While we await official rules related to debt collection from the Consumer Financial Protection Bureau, we are expected by the CFPB to conform to the debt collection-applicable requirements it places upon defendants in its enforcement actions. Director Cordray and CFPB staffers in the Enforcement division have made their position regarding this expectation quite clear.
This review of 2016 enforcement actions provides compliance expectations as expressed by the CFPB in the enforcement actions related to debt collection announced in 2016. Each tip references back to the applicable enforcement action and page number in the action. All can be found at www.consumerfinance. gov under the Policy & Compliance tab.
The following consent agreements were reviewed in development of this information:
• Navy Federal Credit Union, 10/11/2016 (NFCU)
• Pressler & Pressler, LLP, 4/25/2016 (PP)
• Solomon & Solomon, P.C., 2/23/2016 (SS)
• Fredrick J. Hanna & Associates, P.C., 1/16/16) (H)
Controls/Policies and Procedures
• Maintain adequate compliance controls related to debt collection communications. (NFCU 18)
• Maintain appropriate procedures for monitoring consumer debt collection communications and take corrective action where appropriate to ensure compliance with applicable Federal consumer financial laws. (NFCU 19)
• Conduct annual compliance audits and report to the Board or appropriate Board committee and all appropriate managers to ensure policies and procedures are in compliance with applicable Federal consumer financial laws. (NFCU 19)
• Maintain policies and procedures requiring compliance with applicable ethical and procedural requirements for the submission of truthful and accurate evidence in connection with a collection suit. (P& P 17)
• Implement effective controls to review and approve standardized court pleading templates that comply with applicable laws, rules, and court procedures. Document such processes in writing, and make available to employees. (P & P 17)
• Provide adequate training to staff regarding debt collection communication. (NFCU 18)
• Document training activities and review and update training programs at least annually. (NFCU 19)
Debt Collection Practices
• Do not misrepresent, expressly or impliedly:
- your legal authority or intention to take legal action against a consumer,
- garnish a consumer’s wages,
- contact a consumer’s commanding officer or employer concerning a consumer’s debt,
- that a consumer can repair his or her credit reputation by contacting you,
- that you issue a credit rating,
- that a consumer’s decision to settle or pay a debt will result in repairing or improving the consumer’s credit history,
- that the consumer’s delinquency or default will make it difficult or impossible for the consumer to obtain additional credit from other creditors. (NFCU 16, 17)
• Do not disclose a consumer’s debt to a third party. (NFCU 16)
Collection Litigation Activities
Do not threaten or initiate collection suits without the following in your possession: (P& P 12, 13, 14) (H 6)
• Original account-level documentation reflecting the consumer’s name, last four digits of the account number associated with the debt at the time of charge-off.
• The claimed amount, excluding any post charge-off payments unless claimed amount is higher than the charge off balance, in which case you must possess original account level documentation reflecting the charge off balance and explanation of how the claimed amount was calculated and why such increase is authorized by the agreement creating the debt or permitted by law.
• If suing under a breach of contract theory, the applicable contractual terms and conditions.
• A chronological listing of the names of all prior owners of the debt and date of each transfer of ownership of the debt beginning with the name of the creditor at the time of chargeoff, if initiating a collection suit on behalf of a debt buyer.
• Properly authenticated copy of each bill of sale or other document evidencing the transfer of ownership of the debt at the time of charge-off to each successive owner, including the debt buyer on whose behalf respondents initiate a collection suit, including a specific reference to the particular debt being collected upon.
• Either a document signed by the consumer evidencing the opening of the account forming the basis for the debt, or original account-level documentation reflecting a purchase, payment or actual use by the consumer.
Attorney whose name appears on the complaint must: (P& P 14, 15) (H 8, 9)
• Be able to demonstrate having reviewed original accountlevel documentation, the bill of sale (if the account is a purchased debt), document evidencing the opening of the account or actual use by the consumer.
• Confirm that the statute of limitations has not run on the account, it is not subject to a current bankruptcy proceeding nor is discharged in bankruptcy.
• Confirm the consumer’s correct identity and current address, the location of the consumer’s real property if the action is to enforce an interest in real property to determine the appropriate venue for a collection suit.
Attorney must not submit deceptive affidavits in which:
• Affiant misrepresents personal knowledge of the validity, truth, or accuracy of the character, amount of legal status of any debt. (P& P 14, 15) (H 10)
• Affiant misrepresents an affidavit has been notarized. (P& P 14, 15) • Attorney knows the affidavit contains an inaccurate statement. (P& P 14, 15)
• Misrepresents the affiant’s review of any original accountlevel documentation or other documentation that would support the debt that is the subject of the collection suit. (P& P 14, 15) (H 10)
• Misrepresents the date of execution of any affidavit, sworn statement certification of proof, or declaration. (S& S 8)
• Misrepresents the amount of the debt. (S& S 8)
• Misrepresents the fact that the debt is supported by competent or reliable evidence. (S& S 8)
• Misrepresents any material fact to consumers. (S& S 8)
Debra Ciskey is the Compliance Officer at Wakefield & Associates. Inc. She is a member of the board of directors and a certified instructor for ACA International.