CFPB Cites Problems Among Debt Collectors, Payday Lenders

Recently, the Consumer Financial Protection Bureau (CFPB) released a report highlighting abusive and unlawful practices in the payday loan, debt collection, and consumer reporting markets.

The released Supervisory Highlights report, the fourth report of its kind by the CFPB, examines findings such as regulatory violations or unfair, deceptive, or abusive acts or practices (UDAAPs), in selected program areas so that industry participants can use the information to ensure their operations remain in compliance with Federal consumer financial law.

The report also revealed that nonpublic CFPB supervision from November 2013 to February 2014 led to the return of over $70 million in remediation to approximately 775,000 U.S. consumers.

“For the first time at the federal level, nonbank financial institutions are subject to supervisory oversight that holds them accountable for how they treat consumers,” said CFPB Director Richard Cordray. “The CFPB’s oversight of banks and nonbanks alike is exposing risky practices and getting results for consumers. We are pleased that our supervision program has been able to return more than $70 million to consumers in recent months.”

The report summarizes the many inefficiencies and unlawful practices in the payday lending industry. An example of these illegal actions by agencies is the threatening of consumers with the use of unsubstantiated legal action or additional fines in order to collect debts. The CFPB also found that several payday lenders used private consumer information, which they require in order to be used for credit references, in order to locate and harass a consumer in the case of a default.

Debt collectors were also cited for numerous violations. While similarly using deceptive threats towards consumers to use litigation in order to collect debt, the CFPB found that these companies oftentimes violated the law by making excessive and prohibited phone calls to consumers. One company was found to be contacting over 1,000 consumers as often as 10 times a day.

In the consumer reporting market, the CFPB most notably found numerous problems with agencies failing to properly handle consumer disputes, including one agency refusing to even accept disputes which were filed both by phone and online.

According to the CFPB, the “report aims to share information that all industry participants can use to ensure their operations remain in compliance with federal consumer financial law. In all cases where CFPB examiners find problems, they alert the company to their concerns and outline necessary remedial measures. When appropriate, the CFPB opens investigations for potential enforcement actions.”