CFPB Monthly Report Returns its Focus to Debt Collection

The CFPB issued its monthly report of consumer complaints and the focus was back to debt collection.  The Report is a high level snapshot of trends in consumer complaints and provides a summary of the volume of complaints by product category, by company and by state.  Additionally, it highlights a product type and a geographic area. 


Here are the highlights:

•  Debt collection, mortgage and credit reporting continue to be the leaders in complaint volume;
• Debt collections complaints comprise 26% of the total cumulative complaints received to date by the CFPB;
• Credit reporting complaints showed the greatest month-over-month percentage increase with a 13% increase;
• As was the case when the CFPB last highlighted debt collection in July 2015, the most common debt complaint was continued attempts to collect a debt not owed;
• The second most common issue for first-party debt collectors was  communication tactics;
• The second most common issue for third party collectors was disclosure/verification of debt;
• The Report also highlights the following additional concerns by consumers:
  • Frequent or repeated calls from debt collectors;
  • Workplace phone calls; and
  • Refusals by debt collectors to honor requests to cease communication;

 

CFPB Issues Annual Report on Servicemember Complaints

The CFPB has issued its Annual Report detailing complaints submitted to the CFPB by servicemembers, veterans and their families.  According to the Report, the CFPB received 271,600 total complaints in 2015.  Of those, 19,200 (or approximately 7%) were from the military community in 2015.  Consistent with the CFPB’s monthly reports, the three most common complaints involved debt collection, mortgage and credit reporting. 

The CFPB report notes that compared to the general population who files complaints, servicemembers’ complaints are twice as likely to be about debt collection.  The most common debt collection complaint regarding the military community are attempts to collect a debt not owed.  The Report clarifies that in many cases, the attempt to collect the debt is not the problem – rather, service members complain that the calculation of the amount owed is either inaccurate or unfair.  The Report also notes that medical debt concerns comprise 13% of servicemember debt complaints, coming largely from the veteran population.

Regarding mortgage, the most common complaints are problems that occur when unable to pay or put another way, issues with servicers and loss mitigation.  A positive that can be drawn from the Report is that those complaints are down rather significantly from 2014 (falling from 48% of the complaints to 40% of the complaints). 

The dominant issue regarding credit reporting is incorrect information appearing on the consumer’s credit report.  The Report suggests a disproportionate amount of fraud and identity theft.

So what can we draw from this Report?  The Report indicates the products drawing complaints are similar for the military and general population, at least as to the three most common products complained of.  The Report, however, does indicate that consumer loan issues are more prevalent in the military community than in the general population.  Specifically, the Report identifies problems with auto finance which may in part be attributable to the unique lifestyle of the military.  Of particular interest, the Report suggests that a common complaint is the restriction placed upon auto finance products prohibiting the consumer from taking the car out of the country.  On a positive note, the Report reflects that the majority of complaints over all product types are closed with explanation.

District Court Finds Discovery Rule Inapplicable in FDCPA cases

The Eastern District of Pennsylvania has weighed in on when the statute of limitations begins to run with regard to FDCPA claims, holding that the discovery rule does not apply.  Rotkiske v. Klemm et al., 15-3638, 2016 U.S. Dist. LEXIS 32908 (E.D.P.A. March 14, 2016).  In Rotkiske, the defendant law firm filed a collection suit in March 2008 against the plaintiff.  Service was attempted at Rotkiske’s prior address and accepted by an unrelated third party.  The lawsuit was dismissed shortly thereafter, but was refiled in January of 2009.  The defendants again attempted to serve Rotkiske at the same address, and again service was accepted by an unknown person.  The defendants obtained a default judgment against Rotkiske in the second collection suit.  Rotkiske filed suit against the collection law firm six years later asserting violations of the FDCPA and alleging that he did not discover the judgment until September 2014 when he applied for a mortgage.

The defendants moved to dismiss the FDCPA claims alleging that they were time barred.  Under the FDCPA, an action must be brought “within one year from the date on which the violation occurs.”  15 U.S.C. §1692k(d). The plaintiff opposed the motion, contending that the discovery rule required the court to calculate the statute of limitations from the date when the plaintiff knew or should have known of the violation. 

The circuit courts are currently split on the application of the discovery rule to FDCPA claims.  The Fourth and Ninth Circuit currently apply the discovery rule.  The Eighth and Eleventh Circuit have expressly rejected the application of the discovery rule to FDCPA claims.  Other circuit courts have declined to rule on its application.

