CFPB (Credit Financial Protection Bureau)
& Knowing Your Collection Laws
March 14, 2014
he CFPB was formed out of the Dodd-FrankWall Street Reform and
Consumer Protection Act of 2010.
he CFPB works to
Educate – Help to make consumers informed against abusive
Enforce – Supervise all financial companies and enforce federal
consumer financial laws
Study – Gather & analyze information to better understand consumer
financial markets (consumer and financial services providers)
mportant to understand:
Jurisdiction is wide spread and includes Student Loans and Collection
Like GLBA before we need to understand that the CFPB is something
we need to comply with - not ignore
CFPB Established to Protect Consumers:
Conduct rule-making, supervision and enforcement for Federal
consumer protection laws.
Restrict unfair, deceptive or abusive acts or practices
Take consumer complaints.
Promote financial education.
Research consumer behavior.
Monitor financial markets for new risks to consumers.
Enforce laws that outlaw discrimination and other unfair treatment in
CFPB Established to Protect Consumers:
It is important that every school makes sure all of their agencies have
taken the right steps to be in compliance and that the school followsthat the school follows
the same guidelines.the same guidelines.
ACCESS, and other agencies, have taken the steps to be fully compliant
and continue to make necessary changes as regulations change.
A sample of items that compliance must include are: Appoint a
Compliance Office, establish a ComplianceTeam to oversee operations,
build compliance into all systems, conduct an annual audit, document
everything, train and retrain staff, employ good technology, and foster
a culture of compliance.
February 27, 2014 – CFPB Calls on Top Credit Card Companies to Make Credit Scores
Available to Consumers.
Today, the Consumer Financial Protection Bureau (CFPB) called on the
nation’s top credit card companies to make credit scores and related
content freely available to their customers.
February 26 2014 – CFPB Sues For-Profit College Chain, ITT, for Predatory lending.
Today the Consumer Financial Protection Bureau (CFPB) filed a lawsuit
against ITT Educational Services, Inc., accusing the for-profit college chain
of predatory student lending. The CFPB alleges that ITT exploited its
students and pushed them into high-cost private student loans that were
very likely to end in default. The CFPB is seeking restitution for victims, a
civil fine, and an injunction against the company.
December 3, 2013 – CFPB To Oversee Nonbank Student Loan Servicers.
The Consumer Financial Protection Bureau (CFPB) issued a rule today that
allows the Bureau to supervise certain nonbank student loan servicers for
the first time
The CFPB is analyzing:
In the Dodd-FrankWall Street Reform and Consumer Protection Act,
Congress established an ombudsman for student loans within the
The CFPB Ombudsman’s Office is an independent, impartial, and
confidential resource to help consumers resolve process issues arising
from CFPB activities. This office began accepting student loan
complaints at ConsumerFinance.gov in March 2012.
An annual Ombudsman report is issued.
The Federal Deposit Insurance Corporation made a settlement in 2012 with Higher One,
Inc and the Bancorp Bank to address the companies' alleged "unfair and deceptive
practices."They were ordered to pay restitution the FDIC estimated at $11 million.
The CFPD put out a consumer advisory after the settlement advising students to
choose direct deposit instead of school debit cards, if possible.
Encourage electronic refunds
Utilize a competitive process and limit exclusivity
Engage students in the vendor selection process
Comply with Federal and State Regulations
Negotiate low of no-fee options and convenient services for students
Avoid unscrupulous marketing, make contracts transparent
CFPB requirements of third party debt collectors includes:
Large Market Participant (LMP’s) with more than $10 million in “annual receipts” are subject
to comprehensive examinations and mandatory submission of reports to (a) assess
compliance; (b) evaluate systems, policies and procedures; and (c) identify risks to
Disclosure of out of statute debt (time barred debts - see slide 12)
Documentation of policy
Include in campus accounting system to match
Provide accurate information
Provide date of delinquency
Report directs timely
Top complaint – Collection charges
Three Part Requirement
FDCPA verbiage, “an amount incidental to the original amount…
expressly authorized by the agreement creating the debt”
It’s all about the wording.
Bradley’s agreement read:
“In the event of non-payment…I agree to pay all costs of collection, including a
reasonable attorney’s fee…”
“Using reasoning from a previous case in the Eighth Circuit that held “the debt
collector violated the FDCPA when it charged the debtor a collection fee
based on a percentage of the principal balance of the debt due rather than
the actual cost of collection.The court noted that Franklin Collection failed
to produce evidence that the percentage-based fee correlated to the
actual collection costs.”
Our interpretation: The debtor can only be charged the amount we are
charging our client and we can no longer make the client “whole”.
