Blue Flower

From InsideArm:

 

 Following its enaction, the Dodd-Frank Act left the financial services industry with uncertainty in many areas. For nearly 10 years, the industry has wondered and speculated about the inclusion of a prohibition against abusive acts and practices.  What exactly is abusive conduct? Is abusive conduct different from false and misleading acts or unfairness? How will the CFPB handle enforcement?

On Jan. 24, the Consumer Financial Protection Bureau announced the long-awaited policy statement regarding the framework that it will use in enforcement activities related to the catch-all category of “abusiveness.”

At the get-go, the objective demonstrates a common-sense view: the principles are designed to promote compliance and certainty. This theme is carried on with the delineated principles:

  • In evaluating conduct, to be abusive, the harm to consumers should outweigh the benefit.
  • Abusive conduct is distinguishable from unfair or deceptive violations; therefore, no “dual pleading.”
  • Monetary relief (penalties) for abusiveness only when there has been a lack of good-faith effort to comply. CAVEAT: restitution for injured consumer regardless of whether a company acted in good faith or bad.

The full policy may be found Here

The debt collection industry is set to have a busy year adjusting to several “new normals” that are either already at its doorstep or are making their way over. Last year saw a lot of groundwork laid for new laws and regulations that will impact how debt collectors conduct business, and these new requirements will come to fruition in 2020. Below are five key items that 2020 has in store for the industry.

1. CCPA Implementation

Ready or not, the California Consumer Privacy Act (CCPA) is now in effect. The law aims to give consumers knowledge and control of their personal information: what data is collected, how companies use that data, and how to stop that use.

The CCPA came under criticism for how hastily the state legislature passed it and for the challenges it presents to implementation. California’s Attorney General (AG). who is tasked with enforcement of the new law, held several public forums both, both in early and late 2020 to receive public input on the CCPA and, more recently, on the AG’s proposed regulations

Companies have scrambled to do the best they could to prepare. Many pre-implementation efforts dominated much of 2019, including mapping out company data, setting up procedures for receiving and processing consumer requests, and trying to figure out what type of designation the company has per the CCPA’s complicated definitions. (For more information, or if your company is still struggling to figure out a way forward, watch our webinar on CCPA here.)

As of January 1, 2020, the law is in effect. The AG’s office is required to provide CCPA regulations by July 1 of this year. It will be an interesting year to see how consumers react to their new rights, whether companies’ procedures are sufficient to meet the CCPA’s purpose, and how the AG will move forward in regulating the law.

And let’s not forget that legislatures of several other states have pending consumer privacy laws as well. The National Conference of State Legislatures has a chart outlining what’s going on in each state.

2. CFPB Final Debt Collection Rules

The wait for the Consumer Financial Protection Bureau’s (CFPB) final rules for debt collection will finally be over. After a lot of research, several delays, congressional hearings, and busy comment periods to both the Advance Notice of Proposed Rulemaking (ANPRM) and the Notice of Proposed Rulemaking (NPRM), the final rules are set to be released in 2020

What will the final rules look like? Nobody but the CFPB knows for sure, but it’s predicted that they will largely resemble the NPRM. So what is the “new normal” under the new rules? 

  • Debt collectors will have ground rules for communicating with consumers through digital channels.
  • Strong consent management procedures will be required to take advantage of the rule’s digital communication allowance.
  • Call caps will likely be a thing.
  • Debt collectors will have some form of a safe harbor validation notice to use.

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Under an opinion delivered today by the U.S. Supreme Court, a purchaser of a defaulted debt who then seeks to collect the debt for itself is not a “debt collector” subject to the federal Fair Debt Collection Practices Act. 

The issue before the Court was whether a purchaser of defaulted debt meets the FDCPA’s definition of a “debt collector” as one who “regularly collects or attempts to collect . . . debts owed or due . . . another.” 15 U. S. C. §1692a(6). 

Here, Santander Consumer USA Inc., acquired defaulted loans from CitiFinancial Auto and then began to collect on those loans. The petitioners argued this activity made Santander a debt collector subject to the FDCPA.  The Fourth Circuit Court of Appeals disagreed because the debt purchaser was not seeking to collect a debt “owed . . . another”. The Supreme Court affirmed in a unanimous decision. 

The opinion did not consider whether a purchaser of defaulted debt is engaged “in any business the principal purpose of which is the collection of any debts.” §1692a(6). Debt buying companies should consult with their attorneys concerning the ramifications of today's ruling.

 

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In Lampert v. Weltman, Weinberg & Reis Co., LPA, plaintiff Debbie H. Lampert filed suit in the United States District Court for the Central District of Illinois against a debt collection agency, alleging that defendant Weltman, Weinberg & Reis Co., LPA violated the Fair Debt Collection Practices Act when it failed to cease collection activities following Lampert’s request for verification of the debt.

Lampert defaulted on a debt in 2017. On November 3, 2017, the bank placed the account with a debt collection agency. On November 22, 2017, the debt collection agency sent Lampert an initial collection letter seeking to recover the debt. Lampert alleged that on November 27, 2017, she mailed a letter to the debt collection agency to dispute the validity of the debt and to seek verification of the debt. She further claims that on December 1, 2017 at 11:04 a.m., she faxed a second letter to the agency again requesting verification of the debt. The debt collection agency did not respond to Lampert’s letter or fax. On February 2, 2018, the debt collection agency filed suit in an Illinois state court.

Subsequently, Lampert filed suit in the United States District Court for the Central District of Illinois, alleging FDCPA violations as a result of the agency failing to cease collection without providing verification of the debt. The debt collection agency disputed that Lampert actually sent a request for verification. The agency had no record of receiving any verification request from her. The records from the agency’s telephone and fax service provider also showed that the agency never received any call from Lampert’s fax number on December 1, 2017 at 11:04 a.m. The agency proffered that Lampert’s fax confirmation transmission page was suspect and potentially fabricated.

The Court agreed with the collection agency and found that that the records did not show that the agency received a fax from Lampert on the alleged date and time. Still, the Court did not grant summary judgment on this basis.

 

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Last week Encore Capital Group (ECPG), reported its financial results for the first quarter of 2017. The company announced net income of $22.3 million, or $0.85 per fully diluted share, as compared to $28.9 million, or $1.12 per fully diluted share in the same period a year ago. Of note, the firm's CEO commented that issuers are selling much sooner than in the past.

ECPG is an international specialty finance company with operations in eight countries that provides debt recovery solutions for consumers across a broad range of assets.

Highlights for Q1 2017

 

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