Today the CFPB once again showed they do not mess around. They fined Wells Fargo $185m for creating a half a million credit card accounts without customer authorization. Wells and the Regulators have known about this for years, and over the past couple years Wells fired over 5000 employees as a result. The $185m was the largest CFPB fine to date, and while this was not related to debt collection, it’s clear they may have just fired a shot over the bow of the debt collection industry when it comes to generating fines for bad behavior, or what they will now call bad behavior in debt collection, which will be based on these new rules.
The proposed new rules surrounding how 1st and 3rd parties communicate with the debtor, and anyone associated with the debtor, are the most sweeping and significant changes this document contains. Here are some facts, and this is so significant we’ve scheduled a webinar on 9/22 to review in detail. You can sign up at the end of this blog.
Section V. Collector Communication Practices. They state this is the second highest source of consumer complaints, so they’re proposing:
- Regulations to govern contact frequency, the leaving of messages, time, place and manner of collector contacts and situations regarding contact when the debtor is deceased.
- It states the CFPB understands these rules will add cost to the debt collectors.
- One fact discussed is that collectors are now afraid to leave messages due to 3rd party disclosure concerns, which is increasing the number of calls where no message is left.
- They’re proposing to add clarification to how debt collectors can leave messages, for example, they’re suggesting this is OK:
- “This is John Smith calling for David Jones. David, please contact me at 1-800-555-1212.”
- They’re considering mandating all companies have a toll free number with their company name on the Caller ID for customers to call back.
- They’re proposing new terminology called “confirmed consumer contact”, i.e. they speak with the consumer, at which point no other numbers can be called, further stating “confirmed consumer contact would pass from collector to collector.”
- Good luck with that one if everyone isn’t working in the same system, or integrated systems.
- They’re proposing adding numerical restrictions on the number of contacts, and they’re considering these caps applying to all forms of communication during the cap period, i.e. phone, email, text, mail, “or other new technologies”.
- I don’t think they’re opening the door for Facebook and Twitter contact…so not sure what they mean by “other new technologies?”
- Attempts per unique address or ph#: With no confirmed customer contact =3, with confirmed contact = 2
- Total Contact attempts when collector does not have confirmed customer contact = 6, with confirmed contact =3
- Live communications when collector has confirmed consumer contact= 1
One live contact per week, really?
This rule means the lender better have a system in place tracking every call or contact made on their dialer, or made manually, or when contact is made in the field by a repossessor. This also has to include every call and every contact they or their 3rd party vendors make when simultaneously working an account that they and a vendor are both working.
For example, if early stage collection accounts are assigned to a loan servicer, or later stages assigned to skip tracing firm or post charge off assigned to a collection agency or even a debt buyer, then the first party lender needs to be using a central repository software that tracks and logs this in an easily auditable format. So, if the customer calls the 1st party lender, then the 1st party must notify the 3rd party that contact with the customer has been made and they are not allowed to make or receive calls for a week. IF they throw TCPA-like fines on top of these rules, we’re looking at $1500 if it was done on purpose, and what’s the definition of that, or $500 if it was done accidentally. Not having the technology to track these rules does not appear to be an excuse for “accidentally”.
They’re still trying to figure out if some of the caps are per account, or per consumer, i.e. if the customer has two loans, is that one contact or two?
Section 4 then addresses FDCPA rule 804 and the contact and frequency of contacts to “general third parties” to gather location information on consumers, i.e. skip tracing. They’re also looking to cap these contacts as follows:
- Attempts per unique address or ph# per 3rd party when collector does not have confirmed consumer contact = 3, with confirmed consumer contact = 0
- Total contact attempts per 3rd party when collector does not have confirmed consumer contact = 6, with consumer confirmed contact = 0
- Total contact attempts across all 3rd parties when collector does not have confirmed consumer contact is “no specific limit”, but other FDCPA and state laws come into play, so be careful
- Total contact attempts across all 3rd parties when collector has confirmed consumer contact = 0 (no more calling to verify an address to repo a car at with the property owner or another 3rd party if you are already speaking to customer)
- Live communications per 3rd party total, not weekly, when collector does not have confirmed consumer contact = 1 (This is the same as FDCPA rule now, btw, and it’s a rule few follow because its so difficult to track using most technology solutions and with 3rd and 1st party vendors working in different systems, and with most 3rd parties working in their own systems and many times these systems are not interfaced and 1st parties are not mandating systems be integrated, which is trend we see being a must have going forward based on the complexity of tracking these laws for 1st parties needing a microscope into what their own collectors and their 3rd party collectors are doing.
When the collector has consumer contact, it’s clearly saying NO CONTACT with anyone else.
One issue I see that’s missing are the proposed rules here do not address many areas of consumer and state regulatory concern that’s currently in review in several states in regard to why is a debt collector looking at my data if I don’t have a debt with them, how is that being tracked, do they really have permissible purpose to look at it, how is it being used and shared, etc.
These rules, on top of the already existing State and Federal lending and collection rules are a can of worms, and a nightmare if you’re technology challenged.
With this in mind I have been discussing the impact of these proposed rules with many leaders of the industry and on Thursday, Sept 22nd at 2pm CST we will be putting on a webinar to discuss these and other rules and how technology can be a solution.
We will be discussing this on the webinar with Stephanie Alsbrooks, CEO of defi SOLUTIONS. Their highly customizable Loan Origination platform is providing cutting edge, easily adaptable ways to help 1st party lenders manage the regulatory rules surrounding loan origination.
Additionally, we will be joined by Mark Floyd, former COO at Americredit and former Vice Chairman/CEO at Exeter Finance. Mark will provide his input on how he sees these challenges from an Executive Level.
If you would like to attend the webinar, space is limited so we encourage you to sign up today at:
