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CFPB’s Recent Consent Order on Debt Collection Practices

On June 13, 2018, the CFPB issued a Consent Order it entered into with Security Group, Inc. and its subsidiaries. The Consent Order relates to collection actions engaged in by Security Group, Inc. The consent order requires Security Group to pay a civil money penalty of 5 million dollars.

The Consent Order concludes that Security Group engaged in debt collection practices that were unfair acts and practices in violation of applicable law. In particular, the consent order finds that the following acts by Security Group were unlawful:

  • Making personal visits to consumers’ homes, place of employment, the homes of their neighbors and visiting consumers in other public places, when such visits disclosed or risked disclosure of consumer’s delinquency to third parties, disrupted consumers’ workplaces and jeopardized their employment, or humiliated and harassed consumers;
  • Calling consumers at work, on shared phone lines and/or speaking with co-workers or employers and disclosing or risking disclosure of consumer’s delinquencies to third parties;
  • Calling consumers at work after they had been told that the consumer was not allowed to receive calls at work; and
  • Failing to heed and properly record consumers’ and third parties’ requests to cease contact.

One can read this consent order to indicate that first-party collectors that engage in conduct that the FDCPA would prohibit (even though the FDCPA does not apply to first-party collectors) are at risk of violating the unfair, deceptive, abusive acts or practices (UDAAP) prohibition in the Consumer Financial Protection Act (CFPA). This Order is consistent with the direction of the CFPB before Mike Mulvaney took over as the acting director. However, the Order indicates that the CFPB under the acting director will continue to hold creditors accountable under the FDCPA, even though the law on its face does not apply to first-party collectors.

If you read the Consent Order, you will see that the many of the actual acts of Security Group, Inc., were outrageous and not in line with industry norms. However, what is troubling is the CFPB’s stance on in-person visits. While this order does not specifically prohibit Creditors from using in-person visits, it clearly shows that the CFPB disfavors in-person collection activities and that a creditor who uses this tool does so at the risk of being found in violation of the CFPA’s UDAAP prohibitions.

If your Credit Union uses in-person visits as a collection tool, it needs to determine if the continued use of such a tool is worth the risk. If the Credit Union is willing to assume the risk, it should at least review its policy or procedures to be sure that such visits are not done in such a way to risk disclosure of a delinquent loan to a third party and to limit harassment or embarrassment to the consumer.

As always, if you have any questions about this Consent Order or the use of in-person visits to collect a debt, please reach out to one of the lawyers at SVL.