Archive for September 2013

Consent Order Has Broad Impact on Consumer Collections Industry

Yesterday JP Morgan Chase Bank, N.A. and certain of its affiliates entered into a sweeping consent order with the Office of the Comptroller of the Currency covering its practices for collecting debt, as well as the practices used by its third-party service providers, including lawyers.OCC

According to the consent order (available here), the bank, among other things:

  • caused affidavits to be filed in court where the affiant did not have personal knowledge of the assertions made or had reviewed the relevant books and records;
  • allowed the filing of “inaccurate sworn documents” that resulted in judgments with financial errors in favor of the bank; and
  • failed to “sufficiently oversee outside counsel and other third-party providers” who handled its sworn documents and collections litigation.
Concerning Outside Law Firms

The consent order imposes certain requirements upon the bank, which will impact its collections litigation and the practices of its outside collections litigation counsel. Among those requirements are that the bank establish:

  • a plan ensuring that sworn documents and collections litigation, whether performed by the bank or its outside law firms, comply with all applicable federal and state laws, rules, regulations, court orders and attorney ethics requirements;
  • continued training concerning these legal requirements for the employees of the bank, collection agencies and the outside law firms engaged in collections litigation on at least an annual basis, for new hires and after policies and procedures are updated;
  • policies that allow the bank “appropriate oversight” of its collection agencies and outside law firms to ensure they comply with applicable law;
  • policies and procedures for the bank’s due diligence exams of its existing and potential law firms and collection agencies concerning their “qualifications, expertise, capacity, reputation, complaints, information security” and training, among other things.
Concerning the Bank’s Debt Sales

The consent order requires the bank to revise its policies concerning its sales of charged-off consumer debt. Among the requirements imposed by the consent order are the creation of policies that ensure:

  • the accuracy and integrity of “all information” provided to the purchaser;
  • the information provided to debt buyers is sufficient and appropriate for compliant debt collection activities;
  • debt buyers can receive additional information concerning purchased accounts when necessary, “such as during litigation;”
  • the bank engages in initial and ongoing due diligence of the purchasers of the banks charged-off accounts, “including an evaluation of the debt buyers’ past performance with respect to consumer protection and debt collection laws;”
  • the bank has a “thorough understanding” of the “scope of debt buyers anticipated debt collection activities;” and
  • the bank implements a system that monitors complaints and “any allegations of adverse treatment” by debt buyers.
Chase’s Response

The bank issued a press release this morning noting that the issues identified in the consent order “were discovered by Chase in internal reviews that began in 2010.” Chase stated that it had stopped filing credit card collection litigation in 2011 and has not restarted the process. The bank noted that less than 1% of its customers were impacted.”Any mistake is regrettable and does not reflect the high standards we set for ourselves and our commitment to providing all customers an outstanding experience. We are committed to fixing this and getting it right,” the bank said in its release.

In addition to ceasing credit card collection lawsuits, the bank reported that it dismissed the impacted lawsuits.

Impact on the Collections Industry

The consent order touches on many areas of the collection industry and will likely serve as a blueprint for future enforcement actions. Because of the substantial topics covered by the consent order and its impact upon the collections industry, Maurice & Needleman will follow-up with a webinar on Sept. 27, Assessing the Impact of the JP Morgan Chase Consent Order – Today and Tomorrow.

We’ve teamed up with our friends at InsideARM.com to put together a panel of attorneys known for their knowledge and understanding of consumer financial protection law:

Manny Newburger. – Barron & Newburger, P.C.
Joann Needleman – Maurice & Needleman, P.C.
Donald Maurice – Maurice & Needleman, P.C.

The panel will be moderated by Mike Bevel of InsideARM.com.

The webinar begins at 2 p.m. You can register by clicking here.

CFPB Provides Dispute Guidance to FCRA Furnishers on Enhanced e-OSCAR

Changes to the systems by which banks and other entities (also known as “furnishers”)  supply credit reporting agencies with consumer credit information prompted a Bulletin yesterday from the Consumer Financial Protection Bureau emphasizing the greater role it sees documents playing in the consumer credit dispute process.

In announcing its expectation that furnishers review “all relevant information” when responding to consumer disputes, the CFPB reiterates what is already required by FCRA’s section 1681s-2(b). When responding to a consumer’s dispute concerning information furnished by it to a credit reporting agency, a furnisher is required, among other things, to “review all relevant information provided by the CRA . . .”

© thanatip - Fotolia.com

© thanatip – Fotolia.com

But the Bulletin emphasizes that “all relevant information” should now be construed to include “documents that the CRA includes with the notice of dispute or transmits during the investigation.” The emphasis on documents reflects changes in the e-OSCAR system used by furnishers and CRAs to exchange information. The e-OSCAR system recently received the capability to transmit documents to furnishers as part of a consumer’s dispute.  Furnishers, according to the Bulletin, must have systems capable of receiving these documents and consider them as part of their dispute processes.

