1. Compliant
Collections Under
the Dodd-Frank
Act
Justin B. Hosie
October 11, 2014

2. -News stories
-FDCPA and “Lenders”
-General Do’s
-General Don’ts
-Difficult Situations
-Beyond the FDCPA
-CFPB Activity
Overview

3. News portrayal of debt collection
 http://www.kptv.com/story/25417450/bill-collectors-
accused-of-making-abusive-foul-mouthed-calls

4. Does the FDCPA apply to us as a
lender?
 Director Cordray: “…it doesn’t matter who is collecting the debt
— unfair, deceptive, or abusive practices are illegal”
 CFPB Press Release: “any entity subject to the Consumer Financial
Protection Act of 2010, whether a third-party collector or a
creditor collecting its own debts, can be held accountable for any
unfair, deceptive, or abusive practices in collecting a consumer’s
debts”
 Link to the Bulletins:
http://www.consumerfinance.gov/newsroom/the-cfpb-puts-
companies-on-notice-about-harmful-debt-collection-practices/
 Information about the CFPB’s position
 Information about unfair, deceptive, and abusive practices
 Model letters for consumers to send in response to collection activity

5. Congress said the FDCPA only applies
to debt collectors?
 Yes
 But, unless you’re prepared to fight the CFPB, assume
it applies for compliance purposes
 UDAAP authority is broad
 That very interesting discussion is outside the scope of
this presentation

6. What should you do when you collect
a debt?
 Treat consumers fairly
 Be honest and forthright
 Always disclose the caller’s identity to debtor
 Use the Company’s actual name
 Call after 8AM and before 9 PM – The consumer’s time
 Follow the consumer’s instructions on applying
payments
 Stop calling when asked and when the consumer has a
lawyer

7. What should we refrain from doing?
 Don’t:
 Threaten violence or criminal means, arrest, imprisonment, or reporting to
“Legal Authorities”
• Falsely represent or imply legal process
• Hide the legal nature of communications
• Misrepresent legal rights
• Pretend to be an attorney
• Distribute phony legal documents
• Make criminal allegations
 Use obscenity, profanity, or abusive language
 Publish a list of nonpaying consumers
 Advertise a debt for sale to coerce a payment
 Impersonate a government affiliation
 Falsely represent information about the debt
 Make false threats
 Threaten to communicate false information

8. What else should we refrain from
doing?
 Don’t:
 Falsely represent or imply account sale
 Falsely Represent or imply you’re with a consumer reporting
agency
 Collect amounts beyond those explicitly provided in the
consumer’s agreement
 Cause the consumer to incur charges by concealment (fees
for telephone calls and telegram fees)
 Threaten unlawful or unintended repossession, seizure,
garnishment, attachment, etc
 Send postcards about a debt
 Suggest debt collection on envelopes

9. Is it that easy?
 No
 There are some difficult situations too. For example:
 Repetitive rings and repeated or continuous conversations
 Postdated checks
 Third parties
 The FDCPA “Mini-Miranda” and “Miranda” verbiage
 Answering machines
 Workplaces

10. What is the issue with repetitive
rings, repeated, and continuous
conversations?
 The FDCPA prohibits:
 Causing a telephone to ring repeatedly or continuously with
intent to annoy, abuse, or harass any person
 Engaging any person in telephone conversation repeatedly or
continuously with intent to annoy, abuse, or harass any
person

11. What do “continuously” and
“repeatedly” mean here?
 Continuously means making a series of telephone
calls, one right after the other
 “Repeatedly” means calling with excessive
frequency under the circumstances

12. If you can’t reach someone, how
often can you call?
 Don’t ignore requests to stop calling. Immediately
calling back a debtor that has hung up on a debt collector
has been considered a violation. Bingham v. Collection
Bureau, Inc., 505 F.Supp. 864, 873 (D.N.D. 1981). See also:
. Joseph v. J.J. MacIntyre Companies, LLC, 238 F.Supp.2d
1158 (N.D. Cal. 2002).
 Before establishing contact, 7 calls MAY arguably be
alright. 7 or more calls to a debtor in one day was not a
violation, as a matter of law, where the collector was still
attempting to establish contact. Tucker v. CBE Group, 710
F.Supp.2d 1301 (M.D. Fla. 2010). Some cases suggest less.
 2- 3 Calls Before Contact = Safer Approach

