This post was also written by Kenneth M. Kolaski.
In a recent press release, the CFPB indicated that it may consider subjecting creditors to the requirements of the Fair Debt Collection Practices Act that are statutorily exempt.
On July 10, 2013, the Consumer Financial Protection Bureau (“CFPB”) issued two important bulletins on debt collection, published five sample action letters that consumers can adapt and use for their personal circumstances, and announced that it is taking complaints about debt collection from consumers to which companies will generally have to respond within 15 days.
The first bulletin makes clear that ANY entity subject to the CFPB’s jurisdiction, whether a third-party collector or a creditor collecting its own debts, can be held accountable for any unfair, deceptive, or abusive practices in collecting a consumer’s debts. Such action by the CFPB may be inconsistent with the creditor exemption under the Fair Debt Collection Practices Act (“FDCPA”). The second bulletin warns companies to avoid making deceptive statements regarding the impact of a consumer paying a delinquent debt on a consumer’s credit score, credit report, or creditworthiness. The examples provided by the CFPB raise the specter that it may intend to expand what constitutes prohibited practices under the FDCPA beyond what is in the statute or what has been decided by the courts.
What To Do?
A potential result of this new CFPB position could be that creditors collecting their own debts would be subject to an enforcement action by the CFPB for violations of the FDCPA. Consequently, creditors may wish to consider reviewing their current debt collection practices. Those practices may include the scripts used by in-house debt collectors, the frequency with which in-house collectors are permitted to call debtors, the creditor’s policies on leaving telephone messages on land lines or cell phones, scripted responses to customers who ask to have the collection efforts cease, and observing or ignoring such requests, as well as letters and envelopes used to contact debtors, to name a few.
Creditors may consider conducting a similar audit of the practices used by third-party debt collectors that they engage, since it is not yet clear whether the CFPB intends for the creditors’ liability to extend to the actions of third parties collecting on their behalf. Holding creditors liable for violations of the FDCPA by third-party debt collectors would also be a departure from general practice and case law. In October 2012, however, the CFPB held American Express liable for the collection practices of its subsidiaries under Dodd Frank’s provisions against unfair, deceptive or abusive acts or practices because, as the creditor, American Express was not subject to the FDCPA.
The CFPB is now taking complaints about consumer debt collection practices of any company (including creditors that originated and/or still own the delinquent debt, such as credit card debt, mortgages, auto loans, medical bills, and student loans). This means that the CFPB will accept complaints about companies that are statutorily exempt from the provisions of the FDCPA.
Creditors may wish to modify current procedures for resolving customer inquiries to mitigate the likelihood of consumers filing complaints with the CFPB.
You may contact Roberta G. Torian or John R. Mussman in the Financial Services Regulatory Group at Reed Smith LLP for advice about the CFPB’s recent bulletins and announcements, or to assist in formulating a response to any consumer complaint that may be made to the CFPB.