On February 22, the Third Circuit sidestepped the Supreme Court’s 2017 holding in Henson v. Santander Consumer USA Inc. and found that a purchaser of defaulted debt qualified as a debt collector under the Fair Debt Collection Practices Act.

In Barbato v. Greystone Alliance, the Third Circuit considered whether an entity that purchased charged off receivables and outsourced the actual collection activity was subject to the FDCPA.  In analyzing the issue, the court explained that the FDCPA’s definition of the term debt collector has two prongs, and if an entity satisfies either of them, it is a debt collector subject to the Act.  Under the “principal purpose” prong, a debt collector includes any person who “uses any instrumentality of interstate commerce or the mails in any business the principal purpose of is the collection of any debts.”  Under the “regularly collects” prong, a debt collector includes any person who “regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.”

The defendant in Barbato, Crown Asset Management, purchased defaulted debt and outsourced the collection function to a third party.  After being sued for allegedly violating the FDCPA, Crown argued (among other things) that under the Supreme Court’s decision in Henson, the Act did not apply to it because Crown owned the debts and thus did not regularly seek to collect debts owed to another.  In response to this argument, the Third Circuit explained that while Henson clarified the scope of the “regularly collects” definition, the Supreme Court “went out of its way in Henson to say that it was not opining on whether debt buyers could also qualify as debt collectors under [the principal purpose prong].”
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CFPB Director Kathy Kraninger has filed her first contested lawsuit as CFPB Director.  Somewhat surprisingly, the lawsuit seeks to enforce a Civil Investigative Demand (CID) issued by the CFPB in June 2017—under former Director Richard Cordray—to a debt collection law firm.  The petition to enforce the CID makes clear that the respondent law firm made a “final, partial, redacted production” in response to the CID in September 2017.  Clearly, therefore, this matter was pending at the CFPB throughout the year-long tenure of Mick Mulvaney, during which the agency took no action to enforce the CID. It is dangerous to read too much into this action, but it does suggest that Kraninger may take a more aggressive enforcement posture than Mulvaney, who was criticized for the sharp drop in the number of enforcement actions under his watch.

The CID at issue is a typically broad CFPB CID from that era. It contains 21 interrogatories with dozens of sub-parts, seven requests for written reports, 15 requests for documents, and, unusually, four request for “tangible things,” in this case phone recordings and associated metadata. Read as a whole, the CID seeks information regarding virtually every aspect of the respondent’s debt collection business over a period of three-and-a-half years. The CID’s Notification of Purpose is equally broad and limitless,
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The California legislature was active in 2018, enacting several new requirements and provisions applicable to the financial services industry. Those requirements include an important and comprehensive privacy regime (the California Consumer Privacy Act of 2018, or CCPA), which establishes new protections for personal information that covered commercial enterprises collect. The CCPA becomes effective January 1,

On October 17, the Bureau of Consumer Financial Protection (“BCFP” or “Bureau”) issued its Fall  2018 regulatory agenda.  Notable highlights include:

  • Payday Lending Rule Amendments. In January 2018, the Bureau announced that it would engage in rulemaking to reconsider its Payday Lending Rule released in October 2017.  According to the Bureau’s Fall 2018 agenda, the Bureau expects to issue a notice of proposed rulemaking by January 2019 that will address both the merits and the compliance date (currently August 2019) of the rule.
  • Debt Collection Rule Coming. The Bureau expects to issue a notice of proposed rulemaking addressing debt collection-related communication practices and consumer disclosures by March 2019.  The Bureau explained that debt collection remains a top source of the complaints it receives and both industry and consumer groups have encouraged the Bureau to modernize Fair Debt Collection Practices Act (“FDCPA”) requirements through rulemaking.  The Bureau did not specify whether its proposed rulemaking would be limited to third-party collectors subject to the FDCPA, but its reference to FDCPA-requirements suggests that is likely to be the case.
  • Small Business Lending Data Collection Rule Delayed. The Dodd-Frank Act amended the Equal Credit Opportunity Act (“ECOA”) to require financial institutions to submit certain information relating to credit applications made by women-owned, minority-owned, and small businesses to the Bureau and gave the Bureau the authority to require financial institutions to submit additional data.  In May 2017, the Bureau issued a Request for Information seeking comment on small business lending data collection.  While the BCFP’s Spring 2018 agenda listed this item as in the pre-rule stage, the Bureau has now delayed its work on the rule and reclassified it as a long-term action.  The Bureau noted that it “intends to continue certain market monitoring and research activities to facilitate resumption of the rulemaking.”
  • HMDA Data Disclosure Rule. The Bureau expects to issue guidance later this year to govern public disclosure of Home Mortgage Disclosure Act (“HMDA”) data for 2018.  The Bureau also announced that it has decided to engage in notice-and-comment rulemaking to govern public disclosure of HMDA data in future years.
  • Assessment of Prior Rules – Remittances, Mortgage Servicing, QM; TRID up next. The Dodd-Frank Act requires the Bureau to conduct an assessment of each significant rule adopted by the Bureau under Federal consumer financial law within five years after the effective date of the rule.  In accordance with this requirement, the Bureau announced that it expects to complete its assessments of the Remittance Rule, the 2013 RESPA Mortgage Servicing Rule, and the Ability-to-Repay/Qualified Mortgage Rule by January 2019.  At that time, it will begin its assessment of the TILA-RESPA Integrated Disclosure Rule (TRID).
  • Abusiveness Rule? Consistent with recent statements by Acting Director Mick Mulvaney that while unfairness and deception are well-established in the law, abusiveness is not, the Bureau stated that it is considering whether to clarify the meaning of abusiveness through rulemaking.  The Bureau under former Director Richard Cordray rejected defining abusiveness through rulemaking (although the payday rule relied, in part, on the Bureau’s abusiveness authority), preferring instead to bring abusiveness claims in enforcement proceedings to establish the contours of the prohibition.  Time will tell if the Bureau will follow through on this.


