The life-cycle of customer acquisition, execution of a marketing campaign, data collection, documentation management, and consumer auditing can be a resource-intensive operation.
The Consumer Financial Protection Bureau (CFPB), created under the legislative authority of Dodd-Frank, has been a boon to the debt collection industry. The Federal Trade Commission (FTC) provides information to the CFPB, which in turn is included in the annual report which the CFPB must file to Congress, reporting on the federal government’s compliance with consumer debt collection legislation.
Compliance with The Fair Debt Collection Practices Act (FDCPA) is also on the rise. Passed in 1978, the FDCPA eliminates and prevents any debt collection practices that are deemed to be unfair, deceptive, or abusive. It also provides protections for debt collection agencies against unfair competition.
Understanding The Scope Of The FDCPA
It should be noted that the jurisdiction of the FDCPA only extends to personal consumer debt. Corporate, business, or agricultural debt are beyond its scope.
Who Is Considered A Debt Collector, Subject To The FDCPA?
A “debt collector” is any person or organization who collects (or attempts to collect) consumer debt on behalf of a third party.
If a person or organizational entity performs any of the following, they are not classified as a “debt collector” under the FDCPA:
- Collects debts owed unto itself.
- Originates and sells a debt, which it itself continues to service.
- Debts that were not in default at the time that the person or entity took over the servicing thereof.
- Services debt instruments held in a trust or escrow account, on behalf of a third party.
- Services debts on behalf of a person or entity with whom the debt is jointly held in common.
- Serviced by a legal process servicer.
Restrictions On Unfair Collection Practices
Compliance with debt collection regulations governs the “3 W’s”: when, where, and with whom.
- One very important ramification of these tenets is that a debt collector may only communicate with the consumer, the consumer’s spouse, legal guardian, or other designated entity upon whom power of attorney has been bestowed.
- Another important tenet is that debt collectors may not communicate with a consumer outside of conventional hours eg) before 8am or after 9pm, in the consumer’s local timezone.
- The venue where debt collection takes place must not cause undue inconvenience to the consumer, such as their place of employment.
- If the consumer has retained an attorney and provided said attorney’s contact information to the debt collector, then the latter may not circumvent the attorney to contact the consumer.
- The debt collector must cease and desist, if a consumer puts in writing, his intent to refuse to pay the debt.
- If the consumer requests, in writing, that the debt collector cease all further communications, the latter must comply, except to advise the former that:
—The debt collection effort is being ceased.
—The debt collector may seek other legal remedies to satisfy the debt.
What does this mean for financial institutions?
Although financial institutions are not generally subject to the provisions of the FDCPA, the fact of the matter is that UDAAP (unfair, deceptive, or abusive acts or practices) is a matter of regulatory concern. The CFPB does include provisions for federal interagency consumer compliance bank examination procedures. Therefore, we may anticipate the pendulum of regulatory compliance measures swinging toward financial institutions as well.