Browse by Category:
Browse by Month
|
posted on 2016-02-18 by Chris Koegel Assistant Director, Division of Financial Practices, FTC
Making a plan is one thing. Sticking to it: quite another. During 2015, the FTC made a plan to address some new and troubling issues in debt collection. Throughout the course of the year, we stuck to that plan – bringing a record number of new cases, banning bad debt collectors, talking with industry, and finding new ways to do outreach. The FTC gets more complaints against debt collectors than against any other industry. But this year, we hope, we put a dent in the bad practices we hear so much about. During 2015, we not only coordinated the first federal-state-local enforcement initiative against debt collectors – including actions by more than 70 different partners – we also filed 12 new cases against 52 different defendants. And we resolved 9 cases, getting nearly $94 million in judgments. We added to our list of banned debt collectors in 2015 – and published the list. These are people and companies that – because of serious and repeated violations of the law – have been banned by federal court orders from ever doing business in debt collection again. This has the result of putting these folks out of business, but it’s also a message to law-abiding debt collectors everywhere: don’t do debt collection business with these folks or you may find yourself in hot water. One of the really important things we did this year was talk with the debt collection industry. The Debt Collection Dialogues kicked off in Buffalo, and then continued in Dallas and Atlanta. At all three, to sold-out houses, we brought together the debt collection industry with the state and federal agencies that regulate them – allowing all perspectives to be heard. In consumer education, 2015 saw the release of a Spanish-language graphic novel – or fotonovela – about debt collection. It shows how you can deal with questionable debt collection tactics – and people ordered more than 113,000 copies of the publication last year. But 2016 is another year – and we have more plans. So watch this space to see what else is coming – and to learn how to spot and avoid bad debt collection practices.
|
posted on 2016-02-17 by JUSTIN BRANDT, ALAN D. WINGFIELD AND CHAD FULLER
On February 2, following a
joint investigation of the Consumer Financial Protection Bureau and the Civil
Rights Division of the Department of Justice, Toyota Motor Credit Corporation,
the financing arm and subsidiary of the Japanese auto giant, agreed to pay up
to $21.9 million in restitution to thousands of minority borrowers who
allegedly were charged higher interest rates than white borrowers for auto
loans without regard to their creditworthiness.
The administrative
action, In the Matter of Toyota Motor Credit Corporation,
and a civil lawsuit filed the same day in the United States District Court for
the Central District of California, resulted in a Consent Order between the
CFPB, DOJ, and Toyota. The CFPB and DOJ charged Toyota with violating the
Equal Credit Opportunity Act and its implementing regulation “by permitting
dealers to charge higher interest rates to consumer auto loan borrowers on the
basis of race and national origin.”
The CFPB and DOJ alleged that,
in comparison to the average borrower over the course of the loan, affected
African-American borrowers paid at least $200 more and were charged
approximately 27 basis points higher, and Asian and Pacific Islander borrowers
paid $100 more and were charged approximately 18 basis points higher.
Notably, a CFPB statement released
concurrently with the Consent Order said that “the investigation did not find
that Toyota Motor Credit intentionally discriminated against its customers, but
rather that its discretionary pricing and compensation policies resulted in
discriminatory outcomes.” No civil money penalties were assessed, and in
a press release,
Toyota denied any wrongdoing.
As part of the settlement,
Toyota will pay $19.9 million to compensate affected borrowers whose auto loans
Toyota financed between January 2011 and the entry of the Consent Order on
February 2, 2016. Toyota is also responsible for up to $2 million to
compensate any similarly affected borrowers in the interim period until Toyota
“implements its new pricing and compensation structure.” This structure
includes, alongside other restrictions, a substantial reduction in its dealers’
discretion to mark up interest rates. The DOJ’s statementnoted
that these new policies must be in place by August 2016.
Troutman Sanders LLP has
extensive experience representing lenders in the auto finance industry, and
will continue to monitor CFPB and other regulatory activity in this area.
|
posted on 2016-02-17 by JUSTIN BRANDT, ALAN D. WINGFIELD AND CHAD FULLER
As we previously
reported, on November 4, 2015, U. S. Senator Edward Markey (D-Mass.)
introduced the Help Americans Never Get Unwanted Phone calls Act of
2015—or HANGUP Act for
short. The legislation, which has 14 Democratic co-sponsors, would
repeal section 301(b) of the Bipartisan
Budget Act of 2015, which permitted an exception to the Telephone
Consumer Protection Act of 1991 (“TCPA”) for calls and text messages “made
solely to collect a debt owed to or guaranteed by the United States.”