In granting the defendants’ motion to dismiss, the district court first looked to the express language of the statute, which states the statute of limitations runs upon the “date on which the violation occurs.”  15 U.S.C. § 1692k(d).  This language does not contemplate the knowledge of the consumer, but rather explicitly states the clock begins to run on the date the violation occurred.  Further, the Court considered public policy arguments for both sides.  The most important one in the Court’s decision was the timing of when the consumer discovered his injury.  It can be difficult to verify when a consumer discovers the violation, but it is much easier to determine when the violation actually occurred.  The Court relied on other cases, which hold that the statute of limitations period “should begin to run on the date of ‘the debt collector’s last opportunity to comply’” with the FDCPA.  Peterson v. Portfolio Recovery Assocs., LLC, 430 F. App’x 112, 115 (3d Cir. 2011).  In this case, the last opportunity for the defendants to comply with the FDCPA occurred in 2009 when they re-filed the lawsuit and served the individual at Rotkiske’s old address, thus making his 2015 lawsuit time barred.  The decision is a positive one for debt collectors as it limits their exposure to stale FDCPA claims.

Scalia Death Results in 4-4 Tie in ECOA Case

For weeks, we have wondered the impact Justice Scalia's death would have on a few high impact financial service cases that were pending before the Court at the time of his death.  Today, we received an answer in at least one of those cases. The Supreme Court affirmed, in a 4-4 tie, the Eighth Circuit's decision in Hawkins v. Bank of Raymore, effectively holding that spousal guarantors do not have standing to assert violations of the Equal Credit Opportunity Act.  The single sentence per curiam opinion of the Court rejects expansion of the definition of creditor to include guarantors. 


The issues before the Court were whether spousal guarantors have standing to sue under the Equal Credit Opportunity Act (the “ECOA”) and whether the Federal Reserve Board’s Regulation B impermissibly extended the coverage of ECOA to spousal guarantors.  Hawkins v. Community Bank of Raymore, C.A. No. 14-520.  In August of 2014, the Eighth Circuit dismissed ECOA claims brought by two spousal guarantors, holding that the guarantors were not applicants with standing to bring ECOA claims. Hawkins v. Community Bank of Raymore, 761 F.3d (8^th Cir. 2014).

FTC Adds to its Debt Collection "Hall of Shame"

In a blog post earlier this week, the FTC proudly touted the expansion of its Debt Collection "Hall of Shame."  Originally issued in February of 2015, the list has grown from 63 "inductees" to more than 100.  The quick expansion of the list is largely due to "Operation Collection Protection, the FTC's partnership with federal, state and local law enforcement against debt collectors using illegal debt collection tactics.  Through November of last year, the operation had resulted in 115 actions taken. As an advocate for the debt collection industry, I applaud the FTC's efforts to stop illegal debt collection tactics.  The vast majority of debt collectors are committed to complying with federal and state debt collection laws.  Those who are not tarnish the industry's reputation.

Cordray Confirms Activity in Rulemaking

In his prepared remarks to the Consumer Bankers Association last week, Richard Cordray provided a laundry list of regulatory and rulemaking activities currently being undertaken by the CFPB.  For those keeping track:

• Cordray's remarks suggest that a final proposed rule regarding prepaid accounts in imminent;
• Likewise, a notice of proposed rule concerning pay day loans and other small dollar loans will be published in the coming moths;
• Likewise, the CFPB is preparing to issue a notice of proposed rulemaking on the use of arbitration clauses in consumer finance contracts;
• Cordray's remarks also confirmed activity regarding the incidence and transparency of overdraft fees;
• Cordray acknowledged that the CFPB is focused on debt collection but his remarks were oddly silent as to the status of the CFPB's efforts in that regard;
• Cordray also acknowledged that the CFPB has begun working to establish a rule governing the collection and publication of data on small business lending;
• Cordray's remarks also confirmed the CFPB is actively engaged in working to improve the credit reporting market and more specifically, is focused on the accuracy of screening processes used  by depository institutions; and
• Finally, Cordray confirmed the CFPB's continued partnership with the Department of Justice to "identify and stamp out discrimination in auto lending practices."

While providing no hard timelines, Cordray at least confirmed the current priorities of the CFPB regulatory agenda.  For those keeping track, the CFPB's fall rulemaking agenda had anticipated a Notice of Proposed Rulemaking concerning payday lending in early 2016 with a target date of February.