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CFPB releases debt collection FAQs
On October 1, the CFPB released a set of FAQs discussing limited-content messages and the call frequency provisions under the Debt Collection Rule in Regulation F. As previously covered by InfoBytes, in October 2020 the CFPB issued its final rule amending Regulation F, which implements the Fair Debt Collection Practices Act, addressing debt collection communications and prohibitions on harassment or abuse, false or misleading representations, and unfair practices. Among other things, the FAQs clarify: (i) the qualifications of a “limited-content message”; (ii) that debt collectors can utilize a pre-recorded voice message for limited-content messages; (iii) that the final rule “establishes a presumption of a violation of, and a presumption of compliance with, the prohibition against harassing, oppressive, or abusive conduct, based on the frequency of a debt collector’s telephone calls and conversations”; (iii) that the final rule “does not preempt a state law that affords greater protection to consumers, including, for example, by imposing limits or more restrictive presumptions related to telephone call frequency”; (iv) that seven days is the maximum time a consumer’s direct prior consent applies to additional telephone calls; and (v) the factors that may rebut the presumption of a violation.
California governor signs legislation on identity theft
On September 23, California’s governor signed AB 430, which requires a debt collector to pause collection activities until completion of a review if the debt collector receives a copy of an FTC identity theft report and a written statement from the debtor. Among other things, the bill: (i) alters the definition of “victim of identity theft” to include individuals who submit FTC identity theft reports; (ii) authorizes a debtor to send a copy of a police report, as specified, but prohibits a debt collector from also requiring a police report if the debtor submits an FTC identity theft report; and (iii) requires that “in order for a person to recover actual damages or attorney’s fees in an action or cross-complaint filed by a person alleging that they are a victim of identity theft, that the person, upon written request of the claimant, provided the claimant a valid, signed FTC identity theft report before filing the action or within their cross-complaint, as specified.”
FTC settles with debt collector
On September 27, the FTC announced a settlement with a Georgia-based debt collection company and its owners (collectively, “defendants”) for allegedly engaging in fraudulent debt collection practices. As previously covered by InfoBytes, the FTC filed a complaint against the defendants alleging that they violated the FTC Act and the FDCPA by, among other things: (i) posing as law enforcement officers, prosecutors, attorneys, mediators, investigators, or process servers when calling consumers to collect debts; (ii) using profane language and threatening consumers with arrest or serious legal consequences if debts were not immediately paid; (iii) threatening to garnish wages, suspend Social Security payments, revoke drivers’ licenses, or lower credit scores; (iv) attempting to collect debts that were either never owed or were no longer owed; (v) unlawfully contacting third parties, such as family members or employers; and (vi) adding unauthorized or impermissible charges or fees to consumers’ debts. The U.S. District Court for the Northern District of Georgia granted a temporary restraining order against the defendants in September 2020. Under the terms of the stipulated final order, the FTC ordered that the defendants are banned from the debt collection industry, prohibited from misrepresenting that they are attorneys or affiliated with a law firm or whether a consumer owes any kind of debt, and are prohibited from making misleading claims while selling a product or service. The order also requires the defendants to pay more than $266,000 to the Commission. A $3 million monetary judgment will be partially suspended upon completion of asset transfers from all financial institutions holding accounts in the defendants’ names.
DFPI fines debt collector $375k in first action under the CCFPL
On September 22, the California Department of Financial Protection and Innovation (DFPI) announced its first enforcement action against a California-based debt collector and debt buyer for allegedly violating the California Consumer Financial Protection Law (CCFPL) by threatening to sue consumers and furnishing negative information to a credit bureau without first notifying consumers about the alleged debt—a practice commonly known as “debt parking.” According to DFPI, consumers complained that their credit scores dropped significantly as a result. The respondent also, among other things, allegedly left voicemails that did not disclose the caller’s identity, threatened illegal lawsuits and wage garnishment (even though it never actually commenced any legal proceedings), and failed to notify consumers in writing within 30 days of transmitting negative information to the credit bureau. Under the order, the respondent is required to pay a $375,000 fine and must desist and refrain from unlawful acts or practices associated with the FDCPA, the Rosenthal Fair Debt Collection Practices Act, and the Consumer Credit Reporting Agencies Act.
Colorado announces settlement with auto lender
On September 10, the Colorado attorney general announced a settlement with a Texas-based auto lender (defendant) resolving allegations of lending practices that allegedly exposed consumers to unnecessarily high levels of risk and knowingly placed consumers into auto loans with a high probability of default, which violated Colorado’s consumer protection laws, among other things. Under the terms of the assurance of discontinuance, the defendant must amend its origination and collection practices, including by, among other things: (i) rescinding consumers’ debt on certain loans; (ii) attempting to repurchase any loans that may be held by third parties; and (iii) setting a reasonable debt-to-income threshold to ensure that the defendant is reasonably evaluating a consumer’s ability to pay.
Washington reaches $1.6 million settlement with debt collector
On September 8, the Washington attorney general announced that a Renton-based debt collector (defendant) will pay over $1.6 million in a settlement to resolve allegations that it violated the Washington Consumer Protection Act by misleading consumers with offers for “settlements” of debts. According to the AG, the defendant sent letters titled “settlement offers,” but failed to disclose that because the debt was older than the six year statute of limitations for filing a suit to collect, it could not enforce the debt in court. The term “settlement offer” allegedly deceptively suggested the defendant could potentially litigate to collect the debt. Under the terms of the settlement, the defendant is required to: (i) pay full restitution to 1,400 Washingtonians, a total of nearly $710,000; (ii) pay $1,675,000 to the attorney general’s office, including payment to cover the costs of the case and fund future investigations and enforcement of the Consumer Protection Act; (iii) cease using the words “settle” or “settlement” when attempting to collect on time-barred debts; and (iv) disclose that the statute of limitations to sue on the debt has passed.
