CFPB provides Debt Collection Communication Guidance
by: Margaret Wright
On July 10, 2013 the Consumer Financial Protection Bureau (“CFPB”) issued the press release “The CFPB Puts Companies on Notice About Harmful Debt Collection Practices.” The press release includes two bulletins concerning consumer debt collector communications titled “Prohibition of Unfair, Deceptive, or Abusive Acts of Practices in the Collection of Consumer Debts” and “Representations Regarding Effect of Debt Payments on Credit Reports and Scores“. Also included in the press release is guidance concerning consumer complaints regarding debt collection, including the CFPB’s publication of action letters for consumer use and a link to an outline of the press release in a debt collection fact sheet format.
The CFPB’s regulatory oversight authority includes the Fair Debt Collection Practices Act (“FDCPA”) and in October of 2012 the CFPB issued their debt collection examination procedures manual.
The FDCPA applies to third party debt collectors, including “collection agencies, debt purchasers and attorneys who are regularly engaged in debt collections”. The FDCPA includes provisions concerning harassment and abuse of a debtor; false, deceptive or misleading representations to a debtor and prohibition on the use of unfair or unconscionable means to collect a debt. However, the CFPB points out that all debt collectors, whether covered under FDCPA or otherwise, must comply also with the Dodd-Frank Act’s Unfair, Deceptive or Abusive Acts and Practices (“UDAAP”) provisions.
Bulletin 1: Prohibition of Unfair, Deceptive, or Abusive Acts of Practices in the Collection of Consumer Debts
The first bulletin further emphasizes the CFPB’s intention to rely upon the Dodd-Frank Act’s UDAAP provisions in their review of consumer debt collection practices.
The bulletin provides the definition of Unfair, Deceptive or Abusive Acts and Practices and includes practical examples, selections of which are included below:
Failing to post payments timely or properly or to credit a consumer’s account with payments that the consumer submitted on time and then charging late fees to that consumer.
Taking possession of property without the legal right to do so.
Revealing the consumer’s debt, without the consumer’s consent, to the consumer’s employer and/or co-workers.
Misrepresenting that a debt collection communication is from an attorney.
Misrepresenting to consumers that their debts would be waived or forgiven if they accepted a settlement offer, when the company does not, in fact, forgive or waive the debt.
Threatening any action that is not intended or the covered person or service provider does not have the authorization to pursue, including false threats of lawsuits, arrest, prosecution, or imprisonment for non-payment of a debt.”
Bulletin 2: Representations Regarding Effect of Debt Payments on Credit Reports and Scores
The second bulletin issued by the CFPB concerns representations made by debt collectors to consumers regarding the impact of the debt on the consumer’s credit score, credit report or creditworthiness.
The bulletin outlines common credit reporting claims which are potentially deceptive regarding removal of a debt from a credit report where the debt is obsolete or claiming a debt payment will be reported where the collector does not actually report payments. Additionally, a claim that debt payment will improve a consumer’s credit score is considered potentially deceptive as payment may not actually result in an improved score given the many factors which impact the scoring criteria. A debt collector should also avoid any statements concerning any likely increase in creditworthiness of the consumer upon payment of a debt. A lender will review and weigh information from many sources in the decision to extend credit and payment of the debt is not a guarantee that a lender will decide favorably.
Action Letters and Consumer Complaints
In addition to the two bulletins regarding a debt collector’s communication with a consumer, the CFPB has also issued form action letters to aid in the consumer’s communication with a debt collector. The action letters cover the following areas where a consumer:
- Needs more information concerning the debt;
- Wants to dispute the debt and for the debt collector to prove responsibility or stop communication;
- Wants to restrict how and when a debt collector can contact them;
- Has hired a lawyer; and
- Wants the debt collector to stop any and all contact.
If a consumer wishes to make a complaint concerning debt collection they may do so via the CFPB’s website complaint page or via fax, telephone or mail.
Debt Collection Fact Sheet
The Debt Collection Fact Sheet outlines the information included in the July 10th press release concerning the bulletins, action letters and consumer complaints. Additionally, the fact sheet includes a few debt collection statistics:
- Almost 15 percent of all credit reports (covering an estimated 30 million consumer)show items in collection
- Average amount of debt subject to collection: $1400
- Approximate number of debt collection firms in the United States: 4500
View the CFPB’s Debt Collection Press Release in its entirety:
http://www.consumerfinance.gov/pressreleases/the-cfpb-puts-companies-on-notice-about-harmful-debt-collection-practices/
About the Author:
Margaret Wright, Esq., is Vice President and Director of Compliance Research at Bankers Advisory, Inc. She is a graduate of Stonehill College and earned her Juris Doctor at Suffolk University Law School. She serves on the Compliance Committee of the Massachusetts Mortgage Bankers Association and is admitted to the Massachusetts Bar. She can be reached at Margaret@bankersadvisory.com
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Margaret Wright, JD, is regulatory compliance director with CLA. She is a graduate of Stonehill College and earned her juris doctor at Suffolk University Law School. She is admitted to the Massachusetts Bar.
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