Fair Debt Collection Practices Act (FDCPA) and large debt collection participants

The FDCPA defines a debt collector as any person who regularly collects, or attempts to collect, consumer debts for another person or institution or uses some name other than its own when collecting its own consumer debts.

The FDCPA defines who’s a “consumer”; when, where and with whom communication may be permitted with a consumer and third parties; and when communications must cease.

The FDCPA contains a number of provisions that debt collections must follow in the collection of a debt, including:

• Validating the debt requirement
• Prohibition against harassing or abusive practices
• Prohibition against providing false or misleading information
• Prohibition against using unfair or unconscionable means to collect a debt
• Requirement that payments must be applied in accordance with the consumer’s instructions in the event of multiple debts
• Prohibition against furnishing deceptive forms

The Consumer Financial Protection Bureau (CFPB) issued a final rule under 12 CFR Part 1090, which allows the CFPB to supervise large debt collection participants, such as agencies, as well as write future regulations for the industry and enforce them as necessary.

CFPB’s examiners look for potential risks to consumers and whether entities are complying with requirements of federal consumer financial laws, especially the FDCPA. In particular, examiners will be reviewing the practices of debt collectors in at least the following areas:

• Required disclosures: Evaluate whether entities are properly identifying themselves and properly disclosing the amount of debt owed.
• Accurate information: Assess whether debt collectors are using accurate data in their pursuit of debt.
• Consumer complaint and dispute resolution process: Assess whether complaints are resolved adequately and in a timely manner, whether the complaints highlight violations of federal consumer financial law and whether the debt collector has a process in place to address consumer disputes.
• Communications with consumers: Assess whether debt collectors have harassed or deceived consumers in pursuit of debt.

Under the rule, a nonbank covered person is a larger participant of the consumer debt collection market if the nonbank covered person's annual receipts resulting from consumer debt collection are more than $10 million. The CFPB has begun notifying larger participants and begun onsite examinations and monitoring through its compliant process.

With some limited exceptions, the rules use the same definition for a debt collector as found in the FDCPA. Generally, the rule will include collection agencies, debt buyers and collections attorneys. The CFPB has estimated that it will cover about 175 debt collectors, which accounts for over 60 percent of the debt collection industry’s receipts.