Credit Card Interest Rates SoarPublished: October 26, 2009The recent economic climate and the passage of the Credit CARD Act have led to a sharp increase in credit card interest rates. According to a Credit Card Monitor survey conducted by IndexCreditCards.com, the average interest rate on consumer credit cards soared to over 15 percent in September, reaching a two-year high. This rate comes in sharp contrast to the Federal Reserve's cut of credit card interest rates by almost 5 percent in the same two-year period. Currently, the average consumer credit card interest rate is at 15.39 percent, compared to an average rate of 14. 99 percent in August 2009. Although the credit card interest rate is comparable to the rate in September 2007, the rate has significantly increased in a short period of time. The recent passage of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (Credit CARD Act) is a likely cause of the sharp interest rate increase, as many credit card companies are attempting to instate higher interest rates before the Act takes effect in February 2010 because the new rules will make rate increases more difficult. Although credit card interest rates are likely to increase in the future because the federal rate has neared zero and has nowhere to go but up, the Credit CARD Act will make it more difficult for credit card companies to raise the rates of their cards in the future. For more information on credit card rates visit www.indexcreditcards.com/creditcardmonitor/. |
Eleventh Circuit Weighs in on Leaving MessagesPublished: October 20, 2009The Eleventh Circuit recently held a debt collector is not entitled to a bona fide error defense when it intentionally violates one provision of the FDCPA in an effort to avoid violating another provision of the FDCPA when leaving messages for consumers. Much debate surrounds the issue of leaving messages on consumers' answering machines and voice mail. Many courts have held leaving a message on a consumer's answering machine is a form of communication, thus a debt collector must include in the message the Mini-Miranda disclosure as required by Section 807(11), as well as meaningful disclosure of the collector's identity as required by Section 806(6). At the same time, Section 805(b) of the FDCPA prohibits debt collectors from disclosing the existence of a debt to a third party without the consumer's authorization. This leads to a catch-22 for debt collectors. In an effort to help members try to comply with all of the provisions of the FDCPA, ACA has suggested language that could be used in messages for consumers to give them the opportunity to listen to such messages in private. This suggested language is provided in ACA Fastfax #1146. While numerous district courts have weighed in on the issue of debt collectors leaving messages for consumers, the Eleventh Circuit became the first circuit court to analyze the issue. The Eleventh Circuit Court of Appeals includes the states of Alabama, Georgia and Florida. In this Eleventh Circuit decision, the debt collector left over a dozen messages on the consumer's answering machine over a period of four months. One message stated, “This is an important message for Edwards Brenda. [sic] Please return this message at 1-800-381-0416, between the hours of 8 a.m. and 9 p.m. eastern standard time. It is important that you reach our office.” Another message stated “This message is intended for Brenda Edwards. Please contact Jennifer [last name not clear] at 1-800-381-0416, my extension is 220. When returning my call have your file number available, it's 1250740.” The consumer filed suit against the debt collector alleging the debt collector violated Section 807(11) of the FDCPA by failing to state the Mini-Miranda when communicating with the consumer and Section 806(6) by not meaningfully disclosing the debt collector's identity. The debt collector asserted the bona fide error defense. The district court granted summary judgment in favor of the consumer and conclude the debt collector violated Sections 806(6) and 807(11) and that the bona fide error defense did not apply. On appeal to the Eleventh Circuit, the debt collector conceded the messages it left violated Section 807(11) and only challenged whether the collector was protected by the bona fide error defense. Thus, the only issue before the Eleventh Circuit was whether a debt collector is entitled to the bona fide error defense when it intentionally violates one provision of the FDCPA in order to avoid risk of violating another provision. The court contended a debt collector asserting a bona fide error defense must show by a preponderance of the evidence that its violation of the Act: (1) was not intentional; (2) was a bona fide error; and (3) occurred despite maintenance and procedures reasonably adapted for such an error. The debt collector admitted that it deliberately decided not to disclose it was a debt collector in the messages left for the consumer. Therefore, they did not meet the first prong of the bona fide error defense. In regards to the second prong of the defense, the court followed