Bank News

Consumers Are Paying Less on Monthly Payments than Three Years Ago: Experian

2010-11-12T09:26:18-07:00

Costa Mesa, Calif. — Experian®, the leading global information services company, released its insights today on average monthly payments of the top 25 metropolitan areas. The study found that nationally, consumers are paying $903 per month on their bills, which could include a combination of credit cards, auto loans and leases, and mortgages—a decrease of two percent in the last three years.

The study also reveals that Washington D.C., Seattle and Baltimore top the list with the highest average monthly payments with Washington D.C. coming in at 42 percent higher than the national average. Cities with the lowest payments include Cleveland, Tampa and Pittsburgh.

Results ranked by highest to lowest by average monthly payment amounts are detailed below:

Metropolitan area	Average monthly payment	Difference from national average
1. Washington, D.C.	$1,285	42%
2. Seattle	$1,135	26%
3. Baltimore	$1,133	25%
4. Boston	$1,105	22%
5. Denver	$1,104	22%
6. San Francisco	$1,098	22%
7. San Diego	$1,076	19%
8. Sacramento	$1,045	16%
9. Los Angeles	$1,024	13%
10. Chicago	$1,017	13%
11. Philadelphia	$1,011	12%
Minneapolis	$1,011	12%
12. New York	$989	10%
13. Atlanta	$986	9%
14. Dallas	$970	7%
15. Phoenix	$957	6%
16. Portland	$948	5%
17. Cincinnati	$920	2%
18. Houston	$889	-2%
19. Columbus	$888	-2%
20. St. Louis	$886	-2%
21. Miami	$867	-4%
22. Detroit	$832	-8%
23. Cleveland	$812	-10%
24. Tampa	$791	-12%
25. Pittsburgh	$763	-16%

“The trend we’re seeing is that consumers have lower payments, indicating both proactive deleveraging by consumers and tighter limits from lenders and certainly consumers are making fewer major purchases such as homes and cars than they were a few years ago,” said Michele Raneri, senior director of analytics, Experian. “There are many ways to manage and develop a positive credit score and good payment habits. Paying bills on time is generally the single most important contributor.”

Below are some tips to take into consideration when making a major purchase:

Get your credit report. Before approving your request for a home loan, mortgage lenders review your credit report. If you review your credit report in advance, you’ll see yourself from a lender’s perspective.

Be prepared. When lenders review your credit report, they evaluate how much you already owe, how much unused credit you have available, how prompt you are in paying your debts and whether you’ve recently applied for new credit.

Count your savings. To buy a house, you generally need a down payment in the range of 5 percent to 20 percent of your new home’s purchase price, depending on your credit risk. You also need money for closing costs and be sure to set aside extra funds for emergencies. If you spend everything on your down payment, you’re statistically more likely to lose your new home to foreclosure sometime in the future.

Make your payments. How much you borrow, how much you owe and when you pay become a part of your credit history. When you apply for new credit purchases, other lenders will review this history. Late payments can stay on your credit report for up to seven years, can keep you from buying another house or can make it more expensive to buy a car. A good credit history proves that you manage your finances well. It lets you enjoy using credit at your convenience and at a lower cost.

For more information on managing credit, visit http://www.experian.com/credit-education/credit-information.html.

For more information on average debt levels per consumer in the top 20 metropolitan areas and credit card trends please see Experian’s previous studies, Experian ranks top 20 major US metropolitan areas by average debt per consumer and Experian provides insight into credit card trends of the top 20 major metropolitan areas.

Methodology

The data was pulled and analyzed by Experian Decision Sciences using a statistically relevant sampling of Experian’s File OneSM consumer credit database. Credit files analyzed had all personal identification information removed. They then were filtered through Premier AttributesSM, the credit industry’s most robust, accurate and comprehensive set of credit attributes that provides consumer data at the most granular level, facilitating enhanced modeling opportunities. Experian’s credit study data score averages are based on VantageScore®.

About Experian
Experian is the leading global information services company, providing data and analytical tools to clients in more than 90 countries. The company helps businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. Experian also helps individuals to check their credit report and credit score and protect against identity theft.

Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended March 31, 2010, was $3.9 billion. Experian employs approximately 15,000 people in 40 countries and has its corporate headquarters in Dublin, Ireland, with operational headquarters in Nottingham, UK; Costa Mesa, California; and São Paulo, Brazil.

