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Is Your Bank Affected By New Debt Collection Rules?

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Question: 
For years, the Consumer Financial Protection Bureau (CFPB) has promised to prioritize rulemaking based on consumer complaints. The proposed rule was released in May 2019, but what effect, if any, does the proposed rule have on first-party creditors? What other regulatory concerns related to debt collection should my bank be aware of?
Answer: 

This webinar will take an in-depth look at the proposed new collection regulations, and will equip you to implement best practices for collecting past due accounts in 2021.

Whether the FDCPA applies to first party collectors is an unsettled issue of law. Until the Supreme Court weighs in again on the definition of debt collectors under the FDCPA, first party creditors should not simply assume the FDCPA does not apply.
Obviously, that doesn't mean your bank should act as if you're not subject to the FDCPA (and, therefore, unlikely to be subject to any upcoming FDCPA rulemaking).
Nonetheless, regardless of whether the CFPB's new debt collection rules directly apply to first party creditors under the FDCPA, first party creditors should consider the possibility of liability for unfair, deceptive or abusive acts and practices (UDAAP) before discounting the NPRM.
In the mortgage servicing space, the CFPB, under former Director Richard Cordray’s leadership, entered into Consent Orders with one or more servicers in 2014 for conduct that violated the Bureau's mortgage servicing rules using an exam period that predated the effective date of the servicing rules. Under a similar line of thinking, it would not take a significant logical leap for the agency or another regulator to interpret a violation of the standards of conduct under the FDCPA as constituting a UDAAP for a first party creditor. Indeed, portions of the FDCPA specifically define certain behaviors as abusive and unfair..
While it would be easy to assume the current leadership at the CFPB would not take such a stance given the stated intention of ending “regulation by enforcement,” the Bureau’s most recent consent order sends a different message. In the CFPB’s October 2018 Consent Order with Cash Express LLC, the Bureau used its UDAAP authority to apply violations of the FDCPA to a non-debt collection company.

Even if the CFPB ultimately chooses not to utilize its UDAAP authority in this manner, Section 1042 of the Dodd-Frank Wall Street Reform and Consumer Protection Act provides state attorneys general and state regulatory agencies with the ability to enforce UDAAP violations. This enforcement structure significantly complicates and expands upon the potential risks that may be present for first party creditors.

As a result, first party creditors should carefully consider the potential impact of the CFPB’s upcoming NPRM to its current collection practices. After attending this webinar, you will be prepared to update your collection policies and procedures to help your bank comply with the FDCPA and UDAAP.

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Learn more about Carly Souther’s webinar Collecting Past Due Accounts and CFPB Compliance

First published on 09/27/2020

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