Communicating with Consumers Via E-Mail
Published: January 19, 2009
Using e-mail to contact consumers carries numerous benefits and definite risks.

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Many agencies have inquired about attempting to collect unpaid accounts by using e-mail. The benefits to using this method are indisputable. The money saved on letter printing costs and postage would be tremendous. Additionally, the speed of electronic communication obviously surpasses that of the traditional “snail mail.” Despite the undeniable benefits of using e-mail, there are also risks associated with this method of communication. It is vital collectors familiarize themselves with such risks in order to comply with governing laws.

Perhaps the greatest concern surrounding the use of e-mail is the risk of a third-party disclosure under the Fair Debt Collection Practices Act (FDCPA). The risk of a violation of the FDCPA for an inadvertent third-party disclosure may be minimized, if not absolved, if a consumer consents to receiving communications via e-mail. Thus, prior to communicating with the consumer by e-mail, a collector should obtain the express consent of the consumer. The consent may be verbal, written or electronic. Any such consented provided by the consumer must be documented and maintained by the debt collector.

A collector's Web site may include a check-off box, which would give consumers the option of receiving future communications from the collection agency via e-mail. The collector should ask the consumer not to provide a shared e-mail address or a work e-mail address. Additionally, the collector may wish to inform the consumer what information may be sent to their e-mail address and that their address will not be sold or distributed to any third party.

If a debt collector does choose to communicate by e-mail, the communication should be treated the same as any other type of written correspondence to a consumer. The e-mail will need to provide the Mini-Miranda disclosure and any state special text requirements.

The opportunities for cost savings associated with communicating with consumers expand as technology advances. Join Matt Edmunds with SoundBite Communications at the 2009 March for Success Technology Track in Las Vegas, March 15-17, 2009, when he discusses alternative communication methods available to debt collectors, including e-mail, instant message, text messaging and others.

Americans Pulled Back Spending Before Economic Crisis
Published: January 12, 2009
From spring 2007 to summer 2008, the percentage of U.S. adults who felt they would be financially better off in the next year dropped considerably from 46 percent to 37 percent.

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Consumer confidence and spending began slowing as early as spring 2007, according to an analysis by Experian Marketing Services. The analysis found that from spring 2007 to summer 2008, the percentage of U.S. adults who felt they would be financially better off in the next year dropped considerably from 46 percent to 37 percent.

The analysis, which compared the self-reported economic confidence and spending habits of adult Americans along with online site traffic and searches on major purchase items, revealed consumer behaviors to be a strong indicator of a downturn months before the current economic crisis. Not only did the percentage of confident consumers slump, but the number of adults who felt they would be worse off in the coming year grew by 9 percent to 22 percent.

The analysis also found that:

• Households earning $250,000 or more were the fastest to abandon the notion they would be somewhat or significantly better off in the coming year, dropping by 40 percent from spring 2007 to summer 2008.
• Middle- and upper-middle-income Americans (incomes ranging from $50,000 to $249,000) had the largest declines among those who planned to purchase big- or medium-ticket items within the next month, falling nearly 25 percent.
• From October 2006 to October 2008, overall visits to retail Web sites slowed, with a 4 percent year-over-year decline.
• During the same time period, overall visits to Web sites in the travel category were down 10 percent year over year.
• Online searches for major electronic items saw significant, year-over-year decreases, with “televisions” down 33 percent, “laptops” down 48 percent and “computers” down 57 percent.
• While online interest in big-ticket purchases decreased, visits to grocery Web sites are up 29 percent, and visits to coupon Web sites are up 27 percent.

This article is provided as a service of ACA's Creditors International Division.

New Credit Card Rules Approved
Published: January 12, 2009
Under new federal rules, banks and other issuers are prohibited from committing unfair credit card practices.

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On Dec. 18, 2008, federal regulators approved rules prohibiting banks and other issuers from committing unfair credit card practices, such as raising the interest rate on an existing balance when consumers are paying their credit card bills on time.

The Office of Thrift Supervision (OTS), the Federal Reserve Board (FRB) and the National Credit Union Administration (NCUA) all approved the rules, creating uniform protection for consumers regardless of the financial institution that issued their credit card. The OTS version of the rule applies to savings associations, the FRB version applies to banks, while the NCUA rule will apply to federal credit unions.

Among others, highlights of the final rules are:

• Clearer due dates, times and credit terms.
• 45-day notice must be given before any changes are made to the terms of an account.
• Elimination of double-cycle billing (when there are imposed finance charges based on balances associated with previous billing cycles).
• Reasonable time to pay monthly bills (as a “safe harbor,” a reasonable time would be 21 days after a bill is mailed).
• Interest rate hikes on existing balances are allowed only under limited conditions. Interest rates on new transactions can increase only after the first year.
• Prohibits charging fees for the issuance or availability of credit that consume the majority of the available credit during the first year after account opening. Fees exceeding 25 percent of the available credit must be spread over no less than the first six months that the account is open, rather than charged as a lump sum during the first billing cycle.
• When an account has balances with different APRs, amounts paid in excess of the minimum payment must be allocated to the highest interest balance or allocated proportionately to all balances.
• Limitations on over-the-limit fees.
• Ending the practice of raising interest rates based on consumer's payment records with non- related credit issuers (known as “universal default”).
• Elimination of deceptive offers of credit.