For more information, visit http://www.experianplc.com.

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New York Fed Q3 Report on Household Debt and Credit Shows Continued Decline in Consumer Debt

2010-11-09T08:14:01-07:00

The Federal Reserve Bank of New York today released its Quarterly Report on Household Debt and Credit for the third quarter of 2010, which shows that consumer debt continues its downward trend of the previous seven quarters, though the pace of decline has slowed recently. Since its peak in the third quarter of 2008, nearly $1 trillion has been shaved from outstanding consumer debts.

Additionally, this quarter’s supplemental report addresses for the first time the question of how this decline has been achieved and notes a sharp reversal in household cash flow from debt, indicating a decrease in available funds for consumption. According to newly available data through year end 2009, the payoff of debt by consumers reduced their cash flow by about $150 billion, whereas between 2000 and 2007, borrowing had contributed more than $300 billion annually to consumers’ cash flow.

Excluding the effects of defaults and charge-offs, available data show that non-mortgage debt fell for the first time since at least 2000. Also, net mortgage debt paydowns, which began in 2008, reached nearly $140 billion by year end 2009. These unique findings suggest that consumers have been actively reducing their debts, and not just by defaulting.

“Consumer debt is declining but only part of the reduction is attributable to defaults and charge-offs,” said Donghoon Lee, senior economist in the Research and Statistics Group at the New York Fed. “Americans are borrowing less and paying off more debt than in the recent past. This change, which we continue to study carefully, can be a result of both tightening credit standards and voluntary changes in saving behavior.”

Also noteworthy in the third quarter:

Household delinquent debt continues to decline and currently account for about $1.3 trillion or 11 percent of consumer debt, representing an 8.2 percent decline from a year earlier;

The proportion of current mortgage balances that transitioned into delinquency rose slightly from 2.6 percent to 2.7 percent, after about a year of decline.

Given the similar pattern observed in the third quarter of 2009, one might suggest this is a seasonal effect, though the New York Fed continues to closely monitor such developments.

About 457,000 individuals received home foreclosure notices on their credit reports between July 1 and September 30, 2010, a 5.5 percent decrease from the second quarter and a 6.4 percent drop from a year earlier.
The number of new bankruptcies noted on credit reports fell 16 percent from the previous quarter (from 621,000 to 522,000), but is 1 percent higher from a year earlier.

This information is aimed at helping community groups, small businesses, state and local government agencies and the public to better understand, monitor and respond to trends in borrowing and indebtedness at the household level.

The household debt and credit data will be updated quarterly and include such categories as the number of bankruptcies, per capita debt levels, total debt levels and composition of debt, new originations of installment loans, total balance by delinquency status, foreclosures and new delinquencies by loan type for the United States and select states.

The report is based on a nationally representative random sample drawn from data provided by the New York Fed’s Consumer Credit Panel. Sections of the report are presented as interactive graphs on the New York Fed’s Credit Conditions web page and the full report is available for download.

The next quarterly reports are expected to be released on February 14, 2011; May 9, 2011; and August 8, 2011.

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Credit Card Charge Offs Decline at Major Issuers in September

2010-10-21T08:23:37-07:00

The annualized charge-off rate for credit card accounts at four of the five largest issuers in the U.S. decreased in September, according to recent regulatory filings.

Bank of America, Citigroup, Discover, and JP Morgan Chase all saw their credit card charge-off rate drop in September after spiking in August. Capital One was the long issuer that saw its net charge-offs increase, ticking up to 7.89 percent from 7.77 percent in August. Card delinquencies, meanwhile, dropped at all of the banks except for Bank of America, which reported essentially flat delinquencies.

The largest credit card issuer in the U.S., Bank of America, reported the highest annualized charge-off rate for September at 9.99 percent, down sharply from 11.73 percent in August. Citigroup’s 8.99 percent rate was second-highest. Citi also recorded the largest decrease in September as its rate fell from 11.18 percent in August.

Discover enjoyed the lowest net charge-off rate in September with a 7.15 percent annualized rate.

All five card issuers reported improvement in delinquencies, a trend that has been steady for most of 2010. All but one lender, Bank of America, reported delinquency rates under five percent in September. JP Morgan Chase reported the lowest delinquency rate at 3.92 percent while Bank of America’s 5.71 percent rate was the highest.

