In 1977, the United States Congress identified such a high frequency of abuse and deception attributing to unfair debt collection practices that it created the Fair Debt Collection Practices Act (FDCPA) to protect American consumers. Section 802 of the law states that “inappropriate or illegal debt collection practices contribute to marital instability, job losses, invasion of personal property and a rising number of personal bankruptcies.” Forty years later, the Consumer Finance Protection Bureau (CFPB) is the designated federal agency tapped to implement the FDCPA’s debt collection oversight and monitoring capacities in today’s challenging economy. In March of this year, Richard Cordray, former director of the CFPB, issued the agency’s 2016 annual report.
2016 Was a Busy Year for the CFPB
As the nation’s only federal agency dedicated to providing consumer financial protection services, the CFPB’s range and scope are broad. It monitors non-depository entities, including debt collectors, the same way it oversees the collection efforts of banks. In 2016, the agency identified and took action on violations in several sectors of the debt collections and financial services industries.
In the Debt Collection Sector
- Legal violations arose in many variations, including misrepresentations to consumers, unlawful fee charges, and illegal release of protected consumer data to unauthorized third-parties.
- The agency also dealt with entities who sold their debts to third-party collectors without disclosing that the debt was resolved through bankruptcy or repayment.
- Additionally, the agency launched a sweep of the unlawful email and text messaging tactics used by some debt collectors to harass consumers.
In the Courts
- In addition to identifying and fining collectors found in violation, the CFPB also initiated 10 new lawsuits and has continued litigation on three more. Of the litigation cases that the agency concluded in 2016, the organization collected $39 million in restitution for victims and another $20 million in civil penalties and fines.
- The CFPB also weighed in on four significant legal cases. Two of which are pending in the appellate system, and two more that are pending at the Supreme Court level.
- Perhaps one of the most popular CFPB resources is its “Consumer Response” program, which processes complaints from consumers affected by the illegal collection practices of debt collectors and other financial institutions. In these cases, the agency often acts as an intermediary – helping the consumer and debt collector find a resolution to their issue.
- Another popular resource provided to consumers is the “Ask CFPB” service, which provides helpful information consumers can use to resolve their complaints with debt collectors. In the three years since the agency provided five sample letter templates to consumers to use for this purpose, the templates have been downloaded more than 389,000 times.
- In 2016, the agency also saw progress with its financial training and toolkit services that consumers access online. Also used by social workers and other front-line financial industry participants, the educational resources trained more than 13,000 finance industry staff and volunteers, servicing an estimated 600,000 consumers.
As a Rule-Maker
In 2010, the passage of the Dodd-Frank Act granted general “rule-making” authority to the CFPB’s essential functions. In this capacity, the agency has been groundbreaking in regards to clarifying obligations and restrictions while regulating several sectors of the financial services industry.
In 2016, the CFPB turned its attention specifically to the debt collection industry. The organization released an “Outline of Proposals Under Consideration” for the debt collection industry, which was developed in collaboration with the Small Business Regulatory Enforcement Fairness Act (SBREFA). The outline covers several subject matter categories, each related to a specific debt collection concern. Four of the categories are summarized below:
- The Information Integrity and Related Concerns category, which seeks to protect consumer data throughout the collections process.
- The Substantiation category aims to prevent unnecessary debt collection measures when there is no reasonable cause to believe the underlying claim is valid.
- The Review and Transfer category would require an initiating collection agency to share – and subsequent agencies to review – data generated in the pursuit of a claim, including information that the claim was paid off, discharged in bankruptcy or experiences other difficulties.
- The Validation Notice category will require collectors to provide specific details on alleged claims to potential debtors to ensure the accuracy of both the identity of the debtor and the validity of the debt.
As an Overseer of the Debt Collection Market
In January 2017, the CFPB released two new documents – each of which offers a unique perspective of the debt collection industry as a whole:
- A white paper examining the Online Debt Sales market, which handles the sale of charged-off debts, and the potential issues and concerns that might arise with no safeguards in place.
- Additionally, the CFPB produced an unprecedented report on “Consumer Experiences With Debt Collection,” a compilation of data gleaned from the agency’s Survey of Consumer Views On Debt. The report is the first comprehensive analysis of debt collection practices in the United States and contains nationally-represented data about consumers’ opinions, preferences, and experiences as they relate to current debt collection processes.
At the 40th anniversary of the FDCPA, Cordray asserted that the need for an overseer of financial services industries is as relevant and necessary now as it was when the act to create the organization was first passed. By doing this work, the CFPB is helping financial consumers in the US address the challenges and outrage they sometimes experience when faced with an unfair debt collections practices.