cfpb & knowing your collection laws
DESCRIPTION
This presentation was done at the Maryland-DC Bursar's Group's semi-annual meeting.TRANSCRIPT
PRESENTED AT THE MARYLAND-DC BURSAR’S GROUP
CFPB (Credit Financial Protection Bureau)
& Knowing Your Collection Laws
March 14, 2014
The CFPB was formed out of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
The CFPB works to Educate – Help to make consumers informed against abusive
practices. Enforce – Supervise all financial companies and enforce federal
consumer financial laws Study – Gather & analyze information to better understand consumer
financial markets (consumer and financial services providers)
Important to understand: Jurisdiction is wide spread and includes Student Loans and Collection
Agencies Like GLBA before we need to understand that the CFPB is something
we need to comply with - not ignore
CFPB Established to Protect Consumers:
Conduct rule-making, supervision and enforcement for Federal consumer protection laws.
Restrict unfair, deceptive or abusive acts or practices Take consumer complaints. Promote financial education. Research consumer behavior. Monitor financial markets for new risks to consumers. Enforce laws that outlaw discrimination and other unfair
treatment in consumer finance.
CFPB Established to Protect Consumers:
It is important that every school makes sure all of their agencies have taken the right steps to be in compliance and that the school follows the same guidelines.that the school follows the same guidelines.
ACCESS, and other agencies, have taken the steps to be fully compliant and continue to make necessary changes as regulations change.
A sample of items that compliance must include are: Appoint a Compliance Office, establish a Compliance Team to oversee operations, build compliance into all systems, conduct an annual audit, document everything, train and retrain staff, employ good technology, and foster a culture of compliance.
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February 27, 2014 – CFPB Calls on Top Credit Card Companies to Make Credit Scores Available to Consumers. Today, the Consumer Financial Protection Bureau (CFPB) called
on the nation’s top credit card companies to make credit scores and related content freely available to their customers.
February 26 2014 – CFPB Sues For-Profit College Chain, ITT, for Predatory lending. Today the Consumer Financial Protection Bureau (CFPB) filed a
lawsuit against ITT Educational Services, Inc., accusing the for-profit college chain of predatory student lending. The CFPB alleges that ITT exploited its students and pushed them into high-cost private student loans that were very likely to end in default. The CFPB is seeking restitution for victims, a civil fine, and an injunction against the company.
December 3, 2013 – CFPB To Oversee Nonbank Student Loan Servicers. The Consumer Financial Protection Bureau (CFPB) issued a rule
today that allows the Bureau to supervise certain nonbank student loan servicers for the first time
The CFPB is analyzing:
Private Loans
Debit/Campus cards
Banking
Collection Agencies
In the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress established an ombudsman for student loans within the CFPB.
The CFPB Ombudsman’s Office is an independent, impartial, and confidential resource to help consumers resolve process issues arising from CFPB activities. This office began accepting student loan complaints at ConsumerFinance.gov in March 2012.
An annual Ombudsman report is issued.
The Federal Deposit Insurance Corporation made a settlement in 2012 with Higher One, Inc and the Bancorp Bank to address the companies' alleged "unfair and deceptive practices." They were ordered to pay restitution the FDIC estimated at $11 million. The CFPD put out a consumer advisory after the settlement advising students to choose direct deposit instead of school debit cards, if possible.
Encourage electronic refunds
Utilize a competitive process and limit exclusivity
Engage students in the vendor selection process
Comply with Federal and State Regulations
Negotiate low of no-fee options and convenient services for students
Avoid unscrupulous marketing, make contracts transparent
CFPB requirements of third party debt collectors includes:
Onsite audits Large Market Participant (LMP’s) with more than $10 million in “annual
receipts” are subject to comprehensive examinations and mandatory submission of reports to (a) assess compliance; (b) evaluate systems, policies and procedures; and (c) identify risks to consumers.
Disclosure of out of statute debt (time barred debts - see slide 12)
Collection fees Documentation of policy Include in campus accounting system to match
Provide accurate information Place timely Provide date of delinquency Report directs timely
Top complaint – Collection charges
Three Part Requirement Notification Acknowledgment Retrieval
FDCPA verbiage, “an amount incidental to the original amount… expressly authorized by the agreement creating the debt”
It’s all about the wording.
Bradley’s agreement read:
“In the event of non-payment…I agree to pay all costs of collection, including a reasonable attorney’s fee…”
“Using reasoning from a previous case in the Eighth Circuit that held “the debt collector violated the FDCPA when it charged the debtor a collection fee based on a percentage of the principal balance of the debt due rather than the actual cost of collection. The court noted that Franklin Collection failed to produce evidence that the percentage-based fee correlated to the actual collection costs.”
Our interpretation: The debtor can only be charged the amount we are charging our client and we can no longer make the client “whole”.
