The bank just entered into a relationship with a collection agency to collect loans 60 days or more past due. FDCPA has not been an issue, but what effect does this new relationship have on it?

Any thoughts/help is appreciated.

Dave Majkowski, CRCM
Compliance Manager
Farmers-Merchants Bank & Trust
Breaux Bridge, La.
dave@fmbanking.com

Once the loan goes to the collection agency it is now in a "third party's hands". They will have to comply with the FDCPA. (Not sure if this is what you were asking.)

Adding to Dan's comment, you might ask bank management if they intend the collection agency to collect in the name of the bank giving the appearance of a first party collection. This is a trend in the world of outsourced collections the last few years. If so, I'd recommend you consult outside counsel for an opinion. You want to avoid the bank becoming a "debt collector" under the FDCPA.

And even if they aren't doing "first party" collection, you will want to monitor their efforts on your behalf to be sure that they are complying with the requirements of FDCPA. If they are abusing your customers, even those who are in default, your bank will be the one to take the reputation hit.

What about privacy implications? How about turning accounts over for collection and reporting customers to Chex Systems. I read something in a course about not reporting account numbers. I was not sure if that applied to turning overdrawn accounts over for collection. Chex Systems is a third party. Appreciate your thoughts?

regarding Privacy; since it is a collection, it is generally exempt, but you should still check on the agency's privacy practices and policies. This link may help: click here