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The Consumer Financial Protection Bureau (CPFB) monitors debt collectors, banks, credit unions, and credit card companies, among others, to safeguard consumers. The CFPB requires that these institutions institute policies and procedures that are transparent and ensure the fair treatment to all consumers. Some of the more recent actions taken by the Bureau make it clear that just because an institution has policies in place doesn’t mean it has implemented the right policies.
The CFPB requires that all companies under its jurisdiction implement a compliance management system as a way to ensure companies have adequate control systems in place to accurately respond to consumer complaints. Unfortunately, this is one of the most common infractions the CPFB finds. In June, the CPFB fined Syndicated Office Systems, a medical debt collector, $500,000 and forced it to repay $5.4 million to affected consumers. Syndicated Office Systems failed to establish policies for responding to consumer complaints. Additionally, the company collected millions of dollars from consumers but failed to provide proper debt validation notices.
In a separate case, the CPFB found problems with how debt collectors provided information to consumer reporting agencies, which is an area the CFPB monitors closely since inaccurate reporting can affect consumers’ credit ratings. Again, the debt collectors in question didn’t have sufficient policies in place for reporting information to consumer credit reporting agencies.
The CFPB recently finalized a rule that expands CPFB’s review to nonbank auto financiers who acquire, make, or refinance more than 10,000 loans or leases per year. As a result of this rule, approximately 34 nonbank auto financiers are now under CFPB’s authority, a change that will likely force these companies to update their rules and compliance measures.
The Bureau has taken action this year against several companies that service active military and veterans. Many of the complaints from servicemembers allege that these companies routinely threatened to contact those higher up the chain of command in order to persuade individuals into paying. The CPFB judged this to be an unfair practice that not only humiliates servicemembers but also can negatively impact their military career. Freedom Stores, an electronic and furniture retailer, committed numerous violations. First, the company took multiple payments for the same charges from servicemembers’ accounts and accounts of family and friends. If servicemembers could not pay, family and friends would often make a one-time, monthly payment for that person to help them out. However, instead of deleting the payment information of those making one-time payments, the company kept their information and continued to charge them without notification or consent. Further, Freedom Stores threatened to sue these men and women, even after deciding not to sue, in an attempt to coerce individuals into paying. And to make matters worse, Freedom Stores filed over 3,500 lawsuits against persons who had never lived in the state, much less were in-state to sign financing contracts with Freedom Stores.
As the CFPB’s recent actions suggest, failure to have and follow the RIGHT policies is one of the quickest ways to get in trouble with the Bureau. For those in collections, know the rules! And, remember to evaluate your policies against the goal of ensuring transparency and fair treatment for all consumers.
Jerry Myers is Smith Debnam’s Managing Partner and for more than 30 years, he has focused his practice in the area of creditors’ rights, with an emphasis on debt collection, judgment enforcement, and commercial litigation. Jerry is certified by the American Board of Certification as a Specialist in the field of Creditors Rights law. Jerry is a past President of the Commercial Law League of America and was the first President of the North Carolina Creditors Bar Association. He has written and lectured extensively on debt collection and judgment enforcement, including CLE presentations sponsored by Wake Forest University School of Law, the North Carolina Bar Foundation, the Commercial Law League of America, and the National Association of Retail Collection Attorneys....LEARN MORE