Monthly credit card delinquency and charge-off data is reported by major banks that issue asset-backed securities against the card accounts. The SEC requires monthly performance reports on the assets underlying the securities, with credit card receivables often reported as master trusts. The trusts tracked by insideARM.com represent more than $200 billion in outstanding credit card balances.

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Debt Relief Companies Prohibited From Collecting Advance Fees Under FTC Rule That Takes Effect October 27

2010-10-21T08:23:37-07:00

Starting October 27, consumers trying to settle their debts will be protected by a new rule that prohibits companies that sell debt relief services over the telephone from charging fees before settling or reducing a customer’s credit card or other unsecured debt. The ban on advance fees reflects changes that the Federal Trade Commission made to its Telemarketing Sales Rule last July.

“The rule change that goes into effect next week is a major victory for consumers struggling to control and manage their debt without inadvertently digging themselves in deeper,” Chairman Jon Leibowitz said. “Starting on October 27, debt relief telemarketers are on notice – if you charge consumers before actually helping them, you will find the FTC and state enforcers knocking at your door to enforce the Rule. We look forward to working with our state partners to ensure that the Rule is enforced across the country.”

Over the past decade, the FTC and state enforcers have brought over 250 law enforcement actions to stop deceptive and abusive practices by debt relief providers that have targeted consumers in financial distress. The FTC will be enforcing the new rule, as will the states – which also have authority to bring actions under the Rule.

The new advance fee ban specifies that fees for debt relief services may not be collected until:

the debt relief service successfully settles or changes the terms of at least one of the consumer’s debts;
there is a settlement agreement, debt management plan, or other agreement between the consumer and the creditor that the consumer has agreed to; and
the consumer has made at least one payment to the creditor as a result of the agreement negotiated by the debt relief provider.

The new rule also has provisions to ensure that debt relief providers do not front-load their fees if a consumer has enrolled multiple debts in one debt relief program.

The advance fee ban does not apply retroactively, so it applies only to consumers who enroll in a debt relief service after October 27, 2010.

Dedicated Account for Fees and Savings

Another provision of the rule that becomes effective October 27 places additional restrictions on debt relief companies that require consumers to set aside provider fees and savings used to pay creditors in a “dedicated account.” Providers may only require a dedicated account if five conditions are met:

the account is maintained at an insured financial institution;
the consumer owns the funds (including any interest accrued);
the consumer can withdraw from the debt relief service at any time without penalty and receive all unearned provider fees and savings within seven business days;
the provider does not own or control or have any affiliation with the company administering the account; and
the provider does not exchange any referral fees with the company administering the account.

Other New Debt Relief Rules Now in Effect

Other changes to the Rule took effect on September 27, including requiring debt relief companies to make specific disclosures to consumers and prohibiting them from making misrepresentations.

Who’s Covered

The rule covers telemarketers of for-profit debt relief services, including credit counseling, debt settlement, and debt negotiation services. The rule does not cover nonprofit firms, but does cover companies that falsely claim nonprofit status.

Information for Businesses and Consumers

The FTC issued a guide to help businesses comply with the debt relief rule. The guide describes the key changes to the Telemarketing Sales Rule affecting debt relief services, helps businesses determine if they are covered by the new rules, details information that covered entities must disclose to customers, and discusses how fees may now be collected. It can be found at http://www.ftc.gov/bcp/edu/pubs/business/marketing/bus72.pdf on the agency’s website and is linked to this press release. Information for consumers can be found at http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre02.shtm.

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S&P/Experian Index Shows Default Rates Decline Across All Credit Lines

2010-10-20T08:47:02-07:00

NEW YORK -- Data through September 2010, released today by Standard & Poor's and Experian for the S&P/Experian Consumer Credit Default Indices, a comprehensive measure of changes in consumer credit defaults, showed a decline in monthly default rates for all credit lines. First and second mortgages declined in September to 3.0% and 2.1% respectively. Auto loans decreased slightly from 2.1% in August to 2.0% in September. Bank cards had the largest decline in defaults in the past 12 months down to 7.0%.

"The S&P/Experian Consumer Credit Default Indices are showing declining default rates at the national level for all categories, including auto loan defaults which had risen over the previous two months," says Craig Feldman, Director at S&P Indices. "All five of the highlighted cities are showing declines as well, with Miami and Los Angeles continuing to show the largest year-over-year drop in default rates, as has been the trend for the last three months."

