FDIC fines bank $1.8 million for UDAP violations in collecting commercial debt

Ballard Spahr LLP

Ballard Spahr LLP

The FDIC’s settlement with Umpqua Bank announced yesterday is notable because the bank’s collection practices found to be unfair and deceptive involved commercial equipment financing offered by the bank’s wholly-owned subsidiary.  The stipulated Order to Pay Civil Money Penalty requires the bank to pay a $1.8 million CMP.

The practices that the FDIC found to violate Section 5 of the FTC Act consisted of:

  • Charging various undisclosed collection fees to borrowers whose accounts were past due, such as collection call and letter fees and third-party collection fees.
  • Engaging in excessive and sequential collection calls to customers, even when customers requested the subsidiary to stop these calls.
  • Disclosing information about the customers’ debts to third parties.
  • Advising borrowers that the subsidiary would report delinquencies on commercial debt to consumer reporting agencies, when its policy and practice was not to report such delinquencies to consumer reporting agencies.

The bank also voluntarily paid approximately $1,628,000 in restitution to the 16,902 customers who were charged the undisclosed collection fees.

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Ballard Spahr LLP

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