CFPB’s Supervisory Highlights Reveal Struggles Complying with Regulation X and Loss Mitigation (Part 3)

The CFPB published its Supervisory Highlights last week, highlighting examinations across various financial products that were conducted between January and April of this year.  The Report highlights key findings made by the CFPB and provides insight into the current focus of the examiners.  The current edition of Highlights provides insights on consumer reporting, fair debt and student lending, but the centerpiece of the Report are the key findings regarding the mortgage industry.  Today’s post focuses on the mortgage findings, both for loan originators and servicers.  The overriding theme of the Highlights continues to be the need to have appropriate compliance management systems in place.

                Loan Origination

The CFPB indicates that this is the first round of examinations to take into account compliance with the Title XIV rules, which include the ability to repay, loan originator compensation, high-cost mortgages, homeownership counseling and escrows.  The Highlights indicate that supervised entities which originate mortgage loans are struggling with the implementation of the policies and procedures necessary to comply with the new regulations. More generally, the CFPB found entities did not provide adequate training in certain key areas, did not provide for sufficient monitoring and corrective action, and failed to have systems in place for robust compliance audits.  The key highlights:

• Not surprisingly, based upon the recent rash of consent orders, heavy scrutiny was applied to compliance with the Loan Originator Rule.  The CFPB noted that while written policies were in place, there were no written procedures instructing employees how to comply with the written policies.  The CFPB emphasized the need for written procedures that not only ensure compliance with the Loan Originator Rule, but also monitor compliance;
• Some supervised entities struggled with the disclosures required by the Regulation X and did not fully comply with the disclosure requirements by failing to provide the list of housing counseling agencies to consumers and in particular, failing  to provide the websites for each agency;
• Supervised institutions also struggled to comply with the good faith estimate requirements of Regulation X.  Particularly, the CFPB found entities:
  • Failed to timely provide the consumer with the good faith estimate within three business days of receipt of the completed application;
  • Failed to timely provide the consumer with revised good faith estimates within three business days of receiving information of changed circumstances; and
  • Failed to include all fees within the good faith estimate.
• Supervised entities failed to ensure that the HUD-1 settlement statements accurately reflect the actual settlement charges paid by the borrower;

Mortgage Servicing

The CFPB acknowledged that compliance with the CFPB mortgage servicing rules is a high priority.  It should come as no surprise, then, that the report details a number of issues in this regard.  The CFPB again made the general observation that entities needed procedures in place to audit for systemic controls.

• Particularly as to loss mitigation, the CFPB noted:
  • A number of issues with acknowledgement notices sent by servicers.  The Highlights make clear the expectation that servicers’ requests for additional documents should be on point and only request the specific additional documents actually required to complete a loss mitigation application;
  • Entities also need to protect against system failures and weaknesses to insure that loss mitigation acknowledgement notices are timely sent; and
  • Entities need to insure that systems and procedures are in place to insure that loans transferred while in loss mitigation are handled appropriately.

• Particularly as to foreclosure, the CFPB noted the expectation that servicers’ notices of intent to foreclose take into account any pending loss mitigation plans.

• The CFPB also noted that one or more servicer failed to automatically cancel private mortgage insurance as required by the Homeowners Protection Act. 

• Entities also struggled with the periodic statement requirements of Regulation Z. Particularly, the CFPB noted that:
• One or more servicers failed to send periodic statements either because of a sustained system error or because of an erroneous belief that the loans were exempt; and
• One or more servicers inaccurately listed fees and transactions in the transaction history.

 

 

CFPB’s Supervisory Highlights Emphasize Importance of Compliance Management Systems in Debt Collection (Part 2)

The CFPB published its Supervisory Highlights this week, highlighting examinations across various financial products that were conducted between January and April of this year.  The Report highlights key findings made by the CFPB and provides insight into the current focus of the examiners.  The current edition of Highlights provides insights on consumer reporting, fair debt and student lending, but the centerpiece of the Report are the key findings regarding the mortgage industry.  Yesterday’s post focused on consumer reporting agencies and future posts will focus on the findings with respect to student lending and mortgage.  Today’s post focuses on debt collection.

