Frequently asked Questions

How does the program work?

Answer: Many people cannot afford to make monthly minimums payments towards their credit card debt with high interest rates. It could take 30 - 40 years to pay off the debt. Others have had a decrease in income, suffered a disability, or lost a job and are likely already behind on payments or cannot afford to stay current due to a financial hardship. Our certified debt negotiators will negotiate with your creditors on your behalf, not on your creditor's behalf, as is the case with credit counseling. LEI gives you an alternative to bankruptcy and a solution to your unmanageably increasing debt due to high interest rates. So how does settlement work?

Who is an ideal candidate for Debt Settlement?

Is debt settlement the same as debt consolidation?

Answer: No. The goal of debt settlement is to reduce the overall amount of the debt by negotiating agreed payoff amounts with your creditors. Debt consolidation requires you to take a loan to pay off your unsecured debt with secured debt.

Debt Consolidation loans transfer the debt from one account to another and typically takes unsecured debt(s) and changes it into secured debt (usually your home). If you do not have enough equity (typically 25 - 30% LTV), bad credit, or too much debt, it is not likely that you will be approved for a debt consolidation loan.

Statistics show that about 70% of people who obtain a debt consolidation loan find themselves in deeper debt than they were originally in within a two year period. You cannot borrow your way out of debt. Ask yourself why you would want to go from an unsecured loan to a secured loan to be paid over a longer period of time?

The main problem with consolidation loans is that once you have paid off the credit cards you have a whole new source of spending power: $0 Balance credit cards. Many people lack the discipline to avoid incurring any more credit card debt, leaving them in a worse financial situation. You end up not only having to pay back the cards but also the consolidation loan.

If you start missing payments on the consolidation loan, you stand to lose the asset (usually your home) that the loan is secured against.

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Is Debt Settlement the same as Consumer Credit Counseling?

Answer: No. Debt settlement does not work like consumer credit counseling in most respects. The goal of debt settlement is to reduce the overall amount of the debt, by negotiating payoff amounts with your creditors. Debt Settlement can save you thousands of dollars and years of repayment.

Many Consumer Credit Counseling Companies tout their non-profit status. Many consumers confuse "non-profit" with "no charge for services", or charity. Non-profit Consumer Credit Counseling Companies may still make substantial amounts of money. The way Credit Counseling works is that you typically meet with a Credit Counselor who analyzes your unsecured debts, other obligations, and your monthly income. A credit counselor then formulates a monthly budget and presents a plan that includes lowering of some credit card interest rates and sometimes, the monthly payment typically around 11% interest. The Credit Counseling Company then contacts all your unsecured debt Creditors and requests that the consumer be permitted to repay the debt at a lower interest rate. During the program a single monthly payment is sent to the Credit Counseling company and they in turn make payments directly to all your creditors for the next 48 - 72 months.

Can you settle your debt on your own?

Answer: Yes, however, designing plans and settling debt is all LEI Debt Settlement does. You may be able to make your own plumbing repairs or install your own computer network, but most people don't have the time or expertise to deal with it.

Creditors deal with thousands of people who are in financial difficulty every day and have a vast array of sophisticated (and some rather blunt) methods of intimidating you into financial arrangements you cannot keep.

The settlement process is usually very emotional and stressful, especially when you are the one being attacked by collectors over the phone. Most people prefer to leave these tasks to experienced people who earn their livelihood doing that particular kind of work.

We have a staff of debt negotiators whose only job is to negotiate the settlement of unsecured debt, every day, five days a week. By letting LEI do what we do best, you will get better settlements.

LEI knows how to deal with creditors and has in-depth knowledge about how these institutions work. We can potentially save you thousands of dollars and free you from a considerable amount of stress.

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How long does the debt settlement program take?

Answer: The time to complete the debt settlement program varies from case to case and is primarily based upon how much money you will be able to set aside each month to eliminate the debt of your enrolled accounts. During your initial free consultation, the time to complete the debt settlement program for your individual case will be discussed with you by our Debt Consultant. LEI's average client plan is 36 months. The amount of time it takes to clear your debts is largely dependent on your current financial situation. If your budget is extremely limited results may take longer. Every situation is different and we will be happy to discuss this during your free confidential phone consultation.

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What can I expect as a result of your debt settlement program?

Answer: LEI has assembled an impressive team of dedicated individuals who work with one common goal… to save you money and get you through our debt settlement program. LEI's debt settlement program is set up to work with your best interest in mind. We have created a win-win relationship, by implementing procedures to ensure the best results for our clients. Although individual results will vary, accounts settled by LEI average a reduction of up to 50%* of the balance owed on your total debt.

* Settlement estimates of up to 50% are examples of past performance of settled accounts. Individual results may vary and are dependant on successful completion of program and ability to save funds.

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Are your debt settlement services guaranteed?

Answer: Yes, if LEI is unable to settle an enrolled account, we will refund back to you or adjust your service fee by an amount equal to the service fee charged on that particular account balance at initial enrollment. Note: You must have sufficient funds to settle the account in order to be eligible for the guarantee. Enrollment fees are nonrefundable.

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How will debt settlement affect my credit?

Answer: A debt settlement program will have a negative effect on your credit while in the program. If your accounts are already delinquent it may not have much effect. For consumers with unpaid delinquent accounts this makes debt settlement an excellent option over ignoring the delinquent past due account, considering the savings versus paying the past due account in full. The question is, does debt settlement make sense for those who have current accounts, and a good credit rating. Those with a high credit score must weigh the negative impact on credit ratings against the risk of bankruptcy and the potential of being out of debt for less than the full balance. Note: even if your accounts are current your credit score may already be negatively impacted by your total debt and debt to available credit ratio; in this case negotiation of the accounts may still be a better alternative than making minimum monthly payments for the next 30 years and still having bad credit.

While in a debt settlement program, you will receive late marks on your credit as you are not making regular payments to your creditors. Your consumer credit score will be negatively affected during the delinquency period. This occurs for two reasons. First the account is late and is continually reported to credit bureau as the delinquency period extends (60, 90, 120 days). Secondly, the amount listed in the payment due column increases as past due payments stack up. If the accounts are current but the credit score is low due to high balances or a history of late payments, the negative effect on your credit may already be reflected in your credit score.

Once your account balance and payment due is settled and reported as a zero balance, your debt to income ratio will be reduced as long as you have not since incurred more debt. Low debt to income ratios typically have a positive impact on accounts and credit, particularly over the long-term. The history of the delinquency may remain on your credit report, but the account moves from the current derogatory reporting section of the credit report, to the closed account section. As months pass any derogatory history has less and less bearing on the credit score. Some lenders believe that after 12 months the accounts are given very little consideration. It appears that provided all other debts are paid in a timely manner (house, car, and other accounts kept current) the effects of the settlement process are temporary. However, debt settlement should not be used as a method of credit repair. Remember if you are considering chapter 7 or 13 bankruptcy it will stay on your report for 10 years.

