Fair Debt Collection Practices Act (FDCPA) – No Longer Just a Third Party Concern Bob Frick, Vice...
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Fair Debt Collection Practices Act (FDCPA) – No Longer Just a Third Party Concern Bob Frick, Vice President Education Services, NCO Group David Stocker,
Fair Debt Collection Practices Act (FDCPA) No Longer Just a
Third Party Concern Bob Frick, Vice President Education Services,
NCO Group David Stocker, General Counsel, Automated Collection
Services, Inc. Tom Wantuck, Chief Operating Officer, Core
Recoveries, LLC
Slide 2
An Overview of the CFPB Presenter: David Stocker, General
Counsel Automated Collection Services, Inc. 2 2013 Knowledge
Symposium November 5-7, 2013 St. Pete, Florida
Slide 3
A beginning point should be what is the Consumer Financial
Protection Bureau (CFPB)? It is a consumer protection agency
created by the Dodd-Frank legislation and it officially began its
supervisory and enforcement activities July 1, 2012. The enabling
legislation was passed prior to that date, and while the agency was
being organized and awaiting opening actions, it was already
involved in the activity it has become best known for, gathering
industry data. Dodd-Frank was supported by testimony and media
reports that the FTC had not been successful in reducing the number
of consumer complaints they were receiving and not being aggressive
enough in their enforcement actions. There was also a backlash
effect from the mortgage market failure and credit card problems. 3
2013 Knowledge Symposium November 5-7, 2013 St. Pete, Florida
Slide 4
The legislation in its final form comprised 2,319 pages. For
comparison, the Federal Reserve Act was only 31 pages and the
Sarbanes-Oxley Act, 61 pages. The bill was two years getting
through Congress and it created 29 new offices and agencies. The
law requires 55 studies and reports and has an estimated cost for
the first ten years of nearly 27 billion dollars. The legislation
gave the CFPB concurrent jurisdiction with nearly all federal
alphabet soup agencies that control the consumer credit industry.
The CFPB is charged with writing and enforcing rules to target
abusive practices in those markets. 2013 Knowledge Symposium
November 5-7, 2013 St. Pete, Florida 4
Slide 5
CFPBs functions There are eight units that function as follows:
1.To research consumer financial products and develop consumer
educational programs; 2.To provide information and guidance to
traditionally underserved consumers and communities; 3.Tracking
consumer complaints and route those to proper federal or state
agencies; 4.Office of financial education; 5 2013 Knowledge
Symposium November 5-7, 2013 St. Pete, Florida
Slide 6
CFPBs functions continued: 5. Office of fair lending and equal
credit opportunity to oversee fair lending laws; 6. Consumer
advisory board to advise the CFPB and provide information on the
consumer industry and emerging practices; 7. Office of service
member (military) affairs to provide financial services to service
members and their families, including the National Guard; 8. Office
of financial protection and education for older Americans; those
over 62 years old. 6 2013 Knowledge Symposium November 5-7, 2013
St. Pete, Florida
Slide 7
The authority granted to the CFPB in the legislation includes
rulemaking (perhaps the most important), supervisory and
enforcement. A key to this authority is that a significant amount
of all consumer protection rulemaking, supervision and enforcement
is taken from the bank regulators, although the FTC does retain its
authority. The CFPB has authority over service providers, covered
persons (any person that is engaged in offering or providing a
consumer financial product or service or any affiliate of such
person if acting as a service provider) and related persons. This
is one of many omnibus provisions that are included in the CFPB
authority, and it is unlikely that any credit transaction in the
U.S. is not covered in one of them. 7 2013 Knowledge Symposium
November 5-7, 2013 St. Pete, Florida
Slide 8
The CFPB website contains examples of those entities and
services covered and it is important to visit the site at
www.consumerfinance.gov, to review those examples. The site also
provides an opportunity to keep up with their frequent
communications about CFPB activities. It is important to note for
the student aid community the clear statements from the CFPB that
student loans and those who service them are
covered.www.consumerfinance.gov 8 2013 Knowledge Symposium November
5-7, 2013 St. Pete, Florida
Slide 9
The authority of the CFPB extends to defining and enforcing
rules which cover unfair, deceptive and abusive acts and practices,
consumer disclosures, credit reporting and consumer complaints.
Dodd- Frank says an act is abusive if it materially interferes with
the ability of a consumer to understand a term or condition of a
product or takes unreasonable advantage of the ability of a
consumer to understand it. The legislation includes significant
oversight duties for private educational loans. A study into issues
and functions of the private loan market place was ordered in the
original legislation and a report of findings was to be made by
July 2012. That report which has been issued, studied many aspects
of the private loan market and produced several recommendations for
change. 9 2013 Knowledge Symposium November 5-7, 2013 St. Pete,
Florida
Slide 10
An important date for the education industry is April 13, 2012.