Although the rule will not take effect until July 1, 2010, institutions and agencies that will be required to comply with the new rules are encouraged to conform to as soon as it is reasonable.

Price Ceiling for Consumer Reports Increases
Published: January 5, 2009
As required by the Fair Credit Reporting Act, the Federal Trade Commission has adjusted the ceiling on allowable charges for consumer reports to $11.

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The Federal Trade Commission (FTC) has increased the ceiling on allowable charges for consumer reports from $10.50 to $11. The change became effective Jan. 1, 2009. Under 1996 amendments to the Fair Credit Reporting Act (FCRA), the FTC is required to revise the ceiling each year based on changes in the Consumer Price Index.

The FTC reminded consumers this charge does not apply to a consumer's request for free annual disclosures, which are required under Section 612(a)(1)(A) of the FCRA. Under federal law, consumers are entitled to a free copy of their consumer report from each of the nationwide consumer reporting agencies once every 12 months. The charge for a consumer report only applies when a consumer who has received a free annual consumer report does not otherwise qualify for an additional free disclosure.

A consumer is also entitled to a free report if a company takes adverse action against her (such as a denial of an application for credit, insurance or employment) and the consumer requests a report within 60 days of receiving notice of the action. Additionally, consumers are entitled to one free report a year if they are unemployed and plan to seek employment within 60 days; they are on public assistance; or their report is inaccurate because of fraud, such as identity theft.

Two-Thirds of Americans Blame Media for Making Economic Crisis Worse
Published: January 5, 2009
Majority of survey respondents think the financial press has damaged consumer confidence via their coverage of the economy.

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Seventy-seven percent of Americans believe that the U.S. media is making the economic situation worse by projecting fear into people's minds.

The majority of those surveyed feel that the financial press, by focusing on and embellishing negative news, is damaging consumer confidence and damping investment, making a difficult situation much worse.

The survey of 1,000 adults, conducted Dec. 4-7, 2008, by Opinion Research Corporation, asked, "Do you think the financial press is making the economic crisis worse by projecting fear into people's minds?"

"Although statements by the media are protected by the First Amendment, the survey results demonstrate that the public believes that the press bears some responsibility for the lack of confidence in the economy. One would hope that the media would act less out of self-interest in these times of national crisis," said Richard L. Scheff, a national expert on corporate liability and white collar crime issues, and vice chairman and partner with Philadelphia-based law firm Montgomery McCracken Walker & Rhoads.

FTC Issues Report on Social Security Numbers and Identity Theft
Published: December 29, 2008
The commission recommends adopting nationwide standards for how businesses and other organizations verify the identity of new and existing customers.

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The Federal Trade Commission (FTC) issued a report on Dec. 17 recommending five measures to help prevent Social Security numbers (SSNs) from being used for identity theft. Principal among the report's recommendations is that Congress consider taking action to strengthen the procedures that private-sector organizations use to authenticate their customers' identities.

The FTC report states that adopting nationwide standards for how businesses and other organizations verify the identity of new and existing customers would make it harder for identity thieves to use SSNs and other stolen information to consummate their fraud.

“The first step in minimizing the role of SSNs in identity theft is to limit the demand for SSNs by making it more difficult for thieves to use them to open new accounts, access existing accounts, or obtain other benefits or services,” the FTC report states.

Currently, the only private-sector organizations subject to nationwide authentication standards are financial institutions regulated by the federal banking agencies. The FTC's report recommends that Congress consider establishing similar standards to cover all private-sector entities that maintain consumer accounts. Such standards would require organizations to adopt reasonable procedures for authenticating customers, but would also allow them to adopt a program that is compatible with their size and the nature of their business.

The FTC report also recommends that steps be taken to reduce the unnecessary display and transmission of SSNs, but noted that such restrictions must be approached carefully. A number of important functions in the U.S. economy depend on use of and access to SSNs, and the report concluded that overly restrictive attempts to limit the availability of SSNs could unintentionally curtail those functions. Finally, the report recommends steps to improve data security, increase outreach to consumers and businesses on the protection of SSNs, and enhance coordination and information sharing among organizations that routinely use SSNs.

The report was developed pursuant to a recommendation of the President's Identity Theft Task Force, which was established in May 2006 to develop a coordinated plan to prevent identity theft, prosecute identity thieves, and help victims recover from the crime. The report is based on extensive fact finding by the FTC and other federal agencies, including public comments and a workshop the FTC conducted on Dec. 10-11, 2007.

The task force agencies have undertaken a series of measures to curtail the use of SSNs by federal agencies as well. Information on those efforts can be found in the President's Identity Theft Task Force Report, which summarizes the steps taken to implement the Task Force recommendations.

