Debt Collectors Get Ready: The CFPB Isn’t the Only Agency to Fear
The Federal Trade Commission and the Consumer Financial Protection Bureau have announced a jointly-sponsored “roundtable” to address “data integrity” in the debt collection process, to be held June 6, 2013. This initiative, while innocuously presented as an information exchange event, and facially addressing technical issues, is part of a process that may be leading to an effort to fundamentally reform debt collection and debt buying practices and hence will affect not just debt buyers, collection agencies, and debt collection attorneys, but creditors and debt sellers as well. Topics for the roundtable include:
- The amount of documentation and other information currently available to different types of collectors and at different points in the debt collection process;
- The information needed to verify and substantiate debts;
- The costs and benefits of providing consumers with additional disclosures about their debts and debt-related rights; and
- Information issues relating to pleading and judgment in debt collection litigation.
The agenda includes presentations on “Information Available to Debt Collectors at Time of Assignment or Sale”, “Verifying Disputed Debts Under the FDCPA and Investigating Disputed Debts under the FCRA”, and “Time-Barred Debts.”
Practical Impact
It is clear that the FTC is heavily involving itself in the debt collection regulatory space. These efforts not only affect debt debtors and debt buyers but any company that uses debt collectors or sells to debt buyers. The FTC’s interest is further illustrated by the recent FTC settlements with debt buyers and debt collectors for alleged deceptive and abusive practices in January and March of this year. Monetary penalties ranged from $800,000 to over $1 million.
As exemplified by pending state legislation in California, the amount and format of data that is required to support collection efforts, particularly in litigation, may dramatically affect current practices. For example, the California legislation, if enacted, would prohibit a debt buyer, as defined, from making any written statement in an attempt to collect a consumer debt unless the debt buyer possesses information that the debt buyer is the sole owner of the specific debt at issue, the debt balance, as specified, and the name and address of the creditor at the time the debt was charged off, among other things. The bill also would require the debt buyer to make certain documents available to the debtor, without charge, upon receipt of a request, within fifteen days. The FTC and the CFPB could be looking to impose similar requirements.
Companies should be keenly aware of the CFPB and the FTC’s interest in data integrity and documentation of debts. Certainly, this information will arise in supervision and enforcement actions from the CFPB and the FTC. The CFPB and the FTC are just beginning their investigation and regulation of debt collectors. Get ready.
About Troutman Sanders
Troutman Sanders is an accomplished and experienced leader in providing litigation and regulatory advice to a broad spectrum of financial services institutions, including those engaged in indirect automobile lending and motor vehicle dealerships. Troutman Sanders’ CFPB Team monitors the development and activities of the CFPB on its CFPB Report blog and also advises clients on CFPB and Dodd-Frank issues. Additionally, Troutman Sanders’ Financial Services Litigation practice group has successfully litigated a wide variety of individual and class actions, as well as other federal and state consumer protection laws now under the umbrella of the CFPB.
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