This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Bank's Collection Companies Risk Drawing RICO Actions

NEW YORK (TheStreet) -- Big banks are facing unprecedented pressure to rein in the behavior of buyers of their charged-off credit card debt. This pressure is coming from two sources, one well known and one almost no one has talked about -- yet -- and that will put fear into the heart of every banker who hears them: the CFPB and RICO.

The Consumer Financial Protection Bureau is the nation's protector of consumers in all matters financial. An outgrowth of the financial crisis beginning in 2008, the CFPB is charged specifically with supervision and regulation of two interrelated industries -- banking and private debt collection. This is the first time these two industries have been supervised by the same agency.

The intersection of banking and private debt collection rises when a bank sells defaulted credit card loans. The sale of these loans is common and serves a real purpose for the bank. According to the Nilson Report, last year the banking industry sold $51 billion in delinquent credit card loans. Those loan sales produced approximately $5 billion in recoveries for the banking industry.

The CFPB sent a message recently that it plans to hold banks responsible for the actions of third parties, including those who buy delinquent loans. The agency has promised new regulations and enforcement actions in an effort to encourage major banks to reform their historical practices of selling charged-off debt to companies who file millions of lawsuits each year based on inadequate supporting information.

This practice, called robo-signing, gained infamy during the past few years' mortgage loan crisis, costing the banking industry more than $35 billion in fines and penalties from the AGs and the Office of the Comptroller of the Currency. Essentially, the debt buying company, now the owner of the debt, files a lawsuit against a consumer and swears an oath to the court that all the claims made in the petition are true and accurate -- although there is frequently no documentation to support the affidavit. More than 90% of the time, the debt buyer is relying purely upon a string of digital data and has no proof of the facts of the debt.

Courts have ruled repeatedly that robo-signing is illegal and a fraud upon both the court and the consumer.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,098.45 +18.88 0.11%
S&P 500 2,003.37 +6.63 0.33%
NASDAQ 4,580.2710 +22.5760 0.50%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs