Overview of FTC’s 

“Repairing a Broken 

System” and Recent 

Changes in Law

Bevin Murphy

Senior Attorney

Northeast Region

Federal Trade Commission

Colin Hecto

Attorney

Division of Financial Pra

Federal Trade Commi

Presented at:

Life of a Debt: Data Integrity in Debt CollectionAn FTC-CFPB roundtableWashington, DC – June 6, 2013
The FTC’s 

Roundtables R

Repairing D

Collection Litig

and Arbitrat

*Any views expressed in this presentation do not necessarily reflect the viewFTC or any individual Commissioner. This presentation has been prepared feducational purposes only and should not be treated as legal advice. Laws mchanged since this presentation was delivered.
Background

• Commission held roundtables in 200

– Followed the Commission’s 2009 rep

identified some concerns with debt clitigation and arbitration, but concludmore information was needed. 

– Nationwide. – Nearly 100 expert panelists.– Public comments solicited.

• Commission issued report in 2010 w

recommendations to improve efficienfairness to consumers.
Litigation

• Consumer Participation• Evidence of Indebtedness• Time-Barred Debt• Levy of Bank Accounts
Litigation

• Consumer Participation:

– Few consumers appear or defend.– Not clear why. Possibilities: 

• Service and notice problems.• Lack of familiarity with litigation.• Costs of participating.• Appearing or defending would b

– Recommendations include: improv

notice and service of process. 
Litigation

• Evidence of Indebtedness: Findi

– Complaints filed against wrong per

for wrong amount. 

– Complaints lack sufficient informati

• Inadequate information about al

debt.

• Inadequate information about th

underlying credit contract.
Litigation

• Evidence of Indebtedness: Recommendation

– Complaints should include:

• Original creditor + redacted account #• Default/charge-off date + amount due • Current owner of the debt.• Total amount due.• Breakdown of principal, interest, and f

– If complaints do not set forth the above inf

courts should ensure they obtain such infoby:

• Applying existing court rules, or • Consider specifying documents (or ex

in lieu of documents) that must accomcomplaints. 
Arbitration

• Arbitration Fundamental Criteria 

– Meaningful Choice - Creditors mus

consumers a meaningful choice abdebt collection arbitration.

– Fair Process - Arbitration forums m

use a fair process for arbitrating decollection disputes.

• Lack of bias• Notice and cost • Reasoned awards• Transparency 
Examples of 

Proposed & 

Enacted Rece

State Reform
Areas

• Evidence of Debt

– Debt Collection Litigation– Pre-Collection (Verification)

• Time-Barred Debts (Disclosu• Levy (Notice of Exemption)
Evidence of Debt (Litiga

• Enacted Del. Admin. Directive 

02 [Aug. 2012]

– Pleading requirement:

• Original creditor; last 4 digits of a

breakdown of principal amt. due interest/fees

– Required for default judgment: 

• Evidence showing chain of assig

underlying legal obligation

– Supersedes Del. Admin. Direct

2011-1 (2012-02 provides modforms)
Evidence of Debt (Litiga

• Enacted Maryland Court Rul

(Rules 3-306, 3-308, 3-509) [Sept. 2011]

– Judgment by affidavit: 

• Documentation establishing pro

existence of account (not affidavproof of plaintiff’s ownership (incof sale)

• Itemization of post-charge-off fe

and charges
Evidence of Debt (Litiga

• Sup. Ct. Tex. Rule 508 (Deb

Claim Cases) [Apr. 2013]

– Pleading Requirements

• Account name or credit card na

account number; date of issue oorigination if known; date of chaif known; amount owed; whetheplaintiff seeks interest

• W/R/T assigned debt: debt claim 

transferred or assigned; date of transfer/assignment; name of prholders of the debt; name or desof original creditor
Evidence of Debt (Litiga

• Rule 508 continued:

– Default Judgments

• Evidence of damages (sworn 

statement or live testimony, may include documents)

• Judge cannot reject sworn state

only because it is not made by toriginal creditor or because the documents attested to were crea third party and subsequently incorporated into and relied upothe business of the plaintiff
Evidence of Debt 

(Validation)

• Enacted Mass. Revisions (94

CMR 7.08) [Mar. 2012]

– Requires that certain informat

documents in a creditor’s possession be produced in response to a validation reque

– Imposes “automatic stay” on 

collection activity before information/docs is produced
Evidence of Debt (Bo

• Proposed Cal. SB 890/233 (

Debt Buying Practices Act)

– Pre-Collection: Need specified 

and “access to” contract or othdocument evidencing agreem

– Consumer can request record– Suit/Arbitration: Need to subm

contract or other document
Time-Barred Debts

• Enacted New Mex. AG Rule 

2010]

– Collection: disclosure that deb

time-barred

• Proposed Cal. SB 890/233

– Collection: disclosure that deb

time-barred

– Litigation: explicit ban on arbit

or suit to collect time-barred d
Bank Account Levy

• Cal. Proposed SB 890/233

– Requires notice of exemptions 

provided to consumer