The Highlights indicate a focus of examiners on compliance management systems and the adequacy of investigation of dispute notices. 

Compliance Management Systems

The CFPB report emphasizes the CFPB’s expectation that financial institutions maintain robust compliance management systems tailored to their operations. In this regard, the CFPB emphasized:

• Boards of directors need to hold regularly scheduled meetings and receive information sufficient to adequately oversee compliance practices;
• Institutions need to maintain formal escalation procedures for third party debt collection personnel who were delinquent in completing their required training;
• Institutions must maintain comprehensive compliance audit programs;
• Institutions need to adequately document consumer complaints and their resolution. 
• Their expectation that financial institutions enhance their“procedures and monitoring program[s] to ensure complaints are timely identified, categorized, and resolved, and to conduct an audit to identify and analyze items; and
• Their expectation that all furnishers of information, including debt collectors, establish and implement written policies and procedures regarding the accuracy and integrity of the information they furnish to consumer reporting agencies (“CRAs”).

Reasonable Investigation of Dispute Notices.

No surprise to those that have read the CFPB Bulletins and reports on credit reporting, the examinations of debt collectors focused on their efforts to reasonably investigate disputes received from consumers and consumer reporting agencies. The CFPB Report emphasizes the CFPB’s expectation that financial institutions insure the information they provide is accurate.  The key takeaways:

• The CFPB expects financial institutions to conduct a reasonable investigation with respect to disputed information after receiving a dispute notice from a consumer or a CRA;
• The CFPB expects financial institutions to review all relevant information provided, complete their investigation and report its findings to the consumer or CRA (whichever is appropriate) in a timely fashion;
• Simply deleting trade lines after receipt of a direct or indirect dispute will not suffice and does not fulfill the requirements of Regulation V; and
• The CFPB expects entities to track, investigate and resolve all direct or indirect consumer disputes.

Who is Supervised by the CFPB?

As the CFPB continues to expand its list of larger participant rules, it is sometimes hard to keep track of exactly who comes under the CFPB supervision.  Currently, the CFPB supervises:

• Depository Institutions and Credit Unions with total assets of more than $10 billion and their affiliates
• Nonbanks regardless of size in specific markets, including:
  • mortgage companies (including originators, brokers, servicers, and providers of loan modification or foreclosure relief services)
  • payday lenders
  • private education lenders
• Larger Market Participants (NonBanks)
  • Consumer reporting
  • Consumer Debt Collection
  • Student Loan Servicing
  • International money transfers
  • Nonbank auto finance

CFPB’s Supervisory Highlights Reveal an Emphasis on Quality Control Issues in Credit Reporting (Part 1)

The CFPB published its Supervisory Highlights this week, highlighting examinations across various financial products that were conducted between January and April of this year.  The Report highlights key findings made by the CFPB and provides insight into the current focus of the examiners.  The current edition of Highlights provides insights on consumer reporting, fair debt and student lending, but the centerpiece of the Report are the key findings regarding the mortgage industry.  Today’s post will focus on the consumer reporting with future posts to focus on the findings with respect to debt collection, student lending and mortgage.

With regard to consumer reporting, examinations of consumer reporting agencies (“CRAs”) focusing on compliance management systems, oversight of third parties involved in credit reporting, and quality control of the accuracy of consumer reports produced. 

