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Insights from CFPB Annual FDCPA Report — Customer Complaints

Last month, the CFPB published its annual report on the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. As with its former reports, the CFPB included a section about consumer complaints.

In his introduction to the report, Director Richard Cordray states that debt collection was the number one category consumers complained about. Fair Debt Collection Practices Act, CFPB Annual Report 2017, p. 3.  The Report details the variety of ways in which consumers can reach out to the CFPB and lodge a complaint, including a live web-chat feature for assistance in completing the on-line form.  The complaints are compiled and made available to both state and federal law enforcement agencies through the FTC’s Consumer Sentinel system.

Predictably, debt collection continues to be the most-complained about consumer financial product the CFPB monitors. The top complaint under debt collection is that collectors continue to attempt to collect “a debt not owed.” While that is a very broad topic, the CFPB allows consumers to list specific reasons as to why “the debt is not owed.” In asserting that the debt is not owed, the Report states that, “consumers often report that debt collectors are contacting them about debts that either have a different balance or have been fully paid.” CFPB Report, p. 15. Thus, in many instances, the debt is owed but there is a balance discrepancy. The phrase “the debt is not owed” perhaps is a bit of a misnomer once a closer look at the statistics is taken.

The second highest category consumers complained about was that “they were not given enough information to verify a debt.” Id. The collection industry knows that “debt validation/verification” refers to a specific standard.  While the FDCPA itself is not very specific, Courts have held that

“verification of a debt involves nothing more than the debt collector confirming in writing that the amount being demanded is what the creditor is claiming is owed; the debt collector is not required to keep detailed files of the alleged debt.”

 Chaudhry v. Gallerizzo, 174 F.3d 394, 406 (4th Cir. 1999).

It is important to note that while Chaudhry is still good law from a litigator’s perspective, the CFPB has repeatedly pushed the envelope of what it wishes to see as debt validation. This is reinforced by one of the CFPB’s own sample letters available for consumers to use on its web-site.  The request for validation letter includes a long and fairly detailed list about the information the consumer can ask for and, to which by implication, a consumer is entitled.  Since there is this disconnect between what is legally required and what the CFPB wants to be required, relying on Chaudhry and providing only minimal information if more is available may be defensible in litigation but is probably the wrong operational approach.

Additionally, consumers want more information and believe they are entitled to more information. So, while the statistics regarding debt verification should not be ignored, the numbers beg the question – did the debt collector actually send debt verification and the consumer was not satisfied? Or was debt verification not sent? Hopefully this will be resolved thoughtfully by the CFPB.

Overall, the complaints section of the Report does not raise many new issues. From our perspective, it is still hard to imagine that debt collectors still threaten to arrest consumers if they fail to pay.  Really?  Stop!!! Regardless of the ethical code of the employer of the collector, that needs to be forbidden and rooted out and if discovered the collector needs to be terminated.  Immediately!

The other area that continues to expand as an area for risk in debt collection is communication methods, specifically text messaging, e-mails and use of social media. While the report does not endorse the use of these methods of communication, and indeed it is clear that using these methods is to travel in uncharted seas, the CFPB and FTC emphasize that the requirements of the FDCPA, especially relating to truthfulness and transparency continue to apply to these forms of communication.