In the CFPB's eyes, debt collection is a high-risk area, ripe with potential for unfair, deceptive or abusive acts or practices. For a few years now, debt collection has been the most-complained-about area in the CFPB's consumer complaint database. That is why the CFPB seems to be laser-focused on debt collection.
In today's post, we highlight two recent developments.
This week, the CFPB's Office of Servicemember Affairs released its annual report summarizing complaints that affect servicemembers, veterans and their families. Not surprisingly, debt collection is at the top of the list. But, what is surprising is that servicemembers are complaining about debt collection at nearly twice the rate of non-military consumers. That is a red flag for the CFPB.
The Bureau's press release quotes Director Cordray, “The complaints highlighted in today's report show that members of the military continue to have serious problems when it comes to debt collection… The Bureau will continue to closely monitor complaints from servicemembers to ensure our brave men and women are getting the protection they deserve.”
This report is exactly the type of information the CFPB uses in directing its regulation, supervision and enforcement policies. Just last year, the CFPB brought several actions against companies for unacceptable military debt collection practices. Based on this year's report, expect more activity in this area.
The second recent development is a group of actions against Citibank, N.A. last month for illegal debt sales and collection practices. Among the allegations, Citibank sold credit card debts with inflated interest rates and failed to timely forward consumer payments to the debt buyers. For these violations, the CFPB ordered Citibank to refund almost $5 million to consumers and pay an additional $3 million penalty.
Additionally, the CFPB brought an action against Citibank and two of its debt collection law firms that altered court documents in collection cases. The Bureau ordered Citibank to comply with a New Jersey state court order requiring $11 million in refunds to consumers and refrain from collecting another $34 million in debts. However, because Citibank engaged in “responsible business conduct”, it escaped further civil penalties for this violation.
These recent developments demonstrate that debt collection is still at the top of the CFPB's list. All financial institutions, whether first-party original creditors or third-party debt collectors, need to have a Compliance Management System in place. And, debt collection needs to be a key component of a company's CMS.
After all, if you don't pay attention to your debt collection practices, the CFPB will.