Will guys with guns replace US regulators?

If the Dodd-Frank Act is repealed by the Trump administration, it could mean the end of the consumer protection bureau in America

Gulf News

Brandon Wilson is a former armed robber who, after serving roughly a decade in prison, reinvented himself as a successful debt broker. Basically, he makes a living buying and selling old, unpaid debts.

If you want to buy $100,000 worth of old credit card debts for $1,000 (Dh3,678), or even $500, he’s your man. But he offered another service to his clients as well. For years, before the Dodd-Frank act created the Consumer Financial Protection Bureau in the United States — when the industry was still largely unregulated — he was a fixer, a gun for hire. Here is how he explained it: “Part of the package you get of being my business associate or my friend is that I’m gonna protect you from the sharks.”

Consumer debts — be they credit-card debts, auto loans, gym fees, payday loans, overdue cellphone tabs, old utility bills or even delinquent book club accounts — can be bought, sold and even stolen with relative ease. Typically, these loans are really nothing more than a list of names, addresses, Social Security numbers and balances on an Excel spreadsheet. It doesn’t take much for an unscrupulous debt broker to steal such a file or “double sell” it, by unloading the exact same debt on two unsuspecting buyers. When this happens, a debtor may pay off a debt only to get calls from another company demanding payment once again.

This is where Brandon Wilson’s services come in handy.

Wilson offers a kind of “insurance policy”, as he puts it. A few years ago, when I was writing a book on the debt-collection industry, I sat in on a meeting between Wilson and one of his clients — a former banker — and heard him explain how he, and he alone, would keep the thieves, hucksters and criminals away: “If you don’t give them a little bit of fear, right — if it’s just the law, if it’s just the attorney general, if it’s just a civil suit — they could care less. So they need someone to go put a stop to that right now. That might not be bashing someone over the head, it might be sitting them down and saying: Look, man, you ever do 10 years in the can? I have. You ever sat there for 10 years waiting for your date? I have. You think you’re getting away with this? You’re not.”

This wasn’t just tough talk. On one occasion, Wilson rounded up a posse of armed men, drove to Buffalo, New York, tracked down a stolen file of debts, and retrieved it — at gunpoint. It sounds like a scene from a Quentin Tarantino movie, but this kind of mess is exactly what one might expect in a country that is driven by profit, mired in debt and not fully able or willing to tame the marketplace that is created when these two forces meet.

Ever since 2006, the Federal Trade Commission has received more complaints about debt collection than any other specific industry. And yet, up until fairly recently, the government has done surprisingly little to protect consumers from being harassed or having their debts stolen, double-sold or improperly inflated.

Part of the problem was simply a lack of resources. Consider the situation in Buffalo, which is sometimes called America’s debt-collection capital. Historically, it fell almost entirely on the state attorney general’s office to police the collection agencies in the area. For years, the attorney general’s field office in Buffalo had just two full-time employees devoted to debt collections. I spoke with them. They were doing a valiant job, but they were outgunned.

Then came the passage of the Dodd-Frank Act in 2010 and, with it, the creation of the consumer protection bureau. It is the first federal agency to meaningfully supervise debt collectors and it has made a crucial difference. Just last month, in partnership with the New York attorney general, it filed a lawsuit against a notorious Buffalo-based operation that was allegedly harassing, threatening and deceiving millions of consumers across the US into paying inflated or bogus debts. Since its creation, the agency has taken roughly 30 public enforcement actions against companies in the debt-collections industry. The result is more than $5 billion in cancelled debt and $300 million in awards.

Who benefited from this? More than a million Americans — the victims of companies that broke consumer protection laws. In addition, the agency also monitors 175 of the nation’s largest debt collectors, which account for more than 60 per cent of the industry’s annual receipts.

With the coming of the Trump administration, all of this progress is now imperilled. Trump has said that he will repeal Dodd-Frank. During his campaign, he told Reuters: “Dodd-Frank has made it impossible for bankers to function. It makes it very hard for bankers to loan money for people to create jobs, for people with businesses to create jobs. And that has to stop.”

If the law is repealed, it could mean the end of the consumer protection bureau. Even if Trump doesn’t disband the agency, he could simply hobble it by replacing its director, Richard Cordray, with someone who is content to let the market regulate itself. If that happens, one of the few recourses that honest debt buyers will have, to protect themselves and their businesses, will be to hire a savvy fixer like Wilson.

A few days ago, I called Wilson to see how he was doing. “There’ll be less intrusion from the government, more lending, and more defaults — which creates more business for collectors,” he said. That means Wilson’s services will be in high demand once again. He concluded, “We’re back in business.”

— New York Times News Service

Jake Halpern is the author of Bad Paper: Inside the Secret World of Debt Collectors.

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