We have advised previously that the CFPB has debt collectors under close scrutiny; and this scrutiny is directed at both third-party debt collectors and at those creditors collecting their own debt (“first-party”). The Fair Debt Collection Practices Act is certainly the tool that the CFPB uses to analyze the practices of third-party debt collectors. But this tool is unavailable to the CFPB to use with respect to first-party debt collection. Therefore, the CFPB leans on the unfair, deceptive, or abusive acts or practices (“UDAAP”) principle in evaluating the actions of first-party debt collectors; and this concept makes in-person collection of consumer debt problematic even for first-party debt collectors.
Two weeks ago, the CFPB issued Compliance Bulletin 2015-07, In-Person Collection of Consumer Debt. This Bulletin addresses both third-party and first-party debt collection. The Bulletin highlights the importance of the UDAAP analysis in determining whether any collector's in-person collection activity may be a violation of the Dodd-Frank Act. The Bulletin (the entirety of which can be found at CFPB In-Person Collections Compliance) specifically notes:
Depending on the facts and circumstances, in-person collections may cause or may be likely to cause substantial injury to consumers. For example, in-person collection visits may result in third parties, such as consumers' co-workers, supervisors,customers, roommates, landlords, or neighbors learning that the consumers have debts in collection. When such information is revealed to such third parties, it could harm the consumer's reputation and, with respect to in-person collection at a consumer's workplace, result in negative employment consequences. In addition, depending on the facts and circumstances, in-person collection visits may result in substantial injury to consumers even when there is no risk that the existence of the debt in collections will be disclosed to third parties. Such injury may result when, for example, a collector goes to a consumer's place of employment when the consumer 's employer prohibits the consumer from having personal visitors there, which could also result in negative employment consequences. As with other types of collection,in-person visits may also be likely to cause substantial injury to a consumer if, based on the facts and circumstances, a likely or actual consequence of the visits is to harass the consumer.
This language makes clear that the CFPB will look closely at the in-person collection actions of first-party collectors to determine potential violations of the Dodd-Frank Act, irrespective of the applicability of the Fair Debt Collection Practices Act to such first-party collectors. The lesson for all companies is to carefully scrutinize your debt collection policies and practices --particularly your in-person policies-- to make certain that you avoid the types of practices that are of concern to the CFPB.
The CFPB's parting shot in the Bulletin should be carefully noted by all consumer finance companies:
If the CFPB determines that a company has engaged in acts or practices that violate the Dodd-Frank Act, the FDCPA, or other Federal consumer financial law, it will take appropriate supervisory or enforcement actions to address the violationsand seek all appropriate corrective measures, including remediation of harm to consumers and assessment of civil money penalties.
And, need we mention that the CFPB has started to target the owners and operators of companies for UDAAP, too?