Our Mini-Theme: Debt Collection Issues Reign in the Brave New World of Consumer Financial Services

This month in Business Law Today, we consider one of the leading issues in consumer financial services law: debt collection. The debt collection industry is feeling enormous and unprecedented pressure from both debtors’ attorneys, who are benefitting from the federal Fair Debt Collection Practices Act’s (FDCPA) fee shifting provision, and federal regulators, who are just now venturing into uncharted regulatory territory. Until 2010, the debt collection industry never had a regulator with rulemaking authority at the federal level. Instead, federal courts created a complex body of case law interpreting the FDCPA, with wide variations across jurisdictions. But the Dodd-Frank Act has the potential to change all of that by enabling the Consumer Financial Protection Bureau (CFPB) to make rules under the FDCPA; previously, the Federal Trade Commission (FTC) could enforce the FDCPA, but could not make rules. In its third year of existence, the CFPB is starting to address debt collection while consumers are flooding courts with suits against debt collectors under the FDCPA and its state law counterparts. 

On November 6, 2013, the CFPB issued its Advanced Notice of Proposed Rulemaking (ANPR) for debt collection practices, seeking responses to 450 questions and sub-questions about the debt collection industry. The questions suggest, most notably, that the CFPB is considering bringing creditors within the scope of the FDCPA and potentially imposing time-barred debt disclosures in light of the split among the circuits. This BLT mini-theme is dedicated to examining the current debt collection landscape, which was shaped by federal courts, and considering the future debt collection landscape, which will inevitably be shaped by the CFPB. 

In this issue, Sulejman Dizdarevic and Matthew Stromquist consider whether the FDCPA applies to entities pursuing foreclosure actions. The FDCPA defines “debt collector” as a person regularly engaged in collecting debts on behalf of another. For the purposes of only one specific sub-section of the FDCPA, “debt collector” also includes persons who enforce security interests. This article examines the various ways in which different federal courts and the CFPB address the issue of whether a person foreclosing a security interest is a debt collector. 

Donald Maurice discusses the professional obligations of debt collection attorneys. A number of recent state disciplinary actions have found that debt collection attorneys assisted in the unauthorized practice of law by inadequately supervising out-of-state attorneys when acting as local counsel or inadequately supervising non-attorneys. The article provides guidance on how to handle professional supervisory obligations in the debt collection context. 

Joann Needleman describes the CFPB’s advanced notice of proposed rulemaking for debt collection practices and traces the events leading up to and immediately following Dodd-Frank, including the FTC’s debt collection industry studies. The Dodd-Frank Act of 2010 granted the CFPB specific rule making authority over persons engaged in debt collection. Pursuant to that authority, the CFPB issued a detailed Advanced Notice of Proposed Rulemaking with 450 questions covering a wide range of topics. The article considers how the themes in the ANPR questions indicate what types of rules the CFPB will make, and provides an overview of the comments that the National Association of Retail Collection Attorneys submitted in response to the ANPR. 

Thomas R. Dominczyk asks whether collecting time-barred debt is really worth the risk in light of the onslaught of debtors’ lawsuits and the FTC’s and CFPB’s new focus on time-barred debt disclosures. The article traces the history of the issue, from judicial determinations of whether collection of time-barred debt violates the FDCPA, to the FTC’s requirement in a consent order with Asset Acceptance that it provide a particular disclosure when collecting time barred debt, to debtors asking courts to defer to the FTC’s disclosure requirements in the Asset Acceptance consent order, and finally, to the CFPB’s focus on time-barred debt in its debt collection ANPR and recent amicus briefs.

Rachel Marin analyzes whether and how debt collectors can charge interest under the FDCPA. Courts are divided on whether a debt collector can charge interest once the creditor has charged off the debt and stopped charging interest and what responsibilities a debt collector has to provide the debtor with information about the accrual of interest. This article discusses the nuanced variations across jurisdictions when it comes to these tricky FDCPA issues. 

In his article titled “Affidavits: FDCPA Violation or State Court Concern?,” Shannon P. Miller argues that the use of the FDCPA to challenge state court debt collection litigation infringes upon a creditor’s access to the courts for redress while also overshadowing the state court’s ability to make procedural as well as evidentiary determinations related to matters properly within its jurisdiction.