This article is provided as a service of ACA International's Legal and Government Affairs Department.

Consumer Confidence Hovers Near Six-Year Low
Published: December 29, 2008
Americans’ confidence in their future personal financial conditions, current conditions and the jobs market continues to erode.

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Consumer sentiment plunged to a near all-time low as Americans continued to be bombarded with bleak economic news, according to the most recent results of the Royal Bank of Canada (RBC) Consumer Attitudes and Spending by Household (CASH) Index.

The survey found that while consumer attitudes regarding investing show signs of stabilizing, Americans' confidence in their future personal financial conditions, current conditions and the jobs market continues to erode. As a result, the overall RBC CASH Index stands at 15.3 for December, 19.4 points below November's 34.7 level, and nearly in line with the all-time low of 14.6 reached in July 2008.

The RBC Jobs Index dropped more than 8 points in December to 65.6, compared to 74.0 last month. Personal job loss experience has now touched half of all Americans, as 50 percent of consumers report job loss in their immediate circle, compared to 48 percent last month and 43 per cent in October.

Americans' gloomy outlook was underscored by the plunge seen in the RBC Expectations Index, which dropped 44.5 points, to -21.2, the first time the index has been in negative territory since August 2008. The sharp decline in the index is being driven by job worries and a drop in consumers' expectations for their local economy. In December, nearly one-third of consumers (31 percent) said they believe their local economy will be weaker six months from now, up from 24 percent last month.

The RBC Current Conditions Index dropped to an all-time low in December and currently stands at 16.5, compared to 25.6 last month. Consumers' worries over the current state of their local economy fed the decline in the index, as more than half of all Americans (53 percent) rate their local economy as weak to very weak, up from 46 percent last month. Ratings of current personal finances also declined, with 36 percent of Americans rating their current financial situation as weak, compared to 33 percent in November.

Americans' overall opinions regarding investing remained relatively stable this month although at the lowest level ever. The RBC Investment Index, which was at 34.8 in November, currently stands at 31.0, a new low since the index was created in 2002. Americans continue to be cautious about making major purchases and two-thirds of Americans (65 percent) now believe the next 30 days will be a bad time to invest in the stock market, versus 62 percent last month.

View the entire RBC CASH Index report.

This article is provided as a service of ACA's Creditors International Division.

Bankruptcy Filings Increase 34 Percent
Published: December 29, 2008
Business filings during the third quarter of 2008 eclipsed the number of filings during the entire previous year.

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The 292,291 total U.S. bankruptcies filed during the third quarter of 2008 (July 1 – Sept. 30) represented a 34 percent increase over the 218,909 cases filed over the same period in 2007, according to data released by the Administrative Office of the U.S. Courts. Total filings for the first nine months of 2008 (Jan. 1 – Sept. 30) were up 35 percent to 841,496, compared to the 622,999 filings during the same period in 2007.

“The dramatic spike in both personal and business bankruptcies reflects an economy in distress, with worried consumers over-extended and unable to supply the spending typically needed to keep the national economy going,” said American Bankruptcy Institute Executive Director Samuel J. Gerdano.

The 29,960 business bankruptcies recorded during the first three quarters of 2008 (Jan. 1 – Sept. 30) have eclipsed the full year 2007 (Jan. 1- Dec. 31) business filing total of 28,137. Business filings represented the sharpest increase during the three-month period ending Sept. 30, 2008, with 11,504 filings, up 61 percent over the 7,167 business filings in 2007. Chapter 11 business filings spiked to 2,485 during the third quarter of 2008, an increase of 76 percent over the 1,410 filings during the similar period in 2007. Chapter 7 business filings also increased to 7,927 during the three-month period ending Sept. 30, 2008, representing a 65 percent increase over the 4,816 filings during the similar period in 2007.

Consumer filings totaled 280,787 during the third quarter of 2008 (July 1-Sept. 30), representing a 33 percent increase over the 211,742 filed during the same period of 2007. Consumer chapter 7 filings during the 2008 third quarter totaled 187,227, an increase of 47 percent over the 2007 third quarter total of 127,192. Chapter 13 consumer filings also increased during the three-month period ending Sept. 30, 2008, with the 93,333 filings, representing an 11 percent increase over the 84,376 filings during the same period in 2007.

The 1,042,993 total filings for the 12-month period ending Sept. 30 were up more than 30 percent from the same period in 2007, which totaled 801,269. The bankruptcy filing rate per thousand U.S. residents totaled 3.38 for all chapters during the 12-month period ending Sept. 30, 2008, as 2.21 Americans per thousand filed for chapter 7 while 1.15 per thousand filed for chapter 13 bankruptcy, all increases from the similar period a year ago. Tennessee was the state with the highest per capita filing rate in the country, with 7.27 residents per thousand filing in all chapters, and also had the highest per capita filing rate for chapter 13 filings at 4.16. The state with the highest per capita filing rate for chapter 7 bankruptcy was Nevada at 4.30 per thousand for the 12-month period ended Sept. 30, 2008.