GUEST EDITORIAL
In a recent conversation with the head of one of the major recovery industry trade organizations the subject of forwarding companies who are not paying recovery agencies for their services came up and the conversation evolved into a very interesting and involved question which I would pose to the readers of this article.
Is charging consumers for services you have no actual expense on, as you do not pay for those services, considered a UDAAP violation?
The scenario goes like this… A forwarding company takes an assignment from a lender and sends the assignment to a recovery agency. The recovery agency works the assignment and may or may not recover the vehicle but in either case submits a bill to the forwarding company.
The forwarding company bills the lender for the services that were rendered by the recovery agency and those charges, after being remitted to the forwarder, are passed on to the consumer creating a larger balance or deficiency balance.
This is where the “STICKY” comes in. The forwarding agency does not pay the recovery agent and therefore in reality has no expense related to the actual recovery or attempted recovery of the mortgaged collateral. The consumer is being charged for a service that the forwarding agency had no expense on as they did not pay the recovery agency for its efforts. So, in the end, the consumer is paying for an expense which was never expensed out by the forwarding company.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), all covered persons or service providers are legally required to refrain from committing unfair, deceptive, or abusive acts or practices (collectively, UDAAPs) in violation of the Act.
Is the lender aware and possibly even a part of this deceptive and abusive scheme to defraud the consumer by creating a larger balance or deficiency balance on the consumers account and increasing the amount that might be collected or charged off to profit and loss which could result in a tax write off? Should the lender have a fiduciary liability to verify that all charges are actual charges the forwarding company has had to pay out before charging them to the consumers account? Is the forwarding company creating an Unfair and/or Abusive act as defined by UDAAP when they bill the lender and ultimately the consumer for charges they did not actually pay?
I have a feeling these questions and a few more related to the practices of the large lenders and their relationships with the forwarding companies will soon be answered by the Bureau of Consumer Financial Protection (BCFP).
Ron L. Brown
MCE, IFCCE, MPRS, CCCO, CARS, CFA
CSI GROUP / EAGLE GROUP XX
Anything, Anytime, Anyplace… Professionally
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