The Consumer Financial Protection Bureau (CFPB) is highlighting recent enforcement activity with the release of its latest Supervisory Highlights report. This report focuses on activities during the first quarter of 2016, showcasing supervisory actions that the Bureau says resulted in the remediation of approximately $30 million to more than 250,000 consumers.
You can read the full Highlights Report here.
This 12th edition of the CFPB’s Supervisory Highlights, generally covers activities completed between January 2016 and April 2016. Among findings that are particularly relevant to companies in the ARM industry:
- Selling ineligible accounts to debt sellers: CFPB examiners found that in at least one instance, a debt seller sold thousands of dollars in debt accounts improperly due to widespread coding errors. In that case, the coding errors led to the failure to note that the accounts were in bankruptcy, that the debt was fraudulent, or that the accounts had already been settled. Such practices were cited by the CFPB as unfair under the Dodd-Frank Act.
- Misleading consumers about debt repayment options: The CFPB found that some debt collectors convinced consumers that paying a down payment was necessary to repay a debt, when there was no such requirement. The Bureau also found that some collectors told consumers they had to pay through their checking account, when that was not actually required. Such practices are considered deceptive under the Dodd-Frank Act.
- Failure to provide adverse action notices: Institutions were found by the CFPB to have taken adverse actions, such as denial of credit, without making the required disclosures to consumers. Under the Fair Credit Reporting Act, consumers must be notified of any adverse action based on information in a consumer report, along with information about the consumer reporting agency that produced the report. CFPB examiners found these violations were generally caused by inadequate policies and procedures and training.
The Supervisory Highlights report does not refer to specific institutions, except in reference to a public enforcement action against an institution. The CFPB says that where examiners find violations of law or other significant problems or weaknesses, they alert the institutions to their concerns and outline necessary remedial measures. When appropriate, they then open investigations for potential enforcement actions. The CFPB often finds problems during supervisory examinations that are resolved without an enforcement action.
Although the debt collection rulemaking process has been on-going for nearly three years and an official Notice of Proposed Rulemaking has yet to be released, CFPB officials have repeatedly suggested that their Supervisory and Enforcement activities should be closely watched for clues about their priorities and where future rules are likely to focus.
In the case of this latest report, creditors, debt buyers, collection agencies, and law firms should examine their policies and procedures to make sure they are not violating the CFPB’s interpretations of the law in Q1 2016. In particular, creditors and debt buyers should take a hard look at what and how accounts are sold. Collection agencies and Law firms working for debt buyers should also consider some due diligence on their client’s purchases. Finally, anyone collecting on any type of account should closely review how debt repayment options are communicated to consumers.
As far as the CFPB’s rulemaking process is concerned, it does look like things will move to the next phase this summer. insideARM recently learned from multiple sources that the Bureau has scheduled the next step in debt collection rulemaking, the Small Business Regulatory Fairness Enforcement Act (SBREFA) hearing, for the week of August 22, 2016. Learn more about how the SBREFA panel works here.
Editor’s Note: For an in-depth look at the subject of CFPB enforcement actions, be sure to check out insideARM’s report The CFPB’s Consent Orders Regulating the ARM Industry, available now. The report is the first of its kind designed to help the debt collection industry comply with the CFPB’s consent orders. It includes every relevant CFPB consent order – organized, analyzed, and summarized. You can purchase an updated version of the report every quarter, or join the Compliance Professionals Forum and get every update, as well as a wealth of other practical resources, for free.