Companies that provide credit to their customers are well aware that the Fair Debt Collection Practices Act (FDCPA), which authorizes suits against violators for statutory damages of up to $1,000, applies only to "debt collectors"—not creditors. 15 U.S.C. § 1692k.
But a recent bulletin (pdf) by the CFPB—whose commissioner Richard Cordray was just confirmed by the Senate—may open the door to actions against creditors (albeit under the Dodd-Frank Act rather than the FDCPA). That bulletin states that entities covered by the Dodd-Frank Act must "refrain from committing unfair, deceptive, or abusive acts or practices" in "collecting consumer debts."
The bulletin makes clear that the CFPB will be using the Dodd-Frank Act to apply the FDCPA to creditors. The bulletin then sets forth a "non-exhaustive list" of debt-collection practices that it says could violate Dodd-Frank and that the CFPB "will be watching ... closely." The list is essentially a compilation of alleged misrepresentations and coercive tactics that have gotten debt collectors sued under the FDCPA:
- "Collecting or assessing a debt and/or any additional amounts in connection with a debt (including interest, fees, and charges) not expressly authorized by the agreement creating the debt or permitted by law."
- "Failing to post payments timely or properly or to credit a consumer's account with payments that the consumer submitted on time and then charging late fees to that consumer."
- "Taking possession of property without the legal right to do so."
- "Revealing the consumer's debt, without the consumer's consent, to the consumer's employer and/or co-workers."
- "Falsely representing the character, amount, or legal status of the debt."
- "Misrepresenting that a debt collection communication is from an attorney."
- "Misrepresenting that a communication is from a government source or that the source of the communication is affiliated with the government."
- "Misrepresenting whether information about a payment or nonpayment would be furnished to a credit reporting agency."
- "Misrepresenting to consumers that their debts would be waived or forgiven if they accepted a settlement offer, when the company does not, in fact, forgive or waive the debt."
- "Threatening any action that is not intended or the covered person or service provider does not have the authorization to pursue, including false threats of lawsuits, arrest, prosecution, or imprisonment for non-payment of a debt."
In a separate bulletin (pdf) issued the same day, the CFPB suggested that statements that repaying a debt will improve the debtor's "credit report," "credit score," "creditworthiness," or "likelihood" of getting more credit or credit on "more favorable terms" may also be actionable under the Dodd-Frank Act.
What's not on the list in these bulletins? They omit the various affirmative duties that the FDCPA imposes on debt collectors to inform debtors of particular facts, such as that the purpose of the communication is to collect a debt and that the debtor has the right to insist upon verification of a debt. See 15 U.S.C. §§ 1692e(11), 1692g.
The implicit warning of these bulletins, of course, is that violators may face enforcement actions brought by the CFPB. And one of the bulletins hints that even entities not covered by the Act may be named defendants; a footnote observes that the Act prohibits anyone from "knowingly or recklessly" providing "substantial assistance" to a violation of the Act.
But the threat of new litigation against businesses does not end there. Thankfully, the Dodd-Frank Act doesn't create a private right of action. But it's only a matter of time before the plaintiffs' bar files lawsuits alleging that the conduct discussed by the bulletin violates state consumer-protection laws that do authorize private suits. For example, it is inevitable that plaintiffs will argue that California's notorious Unfair Competition Law (UCL), Cal. Bus. & Prof. Code §§ 17200 et seq., allows them to "borrow" violations of the CFPB's interpretation of Dodd-Frank and recast them as violations of the UCL.
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