Collector - October 2016 - 44
COMPLIANCE
UDAAP: "A" is for Abusive
Recent CFPB enforcement actions have provided some specific
examples of what's considered "abusive" conduct.
By Andrew Pavlik
B
y now, most debt collectors are
aware that the Consumer Financial
Protection Bureau has the authority
to protect against unfair, deceptive or
abusive acts or practices (UDAAPs). The
concepts of "unfair" and "deceptive" acts and
practices were borrowed from the Federal
Trade Commission Act, but Congress added
the additional concept of "abusive" when it
passed the Dodd-Frank Wall Street Reform
and Consumer Protection Act in 2010.
At the time, there was considerable case
law detailing the unfair and deceptive prongs
of the statute, but there was little information
as to what would be considered abusive.
Under the law, an act or practice is abusive
when it:
* Materially interferes with the ability
of a consumer to understand a term
or condition of a consumer financial
product or service; or
* Takes unreasonable advantage of;
> A consumer's lack of understanding
of the material risks, costs, or
conditions of the product or
service;
> A consumer's inability to protect his
or her interests in selecting or using a
consumer financial product or service; or
> A consumer's reasonable reliance on
a covered person to act in his or her
interests.
Though this description helps outline
the concept, it does not provide examples
44
of abusive conduct-leaving industry
participants to speculate what the CFPB may
consider "abusive." Recent CFPB enforcement
actions, however, provide a few specific
examples of "abusive" conduct. While there
are still relatively few cases alleging abuse
under UDAAP, two recent actions involving
debt collection from military service
members provide a few specific examples of
"abusive" conduct, as well as some insight into
practices that are abusive.
In one action, the CFPB alleged a lender
engaged in abusive conduct by filing
lawsuits against military service members
in a state in which the consumers had not
signed their contracts and did not reside.
These suits were based on a venue selection
clause in the contract.
The CFPB claimed the clause took
unreasonable advantage of consumers'
inability to protect their interests while
using or choosing credit agreements
because most consumers were unaware that
contracts contained venue selection clauses,
had little opportunity to review contracts
at the time of signing, and the clause was
non-negotiable. Based on these factors, the
CFPB claimed the practice of filing suits
in distant venues was an abusive practice
under UDAAP.
In another example, the CFPB alleged a
lender threatened to contact and actually
contacted military service members'
commanding officers regarding debts.
Although the contracts included a provision
authorizing such contacts, the CFPB
found that consumers were unaware of the
provision and that it was non-negotiable.
The lender also allegedly stated that failure
to pay a debt could result in an action against
the consumer under the Uniform Code of
Military Justice, resulting in adverse career
consequences, when in fact such actions
were unlikely to occur.
The CFPB asserted that threats to
contact commanding officers and
exaggerated claims about impacts to
military careers brought enormous
pressure on service members that would
not be available with civilian borrowers
and took unreasonable advantage of
consumers' inability to protect their
interests by leveraging their military
status. Based on these allegations, the
CFPB found the conduct abusive under
UDAAP.
It's notable that both actions concerned
service members. This may be an indication
that certain populations may be more prone
to abuse than the general population due
to factors that are unique to that group of
consumers. Upcoming CFPB enforcement
actions will no doubt continue to shed light
on what collection practices fall under this
broad definition.
Andrew Pavlik is ACA International's senior
compliance analyst.
ACAINTERNATIONAL.ORG
http://www.ACAINTERNATIONAL.ORG
Table of Contents for the Digital Edition of Collector - October 2016
President’s Page
Industry News
Best Practices
FYI
Collection Tips
Connect the Dots
Looking Deeper
Head of the Class
Calendar
Honor Roll
The Formula of Five
How to Create Winning Bids and Proposals
A Running Start
ACPAC Election Watch
ACA’s Industry Advancement Program Aids Eleventh Circuit Win for Member Company
Compliance
ACA SearchPoint
Last Word
Collector - October 2016 - Cover1
Collector - October 2016 - Cover2
Collector - October 2016 - 1
Collector - October 2016 - 2
Collector - October 2016 - President’s Page
Collector - October 2016 - Industry News
Collector - October 2016 - 5
Collector - October 2016 - 6
Collector - October 2016 - 7
Collector - October 2016 - Best Practices
Collector - October 2016 - 9
Collector - October 2016 - FYI
Collector - October 2016 - 11
Collector - October 2016 - Collection Tips
Collector - October 2016 - 13
Collector - October 2016 - Connect the Dots
Collector - October 2016 - 15
Collector - October 2016 - 16
Collector - October 2016 - 17
Collector - October 2016 - 18
Collector - October 2016 - 19
Collector - October 2016 - Looking Deeper
Collector - October 2016 - 21
Collector - October 2016 - 22
Collector - October 2016 - 23
Collector - October 2016 - Head of the Class
Collector - October 2016 - 25
Collector - October 2016 - 26
Collector - October 2016 - 27
Collector - October 2016 - Calendar
Collector - October 2016 - Honor Roll
Collector - October 2016 - The Formula of Five
Collector - October 2016 - 31
Collector - October 2016 - How to Create Winning Bids and Proposals
Collector - October 2016 - 33
Collector - October 2016 - 34
Collector - October 2016 - 35
Collector - October 2016 - A Running Start
Collector - October 2016 - 37
Collector - October 2016 - 38
Collector - October 2016 - 39
Collector - October 2016 - ACPAC Election Watch
Collector - October 2016 - 41
Collector - October 2016 - ACA’s Industry Advancement Program Aids Eleventh Circuit Win for Member Company
Collector - October 2016 - 43
Collector - October 2016 - Compliance
Collector - October 2016 - 45
Collector - October 2016 - ACA SearchPoint
Collector - October 2016 - 47
Collector - October 2016 - Last Word
Collector - October 2016 - Cover3
Collector - October 2016 - Cover4
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