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Ten years after his debt-buying firm, Commercial Financial Services, closed under a fraud scandal, William R. Bartmann — vindicated in the eyes of the law, if not his fellow market participants — is back in business.
February 23 -
New York state Chief Judge Jonathan Lippman proposed tighter rules on Wednesday to govern how banks and debt collectors sue consumers over unpaid bills. If adopted, the new proposals will require plaintiffs to provide more paperwork to support their claims.
April 30 -
Banks and debt collectors are taking over courtrooms to press consumers for payments. Local officials see these 'rocket dockets' as a way to cope with a deluge of collections suits. But their judicial appearance may also mislead debtors into believing they face offers they can't refuse.
February 11
There are few winners in the current debt collection system. The majority of debt collectors have earned their toxic reputations and are deserving of increasingly heavy regulatory scrutiny. Millions of consumers are drowning in debt and the resulting collection lawsuits and wage garnishments. Meanwhile, banks are
There may be a way for both banks and consumers to come out ahead. A tax credit proposal currently in the works could leave both banks and consumers in much better standing and with a lot more money in their pockets. Traditional debt collection companies that use threats and abuse as weapons against consumers will need to either adapt to a new business model or go the way of the buggy whip.
I am the chief executive of CFS2, a debt collection agency that helps consumers find jobs, gain financial literacy, access social services and achieve some financial order before discussing debt repayment plans. Our experience working with consumers led to the concept of helping even more people through a special tax credit under the Family Stability and Financial Literacy Improvement Act.
Under the proposed legislation, the federal government would provide banks with a one-time tax credit for the full market value of charged-off consumer debt. Banks would then donate the debt to a newly created breed of non-profits dedicated to working with consumers on repayment plans while providing them with a range of other financial services. In order to qualify, non-profits would be required to forego the use of litigation, abstain from charging consumers any interest and agree to offer job search assistance, social services, financial literacy education and advocacy services.
Each non-profit beneficiary of the consumer loans would have the flexibility and the incentive to rewrite the loans they receive into long-term repayment plans tailored to each individual consumer's situation. These non-profits would be fully licensed and subject to all state and federal laws for the collection of debt. While these requirements are tough, any non-profit committed to consumer protection would be capable of meeting the required service standards. Funded by the debts they are able to recover compassionately rather than litigiously, these non-profits would provide millions of consumers with the tools and training to improve their financial circumstances.
Banks would also stand to benefit from the proposal. Through the magic of the tax credit, banks would be able to donate their delinquent consumer loans to a non-profit and receive 40% more-than-market value proceeds to their bottom line. Here's how it works.
Banks
The Family Stability and Financial Literacy Improvement Act would also significantly reduce banks' compliance and regulatory risks. Ever since the release of the
A test case of this proposal showed promising results. The Center for Consumer Recovery, a non-profit I founded in 2012, studied CFS2's debt-recovery rates of more than 8,000 consumer debts between 2010 and 2013. The purpose of the study was to determine if the rate of recovery improved when the debt collector used a non-litigation strategy and when customers had the opportunity to improve their job situations and stabilize their financial conditions prior to repaying charged-off debt. The study results showed a debt-recovery rate over 200% higher than traditional, aggressive methods of collection. Moreover, thousands of consumers are now living better lives without the heavy anchor of debt.
According to another research project conducted by The Center for Consumer Recovery, this proposal would reduce the U.S. bankruptcy rate by 50% and put over $50 billion back onto banks' balance sheets in the form of debts not discharged or restructured by the bankruptcy court. It would drop the unemployment rate by one full point. It would also bring relief to state and local courthouses by preventing lawsuits filed against consumers each year by purchasers of charged-off debt.
These may seem like extraordinary claims, but this is no ordinary proposal. The Family Stability and Financial Literacy Improvement Act has the power to vastly increase effective revenues for banks, position bankers as leaders in a cause to rapidly improve our economy, save our legal infrastructure, and give indebted consumers the assistance and flexibility they desperately need.
Bill Bartmann is founder and CEO of CFS2, a debt collection agency that does not use litigation as a collection methodology but instead deploys a strategy of outreach to help consumers find or upgrade jobs. CFS2 also acts as an advocate to help consumers deal with other creditors and helps consumers find needed social services. He founded a non-profit organization, The Center for Consumer Recovery, to conduct consumer research and to advocate for consumers who are challenged to meet their debt service requirements.