Information Collection

The CFPB Report emphasizes the CFPB’s expectation that CRAs insure the information they are provided is accurate.  The examiners focused on two data entry points: furnishers and public record providers.   Key takeaways from the January through April examinations:

• CRAs are expected to maintain policies and procedures to vet and monitor their furnishers of information for compliance with the CRA’s requirements;
• CRAs are expected to have formal programs to oversee and manage the data supplied by furnishers; 
• CRAs are expected to conduct regular monitoring of their furnishers to ensure adherence to the CRA’s vetting requirements;
• CRAs are expected to have formal programs to oversee and manage the data supplied by furnishers;
• CRAs are expected to have written policies and procedures in place to provide feedback to furnishers as to the quality of data furnished;
• CRAs are expected to formally audit their public record providers; and
• CRAs are expected to have defined processes in place to verify the accuracy of the public information provided.

Quality Control

No surprise to those that have followed the CFPB’s recent reports on credit reporting, the examinations focused on quality control.  The Report notes that, “with certain exceptions, there were no quality control policies and procedures to test complied consumer reports for accuracy.”  The CFPB’s expectation is that processes to analyze and improve the quality of incoming data are not enough.  CRAs are expected to regularly assess the accuracy and integrity of consumer reports and consumer file disclosures and review and sample the accuracy of consumer reports.

CFPB Delays Effective Date for New Mortgage Disclosure Rules

The CFPB has announced that it will  be proposing to delay the effective date of its new mortgage disclosure rules until October 1, 2015.  For months, congressional and trade group leaders have been requesting a delay in the implementation to no avail.  In fact, two weeks ago, the CFPB steadfastly declined to move the date but provided some assurances that it would be "sensitive to the progress made by those entities that have squarely focused on making good-faith efforts to come into compliance with the Rule on time."


In its press release, the CFPB attributed the delay to a newly discovered administrative error and stated that they believe that the additional time "would better accommodate the interests of the many consumers and providers whose families will be busy with the transition to the new school year."

FCC Commissioner Speaks Out Opposing Wheeler TCPA Clarifications

The FCC is scheduled to vote tomorrow on a proposal to resolve more than 20 of the petitions pending before it concerning the TCPA.  I posted an entry last month which sets forth in detail Chairman Wheeler's proposal.  It is anticipated that the proposal will pass.  However, it appears there will be opposition to the proposal within the FCC. 


In a candid post on The Daily Caller, FCC Commissioner Ajit Pai left little doubt where he will stand tomorrow, particularly on two issues - reassigned number calls and the definition of an automated dialing systems. Pai had particularly harsh words for the plaintiff's bar, stating "trial lawyers have twisted the law’s words to target useful communications between legitimate businesses and their customers. And thanks to the $500 penalty, the TCPA has become their ATM." 


Pai voiced his opposition to Wheeler's proposal noting that the "Commission will likely vote to open the floodgates for even more TCPA litigation. One part of the plan would impose a strict liability standard on businesses that call a telephone number that’s been reassigned from a customer to someone else. Even if the business has no reason to know that it’s calling a wrong number, it’ll be liable. With 37 million phone numbers reassigned each year and no reliable numbers database for businesses to consult, this is an invitation for more abusive lawsuits."  Pai further anticipates that the FCC definition of an automated dialing system will "sweep into this definition everything from smartphones to Internet-to-text message apps." 


Pai concludes that "[t]here is simply no reason for the government to help the trial bar update its business model for the digital age. Instead, the FCC should curb the gotcha lawsuits and focus on what the TCPA was designed to do — stopping illegal telemarketers." 

CFPB Files Amicus Brief in ECOA Case

The CFPB has filed an amicus brief in Hawkins v. Community Bank of Raymore, the ECOA case currently pending before the United States Supreme Court.  In Hawkins, the bank sought to enforce spousal guarantees provided by the wives of the primary applicants.  The wives countered by filing counterclaims under ECOA alleging that the guarantees were unenforceable and in violation of ECOA.  The district court dismissed the ECOA claims, holding that the spouses were not applicants under ECOA and therefore had no standing to sue.  The Eighth Circuit agreed, holding that a guarantor does not directly request credit and therefore does not apply for credit and is not a guarantor under the express definition of applicant provided by ECOA.  In their Petition, the guarantors contended that the Eighth Circuit’s decision did not give proper deference to the Federal Reserve Board’s broad authority to prescribe regulations to effectuate the ECOA’s purpose. 

