CFPB Supervisory Highlights: A Mixed Bag for Debt Collectors

The CFPB’s Fall Supervisory Highlights contains a mixed bag for debt collectors.  As you may recall, the Report highlights examinations that were conducted between May and August 2016 and provides a high level summary of the key findings made by the CFPB and the current emphasis of examiners.  Debt collection appears to be back as a point of emphasis for examiners.  The Report makes the following observations which should be heeded by debt collectors:

• CONVENIENCE FEES. Convenience fees continue to be a theme carried over from the Summer Supervisory Highlights.  The CFPB again noted in one or more examinations, the CFPB observed one or more debt collectors charging unauthorized convenience fees to process payments by phone or online.
• INADEQUATE CALL PROCEDURES.  The Report notes that weak Compliance Management Systems attributed to a number of concerns with communications both between the debt collector and the consumer and the debt collector and a third party. While noting these deficiencies, the Report also offered praise for those debt collectors who had “well-established, formal compliance program[s] that met CFPB’s supervisory expectations”, particularly those who used scripts to improve adherence to compliance policies and regularly monitored script adherence. The following deficiencies are highlighted:
  • In one or more examinations, examiners identified collection calls in which the debt collector made false representations regarding the impact that the debt or payment of the debt may have on a consumer’s creditworthiness;
  • The CFPB noted deficiencies with the practices of one or more examined entities concerning third party communications.  Specifically, the Report notes that in one or more examinations, collectors disclosed the debt to third parties, disclosed their employer to third parties without first being asked.

• COMPLIANCE WITH THE FCRA. The Report also noted issues with compliance with Regulation V and the FCRA, continuing a theme raised in the Summer Supervisory Highlights. 
  • Specifically, the Report notes that entities are still struggling with differentiating FCRA disputes from general consumer inquiries, complaints and debt validation requests.  To that end, Supervision directed one or more entities to develop and implement reasonable policies and procedures and establish training to ensure FCRA disputes are appropriately logged, categorized and resolved. 
  • Along similar lines, the Report noted inadequate dispute resolution policies and procedures at one or more examined entities. The Report noted that one or more debt collectors never investigated indirect disputes that either lacked detail or were not accompanied by documentation with relevant information. 
  • The Report also notes concerns with direct disputes.  Regulation V requires that furnishers provide consumers with a notice of determination if a dispute is determined to be frivolous.  In one or more examinations, the examiners noted that the notices failed to advise the consumers of what additional information was needed for the collector to complete its investigation.
• REGULATION E.  The examiners also noted deficiencies with one or more entities compliance with Regulation E.  Specifically,
  • Examiners found that one or more debt collectors failed to provide consumers with the requisite copies of the terms of the authorization, either electronically or in paper form; and
  • Examiners also found that one or more debt collectors who did provide notice, sent deficient notices that failed to describe the recurring nature of the preauthorized transfers from the consumer’s account.
     

The Report reflects that examiners are now focusing on issues aside from compliance with the FDCPA.  Compliance officers need to take a comprehensive look at their policies and procedures and insure their compliance management systems are reflective of compliance with all applicable consumer financial laws which impact their operations.

 

Courts Continue to Draw Line on Standing

A New Jersey district court’s recent dismissal of a single count claim brought under the Fair and Accurate Transactions Act (“FACTA”) reinforces the need for consumers to carefully identify their injury in fact.  In Kamal v. J. Crew Group, Inc., 2016 U.S. Dist. LEXIS 145392 (D.N.J. Oct. 20, 2016), the consumer filed a  putative class action alleging that defendant violated FACTA by displaying the first six digits and last four digits of his credit card on the electronically printed receipt. FACTA, which was passed in part to curb credit card fraud and identity theft, prohibits printing more than five digits of a credit card number on a sales receipt.  The plaintiff alleged that he became more susceptible to fraud as a result of the defendant’s violation of FACTA.

In considering the defendant’s motion to dismiss for lack of standing, the court considered whether, “in light of Congress’ decision to authorize private suits under FACTA, printing ten rather than five credit card digits on a sales receipt elevates the risk of fraud enough to work a ‘concrete’ injury for the purpose of Article III standing.”  Kamal at *6. In determining that the motion to dismiss should be granted, the court found that the amended complaint did not provide facts sufficient to demonstrate a “risk sufficiently ‘actual or imminent’ to constitute a concrete injury.”  Specifically, the court noted that: (a) there was no evidence that anyone had accessed or attempted to access plaintiff’s credit card information; and (b) there was nothing to indicate anyone will actually obtain one of the plaintiff’s discarded receipts and identify the remaining six digits of the credit card number and then attempt to use the card.  Moreover, the court noted that “Congress’ role in identifying and elevating intangible harms does not mean that a plaintiff automatically satisfies the injury-in-fact requirements whenever a statute gives a person a statutory right.” Id. at *10. 

The court’s decision joins a growing body of case law which has emerged since Spokeo v. Robins which refuses to give credence to technical statutory violations without some allegation or indicia of real harm.