I am trying to determine (unsuccessfully) if we will be subject to FDCPA requirements because of a third party that we plan to use for some collection efforts. We have a collections department that performs collections for our institution. I know that for this function – we are not subject to FDCPA.

We are also engaging a third party to perform outbound collection calls on small dollar amount loans, only. When the third party places these calls they will state that they are from our bank, and as far as the customer knows, they are talking to a bank employee. The third party will only have access to the delinquent loan file that we provide to them. They do not have access to our system. They will provide a nightly report to us with any notes, requests for call backs, address changes, etc. that need to be recorded on the loan record. All collection letters will sent by bank staff (regardless of what group is responsible for the collection calls) using our approved language, letterhead, etc.

Will the engagement of this party somehow now pull the bank into being subject to FDCPA? In the contract with the third party there is language that states that they will abide by the Fair Debt Collections Practices Act. Should I review the third party periodically for compliance? What should I be looking for? How should I handle this situation to ensure that we are following all requirements expected of us?

Thank you in advance for any guidance that you may be able to provide.

they will state that they are from our bank,

The bank will not be subject to the rule as long as they are collecting their own debts. The third party would be a debt collector under the rule and must follow its requirements. Stating they are from your bank would be a misrepresentation.

You may want to search the rule for the following terms - false, deceptive, misleading.

From 1006.18

4) Use any business, company, or
organization name other than the true
name of the debt collector’s business,
company, or organization.
(d) False representations or deceptive
means. A debt collector must not use
any false representation or deceptive
means to collect or attempt to collect
any debt or to obtain information
concerning a consumer.
(e) Disclosures required—(1) Initial
communications. A debt collector must
disclose in its initial communication
with a consumer that the debt collector
is attempting to collect a debt and that
any information obtained will be used
for that purpose.

I am sort of leaning to what Dan has indicated. I think you need to get your legal counsel (assuming they are familiar with the issue) involved. There is no direct provision that I can find that addresses employing agents in the collection process. Personally, I think allowing someone to act as an agent of the bank that is not an actual employee is a dangerous undertaking. Your bonding company might also need to be involved in this arrangement.

If you look at the exclusions in the definition of a debt collector that would be related to this arrangement, they are pretty limited and would only extend to actual affiliated businesses:

(2) The term debt collector excludes:

(i) Any officer or employee of a creditor while the officer or employee is collecting debts for the creditor in the creditor’s name;

(ii) Any person while acting as a debt collector for another person if:

(A) The person acting as a debt collector does so only for persons with whom the person acting as a debt collector is related by common ownership or affiliated by corporate control; and

(B) The principal business of the person acting as a debt collector is not the collection of debts;

Thank you both for responding. I plan to go back to the service owner here at the bank. I have lots of questions now.

Would a bank that services Fannie/Freddie loans be subject to FDCPA? I was at a Compliance Forum yesterday and the question came up. I never thought of that as we do sell loans to secondary market but service them at our financial.

Do you as a servicer take any action that would be construed as debt collection activities?

Yes

I was hoping for a loophole since we did originate the loan but so far I haven't found anything.

What about this?

(6) The term "debt collector" means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. For the purpose of section 1692f(6) of this title, such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests. The term does not include --

(F) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement; (ii) concerns a debt which was originated by such person; (iii) concerns a debt which was not in default at the time it was obtained by such person; or (iv) concerns a debt obtained by such person as a secured party in a commercial credit transaction involving the creditor.

Good news!!! After much research I found this, in case anyone else has this same question.


*** (vi) Any person collecting or attempting to collect any debt owed or due, or asserted to be
owed or due to another, to the extent such debt collection activity:
***(B) Concerns a debt that such person originated; (see below)

§ 1006.2 Definitions.
For purposes of this part, the following definitions apply:
(i)(1) Debt collector means any person who uses any instrumentality of interstate commerce or mail in any business the principal purpose of which is the collection of debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due, or asserted to be owed or due, to another. Notwithstanding paragraph (i)(2)(vi) of this section, the term debt collector includes any creditor that, in the process of collecting its own debts, uses any name other than its own that would indicate that a third person is collecting or attempting to collect such debts. For purposes of § 1006.22(e), the term also includes any person who uses any instrumentality of interstate commerce or mail in any business the principal purpose of which is
the enforcement of security interests.
(2) The term debt collector excludes:
(vi) Any person collecting or attempting to collect any debt owed or due, or asserted to be
owed or due to another, to the extent such debt collection activity:
(A) Is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement;
(B) Concerns a debt that such person originated;
(C) Concerns a debt that was not in default at the time such person obtained it; or

Here is some more support:

https://files.consumerfinance.gov/f...tions-practices-act-fdcpa_procedures.pdf

Debt Collectors That Are Not Covered

An institution is not a debt collector under the FDCPA when it collects:

• Another’s debts in isolated instances.

• Its own debts it originated under its own name.

• Debts it originated and then sold, but continues to service (for example, mortgage and
student loans).

Perfect!!
Thank you!!

Reviving this post. Does anyone see a concern with allowing an exception to normal collection practice? Our FI uses a 3rd party collection agency for charged-off DDA and SAV accounts over a certain threshold (anything under is charge-off and no recovery attempt is made). We have had a few instances now where an account was charged-off, it was over a certain threshold, but the banker asked that it not be sent to our collections agency because the customer was going to make periodic payments to our FI. My gut reaction is "no, we should be treating all accounts the same." CCO on the other hand doesn't want to turn away money or the chance to recover. Thoughts?

Fair lending is the first thing to come to mind. An overdraft is a loan under Regulation B. Treating the collection of such loans differently is not a great move without certain fair lending risks.

Anon, if you are an OCC bank, I would suggest reading their fair lending exam manual. They have an additional section on "disparate treatment loan servicing" that this smacks in the face of violating. Let's just assume that only certain segments of the population are turned over to collection agencies.
OK, next question - how do they know the information - no GMI on deposit accounts. Proxies using sir name and location to determine race and ethnicity. First name for gender.