Section 301(b) is scheduled to
take effect by August 2016 following guidance from the Federal Communications
Commission. The amendment to the TCPA was applauded by
trade groups, including ACA International, which stated that “it shows an
understanding in government that limiting dialing technology for legitimate
debt collection doesn’t make sense.”
On February 10, a coalition of
state attorneys general, spearheaded by Indiana Attorney General Greg Zoeller,
a Republican, and Missouri Attorney General Chris Koster, a Democrat, sent a
letter urging passage of the HANGUP Act to Senators John Thune (R-S.D.) and
Bill Nelson (D-Fla.), the chairman and ranking member, respectively, of the
U.S. Senate Committee on
Commerce, Science, and Transportation. The letter is signed by
25 state attorneys general in total, including 19 Democrats and six
Republicans. It claims that the recent enactment of section 301(b) “is a
step backward in our law enforcement efforts” and is an inappropriate
distinction permitted “simply because the debt has a nexus to the federal
government.”
With Republicans in the
majority in the Senate and election season heating up, the bill is unlikely to
gain traction in the current legislative session. However, in the 2016
election, Republicans will be defending 24 Senate seats, including many in
traditionally blue states, compared to just 10 for Democrats. If
Democrats retake the Senate, one can reasonably expect the same or similar
legislation to be reintroduced in the next Congress. Holders of
government-backed debt should continue to monitor this situation and stay tuned
for relevant guidelines from the FCC later this year regarding implementation
of the new exception.
Troutman Sanders LLP has unique
industry-leading expertise with the TCPA, with experience gained trying TCPA
cases to verdict and advising Fortune 50 companies regarding their compliance
strategies. We will continue to monitor legislative developments and
regulatory implementation of the TCPA in order to identify and advise on
potential risks.
|
posted on 2016-01-28 by TIM J. ST. GEORGE, DAVID M. GETTINGS AND DAVID N. ANTHONY
On November 9, 2015, Terria Harris filed an Amended Complaint against Home
Depot U.S.A., Inc. in a Fair Credit Reporting Act (“FCRA”) background check
class action lawsuit. In this complaint, she alleged that Home Depot
violated the FCRA’s background check disclosure requirement because the
disclosure she signed was allegedly “embedded with extraneous
information.” As a result, the plaintiff argued, the disclosure was not a
“stand-alone document,” in violation of the FCRA.
In response to the complaint, Home Depot moved for summary judgment,
arguing the claim was barred by the FCRA’s statute of limitations. The
applicable statute of limitations requires a plaintiff to bring a claim either
two years after the date of discovery by the plaintiff of the violation, or five
years after the date on which the violation occurs, whichever is earlier.
Because the plaintiff viewed and signed the allegedly offending disclosure in
February of 2011, Home Depot argued the claim brought in 2015 was untimely.
The Court agreed with
Home Depot, stating that “a reasonably diligent person would have discovered
the facts giving rise to Harris’ FCRA … claims by March 1, 2011.” It
concluded that the plaintiff’s FCRA claim was time-barred. The Court’s
decision should serve as a reminder to employers hit with FCRA lawsuits to
analyze the timeliness of a plaintiff’s claim. Even the most meritorious
FCRA claim may not be actionable if the plaintiff fails to assert his or her
rights until it is too late.
Troutman Sanders LLP has substantial experience in counseling employers on
disclosure form documents under the FCRA, as well as experience in litigating
challenges to such claims. We will continue to monitor this and similar
cases.
|
posted on 2015-12-03 by Nick Jarman
With complaints against debt collectors rising every year,
regulators, including the Federal Trade Commission and the Consumer
Financial Protection Bureau, have made debt collection a top priority.
In fact, back in June, the FTC began holding “Debt Collection Dialogues”
to better understand the dynamics between creditors, consumers, debt collectors and other regulators.
As president of a national debt collection company, I was invited to
speak at the FTC’s November dialogue. It was focused on industry
regulations on the state level and featured a lineup of speakers that
included representatives from the Attorneys General and Consumer
Protection offices in Georgia, South Carolina and Tennessee.
