In October 2014, the Consumer Financial Protection Bureau (“CFPB”) released its Fall 2014 Supervisory Highlights report. In this report, the CFPB shares its recent supervisory observations in the various areas within its mandate, including a number of specific observations regarding unfair practices of debt collectors and violations of the Fair Debt Collection Practices Act (“FDCPA”) that its examinations uncovered.
Initially, the CFPB noted that a number of debt collectors are imposing “convenience fees” (i.e., fees charged to consumers who make debt payments using a credit card or debit card) in violation of the laws of various states. It is thus important for debt collectors to determine if the law of the state in which the debtor resides makes such convenience fees illegal before they are charged, and to ensure that any convenience fee is not automatically charged without such a determination. It is also important to ensure that the instrument creating the debt permits such convenience fees.
The CFPB also observed that a number of debt collectors are violating the FDCPA by threatening consumers with lawsuits that the debt collector does not intend to file. See 15 U.S.C. § 1692e(5). Supervision identified one collector in particular that routinely threatened to file, but only rarely actually filed, suit. In light of the amorphousness of what constitutes an impermissible number of threats in proportion to suits filed, it is important to avoid statements regarding intended litigation unless it is fairly certain that suit will be filed. Additionally, the CFPB encountered debt collectors who violated the FDCPA by providing their name and the name of their employer to third parties without being requested to do so. See 15 U.S.C. § 1692c(b). The CFPB concluded that this was the result of faulty training manuals. It is thus important to ensure that all materials being used to train representatives who speak to debtors are accurate and up-to-date.
Finally, the CFPB determined that several financial institutions engaged in unfair practices connected to their sale of charged-off credit card debt to debt buyers. It found several institutions that overstated the annual percentage rates “APRs” in the account documents provided to each debt buyer, or reported APRs that exceeded the rate for which the consumer was liable pursuant to the credit agreement, making it appear that the debtor was liable for more than he or she owed. The CFPB further observed at least one other institution that failed to timely forward to the debt buyer payments that it received post-sale, with delays ranging from two months to two years. Sellers of debt should ensure that they (i) maintain practices to accurately and timely communicate to the debt buyer all necessary information about the debt, and (ii) promptly forward to the debt buyer any post-sale payments that they receive.
Again, these violations may be institution specific but they provide a useful reminder of the obligations imposed by the FDCPA. Further, they identify potential issues for debtors’ attorneys to consider when defending against collection actions
or thinking about filing FDCPA claims.