CFPB Considers a Proposal to Overhaul Debt Collection Market

The Consumer Financial Protection Bureau (CFPB) has outlined proposals under consideration that would overhaul the debt collection market by capping collector contact attempts, helping to ensure that companies collect the correct debt.

Under the proposals being considered, debt collectors would be required to have more and better information about the debt before they collect. As they are collecting, companies would be required to limit communications, clearly disclose debt details, and make it easier to dispute the debt. When responding to disputes, collectors would be prohibited from continuing to pursue debt without sufficient evidence. These requirements and restrictions would follow the debt if it were sold or transferred.

The proposals under consideration would increase protections pertaining to third-party debt collectors and others covered by the Fair Debt Collection Practices Act, including many debt buyers. As part of its overhaul of the debt collection marketplace, the CFPB plans to address consumer protection issues involving first-party debt collectors and creditors on a separate track. Specifically, the new protections are aimed at ensuring that debt collectors:

Collect the correct debt

Collectors would have to scrub their files and substantiate the debt before contacting consumers. For example, collectors would have to confirm that they have sufficient information to start collection, such as the full name, last known address, last known telephone number, account number, date of default, amount owed at default, and the date and amount of any payment or credit applied after default.

Limit excessive or disruptive communications

Collectors would be limited to six communication attempts per week through any point of contact before they have reached the consumer. In addition, if a consumer wants to stop specific ways collectors are contacting them, for example on a particular phone line, while they are at work, or during certain hours, it would be easier for a consumer to do that. The CFPB is also considering proposing a 30-day waiting period after a consumer has passed away during which collectors would be prohibited from communicating with certain parties, like surviving spouses.

Make debt details clear and disputes easy

Collectors would be required to include more specific information about the debt in the initial collection notices sent to consumers. This information would include the consumer’s federal rights. They would have to disclose to consumers, when applicable, that the debt is too old for a lawsuit. The proposal under consideration would also add a “tear-off” portion to the notice that consumers could send back to the collector to easily dispute the debt, with options for why the consumer thinks the collector’s demand is wrong. The tear-off would also allow consumers to pay the debt. The consumer could also verbally question the debt’s validity at any time, and prompt the collector to have to check its files again.

Document debt on demand for disputes

If the tear-off sheet or any written notice is sent back within 30 days of the initial collection notice, the collector would have to provide a debt report – written information substantiating the debt – back to the consumer. The collector could not continue to pursue the debt until that report and verification is sent.

Stop collecting or suing for debt without proper documentation

If a consumer disputes – in any way – the validity of the debt, collectors would have to stop collections until the necessary documentation is checked. Collecting on debt that lacks sufficient evidence would be prohibited. In addition, collectors that come across any specific warning signs that the information is inaccurate or incomplete would not be able to collect until they resolve the problem. Warning signs could include a portfolio with a high rate of disputes or the inability to obtain underlying documents to respond to specific disputes. Collectors also would be required to check documentation of a debt before pursuing action against a consumer in court. For example, collectors would have to review evidence of the amount of principal, interest, or fees billed, and the date and amount of each payment made after default.

Stop burying the dispute

If debt collectors transfer debt without responding to disputes, the next collector could not try to collect until the dispute is resolved. The proposals under consideration also outline information that collectors would have to send when they transfer the debt to another collector so that a consumer does not have to resubmit this information to the new collector.

Compliance Question of the Week

What are the procedures if a safe deposit box renter does not pay rent?

If the amount due on a safe deposit box has not been paid for 1 year, the credit union should start by sending the renter a notice.  The notice should be in writing and sent securely closed, postpaid and certified mail, return receipt requested to the address and person listed as the renter in the credit union records.  The notice should state that if the amount due for the safe deposit box is not paid within 30 days from the date of the notice, the credit union will open the safe or box and the contents will be inventoried, sealed and placed in one of its general safes or boxes.