The issues before the Court for consideration are: “(1) Whether “primarily and unconditionally liable” spousal guarantors are unambiguously excluded from being Equal Credit Opportunity Act (ECOA) “applicants” because they are not integrally part of “any aspect of a credit transaction”; and (2) whether the Federal Reserve Board has authority under the ECOA to include by regulation spousal guarantors as “applicants” to further the purposes of eliminating discrimination against married women.”  Not surprisingly, the CFPB’s brief favors the petitioner and takes the position that Regulation B is entitled to deference and that its definition of “applicant” is a permissible interpretation of ECOA’s text.

The CFPB brief makes the following arguments in support of reversal:

• For thirty years Regulation B has included guarantors with ECOA protection.  Congress has made amendments to ECOA but has not seen fit to amend the Board’s rules and therefore, the Court should give deference to the rulemaking.
• Regulation B’s inclusion of guarantors as applicants is reasonable because the CFPB believes that guarantors impliedly request the extension of credit, “are often extensively involved in the application process,” and “are commonly required to provide financial information and subjected to creditworthiness analysis comparable to that applied to principal borrowers.” (Interestingly, in most ECOA/guarantor cases, the opposite is argued in support of discrimination – that the guaranty was blindly requested without any consideration of independent creditworthiness); and
• Regulation B’s definition of applicant to include guarantors furthers the purpose of ECOA – eliminating marital status discrimination.  To its point, the CFPB notes that requiring a spousal guaranty not only discriminates against the borrower who is denied the ability to obtain individual credit but also against the guarantor who is required to assume debt by virtue of being married to the applicant.

 

Does an Offer of Judgment for Full Relief of the Individual Plaintiff’s Claims Moot a Class Action?

In advance of the Supreme Court’s consideration of the issue, the Southern District of Ohio has weighed in on whether an offer of judgment for full relief of the named plaintiff’s claims can moot a putative class action.  In Charvat v. National Holdings Corporation, a veteran pro se litigant filed a putative TCPA class action for calls made to him while he was on the National Do Not Call Registry.  The defendant served Charvat with an offer of judgment for full relief of his individual claims – specifically, $10,500.00 ($1,500.00 for each of the seven calls Charvat alleged he received) and the entry of an injunction against defendant as requested in the Complaint.  The offer of judgment also stated that its intent was to provide plaintiff with all of the individual relief sought in the Complaint.  Charvat rejected the offer and the defendant moved to dismiss asserting the offer of judgment mooted the plaintiff’s claim. 

The court gave considerable consideration to the concerns raised by Sixth Circuit precedent as to whether Rule 68 offers of judgment should be used to pick off named plaintiffs before the class can be certified.  Additionally, the court paid close attention to Justice Kagan’s dissent in the Supreme Court’s 2013 decision in Genesis Healthcare Corp v. Symjczyk, 133 S. Ct 1523 (2013) where Kagan noted that “[R]ule 68 provides no appropriate mechanism for a court to terminate a lawsuit without the plaintiff’s consent…Nor does a court have inherent authority to enter an unwanted judgment for [a hypothetical plaintiff Smith] on her individual claim, in service of wiping out her proposed collective action.  To be sure, a court has discretion to halt a lawsuit by entering judgment for the plaintiff when the defendant unconditionally surrenders and only the plaintiff’s obstinacy or madness prevents her from accepting total victory.  But the court may not take that tack when the supposed capitulation in fact fails to give the plaintiff all the law authorizes and she has sought.  And a judgment satisfying an individual claim does not give a plaintiff like Smith, exercising her right to sue on behalf of other employees, “all that [she] has…requested in the complaint.” Genesis, 133 S.Ct. at 1536.

