Who's Killing the CFPB? We Are. - Page 2 of 2

Looking at the kinds of abuses that have been reported is enough to make anyone lose sleep, even if you are pathologically punctual about paying your bills. Late-night calls, robo-calls, calls to neighbors and friends, threats of lawsuits and much worse are commonplace. Then there are the out-and-out frauds.

Consider a recent California case brought by the Federal Trade Commission against Rincon Management Services, LLC. According to the complaint, Rincon (note that second syllable) employees contacted consumers and told them that that they would be sued or arrested, if they did not call back promptly.

“They gave them a phony case number making it sound like it was a filed case in court, all in what was an apparent attempt by the debt collector to get the debtor to call back,” said Thomas Syta, assistant regional director for the FTC, in an interview with CaliforniaWatch.org. This proved to be a reasonably successful tactic, as Rincon had earned at least $9.4 million since 2009, doing business under at least 10 different names, with 10 different “shell” corporations. The lawsuits and garnishments referred to by the debt collectors over the phone in this case were imaginary; in other cases the debts themselves were imaginary, but many people paid them anyway just to stop the harassment. Unfortunately, this is what happens when a business that can create quick and large personal rewards for unscrupulous behavior—behavior which can be rendered more effective and more illegal by technological means—remains virtually unregulated. Except for large, organized, and often nationwide abuses, the FTC is generally toothless absent the ability to promulgate regulations. And although almost every state has some kind of equivalent to the Fair Debt Collection Practices Act, most often enforcement procedures and staffing are underfunded and many cases are never brought.

Commenting on the action in California against Rincon, Victoria Kirk, executive director of the California Association of Collectors said that such illegal practices were “incredibly rare.” (Is that optimism or denial?) “Debt collectors must abide by rules laid out in the federal Fair Debt Collection Practices Act, as well as the state’s Rosenthal Act. This is one of the most highly regulated industries imaginable,” Kirk told Californiawatch.org.

And that, of course, is an example of the second kind of statistic.

Let’s make two assumptions: first, let’s assume that if an industry trade group can make unfounded generalizations about the amount of illegality and abuse found in the debt collection business, so can we; second, let’s assume that flagrant illegality is incredibly rare—say one in 20 cases, and that abuse is itself rare, say one in 10.

This would mean, if we limited the universe only to complaints made to the FTC, every day in 2010 about 20 consumers were subjected to truly illegal practices, and another 40 were unduly harassed. And all indications are that that number is increasing in 2011. At this point, we’re probably above three people per hour—24 hours a day, seven days a week—being persecuted.

In the face of this, Congress, or part thereof, saw fit to continue its effort to render the CFPB impotent by stopping the nomination of Richard Cordray.

So the next time (or if ever) you, your spouse, your significant other, your parent, your child, your sibling, friend or neighbor receives one of those “incredibly rare,” yet disturbing, calls from someone who claims that they are owed money—especially if they aren’t—think about the gang of 45 and remember this:

They didn’t come from a test tube. They aren’t the descendents of extra-terrestrials. They weren’t appointed by Zeus and the Pantheon of gods. They didn’t magically appear next to a burning bush.

A bunch of us elected them.

How’s that working for you?