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How does debt settlement compare to bankruptcy?

Answer: Filing for bankruptcy has many negative implications, and is usually considered only as a last resort. Bankruptcy may seem to be the quickest solution to removing your outstanding debt but even bankruptcy attorneys will tell you it will remain on your credit for 10 years.

Both Chapter 7 and Chapter 13 will represent a major negative mark on your credit rating. In Chapter 7 bankruptcy it will stay on your report for 10 years and chapter 13 bankruptcy stays on your report during the time you are in the bankruptcy program plus a specified time calculated from the date you complete the program.

Do you keep my information confidential?

Answer: Yes. LEI maintains your confidentiality at all times. We only disclose information to those persons that you have authorized. All creditors that you have contracted us to settle with on your behalf will be contacted by us and advised that you have retained us to represent you. All information is considered highly confidential and personal.

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What is the difference between unsecured debt and secured debt?

Answer: Unsecured debt is any loan or debt that has no tangible assets or property attached to it. The most common types of unsecured debt are credit cards, department store cards, medical bills, utility bills, and personal loans. Should you fail to make timely payments, the lenders only recourse is to pursue legal action.

Secured debt is debt for which the creditor has collateral in the form of a security interest in personal and/or real property. Should you fail to make timely payments on secured debt, the creditor is entitled to repossess the property and sell it. Please keep in mind that you may still be liable for any deficient balance remaining after the sale of the property. When dealing with secured debt, it is important to obtain advice from a licensed attorney in order to protect your interests.

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Will I continue to get calls and collection letters from my creditors?

Answer: Most likely, yes. Most original creditors are cooperative. Calls may reduce after the original creditor receives a hardship letter from you.. It is important that you review the section on how to handle creditor calls in the program kit you receive as a new client to minimize creditor harassments Consumers have rights against abusive collection tactics.

See your rights under the Fair Debt Collection Practices Act & Debt Collection Laws for your State.

Fair Debt Collection Practices Act
Learn more about the Fair Debt Collection Practices Act

FDIC Guidelines on Debt Collection
Learn more about the FDIC Guidelines on Debt Collection

FTC Original Creditor Suit
Learn more about the FTC Original Creditor Suit

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Will fees and interest continue to accrue?

Answer: Most creditors will continue to charge fees and interest until the account is written off (typically 120 - 210 days) although it may be longer.

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Will your program stop legal action against me?

Answer: No - creditors have the right to use legal means to collect a debt. Some creditors are more likely to file suit than others.

In our experience, a small minority of consumers are involved in lawsuits. However, it is a common tactic of third-party creditors or collection agencies to threaten you with a lawsuit (which is illegal if they do not intend to sue). Third-party creditors or collection agencies sue less frequently than original creditors. While we cannot guarantee that legal action will not be taken, we are confident that our experience in dealing with creditors can reduce the possibility of this happening.

Despite any legal action that may or may not be taken, your account can be settled before, during or after the suit. Just because an account goes to legal action does not mean that we cannot settle it. The threat of legal action can be the scariest of all. IT CAN BE HANDLED. Sometimes a single lawsuit is not a bad thing because it may give our negotiators leverage to settle your other accounts. We recommend that our clients seek competent legal counsel in certain situations.

Note: We cannot provide you with legal advice. However, we work with your creditors in an attempt to make a settlement even when legal action is pending.

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Will I owe money to the IRS for my reduced settlement?

Answer: Original Creditors are required to report canceled debts exceeding $600 to the IRS and you are supposed to report the same as income on your annual tax return. However, the IRS permits you to write off any "income" from canceled debts up to the amount by which you were "Insolvent" at the time. Therefore, unless you have a positive net worth, then you ordinarily will not be obligated to pay taxes on the forgiven amounts. Additionally, if you do not qualify as insolvent non principal amounts such as fees accumulated on the account may be deducted from the amount reported. Refer to: www.IRS.gov Publication 908, Form 982.

Note: You should consult a tax advisor for advice specific to your situation. This should not be considered tax advice.

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Who controls my personal savings used for settlement?

Answer: While we may recommend a bank that helps protect your money, your personal savings account is a bank account that you control. This account remains your property and under your control. LEI will contact you monthly to ensure that you are depositing the minimum program savings amount as set out in your settlement program. When you have accumulated enough funds in your account our debt negotiators will begin the negotiations process with your creditors.

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So what does the program cost and how do you get paid?

Answer: Our fees are very competitive, are based on a percentage of your overall debt, and consist of an enrollment fee and a service fee. We earn our enrollment fee as follows: when we perform a budget review, analysis of your accounts, and file setup; when we have prepared initial correspondence for the client to send to the contracted creditors directly, and when we send the program kit to the clients. The service fee is earned as we engage creditors for settlement, handle creditor calls and communication, negotiate a settlement of your contracted accounts and administer the settlement and funding arrangements. If LEI is unable to settle an enrolled account, LEI will refund back to you, an amount equal to the service fee collected on that particular account based on the balance at initial enrollment.

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Who pays my Creditors?

Answer: LEI DOES NOT disburse funds to your creditors during the program. The purpose of our debt settlement program is to create a savings plan for you and negotiate settlements on the balances you owe. Those in a debt settlement program, are financially unable to make regular payments to creditors and instead set aside money in savings to pay a settlement once negotiated. If you can afford to keep paying off your debts on your own, you should do so. Under the debt settlement program, once you approve a negotiated settlement offer, you will then make the payment directly to your creditors from your personal savings account. Once the payment has been made the account will now be considered settled in full.

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Glossary of Terms

Bankruptcy

Filing Bankruptcy is a legal declaration of your inability to pay your debts. It gives you protection under a Federal bankruptcy code that can save some assets, keep creditors at bay, and provide you with professional help (for example: an attorney or a court-appointed trustee) to sort out the situation.
Learn more about Bankruptcy

Credit Counseling

Credit Counseling is a debt relief program that consolidates your payment to creditors and typically at a lower interest rate.
Learn more about Credit Counseling

Debt Consolidation

Debt consolidation, simply put, is taking out a loan to pay off other debt. This is often done to save money that would normally be paid on interest.
Learn more about Debt Consolidation

Unsecured Debt

Unsecured debt is debt that is not secured with some sort of collateral or asset such as a car or house.
Learn more about the types of Unsecured Debt

Debt Settlement

Debt settlement or debt arbitration is a legal process used by people or companies in debt to negotiate a settlement of an existing legal debt with their creditors.
Learn more about Debt Settlement

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What is Bankruptcy?

Filing Bankruptcy is a legal declaration of your inability to pay your debts. It gives you protection under a Federal bankruptcy code that can save some assets, keep creditors at bay, and provide you with professional help (for example: an attorney or a court-appointed trustee) to sort out the situation.