Considering all of this, the court determined the ultimate question becomes “under what circumstances is it appropriate to enter judgment in the plaintiff’s favor over his or her objection?”    The court determined that the focus should be on plaintiff’s demand for relief.  Because the demand in the instant case included class action relief and the offer of judgment did not address class action relief, the court determined it was not compelled to enter the judgment in plaintiff’s favor over his objection and denied the motion to dismiss.

As previously noted, the Supreme Court recently granted certiorari in Campbell-Ewald Company v. Gomez,No. 14-857, to determine whether a defendant’s unaccepted offer of judgment prior to class certification renders the plaintiff’s individual and class claims moot.  That case, like Charvat, involves TCPA claims.  One of the issues courts have struggled with under this scenario, in addition to the mooting of the class claims, is that if an unaccepted Rule 68 offer of judgment moots a plaintiff’s claim and deprives the court of subject matter jurisdiction, is the court forced to dismiss the case or can it forcibly enter the judgment in favor of the plaintiff over his objection.  It is likely that Campbell-Ewald will shed some light on that issue, as well.

CFPB Continues its Focus on Loan Originator Compensation

In the span of a week, the CFPB has made it clear that it will not tolerate compensation to loan originators based upon interest rates.  These are the second and third cases resolved by the CFPB regarding loan originator compensation in the past six months and are based upon Regulation Z’s Loan Originator Compensation (“LOC”) Rules.

On June 4^th, the CFPB and RPM Mortgage entered into a proposed consent order which requires RPM to pay $18 million dollars in monetary relief and a $1 million civil money penalty.  It additionally requires RPM’s CEO to pay an additional $1 million civil money penalty.  The complaint alleged generally that RPM instituted a compensation plan which incentivized loan originators to steer consumers to higher rate mortgage loans.  Specifically, the Complaint alleged that RPM established employee expense accounts into which RPM deposited profits from an originator’s closed loans.  The Loan officers could receive bonuses from the accounts or use the accounts to offset interest rate or provide other incentives to consumers to avoid losing transactions.  The CFPB contended that by doing so, the officers were able to close and earn commissions on accounts they would have otherwise lost to competitors.  All of the actions of RPM occurred prior to January 1, 2014 and therefore fell under the prior version of the LOC Rule.

On June 5^th, the CFPB entered into a consent order with Guarantee Mortgage Corporation to resolve violations of the LOC Rules.   The consent order requires Guarantee, which is no longer in business, to pay $228,000.00 to the CFPB’s Civil Penalty Fund.  The consent order finds that Guarantee paid monthly fees to marketing services entities (“MSEs”) which were associated with Guarantee’s branch offices and set the fees based upon the profitability of the associated branch.  The owners of the MSEs drew the monthly fees as additional compensation. The Consent Order asserts that the MSE owners included in some cases loan originators.  Because of the accounting methods used by Guarantee, the fees paid to the MSEs included income from loans originated by their owners based on interest rates charged on the originated loans.  The CFPB therefore determined that in certain cases compensation was received based upon the terms of loans they originated in violation of the LOC Rule.

Debt Buyers Are not Entitled to National Banking Act Usury Preemptions

According to the Second Circuit, debt buyers are not entitled to National Banking Act (the "NBA") preemptions.  In Madden v. Midland Funding, LLC, 2015 U.S. App. LEXIS 8483 (2nd Cir. 2015), the consumers sued the debt buyer alleging that the debt buyer attempted to collect interest at a rate higher than permitted under New York law.  The debt buyer argued that it was the assignee of a national bank and therefore state law usury claims and FDCPA claims predicated on state law violations were preempted by the NBA. 


Under the NBA, national banks are expressly permitted to charge interest at the rate allowed by the laws of the state where the bank is located.  12 U.S.C. §85.  The NBA also provides the exclusive remedy for usury claims against national banks.  Therefore, there is no such thing as a state usury claim against a national bank. 


