Deputy Treasury Secretary Sarah Bloom Raskin said in a speech on Monday that while student loan debt totals a record $1.2 trillion, the rampant growth could slow as the strengthening economy reduces the number of new loans, CollectionsCreditRisk.com reported today. "Total federal originations have fallen since their 2012 peak and originations per borrower have fallen since 2010," she said. "If these trends continue as the recovery strengthens further, they may noticeably slow the growth of outstanding student-loan debt." Student loan debt, however, still outpaces credit card and auto loan debts and Raskin called for measures to reduce delinquencies and defaults so as not to impair borrowers’ future access to credit. "Delinquency and defaults in sufficient numbers can undermine economic growth by crowding out other kinds of investment," Raskin said. "Negative credit events exacerbate access to not just mortgage credit, but also to other forms of credit."
Debt collectors scored a major victory on Monday when the Eleventh Circuit Court of Appeals voted 3-0 to reverse a district court ruling in the case of Gulf Coast Collection Bureau Inc. v. Mais, CollectionsCreditRisk.com reported yesterday. The case involved plaintiff Mark Mais, who was treated in a Florida emergency room in 2009. His wife completed and signed admission forms for him, providing the hospital personal information including a cell phone number. The forms came with a standard notice that the information could be provided to and used by others in the case of both further medical care and bill payment issues. When Mais did not pay the medical bill, Gulf Coast was hired to collect the debt. The agency used an automated dialer to call Mais and left four messages. Mais then sued the collection agency, citing violations of the Telephone Consumer Protection Act (TCPA) for using the automated dialer without prior express consent. He also pushed to certify the case as a class action. Gulf Coast had pushed for dismissal, citing a Federal Communication Commission 2008 ruling that concluded when a consumer provides a cell phone number to a creditor, for example, on a credit application or on admission forms, then auto-dialed and pre-recorded calls to mobile numbers were considered to have prior express consent and therefore were permissible under the TCPA. The FCC further stated that calls placed by a third-party collector on behalf of the creditor should be treated as if the creditor placed the call. The U.S. District Court for the Southern District of Florida ultimately ruled against Gulf Coast, declining to apply the FCC's interpretation of prior express consent in a TCPA case. The court thus became the only one to conclude that district courts have jurisdiction to review FCC rulings and disregard FCC interpretation. Monday's appellate ruling is the first to clarify the scope of the FCC’s consent ruling. It specifically found that the act of providing a mobile phone number to a creditor is consistent with the meaning of "prior express consent" announced in the FCC's 2008 ruling and thus the collection agency's calls were legal. The appellate court further held that the FCC’s ruling applies to a wide range of creditors and collectors, such as those collecting medical debt.
The Consumer Financial Protection Bureau said yesterday that Michigan-based Flagstar Bank will be required to pay $37.5 million in restitution and fines over regulatory allegations it blocked struggling homeowners from receiving foreclosure relief, CollectionsCreditRisk.com reported yesterday. In a consent order issued by the agency, the CFPB said that the $9.9 billion-asset Troy, Mich.-based bank violated mortgage servicing rules that took effect in January. Flagstar was cited for, among other things, taking too long to process applications for foreclosure relief and finalizing permanent loan modifications; failing to inform borrowers when their application was incomplete; and denying loan modifications to qualified borrowers. Flagstar has agreed to pay $27.5 million to about 6,500 consumers affected by these practices and another $10 million penalty to the CFPB. http://www.collectionscreditrisk.com/news/ccr_regulation/cfpb-hits-flag…
The Somerset Inn in Troy, Mich., will be the site of ABI’s 10th Annual Consumer Bankruptcy Conference on Nov. 11 Featured programming will include a session on court-facilitated loan modifications. For more information and to register, please click here: http://www.abiworld.org/DETROIT14/
Aiming to restrict lenders who prey on members of the military, the Obama administration on Friday moved to close legal loopholes that have placed hundreds of thousands of service members at risk of excessive payday and other short-term loan fees, the Associated Press reported. The Defense Department proposed new rules to toughen a 2006 law that limits interest rates for certain types of credit available to service members and their dependents. Under current law, lenders cannot charge members of the military more than 36 percent interest. But the loans covered by the law are so narrowly defined that lenders, many of them located near military bases, can make simple adjustments to get around its provisions. The proposed rules would broaden the definition of consumer credit so that more loans would fall under the provisions of the 2006 law. Final rules likely won't take effect until next year; the public and interest groups have 60 days to comment on the plan. Currently, transactions covered by the 36 percent cap on interest are limited to payday loans of $2,000 or less with terms of no more than 91 days, loans that are secured by a personal vehicle with terms of no more than 181 days, and tax refund anticipation loans. But the Consumer Financial Protection Bureau and the Pentagon have found that in some cases lenders slightly altered the loans, adding $1 to the loan or one day to the terms to bypass the interest cap.