That is when the CFPB released a bulletin that set out the
requirements that creditors who hire third parties to do work for
them, must oversee their compliance with consumer laws. It has
become clear that collection agencies and servicers who employ
vendors, are responsible for the actions of their vendors. Included
in that April 13 Bulletin was a specific list of duties the
employing entity must follow in its oversight, including monitoring
compliance activities, reviewing policies and procedures, training
materials and the total compliance management system. The CFPB has
made clear that they will not only examine a covered entity, but
their vendors as well when doing a full review. 10 2013 Knowledge
Symposium November 5-7, 2013 St. Pete, Florida
Slide 11
This duty is set out in the Third Party Servicer Rules on the
CFPB web site. Several findings by the CFPB against banks have been
based in large part on the banks failure to oversee the actions of
their third party service providers. It therefore seems likely that
collection agencies will be held accountable for violations of
their service providers. Thus, part of a compliance initiative for
a collector or creditor, must include active due diligence in
overseeing their service providers/vendors. It seems prudent to
review current contracts between these entities. 11 2013 Knowledge
Symposium November 5-7, 2013 St. Pete, Florida
Slide 12
The CFPB has been active in recent months with many of their
initiatives directed at the collection industry and student aid
issues. This attention to student aid was included in the
originating legislation which required a study and report on
private educational loans, as mentioned above. The CFPB gathered
data from student borrowers, servicers and participating lenders.
That report, released one year after the CFPB began operation, also
recommended revisiting student loan discharge in bankruptcy. That
focus on student aid was recently revisited by an announcement and
release of proposed rules in the Federal Register, that the CFPB
would be issuing final regulations to establish a process to
oversee student loan billing servicers. 12 2013 Knowledge Symposium
November 5-7, 2013 St. Pete, Florida
Slide 13
May 2013, CFPB employees join the National Treasury Employees
Union; A significant part of the CFPB operational model is
gathering data, especially about consumer complaints. As noted
above, they have reached out to state attorneys general, state and
local banking and consumer protection agencies, borrower advocates
and legal aid, complaint resolution departments of lenders and
servicers, local city governments and institutions of higher
education; July 2013, exchange between Senators from Banking
Committee and Dir. Cordray about scope of data gathering continues;
July 2013, CFPB testifies before House subcommittee on the scope of
their data gathering and use; 13 2013 Knowledge Symposium November
5-7, 2013 St. Pete, Florida
Slide 14
August, 2013, the CFPB seeks OMB approval of new generic
information gathering clearance which will enable the Bureau to
test and improve information gathering techniques; August 2013, the
CFPB proposes new information gathering titled Development of
Metrics to Measure Financial Well Being of Working Age and Older
American Consumers. The discussion indicated that this would assist
in upgrading the financial literacy of consumers; 14 2013 Knowledge
Symposium November 5-7, 2013 St. Pete, Florida
Slide 15
August 2013, the CFPB, in a continuing course in this area,
announces a program of outreach to teachers and other public
servants to assist in providing information about their ability to
reduce or cancel their student loan debt. In addressing the latest
CFPB actions, a Deputy Assistant Director of the CFPB spoke at the
ACA conference in California July 15, 2013. A brief overview of
those comments follows. That spokesperson identified three themes
of CFPB focus in the debt collection arena: 1.Accuracy and
integrity of data used to collect debts; 2.Debt verification,
consumer complaints and disputes and their impact upon consumer
reporting agencies; 3.Understanding industry practices. 15 2013
Knowledge Symposium November 5-7, 2013 St. Pete, Florida
Slide 16
She then described the organization of the CFPB in the Office
of Supervision, which has two sections, Office of Supervision of
Policy and Office of Supervision of Examinations. She also stated
the expectations of the CFPB for collection agencies were that each
agency would have an internal compliance department that manages
compliance with consumer laws. The goals of this internal
compliance should be to prevent violations, monitor for and correct
violations and track corrections made. In addition, to manage
relationships with third party vendors to ensure they are complying
with the CFPB rules and consumer laws. 16 2013 Knowledge Symposium
November 5-7, 2013 St. Pete, Florida
Slide 17
The CFPB released on October 2012 and have since amended, their
Examination Procedures, a 900 page guide. The goal of these
examinations is to identify risks to consumers and review the
internal policies and processes used to ensure overall compliance
with consumer laws. The spokesperson then gave an overview of the
examination process. There will likely be an initial conference
with the agency, followed by a request for documents, including
training, process and policy documents, as well as complaint
history. After review of those records, there will be an onsite
visit by several examiners who will need unlimited access to your
computer, staff and internal documents. 17 2013 Knowledge Symposium
November 5-7, 2013 St. Pete, Florida
Slide 18
CFPBs Complaint Portal On July 10, 2013, the CFPB announced
several new actions that address consumer complaints. This
continues a process that the Bureau has been active in since the
beginning in gathering complaint data from several sources,
including an early web driven complaint process. They have since
entered into agreements with the state attorneys general, the FTC
and other federal agencies to have their data sent to the CFPB as
well as other state and local government entities as set out above.