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Facts about bankruptcy

Although bankruptcy is appropriate for some individuals there are reasons not to do it. The reality is that even after ten years bankruptcy leaves a trail. Every time you fill out a credit application you will be asked if you have filed for bankruptcy which can affect the approval outcome. It may affect your ability to rent or buy a home any time in the future. You will not be excused from certain debts, including Federal Student Loans, IRS debt, and child support. It may also effect the privilege of using credit to purchase necessary items even the ability to make plane and car reservations. Even if the bankruptcy has fallen off your credit report, to answer this question untruthfully is considered a federal offense. For most people filing Bankruptcy is a permanent decision that should only be considered as an absolute last resort to solving your debt matters.

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Questions to ask yourself before Filing Bankruptcy:

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Other Bankruptcy Effects:

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Important Information about Bankruptcy and other options

Before you make that important decision dealing with your financial situation, make sure you read over all the facts and understand the steps completely that you are about to take. Our program's goal is designed to keep you from going into bankruptcy with flexible payments and dedicated staff that works with you throughout our program. Your debt will be settled in 18 - 36 months. Bankruptcy can not only be difficult to qualify for but also very damaging to your future credit scores. In most case you might not qualify for a Chapter 7 bankruptcy and as a result it will leave you having to file for a Chapter 13 bankruptcy in which case you will still have to pay some of the debt back to the creditor. On top of having to still pay some of the debt back the bad bankruptcy remarks on your credit report will not start until the debt is paid back. Some individuals have no other choice but to file for a bankruptcy, but there are also other individuals who would fit more comfortably into a debt settlement type of program.

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What Next?

Do you have bankruptcy or bankruptcy related questions about how to get out of your current financial situation? Our free consultation can help if you are considering bankruptcy, or just trying to find a way to eliminate all of your high interest payments into one low monthly financially budgeted plan. One of our experienced Debt Consultant will consult with you about your financial problems absolutely free.

 

Credit Counseling

 

Many Consumer Credit Counseling Companies tout their non-profit status. Many consumers confuse "non-profit" with "no charge for services", or charity. Non-profit Consumer Credit Counseling Companies may still make substantial amounts of money. The way Credit Counseling works is that you typically meet with a Credit Counselor who analyzes your unsecured debts, other obligations, and your monthly income. A credit counselor then formulates a monthly budget and presents a plan that includes lowering of some credit card interest rates and sometimes, the monthly payment typically around 11% interest. The Credit Counseling Company then contacts all your unsecured debt Creditors and requests that the consumer be permitted to repay the debt at a lower interest rate. During the program a single monthly payment is sent to the Credit Counseling company and they in turn make payments directly to all your creditors for the next 48 - 72 months.

Consumer credit counselor charges what seems like a relatively small fee but over time it adds up to costing you more than a debt settlement program.. What you are not told is that the Credit Counseling companies act as a surrogate of the Credit Card Company. They make most of their money from "donations" from your Creditors based on the amount they "collect" from you while in the program. This is an arrangement very similar to the way collection agencies are paid by creditors. Since credit counseling companies rely on payments from the credit card companies, they do not truly represent the consumer. However, there are good credit counseling companies out there and credit counseling may be the right option for you if you do not have a true financial hardship -- research them carefully to make sure their services make sense for and that you can afford to make payments under the credit counseling program.

The downside to credit counseling is as follows:

Debt Consolidation

Debt consolidation, simply put, is taking out a loan to pay off other debt. This is often done to save money that would normally be paid on interest. IF you happen to still have equity in your home it may make sense in some instances to refinance.

Debt Consolidation & Debt Settlement company's take on the huge responsibilities dealing with your Credit Card companies. These companies deal with creditors on a daily basis and can save you potentially thousands of dollars letting their negotiators work on your behalf. If you would like more information on Debt Consolidation & Debt Settlement please call one of our experienced Debt Consultants to consult with you on your financial needs. LEI is here to help you structure a financial budget. You can also learn more about Consolidation and Settlement throughout the website.

Some of the downsides to debt consolidation are as follows:

Unsecured Debt

"Unsecured debt", meaning a debt that is not secured with collateral (asset), are the types of debts we negotiate.

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What debt may qualify?

Qualifying Debt Includes:

Debt Settlement

Debt settlement or debt arbitration is a legal process used by people or companies in debt to negotiate a settlement of an existing legal debt with their creditors. Debt Settlement is not the same as Consumer Credit Counseling or Debt Consolidation. Debt settlement is the consumer equivalent of a Turn Around Consultant for a business who helps settle their debts with creditors and get the company back on track. Any person owing credit card debt, or any other debt, has the legal right to contact and negotiate with their creditors. However this practice takes time to master, knowledge of the credit industry, and sharp negotiation skills to get the maximum benefits. LEI Debt Settlement typically will settle your current unsecured debt balances up to 50% * by negotiating an agreed settlement amount with your creditors.

Debt settlement is a plan to renegotiate the amount of debt you owe so that the amount paid is less than that owed, yet is accepted as full payment of the debt. Many individuals who have a financial hardship find that debt settlement is the only debt management method affordable for them. Debt settlement depends heavily on using the correct approach with a particular creditor. This can be done best by hiring an experienced third party, such as LEI Debt Settlement , who understands current industry trends.

Debt Settlement Quick Facts:

Free Consultation with a Professional Debt Consultant

LEI is successful because our Debt Consultants are highly trained. LEI's debt negotiators carefully structure a debt negotiation action plan for each and every client. LEI's mission is to settle your debts while keeping you away from bankruptcy. Your success also depends on a total commitment by you to work with our experienced staff as we form a partnership to settle your debt. Our Team has helped hundreds of people just like you get out of debt. Let us help you!

You will need to retrieve your creditor documentation (most recent statements) so that our Debt Consultant can assist you in a timely manner. You may be asked for detailed information about your creditors and debt as necessary. We will help you through this process - step by step. Call and speak with a Debt Consultant and see how you can count on LEI to settle your Debt and give you peace of mind!

Building a Debt Settlement Plan for you

After determining the best debt settlement plan for you, we will send you an enrollment package. The enrollment package will provide us with information on you as well as information about your creditors.

LEI will educate you on how to handle creditor calls and communications and LEI will contact creditors when appropriate. We will also assist you in communicating with creditors by providing you forms and letters that may help reduce the call volume and/or collection attempts, particularly after the debt has passed from the original creditor to collection agency. This process will vary as creditors change their collection method from time to time.

Our Debt Negotiators will start negotiations with all your creditors to obtain the best settlement possible once you have saved some money. Our Debt Negotiators are paid based on their performance in getting the best settlement for you. Our average settlements range up to 50% of your total current balance*.

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Setting up an Affordable Low monthly savings plan

LEI will work with you to determine an affordable low monthly payment to put towards your debt settlement savings fund. When a comfort level is met with the appropriate set monthly amount, these funds will be dedicated to your debt settlement. These funds must be set aside each month so that our debt negotiators can use the savings to negotiate a settlement with your creditors.