previous decisions that held the bona fide error must be an objectively reasonably mistake. The debt collector stated it was concerned that disclosing the call was from a debt collector could result in a violation of Section 805(b) of the FDCPA prohibiting third-party disclosures. The court found it was not reasonable for the debt collector to violate Section 807(11) in every message it left in order to avoid the possibility that some of those messages might lead to a violation of Section 805(b) of the FDCPA. As such, the court found the debt collector failed to meet the second prong of the defense and affirmed the ruling of the district court. While the court did not analyze the issue of third-party disclosure in regards to leaving message for consumers, the court did state the FDCPA does not guarantee a debt collector the right to leaving messages on consumers' answering machines. The Eleventh Circuit's recent decision continues to highlight the FDCPA's inherent contradiction between providing affirmative disclosures to consumers regarding a debt and avoiding the risk of third-party disclosures. Nevertheless, it is clear debt collectors leaving voice mail messages in an attempt to collect a debt from consumers in the Eleventh Circuit (Alabama, Florida and Georgia) must include meaningful disclosure of the caller's identity and the Mini-Miranda disclosure in the messages. ACA encourages its members to consult with independent legal counsel when determining whether to continue to leave answering machine or voice mail messages, and if so, what policies and procedures will be implemented to ensure the member's messages are in compliance with the FDCPA. The court's decision is available on the Eleventh Circuit's Web site. ACA's Compliance Department is currently updating its Fastfax regarding leaving voice mail messages to ensure ACA members have the most up to date information, and will be releasing the updated version shortly. |
Federal Agencies Release Final Rule Concerning Accuracy, Integrity and Disputes of Consumer ReportsPublished: June 22, 2009Although not yet officially published, final rules implementing Fair Credit Reporting Act provisions will a have wide-reaching effect on the credit and collection industry. Certain federal agencies, including the Office of Comptroller of the Currency (OCC) and the National Credit Union Administration, have released for publication in the Federal Register final rules and guidelines that implement Section 312 of the Fair and Accurate Credit Transactions Act of 2003 (FACT Act) regarding the accuracy and integrity of information furnished to consumer reporting agencies (CRAs). The final rules have not been officially published in the Federal Register, and will become effective one year after the date of publication. The draft final rules and guidelines are available on the OCC Web site. The final rules also implement a provision of the FACT Act that provides consumers with a broad right to directly dispute inaccurate information in their consumer report with a data furnisher who furnished the information. The Federal Trade Commission has not released the final rules and guidelines for publication at this time, but is expected to do so in the near future. In addition, the final rules include the accuracy and integrity regulations, which contain definitions of key terms, such as, "accuracy," "integrity," "direct dispute" and "furnisher." The rules also require data furnishers to establish and implement reasonable written polices and procedures regarding the accuracy and integrity of consumer information provided to a CRA. The final rules also: (1) set forth circumstances under which a data furnisher must reinvestigate a consumer's direct dispute; (2) provide exceptions to the requirements imposed; (3) detail the direct dispute address and dispute notice content requirements; (4) specify furnishers' duties after receiving a direct dispute; and (5) establish when a furnisher may deem a direct dispute to be frivolous or irrelevant. The federal agencies approving the final rule also plan on issuing an advance notice of proposed rulemaking to obtain more information to aid in considering possible additions to the guidelines. ACA is currently reviewing the final rules and will be releasing a Fastfax on the rules in the near future. In addition, ACA will host a teleseminar on Thursday, July 9, 2009, to discuss the final rules. |