The Bulletin advises that compliance with the requirement to review “all relevant information” can be demonstrated through, among other things:

1) maintaining a system reasonably capable of receiving dispute information from CRAs, including documents;

2) conducting an investigation of the dispute, which includes review of “all relevant information” provided by the CRA as well as information from a furnisher’s own files 1

Furnishers should anticipate CFPB scrutiny of their dispute processes in light of the Bulletin and undertake appropriate measures, if necessary, to make their systems compliant.

Consumer advocacy organization Public Justice interprets the Bulletin to essentially require a person to “review the documents and [] make a judgment about whether the entry is erroneous.”

A copy of the Bulletin is available here. The CFPB press release concerning the Bulletin can be obtained at this link.

Notes:

  1. In addition, the Bulletin calls for reporting the results of the investigation to the CRA that provided the dispute; if the information was corrected, then provide every CRA that had received the original information with the corrected information; and, for information that is incomplete, inaccurate or cannot be verified, modifying, deleting or permanently blocking such information from being furnished

Federal Court Rules All Debt-Collection Calls Exempt from TCPA

A federal judge in Pennsylvania has ruled that the Telephone Consumer Protection Act does not apply to debt-collection calls, even calls made to cellular telephones. A copy of the decision is available here.

Noting that Congress enacted the TCPA to address telemarketing, the decision relied upon a portion of the Eleventh Circuit Court of Appeals’ decision in Meadows v. Franklin 1 which stated, “the [Federal Communications Commission] has determined that all debt-collection circumstances Robotare excluded from the TCPA’s coverage.”

The decision is certainly in the minority as nearly all courts examining the issue have determined that debt-collection calls made to cellular telephones using an automatic telephone dialing system or a prerecoreded voice violate the TCPA if the called party has not provided their “prior express consent” to receiving such calls. The Federal Communications Commission, which issues TCPA rules, has also considered debt collection calls within the scope of the TCPA. 2

The decision in Roy v. Dell Financial Services is on appeal to the Third Circuit Court of Appeals and we expect a decision within the year.

Roy adds to a Growing List of Confusing TCPA Decisions

Roy joins several decisions over the past six months that have reached extraordinary conclusions, confusing interpretations of the TCPA. In May, a federal judge in the Southern District of Florida ruled that a consumer providing a cell phone number to a creditor is insufficient to establish the TCPA’s prior express consent. 3 Mais rejected the argument it was bound by an FCC ruling, which found that “the provision of a cell phone number to a creditor, e.g., as part of a credit application, reasonably evidences prior express consent by the cell phone subscriber to be contacted at that number regarding the debt.” 4. The Mais decision is on appeal to the Eleventh Circuit Court of Appeals.

A federal court in Wisconsin ruled in March that “preview dialing,” a form of automated dialing that requires human intervention to initiate the call, fell within the TCPA’s coverage. 5  Relying on a 2003 FCC ruling that predictive dialers constitute an automatic telephone dialing system, the court found that the telephony system here, although it did not use the predicative dialer, still had the capacity to perform “predictive dialing.” 6 The decision was later vacated by the court and the case dismissed.

For assistance concerning TCPA issues, contact the attorneys at Maurice & Needleman who regularly defend and provide counsel on TCPA matters. The Consumer Financial Services Blog also provides a re-broadcast of its June 2013 webinar Hot Topics in TCPA Litigation, available here.

Notes:

  1. 414 F. App’x 230, 235 (11th Cir. 2011)
  2. See, FCC Declaratory Ruling, FCC 07-232, para. 11 (January 4, 2008) (“We also reiterate that the plain language of section 227(b)(1)(A)(iii) prohibits the use of autodialers to make any call to a wireless number in the absence of an emergency or the prior express consent of the called party. We note that this prohibition applies regardless of the content of the call, and is not limited only to calls that constitute ‘telephone solicitations.’ However, we agree . . . that calls solely for the purpose of debt collection are not telephone solicitations and do not constitute telemarketing. Therefore, calls regarding debt collection or to recover payments are not subject to the TCPA’s separate restrictions on ‘telephone solicitations.'”)
  3. Mais v. Gulf Coast Collection Bureau, Inc., 2013 U.S. Dist. LEXIS 65603, 14-15 (S.D. Fla. May 8, 2013)
  4. In re Rules Implementing the Tel. Consumer Prot. Act of 1991, 23 FCC Rcd 559, 564 (F.C.C. 2007)
  5. Nelson v. Santander Consumer USA, Inc., 2013 U.S. Dist. LEXIS 40799 (W.D. Wis. Mar. 8, 2013)
  6. Id, citing  In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 18 F.C.C.R. 14014, 14091-93 (July 3, 2003)