Midland purchased the account at issue from a national bank and therefore took the position that, as the national bank's assignee, it was entitled to use the national bank's home state's interest rate.  While under certain circumstances, assignees of national banks are entitled to the NBA usury preemptions, the court determined that debt buyers are not.  In doing so, the court relied heavily on last year's OCC bulletin which provides guidelines as to how national banks are to manage the risk associated with selling consumer accounts to debt buyers. The court determined that since the debt buyer was acting on its own behalf and not on behalf of the national bank or carrying out the business of the national bank, the debt buyer could not avail itself to the preemptions contained in the NBA.  The court therefore reversed the district court and remanded to the state court. 


Debt buyers should take consolation as to two key points made by the Court:

• First, the court did not rule on whether the cardmember agreement's Delaware choice of law provision precluded the New York usury claim as that issue had not been reached previously by the district court; and
• Second, the court made clear that the potential usury claim was only as to interest charged after the account was assigned to Midland. 

Lessons to be Learned from the Bank of America Consent Orders

Last week, the OCC and Bank of America entered into two consent orders arising from the bank’s practices concerning the Servicemembers Civil Relief Act (“SCRA”) and their non-home debt collection litigation practices.   The SCRA, among other things, limits the amount of interest that can be charged on credit obligations incurred prior to military service or activation. The SCRA limits the rate of interest which can be charged on credit card debt for active duty servicemembers and protects them from the entry of default judgments.  The consent orders are intended to address deficiencies in the bank’s practices and procedures relating to its SCRA-compliance program and the preparation of sworn statements used in debt collection litigation. Two separate consent orders were entered into – one providing for a civil penalty and the second providing for remediation.  The first order requires an immediate payment of $30 million by Bank of America as a civil penalty. 

While the second order does not include any admission of wrongdoing, it provides for remediation and provides more detail of the OCC’s findings. The Order requires that the bank:

• Establish a Compliance Committee to monitor and oversee the bank’s compliance with the terms of the Consent Order, as well as provide the OCC with quarterly progress reports as to the bank’s compliance;
• Create and submit for OCC approval a comprehensive action plan describing the actions and specific timeline to be taken to achieve compliance with the Consent Order;
• Create an submit for OCC approval a compliance risk management plan which implements an enterprise-wide compliance risk management program to ensure compliance “with all applicable laws, regulations and regulatory guidance”;
• Conduct a written, comprehensive assessment of the bank’s risks in SCRA compliance operations and submit a written plan to effectively manage and mitigate the identified risks;
• Submit for OCC approval a SCRA Compliance Plan and ultimately, a SCRA written training program;
• Audit all accounts (with the exception for the home lending line of business) from January 1, 2006 forward to identify SCRA-Protected servicemembers eligible for remediation;
• Submit for OCC approval a proposed remediation plan for affected SCRA-Protected servicemembers;
• Develop a comprehensive written SCRA compliance audit program;
• Submit of OCC approval policies and procedures for outsourcing SCRA compliance functions to third party providers;
• Report quarterly to the Compliance Committee as to accounts receiving SCRA benefits and the number of denials of CRA benefits requests received;
• Submit for OCC approval its Collection Litigation compliance action plan;
• Submit for OCC approval a Collections Litigation Account Review Plan designed to identify collections litigation accounts eligible for remediation;
• Provide remediation to eligible litigation account holders.

The second order shall remain in effect indefinitely.

So what are the lessons to be learned from the Bank of America Consent Orders? The language of the Consent Order gives guidance to banks of what the OCC’s expectations are for a robust SCRA Compliance and Audit Plan.

