As a follow up to prior blogs, I wanted to provide a list of those states and cities that have enacted legislation compelling employers to provide their employees with paid sick leave.   We had previously discussed the new laws in California and Philadelphia.  Now Pittsburgh is following suit, and so have other states and cities. Under the new Pittsburgh law, effective January 11, 2016, all full-time and part-time employees working in the city of Pittsburgh, excluding independent contractors, state and federal employees, any members of construction unions subject to collective bargaining agreements, and seasonal employees notified in writing when hired that they will not work more more than 16 weeks during the year, will accrue one hour of paid sick leave for every 35 hours worked (including overtime hours).

Pittsburgh employers with 15 or more employees must permit employees to accrue 40 hours of paid sick leave per year while employers with less than 15 must permit employees to accrue 24 hours of paid sick leave per year.  Those employees must be allowed to carry over accrued sick leave from year to year but employers need not allow them to use more than 40 hours (or 24 for smaller employers) of that paid sick leave in a given year.  In lieu of the carryover, employers can choose to provide all of the required sick leave at the beginning of the year, to avoid that carryover of unused leave.   For those smaller employers, they are only required to provide unpaid sick leave (accrued at the same rate state above) for the first year after the law is enacted.  The Pittsburgh law also has stated terms and regulationsfor permitted use and increments of using the leave, notice, documentation and posting requirements, recordkeeping and prohibited conduct, to name a few.

As far as the rest of the country, California, Connecticut, and Massachusetts are the only states that have enacted legislation to allow statewide paid sick leave.  It is expected that other states and cities will attempt to follow the trend– specifically Oregon, who recently adopted a paid sick leave and safe[1] leave law that will be effective next year.  Tacoma, WA and Montgomery County, MD (the first county to do so) also passed sick and safe leave laws also to be effective in 2016.  In some jurisdictions, such as San Diego, proposed laws such as these have been met with opposition.

As far as cities go, Eugene, OR, Newark, Jersey City, Irvington, Passaic, East Orange, Paterson, Trenton, Montclair, Bloomfield, New York City, Oakland, Philadelphia, Pittsburgh (discussed above, effective 1/1/16), Portland, OR, San Francisco, Seattle, and Washington, D.C., already have laws on the books that allow workers to earn paid sick leave, or in a few of those cities, also allows workers to earn paid safe days as well.

For more detailed information on the new Pittsburgh law, or any employer vacation/sick/PTO policies around the country, please contact Dana Perminas at 312-334-3474 or for more information.

[1] Safe Day laws involve allowing an employee paid days off in the event care or treatment is needed for domestic violence, sexual assault or stalking.


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CFPB to Curb Mandatory Arbitration in Bank Contracts

On October 7th, 2015, the Consumer Financial Protection Bureau (“CFPB”) is set to propose new regulations which would prohibit financial institutions from including arbitration clauses that revoke consumers’ rights to class-action litigation. Such clauses appear in a broad range of financial contracts including, but not limited to, those for credit cards, checking and deposit accounts, prepaid cards, money transfer services, home mortgages, and private student loans. Through this proposal, the CFPB hopes to shift more power to consumers but in doing so, it has sparked national debate as to whether consumers are actually helped or harmed by arbitration agreements. According to a March study conducted by the CFPB, mandatory arbitration clauses affect millions of consumers, of which only 7% were aware such clauses restrict their rights to sue in court. The CFPB hopes their findings will justify the pending regulations; Opponents of the proposed regulation maintain that consumer class actions often times do little to help consumers and impose huge costs to businesses.

For more information regarding the proposed regulations or about the CFPB generally, contact Joseph Messer at 312-334-3440 or

Account Number on Envelope Not a FDCPA Violation

On March 17, Judge Milton I. Shadur, a Senior U.S. District Judge for the Northern District of Illinois, dismissed a Fair Debt Collection Practices Act (“FDCPA”) case, which alleged an account number on an envelope violated the statute, just one day after the complaint was filed. In Sampson v. MRS BPO, LLC, No. 15-C-2258, 2015 WL, the court held that revealing an indecipherable sequence of numbers and symbols on the outside of an envelope was not abusive and, therefore, could not violate the FDCPA. In his Opinion, Judge Shadur wrote, “It takes only a quick look at those two exhibits to see that the Complaint is a bad joke -- a joke because the claims are so patently absurd, and a bad one because $400 has been wasted on a filing fee.” The Court reasoned the public would need supernatural powers to determine the letter held inside the envelope was sent in an effort to collect a debt.

The attorney who represented Plaintiff is now facing sanctions for his conduct.

For more information regarding this case and what abusive behaviors the FDCPA covers, contact Joseph Messer at or (312) 334-3440.

