Last week, the Consumer Financial Protection Bureau issued its 2015 Annual Report on the Fair Debt Collection Practices Act. Here are the highlights from that report.
Through its supervision of the debt collection market, the CFPB found that collectors frequently violate the FDCPA by: placing excessive or inconveniently timed telephone calls; making misleading statements in litigation, as evidenced by a pattern of voluntarily dismissing lawsuits if a consumer merely files an answer; falsely threatening litigation; conducting faulty training with regard to third-party disclosures; and generally making false and misleading statements to consumers.
It is no surprise, therefore, that the CFPB targeted many of these practices in its seven public enforcement actions in 2014, which resulted in $570 million in consumer relief and $13 million in civil penalties. These enforcement actions sought to eliminate conduct including: (a) falsely leading consumers to believe they would be sued or prosecuted if they did not pay the debt; (b) making excessive numbers of telephone calls to consumers, as well as their employers and relatives; (c) threatening to charge fees and report consumers to credit reporting agencies, despite having no intention to do so; (d) relying on deceptive court filings and unsubstantiated evidence; (e) failing to inform consumers that some or all of their debt is void under state lending laws; (f) harassing consumers at work, sometimes despite knowing their employers did not permit calls; and (g) contacting service members' commanding officers without consent to discuss the service members' debts.
The Federal Trade Commission also was very active in the debt collection arena in 2014, bringing or resolving a record 15 cases, including one in which the FTC obtained a record $90.5 million in judgments. The FTC brought actions against entities: (a) requiring consumers to consent to wage garnishment in the event of default; (b) disclosing confidential information to third parties; (c) deceptively manipulating caller ID; (d) using deceptive representations to elicit personal information to be used in subsequent collection efforts; (e) improperly assessing collection fees; and (f) failing to reasonably investigate disputes and establish procedures for handling credit reporting disputes. The FTC also sought to eliminate targeting of limited-English-proficiency consumers for debts they often do not owe—conduct which is frequently accompanied by threats of litigation or arrest—and pursued collectors of "phantom" debts that either do not exist or are not owed to that collector. Further, the FTC obtained injunctions against debt sellers that posted consumer information, including credit card numbers and consumer contact and employment information, on a public website, apparently so that prospective debt purchasers could evaluate the debts.
The CFPB and FTC also advocated for the position adopted by the United States Court of Appeals for the Seventh Circuit that a collector can violate the FDCPA's prohibition against false, misleading, or deceptive representations by making a time-restricted settlement offer in a consumer dunning letter when seeking to recover on a time-barred debt, even if the collector does not threaten litigation. The Sixth Circuit adopted a similar position in early 2015, as well. The Ninth Circuit has taken up the issue of whether the phrase "initial communication" in 15 U.S.C. § 1692g means only one initial communication with a debtor on a given debt, or whether it refers to each collector's initial communication with a consumer, the latter of which is supported by the CFPB and FTC. This case is still pending before the court.
In terms of areas that need modification or an update, comments from those inside and outside the industry have made the CFPB aware that it needs to consider: (a) the effect of technological change, such as email, on the FDCPA, which does not address email; (b) the information that should accompany a debt when it is sold to another party; (c) the proper time, place, and method of debt collection communications; and (d) whether to create rules that would apply to first-party collectors. The CFPB also plans to research and test consumers' understanding of the disclosures that collectors currently make to determine whether changes to the information disclosed or method of disclosure would be in the interest of consumers.