Fair Debt Collection Practices Act (FDCPA)
Passed in 1977 as a consumer protection amendment establishing legal
protection from abusive debt collection practices.This has been
strengthened and is used in conjunction with the Fair Credit
Reporting Act to hand down penalties and fines and protect
consumers. In 2006, attorneys were added to those the Federal
Trade Commission regulates under this law.
There are many prohibited actions and specific guidelines that need to
be followed when collecting from Consumers.
The FDCPA and related laws prohibit abusive, unfair and deceptive practices:
Specifically limit when a debtor can be contacted – not at an inconvenient time or at work without specific
Consumers can tell you not to call at work and your agency not to call them.
Know who you can discuss the Debt with –Collection Laws vs. FERPA .. . And regulations for first party’s
vs. third party’s.
Written verification required from third party’s and can be requested from first party’s.
Know what is considered harassment.
Threats, publication of names, profane language (even in response to the same), false statements, etc.
Know what can be garnished (federal payments exempt except for federal loans).
Know how to leave a message and identify yourself.
o understand the Statutes of Limitation, keep in mind:
Each state established a statute of limitations for debts
For most states, these vary from 3 to 6 years
When the time limit expires, a creditor may NOT sue to get paid.
After the limit Credit Reporting Bureaus will no longer list the debt
Federal Loans are NOT time-barred
Schools CAN maintain HOLDS and require payment before services
Agencies can legally request payment in most states, BUT cannot sue,
infer or threaten suit or credit damage and should inform the debtor
that the debt is time-barred.
DCPA suits for time-barred collections are growing.The CFPB and lawyers have
educated the consumer on their rights
n NewYork on July 21,2013, the Cuomo Administration proposed new reforms including
the following for time-barred (Zombie Accounts):
Protections against Collection of ‘Zombie Debts.’ Often times, debt collection companies will
try to collect on “zombie debts” for which the statute of limitations has already expired. Under
this new regulation, if a debt collector tries to collect on a debt after the statute of limitations has
expired, the collector will need to inform the consumer, in every communication, that the statute
of limitations has expired and the consumer can use that as a defense against a collection
lawsuit. Most consumers are not represented by counsel and debt collectors can take advantage
of this by threatening to sue, or actually suing, without the consumer knowing he or she has this
defense.This reform will help prevent companies from bringing expired zombie debts back from
ake sure that you and your agency partners understand that the accounts are time-
barred and follow the laws and restrictions.
The Communication Act of 1934 established the Federal Communications
Commission (FCC). The FCC regulates interstate, international, and maritime
communications including radio, television, wire, satellite, and cable.Their
jurisdiction covers all 50 States, the District of Columbia and U.S. possessions.
DCPA prohibits a debt collector from communicating with a consumer in
connection with the collection of any debt at any unusual time or place or at a
time or place known or which should be known to be inconvenient to the
consumer. The consumer can inform the collector that contacting the cell
phone is inconvenient and the collector must cease any further communication
with the debtor by way of the cell phone.
You are permitted to call from 8A – 9P local time. Be sure you know where you
are calling –Telephone numbers can travel with individuals across the country.
School collection staff should follow these same guidelines.
elephone Consumer Protection Act of 1991 restricts the use of automated
dialing systems, artificial or prerecorded voice messages, SMS text messages
received by cell phones and the use of fax machines to send unsolicited
advertisements. Additionally, theTCPA specifies technical requirements for fax
machines, auto-dialers, and voice messaging systems – principally with
provisions requiring identification and contact information of the entity using
the device to be contained in the message. Additionally:
Calls cannot be made with artificial voices or recordings to cell phones or to
any service in which the recipient is charged for the call.
In the event of aTCPA violation, individuals are entitled to collect damages
directly from a solicitor for $500 to $1,500 for each violation, or recover
actual monetary loss, whichever is higher.
The CAN-SPAM Act made a minor amendment to theTCPA to explicitly
apply theTCPA to calls and faxes from outside the US.
rom the beginning incorporate full disclosure and good communication. Focus on the idea
of “prior express permission” or required authorization which includes:
Obtain permission to use cell phones for contact purposes.
Make sure to be compliant in the verbiage of the statement that you are requesting the
student to sign.
Make sure that this happens in the admissions or registration process.
Make sure that there are statements in printed materials indicating that you will use
the number provided to make contact with the student.
If adding collection fees when placing an account in collections, make sure this is
provided to the student in writing at the time of registration.
Work hard to accompany all receivables with a promissory note and written
aking training of collectors a priority. Use your agency partners, associations and ACA
now who you may disclose the existence of a debt. Only those the borrower/debtor has
granted permission – usually their attorney and spouse
nderstand the dangers of communicating about the debt via unsecured fax or e-mail
(even with consolidation information)
e aware of changing rules and regulations. Your agency partners, loan servicers,
associations, list serves and ACA are all good sources of information.
Pam Long – Vice President of Sales