Knowing Your Consumer Laws


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Collecting debts from consumers has many laws and regulations. Here we cover the CFPB, FDCPA, TCPA, Statute of Limitations, time-barred debts and calling cell phones.

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Knowing Your Consumer Laws

  1. 1. 2013 WEBINAR SERIES Collecting the Right Way - Know your Consumer Collection Laws September 17, 2013
  2. 2.  Consumer Financial Protection Bureau (CFPB)  Fair Debt Collection Practices Act (FDCPA)  Telephone Collection Laws  CollectingTime Barred Accounts  Lessons and Contact Information
  3. 3. The CFPB was formed July 21, 2011 – Crafted out of the Dodd-FrankWall Street Reform and Consumer Protection Act  The CFPB has 3 missions: Educate, Enforce and Research  Established the federal agency to regulate consumer protection for financial products and services.  Jurisdiction is wide spread and includes Student Loans and Collection Agencies  Job is to take and act on consumer complaints  An extension of the FTC looking at non-banks  Know Before you Owe - see CFPB website is a good resource to check out for your knowledge and students  Like GLBA before we need to understand that the CFPB is something we need to comply with--- not ignore
  4. 4. The Compliance is IMPORTANT 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 follows 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: Appoint a Compliance Officer, 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. Understand the Rules, Laws and Regulations discussed in thisWebinar.
  5. 5. Recently in the News On July 10, 2013, CFPB Director Richard Cordray remarked that it is the CFPB's job to “root out bad actors and protect consumers against unfair, deceptive or abusive practices and other legal violations. which damage both consumer and also every debt collector that tries to operate within the law.” CFPB Now Accepting Debt Collection Complaints The CFPB announced that it is now accepting complaints about debt collection. Consumers are now able to submit complaints against any company that attempts to collect a debt from them. In addition, however, the consumer can also choose to submit a separate complaint against the company with whom the consumer had the original account. According toCFPB these new complaints will serve as useful feedback for creditors that hire third-party debt collectors or sell their debts. Creditors, he stated, “will be made aware of the kinds of struggles that consumers are having with their continuing debts and can potentially rethink what is happening to their customers or cut off those debt collectors they deem to be problematic.”
  6. 6. 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.
  7. 7. 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 permission  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.
  8. 8. The FTC and Department of Education jointly oversee the Student Loan Industry. They are watching for deceptive practices. Understand that Consolidation is a good tool for collecting, but is not the best for every Perkins borrower. Be sure that borrowers fully understand the loss of benefits BEFORE they consolidate. Be sure your in-house collectors and agencies understand your rehabilitation requirements.
  9. 9. 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. FDCPA 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.
  10. 10. Telephone 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.
  11. 11.  The Rosenthal Act in California  This is basically a FDCPA that also applies the same rules and regulations to first party collectors – YOU the School!  Yes, this applies if your debtor/borrower is in California but beware as other States are following California’s lead.  This law means that all of your collectors and others who talk to borrowers or past due students (and former students) must understand the limitations on what they can say, whom they can speak to and when they can call.  ACA Certification Classes were eye openers and helped College Collection Staffs gain insight and improve results (TU )
  12. 12. To 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  SchoolsCAN maintain HOLDS and require payment before services  Agencies can legally request payment, BUT cannot sue, infer or threaten suit or credit damage and should inform the debtor that the debt is time-barred.
  13. 13. FDCPA suits for time-barred collections are growing.The CFPB and lawyers have educated the consumer on their rights In 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 the dead. Make sure that you and your agency partners understand that the accounts are time- barred and follow the laws and restrictions. Holds may be the most effective collection tool for time-barred accounts!
  14. 14. + More than one out of every six American homes (17.5%) had only wireless telephones in 2008 – a number that continues to increase every year! + In addition, more than one out of every eight American homes (13.3%) received all or almost all calls on wireless telephones despite having a landline telephone in the home. + Estimates put collection calls to student loan recipients at 50- 60%.
  15. 15. These Laws make it imperative that we as Schools and Collection Agencies that represent schools, understand the rules, laws and regulations that apply to all levels of collections and specifically to Higher Education debts and loans. The news is full of reports on higher education debt loans and we need to make sure we follow the right steps when contacting and collecting from the former students.
  16. 16. From 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 authorization.
  17. 17.  Foster a Culture of Compliance (CFPB and more) and education for all your Students  Follow the guidelines of FDCPA and related laws and do not step over the line with demands or harassment.  Do what is best for the Student borrower/debtor regarding Consolidation and Rehabilitation.  Know the laws for telephone collections such as leaving messages, working with debtors and related individuals (TCPA, FERPA, etc.).  Understand time-barred debts and make the decisions that are best for your Campus.
  18. 18. + MakingTraining of Collectors a Priority. Use your agency partners, associations and ACA + Know who you may disclose the existence of a debt. Only those the borrower/debtor has granted permission – usually their attorney and spouse + Understand the dangers of communicating about the debt via unsecured fax or e-mail (even with consolidation information) + Be aware of changing rules and regulations. Your agency partners, loan servicers, associations, list serves and ACA are all good sources of information.
  19. 19. QUESTIONS Contact us at: Mark Goodman – Educational Service Advisor 856-577-7703 (Pacific time zone) Pam Long – Vice President of Sales 410-836-7465