We provide a variety of programs to choose from depending on how fast you want to be debt free and what you can afford. Programs usually range from 12-36 months depending on the size of debt. Every case is unique and one of our Debt Consultants will be able to provide you with a plan for your individual debt situation.

A DSA client services account manager will make a monthly courtesy call to make sure everything is going as planned. If you have any new information or questions your client account manager will be happy to assist you at that time. You will also be given a direct line to call anytime with any concerns or questions you may have.

Our process in settling your debt with your creditors

Working with creditors can be a timely process of negotiations between the creditor and our company. Our program is structured for you, and is set up so that when you have a reasonable amount of savings, our debt negotiators will begin the process of obtaining settlement offers. Creditors know that approximately 30% of the almost 2 million bankruptcies last year occurred on debt that was current. Creditors do want to settle and we will negotiate aggressively on your behalf.

You are always asked to approve any settlement and written documentation is obtained for every finalized settlement before you fund the settlement. Remember, LEI is working for you and not your creditor.

Fair Debt Collection Practices Act

As amended by Public Law 104-208, 110 Stat. 3009 (Sept. 30, 1996)

To amend the Consumer Credit Protection Act to prohibit abusive practices by debt collectors.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Consumer Credit Protection Act (15 U.S.C. 1601 et seq.) is amended by adding at the end thereof the following new title:

TITLE VIII - DEBT COLLECTION PRACTICES [Fair Debt Collection Practices Act]
Sec.

This title may be cited as the "Fair Debt Collection Practices Act."

802. Congressional findings and declarations of purpose [15 USC 1692]

(a) There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.
(b) Existing laws and procedures for redressing these injuries are inadequate to protect consumers.
(c) Means other than misrepresentation or other abusive debt collection practices are available for the effective collection of debts.
(d) Abusive debt collection practices are carried on to a substantial extent in interstate commerce and through means and instrumentalities of such commerce. Even where abusive debt collection practices are purely intrastate in character, they nevertheless directly affect interstate commerce.
(e) It is the purpose of this title to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.

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803. Definitions [15 USC 1692a]

As used in this title --
(1) The term "Commission" means the Federal Trade Commission.
(2) The term "communication" means the conveying of information regarding a debt directly or indirectly to any person through any medium.
(3) The term "consumer" means any natural person obligated or allegedly obligated to pay any debt.
(4) The term "creditor" means any person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another.
(5) The term "debt" means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.
(6) The term "debt collector" means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. For the purpose of section 808(6), such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests. The term does not include --
(A) Any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor;
(B) Any person while acting as a debt collector for another person, both of whom are related by common ownership or affiliated by corporate control, if the person acting as a debt collector does so only for persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts;
(C) Any officer or employee of the United States or Any State to the extent that collecting or attempting to collect Any debt is in the performance of his official duties;
(D) Any person while serving or attempting to serve legal process on Any other person in connection with the judicial enforcement of any debt;
(E) Any nonprofit organization which, at the request of consumers, performs bona fide consumer credit counseling and assists consumers in the liquidation of their debts by receiving payments from such consumers and distributing such amounts to creditors; and
(F) Any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement; (ii) concerns a debt which was originated by such person; (iii) concerns a debt which was not in default at the time it was obtained by such person; or (iv) concerns a debt obtained by such person as a secured party in a commercial credit transaction involving the creditor.
(7) The term "location information" means a consumer's place of abode and his telephone number at such place, or his place of employment.
(8) The term "State" means any State, territory, or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any political subdivision of any of the foregoing.

804. Acquisition of location information [15 USC 1692b]
Any debt collector communicating with any person other than the consumer for the purpose of acquiring location information about the consumer shall --
(1) Identify himself, state that he is confirming or correcting location information concerning the consumer, and, only if expressly requested, identify his employer;
(2) Not state that such consumer owes any debt;
(3) Not communicate with any such person more than once unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information;
(4) Not communicate by post card;
(5) Not use any language or symbol on any envelope or in the contents of any communication effected by the mails or telegram that indicates that the debt collector is in the debt collection business or that the communication relates to the collection of a debt; and
(6) After the debt collector knows the consumer is represented by an attorney with regard to the subject debt and has knowledge of, or can readily ascertain, such attorney's name and address, not communicate with any person other than that attorney, unless the attorney fails to respond within a reasonable period of time to the communication from the debt collector.

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805. Communication in connection with debt collection [15 USC 1692c]

(A) COMMUNICATION WITH THE CONSUMER GENERALLY.
Without the prior consent of the consumer given directly to the debt collector or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the collection of any debt --
(1) At any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer. In the absence of knowledge of circumstances to the contrary, a debt collector shall assume that the convenient time for communicating with a consumer is after 8 o'clock antimeridian and before 9 o'clock postmeridian, local time at the consumer's location;
(2) If the debt collector knows the consumer is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney's name and address, unless the attorney fails to respond within a reasonable period of time to a communication from the debt collector or unless the attorney consents to direct communication with the consumer; or
(3) At the consumer's place of employment if the debt collector knows or has reason to know that the consumer's employer prohibits the consumer from receiving such communication.

(B) COMMUNICATION WITH THIRD PARTIES.
Except as provided in section 804, without the prior consent of the consumer given directly to the debt collector, or the express permission of a court of competent jurisdiction, or as reasonably necessary to effectuate a postjudgment judicial remedy, a debt collector may not communicate, in connection with the collection of any debt, with any person other than a consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.

(C) CEASING COMMUNICATION.
If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt, except --
(1) to advise the consumer that the debt collector's further efforts are being terminated;
(2) to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor; or
(3) where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy.
If such notice from the consumer is made by mail, notification shall be complete upon receipt.

(D) For the purpose of this section
The term "consumer" includes the consumer's spouse, parent (if the consumer is a minor), guardian, executor, or administrator.
806. Harassment or abuse [15 USC 1692d]
A debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
(1) The use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person.
(2) The use of obscene or profane language or language the natural consequence of which is to abuse the hearer or reader.
(3) The publication of a list of consumers who allegedly refuse to pay debts, except to a consumer reporting agency or to persons meeting the requirements of section 603(f) or 604(3)1 of this Act.
(4) The advertisement for sale of any debt to coerce payment of the debt.
(5) Causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.
(6) Except as provided in section 804, the placement of telephone calls without meaningful disclosure of the caller's identity.

