Staying on Top of Collection Compliance
Keeping in compliance is a full time responsibility for debt collectors unless you have intelligent collection and recovery software that helps take the guesswork out of it.
Two recent Consumer Financial Protection Bureau (CFPB) action confirms the need to stay on top of compliance:
On December 16, 2015, the CFPB announced an administrative enforcement action against EZCORP, Inc., for allegedly engaging in illegal practices in violation of the Electronic Fund Transfer Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
EZCORP and its related entities provided high-cost, short-term, unsecured loans, in 15 states from more than 500 storefronts. Specifically, the CFPB alleges that EZCORP made in-person visits to consumers’ homes and workplaces for collecting debts; communicated with third parties about consumers’ debts; deceived consumers with the threat of legal action; and lied about not conducting credit checks on loan applications, but routinely ran credit checks on consumers.
In addition the company required debt repayment by pre-authorized checking account withdrawals, even though by law consumer loans cannot be conditioned on pre-authorizing payment through electronic fund transfers; and lied to consumers by stating they could not stop electronic withdrawals or calls or repay loans early.
Our robust software helps any bank or credit unions stay in compliance, if the client owes the financial institution.
In-Person Debt No Nos
In addition, the CFPB released Compliance Bulletin 2015-07, to provide guidance to creditors, debt buyers, and third-party collectors related to compliance with Dodd-Frank and the Fair Debt Collection Practices Act.
As it relates to Dodd-Frank, CFPB Bulletin 2015-07 warns that in-person debt gathering creates heightened risk of committing unfair acts or practices in violation of Dodd-Frank.
In addition, the FDCPA prohibits third-party debt collectors from communicating with any person other than consumer. Thus, in-person efforts cause heightened regulatory risks, because debt collectors are likely to interact with third parties during those efforts.
The bulletin asserts that consumers may find in-person visits to be inconvenient or perhaps have knowledge that a consumer’s employer prohibits the consumer from receiving such communications at the workplace.
The bulletin notes the FDCPA prohibit a debt collector from engaging in any conduct the natural consequence of which is to harass, oppress, or abuse any person and from using unfair or unconscionable means to collect or attempt to collect any debt.
In light of the strict stance, the CFPB is taking on in-person activities, creditors, third-party debt collectors and asset buyers who currently engage in such practices should closely review the bulletin and consider whether their current activities with regard to in-person visits comply with federal law and the expectations of the CFPB.
The leveraging of powerful and compliant up-to-date collection software, such as CARM-Pro, limits the risk of a loss while balancing the borrowers’ rights.
Need Professional Judgment
In another case, a CFPB’s lawsuit alleges Georgia law firm Frederick J. Hanna & Associates and its individual principals functioned as little more than a debt-collection mill for over four years. Hanna primarily represented debt buyers and other debt collectors. According to the complaint, between 2009 and 2013, Hanna filed over 350,000 lawsuits against delinquent consumers.
The firm only employed eight to 16 attorneys and relied on “hundreds” of non-attorney staff to review consumer files and prepare lawsuits with almost no attorney involvement. The firm’s attorneys rarely, if ever, spent more than a minute reviewing each complaint prior to filing. As a result, the CFPB alleged, Hanna’s attorneys did not exercise independent professional judgment in determining whether to file the suits or what remedies to seek.
Further, the lawsuits allegedly included improper affidavits from the collecting companies, which the CFPB alleged Hanna knew or should have known, were signed by persons without personal knowledge of any of the facts presented in the affidavits. Again, Hanna’s attorneys allegedly did not review the affidavits and did not take any independent steps to verify the accuracy or amounts of the debts over which the lawsuits were filed.
Our Online Self-Guided User Training Modules provides interactive training, to ensure consistent and compliant representation approaches, at no additional cost to support IBS clients, allowing platform users to take the online classes based on their availability.