CFPB's Winter Supervisory Report Reveals New Issues in Debt Collector Examinations

The Consumer Financial Protection Bureau (CFPB) Wednesday released its Supervisory Highlights Report for Winter 2015. The report details findings from supervisory examinations conducted by the Bureau. Along with usual findings of FDCPA and UDAAP violations, the report reveals some other issues in debt collection examinations that have not been highlighted previously.

In its press release on the Supervisory Highlights Report, which covers examinations in the second half of 2014 in all the industries the Bureau supervises, the CFPB singled out “deceptive student loan debt collection practices” in its first paragraph, certainly a current hot topic with the regulator.

In one or more examinations of debt collectors performing collection services of defaulted student loans for the Department of Education, CFPB examiners identified collections calls, scripts and letters containing various misrepresentations to consumers. Examiners found that collection agents overstated the benefits of federal student loan rehabilitation. Specifically, these agents overstated the rehabilitation program’s impact on consumers’ credit report and credit score and the extent to which collection fees would be waived upon completion of the program.

In addition, examiners identified instances in which collection agents misrepresented to consumers that they could not participate in a federal student loan rehabilitation program unless consumers made payments by credit card, debit card, or Automatic Clearing House (ACH) payment, when in fact no such program requirement existed.

Some of those representations constituted deceptive practices and violations of the FCRA and Regulation V, which also covers practices related to credit reporting.

The focus on collectors discussing ED’s rehabilitation program is interesting timing, given the recent news that ED has cancelled contracts with five collection agencies specifically over their practices regarding rehabilitations. The CFPB report does cover the period from July 2014 to December 2014, so those findings were made before ED announced the contract cancellations.

More broadly within the ARM industry, Bureau examiners also found that collectors threatened to take action against certain consumers, which created the impression that if they did not make a payment they would be sued. In fact, none of the collection agents knew whether legal action would be taken and did not intend to take legal action. This is a potential FDCPA violation.

A more novel finding of a potential deceptive practice involved representations involving recurring ACH payments.

In one or more examinations, the CFPB noted that when attempting to collect on delinquent accounts, collectors offered consumers a recurring ACH payment option. When informing consumers about this payment option, collectors promoted the consumers’ ability to adjust or cancel a recurring ACH payment with only 24 hours’ notice. This representation, however, contradicted both an express representation in monthly periodic statements provided to consumers and internal policies and procedures, which stated that a minimum of 72 hours’ notice was required. The contradiction in oral and written disclosures of the timeframe required to cancel or adjust a recurring ACH created a risk of deception, the CFPB said.

For reference, read the Supervisory Highlights Report from Fall 2014.