13. What is the issue with postdated
checks?
 Give 3-10 Days Warning Before Depositing. The
FDCPA prohibits debt collectors from taking and
depositing a postdated instrument, unless you notify
the consumer of an intent to deposit 3-10 days before
depositing.
 No CFPB Guidance.
 No guidance from the CFPB on whether this applies to first
party creditors now
 Do you want to be the test case on this issue?

14. What are the rules governing calls
with third-parties?
 Only Contact 3
rd
Parties to Learn about the
Consumer’s Location. If you know where the consumer
resides, you shouldn’t call references during collections
 The Company's caller must:
 identify herself/himself
 state that she/he is confirming or correcting location information
concerning the consumer, and
 only if expressly requested, identify his employer
 Do NOT:
 State that such consumer owes any debt
 Communicate with the third party more than once (with few
exceptions)

15. What is the issue with the “Mini-
Miranda” and “Miranda” notice?
 FDCPA requires debt collectors to provide very specific
information about the debt
 No guidance from the CFPB on whether creditors
should do this now
 This could confuse consumers
 Could be deceptive to do it – suggests the debt collection
status has elevated beyond the original creditor, to a 3
rd
party
debt collector

16. What is the issue with answering
machines?
 FDCPA prohibits communicating with 3rd parties about
the debt, except for location information, without the
consumer’s consent
 FDCPA requires disclosing the caller’s identity to the
consumer
 If a third party hears a message from a debt collector,
this can inadvertently violate the FDCPA

17. What is the issue with the
consumer’s workplace?
 FDCPA prohibits communicating with the consumer at
the consumer's place of employment if the debt
collector knows or has reason to know that the
consumer's employer prohibits the consumer from
receiving such communication
 Field visits to places of employment = a problem on
CFPB examinations, noted as a deceptive practice in
recent CFPB Supervisory Highlights

18. Are there collection considerations
beyond the text of the FDCPA?
 CFPB Bulletins
 CFPB Supervisory Highlights
 CFPB Actions
 Also consider: Case law, older FTC pronouncements,
etc

19. What are the CFPB Bulletins about?
 July 10, 2013 – Bulletin on prohibition of unfair, deceptive, or
abusive acts or practices in the collection of consumer debts
http://www.consumerfinance.gov/f/201307_cfpb_bulletin_unfair-
deceptive-abusive-practices.pdf
 No UDAAP allowed in collections for covered persons
(includes payday lenders). “Although the FDCPA’s definition of
“debt collector” does not include some persons who collect
consumer debt, all covered persons and service providers
must refrain from committing UDAAPs in violation of the
Dodd-Frank Act”
 Restates general definitions for unfair, deceptive, and
abusive
 Provides Examples

20. What are the examples?
 Fake charges
 Fake late fees
 Unlawful repossession
 Revealing the debt to others
 Falsely representing the debt
 Misrepresenting communication is from an attorney or
government
 Misrepresenting credit reporting practices
 Misrepresenting debt waiver policies
 Threatening unintended activity

21. What about other CFPB Bulletins and
Other Information?
 Bulletin on debt collectors discussing consumers’ credit is available
at:
http://files.consumerfinance.gov/f/201307_cfpb_bulletin_collectio
ns-consumer-credit.pdf
 Service Providers – Do Your Due Diligence, Train,
Supervise, and Audit Your Service Providers, including
Debt Collectors. Bulletin:
http://www.consumerfinance.gov/f/201204_cfpb_bulletin_service-
providers.pdf
 Debt collection examination procedures:
http://www.consumerfinance.gov/f/201210_cfpb_debt-collection-
examination-procedures.pdf
 CFPB Small Dollar Exam Manual:
http://files.consumerfinance.gov/f/201309_cfpb_payday_manual_r
evisions.pdf

