On September 13, the House Financial Services Committee approved by a 30-26 vote the Financial CHOICE Act, Congressman Jeb Hensarling’s (R-TX) legislative replacement to the Dodd-Frank Act. In his opening remarks, Hensarling claimed that the bill aims to end bailouts, support economic growth, and provide regulatory relief to community banks. House Democrats did not offer amendments to the bill, although many expressed adamant disapproval. Congresswoman Carolyn Maloney (D-NY) claimed that the “deeply disturbing” legislation “would take us back to the regulatory stone age.” Various Democrats referenced the CFPB’s recent enforcement action against a national bank to argue that the Financial CHOICE Act’s attempt to remove the CFPB’s authority over abusive practices was one of many reasons to oppose the bill. Democrats unanimously voted against the legislation, while all but one Republican, Congressman Bruce Poliquin (R-ME), voted in favor of moving the legislation forward.
On October 11, the CFPB issued a consent order to a Virginia-based federal credit union to resolve allegations that its debt collection activities were unfair and deceptive in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. According to the CFPB’s consent order, the credit union failed to implement adequate compliance controls and employee training on debt collection communications. The credit union’s actions involved employees who sent letters to “hundreds of thousands” of consumers containing various misrepresentations regarding the handling of consumer debt. The consent order alleged that these debt collection letters falsely threatened legal action, wage garnishment, and contacting servicemembers’ commanding officers for failure to remit payments. The consent order also noted that the same threats were made via telephone. The CFPB further contends that the credit union (i) sent approximately 68,000 letters misrepresenting the credit consequences of falling behind on a loan, alleging that members would “find it difficult, if not impossible, to obtain additional credit because of [their] present unsatisfactory credit rating” (internal quotations omitted); and (ii) restricted consumers’ electronic account access and electronic accounts services – without providing adequate notice – once their accounts became delinquent. Pursuant to the consent order, the credit union must (i) pay $23 million in consumer redress; (ii) pay a $5.5 million civil money penalty; and (iii) establish a comprehensive compliance plan regarding its policies and procedures on consumer debt collection communications and electronic account restrictions.
On September 8, the CFPB issued a consent order to a national bank to resolve allegations that its employees opened deposit and credit card accounts for consumers without obtaining consent to do so. According to the CFPB’s consent order, the respondent implemented an incentive compensation program under which employees “engaged in Improper Sales Practices to satisfy goals and earn financial rewards.” The CFPB alleges that the bank’s employees’ Improper Sales Practices were unfair and abusive. Specifically, the consent order alleges that the employees, possibly without consumers’ knowledge or without their consent, (i) opened more than 1.5 million deposit accounts and subsequently transferred money from consumers’ existing accounts to fund the newly opened accounts; (ii) submitted approximately 565,000 credit card account applications on behalf of consumers, with consumers consequently incurring late, annual, and over-draft fees on such accounts; (iii) issued debit cards and created personal identification numbers to activate the cards; and (iv) enrolled consumers in online-banking services. Pursuant to the consent order, the bank, among other things, must pay a civil penalty of $100 million and an expected $2.5 million in consumer redress.
FTC Resolves “Operation Collection Protection” Charges; Bans Companies from Debt Collection Business
On September 7, the FTC announced separate stipulated orders (here and here) against two groups of debt collectors to resolve November 2015 charges that their debt collection practices were deceptive, abusive, and unfair in violation of the FTC Act and the Fair Debt Collection Practices Act (FDCPA). According to the FTC, the first group of debt collectors (i) attempted to collect on debts consumers claimed they did not owe; (ii) failed to verify the debts; and (iii) impersonated law enforcement, threatened non-compliant consumers with arrests and lawsuits, and made accusations of bank fraud. In addition to barring the defendants from debt collection activities and from “misrepresenting material facts about any financial-related products or services,” the order imposes a judgment of more than $4.47 million. Regarding the second group of debt collectors, the FTC alleged that, in addition to threatening consumers with arrest if purported debts went unpaid and harassing friends, family members, and employees in an attempt to collect debts, they sent “alarming and deceptive text messages to trick consumers into contacting them, without identifying themselves as debt collectors.” Pursuant to the final judgment, the defendants must pay a judgment of approximately $27 million. The order imposes a separate judgment of $11,000 on the individually named defendant.
Filed in federal district court of New York, the actions were part of the FTC’s Operation Collection Protection, a federal-state-local initiative that has brought a total of 148 debt collection-related actions to date.
Recently, Representative Blaine Luetkemeyer (R-MO) introduced H.R. 5112, the Unfair or Deceptive Acts or Practices Uniformity Act, to make the authority of the CFPB and FTC more consistent and similar, and to encourage greater communication among regulators. Specifically, the Act would amend Section 1031 of the Dodd-Frank Act by removing the CFPB’s ability to regulate “abusive” conduct from its current authority to regulate “unfair, deceptive or abusive” acts or practices (UDAAP). In addition, the bill would insert the following language at the end of Section 1031: “[i]n prescribing any rule under this subsection, the Bureau shall comply with the requirements of section 18 of the Federal Trade Commission Act (15 U.S.C. 57a) applicable to the Federal Trade Commission when the Commission prescribes rules and general statements of policy under that section with respect to unfair or deceptive acts or practices in or affecting commerce.”