CFPB Issues Fifth Annual Report to Congress on the FDCPA

On Wednesday, March 23^rd the Consumer Financial Protection Bureau (CFPB) issued its fifth annual Fair Debt Collection Practices Act report to Congress. The report covers the CFPB’s activities in 2015. Until the creation of the CFPB, the responsibility for drafting of the report fell to the Federal Trade Commission (FTC). The FTC is still involved, however; the CFPB report incorporates information provided to the CFPB by the FTC in its February 12, 2016 letter to the CFPB on the FTC’s 2015 debt collection activities. The FTC letter is an Appendix to the report. A complete copy of the report can be found here.

In the transmittal letter CFPB Director Richard Cordray highlights five specific 2015 activities.

1)     Enforcement Actions

In 2015 enforcement actions by the CFPB returned $360 million to consumers wronged by unlawful debt collection practices and collected over $79 million in fines. During this time period, our colleagues at the FTC banned 30 companies and individuals that engaged in serious and repeated violations of the law from ever again working in debt collection. In addition, the FTC filed 12 new cases, a record number of debt collection enforcement actions for the FTC in a year.

Cordray also noted that three of its recent cases were particularly noteworthy: In its case with JP Morgan Chase, the Bureau took action against the bank for selling credit card debts which, in some cases, overstated the amount owed or misidentified the individual owing the debt. In its cases with Encore and Portfolio Recovery Associates, the nation’s two largest debt buyers, the Bureau took action against those entities for demanding payments and filing lawsuits on debts that they knew very little about and without reviewing the appropriate documentation to make sure they were collecting the right amount from the right consumer. Taken together, these cases paint a broader picture about how the Consumer Bureau is working to clean up the market from both ends. Regardless of whether you are a debt seller or a debt buyer, all players in the collections market need to do their part and invest the resources to ensure they are collecting the right amount from the right consumer.

2)     Development of Regulations

The Bureau continues its effort to develop the first comprehensive federal regulations covering debt collection. According to Cordray, the Bureau is considering provisions to ensure that debt collectors have sufficient information to collect the debt, prevent unfair, deceptive and abusive acts and practices, inform consumers of their rights, and provide interpretation of some sections of the FDCPA. In order to inform rulemaking efforts, the Bureau surveyed consumers in 2015 about their debt collection experiences and preferences. Furthermore, the Bureau conducted extensive interviews with industry vendors and participants to expand its understanding of the debt collection market.

The Bureau plans to convene one or more Small Business Regulatory Enforcement Fairness Act panels before issuing a notice of proposed rulemaking. Additionally, the industry can expect more Bureau engagement through roundtables, meetings, and field hearings.

3)     Data Collection

The Bureau now has two full years of data on debt collection complaints. In 2015, the Bureau handled over 85,200 debt collection complaints, making debt collection the largest source of consumer complaints. The Bureau forwarded almost half of these complaints to debt collectors, which responded in a timely manner to 90% of them. The leading reason for complaints is consumers being contacted for debts they report they do not owe.

4)     Debt Collection Agency Examinations

In its examination of debt collection agencies last year, the Bureau identified many violations of the FDCPA, including: misleading statements about credit reporting; failures of debt collectors to identify themselves as debt collectors during calls to consumers; and failures to ensure that consumer requests about communications, such as requests not to call at work, were honored. Bureau examiners directed institutions found in violation to comply with the FDCPA and in some cases directed them to improve employee training, or take other steps necessary to fully comply with the law.

5)     Work with the FTC and State Regulators

The CFPB worked closely with the FTC and state regulators to enforce the laws applicable to debt collectors, file amicus briefs, supervise debt collectors, coordinate rulemaking activities, and reach out to consumer and trade groups. The FTC has been a highly valued partner in the CFPB’s efforts to regulate the debt collection industry and enforce the FDCPA. For instance, the FTC led an effort, working with the CFPB and state regulators, to bring over 115 actions against debt collection firms and phantom debt scammers. Furthermore, the Bureau and the FTC jointly filed two amicus briefs in 2015. Additionally, the CFPB and the FTC organized and participated in events across the country to engage industry.

insideARM Perspective

The bulk of the report is a basically a summary of 2015 activities. insideARM has previously written about the highlights. However, there was an item that was prospective in nature. When discussing the long-awaited debt collection rulemaking, the report suggests that the CFPB “is preparing to convene one or more Small Business Regulatory Enforcement Fairness Act panels before issuing a notice of proposed rulemaking.”  Unfortunately, the report does not suggest any timetable for the rulemaking.

When discussing the Rulemaking, the report also highlights some of the critical issues that have been raised by industry groups, individual debt collectors, and consumer groups.  Implicit is this discussion is the likelihood of rulemaking on these specific issues.

• Need to consider effect of technological change – Many third-party debt collectors and consumer groups noted that the debt industry has experienced significant technological changes since the enactment of the FDCPA in 1977, and the FDCPA, therefore, does not specifically address the use of new types of technology, like email. As a result, it would be useful for the Bureau to address the use of newer technologies. However, there were many differences among commenters as to how the CFPB should address these newer technologies.
• Information accuracy and flow – Consumer groups, debt collectors, and states’ Attorneys General also repeatedly commented about the types of information that should travel with a debt when it is sold and the consumer advantages that may result from the transfer of additional information. There were also comments related to whether certain types of debt, like medical or student loan debt, should require more or less documentation. Some industry commenters noted that it was important to consider the burden of requiring particular types of information.
• Communication issues – Many consumer groups and industry members supported rules addressing or clarifying a wide variety of issues relating to the proper time, place, and manner of debt collection communications, offering diverse views as to how the Bureau should approach these issues.
• First- vs. third-party debt collection issues – Many consumer groups advocated for creating rules that would apply to first party collectors, because harm from first-party collectors can be equally problematic for the consumer. In contrast, credit unions and several industry groups stated that an extension of debt collection rules to first-party collectors could impose significant burdens and increase consumer confusion, and are not necessary.

The industry needs to come together and work with the CFPB on these issues. We need to educate CFPB staff on the potential impact any regulations on these issues will have on the industry and how and why the consumer might benefit by any potential regulation on these issues.