How Smaller Firms Are Not Exempt From the CFPB’s New Rules

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While the bulk of the new rules enacted by the Consumer Financial Protection Bureau (CFPB) are aimed at the bigger banks and servicers of consumer loans, small banks will also experience some changes.  The January 10, 2014 deadline for these rules to go into effect has already passed, meaning that all firms (including the small, community banks) must now comply with the new regulations with new procedures or face heavy fines. 

Since the smaller banks and lending firms are often unprepared for this level of in-house scrutiny and regulatory compliance measures, many will look to third-party vendors for solutions to handling the increased workload of ensuring all transactions are compliant.  According to the CFPB’s new rules, these smaller firms will be responsible for the actions of their third-party vendors—including all debt collection practices—making their financial interest in maintaining compliance even more significant. 

Since the CFPB has made it clear that all servicers, whether large or small, are expected to uphold the new regulations or suffer penalty, no firm will be given special consideration unless it services 5,000 or fewer mortgages as of the first of each year.  However, even in this special circumstance, the smaller firm must originate and own the loans.  If it services loans that are originated or owned elsewhere, the exemption does not apply, even if that total number of loans falls beneath the 5,000 cut-off amount. 

There are loss mitigation requirements that are also required of the small servicers.  A notice of foreclosure or filing of foreclosure cannot be processed until the borrower has reached 120 days of delinquency on his or her loan.  Additionally, the foreclosure cannot be continued and the sale cannot be conducted if a borrower is following specific actions stated within the loss mitigation agreement.  

What are the biggest changes anticipated from the Consumer Financial Protection Bureau's proposed new rules?

Do Debt Collectors REALLY Need to Follow Their Industry Regulations?

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You don’t need me to tell you the debt collection field is filled with unscrupulous individuals looking to make a quick buck by taking advantage of the desperation of both their clients and their debtors. Left to their own devices, most debt collectors would employ every thug tactic they could think of in order to get debtors to pay up. Thankfully the debt collection field is highly regulated and any law firm or agency looking to collect debts needs to comply with these laws to the letter if they want to stay in business.

The two primary sets of regulations relating to the debt collection field are the Fair Debt Collection Practices Act (FDCPA) and the Telephone Consumer Protection Act (TCPA). Let’s take a minute to outline what these acts state when it comes to how we can perform our duties.

The TCPA was primarily designed to rein in telemarketers, but it applies to debt collection agencies and firms as well. Under the TCPA, no debt collection professional is allowed to do the following actions:

• Call between 9 p.m. and 8 a.m. local time
• Call individuals on the Do Not Call list
• Refuse to provide their agency’s identifying information
• Solicit using automated messages
• Engage more than 2 lines of a business with automated calls

Each instance of breaking one of these regulations can result in a fine of $500 - $1,500 a piece, making the TCPA costly to violate!

The FDCPA works in much the same way, but isn’t limited exclusively to regulating telephone calls. Under the FDCPA, debt collectors can’t misrepresent themselves, their intentions, or their capabilities. The FDCPA also prevents collectors from being able to embarrass or harass their debtors through a variety of once-common practices.

For legal, financial, and ethical reasons, it’s wise to ONLY work with debt collectors who follow these regulations as closely as possible!