Legal and Regulatory Developments:
Debt Collection Regulation through Enforcement Continues; New Bulletin on In-Person Collection
While the CFPB is developing proposed rules for debt collection, the trend of debt collection regulation through enforcement continues. New settlements at the end of 2015 focused on debt collection practices add to significant actions taken earlier in the year, including the announcement by the FTC of Operation Collection Protection. The highlights below provide important "tea leaves" regarding the CFPB's apparent expectations for collection activity, though each relies heavily on the application of UDAAP to justify positions that are not clearly within the FDCPA. In addition, below we highlight a new compliance bulletin on in-person debt collection.
Law Firm Settles CFPB Lawsuit on Debt Collection
A law firm sued by the CFPB over its debt collection activities on behalf of debt buyer clients reached a settlement with the CFPB after a year and a half of litigation. The CFPB's December 28, 2015 announcement of a consent order (subsequently finalized on January 6, 2016) with Frederick J. Hanna & Associates, a Georgia-based law firm, resolved allegations that the law firm engaged in illegal debt collection practices in violation of UDAAP and FDCPA. The lawsuit and settlement offer some important insight into the CFPB's view of law firm debt collection practices, including on the topic of what constitutes "meaningful attorney involvement."
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First-Party Debt Collection Results in UDAAP and EFTA Enforcement
A small-dollar lender entered into a consent order with the CFPB resolving allegations of unlawful first-party debt collection activity under UDAAP and violations of the Electronic Fund Transfer Act (EFTA). According to the CFPB, EZCORP collected debt from consumers at their homes and workplaces, made empty threats of legal action, misrepresented consumers' rights, and exposed consumers to bank fees through unlawful electronic withdrawals.
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CFPB Compliance Bulletin on In-Person Debt Collection
The CFPB issued a bulletin to provide guidance to creditors, debt buyers, and third-party collectors about compliance with UDAAP and the FDCPA for in-person debt collection. The bulletin highlights that in-person collection visits may be harassment and may result in third parties, such as consumers' co-workers, supervisors, roommates, landlords, or neighbors, learning that the consumer has debts in collection. The bulletin cautions that in the CFPB's view it is illegal to contact consumers to collect on a debt at times or places known to be inconvenient to the consumer, except in very limited circumstances.
Settlement Highlights CFPB Focus on Account Accuracy and Credit Reporting by Debt Collectors
On December 7, 2015, the CFPB announced a settlement with Collecto, Inc. d/b/a EOS CCA, a debt collection firm, for allegedly reporting and collecting on old, disputed, and unverified cell phone debt in violation of the FDCPA, FCRA, and UDAAP. In addition to its efforts to collect on the debt, the firm allegedly provided inaccurate information to credit reporting companies, and failed to correct this information after it was determined to be inaccurate. The CFPB's consent order includes detailed injunctive relief, refunds of at least $743,000 to consumers, and requires the payment of a $1.85 million civil money penalty.
CFPB Consent Order Highlights FCRA Requirements for Users and CRAs
A consumer reporting company and its CEO entered into a consent order with the CFPB over alleged violations of the Fair Credit Reporting Act (FCRA). According to the Bureau, Clarity, a nationwide credit reporting company, compiles and sells credit reports to financial service providers with a focus on the subprime lending market. The CFPB alleged that Clarity used a number of the consumer reports it purchased in marketing materials for potential clients.
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Money Transfer Service Complaints under the CFPB Spotlight
Of the over 770,100 complaints the CFPB has handled (as of December 1, 2015), 5,100 dealt with domestic and international money transfer issues. The most common sources of money transfer complaints stem from allegations of fraud, customer service issues, error resolution problems, and issues with international transfers.
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Analysis:
CFPB Outlook 2016 Webinar
With 2016 now upon us, consumer financial services providers are taking a look back and a look forward to plan for the year. Legal and regulatory compliance departments are no exception to that, and we've got you covered when it comes time to assess the legal and regulatory landscape, with our CFPB Task Force's recent webinar, "Consumer Financial Protection Bureau Outlook 2016," which is available now for downloading and viewing.
Furnishing Data to the Bureaus?
Data furnishers, including debt collectors and lenders, can reduce supervision and enforcement risk by avoiding the common mistakes the FTC and CFPB have identified in their recent enforcement announcements. Venable attorneys Jonathan Pompan, Andrew Bigart, and Alexandra Megaris conducted a webinar, "Minimizing Legal and Compliance Risk for Credit Furnishers," that focused on compliance tips and best practices.
Regulatory Issues for Colleges Offering Financial Products to Students
The CFPB recently sent warning letters to 17 colleges directing them to improve disclosure of school-sponsored credit card agreements as required by law. These letters, sent in connection with the CFPB's annual report on college credit card agreements, put colleges and universities on notice that it is important to comply with consumer protection law when marketing school-sponsored credit card agreements. Read the full article here for more on student credit card marketing.
Preparing for Compliance with the New HMDA Rule
In October of 2015, the CFPB released its final Home Mortgage Disclosure Act (HMDA) Rule. The final rule adopted many of the changes proposed in the July 2014 proposal. The new HMDA rule expands the breadth and scope of HMDA data collection requirements—which includes the addition of roughly 25 new data fields and the modification of an additional 12 data fields. For more information, read the preliminary analysis of the HMDA rule.
Advertising Consumer Financial Products and Services? Hot Issues for 2016
The legal and regulatory changes expected in 2016 may affect advertisers of consumer financial products and services and the focus of their internal compliance and audit teams. However, it's worth noting that the areas that the CFPB and other regulators will be focusing on this year include several that have already been enforcement and supervision priorities that are relevant for all consumer-facing companies. For a few recent examples, see a recent allaboutadvertisinglaw.com blog post.
Telemarketing Sales Rule: Amendments Include a Ban on the Use of Certain Payment Mechanisms in Telemarketing
The CFPB and the FTC share enforcement authority for the Telemarketing Sales Rule. Recently, the FTC released amendments that will take effect in February and June 2016. As expected, the new amendments make a number of substantial changes, including a ban on the use of four types of payment methods in telemarketing. For an in-depth review of the new rules, read the full article here.
Upcoming Events:
January 27, 2016: "Fireside Chat on Legal and Regulatory Developments Impacting the Education Sector" at the Innovation Education Summit
February 3, 2016: How Will the Consumer Financial Protection Bureau's Proposed Arbitration Clause Ban Impact You? (Venable webinar)
February 11, 2016: "Current Issues in Debt Buying: Hot Topics Panel" at the DBA International 19th Annual Conference
March 17, 2016: "Navigating Consumer Protection, Complaints and Regulatory Oversight" at LeadsCon Las Vegas