If the 30 days has expired and the renter failed to pay the amount due, the credit union may, in the presence of two credit union officers, open the safe or box, remove its contents and inventory and seal the contents in a package.  The officers should mark the renter’s name and date of removal, and place the package in a general safe or box at a rental rate not to exceed the original rental rate of the opened safe or box.  The package should remain in the general safe or box for a period of not less than 1 year, unless sooner removed by the renter.  Once the package is put in the general safe or box, two credit union officers should file a certificate with the credit union that states the date of the opening, renter’s name, and a reasonable description of the contents. 

A copy of the certificate should be mailed to the renter’s last known address within 10 days in securely closed, postpaid and certified mail, return receipt requested.  Along with the certificate, the credit union should mail a notice stating that the contents will be kept at the expense of the owner, in a general safe or box in the credit union’s vaults for a period of not less than one year.  Any time after the mailing of the certificate and notice and before the expiration of 1 year, the owner may require the delivery of the contents if they pay all rentals due, the cost of opening the safe or box, and the payment of all further charges accrued during the period the contents remained in the general safe or box of the company.

Once the year has passed the credit union can sell the property stated in the certificate at a public auction.  Notice of the time and place of sale must be published once within 10 days prior to the sale in a newspaper published in the county where the contents of the safe or box are located and where the credit union chooses to conduct the sale.  If the credit union chooses not to sell the contents at public sale, the contents should be delivered to the department of revenue as unclaimed property.

From the proceeds of the sale, the credit union should deduct the amounts due for rental, the cost of opening and safekeeping the contents since the safe was opened, plus any additional charges accruing during the time of the sale, including advertising and cost of sale.  The balance of the proceeds, together with any unsold property, should be deposited by the credit union within 30 days after the receipt of proceeds, with the department of revenue as unclaimed property.  The credit union should also include the certificate stating the name and last know place of residence of the owner of the property sold, the articles sold, the price obtained and showing that the required notices were duly mailed and that the sale was advertised as required. 

In Oregon, the contents of the safe deposit box are considered abandoned if unclaimed by the owner 2 years after the lease or rental period on the box has expired.

Related Links:

RCW 22.28.040

ORS 98.328

Legal Briefs

National Credit Union Administration (NCUA)

The NCUA released a new video that explains the examination process. The video series covers how credit unions can prepare for examinations and explains how the CAMEL ratings are determined.

The NCUA announced that it is giving away 309 grants totaling over $2.5 million to low income designated credit unions. The grants are aimed at helping credit unions expand services to underserved communities, training and cybersecurity.

Consumer Financial Protection Bureau (CFPB)

The CFPB announced that it issued proposed amendments to the TRID rule. The amendments include technical updates as well as clarifications in certain areas, including tolerances for total payments, housing assistance lending, cooperatives, and privacy concerns.

Director Cordray delivered prepared remarks at a field hearing on debt collection.

The CFPB announced the outline of a new proposal that would help regulate the debt protection market. 

The CFPB announced that its most recent consumer complaint snapshot focuses on credit card complaints. The complaints include consumers finding payment allocation for cards with multiple balances confusing, difficulty understanding credit decisions on initial applications, and disclosure of credit card fees.

Federal Reserve Board (FRB)

The FRB announced that it will begin a soft rollout of the ODFI ACH fee for unauthorized entries. Beginning on August 1, 2016, the FRB will begin providing unauthorized return entry counts for ODFIs to show what the return volume might look like for the specific ODFI.

The FRB issued its July 2016 Federal Open Market Committee statement.

U.S. Department of the Treasury (Treasury)

The Treasury, along with HUD and FHFA, issued a white paper that provides guidance on loss mitigation strategies aimed at preventing foreclosure.

Office of Foreign Assets Control (OFAC)

OFAC updated its Frequently Asked Questions regarding information collection and recordkeeping requirements related to Cuba.

OFAC has updated the SDN list as of July 27, 2016. The last update prior to this was July 21, 2016.

Questions? Contact the Compliance Hotline: 1.800.546.4465,
compliance@nwcua.org.

 

 

Posted in Federal, NCUA.