807. False or misleading representations [15 USC 1962e]
A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
(1) The false representation or implication that the debt collector is vouched for, bonded by, or affiliated with the United States or any State, including the use of any badge, uniform, or facsimile thereof.
(2) The false representation of --
(A) the character, amount, or legal status of any debt; or
(B) any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt.
(3) The false representation or implication that any individual is an attorney or that any communication is from an attorney.
(4) The representation or implication that nonpayment of any debt will result in the arrest or imprisonment of any person or the seizure, garnishment, attachment, or sale of any property or wages of any person unless such action is lawful and the debt collector or creditor intends to take such action.
(5) The threat to take any action that cannot legally be taken or that is not intended to be taken.
(6) The false representation or implication that a sale, referral, or other transfer of any interest in a debt shall cause the consumer to --
(A) lose any claim or defense to payment of the debt; or
(B) become subject to any practice prohibited by this title.
(7) The false representation or implication that the consumer committed any crime or other conduct in order to disgrace the consumer.
(8) Communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.
(9) The use or distribution of any written communication which simulates or is falsely represented to be a document authorized, issued, or approved by any court, official, or agency of the United States or any State, or which creates a false impression as to its source, authorization, or approval.
(10) The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.
(11) The failure to disclose in the initial written communication with the consumer and, in addition, if the initial communication with the consumer is oral, in that initial oral communication, that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose, and the failure to disclose in subsequent communications that the communication is from a debt collector, except that this paragraph shall not apply to a formal pleading made in connection with a legal action.
(12) The false representation or implication that accounts have been turned over to innocent purchasers for value.
(13) The false representation or implication that documents are legal process.
(14) The use of any business, company, or organization name other than the true name of the debt collector's business, company, or organization.
(15) The false representation or implication that documents are not legal process forms or do not require action by the consumer.
(16) The false representation or implication that a debt collector operates or is employed by a consumer reporting agency as defined by section 603(f) of this Act.

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808. Unfair practices [15 USC 1692f]
A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
(1) The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.
(2) The acceptance by a debt collector from any person of a check or other payment instrument postdated by more than five days unless such person is notified in writing of the debt collector's intent to deposit such check or instrument not more than ten nor less than three business days prior to such deposit.
(3) The solicitation by a debt collector of any postdated check or other postdated payment instrument for the purpose of threatening or instituting criminal prosecution.
(4) Depositing or threatening to deposit any postdated check or other postdated payment instrument prior to the date on such check or instrument.
(5) Causing charges to be made to any person for communications by concealment of the true propose of the communication. Such charges include, but are not limited to, collect telephone calls and telegram fees.
(6) Taking or threatening to take any nonjudicial action to effect dispossession or disablement of property if --
(A) there is no present right to possession of the property claimed as collateral through an enforceable security interest;
(B) there is no present intention to take possession of the property; or
(C) the property is exempt by law from such dispossession or disablement.
(7) Communicating with a consumer regarding a debt by post card.
(8) Using any language or symbol, other than the debt collector's address, on any envelope when communicating with a consumer by use of the mails or by telegram, except that a debt collector may use his business name if such name does not indicate that he is in the debt collection business.

809. Validation of debts [15 USC 1692g]
(A) Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing --
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer's written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
(b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.
(c) The failure of a consumer to dispute the validity of a debt under this section may not be construed by any court as an admission of liability by the consumer.

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810. Multiple debts [15 USC 1692h]
If any consumer owes multiple debts and makes any single payment to any debt collector with respect to such debts, such debt collector may not apply such payment to any debt which is disputed by the consumer and, where applicable, shall apply such payment in accordance with the consumer's directions.

811. Legal actions by debt collectors [15 USC 1692i]
(A) Any debt collector who brings any legal action on a debt against any consumer shall --
(1) in the case of an action to enforce an interest in real property securing the consumer's obligation, bring such action only in a judicial district or similar legal entity in which such real property is located; or
(2) in the case of an action not described in paragraph (1), bring such action only in the judicial district or similar legal entity --
(A) in which such consumer signed the contract sued upon; or
(B) in which such consumer resides at the commencement of the action.
(b) Nothing in this title shall be construed to authorize the bringing of legal actions by debt collectors.

812. Furnishing certain deceptive forms [15 USC 1692j]
(A) It is unlawful to design, compile, and furnish any form knowing that such form would be used to create the false belief in a consumer that a person other than the creditor of such consumer is participating in the collection of or in an attempt to collect a debt such consumer allegedly owes such creditor, when in fact such person is not so participating.
(B) Any person who violates this section shall be liable to the same extent and in the same manner as a debt collector is liable under section 813 for failure to comply with a provision of this title.

813. Civil liability [15 USC 1692k]
(A) Except as otherwise provided by this section, any debt collector who fails to comply with any provision of this title with respect to any person is liable to such person in an amount equal to the sum of --
(1) any actual damage sustained by such person as a result of such failure;
(2) (A) in the case of any action by an individual, such additional damages as the court may allow, but not exceeding $1,000; or
(B) in the case of a class action, (i) such amount for each named plaintiff as could be recovered under subparagraph (A), and (ii) such amount as the court may allow for all other class members, without regard to a minimum individual recovery, not to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector; and
(3) in the case of any successful action to enforce the foregoing liability, the costs of the action, together with a reasonable attorney's fee as determined by the court. On a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney's fees reasonable in relation to the work expended and costs.
(B) In determining the amount of liability in any action under subsection (a), the court shall consider, among other relevant factors --
(1) in any individual action under subsection (a)(2)(A), the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, and the extent to which such noncompliance was intentional; or
(2) in any class action under subsection (a)(2)(B), the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, the resources of the debt collector, the number of persons adversely affected, and the extent to which the debt collector's noncompliance was intentional.
(C) A debt collector may not be held liable in any action brought under this title if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.
(D) An action to enforce any liability created by this title may be brought in any appropriate United States district court without regard to the amount in controversy, or in any other court of competent jurisdiction, within one year from the date on which the violation occurs.
(E) No provision of this section imposing any liability shall apply to any act done or omitted in good faith in conformity with any advisory opinion of the Commission, notwithstanding that after such act or omission has occurred, such opinion is amended, rescinded, or determined by judicial or other authority to be invalid for any reason.

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814. Administrative enforcement [15 USC 1692l]
(A) Compliance with this title shall be enforced by the Commission, except to the extend that enforcement of the requirements imposed under this title is specifically committed to another agency under subsection (b). For purpose of the exercise by the Commission of its functions and powers under the Federal Trade Commission Act, a violation of this title shall be deemed an unfair or deceptive act or practice in violation of that Act. All of the functions and powers of the Commission under the Federal Trade Commission Act are available to the Commission to enforce compliance by any person with this title, irrespective of whether that person is engaged in commerce or meets any other jurisdictional tests in the Federal Trade Commission Act, including the power to enforce the provisions of this title in the same manner as if the violation had been a violation of a Federal Trade Commission trade regulation rule.

