Wells Fargo Halts Card Debt Sales as Scrutiny Mounts

July 29, 2013
American Banker  
debt settlement news

Wells Fargo reportedly has ceased sales of its customers' unpaid consumer loans to third-party debt collection agencies. The bank's move follows JPMorgan Chase's more drastic decision to freeze most of its credit card debt-sales activities. Sources say Wells Fargo appears to be reviewing its operations to ensure they comply with regulators' increasingly stringent guidelines for: the process through which banks sell defaulted credit card loans; who collections rights are sold to; and what data they provide to third-party debt collectors. The Office of the Comptroller of the Currency has put together a list of best practices and is working on more binding guidance, while the Consumer Financial Protection Bureau has pledged to crack down on debt-collection industry. The Federal Trade Commission is taking action on the matter as well, as are a number of state attorneys general. Consumer advocates believe the scrutiny will force other big banks to reconsider their debt-collection practices, especially with regard to how much documentation they retain and provide to third-party buyers. "I just don't think this [previous industry practice] can continue, and I think anyone who's stopping it [debt sales] realizes that after the mortgage robo-signing fiasco, there's potential reputational damage from continuing," remarked National Association of Consumer Advocates head Ira Rheingold. "The writing is on the wall."
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