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Foreign statutory trusts that acquire delinquent residential mortgage loans are NOT required to be licensed under the Maryland Collection Agency Licensing Act (the “Act”), based on an opinion released today by the Maryland Court of Appeals. The opinion reverses lower court rulings that called for such licensing. According to the opinion, the Act’s plain

Nearly seven months into Mick Mulvaney’s tenure as Acting Director of the Bureau of Consumer Financial Protection (Bureau), the agency issued just its second enforcement action under his leadership on June 13, 2018. You may have missed it, as the press release was not pushed out through the Bureau’s email notifications and the cursory press release may have flown under your radar. The settlement is with a parent company and its subsidiaries that originated, provided, purchased, serviced, and collected on high-cost, short-term secured and unsecured consumer loans. The consent order contains allegations of violations of the prohibition on unfair practices under the Consumer Financial Protection Act and of the Fair Credit Reporting Act, and requires the respondents to pay a $5 million civil money penalty. Notably, the consent order does not require any consumer redress, despite Mr. Mulvaney’s stated intent to only pursue cases with “quantifiable and unavoidable” harm to consumers.

Debt Collection Practices

The Bureau alleges that respondents engaged in unfair in-person debt collection practices, including discussing debts in public, leaving the respondents’ “field cards” (presumably identifying the respondents) with third parties (including the consumers’ children and neighbors), and visiting consumers’ places of employment. The Bureau alleges that these practices were unfair because they caused substantial injury such as humiliation, inconvenience, and reputational damage; consumers could not reasonably avoid the harm because consumers were not informed of whether and when such visits would occur and could not stop respondents from engaging in the visits; and any potential benefit in the form of recoveries were outweighed by the substantial injury to consumers. The consent order notes that respondent attempted 12 million in-person visits to more than 1.3 million consumers over a five-year period, and requires respondents to cease in-person collection visits at consumers’ homes, places of employment, and public places.
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Last week, we wrote about how the Bureau of Consumer Financial Protection (“Bureau”) under Acting Director Mick Mulvaney had surprisingly doubled down on claims of unfair, deceptive and abusive practices (“UDAAP”) brought under former Director Richard Cordray in a case against a lead aggregator (back when the Bureau referred to itself as the Consumer Financial Protection Bureau). As if to prove the point that the Bureau is not backing off aggressive UDAAP claims, the very next day the Bureau filed a brief  in another case similarly supporting novel UDAAP claims brought under Cordray. The Bureau’s brief was filed in opposition to a motion to dismiss by defendants Think Finance, LLC and related entities. The case involves Bureau claims that Think Finance engaged in unfair, deceptive and abusive conduct when it attempted to collect on loans that were, according to the Bureau, void under state law.
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In an email to staff, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray announced on Wednesday, November 15, that he will be stepping down this month.  His departure was widely anticipated.  Because the CFPB is headed by a single director – as opposed to a 5-member commission – the agency’s director wields enormous power. Below we address some of the most frequently asked questions regarding Director Cordray’s resignation.

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Pay-by-phone fees continue to attract the Consumer Financial Protection Bureau’s attention. Compliance Bulletin 2017-01, issued on July 27, 2017, indicates that the following acts or practices may constitute unfair, deceptive, or abusive acts or practices (“UDAAP”) or contribute to the risk of committing UDAAPs:

  1. Failing to disclose the prices of all available phone pay

On May 15, the Supreme Court held that a debt collector does not violate the Fair Debt Collections Practices Act (FDCPA) by knowingly attempting to collect a debt in bankruptcy proceedings after the statute of limitations for collecting that debt has expired. As explained in Mayer Brown’s Decision Alerts, the FDCPA generally prohibits a