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OCC Provides Clarification on Consumer Debt Sales Bulletin

The Office of the Comptroller of the Currency (OCC) has clarified a critical component of its August 4th bulletin on consumer debt sales.

During a speech in Las Vegas on Oct. 28th, Darrin Benhart, the OCC’s Deputy Comptroller for Supervision Risk Management, specifically addressed the guidelines for selling the debt of consumers seeking bankruptcy protection.

"The guidance indicates that certain types of debt are not appropriate for sale because they likely fail to meet the basic requirements to be an ongoing legal obligation of the borrower,” Benhart said. "The intent of that statement was to protect borrowers during a vulnerable period when creditors become aware that they are likely going to file, or in fact have filed, for bankruptcy protection and are awaiting plan confirmation.”

According to Benhart, the OCC has seen instances where banks have sold accounts after the borrowers sought bankruptcy protection. The debt buyers who purchased the accounts continued collections efforts, violating the automatic stay.

"The OCC recognizes that in Chapter 13 bankruptcies, where the borrower’s payment plan has been confirmed, the bank may have the ability to sell the obligation that is owed to it by the borrower,” Benhart said. "The OCC recognizes, and this reference was not meant to affect cases where certain debts remain valid, such as in a Chapter 13 bankruptcy where the court has confirmed a payment plan. Bank management has the ability to continue to collect and sell the legal debt.”

AIS will continue to follow this story and provide updates.


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