18 2013 Knowledge Symposium November 5-7, 2013 St. Pete,
Florida
Slide 19
The July 10, 2013 announcement included two bulletins on
illegal conduct, published action letters for consumers and
information about opening their consumer complaint resolution
process, commonly referred to as the portal. Each agency is
encouraged to register their company with the CFPB portal to
receive notice of complaints that consumers will be filing through
the portal. The consumer initiates the process by submitting a
complaint. This is then reviewed by the CFPB and routed to the
portal. The next step is for the agency to respond, presumably
after making their investigation into the complaint. This response
is sent to the consumer for review and their counter response. If
they elect to do so, they have up to sixty days to provide this
information. 19 2013 Knowledge Symposium November 5-7, 2013 St.
Pete, Florida
Slide 20
The CFPB routes the complaint to the company within 48 hours
through a secure web portal that the company has established. The
information is sent to the companys portal. While there is not an
independent notice of a new complaint, the CFPB provides a status
report of all open complaints, and by reviewing that status report
you can determine the new complaints. Each company is responsible
to monitor their site to determine if they have had a complaint
filed against them. 20 2013 Knowledge Symposium November 5-7, 2013
St. Pete, Florida
Slide 21
Monitoring should be performed daily as the response time is 15
days. During her ACA presentation in San Diego, the Asst. Director
stated that it is better to make a response sooner than later and
that those who do not respond at all can trigger an investigation
into that situation. This suggests to those who have expressed a
reluctance or refusal to register, such inaction could be a serious
problem. The CFPB will investigate individual complaints based upon
a set of criterion. Examples include an analysis of the companys
response, the consumers input, the severity of the complaint and
timeliness of the companys response. 21 2013 Knowledge Symposium
November 5-7, 2013 St. Pete, Florida
Slide 22
The resolution response categories are set out in the rules and
include; closed with monetary relief, closed with non-monetary
relief, closed with explanation and closed. Each category has
particular consequences and the discussion is beyond the scope of
this paper. Included in the July 10 2013 compliance alert were five
consumer action letters, including: 1.Needs to know more
information on debt collection (additional verification); 2.Wants
to dispute the debt (interesting to see how this interplays with
FCRA issues); 3. Wants to restrict a debt collectors contact with
them (impact on cease and desist?); 4.Has hired a lawyer; 5.Wants
the debt collector to stop all communication (likely to drive up
litigation as this has the potential to drive up all cease and
desist demands). 22 2013 Knowledge Symposium November 5-7, 2013 St.
Pete, Florida
Slide 23
23 2013 Knowledge Symposium November 5-7, 2013 St. Pete,
Florida
Slide 24
24 Fair Debt Collection Practices Act (FDCPA) governs the
communications, actions and acquisition of information, the actions
of the debt collector and agency. Enforced by Federal Trade
Commission and the CFPB Laws are to protect consumers from
harassment, fraud and other issues under Title VIII of the Consumer
Credit Protection Act Enacted on March 20,1978 Enacted to eliminate
abusive, deceptive and unfair practices of debt collectors. 2013
Knowledge Symposium November 5-7, 2013 St. Pete, Florida
Slide 25
25 Commission is the Federal Trade Commission Communications
includes but is not limited to letters, phone communication, fax,
email and in person communications. Consumer is the person
allegedly obligated to pay any debt Debt is any obligation to pay
money Location Information is a consumers home phone number, home
address and place of employment ONLY Debt Collector is any person
that has the primary purpose of collecting a debt 2013 Knowledge
Symposium November 5-7, 2013 St. Pete, Florida
Slide 26
26 Debt incurred primarily for personal, family or household
purposes It DOES NOT apply to corporate debt or debt owed for
business or agricultural purposes 2013 Knowledge Symposium November
5-7, 2013 St. Pete, Florida
Slide 27
27 Any person who regularly collects debts for another person
or institution Anyone who uses a name other than its own when
collecting its own consumer debts EXAMPLE: If you have an unpaid
credit card and the bank is trying to collect the debt, they are
considered 1 st party. If they hired a collection agency, that
agency would be the 3 rd party and FDCPA would apply to the
collection agency. 2013 Knowledge Symposium November 5-7, 2013 St.
