Continuing my Receivables Management Association International (RMAI)’s Certified Receivables Compliance Professional (CRCP) training brings us to my second installment on their chief component of becoming certified, the Introductory Survey Course on Debt Buying. Perhaps even more important than my first article, the second portion of their training is a how-to on the alphabet soup of the numerous changes to the regulatory landscape. Understanding and following these statutes is a critical component to compliance and I am so pleased to highlight the crucial aspects of these laws.
Navigation of Federal Laws
As most of us in our industry are aware, essentially every interaction with a consumer or third party is governed in some manner by the Fair Debt Collection Practices Act (FDCPA), Consumer Financial Protection Bureau (CFPB), Fair Credit Reporting Act (FCRA), or Telephone Consumer Protection Act (TCPA). Within these federal statutes, especially the FDCPA, there are not only numerous vaguely worded statutes, but there are also thousands of judicial decisions based on them that give additional interpretations and allowances, both favorable towards consumers and our industry. Aside from this ambiguity, different judicial districts and active litigation add additional interpretations to the FDCPA, TCPA, CFPB, and FCRA. Still, though, a keen awareness of the generalities and interpretations of these Acts and Bureaus is essential for performing our jobs well.
Fair Debt Collection Practices Act (FDCPA)
Some of the more stalwartly established aspects of the FDCPA, often violated, are simple aspects that, if followed as a debt collector, will help ensure compliance. These include calling at reasonable times of day, no third party communications, not stating that the consumer owes a debt, seeking location information only once, and, very importantly, cease and desist is required if the consumer notifies in writing AND now even verbally, per regulators and consumer attorneys, that they refuse to pay. These are all fairly limiting to our practices, but savvy consumers can easily use these portions of the FDCPA to bring suits against our industry. Awareness of the current FDCPA climate is essential to working within the current compliance framework. In fact, the specific harassment and abuse and false or misleading representation portions of the FDCPA are very broadly written, and utmost care to not fall into any of these practices is essential for not only compliance but the smooth operation of our business. In fact, many consumers and attorneys representing consumers will even call upon the “meaningful involvement” portion of the FDCPA to state that collections attorney involvement isn’t actually representing the collector and this circular logic can stand in court under the FDCPA, as well as receiving support from the Consumer Financial Protection Bureau (CFPB).
An important aspect of communications and the FDCPA is how to leave a voicemail. Whether it’s a voicemail or actually speaking with the consumer, it is important to disclose your identity and purpose, but only to the person and not a third party. Given that a voicemail could be heard by a third party, by not stating the consumer’s name in the voicemail is a way around the FDCPA limits. Another FDCPA statute that can easily be violated is having the notice of your firm’s name or the aspect of debt collection on an envelope. Another aspect of the FDCPA to consider is notifying the consumer whether the debt is out of statute when attempting to collect. Considering the FDCPA’s validation notice and requirements, it’s best not to act on collecting or even communicating regarding the debt until after the 30 day period of notice to the consumer. Regardless of all these caveats, falling prey to any of these aspects of the FDCPA can cause untold harm to your compliance and bottom line. Being familiar with all aspects of the FDCPA is essential, but these included here are easy targets and things to consider and adjust your practices to accommodate.
Fair Credit Reporting Act (FCRA) and Consumer Financial Protection Bureau (CFPB)
The goal of understanding the alphabet soup of the FDCPA, CFPB, and the Fair Credit Reporting Act (FCRA) is to increase adherence and compliance and reduce headaches but to also assist our bottom lines. In our industry, we also must consider our adherence to the FCRA. Firstly, using consumer credit information is voluntary. To lessen compliance issues surrounding the FCRA, we as receivables management professionals can simply not utilize this resource. If one chooses to, however, the FCRA compliance bulletins must be followed. Furnishing credit data to consumers requires that the consumer must be notified in writing, ensure accuracy of all data, and respond to any and all disputes brought about by the consumer, following the CFPB and FCRA guidelines. Previously, prior to the CFPB, our industry would default to obtaining credit reports for debts, as a way to notify consumers of the effect on their credit of not paying their debt; however, the CFPB has changed the climate of these credit inquiries. If you choose to use Credit Report data, you must prove that you have permissible purpose to use that data as well as a “red flag rule” in place. Permissible purpose includes investigating a voluntary credit transaction that you are collecting on, which is simple enough; however, proving that only the allowed individuals in your organization have access to this data is a crucial component of this. The red flag rule is a system in place where your business has to investigate a possible identity theft situation, for instance, if mail for an individual keeps being returned. The inability to actually reach the person requires additional investigation under the FCRA.
Telephone Consumer Protection Act (TCPA)
Since its inception in 2015, many of us have become familiar with the TCPA but as an important caveat, we must be aware that the Federal Corporation Commission has very broadly interpreted the TCPA to include that any automated telephone dialing system (ATDS) to be any phone system that can predictively or progressively dial from a list of numbers without human intervention. It is important to note that Prior Express Consent (PEC) has a wide berth of interpretation. Obtaining people’s phone numbers from past papers and then simply asking if you can call this number counts as PEC. However, consent can be revoked at any time, which, of course, seems somewhat absurd, since most other terms of any agreement can’t be revoked, but at least knowing this gives some consolation should you be the recipient of such conduct. TCPA damages are steep so making sure you are calling the right number when attempting to collect can save you an exponential damages penalty. Some excellent tips, and things to keep in mind, even if you don’t make your own phone calls but another firm does on your behalf, in order to comply with TCPA are to check numbers for cell phones, do not allow pre-recorded calls without prior consumer consent, keep documentation of consents and revocations of consent, keep a record of how you obtained phone numbers, and if in doubt, simply dial manually as a way to avoid the tangle of the TCPA web!
And, of course, in summary, no seminar on debt buying would be complete without a nod to how bankruptcy accounts must be handled with care and properly documented; that you must comply with all state licensing requirements for debt buyers; that we in our receivables management industry must follow the Gramm-Leach-Bliley Act; all relevant consumer data security protections are in place. Keeping up with all relevant cases and government movement of the FTC and CFPB will help you keep your head above the rising tide of regulation and oversight that our industry must pay attention to and heed in our work.
Keep in mind that all of these federal rules and regulations, as well as keeping up with all the legislative changes and various court decisions can be quite a headache. As a Certified Compliance Professional, I keep up with these alphabet soups and related compliance as part of my job and daily operations. I enjoy summarizing and sharing this information, both old and new, as part of my best practices!
This information is not legal advice and may not be used as legal advice. Information discussed or contained is not an explanation of the law and is presented for educational purposes only.