Consumer debt collection activities remain one of the primary focus areas of the Consumer Financial Protection Bureau (CFPB)—and this focus is not limited to the activities of third—party debt collectors. The CFPB released a Compliance Bulletin (Bulletin) on December 16, 2015, outlining its expectations regarding in-person debt collection activities both by first-party and third-party debt collectors. The CFPB said this guidance was released in response to practices discovered in its recent supervisory examinations and enforcement investigations.
In one such enforcement action, announced on the same day as the Bulletin, the CFPB cited EZCORP, Inc., a Texas-based, small-dollar lender, for illegal debt collection practices, including in-person collection visits that disclosed or risked disclosing consumers’ debt to third parties and caused or risked causing adverse employment consequences to consumers, such as disciplinary actions or job loss. The CFPB ordered EZCORP to refund $7.5 million to over 90,000 consumers, pay $3 million in penalties, and stop the collection of all remaining payday and installment loan debts owed by approximately 130,000 consumers. The settlement agreement also bars EZCORP from future in-person debt collection activities.
The guidance in the Bulletin applies to third-party debt collectors otherwise subject to the Fair Debt Collection Practices Act (FDCPA). The guidance also applies to the collection activities of first-party debt collectors, i.e., creditors collecting their own debt in their own name through CFPB’s application of prohibitions or unfair, deceptive and abusive practices. The Bulletin reminds all debt collectors that they may face a heightened risk of committing unfair acts or practices in violation of the Dodd-Frank Act when they conduct in-person debt collection visits to a consumer’s home or place of employment. The CFPB noted that such visits may result in third parties, such as the consumer’s co-workers, supervisors, customers, roommates, landlords, or neighbors, learning that the consumer has debts in collection. As such, these in-person visits could result in substantial damage to the consumer’s reputation or lead to negative employment consequences.
First- and third-party debt collectors should review the Bulletin to ensure their in-person debt collection activities comply with this guidance. At a minimum, debt collectors should ensure that in-person debt collection activities do not mirror the practices highlighted in the EZCORP consent order. Debt collectors may also wish to consider incorporating the following suggested practices into in-person debt collection policies and procedures:
In-person debt collection employees should not state the name of the company, wear name tags, hand their business cards to third parties, or leave their business cards on a consumer’s door where third parties could find the cards.
Debt collection employees should not threaten consumers with in-person collection visits, such as by telling a consumer that if the consumer does not return a phone call or make a payment, the lender will conduct an in-person collection visit.
In-person debt collection employees should exercise caution in (1) visiting a consumer’s home or place of employment when they are able to contact the consumer through other means, and (2) in visiting a consumer’s home or place of employment when an employee of the lender has recently spoken with the consumer by phone.
If a consumer was not present or not available to speak during an in-person collection visit, an in-person debt collection employee should not attempt to leave a letter for the consumer with a third party, such as the consumer’s supervisor, co-worker, parent, child, or roommate.
An in-person debt collection employee should not discuss the consumer’s debt with third parties or discuss the debt with the consumer in a place where third parties may overhear all or part of the conversation.
An in-person debt collection employee should not visit a consumer’s place of employment (1) when the employee knows or should know that personal visitors are not permitted or that going to a consumer’s place of employment is inconvenient to the consumer, and (2) when the employee knows that the consumer has requested that the lender not communicate with the consumer at work.
The consent order noted that EZCORP would be closing down its financial services division, which offered payday, installment, and auto-title loans, on or before March 31, 2016.
The Bulletin and consent order are strong reminders to first-party debt collectors not otherwise subject to the FDCPA that the CFPB can tag all or any part of their collection activities as unfair, deceptive, or abusive practices. First-party debt collectors should proceed with caution when engaging in field calls, on-site collateral checks, or other in-person debt collection activities.