District Court grants summary judgment for defendant in FDCPA case
On September 1, the U.S. District Court for the Northern District of Illinois granted a defendant debt collector’s motion for summary judgment resolving FDCPA allegations. The defendant allegedly sent the plaintiff a debt collection letter, which the plaintiff disputed. Then, the plaintiff allegedly received another letter that included language regarding how to dispute the debt. Again, the plaintiff disputed the debt, requested validation of the debt, and filed a second dispute, which allegedly caused the plaintiff “stress and confusion” and “led her to unnecessarily expend time and money, as she went to the library to type and print the letter and spent money to mail it.” After the defendant filed a motion to dismiss, the court certified a class in the case. Since both sides had engaged in discovery, the court treated the defendants’ motion as one for summary judgment and concluded that the plaintiff did not demonstrate a concrete harm. The judge granted the defendant’s motion to dismiss, noting that the plaintiff’s “injury—spending time and money in an attempt to clear up her confusion concerning whether she had validly disputed the debt—is analogous to injuries arising from consultations with lawyers or filing suit, which the Seventh Circuit has held do not amount to concrete harm.”
As previously covered by Infobytes, the Seventh Circuit earlier this year held that a consumer’s alleged “stress and confusion” did not constitute a concrete and particularized injury under the FDCPA after the plaintiff alleged that the defendant debt collector violated the FDCPA when it directly communicated with her by sending a dunning letter related to unpaid debt even though she had previously notified the original lender that she was represented by counsel and requested that all debt communications cease. In that case, the Seventh Circuit held that the consumer’s allegations—that the dunning letter caused her “stress and confusion” and “made her think that ‘her demand had been futile’”—did not amount to a concrete and particularized “injury in fact” necessary to establish Article III standing under the FDCPA. The court further noted that “the state of confusion is not itself an injury”—rather, for the alleged confusion to be concrete, “a plaintiff must have acted ‘to her detriment, on that confusion.’”
DC passes debt collection bill
On September 1, the District of Columbia Mayor signed B24-0347, which updates the District’s collection laws by expanding protections to cover most consumer debt, including medical and credit card debt, in addition to strengthening existing protections for DC consumers. Among other things, the bill: (i) prohibits excessive communications that qualifies as harassment, including making over three phone calls in a 7-day period; (ii) increases penalties for debt collection violations; (iii) clarifies that no one can be jailed for failing to pay a debt; (iv) prohibits debt collectors to communicate any information regarding a person’s debt to their employers or family members; and (v) clarifies that debt buyers are required to follow all laws applicable to debt collectors. The law is effective September 23.
DFPI: Debt collection licensing applications due before January 1
On September 1, the California Department of Financial Protection and Innovation (DFPI) announced that all debt collectors operating in California can apply to be licensed by the DFPI, which portrays the initial step in increased state oversight including an assessment of applications, formal examinations, and protections for California consumers. As previously covered by InfoBytes, as required under SB 908, all debt collectors must submit a license application prior to Jan. 1, 2022, to continue operating in California next year and authorizes the DFPI to take in borrowers’ complaints and enforce violations. Debt collectors, debt buyers, and debt collection attorneys operating in the state can submit their license applications here at the Nationwide Multistate Licensing System (NMLS), which requires financial and other information electronically, starting September 1. The announcement notes that, “[a]ny debt collector collecting debt in the state of California must submit an application on or before Friday, Dec. 31, 2021.” When a debt collector has submitted an application, “they may continue operating as a debt collector in California while the application is pending,” according to the DFPI. However, the applicant will be required to wait for the issuance of a license prior to continuing operations in the state if an application is submitted after December 31.
DFPI issues second Debt Collection Licensing Act proposed rulemaking
On August 19, the California Department of Financial Protection and Innovation (DFPI) issued an invitation for comments on a proposed second rulemaking (NPRM) under the Debt Collection Licensing Act (the Act). As previously covered by InfoBytes, in 2020, California enacted the Act, which requires a person engaging in the business of debt collecting in the state, as defined by the Act, to be licensed and provides for the regulation and oversight of debt collectors by DFPI. Earlier in April, DFPI issued an NPRM to adopt new debt collector licensing requirements (covered by InfoBytes here). The most recent NPRM, among other things, seeks further input from stakeholders on topics related to:
- The scope of the Act as related to several definitions, including “debt,” “debt collection,” “person,” “consumer credit transaction,” “debt collector,” and “debt buyer,” to determine if additional clarity is necessary and whether these definitions are the same as those in California’s Rosenthal Fair Debt Collection Practices Act (Rosenthal Act) and the Fair Debt Buying Practices Act (FDBPA).
- Whether certain terms related to definition of a debt collector, such as “engage in the business of debt collection,” “in the ordinary course of business,” or “regularly,” require clarifying regulations.
- Whether additional clarification is needed concerning entities or transactions exempt from the Act’s requirements.
- Whether the term “due or owing” is clear with respect to the definition of a “debtor.”
- Whether additional clarification is needed regarding DFPI’s authority to enforce the Rosenthal Act and the FDBPA. Under the Act, DFPI has the “authority to enforce the Rosenthal Act and the FDBPA against persons required to be licensed under the [Act] and persons expressly exempt from licensure, including certain federally regulated entities.”
The NPRM also addresses certain provisions related to annual reports and bond amounts. Comments on the most recent proposed rulemaking are due October 5, and may be sent electronically to regulations@dfpi.ca.gov.