(B) Compliance with any requirements imposed under this title shall be enforced under --
(1) section 8 of the Federal Deposit Insurance Act, in the case of --
(a) national banks, by the Comptroller of the Currency;
(b) member banks of the Federal Reserve System (other than national banks), by the Federal Reserve Board; and
(c) banks the deposits or accounts of which are insured by the Federal Deposit Insurance Corporation (other than members of the Federal Reserve System), by the Board of Directors of the Federal Deposit Insurance Corporation;
(2) section 5(d) of the Home Owners Loan Act of 1933, section 407 of the National Housing Act, and sections 6(i) and 17 of the Federal Home Loan Bank Act, by the Federal Home Loan Bank Board (acting directing or through the Federal Savings and Loan Insurance Corporation), in the case of any institution subject to any of those provisions;
(3) the Federal Credit Union Act, by the Administrator of the National Credit Union Administration with respect to any Federal credit union;
(4) subtitle IV of Title 49, by the Interstate Commerce Commission with respect to any common carrier subject to such subtitle;
(5) the Federal Aviation Act of 1958, by the Secretary of Transportation with respect to any air carrier or any foreign air carrier subject to that Act; and
(6) the Packers and Stockyards Act, 1921 (except as provided in section 406 of that Act), by the Secretary of Agriculture with respect to any activities subject to that Act.

(c) For the purpose of the exercise by any agency referred to in subsection (b) of its powers under any Act referred to in that subsection, a violation of any requirement imposed under this title shall be deemed to be a violation of a requirement imposed under that Act. In addition to its powers under any provision of law specifically referred to in subsection (b), each of the agencies referred to in that subsection may exercise, for the purpose of enforcing compliance with any requirement imposed under this title any other authority conferred on it by law, except as provided in subsection (d).

(d) Neither the Commission nor any other agency referred to in subsection (b) may promulgate trade regulation rules or other regulations with respect to the collection of debts by debt collectors as defined in this title.

815. Reports to Congress by the Commission [15 USC 1692m]
(A) Not later than one year after the effective date of this title and at one-year intervals thereafter, the Commission shall make reports to the Congress concerning the administration of its functions under this title, including such recommendations as the Commission deems necessary or appropriate. In addition, each report of the Commission shall include its assessment of the extent to which compliance with this title is being achieved and a summary of the enforcement actions taken by the Commission under section 814 of this title.
(B) In the exercise of its functions under this title, the Commission may obtain upon request the views of any other Federal agency which exercises enforcement functions under section 814 of this title.

816. Relation to State laws [15 USC 1692n]
This title does not annul, alter, or affect, or exempt any person subject to the provisions of this title from complying with the laws of any State with respect to debt collection practices, except to the extent that those laws are inconsistent with any provision of this title, and then only to the extent of the inconsistency. For purposes of this section, a State law is not inconsistent with this title if the protection such law affords any consumer is greater than the protection provided by this title.

817. Exemption for State regulation [15 USC 1692o]
The Commission shall by regulation exempt from the requirements of this title any class of debt collection practices within any State if the Commission determines that under the law of that State that class of debt collection practices is subject to requirements substantially similar to those imposed by this title, and that there is adequate provision for enforcement.

818. Effective date [15 USC 1692 note]
This title takes effect upon the expiration of six months after the date of its enactment, but section 809 shall apply only with respect to debts for which the initial attempt to collect occurs after such effective date.
Approved September 20, 1977

ENDNOTES
1. So in original; however, should read "604(a)(3)." LEGISLATIVE HISTORY:
Public Law 95-109 [H.R. 5294]
HOUSE REPORT No. 95-131 (Comm. on Banking, Finance, and Urban Affairs).
SENATE REPORT No. 95-382 (Comm. on Banking, Housing, and Urban Affairs).
CONGRESSIONAL RECORD, Vol. 123 (1977):
Apr. 4, considered and passed House.
Aug. 5, considered and passed Senate, amended.
Sept. 8, House agreed to Senate amendment.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 13, No. 39:
Sept. 20, Presidential statement. AMENDMENTS:
SECTION 621, SUBSECTIONS (b)(3), (b)(4) and (b)(5) were amended to transfer certain administrative enforcement responsibilities, pursuant to Pub. L. 95-473, ¤ 3(b), Oct. 17, 1978. 92 Stat. 166; Pub. L. 95-630, Title V. ¤ 501, November 10, 1978, 92 Stat. 3680; Pub. L. 98-443, ¤ 9(h), Oct. 4, 1984, 98 Stat. 708.
SECTION 803, SUBSECTION (6), defining "debt collector," was amended to repeal the attorney at law exemption at former Section (6)(F) and to redesignate Section 803(6)(G) pursuant to Pub. L. 99-361, July 9, 1986, 100 Stat. 768. For legislative history, see H.R. 237, HOUSE REPORT No. 99-405 (Comm. on Banking, Finance and Urban Affairs). CONGRESSIONAL RECORD: Vol. 131 (1985): Dec. 2, considered and passed House. Vol. 132 (1986): June 26, considered and passed Senate.
SECTION 807, SUBSECTION (11), was amended to affect when debt collectors must state (a) that they are attempting to collect a debt and (b) that information obtained will be used for that purpose, pursuant to Pub. L. 104-208 ¤ 2305, 110 Stat. 3009 (Sept. 30, 1996).

 

FDIC Guidelines on Debt Collection

FDIC Guidelines to State Chartered Banks on Debt Collections 3-11-2004

 

Unfair or Deceptive Acts or Practices by State-Chartered Banks

 

FIL-26-2004 March 11, 2004

 

TO: CHIEF EXECUTIVE OFFICER (also of interest to Compliance Officer)

 

SUBJECT: Unfair or Deceptive Acts or Practices Under Section 5 of the Federal Trade Commission Act

 

SUMMARY: The FDIC and the Board of Governors of the Federal Reserve System are issuing guidance to state-chartered banks to outline the standards that the agencies will consider when applying the prohibitions against unfair or deceptive acts or practices found in section 5 of the Federal Trade Commission Act. The guidance also provides information about managing risks relating to unfair or deceptive acts or practices, including best practices.

 

In FIL-57-2002, issued May 30, 2002, the FDIC informed state nonmember banks that these prohibitions apply to their activities, and that the FDIC would issue guidance about how institutions could avoid engaging in practices that might be viewed as unfair or deceptive. In its corresponding release, the Federal Reserve Board indicated that it would work with the FDIC to prepare additional guidance for state member banks on this subject. The attached guidance fulfills these commitments.

 

Specifically, the guidance explains:

 

* the standards used to assess whether an act or practice is unfair or deceptive;

* the interplay between the FTC Act and other consumer protection statutes; and

* guidelines for managing risks related to unfair and deceptive practices.

 

Although most insured banks adhere to high levels of professional conduct, managers of all banks must remain vigilant against possible unfair or deceptive acts or practices to protect consumers and to minimize their own risk.

 

For more information about the guidance, please contact April P. Breslaw, Section Chief (202- 898-6609); Deirdre Foley, Senior Policy Analyst (202-898-6612); or Mira N. Marshall, Senior Policy Analyst (202-898-3912), in the Division of Supervision and Consumer Protection.

 

For your reference, FDIC Financial Institution Letters (FILs) may be accessed from the FDIC's Web site at www.fdic.gov/news/news/financial/2004/index.html.