Fair Debt Collection Practices Act (FDCPA)
Passed in 1977 as a consumer protection amendment establishing legal protection from abusive debt collection practices. This has been strengthened and is used in conjunction with the Fair Credit Reporting Act to hand down penalties and fines and protect consumers. In 2006, attorneys were added to those the Federal Trade Commission regulates under this law.
There are many prohibited actions and specific guidelines that need to be followed when collecting from Consumers.
The FDCPA and related laws prohibit abusive, unfair and deceptive practices:
Specifically limit when a debtor can be contacted – not at an inconvenient time or at work without specific permission
Consumers can tell you not to call at work and your agency not to call them.
Know who you can discuss the Debt with –Collection Laws vs. FERPA .. . And regulations for first party’s vs. third party’s.
Written verification required from third party’s and can be requested from first party’s.
Know what is considered harassment.
Threats, publication of names, profane language (even in response to the same), false statements, etc.
Know what can be garnished (federal payments exempt except for federal loans).
Know how to leave a message and identify yourself.
To understand the Statutes of Limitation, keep in mind:
Each state established a statute of limitations for debts For most states, these vary from 3 to 6 years When the time limit expires, a creditor may NOT sue to get paid. After the limit Credit Reporting Bureaus will no longer list the
debt Federal Loans are NOT time-barred Schools CAN maintain HOLDS and require payment before
services Agencies can legally request payment in most states, BUT
cannot sue, infer or threaten suit or credit damage and should inform the debtor that the debt is time-barred.
FDCPA suits for time-barred collections are growing. The CFPB and lawyers have educated the consumer on their rights
In New York on July 21,2013, the Cuomo Administration proposed new reforms including the following for time-barred (Zombie Accounts):
Protections against Collection of ‘Zombie Debts.’ Often times, debt collection companies will try to collect on “zombie debts” for which the statute of limitations has already expired. Under this new regulation, if a debt collector tries to collect on a debt after the statute of limitations has expired, the collector will need to inform the consumer, in every communication, that the statute of limitations has expired and the consumer can use that as a defense against a collection lawsuit. Most consumers are not represented by counsel and debt collectors can take advantage of this by threatening to sue, or actually suing, without the consumer knowing he or she has this defense. This reform will help prevent companies from bringing expired zombie debts back from the dead.
Make sure that you and your agency partners understand that the accounts are time-barred and follow the laws and restrictions.
Holds may be the most effective collection tool for time-barred accounts!
The Communication Act of 1934 established the Federal Communications Commission (FCC). The FCC regulates interstate, international, and maritime communications including radio, television, wire, satellite, and cable. Their jurisdiction covers all 50 States, the District of Columbia and U.S. possessions.
FDCPA prohibits a debt collector from communicating with a consumer in connection with the collection of any debt at any unusual time or place or at a time or place known or which should be known to be inconvenient to the consumer. The consumer can inform the collector that contacting the cell phone is inconvenient and the collector must cease any further communication with the debtor by way of the cell phone.
You are permitted to call from 8A – 9P local time. Be sure you know where you are calling –Telephone numbers can travel with individuals across the country.
School collection staff should follow these same guidelines.
Telephone Consumer Protection Act of 1991 restricts the use of automated dialing systems, artificial or prerecorded voice messages, SMS text messages received by cell phones and the use of fax machines to send unsolicited advertisements. Additionally, the TCPA specifies technical requirements for fax machines, auto-dialers, and voice messaging systems – principally with provisions requiring identification and contact information of the entity using the device to be contained in the message. Additionally:
Calls cannot be made with artificial voices or recordings to cell phones or to any service in which the recipient is charged for the call.
In the event of a TCPA violation, individuals are entitled to collect damages directly from a solicitor for $500 to $1,500 for each violation, or recover actual monetary loss, whichever is higher.
The CAN-SPAM Act made a minor amendment to the TCPA to explicitly apply the TCPA to calls and faxes from outside the US.
From the beginning incorporate full disclosure and good communication. Focus on the idea of “prior express permission” or required authorization which includes:
Obtain permission to use cell phones for contact purposes. Make sure to be compliant in the verbiage of the statement that you are
requesting the student to sign. Make sure that this happens in the admissions or registration process. Make sure that there are statements in printed materials indicating that
you will use the number provided to make contact with the student. If adding collection fees when placing an account in collections, make sure
this is provided to the student in writing at the time of registration. Work hard to accompany all receivables with a promissory note and
written authorization.
Making training of collectors a priority. Use your agency partners, associations and ACA
Know who you may disclose the existence of a debt. Only those the borrower/debtor has granted permission – usually their attorney and spouse
Understand the dangers of communicating about the debt via unsecured fax or e-mail (even with consolidation information)
Be aware of changing rules and regulations. Your agency partners, loan servicers, associations, list serves and ACA are all good sources of information.