On April 12, 2014, at the Business Law Section’s Spring Meeting in Los Angeles, the Consumer Financial Services Committee’s Debt Collection Practices and Bankruptcy Subcommittee presented a CLE program titled “Assessing the CFPB's ANPR on Debt Collection Rules.” The presentation was co-sponsored by the Banking Law Committee, Consumer Bankruptcy Committee, and Credit Unions Committee. The panel discussed issues raised by the CFPB’s Advance Notice of Proposed Rulemaking on Debt Collection Rules and the comments made by consumer groups and members of the credit and collection industry. The program was recorded and is available through the Business Law Section’s Program Library.

Additional Resources

For other materials on this topic, please refer to the following. 

BLS Programs Material Library

Debt Collection: The CFPB Steps into the Fray (PDF) (Audio)
2014 Committee Meeting 

Assessing the CFPB's ANPR on Debt Collection Rules (PDF)
2014 Spring Meeting 

Understanding the CFPB's Role in The Debt Collection Market (PDF)
2013 Committee Meeting 

ABA Web Store 

The CFPB & State Attorneys General: A New Age for Consumer Financial Protection (Online Course) (Audio CD-ROM) (MP3 Audio Download)
Recording Date: September 25, 2013
Credit Hours: 1.5 

Consumer Financial Protection Bureau: Investigations, Enforcement Actions, and Settlements (Online Course) (Audio CD-ROM)
Recording Date: June 6, 2013
Credit Hours: 1.5



Nominations Sought for Section Leadership Positions

Do you know anyone who has what it takes to be a good Section leader? The Nominating Committee of the Section needs your recommendations for leadership positions for the 2017-2018 association year. Nominees will be selected for: Chair-elect (who automatically assumes the position of chair the following year); Secretary (who automatically assumes the position of vice chair the following year); Content Officer; two Section Delegates to the ABA House of Delegates; and five additional Council members for a four-year term expiring in 2021. The Nominating Committee will take into account the following principles in making its selections. It will: select nominees who have been substantial and active contributors to the Section; seek geographic diversity in the leadership of the Section; strive for representation from a broad cross-section of the areas of law represented in the Section; and seek to draw leaders from a broad cross-section of the various sectors of practice, including corporate law departments, government, academia and private law firms; and actively recruit nominees that reflect the diversity of the Section. Please send your nominations by email to susan.tobias@americanbar.org no later than November 18.

Question: Between November 2, 2015 and November 4, 2015, Harris Poll conducted an online survey of 2,017 adults ages 18 and older on behalf of NerdWallet, Inc. to understand U.S. consumers’ credit card payment habits and feelings around different types of debt. The results of this study were published in the 2015 American Household Credit Card Debt Study. According to the 2015 American Household Credit Card Debt Study, what percentage of U.S. adults would be more embarrassed to tell others about credit card debt than any other type of debt?
A. 10%
B. 35%
C. 55%
D. 90%

Question: From the late 1600s to the early 1800s, “debtors’ prisons” were commonplace with many cities and states operating brick-and-mortar detention facilities that were designed for incarcerating individuals who were unable or unwilling to pay their debts. Imprisonment for indebtedness was so commonplace that two signatories of the Declaration of Independence were jailed for failure to pay their debts. Can you name those two signatories?

The November issue of Business Law Today will focus on Nonprofits. Articles will range from the “Delaware Advantage” to nonprofit organizations needing nonprofit lawyers. In addition, other features include keeping pace with disruptive technological change, insurance bad faith recoveries, and constitutional issues in granting Americans a “Right to Dispute.”

Do you have a great idea for a BLT article? Would you like to see more of a featured column? Let us know how we can make Business Law Today the best resource for you and your clients. We welcome any suggestions. Please send us your feedback here.

Business Law Section Fall Meeting
November 18-19, 2016
Washington, DC

Business Law Section Spring Meeting
April 6-8, 2017
New Orleans, LA

Miscellaneous IT Related Legal News (MIRLN) 25 September - 15 October 2016 (v19.14)

BLT is a web-based publication drawing upon the best of the Section's resources, including featured articles and other information from around the Section. Stay informed on the latest business law practice news and information that will benefit you and your clients.