Defaults on federal student loans declined from a year earlier, as the U.S. government bolsters programs to prevent borrowers from skipping payments, Bloomberg News reported yesterday. The rate, measured over the first three years that borrowers are required to pay their loans, was 13.7 percent, down from 14.7 percent last year, the Education Department said yesterday. The data encompasses borrowers who would have begun paying in 2011. The data covers student borrowers through Sept. 30, 2013, and shows the share that haven’t made required payments for at least 270 consecutive days. It includes both those who graduated from their programs and those who dropped out. President Barack Obama and the Education Department have tried to stem defaults by publicizing several income-based repayment plans for those who are struggling. Under the programs, borrowers pay a certain percentage of their discretionary income. The Department last November began a campaign to e-mail about 3.5 million borrowers about repayment options.
Sen. Elizabeth Warren (D-Mass.) promised yesterday to keep pushing for student loan legislation after a bill allowing borrowers to refinance their debts failed to come up for a vote this week, Collections & Credit Risk reported today. The Bank on Students Emergency Loan Refinancing Act was blocked when Sen. John Cornyn (R-Texas) sought an open amendment process — something Warren, the bill's author, did not want. The bill would allow more than 25 million people with federal and private student loans to refinance at current lower interest rates of less than 4 percent. Warren paid for the plan with the "Buffett Rule" — a minimum 30 percent income tax payment from people who earn between $1 million and $2 million. The cost of the bill would be paid for through tax increases to U.S. high-income earners, a non-starter for Republicans. The tax would offset the cost of lowering interest rates. http://www.collectionscreditrisk.com/news/ccr_otherconsumer/warren-vows…
The Senate Banking Committee will hold a hearing today at 11 a.m ET titled “Assessing and Enhancing Protections in Consumer Financial Services.” The witnesses will be: Travis B. Plunkett, Senior Director, Family Economic Stability, The Pew Charitable Trusts; Sheri Ekdom, Director, Center for Financial Resources, Lutheran Social Services of South Dakota; Oliver I. Ireland, Partner, Morrison & Foerster; and Hilary Shelton, Washington Bureau Director and Senior Vice President for Advocacy, National Association for the Advancement of Colored People. For more information, including prepared witness testimony, please click here: http://www.banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hear…
Two fraudulent online payday lending operations based in the Kansas City area have been temporarily shut down after being sued by federal authorities, Collections & Credit Risk reported today. Combined, the two schemes allegedly bilked at least $36 million, and likely substantially more, from consumers nationwide, officials from the Consumer Financial Protection Bureau and the Federal Trade Commission said yesterday. In both cases, the companies are accused of using sensitive personal information that they purchased about individual consumers to access their bank accounts, deposit $200 to $300 in payday loans, and make withdrawals of up to $90 every other week, despite the fact that many of the consumers never agreed to take out a payday loan. The firms are also accused of generating phony loan documents after the fact to make it appear that the loans were legitimate.
Borrowers who want to lower the interest rate on their federal student loans have a new option, the Wall Street Journal reported today. Citizens Financial Group announced yesterday that it is accepting applications from both parent and student holders of federal loans to refinance into private loans at the Providence, R.I.-based bank. Some borrowers who have good credit scores could get a lower interest rate than what they’re currently paying. Citizens’ fixed interest rates start as low as 4.74 percent, while variable-rate loans, whose rates can change each month, have rates as low as 2.31 percent. The lowest rates are given to borrowers with very high credit scores and long-term employment and who also have a Citizens checking account and set up automatic bill payments for their loan. In contrast, parents who signed up for a federal Plus loan to help their kids pay for college would have received a fixed interest rate between 6.41 percent and 8.5 percent since the 2006-07 academic year. Before then, Plus loans carried variable rates. Undergraduate student borrowers of unsubsidized Stafford loans—the most commonly used federal loans—pay fixed rates ranging from 3.86 - 6.8 percent.
The state of New York's court system announced new rules yesterday designed to ban collecting debts that consumers already have paid off, did not incur or where the six-year statute of limitations has expired, Collections&CreditRisk.com reported yesterday. Chief Judge Jonathan Lippman said that the new rules will reduce cases where abusive and aggressive collectors seek default judgments against consumers in court based on incomplete or erroneous documents. Often, these collection agencies have held debts that changed hands many times over several years. Judge Lippman said that the new rules will "avert unwarranted default judgments," though New York's Unified Court System's Office of Court Administration could not estimate how many. Some of the new provisions have been used to tighten up filing and documentation requirements in mortgage foreclosure proceedings.
