Compliance Blog

Written by Michael Coleman, Regulatory Compliance Counsel

Last month, the Consumer Financial Protection Bureau (CFPB) released two bulletins on debt collection practices. We blogged about their release here, and about Bulletin 2013-08 in more detail here (concerning representations made by creditors and third party debt collectors about the effects of debt payments on credit reports and scores). Today we would like to take a closer look at CFPB Bulletin 2013-07, which concerns the prohibition of unfair, deceptive, or abusive acts or practices (UDAAPs) in the collection of consumer debts.

The Bulletin provides an overview of the legal prohibitions against UDAAPs contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), and the standards which apply. But if you have ever been in the position of having to determine whether something is or is not a prohibited UDAAP, you know that this particularly difficult. The general “sniff test” is useful to a certain extent (I always say “If you think you have a UDAAP problem, you probably do.”) However, some actual examples of what constitutes a UDAAP violation would be pretty useful.

I feel like the CFPB has done a pretty good job of reading my mind lately (or at least reading my blog posts), like the fact that they just released a consolidated –unofficial- version of the regulatory text and commentary to the remittance transfer final rule(s). Well, the Bulletin actually gives some potential examples of UDAAPs:  

“C. Examples of Unfair, Deceptive and/or Abusive Acts or Practices

Depending on the facts and circumstances, the following non-exhaustive list of examples of conduct related to the collection of consumer debt could constitute UDAAPs. Accordingly, the Bureau will be watching these practices closely.

• Collecting or assessing a debt and/or any additional amounts in connection with a debt (including interest, fees, and charges) not expressly authorized by the agreement creating the debt or permitted by law.
• Failing to post payments timely or properly or to credit a consumer’s account with payments that the consumer submitted on time and then charging late fees to that consumer.
• Taking possession of property without the legal right to do so.
• Revealing the consumer’s debt, without the consumer’s consent, to the consumer’s employer and/or co-workers.
• Falsely representing the character, amount, or legal status of the debt.
• Misrepresenting that a debt collection communication is from an attorney.
• Misrepresenting that a communication is from a government source or that the source of the communication is affiliated with the government.
• Misrepresenting whether information about a payment or nonpayment would be furnished to a credit reporting agency.
• Misrepresenting to consumers that their debts would be waived or forgiven if they accepted a settlement offer, when the company does not, in fact, forgive or waive the debt.
• Threatening any action that is not intended or the covered person or service provider does not have the authorization to pursue, including false threats of lawsuits, arrest, prosecution, or imprisonment for non-payment of a debt.”

The Bulletin notes that whether these examples will amount to UDAAPs will depend on the facts and circumstances of the situations, and that this list is not exhaustive.

The Bulletin references the CFPB’s Supervision and Examination Manual version 2 section on UDAAP in several places, credit unions might find it useful to review.  The CFPB also released an updated section on debt collection examination procedures on October 24, 2012, which credit unions will also want to review.