The main point I wanted to get across to everyone in attendance was
that there is a difference between legitimate debt collectors and
criminals. It seems every day there is a story in the news about a debt
collector doing something harmful to consumers, but most of these
pieces, including ones that involve federal and state enforcement
actions, pertain to bad actors. And little to no efforts are made to distinguish between law-abiding companies and criminals committing theft or fraud. To be clear, when I speak of a legitimate debt collector I am referring to one that is:
- Legally authorized to do business in the particular state they are collecting consumer debts from.
- Licensed, bonded and insured in those states that require them to be.
- A member of ACA International, the trade association for the credit and collection industry (of which I am a board member).
Regulators at the panel did acknowledge that because of the
inconsistency in state licensing and lack of federal licensing, it is
difficult for them to clearly identify legitimate debt collectors from
criminals using the industry to perpetrate their crimes. One of the
ideas I floated during the discussion was the possibility of creating a
national registry of debt collectors that would identify legitimate debt
collectors through a pre-determined process. Overall, the regulators
were very receptive to the idea and felt this registry would help them
make important distinctions. The FTC was also interested in what recent
state regulations and enforcement actions the debt collection industry
found important. It’s imperative to keep in mind three things when
discussing regulations:
- What is the intended purpose of the regulation?
- What is the expected outcome the regulation hopes to achieve?
- What are the potential unintended consequences?
Most people may not realize that debt collection is one of the most
extensively regulated activities in the country. There are overarching
federal regulations that address collection activity and more than 30
states require licensing for debt collection agencies, adding more
layers of protection.
The Wild West mentality the media often portray regarding the debt
collection industry appears to necessitate more stringent laws, but that
image is simply untrue. A 2014 study from the Urban Institute found one
in three adults in America have a debt in collection — a pervasiveness
that draws attention to industry practices. However, according to stats
from the CFPB’s consumer complaint database, less than 5% of the 75
million consumers with a collection account have filed a complaint with
the CFPB in the past three years. Furthermore, over 65% of these
complaints are related to a dispute of the debt — not poor treatment.
Any new regulation considered should aim to fix the issues consumers
are complaining about: disputes about the existence or balance of debts.
(It’s important to note that attempting to collect on a debt the
consumer does not owe or for an amount that is not owed is already
illegal.) But new laws may focus instead on the types and frequency of
communication debt collectors are permitted to have with consumers. The Fair Debt Collections Practice Act
already imposes these types of limitations and further restrictions
would likely lead to additional adverse consequences for consumers.
Debt collectors, first and foremost, desire to resolve debts with
consumers on a voluntary basis, as this resolution is the most cost
effective and mutually beneficial. However, when debt collectors are
unable to communicate with a debtor either due to that consumer’s
unwillingness or regulation barriers, involuntary debt collection action
becomes the only other option to recoup what is owed. Involuntary debt
collection action refers to negative credit bureau reporting,
judgments, wage garnishments, liens, bank levies, or other measures
state laws allow for recovery of unpaid debts. The reality is, as
regulation grows, the level of involuntary measures to collect debt will
likely grow as well.
Consider, for instance, the statutes of limitations states place on
how long a creditor has to enforce legal action on a debt. These
statutes vary from state to state, but generally range from three to 10
years. Some states have moved to shorten their statutes of limitations
on debt collection lawsuits. The prevailing thought is that doing so
will help consumers and prevent creditors from suing on “zombie debts”
— debts that are very old and/or no longer owed.
But as an unintended consequence of shortening these timeframes,
creditors may be forced to seek involuntary legal action against
consumers sooner than they would like. Creditors understand consumers
face hardships and that sometimes it could take several years for them
to re-establish their finances and regain the ability to repay
delinquent debts. Unfortunately, reducing statutes of limitations could
easily increase the likelihood that collectors won’t wait for the
consumer to rebound or agree to negotiate a repayment plan. Instead, they will simply move to legal action.
It’s important that regulators take these and other issues into
account as they seek to better understand the debt collection industry.
The FTC’s panels are a good start; free-flowing dialogues between all
parties can help root out bad actors, which would benefit consumers more
than additional regulations would.
|
« previous 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 next » |