Where is the CFPB to protect those suffering from phantom debt?
Last week Bloomberg published an article how a man had had enough of bogus debt collectors harassing him and his family to collect a phantom debt, money he didn’t owe. Andrew Therrien used his own money and time to locate these people and found help only from the FBI and the Federal Trade Commission (FTC).
Do you know which agency was missing? The Consumer Finance Protection Bureau (CFPB), an brainchild of Senator Elizabeth Warren (D-MA). Instead of focusing on fraud, the agency decided to target already well-regulated businesses that help the poor.
The man who had had enough
Andrew Therrien is the man who has had enough. He is one of the millions of Americans who have found themselves in phantom debt, or money they don’t really owe. Of Bloomberg:
Therrien had been caught up in a fraud known as Phantom Debt, where millions of Americans are forced to repay money they don’t owe. The concept is centuries old: Inmates at a New York debt prison joked about it as early as 1800, in a newspaper they published called Forlorn Hope. But the systematic schemes of collecting false debts began only about five years ago. It starts when someone grabs treasures of personal information cheaply available online (old loan applications, long-standing obligations, data from hacked accounts) and reformats it to look like a list of debts. Then they make deals with unscrupulous collectors who will demand reimbursement of the fictitious invoices. Their targets are often poor and are already at risk of receiving confused calls about other loans. Harassment usually doesn’t work, but some brands are convinced that because collectors know so much the debt must be real.
Bloomberg noted that the FTC had “halted” 13 scams since 2012 after a call center in India broke up after being caught “making 8 million calls in eight months to collect fabricated bills.” Unfortunately, authorities are struggling to identify “the original authors because the data files have been sold and repackaged so many times”.
Therrien would spend all night finding the owners of these agencies and try to coax them on his side. Other times he would make a small payment to keep track of bank statements. This led him to “people convicted of counterfeiting, stock market fraud, drug trafficking and indecent assault on children”.
Therrien’s problem led him to the Tucker brothers: Ted, Scott and Joel. They had a plan with a payday loan store and managed to make a ton of money by having websites “owned on paper by a Native American tribe, which could claim sovereign immunity from regulators.” These websites would charge “up to $ 150 interest on a two-week $ 500 loan, or an annualized interest rate of about 700%.”
It all finally fell apart for the Tuckers, which led Therrien to conclude this:
In November 2015, he developed a simple theory. Tucker’s company had given him access to a huge database of people who had applied for loans, including, perhaps, the one Therrien had taken out when he was selling photocopiers. What if, when Tucker was broke and needed money, he took personal information from applicants, invented loan balances, and sold the list as a portfolio of overdue debts?
He contacted the FBI and the FTC about his theory. Strangely enough, the CFPB did not appear in the article.
In 2016, a collection manager sent Therrien an email that contained “ghost debt files, with names and social security numbers.” He came up with the name of Rob Harsh, the IT guy for Tucker:
Harsh, who declined to comment for this story, said Tucker asked him to manipulate a database of nearly 8 million payday loan applications, writing a fictitious lender and adding an amount owed of $ 300 to each person.
Therrien had been right from the start.
Why have the CFPB?
Go to the CFPB website and it has its goal in big bold print: an agency “that makes sure that banks, lenders and other financial companies treat you fairly.” The agency was born after the 2008 financial crisis in Dodd-Frank. He doesn’t respond to anyone, which gave former Chief Richard Cordray unchecked power.
Instead of going after people like Tucker, the CFPB has adopted a new rule against legitimate breakdown companies:
The new CFPB rule will end payday loan debt traps by forcing lenders to take steps to ensure people can repay their loans.
The rule will also prevent lenders from attempting to collect payments from people’s bank accounts in a way that incurs excessive fees. Our new debt trap protections will apply to some small dollar loans, including payday loans and some vehicle title loans.
The rules were passed in October, and the owners of these businesses raged against the agency because the majority of clients need money for emergencies. With too many regulations, customers could end up turning to people like the Tuckers:
“Taking away their access to this line of credit means that many other Americans will have no choice but to turn to the unregulated lending industry, abroad and elsewhere. [sic], while others will simply reject the checks and suffer under the weight of greater debt, ”said Edward D’Alessio, head of the Financial Service Centers of America, a trade group.
The left always goes crazy about loopholes and yet these rules did not close this important loophole that the Tuckers were using to rip people off.
A bipartisan group in the House has pledged to fight the new rule. Representative Dennis Ross (R-FL) say that a lot in his state rely on its “carefully regulated low dollar lending industry to make ends meet” and insisted that MPs “cannot sit idly by while irresponsible federal agency denies voters a lifeline when needed, while usurping state authority. “
House Financial Services Committee Chairman Jeb Hensarling (R-TX) reminded CFPB that Americans have the freedom to choose the loan they want and don’t need an “unelected Washington bureaucrat” to tell them what to do.
But. What is the interest of the CFPB if it attacks legitimate companies instead of those who commit fraud against others? You know those people like the Tuckers who sell people’s information and take money from other people for debt they don’t owe?
If the FTC can handle this, why have the CFPB?
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