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United Guaranty Corporation Debt Collection
If you have debt with United Guaranty Corporation, you may be wondering about their debt collection practices. As a company that provides mortgage insurance, United Guaranty sometimes needs to collect on debts when homeowners default on their mortgages. Here’s an overview of how United Guaranty approaches debt collection and what you need to know if you owe them money.
Who is United Guaranty Corporation?
United Guaranty Corporation (UGC) is a mortgage insurance company based in North Carolina. They provide insurance on residential mortgages, which pays the lender if the borrower defaults. This allows lenders to make loans to borrowers who may not qualify for conventional mortgages.
UGC operates in all 50 states and is a subsidiary of AIG. They’ve been around since the 1960’s. Over the years, UGC has insured millions of mortgages across the country.
When does UGC get involved in debt collection?
UGC gets involved when a homeowner defaults on their mortgage. As the mortgage insurer, UGC has to pay out a claim to the lender. At that point, UGC takes over the right to collect the deficiency from the homeowner.
Let’s say someone borrows $200,000 to buy a house. After a few years, they default on the loan when there’s still $180,000 owed. The bank forecloses and sells the house for $150,000. That leaves a $30,000 deficiency. UGC has to pay that to the bank, so now they want to collect it from the homeowner.
What laws apply to UGC’s debt collection practices?
As a debt collector, UGC has to follow federal and state debt collection laws. Here are some of the main laws that apply:
- Fair Debt Collection Practices Act (FDCPA) – This federal law prohibits abusive debt collection practices. It covers things like harassment, false statements, unfair practices, and disclosure requirements.
- State debt collection laws – Many states have their own debt collection laws that UGC must follow when collecting in that state. For example, some states limit how often UGC can call a debtor.
- Consumer Financial Protection Bureau (CFPB) rules – The CFPB provides federal oversight of debt collectors and can file enforcement actions against companies that violate debt collection laws. They’ve gone after UGC before (more on that later).
What are some of UGC’s debt collection practices?
Based on consumer complaints and legal cases, we know some details about how UGC collects debts:
- Phone calls – UGC agents will call debtors to request payment on the deficiency. Sometimes they call repeatedly, which becomes harassing.
- Letters – UGC sends letters informing debtors of the deficiency and demanding payment. The letters outline options to resolve the debt.
- Lawsuits – If the debtor won’t pay voluntarily, UGC sues them to get a court judgment. This allows them to pursue other collection methods.
- Credit reporting – UGC reports unpaid deficiencies to the credit bureaus, damaging the debtor’s credit score.
These practices don’t always follow the law. Keep reading to learn about some of UGC’s legal issues with debt collection.
UGC Legal Issues and Controversies
United Guaranty has faced lawsuits and government enforcement actions related to their collection conduct. Here are some examples:
CFPB Enforcement Action
In 2016, the Consumer Financial Protection Bureau (CFPB) took action against UGC for illegal kickbacks and improper debt collection practices. This included:
- Paying kickbacks to mortgage originators in exchange for business
- Collecting money from borrowers that wasn’t owed
- Harassing borrowers by calling repeatedly
- Reporting false information to credit reporting agencies
UGC paid a $1.1 million penalty and had to refund $211,000 to consumers as part of the CFPB settlement.
Lawsuits from Lenders
When the housing bubble burst in 2008, UGC ended up in legal fights with some lenders they had insured. Lenders claimed UGC improperly denied insurance claims after borrowers defaulted on their mortgages.
For example, Countrywide sued UGC for not paying out claims on 17,000 loans that had gone bad. They said UGC made up bogus reasons to avoid the payouts.
UGC argued the mortgage loans didn’t meet the terms of their insurance policies. But lenders felt UGC was just trying to avoid massive payouts as foreclosures skyrocketed.
Lawsuits from Borrowers
Homeowners have also sued UGC for issues related to debt collection. For instance, a group of borrowers filed a class action lawsuit accusing UGC of:
- Trying to collect premiums that weren’t owed
- Falsely threatening to foreclose or damage borrowers’ credit
- Harassing borrowers by calling repeatedly
The plaintiffs said these practices violated debt collection laws like the FDCPA. UGC denied any wrongdoing but agreed to settle the case in 2017.
What to Do if UGC Contacts You
If United Guaranty Corporation contacts you trying to collect a debt, here are some tips:
- Review your mortgage documents – Make sure you actually owe the debt and UGC has the right to collect. Don’t pay anything that isn’t valid.
- Keep records – Document all calls, letters, and communications from UGC. This supports any complaints about harassment.
- Stop contact if requested – Under the FDCPA, debt collectors must honor written requests to cease contact.
- Dispute invalid debts – You can dispute incorrect or invalid debts with UGC and the credit bureaus.
- Seek legal help – If UGC violates debt collection laws, contact a consumer lawyer about your options.
Dealing with debt collectors is stressful. But knowing your rights under federal and state law can help protect you from any unlawful collection practices.