Based upon the Consent Order, the OCC expects an SCRA Compliance Plan to include:

• Uniform standards and processes for determining whether a servicemember who requests SCRA benefits is eligible for all accounts that the borrower may have;
• Policies and procedures for notifying a servicemember of the denial of SCRA benefits or protections;
• Policies and procedures for determining whether real or personal secured property is owned by a SCRA-protected servicemember before referring a loan for foreclosure or repossession and during the foreclosure or repossession process in order to determine whether a court order is required pursuant to the SCRA prior to foreclosure or repossession;
• Processes to ensure that all factual assertions in affidavits of military service are accurate, complete and reliable;
• Procedures for searching the Department of Defense Manpower Data Center database or an equivalent database before filing an affidavit in connection with a default judgment on an account, initiating the foreclosure or repossession process, or making a determination of eligibility for SCRA benefits;
• Procedures for filing an affidavit in connection with obtaining a default judgment on an account;
• Procedures for initiating and pursing a waiver of rights;
• Procedures regarding applicable state laws which may provide more benefits or protections that the SCRA;
• A record retention policy to protect records which demonstrate compliance with the SCRA (including documentation of the calculation of benefits; assessment of eligibility for benefits; correspondence with servicemembers; and method, dates and results of military status verification);
• Policies and procedures to ensure risk management, periodic audits for quality assurance, vendor management and corporate compliance with the SCRA;
• Policies and procedures for training of employees;
• Policies and procedures for compliance of third party vendors; and
• Processes for ongoing monitoring, testing and reporting.

Less is More: Second Circuit Holds that Failure to Disclose Tax Consequences of Settlement Does Not Violate FDCPA

The Second Circuit has resolved a debt collector’s obligation to disclose the tax consequences of settlement.  The Second Circuit recently ruled that a debt collector does not violate the FDCPA if it fails to advise a consumer of the potential tax consequences of a settlement.  In Altman v. J.C. Christensen & Assocs., the collection agency sent a settlement letter to the consumer which provided several options for settlement, including: “1. Settle your account now for a lump-sum payment of $3,155.43.  That is a savings of 48% on your outstanding account balance.  2. Extend your time and settle your account in three payments of $1,314.76.  This is a savings of $2,123.85 on your outstanding account balance.”  Altman v. J.C. Christensen & Assocs., 2015 U.S. App. LEXIS 7980, * 2-3 (2d Cir. May 14, 2015).  The consumer contended that J.C. Christensen violated the FDCPA by failing to advise him that the forgiven debt might be taxable under the Internal Revenue Code.  In affirming the district court’s ruling in favor of the collection agency, the Court made the following points:

• The letter plainly stated the percentage saved was on the outstanding balance.  Taken in context with the letter, the fact that the letter did not disclose the debtor might then have to pay taxes on the amount saved in not deceptive.
   
• The language of the FDCPA does not require a debt collector to make any affirmative disclosures of potential tax consequences when collecting a debt.
   
• Requiring a debt collector to disclose potential collateral consequences of a settlement is far afield from the broad mandate of the FDCPA to protect from abusive debt collectors.
  
  

In contrast, debt collectors should also be aware that the disclosure of information as to tax consequences, if not done correctly, can land them in hot water. In Good v. Nationwide Credit, 55 F. Supp. 3d 742 (E.D. Pa. 2014), a district court in the Third Circuit denied a collection agency’s motion to dismiss where the letter similarly offered to “settle his account of $613.03 for $183.90, representing a savings of $429.13.”  The letter in that case, however, went a step further and included a notice that “GE CAPITAL BANK is required to file a form 1099C with the Internal Revenue Service for any cancelled debt of $600 or more.  Please consult your tax advisor concerning any tax questions.”  The Court held that the additional language of the notice could state a claim for violation of the FDCPA because: it did not accurately reflect controlling law, could be construed as deceptive and misleading, and was a material representation.  The court stated that “the least sophisticated consumer may reasonably believe that in order not to be reported to the IRS, he or she must pay enough on the alleged debt so that a balance of less than $600.00 remains regardless of whether the event is reportable, or any exception applies.”