Agencies Address Frequently Asked Questions Regarding Red Flag RulesPublished: June 22, 2009Answers from six federal agencies provide assistance to entities expected to implement an identity theft prevention program. On June 11, 2009, six federal agencies, including the Federal Trade Commission (FTC), released a set of frequently asked questions (FAQs) to help entities comply with the Red Flag Rules. The Red Flag Rules require creditors and financial institutions that offer or maintain covered accounts to adopt and implement an identity theft prevention program. The Red Flag Rules also require service providers to adopt and implement policies and procedures designed to detect, mitigate, and prevent identity theft. For those under the FTC's jurisdiction (which includes debt collectors), enforcement of the Red Flag Rules begins Aug. 1, 2009. The FAQs cover many topics concerning the Red Flag Rules, such as the scope of the rules, methods for establishing a program, examples of red flags, detection of red flags and detailed descriptions of what constitutes a "covered account," among others. Specifically regarding requirements for those in the collection industry, the FTC plans to issue additional FAQs specific to entities under its jurisdiction. However, there are a few questions discussed in the FAQs that speak directly to the collection industry. For example, the FTC previously determined third-party collection agencies likely constitute a service provider within the scope of the Red Flag Rules. One question within the FAQs addressed whether a financial institution or creditor would be required to oversee all service provider arrangements or only oversee service providers that offer fraud detection services. The response indicates the oversight arrangement applies whenever the financial institution or creditor “engages a service provider to perform an activity in connection with opening or accessing one or more covered accounts,” rather than merely overseeing service providers that offer fraud detection services. The collection of debts on delinquent accounts is included in such an engagement. The oversight is intended to ensure the financial institution or creditor remains responsible for complying with the Red Flag Rules. Note, however, this requirement does not require a service provider to have the exact same program as the financial institution or creditor. Additionally, the FAQs addressed whether the Red Flag Rules require the oversight of service provider arrangements through written contracts. Written contracts are not specifically required; however, as the financial institution or creditor is required to ensure the service provider's compliance with the rules, it may be beneficial to ensure compliance under contract to aid in the prevention or mitigation of identity theft. View the recently released FAQs in their entirety. |
Total Bankruptcy Filings Increase Nearly 35 Percent Over First Quarter 2008Published: June 22, 2009Both consumer and business bankruptcy filings increased dramatically during the first quarter of 2009 over last year. The total number of U.S. bankruptcies filed during the first three months of 2009 increased 34.5 percent over the same period in 2008, according to data released by the Administrative Office of the U.S. Courts on June 9, 2009. As total filings reached 330,477 for the first quarter, the total surpassed the 245,695 new cases filed over the same period in 2008. The total filings in the 2009 first quarter also represent a 9.7 percent increase from the 301,317 bankruptcies filed during the fourth quarter of 2008. Business filings for first quarter totaled 14,319, representing a 64.3 percent increase over the first quarter 2008 total of 8,713. The first quarter filings represented an 11 percent increase over the fourth quarter 2008 total of 12,901. Consumer filings also increased during the first quarter of 2009. The total number of filings increased 33.4 percent to 316,158, from the 2008 first quarter total of 236,982. They also represent a 9.6 percent increase from the fourth quarter of 2008, which recorded a total of 288,416 non-business filings. The percentage of consumers filing for Chapter 13 protection fell slightly, from 35.6 percent during the first quarter of 2008 to 29.2 percent over the same period in 2009. The number of consumers filing for Chapter 7 protection increased to 70.8 percent during the first three months of 2009, the largest percentage of consumer Chapter 7 filers since the implementation of Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005. Tennessee, Nevada and Alabama were the states with the highest per capita filing rate for the 12-month period ending March 31, 2009. Georgia, Indiana, Michigan, Ohio, Kentucky, Arkansas and Illinois round out the top 10. Chapter 7 of the Bankruptcy Code is available to both individual and business debtors. Its purpose is to achieve a fair distribution to creditors of the debtor's available non-exempt property. Unsecured debts not reaffirmed are discharged. Chapter 13 of the Bankruptcy Code is available for an individual with regular income whose debts do not exceed specific amounts; it is typically used to budget some of the debtor's future earnings under a plan through which unsecured creditors are paid in whole or in part. For more information, visit the American Bankruptcy Institute's Web site. |
