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What Constitutes a Deceptive Practice?

ciskey debra jThe Bureau of Consumer Financial Protection recently issued its annual report on the FDCPA (Report), including input provided by the Federal Trade Commission related to complaints and enforcement issues.

https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/cfpb_fdcpa_annual-report-congress_03-2018.pdf

These agencies continue to share responsibility for FDCPA enforcement. While the report contains many pages of data about collection industry demographics and complaints, my interest always falls to the narrative related to enforcement actions, because it is here that we learn about the practices that might bring an industry member to the attention of the enforcement teams at these agencies. Of particular interest are descriptions of deceptive practices identified in supervisory exams and enforcement actions.

In the supervisory examinations summary only a couple of examples were described. In supervisory examinations of debt collectors handling credit card debt, the Bureau focuses on instances in which debt collectors deceptively implied that authorized users are responsible to pay the debt for the main cardholder. According to the report, examiners observed debt collectors “[a]ttempting to collect a debt directly from an authorized user of a credit card, even though the authorized user was not financially responsible for the debt.” The Bureau explains “[s]oliciting payment from a non-obligated user in a manner that implies that the authorized user is personally responsible for the debt constitutes a deceptive means to collect a debt.” (Report, p. 20)

Further, Bureau examiners continue to observe false representations to consumers about the effect on their credit score of paying a debt in full rather than settling a debt for less than the full amount. Considering the Bureau initially provided compliance advice related to this practice back in July, 2013 in CFPB bulletin 2013-8, it is somewhat surprising this continues to be an issue, yet a review of 10 collection calls will reveal in nine of them the consumer will bring up this very question. Specific and adamant scripting provided to collectors can prevent occurrences of this potential violation. The bulletin can be found on the Bureau’s website: https://www.consumerfinance.gov/policy-compliance/guidance/implementation-guidance/bulletin-effect-debt-paymentscredit-reports-scores/

If you enjoy a good story, you should spend time reading the content of the enforcement actions. Spend time reading the complaint filed by the Bureau and the FTC as well as the order. The complaints often contain more detail and description related to actual practices, and can be very instructive. Deceptive practices were prevalent violations in enforcement actions carried out in 2017.

The FTC has focused its enforcement efforts primarily on activities of organizations that purport to be debt collectors but are either seeking to collect on fake debt or debt they have no authority to collect. The FTC initiated or resolved six actions involving phantom debt collection. Two of those six involved the sale of fake debt portfolios. Both agencies are working to eradicate FDCPA-prohibited behavior, regardless of the legitimacy of the organization they are investigating.

Often the fake debt collectors use threats and harassment to collect phantom debt from consumers. One pending action is against a quasi-consortium of seven debt collection agencies, six individual debt collectors, four payment processors and a telephone marketing service provider. Purported debt collectors involved in this scheme used threats of arrest and prison if payments were not made. They made allegations that consumers had committed a crime, tricked people into paying debts they didn’t have the authority to collect, threatened dire consequences such as lawsuits, garnishments, and imprisonment. They deceived consumers about their identity, claiming to be unrelated, legitimate small businesses.

In another action, a company allegedly targeted thousands of Spanish-speaking consumers, collecting fake debts and coercing consumers into purchasing goods they did not want.

In the collection of municipal debt such as court fines, parking tickets and other debts, another company used letterhead falsely suggesting they were a government agency. The company made false claims that consumers were subject to imminent arrest for nonpayment, that the consumer’s driver’s license would be suspended and falsely represented that debts would be reported to consumer reporting agencies.

Another operation sent texts containing false statements in an effort to trick consumers into calling them.

Texts purported to inform recipient a credit card payment had been declined, and to call a provided number immediately. This same outfit also used deceptive emails and calls threatening arrest and lawsuits.

While these allegations seem mighty outrageous to those of us who own and work in legitimate debt collection agencies, constant vigilance related to the activities of our employees is required to prevent creative minds from implementing practices you would not condone. The organizations in the actions described above were full-out scammers – that is not us. However, detective controls such as call recording and monitoring, management walking around, and regular training and retraining can ease your mind about the practices your collectors are employing, and may even help you improve your performance for your clients. I highly recommend it.


Debra Ciskey is the Compliance Officer at Wakefield & Associates. Inc. She is a member of the board of directors and a certified instructor for ACA International.

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