Consumer credit defaults vary across major cities and regions of the U.S. Among the five major Metropolitan Statistical Areas reported each month in this release, Los Angeles had the largest decrease in defaults, for the second month in a row, of 13.8%, followed by Dallas which declined by 9.83%. New York and Chicago experienced a modest decline of 5.23% and 4.84% respectively. Miami continues to decline by 40.30% in the last 12 months.

Jointly developed by Standard & Poor's and Experian, the S&P/Experian Consumer Credit Default Indices are published on the third Tuesday of each month at 9:00 am ET. They are constructed to accurately track the default experience of consumer balances in four key loan categories: auto, bankcard, first mortgage lien and second mortgage lien. The Indices are calculated based on data extracted from Experian's consumer credit database. This database is populated with individual consumer loan and payment data submitted by lenders to Experian every month. Experian's base of data contributors includes leading banks and mortgage companies, and covers approximately $11 trillion in outstanding loans sourced from 11,500 lenders.

For more information, please visit: www.consumercreditindices.standardandpoors.com.

About S&P Indices
S&P Indices, the world's leading index provider, maintains a wide variety of investable and benchmark indices to meet an array of investor needs. Over $1 trillion is directly indexed to Standard & Poor's family of indices, which includes the S&P 500, the world's most followed stock market index, the S&P Global 1200, a composite index comprised of seven regional and country headline indices, the S&P Global BMI, an index with approximately 11,000 constituents, and the S&P GSCI, the industry's most closely watched commodities index. For more information, please visit www.standardandpoors.com/indices.

About Standard & Poor's
Standard & Poor's, a subsidiary of The McGraw-Hill Companies (NYSE: MHP), is the world's foremost provider of independent credit ratings, indices, risk evaluation, investment research and data. With offices in 23 countries and markets, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for 150 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit http://www.standardandpoors.com

Standard & Poor's does not sponsor, endorse, sell or promote any S&P index-based investment product. The S&P/Experian Consumer Credit Default Indices are products of S&P Indices, which operates independently of Standard & Poor's Ratings Group. Standard & Poor's Ratings Group plays no role in the compilation, distribution or licensing of the Indices.

About Experian Capital Markets
Formed as a response to market needs, Experian Capital Markets leverages Experian's comprehensive U.S. consumer and business databases to provide data and analytics to serve the transparency needs of the structured finance market participants. By taking underlying borrower data and applying advanced analytics, Experian provides insight into U.S. consumer and business credit behavior across all obligations, helping to forecast future payment patterns on prepayments, delinquencies, charge-offs or defaults for non-agency residential mortgage–backed securities and other asset-backed securities.

About Experian
Experian is the leading global information services company, providing data and analytical tools to clients in more than 65 countries. The company helps businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. Experian also helps individuals to check their credit report and credit score and protect against identity theft.

Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended March 31, 2009, was $3.9 billion. Experian employs approximately 15,000 people in 40 countries and has its corporate headquarters in Dublin, Ireland, with operational headquarters in Nottingham, UK; Costa Mesa, California; and Sao Paulo, Brazil.

For more information, visit http://www.experianplc.com.

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Credit Card Debt Still Falling at a Steady Rate

2010-10-08T08:14:25-07:00

Total consumer credit card debt outstanding decreased in August for the 24th straight month. Consumer credit card debt levels now are at the same level as in late 2005 after peaking in mid-2008.

The Federal Reserve said late Thursday in its monthly Consumer Credit statistical release – also called the G.19 report – that revolving debt, mostly comprised of credit card debt, fell an annualized 7.2 percent in August, or by $5 billion, to $822.2 billion. Revolving debt also fell by 7.2 percent in July.

In the first quarter of 2010, revolving debt slid at an 8.5 percent annualized rate while the same measure dropped 7.2 percent in the second quarter.

Non-revolving debt – like that found in student, auto and personal loans – increased 1.2 percent in August after expanding at a 0.7 percent in July. Total non-revolving debt now stands at $1.592 trillion.

The Fed’s G.19 report does not track debt backed by real estate.

Charge-offs continue to be a main driver in the rapid fall of credit card debt. Moody’s recently reported that card charge-offs at major issuers climbed back over the 10 percent mark in August after improving slightly over the early summer. Delinquencies, however, continue to improve, with August’s average reading falling below 5 percent. The improvement in delinquencies could signal that charge-offs will decrease in coming months as banks have already worked through a backlog of old bad debt.

