CFPB Issues $4M in Penalties, Permanent Bans Against Predatory Collection Ring: Report

On May 23, 2022, the Consumer Financial Protection Bureau (CFPB), in partnership with the New York Attorney General, filed a proposed judgment “against a debt collection enterprise with a history of deception and harassment to pay $4 million and be permanently banned from the debt collection industry.”

This follows the September 2020 Federal Trade Commission (FTC) initiative ‘Operation Corrupt Collector’ “to protect consumers.”

The FTC, along with more than 50 federal and state law enforcement partners, focused on several predatory collection methods, including “phantom debt collection,” a practice where companies were trying “to collect debts they cannot legally collect or that a consumer does not owe.”

According to federal regulators in the 2022 case, the group of debt collectors in upstate New York went after their targets “by calling friends, family and employers and orchestrating “smear campaigns” against people they claimed owed money—only one part of the predatory practices the debt collection ring employed.”

As noted in a blog post by TrueAccord, the collection industry has long been scrutinized for the methods used “to engage and recover debts, but technology and social media have created new avenues for predatory practices to evolve.”

In addition to the smear campaigns, other illegal tactics “to collect debt” outlined in the CFPB lawsuit include:

  • Falsely claiming arrest and imprisonment
  • Lying about legal action
  • Inflating and misrepresenting debt amounts owed
  • Harassing people with repeated phone calls
  • Failing to provide legally mandated disclosures
  • Contacting to Collect Via Social Media

As of November 30, 2021, debt collectors can now “contact consumers on social media.”

This change to the Fair Debt Collection Practices Act (FDCPA) did “include specific rules” for social media communications:

  • The message must be private
  • The debt collector must identify themself
  • The debt collector must provide a way for the consumer to opt-out of social media communications

In addition to these new rules under the FDCPA, collectors who abuse or harass consumers via social media “violate the Dodd Frank Act’s prohibition against unfair deceptive abusive acts or practices (UDAAPs).”

The CFPB and FTC through Operation Collection Protection, “also look to prosecute UDAAPs in their protection of consumers.”

Although the majority of collectors do not go as far as committing “emotional terrorism,” as one social media smear campaign victim described in the 2022 lawsuit, finding the appropriate way “to connect with today’s consumers to recover delinquent funds can seem nebulous—and nerve-racking with the potential for hefty penalties.”

Even as communication channels expand and new regulations are handed down, best practices to engage with consumers remain the same: “friendly, humane messages will empower and motivate customers to pay more effectively than aggressive outreach and threats.”

TrueAccord has “proven that this compassionate approach works with more than 16 million customers served, 4.7 on Google reviews, A+ rating with the BBB, overwhelmingly positive customer feedback, and industry-leading recovery results.”

Discover how you can “flip the script on your collection communication with TrueAccord and protect your business and customers.”

You may schedule a consultation to get started.

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