Big Picture
Although the Fair Debt Collections Practices Act (FDCPA) is applicable only to third-party debt collectors, prevailing industry standard practice is for first-party debt collectors to adopt the FDCPA’s key requirements as a matter of policy. The FDCPA prohibits debt collectors from using unfair, deceptive, or abusive practices when collecting debts. This includes actions that include harassing consumers with repeated calls, making false threats of arrest or legal action, or disclosing debt information to unauthorized third parties. Violations of the FDCPA can result in civil liability, including statutory damages of up to $1,000 per individual lawsuit, plus actual damages, attorney’s fees, and court costs. In addition, the CFPB and FTC can take enforcement action against violators, leading to civil penalties and restitution. It is critical for financial institutions to consistently evaluate their debt collection practices and processes to mitigate risks associated with violations of the FDCPA.
Client Scenario
A community-focused digital banking institution engaged Asurity Advisors to conduct a mock exam of their collections program related to collections for direct and indirect vehicle secured loans (“auto loans”). The goal was to proactively identify and address potential gaps identified with the bank’s debt collection practices. The lender achieved strategic benefits through this proactive approach which transformed compliance from a defensive practice into an operational strength. The end result allowed the lender to implement stronger controls, improve oversight, and demonstrate its commitment to doing the right thing.
Asurity Solution
Asurity Advisors leveraged industry expertise, extensive knowledge of the FDCPA, and the CFPB’s Supervision and Examination Manual to conduct a mock exam to assess the quality of the bank’s compliance management systems specific to controls, policies, and procedures for its debt collection activities. Additionally, the mock exam would identify acts or practices that materially increased the risk of violations of consumer financial laws associated with the collection of debts. Lastly, the mock exam gathered facts that allowed Asurity to determine if the bank engaged in acts or practices that put the institution at risk of violating requirements of federal consumer protection laws. Upon completion of the project, Asurity provided a report of findings, observations, and recommendations identified in the mock review pertaining to the servicing portfolio.