What is the forecast for CFPB and FTC debt collection activities for 2021? | Alston & Bird

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Debt collectors can expect the Consumer Financial Protection Bureau and the Federal Trade Commission to be active regulators within the Biden administration, particularly during and in the aftermath of the COVID-19 pandemic. Our Consumer Protection / FTC and Financial Services Litigation teams review the agencies’ latest reports on their work in 2020 and anticipate a more challenging environment going forward.

  • What does the CFPB report on the Fair Debt Collection Practices Act contain?
  • What is the heart of the FTC’s debt collection work?
  • What kind of execution can collectors expect from both agencies?

On March 22, 2021, the Consumer Financial Protection Bureau (CFPB) released its 2020 annual report to Congress on the administration of the Fair Debt Collection Practices Act (FDCPA). The CFPB annual report follows the Federal Trade Commission (FTC) annual letter to the CFPB regarding the FDCPA, released on March 19, 2021. The annual report highlights the efforts of both agencies to protect and provide a debt collection relief for consumers, especially in light of the current COVID-19 pandemic and resulting economic hardship.

Overview of CFPB’s 2020 activities

The annual report integrates the debt collection activities carried out by the CFPB and the FTC in 2020. It includes a report on complaints, the supervision activity surrounding debt collection activities, participation in debt collection disputes, FTC and CFPB enforcement actions, advocacy initiatives and policy initiatives.

Last year, the number of debt collection complaints reported to the CFPB increased by 10 percent. Debt collection was one of the most prevalent consumer complaints in 2020; almost one in six complaints concerned debt collection.

Through surveillance reviews, the CFPB identified several violations of the FDCPA: (1) false threats of litigation and false statements about litigation; (2) by mistakenly suggesting that the debt could be reported to credit reporting companies; and (3) misrepresentation by debt collectors that they are a credit reporting company. The CFPB has also conducted numerous priority COVID-19 assessments in response to the pandemic. The aim of the priority assessment was to “get real-time information” from a wide range of entities operating in areas at high risk due to the pandemic. Through these assessments, the CFPB identified delays in processing administrative suspensions of wage garnishment, resulting in inappropriate contact by debt collectors. There were also delays in processing payments for debt payments.

Through two amicus briefs filed in 2020, the CFPB made known its position on the breakdown of debt statements after delisting. The Seventh Circuit was convinced by the CFPB’s argument that “a precise breakdown of a debt does not mislead consumers as to the possibility of future interest or charges”. In the Third Circuit, the CFPB argued that the Seventh Circuit opinion should be followed.

The CFPB brought four public execution actions related to alleged violations of the FDCPA. He resolved two of those actions, resulting in nearly $ 15.2 million in civil monetary penalties and $ 80,000 in reparations for consumers. The CFPB also announced that it is conducting a number of non-public investigations of companies to determine whether their debt collection practices violate the FDCPA or the Consumer Financial Protection Act.

Given the high risk of harm to consumers due to issues and stress associated with the pandemic, the CFPB has been proactive in raising awareness of debt collection issues. The CFPB, in conjunction with state and federal partners, has released tips to help consumers navigate housing, student loan and federal relief options; manage their finances; and get answers to other pressing financial questions that are particularly relevant given the COVID-19 pandemic. This included an interactive online educational tool called “Ask CFPB,” which helps consumers, in English and Spanish, get their financial questions answered and received nearly 2 million views and downloads.

The CFPB also continued its research, marketing monitoring and awareness efforts and released the results of its quantitative online survey of over 8,000 respondents to test multiple versions of disclosures to support understanding of prescribed debt. and recovery which helped inform the final CFPB rules. on debt collection that were issued in the last quarter of 2020. In October 2020, the CFPB issued a final rule focused largely on debt collection communications. In December 2020, the CFPB finalized a second rule focused largely on debt collection disclosures.

FTC 2020 Activity Snapshot

Investigations and litigation were at the heart of the FTC’s debt collection work in 2020. Last year, the FTC filed or resolved seven debt collection cases against nearly 40 defendants, resulting in $ 26 million in judgments. .

Working with three other federal agencies and partners in more than 15 states, the FTC also led Operation Corrupt Collector, which was a nationwide federal-state law enforcement sweep and awareness initiative targeting debt collection. phantom debt, where the debt may have been entirely fabricated. , and abusive and threatening debt collection practices. Operation Corrupt Collector has led to over 50 legal challenges against some of the most predatory and egregious debt collection tactics. As part of Operation Corrupt Collector, the FTC has released a new online dashboard that provides a state breakdown of consumer debt collection complaints received through the FTC’s Consumer Sentinel network.

In 2020, the FTC also launched its first federal action to combat illegal ‘debt parking’ – when a business reports alleged debt to credit bureaus without first contacting the bank. the consumer about the debt. The consumer does not find out that the suspected debt exists when their credit report is consulted while buying a car or a house, opening a credit card or looking for a job. The case was resolved in November 2020 and included a pecuniary judgment of more than $ 24 million.

In 2020, the FTC received more than 85,000 consumer reports related to debt collection. Like the CFPB, the FTC continued to distribute educational materials and resources to consumers, in English and Spanish, on the FDCPA, including specific information on phantom debt collection to help consumers avoid debt. ” be victims of these predatory practices.

Key points to remember

Under new administration and in light of the ongoing COVID-19 pandemic and the resulting economic hardship for many Americans, the CFPB and FTC will be active regulators. The acting director of CFPB said he was prioritizing “the relief of consumers facing hardships due to COVID-19 and the related economic crisis.” We anticipate that the CFPB’s efforts will include ongoing monitoring of FDCPA violations, particularly in markets that present an increased risk and opportunity of harm to consumers due to pandemic-related issues, such as housing or the student loan collection. We also anticipate that the FTC will continue to target debt collections, including those who misuse consumers’ personal information, and we expect to see more enforcement action against debt collectors, especially those who fail. indulge in illegal parking of debts. We expect the FTC to continue its coordinated efforts with federal-state law enforcement agencies nationwide. If the appointment of Rohit Chopra as director of the CFPB is confirmed, coordination between the FTC and the CFPB is all the more expected, allowing a coordinated deployment of resources in a strengthened regulatory environment.

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