A recent Federal Trade Commission ("FTC") settlement
with debt buyer Asset Acceptance Capital Corp. is the latest of
several actions against companies that profit from consumers in
financial distress. The settlement illustrates the type of
pro-consumer disclosures we expect the FTC to demand in connection
with investigations and enforcement actions going forward. We
also expect the new federal Consumer Financial Protection Bureau
("CFPB") to follow this course through industry specific
regulations for debt collectors and debt buyers that are on the
horizon.
Asset Acceptance purchases old debts from companies at a fraction
of the face amount and then attempts to profit by collecting on
those debts. Under the settlement, the company has agreed to
pay a $2.5 million civil penalty to settle FTC charges that it made
misrepresentations when trying to collect old debts, including
failure to inform consumers when a legal action to enforce the debt
would be time-barred. The settlement requires that, after a
consumer disputes the accuracy of a debt and before the debt buyer
places the debt on a consumer's credit report, the debt buyer
must investigate the dispute and ensure it has a reasonable basis
to claim the consumer owes the debt. The proposed order also
bars the company from placing debt on consumer credit reports
without notifying the consumer about the negative
report.
The FTC and the CFPB share law enforcement authority under the Fair
Debt Collection Practices Act ("FDCPA"). In
addition, the Dodd-Frank Wall Street Reform and Consumer Protection
Act (the "Dodd-Frank Act") grants the CFPB rulemaking
authority under the FDCPA and authority to supervise and enforce
compliance with the FDCPA. On top of all of this, the CFPB
has broad authority to prohibit acts or practices the CFPB
determines are unfair, deceptive, or abusive.
According to a Memorandum of Understanding between the FTC and
CFPB, the agencies will consult with one another before either
issues formal guidance documents addressing unfair, deceptive, or
abusive acts or practices under Dodd-Frank Act Section 1031, FTC
Act Sections 5 and 18, and among several federal laws, the FDCPA
and the Fair Credit Reporting Act ("FCRA").
The FTC's enforcement actions and investigations into the
activities of debt collectors and debt buyers highlight the ongoing
focus by the FTC and now the CFPB into the practices of anyone that
collects or buys debt.
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