New York Department of Financial Services Clarifies Debt Collection Regulations

On February 19, 2015, the New York State Department of Financial Services (the “Department”) issued answers to frequently asked questions to assist debt collectors and debt buyers in understanding and complying with the recently enacted rules regulating debt collection practices in the state of New York.  For a quick overview of the newly enacted New York regulations see December 8, 2014 Blog Post titled “New York Issues New Rules on Debt Collection.”  The FAQs are available on the Department’s website: Note that the Department is likely to update its website with additional information as it continues to receive questions regarding the new regulations.  Accordingly, debt collectors and debt buyers are encouraged to visit the website as the effective date for the regulations approaches. As a reminder, the new regulations will take effect on March 3, 2015, with the exception of Sections 1.2(b) (disclosure requirements) and 1.4 (substantiation requirements), which take effect on August 30, 2015.  Debt collectors who collect in the state of New York should examine the regulations and newly issued FAQs and prepare compliance plans to meet the new requirements.

For more information on the new regulations and/or compliance recommendations, contact Katherine Olson at (312) 334-3444 or


On May 22, 2014, the Consumer Financial Protection Bureau (“CFPB”) issued its Spring 2014 Supervisory Highlights Report, which includes a review of recent rulemaking, guidance, and enforcement activity.  The CFPB uses its fourth edition since the agency’s founding to reiterate the importance of robust compliance management systems. 

The report notes that a well-developed compliance management system (“CMS”) establishes an entity’s compliance responsibilities; ensures those responsibilities are communicated to employees; ensures that responsibilities for meeting legal requirements and internal policies are incorporated into business process; requires reviews of operations to ensure responsibilities are carried out and legal requirements are met; and requires corrective action when necessary, including updates to tools, systems, training, and materials.  While the CFPB does not require a particular CMS structure, the CFPB reasons that an effective CMS commonly has four interdependent control components: (1) board of directors and management oversight; (2) a compliance program; (3) consumer complaint management program; and (4) an independent compliance audit.  “When all of these control components are strong and well-coordinated, a supervised entity is likely to be more successful at managing its compliance responsibilities and risks.”

Some interesting highlights from the Spring 2014 Report include:

-    CFPB Supervision found that board of directors and senior management at some consumer reporting agencies (“CRAs”) exercise insufficient oversight of the entity’s CMS, with at least one of the CRAs lacking a chief compliance officer or an official with comparable responsibility for company-wide compliance oversight.

-    CFPB examinations found that some CRAs fail to exercise adequate oversight of their business relationships with third-party service providers and that one or more of the CRAs failed to monitor and track consumer complaints altogether.

-    CFPB Supervision observed significant weaknesses in the CMS of several debt collectors.  For example, CFPB Supervision determined that at least one entity had inadequate written CMS policies and procedures and lacked sufficient board and management oversight of CMS.

-    For one debt collector, CFPB Supervision determined that the entity made approximately 17,000 calls to consumers outside the appropriate calling hours set forth in the FDCPA, in addition, the entity also violated the FDCPA when it repeatedly contacted more than one thousand consumers, contacting some consumers as often as 20 times within two days. 

-    CFPB Supervision has cited multiple lenders for unfair, deceptive, or abusive acts or practices, or risks of these acts or practices, for their policies of: repeatedly making unnecessary calls to third parties; improperly disclosing personal debt information; calling borrowers in violation of do-not-call requests; and making false claims during collection calls.

-    The CFPB’s nonpublic supervisory actions have “resulted in more than $70 million in remediation to over 775,000 consumers.”

As with previous Supervisory Highlight Reports, the 2014 spring edition provides insight into the CFPB’s supervisory and enforcement priorities.  For more information on the CFPB and its supervisory role, please contact Katherine Olson of Messer Strickler, Ltd. at 312-334-3444 or   

Bank of America to Pay $727 Million for Illegal Credit Card Practices

Last month, the Consumer Financial Protection Bureau (“CFPB”) issued a consent order to Bank of America, N.A. and FIA Card Services, N.A. (“BOA”) instructing them to pay an estimated $727 million in relief to consumers harmed by deceptive marketing of credit card add-on products.  According to the CFPB, the relief will spread to approximately 1.4 million consumers. Additionally, BOA will pay $20 million to the CFPB as a civil money penalty.

BOA marketed two credit card payment protection products, “Credit Protection Deluxe” and “Credit Protection Plus” from 2010 through 2012.  According to the CFPB, these products were marketed as an opportunity to reduce incurred debt if certain hardships occurred in the future, such as disability or involuntarily unemployment. Allegedly, the bank misled its customers about the enrollment process for the credit protection products, the cost of the first 30-day coverage, and the benefits of credit protection products. 

The CFPB also ordered BOA to submit a compliance plan to the CFPB concerning these products and services and prohibited the bank from marketing any credit monitoring or credit protection add-on products in the interim. CFPB Director Richard Cordray commented:

“Bank of America both deceived consumers and unfairly billed consumers for services not performed.  We will not tolerate such practices and will continue to be vigilant in our pursuit of companies who wrong consumers in this market.”

This enforcement action originally arose as a result of an investigation began by the Office of Controller of the Currency (“OCC”) in connection with the unfair billing practices of the identity protection credit card products. The OCC has also ordered BOA to pay $25 million in civil money penalties for unfair billing practices. 

