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Collection Compliance is a Difficult Road to Follow


Recent actions by government agencies point out how difficult it is to ensure compliance now and remain aware of future debt regulatory changes. Robust bank collection and recovery software keeps organizations protected by remaining up-to-date with rules.

An example of what might be coming in terms of regulation came by way of a Consumer Financial Protection Bureau (CFPB) examination of consumer reporting, debt gathering, mortgage origination and servicing, fair lending, and student loan servicing earlier this summer.

Specific violations identified included:

  • Disregarded complaints: Some organizations utilized inadequate compliance management systems. As a result, improperly trained personnel did not correctly log, record, or categorize consumer complaints.
  • Mortgage servicing violations: The CFPB’s new Real Estate Settlement Procedures Act (RESPA) loss mitigation rules include detailed requirements for soliciting and evaluating loss mitigation applications from borrowers. Violations of loss mitigation rules mentioned in the report included failing to send required LMA acknowledgements five days after receipt, and requesting additional documents, which had either been previously submitted.
  • Fair lending violations: Lenders, who denied or discouraged mortgage applications from those relying on public assistance income, violated the Equal Credit Opportunity Act.

The CFPB continues to rely on the Consumer Financial Protection Act’s prohibitions on deceptive and unfair practices in its enforcement measures.

The leveraging of powerful up-to-date collection software, such as CARM-Pro, limits the risk of a loss when it comes to regulations.

Are More Regulations Coming?

In October, the Federal Trade Commission filed an amicus brief (not a party in the action) in Davidson v. Capital One Bank (USA), N.A. a case brought by a consumer complaining of Capital One’s efforts to collect on a defaulted credit card. The consumer argued that Capital One qualified as a “debt collector” under the FDCPA because the account was already in default at the time of acquisition.

The amicus brief asks the Eleventh Circuit to review and reverse the decision. In FTC’s view, banks that acquire defaulted consumer accounts are collecting debts “due another.”

Banks that obtain consumer debt asset portfolios should observe the Davidson case, since it could affect future regulations or encourage fresh lawsuits from consumers.

Rules change, sometimes safeguard do not. Financial institutions utilizing state-of-the-art software, with built-in regulation checks, assures you are in compliance.

Unintended Consequences

The Mercatus Center at George Mason University in Arlington, Va. reviewed “The Law and Economics of Consumer Debt Collection and Its Regulation,” in a paper by Todd Zywicki, a senior scholar and senior fellow.

The report maintained the CFPB should consider all potential consequences of new regulation, both intended and unintended, to ensure that it benefits consumers.

“Maintaining a modern, flexible system of rules for debt collection is essential in order for both borrowers and lenders to have confidence that contracts will be enforced and that the terms of those contracts will be fair and transparent,” the report said.

Before imposing new regulations, Zywicki pinpointed factors that can adversely affect consumers of credit, including overregulation in debt gathering industry, and how bad regulation can injure consumers and the economy. “The CFPB should consider consumers’ growing reliance on technologies such as cell phones, email, and text messaging, and modernize its rules to allow more flexible contact using those technologies while at the same time protecting consumers from intrusions on their privacy.”

Nevertheless some new regulations seem almost assured.

In addition to providing the right technology, IBS offers clients with ongoing and dependable training for your staffs to assure compliance. Our Online Self-Guided User Training Modules provides interactive training at no additional cost to support IBS clients.