ciskey debra jSince the CFPB’s inception, it has issued five Supervisory High-lights reports in which it summarizes scenarios and issues its examiners identify in the field during supervisory examinations. These reports give us a view into what to expect when our own examinations occur, and also inform us about practices that might raise a red flag at the CFPB if a complaint describes a similar situation.

Convenience Fees

The Fall 2014 Supervisory Highlights, published on October 29, 2014, provides specific comments that should make us re-evaluate processes to ensure compliance. In this bulletin, we get insight into the CFPB’s position related to the imposition of convenience fees. These are fees charged to consumers who choose to pay their accounts via credit card or debit card. Some states specifically prohibit the imposition of such fees. Other states’ laws are silent about such fees. The CFPB observed in its examination with debt collectors the imposition of fees on consumers “who lived in states where the law was silent regarding the collection of fees without reviewing the agreements creating the consumer debts to find out if those agreements expressly authorized the collection of such fees.” This is problematic. The CFPB is clearly applying the language of Sec. 808(1) of the FDCPA, which prohibits “the collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” Equally problematic is the imposition of convenience fees on consumers who reside in states where the fees are clearly prohibited by state law. The report says, “these collectors [were directed] to identify consumers who were improperly charged convenience fees, and to develop a plan for reimbursing those consumers.” Are you seeing dollar signs?

Remembering the CFPB and the FTC work together on the enforcement of the FDCPA and other applicable laws related to debt collection, we also need to consider the FTC’s action in FTC v. RTB Enterprises, Inc., in which the company’s collectors must “disclose to consumers clearly, truthfully, prominently and before consumers agree to pay any fee” the fact that “a fee will be charged, the amount of the fee, the number of times the fee will be charged, the reason for the fee, and how consumers can avoid paying the fee.” Misrepresenting the process is another issue to watch. It is clear the imposition of convenience fees is a front-of-mind issue for the CFPB and the FTC. It should be for debt collectors as well. According to research compiled by ACA International, the imposition of convenience fees is prohibited in the follow-ing states: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, Texas and Utah. (see FastFax # 4006, available at www.acainternational.org.)

Third-Party Disclosure

The report also highlights third-party disclosure issues which could easily be missed by agencies who limit their calls reviewed to “right party contacts” only. This is a com-mon practice because right party contacts are where the money is; and we want to be sure that our collectors are making the most of these contacts. However, be sure to spot check skip trac-ing calls as well. The CFPB points out that supervision teams observed collectors identifying the name of their employer to third parties without being asked, potentially leading to third party disclosure. At least one agency had it wrong in their training materials, and this agency was directed to revise the training and provide remedial training to employees to ensure compliance with Sec. 804(1) of the FDCPA.

Dialer Controls

Unless you read the entire report, you could miss this next one, which is an important nugget related to automated dialing. In the section of the report related to supervision at student loan servicer organizations, the CFPB said that inconvenient calls were being made as the result of an automated dialer with insufficient controls. The dialer was not programmed to ac-count for information related to the consumer’s location. In other words, the dialer was sorting out area codes in which the calls could be inconvenient at the time the calls were dialed, but it was not looking at ZIP codes. The entity where this was found to be an issue was directed to improve internal controls. This certainly sets the expectation that the CFPB expects all possible controls to be in place to avoid law violations, even inadvertent ones.

Credit Reporting

An earlier Supervisory Highlights, published in Spring, 2014, reported supervisory teams observed some debt collectors that failed to investigate disputes regarding information provided to credit reporting agencies, choosing instead to merely have the reported information removed from credit reports. The CFPB expressed its position that investigation is required, which can benefit more consumers by uncovering systemic problems. The same report said debt collectors were failing to obtain written authorization from consumers prior to initiating recurring electronic transfer of funds from a consumer’s account. The report continued and said debt collectors were failing to comply with the FDCPA’s limitations on the use of phone calls, both in the time of day the calls were made and the frequency of calls. This report also described a plethora of problems with debt collectors’ compliance management systems, from the lack of policies and procedures to insufficient oversight of the board of directors and executive management over the CMS, as well as a lack of complaint management and compliance auditing.

As time passes, I predict the expectation of CFPB examiners will be even higher than they were when examinations began for debt collectors in 2013. The CFPB has been public about its findings in examinations. Even collection agencies who are not large market participants should read these reports and implement fixes to processes they can see would not meet the CFPB’s expectations for compliance and for their compliance management system. This is a scenario in which the old adage, “an ounce of prevention is worth a pound of cure” is truly applicable. Especially considering the CFPB has enforcement jurisdiction over every segment of the debt collection market, not just the large market participants. They are extracting consumer redress in the examination process, and we have seen not only redress but also civil penalties in every enforcement action taken against entities in other markets. There is no indication they will play with differ-ent rules when taking enforcement action against debt collectors.

CFPB Supervisory Highlights reports are available at http:// www.consumerfinance.gov/reports/.

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.