Total consumer credit outstanding in the U.S. was $2.414 trillion at the end of August after peaking at $2.582 trillion in July 2008.

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Bank to Pay $3 million to Settle FDCPA Charges from FDIC

2010-10-06T07:04:56-07:00

The Federal Deposit Insurance Corporation (FDIC) announced a settlement with Monterey County Bank, Monterey, California (MCB), for deceptive practices in violation of Section 5 of the Federal Trade Commission Act and Section 807 of the Fair Debt Collection Practices Act in connection with solicitations for its balance transfer credit card program (Balance Transfer Card) and debit card program.

Under the settlement, MCB has agreed to a Consent Order and to pay restitution of approximately $2 million in the form of credits or cash refunds to approximately 15,500 Balance Transfer Card consumers and approximately $250,000 of cash restitution in connection with the debit card program. MCB will pay a civil money penalty of $500,000. MCB will contact those consumers entitled to restitution; affected consumers need not take any action.

MCB is also going to donate $300,000 toward consumer financial education and counseling.

The Balance Transfer Card was marketed to consumers with charged-off consumer debt as an opportunity to pay down old debts and obtain credit cards. The FDIC determined that the solicitations did not disclose information necessary for consumers to make an informed decision. In addition, MCB failed to adequately disclose all fees and charges assessed in connection with its debit card product, which was marketed by a third party through e-mail solicitations and advertisements on various Web sites. In agreeing to the issuance of the consent order, MCB does not admit or deny any liability.

A copy of the FDIC's Consent Order, Order of Restitution, and Order to Pay issued against MCB is attached.

Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's banking system. The FDIC insures deposits at the nation's 7,830 banks and savings associations and it promotes the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed. The FDIC receives no federal tax dollars – insured financial institutions fund its operations.

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Bank Card Delinquencies Drop Significantly In Second Quarter 2010

2010-10-05T07:12:01-07:00

WASHINGTON – Consumer loan delinquencies generally improved in the second quarter of 2010, as bank card, home equity loans, and auto loans all showed improvement according to the American Bankers Association’s Consumer Credit Delinquency Bulletin. The results were not as broadbased as the previous two quarters and, as a result, the composite ratio, which tracks delinquencies in eight closed-end installment loan categories, was virtually flat, rising just 2 basis points from the first quarter to 3.00 percent of all accounts in the second quarter.

Bank card delinquencies fell 26 basis points to 3.62 percent of all accounts which remains well below the 15-year average (3.93 percent). This is the lowest that bank card delinquencies have fallen since the first quarter of 2001. The ABA report defines a delinquency as a late payment that is 30 days or more overdue.

ABA Chief Economist James Chessen said part of the reason bank card delinquencies have been falling is because banks continue to write off loans that have not been repaid, but also because consumers are being prudent with their spending.

“Consumers continue to focus on reducing debt levels, using credit cards less, and building savings,” Chessen said. “This is very positive, but the fundamental story is the same: it’s all about jobs. When people don’t have jobs, they can’t pay their bills. High numbers of unemployed workers and slow job growth continue to paint a picture of financial stress for many households,” he added.

Loan categories showing increased signs of stress include mobile home loans and marine loans. Mobile home loan delinquencies rose 36 basis points from the previous quarter to 4.01 percent, the highest rate since October 2005. Marine loan delinquencies rose 27 basis points from the previous quarter to 2.20 percent.

“The economic momentum over the last few quarters seems to be losing steam. This will affect job creation and the ability of consumers to pay off debt,” Chessen said. “I think delinquencies will continue to improve but at a slower pace, reflecting a struggling economy.”

The second quarter 2010 composite ratio is made up of the following eight closed-end loans. All figures are seasonally adjusted based upon the number of accounts.

CLOSED-END LOANS

Decreased Delinquencies:

Direct auto loan delinquencies fell from 1.79 percent to 1.67 percent.
Indirect auto loan delinquencies fell from 3.03 percent to 3.01 percent.
Home equity loan delinquencies fell from 4.12 percent to 3.97 percent.
Personal loan delinquencies fell from 3.61 percent to 3.55 percent.
Property improvement loan delinquencies fell from 1.40 percent to 1.35 percent.