Pete, Florida
Slide 28
28 Consumer Executor Parent (if the borrower is a minor)
Guardian Spouse, in authorized states Consumers Attorney upon
verification of representation Consumer Reporting Agency Creditor
Creditors attorney Third Parties expressly authorized by the
consumer or the court 2013 Knowledge Symposium November 5-7, 2013
St. Pete, Florida
Slide 29
29 An unauthorized third party is someone we do not have
permission to speak with regarding the debt. Here are some
examples: Employer, Case worker, Financial Aid Officer, Mortgage
company. We must have PERMISSION and it must be DOCUMENTED to speak
with a 3 RD PARTY. 2013 Knowledge Symposium November 5-7, 2013 St.
Pete, Florida
Slide 30
30 Between the hours of 8:00 a.m. and 9:00 p.m. in the
consumers time zone. Inconvenient times and places are determined
by the consumer. 2013 Knowledge Symposium November 5-7, 2013 St.
Pete, Florida
Slide 31
31 If we have knowledge that the consumer cannot have calls at
work, we cannot call the consumer at work. If the consumer requests
no calls at work, we must honor their request. If the receptionist
at the job says no personal calls, we cannot call the consumer at
work. (it must also be documented in the notes) 2013 Knowledge
Symposium November 5-7, 2013 St. Pete, Florida
Slide 32
32 The mini-Miranda must be stated in every communication.
Federal law requires me to inform you that this is an attempt to
collect a debt by a debt collector and any information obtained
will be used for that purpose. 2013 Knowledge Symposium November
5-7, 2013 St. Pete, Florida
Slide 33
33 Once we receive knowledge the consumer has an attorney, all
communication must be with the attorney. If we are unable to speak
with the attorney, we will not call the consumer back. ACSI POLICY:
the collector should attempt to contact the attorney three (3)
times over a seven (7) day period. If the collector is not
successful in reaching the attorney, the collector should request
the approved Attorney Representation Verification letter to be
mailed to the attorney. If the collector doesnt receive a
communication back from the attorney within 14 days after the
mailing of the letter, the collection manager may transfer the
account back to a collector to resume collection efforts. 2013
Knowledge Symposium November 5-7, 2013 St. Pete, Florida
Slide 34
34 May be in writing or verbal One final contact after written
request is received to notify the consumer that: 1. Collection
efforts are being stopped 2. Certain specific remedies ordinarily
invoked may be pursued. 2013 Knowledge Symposium November 5-7, 2013
St. Pete, Florida
Slide 35
35 Every contact with a consumer or an authorized third party
must include: KEY WORD IS AUTHORIZED 3 RD PARTY Mini Miranda and
Recording Disclosure Collector name Company name Clients name 2013
Knowledge Symposium November 5-7, 2013 St. Pete, Florida
Slide 36
36 The validation period is the 30 day period after the initial
communication with the consumer. The initial communication
includes: The amount of the debt Name of the original creditor
Notice that the consumer has 30 days to dispute the debt *IMPORTANT
We dont overshadow, do not say due in full with a deadline that
falls within the above 30 day period. 2013 Knowledge Symposium
November 5-7, 2013 St. Pete, Florida
Slide 37
37 If the consumer disputes the debt verbally or in writing,
the debt collector must: Stop all collection efforts 2013 Knowledge
Symposium November 5-7, 2013 St. Pete, Florida
Slide 38
38 Debt collectors may not harass or oppress any person while
collecting a debt. Threaten violence Use obscene or profane
language Publish a public list of consumers who refuse to pay
Annoy, abuse, or harass by calling repeatedly or causing the phone
to ring repeatedly Make phone calls without meaningful disclosure
2013 Knowledge Symposium November 5-7, 2013 St. Pete, Florida
Slide 39
39 False or misleading information is information known to be
untrue, such as: Implying you are an attorney Threaten action that
is not legal or you do not intend to take Imply non-payment will
result in arrest Use post cards Use other names to identify
yourself Use government seals or logos 2013 Knowledge Symposium
November 5-7, 2013 St. Pete, Florida
Slide 40
40 Adding interest, fees or collection costs to the principle
unless it was authorized by the original agreement or permitted by
law. Deposit or threaten to deposit a postdated check prior to the
date on the check Cause communication charges such as collect calls
2013 Knowledge Symposium November 5-7, 2013 St. Pete, Florida
Slide 41
41 A collector can be held personally liable for FDCPA
violations. Consumer has one year from the date the violation
occurred to start such action. Statutory damages are determined by
the court based on the nature, frequency and persistency of the
violation. Any actual damages sustained Damages up to $1000 for an
individual case and up to $1000 in a class action case for each
named plaintiff up to $500,000 or 1% of the net worth of the
collector Reasonable attorney fees Some state laws supersede the
FDCPA when the state law provides the consumer with greater
protection. 2013 Knowledge Symposium November 5-7, 2013 St. Pete,
Florida
Slide 42
Thank you! David Stocker [email protected] 42 2013 Knowledge
Symposium November 5-7, 2013 St. Pete, Florida