Last week, Bloomberg published an article how one man had enough of fake debt collectors badgering him and his family to collect a phantom debt, money he did not owe. Andrew Therrien used his own money and time to track down these people and only found assistance from the FBI and the Federal Trade Commission (FTC).
You know what agency was missing? The Consumer Finance Protection Bureau (CFPB), the brainchild of Sen. Elizabeth Warren (D-MA). Instead of concentrating on fraud, the agency decided to target businesses already well-regulated that help the poor.
The Man Who Had Enough
Andrew Therrien is the man who had enough. He is one of the millions of Americans who found themselves wrapped up in phantom debt, or money they don’t actually owe. From Bloomberg:
Therrien had been caught up in a fraud known as phantom debt, where millions of Americans are hassled to pay back money they don’t owe. The concept is centuries old: Inmates of a New York debtors’ prison joked about it as early as 1800, in a newspaper they published called Forlorn Hope. But systematic schemes to collect on fake debts started only about five years ago. It begins when someone scoops up troves of personal information that are available cheaply online—old loan applications, long-expired 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 repayment of the fictitious bills. Their targets are often poor and likely to already be getting confusing calls about other loans. The harassment usually doesn’t work, but some marks are convinced that because the collectors know so much, the debt must be real.
Bloomberg noted the FTC has “broken up” 13 scams since 2012 after a call center India broke up after it was caught “making 8 million calls in eight months to collect made-up bills.” Unfortunately, officials have a hard time identifying “the original perpetrators because the data files had been sold and repackaged so many times.”
Therrien would spend all night finding owners of these agencies and try to coax them on his side. Other times he’d make a small payment to track bank records. This led him to “people with convictions for counterfeiting, stock fraud, drug dealing, and child molestation.”
Therrien’s problem led him to the Tucker brothers: Ted, Scott, and Joel. They had a scheme with a payday-loan store and managed to make a ton of money by having websites “owned on paper by an American Indian tribe, which could claim sovereign immunity from regulators.” These websites would charge “as much as $150 interest on a two-week, $500 loan—an annualized interest rate of about 700 percent.”
Everything eventually fell apart for the Tuckers, which led Therrien to conclude this:
By November 2015 he developed a simple theory. Tucker’s business had given him access to a huge database of people who’d applied for loans—including, just maybe, the one Therrien had taken out in his copier-selling days. What if, when Tucker was broke and needed money, he’d taken applicants’ personal information, invented loan balances, and sold the list as a portfolio of delinquent debt?
He contacted the FBI and FTC about his theory. Weirdly enough, the CFPB didn’t appear in the article.
In 2016, one collection manager emailed Therrien that contained “phantom-debt files, with names and Social Security numbers.” It came with the name of Rob Harsh, the IT guy for Tucker:
Harsh, who declined to comment for this story, testified that Tucker had asked him to manipulate a database of almost 8 million payday-loan applications, writing in a made-up lender and adding an amount owed of $300 for each person.
Therrien had been right all along.
Why Have the CFPB?
Go to the CFPB website and it has its purpose in big bold letters: An agency “that makes sure banks, lenders, and other financial companies treat you fairly.” The agency came about after the 2008 financial crisis in Dodd-Frank. It doesn’t answer to anyone, which gave former head Richard Cordray unchecked power.
Instead of going after the people like Tucker, the CFPB passed a new rule against legitimate payday businesses:
The CFPB’s new rule will stop payday loan debt traps by requiring lenders to take steps to make sure people can repay their loans.
The rule will also prevent lenders from attempting to collect payment from people’s bank accounts in ways that may rack up excessive fees. Our new debt trap protections will apply to certain small dollar loans including payday loans and certain vehicle title loans.
The rules passed in October and the owners of these businesses have lashed out at the agency because the majority of the customers need the money for emergencies. With too many regulations, the customers could end up going to people like the Tuckers:
“Taking away their access to this line of credit means many moreAmericans will be left with no choice but to turn to the unregulated loan industry, overseas andelsewhere [sic], while others will simply bounce checks and suffer under the burden of greater debt,” said Edward D’Alessio, head of the Financial Service Centers of America, a trade group.
The left is always going crazy over loopholes and yet these rules did not close that important loophole the Tuckers used to scam people.
A bipartisan group in the House have vowed to fight against the new rule. Rep. Dennis Ross (R-FL) said that many in his state rely on its “carefully regulated small-dollar lending industry to make ends meet” and insisted that those in the House “cannot stand by while an unaccountable federal agency deprives out constituents of a lifeline in times of need, all while usurping state authority.”
House Financial Services Committee chairman Jeb Hensarling (R-TX) reminded the CFPB that Americans have the freedom to choose whatever loan they want and don’t need an “unelected Washington bureaucrat” to tell them what to do.
But again. What is the point of the CFPB if they will go after the legitimate businesses instead of those who commit fraud against others? You know, those people like the Tuckers who sell people’s information and pull money from others for a debt they don’t owe?
If the FTC can handle this, why have the CFPB?