Supervisory Issues in Debt Collection, Part 1
Join Senior Compliance Consultant Jon Tavares as he discusses some of the recent violations of the FDCPA and Regulation F found in recent debt collector examinations.
On April 15, the CFPB issued its Annual Report on the Fair Debt Collection Practices Act (FDCPA) to Congress. In the Report, among other things, the CFPB describes common consumer complaints, issues identified by examiners, and enforcement actions related to the FDCPA and debt collection generally. Last month I wrote an article discussing common consumer complaints in debt collection – Consumer Complaints in Debt Collection. This article will discuss a few of the supervisory issues addressed in the Report. My next articles will address the remaining supervisory issues identified in the report and enforcement actions related to debt collection. It should be noted that the issues discussed herein are not limited to the FDCPA, and creditors not subject to the FDCPA and Regulation F (12 CFR Part 1006), its implementing regulation. Any entity collecting debts, whether they are collecting debts owed to them or are a third-party debt collector, should take note of this Report.
In recent examinations of debt collectors, the CFPB has identified several violations of the FDCPA and Regulation F. In addition to the issues discussed in this article, a summary of recent developments in the CFPB’s supervision program and remedial actions related to debt collections can be found in the Summer 2021 and Fall 2021 Supervisory Highlights.
Prohibited Calls to Consumers’ Workplace
Section 805(a)(3) of the FDCPA (15 USC §1692c(a)(3)) and §1006.6(b)(3) of Regulation F prohibits a debt collector from communicating with a consumer in connection with the collection of a debt at the consumer’s workplace if the debt collector knows or has reason to know that the consumer’s employer prohibits such communications. The CFPB has determined that debt collectors communicated with consumers at their workplaces after they knew or should have known that the consumers’ employers prohibit such communications.
In addition, section 805(a)(1) (15 USC §1692c(a)(1)) and §1006.6(b)(1) of Regulation F prohibits a debt collector from communicating with a consumer in connection with the collection of any debt at a time or place that the collector knows or should know is inconvenient to the consumer. The CFPB found that debt collectors communicated with consumers at their places of employment during work hours when the debt collectors knew or should have known that calls during work hours were inconvenient to the consumers. For example, one debt collector called a consumer during work hours at a time the consumer had previously specified as inconvenient. Another debt collector called a consumer on a workplace phone number after being informed by the consumer that calls to the workplace number were inconvenient.
Debt collectors and creditors should review their policies and procedures and improve their training and monitoring to ensure that they are not communicating with consumers at their place of employment if they know the consumer’s employer prohibits such communication or the time or place is inconvenient.
Communication With Third Parties
Section 805(b) of the FDCPA (15 USC §1692c(b)) and §1006.6(d) of Regulation F prohibits a debt collector from communicating in connection with the collection of a debt with any person other than the consumer and certain other parties, subject to certain limited exceptions. The CFPB found that debt collectors communicated with third parties that were not within a listed exception. These violations resulted from inadequate compliance controls to verify right-party contact during efforts to locate the consumer. In several instances, the third party had a name similar to the consumer’s name.
Additionally, section 804(1) of the FDCPA (15 USC §1692b(1)) and §1006.10 of Regulation F requires the debt collector, when communicating with third parties for the purpose of acquiring location information for the consumer, to disclose the name of their employer only if expressly requested. The CFPB found that debt collectors identified their employers when communicating with third parties who had not expressly requested it.
Debt collectors and creditors should review their policies and procedures and improve their training and monitoring to ensure they are not communicating with third parties unless covered by an exception and, when acquiring location information, not identify their employers unless expressly requested.
Failure to Cease Communication Upon Written Request or Refusal to Pay
Section 805(c) of the FDCPA (15 USC §1692c(c)) and §1006.6(c) of Regulation F provides that if a consumer notifies a debt collector in writing that the consumer wishes the collector to cease further communication or that the consumer refuses to pay the debt, the collector must cease further communication with the consumer, with certain exceptions. The CFPB found that a consumer used a model form to mail a written statement to a debt collector stating that the debt was the result of identity theft, requesting that the collector cease further communication, and requesting that the collector provide confirmation along with information concerning the disputed account. After receiving this form, the collector continued attempts to collect the debt from the consumer. These attempts were not efforts to respond to the consumer’s request for information about the identity theft claim.
Debt collectors and creditors should review their policies and procedures and improve their training and monitoring to ensure that they cease communication with the consumer when the consumer requests the debt collector cease further communication or refuses to pay the debt.
Harassment Regarding Inability to Repay
Section 806 of the FDCPA (15 USC § 1692d) and §1006.14 of Regulation F prohibits a debt collector from engaging in any conduct, the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. The CFPB found when consumers stated they were unable to make or complete payment arrangements, debt collectors emphasized two or more times to each of the consumers that the collector would place a note in the account system stating that the consumer was refusing to make a payment. The natural consequence of these inaccurate statements was to harass or oppress the consumer.
Debt collectors and creditors should review their policies and procedures and improve their training and monitoring to ensure that they do not engage in any conduct, the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. In my next article, I will discuss the remaining issues identified by examiners. Then, the following article will address recent enforcement actions by the CFPB, other federal regulator agencies, and the FTC. Until then, debt collectors and creditors should review the CFPB’s Report and Regulation F to ensure that they are avoiding potential UDAAPs in their debt collection practices.