On February 23, the CFPB announced two separate actions, one against a New York-based financial institution and another against the same financial institution, two of its affiliates, and two debt collection law firms, alleging that the respondents’ debt sales and debt collection practices constituted unfair or deceptive acts or practices under the CFPA. In the first action, the CFPB asserted that, between 2010 and 2012, the financial institution “failed to identify and timely remit to Debt Buyers over 9,500 payments totaling $701,000 made by Consumers to Respondent relating to accounts Respondent sold.” The CFPB further alleged that, between February 2012 and June 2013, the financial institution overstated the APR information in sales files, ultimately providing debt buyers with inaccurate APR data. As a result, the Bureau claimed that consumers “likely made payments based on Debt Buyers’ misstatements about the amount owed on their Accounts, and were likely subjected to inaccurate credit reporting and to collection efforts by Debt Buyers when the Consumers had already paid off their Accounts.” In addition to $4.89 million in redress to impacted consumers and $3 million in civil money penalties to the CFPB, the consent order requires the financial institution to enhance its processes, systems, and controls so that they (i) ensure accurate documentation of the financial institution’s debt sales; (ii) prevent the financial institution from selling debt that is undocumented, unverifiable, or within 150 days of the expiration of any applicable statute of limitations; (iii) include provisions in the financial institution’s debt sales contracts that require debt buyers to send borrowers debt validation notices and prohibit debt buyers from reselling debt or collecting post-sale interest on debt except under certain limited circumstances; (iv) require that the financial institution provide consumers with information about their debt, including the name of the original creditor, the credit agreement, and recent account statements; (v) ensure that the financial institution timely forwards consumer payments on sold accounts; and (vi) ensure that the financial institution provides training to employees and service providers on the enhancements to its processes, systems, and controls.
In a separate action, the CFPB issued consent orders to the same financial institution, two of its affiliates, and two debt collection law firms, because the law firms altered affidavits, sworn statements, certifications of proof, and other such declarations (collectively “declarations”) after their execution and then filed those declarations with New Jersey courts. In May 2011, the financial institution discovered the law firms’ conduct and self-reported it to the New Jersey Courts Administration. In response, the Superior Court of New Jersey ordered the financial institution and its affiliates to refund $11 million to impacted consumers and to cease collection efforts on an additional $34 million in debts. Citing to its 2013 Responsible Business Conduct Compliance Bulletin, the CFPB has opted not to impose civil money penalties against either the financial institution or its affiliates. However, the Bureau is requiring, among other things, that the financial institution and its affiliates fully comply with the New Jersey state court order and enhance their oversight and compliance management systems surrounding the execution of declarations. In contrast, the consent orders that the CFPB entered into with the debt collection law firms impose civil money penalties of $15,000 on one firm and $65,000 on the other.