CFPB: Some Non-Bank Debt Collectors Still Misleading Consumers

Posted by Patrick Barnard on May 22, 2014 No Comments
Categories : Mortgage Servicing

The Consumer Financial Protection Bureau (CFPB) has issued a report showing that some non-bank debt collectors – possibly including certain non-bank mortgage servicing companies – continue to engage in prohibited practices, such as making excessive phone calls and threatening lawsuits when they don't have the documentation to make a case.

The CFPB, which has authority to supervise certain non-banks, including mortgage companies, private student lenders and payday lenders, as well as non-banks the bureau defines through rulemaking as ‘larger participants,’ reports that its supervisory activities in these industry segments have so far netted more than $70 million in remediation to approximately 775,000 consumers.

‘For the first time at the federal level, non-bank financial institutions are subject to supervisory oversight that holds them accountable for how they treat consumers,’ says Richard Cordray, director of the CFPB, in a statement. ‘The CFPB's oversight of banks and non-banks alike is exposing risky practices and getting results for consumers. We are pleased that our supervision program has been able to return more than $70 million to consumers in recent months.’

The report generally covers supervisory activities between November 2013 and February 2014. In the three non-bank markets highlighted, examiners found that many companies had systemic flaws in their compliance management systems, such as consistently failing to have a system in place to track and resolve consumer complaints.

The CFPB reports that some debt collectors continue to intentionally and illegally mislead consumers about litigation. Under the Fair Debt Collection Practices Act (FDCPA), debt collectors are allowed to file lawsuits only if they intend to prove their claims. The problem, the CFPB says, is that many debt collectors are simply bluffing when they say they are going to sue: Very often, they do not possess the needed documentation to build a case against the consumer.

In addition, debt collectors are sometimes making excessive, illegal calls to consumers. Examiners found that one debt collector had made approximately 17,000 calls to consumers outside of the appropriate times established by the FDCPA. That company further violated the law by repeatedly contacting more than 1,000 consumers as often as 20 times within two days.

What's more, debt collectors continue to fail to investigate consumer credit report disputes. As furnishers of credit data to the consumer reporting agencies, they are responsible for providing timely and accurate information. In addition, they must investigate and respond when a consumer complains that the data that has been furnished is inaccurate.

The CFPB found during its examinations that at least one debt collector (unknown if it was a mortgage servicer) was deleting disputed accounts rather than investigating such disputes. Examiners directed this debt collector to investigate the disputes it receives regarding information it has furnished.

Although the report mentions mortgage servicers, it does not cite specific violations by any named servicers.

To read the full report, click here.

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