Michael J. Zamorski

Director

Division of Supervision and Consumer Protection

 

Unfair or Deceptive Acts or Practices by State-Chartered Banks March 11, 2004

 

http://www.fdic.gov/news/news/financial/2004/fil2604a.html

Purpose

The Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (the "Board" and the "FDIC," or collectively, the "Agencies") are issuing this statement to outline the standards that will be considered by the Agencies as they carry out their responsibility to enforce the prohibitions against unfair or deceptive trade practices found in section 5 of the Federal Trade Commission Act ("FTC Act") as they apply to acts and practices of state-chartered banks. The Agencies will apply these standards when weighing the need to take supervisory and enforcement actions and when seeking to ensure that unfair or deceptive practices do not recur.

 

This statement also contains a section on managing risks relating to unfair or deceptive acts or practices, which includes best practices as well as general guidance on measures that state-chartered banks can take to avoid engaging in such acts or practices.

 

Although the majority of insured banks adhere to a high level of professional conduct, banks must remain vigilant against possible unfair or deceptive acts or practices both to protect consumers and to minimize their own risks.

 

Coordination of Enforcement Efforts

Section 5(a) of the FTC Act prohibits "unfair or deceptive acts or practices in or affecting commerce," and applies to all persons engaged in commerce, including banks. The Agencies each have affirmed their authority under section 8 of the Federal Deposit Insurance Act to take appropriate action when unfair or deceptive acts or practices are discovered.

 

A number of agencies have authority to combat unfair or deceptive acts or practices. For example, the FTC has broad authority to enforce the requirements of section 5 of the FTC Act against many non-bank entities. In addition, state authorities have primary responsibility for enforcing state statutes against unfair or deceptive acts or practices. The Agencies intend to work with these other regulators as appropriate in investigating and responding to allegations of unfair or deceptive acts or practices that involve state banks and other entities supervised by the Agencies.

 

Standards for Determining What is Unfair or Deceptive

The FTC Act prohibits unfair or deceptive acts or practices. Congress drafted this provision broadly in order to provide sufficient flexibility in the law to address changes in the market and unfair or deceptive practices that may emerge.

 

An act or practice may be found to be unfair where it "causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition." A representation, omission, or practice is deceptive if it is likely to mislead a consumer acting reasonably under the circumstances and is likely to affect a consumer's conduct or decision regarding a product or service.

 

The standards for unfairness and deception are independent of each other. While a specific act or practice may be both unfair and deceptive, an act or practice is prohibited by the FTC Act if it is either unfair or deceptive. Whether an act or practice is unfair or deceptive will in each instance depend upon a careful analysis of the facts and circumstances. In analyzing a particular act or practice, the Agencies will be guided by the body of law and official interpretations for defining unfair or deceptive acts or practices developed by the courts and the FTC. The Agencies will also consider factually similar cases brought by the FTC and other agencies to ensure that these standards are applied consistently.

 

Unfair Acts or Practices

Assessing whether an act or practice is unfair

 

An act or practice is unfair where it (1) causes or is likely to cause substantial injury to consumers, (2) cannot be reasonably avoided by consumers, and (3) is not outweighed by countervailing benefits to consumers or to competition. Public policy may also be considered in the analysis of whether a particular act or practice is unfair. Each of these elements is discussed further below.

 

* The act or practice must cause or be likely to cause substantial injury to consumers.

 

To be unfair, an act or practice must cause or be likely to cause substantial injury to consumers. Substantial injury usually involves monetary harm. An act or practice that causes a small amount of harm to a large number of people may be deemed to cause substantial injury. An injury may be substantial if it raises a significant risk of concrete harm. Trivial or merely speculative harms are typically insufficient for a finding of substantial injury. Emotional impact and other more subjective types of harm will not ordinarily make a practice unfair.

 

* Consumers must not reasonably be able to avoid the injury.

 

A practice is not considered unfair if consumers may reasonably avoid injury. Consumers cannot reasonably avoid injury from an act or practice if it interferes with their ability to effectively make decisions. Withholding material price information until after the consumer has committed to purchase the product or service would be an example of preventing a consumer from making an informed decision. A practice may also be unfair where consumers are subject to undue influence or are coerced into purchasing unwanted products or services.

 

The Agencies will not second-guess the wisdom of particular consumer decisions. Instead, the Agencies will consider whether a bank's behavior unreasonably creates or takes advantage of an obstacle to the free exercise of consumer decision-making.

 

* The injury must not be outweighed by countervailing benefits to consumers or to competition.

 

To be unfair, the act or practice must be injurious in its net effects -that is, the injury must not be outweighed by any offsetting consumer or competitive benefits that are also produced by the act or practice. Offsetting benefits may include lower prices or a wider availability of products and services.

 

Costs that would be incurred for remedies or measures to prevent the injury are also taken into account in determining whether an act or practice is unfair. These costs may include the costs to the bank in taking preventive measures and the costs to society as a whole of any increased burden and similar matters.

 

* Public policy may be considered.

 

Public policy, as established by statute, regulation, or judicial decisions may be considered with all other evidence in determining whether an act or practice is unfair. For example, the fact that a particular lending practice violates a state law or a banking regulation may be considered as evidence in determining whether the act or practice is unfair. Conversely, the fact that a particular practice is affirmatively allowed by statute may be considered as evidence that the practice is not unfair. Public policy considerations by themselves, however, will not serve as the primary basis for determining that an act or practice is unfair.

 

Deceptive Acts and Practices

Assessing whether an act or practice is deceptive

 

A three-part test is used to determine whether a representation, omission, or practice is "deceptive." First, the representation, omission, or practice must mislead or be likely to mislead the consumer. Second, the consumer's interpretation of the representation, omission, or practice must be reasonable under the circumstances. Lastly, the misleading representation, omission, or practice must be material. Each of these elements is discussed below in greater detail.

 

* There must be a representation, omission, or practice that misleads or is likely to mislead the consumer.

 

An act or practice may be found to be deceptive if there is a representation, omission, or practice that misleads or is likely to mislead the consumer. Deception is not limited to situations in which a consumer has already been misled. Instead, an act or practice may be found to be deceptive if it is likely to mislead consumers. A representation may be in the form of express or implied claims or promises and may be written or oral. Omission of information may be deceptive if disclosure of the omitted information is necessary to prevent a consumer from being misled.

 

In determining whether an individual statement, representation, or omission is misleading, the statement, representation, or omission will not be evaluated in isolation. The Agencies will evaluate it in the context of the entire advertisement, transaction, or course of dealing to determine whether it constitutes deception. Acts or practices that have the potential to be deceptive include: making misleading cost or price claims; using bait-and-switch techniques; offering to provide a product or service that is not in fact available; omitting material limitations or conditions from an offer; selling a product unfit for the purposes for which it is sold; and failing to provide promised services.