Increased Delinquencies:

Marine loan delinquencies rose from 1.93 percent to 2.20 percent.
Mobile home loan delinquencies rose from 3.65 percent to 4.01 percent.
RV loan delinquencies rose from 1.58 percent to 1.63 percent.

In addition, ABA tracks three open-end loan categories:

OPEN-END LOANS

Unchanged Delinquencies:

Home equity lines of credit delinquencies were unchanged at 1.81 percent.

Decreased Delinquencies:

Bank card delinquencies fell from 3.88 percent to 3.62 percent.
Non-card revolving loan delinquencies fell from 1.63 percent to 1.21 percent.

The American Bankers Association represents banks of all sizes and charters and is the voice for the nation’s $13 trillion banking industry and its two million employees. Learn more at aba.com.

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Akcelerant Hosts 5th Annual Customer Conference

2010-10-04T07:19:37-07:00

MALVERN, PENNSYLVANIA – Akcelerant, a provider of connected software technology for the financial services industry, announced today the success of the company’s 2010 Customer Conference. The event took place September 22-23, 2010 in Akcelerant’s hometown of Malvern, Pennsylvania. More than 200 individuals, including representatives from 90 financial institutions, gathered at the Penn State Great Valley Conference Center for this highly anticipated event.

The conference began with the Opening Ceremony in which Jay Mossman, President and CEO of Akcelerant, spoke on the past, present, and future of the company. Also during the Opening Ceremony, Akcelerant’s annual Pioneer Award was presented to Addison Avenue Federal Credit Union. This award is presented each year to a financial institution that promotes the advancement of technology with Akcelerant. Addison Avenue was selected primarily for their early adoption of Akcelerant’s “next generation” loan origination system earlier this year.

Directly following the opening ceremony, attendees were broken down into a number of small groups in order to facilitate greater knowledge transfer and open discussion. The main focus of this year’s event was education and training on Akcelerant’s collection and lending products. The agenda included both advanced and intermediate educational sessions, multiple interactive computer labs, grab-and-go lunches focused on networking, and a panel discussion made up of six advanced Akcelerant customers.

SWBC, event Gold Sponsor, and 9 other Akcelerant partners and industry-leading service providers also participated by showcasing their products and services in the exhibit hall and during Akcelerant’s Product and Technology Night.

“The response to the 2010 Akcelerant Customer Conference, from both our customers and partners, has been overwhelmingly positive. We understand that in today’s economy it is difficult to justify any expense. Therefore, our goal was to offer a strong event ROI through intense product training, significant networking, and hands-on education,” states Eric Snyder, executive vice president, business development. “We are grateful for the time our customers and partners invest with us during our annual event and look forward to seeing everyone again in 2011!”

About Akcelerant Software LLC
Akcelerant, with offices in Malvern, Pennsylvania and Vancouver, British Columbia, provides connected software applications to the financial services industry through multiple product lines and integration to best-of-breed service providers. Approximately 500 financial institutions in all 50 states and all provinces of Canada are currently using Akcelerant technology. For more information about Akcelerant, visit www.akcelerant.com.

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Media Reports Blacken Eye of Entire ARM Industry

2010-09-29T08:07:04-07:00

Control cannot be called conscience until we are able to take it inside us and make it our own, until—in spite of the fact that the wrongs we have done or imagined will never be punished or known—we nonetheless feel that the clutch in the stomach, that chill upon the soul, that self-inflicted misery called guilt.

—Judith Viorst

And now to the industry’s other black eye: an ugly contusion, principally of its own making. (Read about the first black eye)

On May 28, 2010, a jury in Texas awarded a Dallas consumer, Allen Jones, more than $1.5 million in damages after he sued Philadelphia-based collection agency Advanced Call Center Technologies, LLC (ACT) for violations of the Fair Debt Collection Practices Act ("Jury Hands Down $1.5 million Verdict Against Debt Collection Agency," June 1). In a series of phone messages recorded by Jones—some of which were left before 8am as proscribed under the FDCPA—collection representatives from ACT assailed Jones in language that most reasonable people would describe as hate speech.

The calls were placed by ACT employees under contractual agreement with Bank of America to recover a credit card delinquency of less than $100. The messages were profanity-laden. They were racist. They were illegal. They remain inexcusable.