What's in Store for Healthcare in 2008?Published: January 11, 2008National health expenditures and out-of-pocket healthcare costs are projected to rise, but key issues are also developing as the nation prepares for the upcoming presidential election and new policies are implemented. The beginning of a new year has brought predictions about the future of healthcare from many different organizations. Not surprisingly, national health expenditures and out-of-pocket healthcare costs are projected to rise, but key issues are also developing as the nation prepares for the upcoming presidential election and new policies are implemented. Out-of-pocket costs Employees' total out-of-pocket costs for healthcare are set to hit $3,597 per person in 2008, Hewitt Associates reported. This projection is $331 (10.1 percent) higher than 2007 figures. National health expenditures According to the Centers for Medicare and Medicaid Services (CMS), national health expenditures are projected to reach $2,420 billion by 2008 and $4,136.9 billion by 2016, consuming 16.5 percent of the gross domestic product (GDP) in 2008 and 19.6 percent of the GDP by 2016. This is an increase from the 2006 expenditures, which were $297.5 billion less than the 2008 predictions. CMS says national health expenditures per capita will also rise, with estimates at $7,957 per person in 2008 compared to $7,092 in 2006. Top Eight Health Industry Issues in 2008 PricewaterhouseCoopers' Health Research Institute identified areas of concern for health executives and policymakers in 2008 by commissioning a survey of 1,000 consumers and combining it with information from recent industry and government publications. The result was the top eight industry issues for 2008:
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Credit Crisis Has Little Effect on Liquidation Rates for Healthcare PaperPublished: January 18, 2008The recent credit and housing crisis has had only a mild affect on collection/liquidation rates for debt buyers, according to a survey by Milestone Advisors, a merger and acquisition advisory firm and information source specializing in the ARM sector. While 50 percent of the debt buyers and contingency collectors surveyed did not experience any negative impact, the other 50 percent reported experiencing some degree of impact as a result of the current credit/housing fallout. Of those affected, debt buyers reported experiencing only a mild reduction in liquidations, while contingency collectors' responses were more evenly distributed, with a moderate impact accounting for the highest number of positive responses (30 percent). One possible explanation for this difference is that, in selecting the debt they purchase, debt buyers have chosen paper that is more likely to resist the current economic situation. Credit card liquidation rates were markedly affected by the credit crisis, as 72 percent of firms collecting on this paper reported an impact. Further, an astounding 43 percent sustained a moderate or significant impact. The credit crisis seems to have had a lesser effect to date on liquidation rates on healthcare paper, with 75 percent of the firms reporting no impact. When compared to the high impact reported among credit card collectors, this is perhaps an indication of debtors placing a higher priority on their medical debt. |
One-Fourth of Small Business Owners Unconcerned About Data SecurityPublished: December 06, 2007Although the majority of small businesses secure their computer systems, one-fourth are unconcerned about computer and online data security, according to a survey conducted by AT&T Inc. Similarly, one-third (32 percent) of small businesses are unconcerned about wireless data security, and one in six (17 percent) that use wireless technology have taken no precautions against wireless threats. Nearly two-thirds (60 percent) of small businesses consider online security a concern, and four-fifths (82 percent) have installed software, such as spam filters or anti-virus protection, to help keep their business safe from online security threats. Of those companies that have not taken any specific precautions against computer or wireless threats, two-thirds (65 percent) don't think it's an issue with their business. When asked about the importance of recovering computer data in the event of a disaster, two-thirds (65 percent) said it is extremely important. More than nine of 10 (93 percent) small businesses back up their data, with almost half (47 percent) doing so at least once a day and almost three-fourths (72 percent) backing up their data at least weekly. Many small businesses consider computer security important enough to make it an official job responsibility-almost one-third (29 percent) of small businesses have an employee who handles computer security as part of his or her job, and one-fourth (24 percent) have hired an outside consultant to handle security. Although three-fourths (73 percent) back up their data on-site using CDs, hard drives or other devices, only 7 percent of small businesses use the Internet or another computer network to send data to a remote location. In addition, three-fourths (78 percent) of small businesses said it's important for their business to recover computer data in the event of a disaster. Of those small businesses that have not taken specific steps to backup data, two-thirds (63 percent) don't think it's an issue with their business. Two percent didn't know they should take any precautions. |
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