On July 10, 2013, the Consumer Financial Protection Bureau (CFPB) issued two bulletins, CFPB Bulletins 2013-07 and 2013-08, to address debt collection activities of lenders and debt owners collecting consumer debts. Debt collection practices have been governed by the Fair Debt Collection Practices Act (FDCPA) since 1977, but the FDCPA generally only covers third party debt collectors. The CFPB recently provided guidance that it intends to use its authority to regulate unfair, deceptive and abusive practices (UDAAP), to extend requirements similar to those contained in the FDCPA to lenders and debt owners engaged in debt collection activities.
CFPB Bulletin 2013-07 puts lenders on notice that their activities in collecting their own consumer debt will be subject of very similar rules and that their activities will now be more heavily scrutinized. Under the FDCPA, third party debt collectors are prohibited from engaging in abusive debt collection practices. Bulletin 2013-07 provides guidance that “covered persons” under the Dodd-Frank Act will similarly be prohibited from engaging in unfair, deceptive, or abusive acts or practices in their debt collection activities.
Under the Dodd-Frank Act, an act or practice is considered:
(a) unfair if:
(b) deceptive if:
(c) abusive if:
Although the surrounding facts and circumstances will determine whether a lender’s conduct will actually be deemed unfair, deceptive, or abusive, the CFPB will be closely watching consumer debt collection activities of lenders, with special attention focused on the following activities:
The CFPB stated that it will “closely review any covered person or service provider’s consumer debt collection efforts” for violations of the Federal consumer financial laws and that it will use “appropriate tools” to evaluate whether supervisory, enforcement, or other actions may be necessary. In addition to the guidelines set forth in the CFPB Bulletin 2013-07, the CFPB also announced it will accept debt collection complaints and will publish action letters for consumers to consider using when corresponding with debt collectors.
CFPB Bulletin 2013-08 advises lenders and debt owners (together with their service providers) that the FDCPA and the Dodd-Frank Act together prohibit “covered persons” or service providers, including debt collectors, from engaging in deception while collecting on consumer debts. The bulletin provides specific guidance that that creditors and debt buyers are prohibited from making deceptive claims regarding the relationship between the consumer paying a debt in collection and:
The publication of these bulletins by the CFPB, along with the announcement that debt collection complaints will be accepted, means that all lenders, debt buyers and their service providers should carefully assess their current consumer debt collection practices and policies and determine what, if any, adjustments need to be made in order to address potential UDAAP concerns.
The entire CFPB Bulletin 2013-07 can be found here:
CFPB Bulletin 2013-07
The entire CFPB Bulletin 2013-08 can be found here:
CFPB Bulletin 2013-08
Gray Plant Mooty is a full-service law firm with specialized practices in consumer finance and regulation and community banking. Contact Hailey A. Harren or George E. Meinz if you have any questions regarding this alert.
This article is provided for general informational purposes only and should not be construed as legal advice or legal opinion on any specific facts or circumstances. You are urged to consult a lawyer concerning any specific legal questions you may have.
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