That said, ACT acknowledged the verdict, terminated the employee or employees responsible for the calls, and restructured some of its management. But ACT also continued to receive placements from Bank of America subsequent to the judgment against it. That is, until last week.

Almost four months to the day after the Jones trial, ABC News approached Bank of America CEO, Brian Moynihan, on the street armed with cameras and a copy of the ACT messages Jones had taped. Moynihan was nonplussed; two days later, the creditor severed its relationship with ACT. Bank of America officially cited “issues surrounding the economy” as the basis for its decision. That same beleaguered economy that had been officially in recession since December 2007 and arguably farther from recovery at the time of the Jones verdict than it was just a few days ago.

You say potato, I say headline risk.

This is the story of mutual and compounded failures. Both the creditor and the collection agency ostensibly abandoned their responsibility to vet, to monitor, to educate, to train, to comply, and to control. ACT has already paid a high price for its mistakes. But the ultimate cost of its missteps remains to be seen. Rest assured, however, that the toll will not be restricted to a single collection agency.

Headline risk is the second black eye. So what can the ARM industry do to keep this problem from swelling out of control?

First, the industry’s trade associations should finally step up and do triage. Like it or not, the battlefield has arrived at their doorsteps. Codes of conduct and ethics must now become more than words on a page. In the days since the recent ABC News story on Bank of America broke, Google alerts for terms like “debt collection” are suddenly dredging up articles, video, blogs, and message board chatter that are in some cases years old. Why? Because people are talking, and people are writing, and headlines are being made. And those people aren’t just consumers and newspaper reporters. People are men like Senator Al Franken. People are women like Elizabeth Warren. In the service of the greater good of its members, ARM industry associations should begin actively dissociating its compliant members from companies that violate established rules of professional conduct. Triage in this instance means letting the dead bury the dead.

Second, each and every company in the collection industry should immediately treat the inevitable problem of headline risk as a mirror instead of a veil. The ARM industry cannot hide from this threat to its very existence as we know it. Rather it should convert the lesson of ACT – Bank of America into a diagnostic tool. Business owners and executives should seize upon the opportunity to review their internal business practices, to invest in the monitoring and training of their employees at all levels of the organization, to make hard decisions as situations warrant, and to get ahead of—or at least keep pace with—impending and inescapable regulatory reform.

Headline risk is the second black eye. The ARM industry must act now, before it goes blind.

Michael Klozotsky is Managing Editor of insideARM.com. He can be reached by email. On October 6, 2010, he and insideARM.com will present a free webinar at EXPO 10.6.10, "Headline Risk—The media assault on debt collection: How it affects your business and what to do about it." Register for EXPO 10.6.10 today.

Link Financial to Partner with Funding Circle, the Newly Launched Social Lending Platform

2010-09-23T08:16:37-07:00

LONDON – Link Financial Outsourcing (LFO), part of Link Financial Group, is pleased to announce its partnership with Funding Circle, the innovative new ‘social lending platform’ that facilitates loans between individuals and businesses.

The partnership will see LFO providing back-up, debt collection and recovery services for the Funding Circle platform, mitigating the risk for this fast-growing new enterprise.

Selina Burdell, COO of Link Financial Group, commented: “This partnership leverages on Link’s long standing operational experience and on the diversified skills of our management team to provide back-up services to Funding Circle. We are delighted to be collaborating with an innovative team with a forward-looking mindset who recognised the need to appoint us as an effective and reliable backup servicer.”

Paul Burdell, CEO of Link Financial Group, added: “Link Financial is proud to contribute to a project that aims to sustain UK small and medium enterprises, the core of our economy.”

For more information on the Back-up Servicing Solutions that Link Financial can provide, please email info@linkfinancial.eu

For more information on Funding Circle, please visit http://www.fundingcircle.com/

Link Financial Group is one of Europe’s leading purchasers and servicers of performing, semi- and non-performing consumer receivables. The Company has acquired rights to $8.25bn of receivables, which represents more than 2 million individual customers. Link operates in over 40 countries and has servicing operations in the UK, Spain, Italy, Germany and Ireland.

Link Financial Outstourcing is the dedicated third party servicer of Link Financial Group that offers different services to the financial community: Master servicing, Back-up servicing, Cash management, Loan portfolio consulting services, System consulting services.

Link Financial Outstourcing leverages on more than 12-year of operational experience and caters for both its clients and its investment partners.