 

* The act or practice must be considered from the perspective of the reasonable consumer.

 

In determining whether an act or practice is misleading, the consumer's interpretation of or reaction to the representation, omission, or practice must be reasonable under the circumstances. The test is whether the consumer's expectations or interpretation are reasonable in light of the claims made. When representations or marketing practices are targeted to a specific audience, such as the elderly or the financially unsophisticated, the standard is based upon the effects of the act or practice on a reasonable member of that group.

 

If a representation conveys two or more meanings to reasonable consumers and one meaning is misleading, the representation may be deceptive. Moreover, a consumer's interpretation or reaction may indicate that an act or practice is deceptive under the circumstances, even if the consumer's interpretation is not shared by a majority of the consumers in the relevant class, so long as a significant minority of such consumers is misled.

 

In evaluating whether a representation, omission or practice is deceptive, the Agencies will look at the entire advertisement, transaction, or course of dealing to determine how a reasonable consumer would respond. Written disclosures may be insufficient to correct a misleading statement or representation, particularly where the consumer is directed away from qualifying limitations in the text or is counseled that reading the disclosures is unnecessary. Likewise, oral disclosures or fine print may be insufficient to cure a misleading headline or prominent written representation.

 

* The representation, omission, or practice must be material.

 

A representation, omission, or practice is material if it is likely to affect a consumer's decision regarding a product or service. In general, information about costs, benefits, or restrictions on the use or availability of a product or service is material. When express claims are made with respect to a financial product or service, the claims will be presumed to be material. Similarly, the materiality of an implied claim will be presumed when it is demonstrated that the institution intended that the consumer draw certain conclusions based upon the claim.

 

Claims made with the knowledge that they are false will also be presumed to be material. Omissions will be presumed to be material when the financial institution knew or should have known that the consumer needed the omitted information to evaluate the product or service.

 

COMPLAINTS

 

Complaints should be mailed to the appropriate agency with copies of all relevant documents. Original documents or currency should not be sent. Addresses for the federal agencies are:

 

Board of Governors of the Federal Reserve System

Division of Consumer and Community Affairs

20th & Constitution Avenue, NW

Washington, DC 20551

 

Federal Deposit Insurance Corporation

Office of Consumer Affairs

550 Seventeenth Street, NW

Washington, DC 20429

 

Office of Thrift Supervision

Consumer Affairs

1700 G Street, NW

Washington, DC 20552

 

National Credit Union Administration

1775 Duke Street

Alexandria, Virginia 22314-3428

 

Office of the Comptroller of the Currency

Customer Assistance Group

1301 McKinney Street

Suite 3710

Houston, TX 77010

 

Federal Trade Commission

Bureau of Consumer Protection

Office of Credit Practices

Washington, DC 20580

 

Fair Debt Collection Practices Act

 

The Fair Debt Collection Practices Act prohibits unfair, deceptive, and abusive practices related to the collection of consumer debts. Although this statute does not by its terms apply to banks that collect their own debts, failure to adhere to the standards set by this Act may support a claim of unfair or deceptive practices in violation of the FTC Act. Moreover, banks that either affirmatively or through lack of oversight, permit a third-party debt collector acting on their behalf to engage in deception, harassment, or threats in the collection of monies due may be exposed to liability for approving or assisting in an unfair or deceptive act or practice.

 

OCC

 

http://www.occ.treas.gov/ftp/advisory/2002-3.doc

 

* Fair Debt Collection Practices Act

 

The Fair Debt Collection Practices Act (FDCPA) prohibits unfair, deceptive, and abusive practices related to collection of consumer debts. Although the bank itself may not be subject to the FDCPA when a third party collects debts on its behalf, it nevertheless faces reputation risk - and potential legal risk for approving or assisting in an unfair or deceptive act or practice in violation of the FTC Act - if the third party violates the FDCPA by engaging in deception, harassment, or threats in the collection of the bank's loans.

 

FIL-26-2004 Unfair or Deceptive Acts or Practices Under Section 5 of the Federal Trade Commission Act

 

FTC Original Creditor Suit

FTC - Original Creditor Suit Finalized 10/8/2004

Complaints about creditors' in-house collectors: The Commission also received 12,906 complaints in 2003 about creditors that were collecting their own debts, down from 14,705 in 2002. Because creditors are not generally covered by the FDCPA, some in-house collectors use no-holds-barred collection tactics in their dealings with consumers. While the Commission cannot pursue such creditors under the FDCPA, it has done so under the Federal Trade Commission Act in the past, and will continue to do so in the future as appropriate cases present themselves.

 

Two Companies Settle Harassment Charges Relating to Debt Collection.

 

Two companies whose representatives allegedly harassed consumers with multiple phone calls and abusive language have agreed to settle Federal Trade Commission charges that their business practices violated federal law. The FTC's complaint against Applied Card Systems alleged that, as part of the companies' debt collection practices, representatives repeatedly call third parties who had already told them they did not have any information about the consumers from whom the companies were trying to collect payments.

 

According to the FTC, representatives of Applied Card Systems, Inc., and Applied Card Systems of Pennsylvania, Inc., call third parties, including relatives, neighbors, and employers, attempting to get information about where consumers live or work in order to contact them about a delinquent debt. The FTC alleges that the representatives have continued to call these third parties, even after they have told the representatives that the consumer they are looking for does not reside or work with them. Many of the third parties requested that the representatives stop calling them. The FTC charges that, in many cases, the companies' representatives harassed the third parties with repeated phone calls, and abusive, sometimes obscene, language.

 

The consent order bars the respondents from:

* Contacting any third party more than once unless the third party requests that they do so, or unless they reasonably believe that the third party gave them incorrect or incomplete information and now has further information;

* Harassing third parties with abusive or obscene language or repeated phone calls;

* Communicating with a consumer to collect on a delinquent debt: (1) at a time or place the consumer has said is inconvenient; (2) at the consumer's place of employment if the consumer has already stated that the employer prohibits personal phone calls; and (3) if the consumer is represented by an attorney with respect to the debt;

* Falsely representing to consumers the amount or status of a debt or threatening to take action against a consumer that they do not intend to take or that is illegal to take;

* Collecting any amount other than the amount expressly stated in the agreement creating the debt; and

* Applying a consumer's payment in a way that the consumer has not directed.

 

The proposed consent agreement also contains standard record keeping requirements to assist the FTC in monitoring the Respondents' compliance.

 

The Commission vote authorizing the staff to file the comments was 5-0.

 

Commission approval of final consent order: Following a public comment period, the Commission has approved a final consent order in the matter concerning Applied Card Systems, Inc., et al. The Commission vote to approve the final consent order was 5-0. (FTC File No. 032-3040; the staff contact is Jessica D. Gray, FTC Southeast Region, 404-656-1350; see press release dated August 25, 2004.) (http://www.ftc.gov/opa/2004/10/fyi0458.htm)