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Misleading Collection Scripts Cost Financial Institution $28.5 Million

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In its $28.5 million settlement with Navy Federal Credit Union (NFCU), the Consumer Financial Protection Bureau (CFPB) stated that NFCU's collection letters contained material misrepresentations – or unfair or deceptive abusive acts or practices – that were likely to mislead consumers; how did NFCU's templates violate UDAAP?

NFCU's collection letter templates contained many material misrepresentations that the CFPB determined to qualify as UDAAP violations because they were likely to mislead consumers. In one or more templates, the following misrepresentations were made:
• A false statement that legal action against the debtor had been recommended (when, in fact, no such recommendation had been made);
• A threat to garnish the debtor's wages;
• Implication that NFCU intended to sue the debtor if s/he failed to remit payment
• A threat to contact the debtor's military commanding officer about his/her delinquencies
In addition, NFCU established at least two (2) unfair practices after a debtor became delinquent on one account: (1) freezing the debtor's electronic account access; and, (2) freezing all of the debtor's NFCU accounts (e.g., delinquency on one account would trigger a freeze for all of the consumer's accounts).
These UDAAP violations resulted in the CFPB filing a Consent Order Against NFCU in October 2016. The Order required NFCU to pay $23 million to redress the grievances of eligible consumers and pay a civil money penalty of $5.5 million.
Attend this webinar for guidance on drafting effective and compliant scripting that ensures you motivate your customers to pay-in-full without violating UDAAP!
Learn more about Carly Souther’s webinar Collecting Past Due Accounts and CFPB Compliance

First published on 10/18/2020

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