22. What do the most recent CFPB
Supervisory Highlights cite?
 Failure of debt collectors (and others) who furnish
information to CRAs to investigate disputes regarding that
information
 Failure to obtain appropriate authorization prior to initiating
a recurring electronic transfer of funds from a consumer’s
account
 Failure of debt collectors to comply with the Fair Debt
Collection Practices Act’s limitations on the use of phone
calls and its prohibition on false and misleading statements
 Inadequate written CMS policies and procedures
 Lacked sufficient board and management oversight
 Lenders did not adequately monitor collections calls

23. What else do the most recent
supervisory highlights cite?
 Repeatedly making unnecessary calls to third parties
 Improperly disclosing personal debt information
 Calling borrowers in violation of do-not-call requests
 Making false claims during collections calls
 Lenders did not attempt to understand the root causes
of complaints arising from collections practices
 Called third parties even after the employees had
already made contact with consumers.

24. More from the most recent
supervisory highlights?
 Lenders did not provide training for collectors
 Lenders did not properly oversee third-party service providers
 Continued to call customers and references after consumers had made verbal and
written requests that they stop doing so
 Contacted references and improperly disclosed personal debt information to these third
parties
 Lacked sufficient procedures to verify that these in-house collection calls first confirmed
the identity of the borrower before sharing personal debt information
 Common practice of calling a borrower multiple times per day
 Failed to properly log calls, leading borrowers to receive more calls than documented
 Practices and weaknesses in the monitoring and corrective action functions at other
lenders that could lead to excessive daily calls
 False threats to add additional fees

25. Even more from the recent
supervisory highlights?
 False threats to report to consumer reporting agencies
(CRAs)
 False threats of legal action or referral to a non-
existent in-house “legal department”
 False claims that the lender will debit the borrower’s
account at any time
 Deceptive messages regarding non-existent special
promotions to induce borrowers to return calls
 Workplace collections visits

26. What enforcement actions has the
CFPB taken, that relate to payday
collection practices?
 ACE
 Cash America
 Examples of some other matters addressing debt collection:
 Hydra
 Corinthian Colleges
 Colfax
 American Express Travel
 American Express FSB
 American Express Centurion Bank

27. What happened with ACE’s
collections according to the CFPB?
 Didn’t prevent third party debt collector violations
 Kept calling the wrong number
 Trained employees to create a sense of urgency.
 Made excessive calls
 Disclosed the debt to 3rd parties
 Made prohibited calls.
 Falsely threatened collection fees
 Falsely threatened reporting to national credit bureaus
 Threatened “hassling” and unlimited collection action by 3rd party debt collection
 Threatened to send consumers to non-existent “FDCPA Department”
 Falsely threatened or implied “legal activities”

28. Wasn’t something deemed abusive?
 Encouraged delinquent borrowers (those without an ability
to repay) to take out new loans
 An act or practice is “abusive” if it takes “unreasonable
advantage of … the inability of the consumer to protect the
interests of the consumer in selecting or using a consumer
financial product or service”
 Leveraged an artificial sense of urgency to induce delinquent
borrowers with a demonstrated inability to repay their existing
loan to take out a new loan with accompanying fees
 These acts or practices took unreasonable advantage of the
inability of consumers to protect their own interests in selecting
or using a consumer financial product or service

29. What happened with Cash America’s
collections, according to the CFPB?
 Consumers paid money as a result of debt collection litigation
which may have involved reliance on improper court filings
 The Company withheld an internal audit report related to
collection practices
 Other alleged practices beyond collections too

30. Closing Collection Story
 http://www.cbsnews.com/news/debt-collector-thrives-
with-simple-strategy-kindness/

31. Contact Information
Justin B. Hosie
Hudson Cook, LLP
6005 Century Oaks Drive
Suite 500
Chattanooga, TN 37416
(423) 490-7564
jhosie@hudco.com