Top 5 Collection Violations to Watch Out For at Your Credit Union
Top 5 Collection Violations to Watch Out For at Your Credit Union
There are numerous debt collection laws and regulations – and numerous opportunities for errors. Borrowers, their attorneys, and regulators are closely monitoring collection practices. It is important to understand and implement proper collection procedures to avoid liability.
As Elizabeth Fast claims in her March 2022 webinar, “consumer debt collection remains as one of the major sources of lawsuits and enforcement actions. This is no surprise due to the huge number of rules and regulations that have been imposed by the Consumer Financial Protection Bureau (CFPB) over the last several years with respect to consumer collections.”
1. Collecting Debt Not Expressly Authorized
- The Consumer Financial Protection Bureau’s annual report stated that the top consumer complaint was: “Attempts to collect debt not owed.”
- The Consumer Financial Protection Bureau previously reported its concerns that creditors were attempting to collect a debt and/or assess additional amounts in connection with debt (including interest, fees, and charges) not expressly authorized by the agreement creating the debt or permitted by law.
- Review your agreements to confirm that your institution has the right to charge late fees, collection fees, etc.
- Confirm that the amount charged by your institution does not exceed that permitted by law.
2. Failing to Post Payments Timely
The CFPB is concerned that creditors are failing to post the consumer’s payments timely and properly. The claim is that creditors are not properly crediting a consumer account with payments that the consumer submitted on time and then charging late fees to that consumer. To the Consumer Financial Protection Bureau, this appears that the creditor is intentionally doing this to charge late fees.
For example, payments were due on days that the creditor was not open for business to accept the payment.
3. Inconvenient Time for Collections
- The Debt Collection Rule clarifies how the prohibition on communicating or attempting to communicate with consumers at inconvenient or unusual times or places applies to electronic communication media. With respect to all communication media, the Rule clarifies that the consumer does not need to use the word “inconvenient” to designate a time or place as inconvenient.
- Creditors cannot communicate with a consumer at any time that is inconvenient for the consumer.
- In absence of the creditor's knowledge of circumstances to the contrary, the creditor can assume a convenient time is between 8:00 am to 9:00 pm consumer’s time. But if you have knowledge of the consumer's specific circumstances you must follow those.
4. Inconvenient Place
- A creditor does not violate the rule regarding unusual or inconvenient places by calling a mobile phone or sending an electronic communication unless the creditor knows (or has reason to know) that the consumer is at an unusual or inconvenient place.
- For example, the consumer tells the creditor not to communicate with the consumer at a particular place, such as the consumer’s home. The creditor asks whether the consumer intends to prohibit the creditor from communicating with the consumer through all media associated with the consumer’s home, including, for example, mail. Absent such additional information, the creditor knows or should know that communications to the consumer at home, including mail to the consumer’s home address and calls to the consumer’s home landline telephone number, are inconvenient.
- Creditor cannot communicate with the consumer at his/her place of employment if the creditor knows (or has reason to know) the consumer’s employer prohibits the consumer from receiving such communications. There is an exception if prior consent of the consumer is directly given to the creditor.
- A creditor cannot communicate directly with a consumer if they know the consumer is represented by an attorney and can readily ascertain the attorney’s name and address. However, there are two exceptions: 1) if the attorney fails to respond within a reasonable period of time to communication from the creditor; 2) if the attorney consents to the creditor’s direct communication with the consumer.
5. Repeated and Continuous Calls
The following calls do not count toward the above information:
- Calls placed with the consumer's prior consent given directly to the creditor and within a period of no longer than seven consecutive days after receiving the prior consent, with the date the creditor received prior consent counting as the first day of the seven consecutive day period.
- Not connected to the dialed number.
- Calls placed to consumers attorney or credit reporting agency.
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