For more information regarding this enforcement action, the CFPB or CFPB compliance, you may contact Nicole Strickler at (312) 334-3442 or at

Time-Barred Debt Collection Can Violate FDCPA According to Joint CFPB-FTC Brief

On March 7th, 2014, the Consumer Financial Protection Bureau (“CFPB”) and Federal Trade Commission (“FTC”) filed a joint amicus brief with the Sixth Court of Appeals arguing that a settlement offer on an out-of-state account can mislead a consumer thus violating the Fair Debt Collection Practices Act (“FDCPA”).  The brief was filed in a class action case Buchanan v. Northland Group, which has been dismissed by a district court and is currently on appeal to the Sixth Circuit Court.

In Buchanan, the debt collector sent plaintiff a dunning letter that offered Buchanan an opportunity to settle the debt which was beyond the statute of limitations.  Plaintiff filed a class-action complaint accusing Northland Group of violating the FDCPA by using “any false, deceptive, or misleading representation or means in connection with the collection of any debt” in its letter.  The Western District of Michigan ruled that, the letter could not have violated the FDCPA as a matter of law, and dismissed the claim.

In their brief, the CFPB and FTC contend that court’s decision should be reversed because the statements in their dunning letter to the consumer could “deceive or mislead ‘the least sophisticated consumer’ whom the FDCPA was enacted to protect”.  More specifically, Buchanan could be misled into believing that she could be sued for the debt by the wording of a dunning letter which stated that her balance would continue to accrue interest.   The letter also included a warning that the company was not under obligation to renew their settlement offer.  The CFPB and FTC also bring to attention of the court that the dunning letter did not inform the consumer that the statute of limitation on the debt addressed in the letter had expired, arguing that “omissions may also deceive” the consumer. 

The CFPB and FTC filed a similar joint brief in 2013 in Delgado v. Capital Management Services, LP, et al.  In Delgado, the argument is also concerning a settlement offer on a time-barred debt made in a dunning letter.  On March 11, 2014, the Seventh Circuit sided with the CFPB and FTC when it found the defendant-debt collector’s dunning letter potentially misleading.  Specifically, the Seventh state at the record showed that the dunning letter did not inform the plaintiff that debt was subject to statute of limitations defense, and plaintiff alleged that defendant’s use of offer to “settle” the debt gave her impression that underlying debt was legally enforceable. 

Briefs filed in Buchanan and Delgado show that both the CFPB and FTC are concerned about the communications with consumers regarding time-barred debt.  The CFPB also discusses questions concerning time-barred debt in Part IV of its Advanced Notice of Proposed Rulemaking (“ANPR”).  The CFPB expresses its interest in comments about the needs for rules related to collection of time-barred debt.  The CFPB states that “there are no requirements set forth in the FDCPA or the Dodd-Frank Act regarding time-barred debts” and considers creating uniform notices that would be used by collectors to inform consumers regarding their rights in respect to time-barred debt.

We will keep you inform of future developments in this contentious area of the law.  If you have questions regarding these cases or issues regarding the collection of time barred debtsfeel free to  contact Joseph Messer at (312) 334-3440 or at

Don’t Just Delete! CFPB Reminds Furnishers to Properly Investigate Disputes

Recently, the Consumer Financial Protection Bureau (“CFPB”) issued a bulletin to highlight the obligations that debt buyers, debt collectors and others who furnish information to credit reporting agencies (“CRAs”) have under the Fair Credit Reporting Act (“FCRA”) to investigate disputed information in a consumer report. 

Interestingly, one of the main concerns echoed by the CFPB is the practice of merely deleting a line item on a report in lieu of conducting an investigation. Proper investigations of disputes, according to the CFPB, are important because they provide critical checks on the accuracy of furnished information.  Investigations prompt a furnisher to reconsider information that a consumer has identified as incorrect, a process that not only helps the individual consumer at issue but also help furnishers identify systematic problems in their system. If a furnisher’s practice is merely to delete disputed entries instead of conducting an investigation, consumers are denied the full protections of the FCRA. For example, furnishers must provide notice of information found to be inaccurate to all consumer reporting agencies to which it reports. If a furnisher did not conduct an investigation, it may not provide this notice to all credit reporting agencies. Thus, furnishers should not assume that deleting an item will generally constitute a reasonable investigation.

The CFPB has been and will continue to monitor furnishers’ compliance with the FCRA and other federal consumer financial laws and regulations, especially regarding consumer disputes of information they have furnished to CRAs.  As a result, it is important to ensure that your organization is following the CFPB’s established protocol in handling disputes. For more information on the FCRA and CFPB’s enforcement and supervisory actions, contact Nicole Strickler at (312) 334-3442 or at

Debt Collection Complaints Analyzed in CFPB Report

On March 20, 2014, the Consumer Financial Protection Bureau (“CFPB”) issued a report analyzing the consumer complaints it received concerning debt collection.  The CFPB started accepting and compiling consumer complaints on debt collection in its consumer response system in July 2013.  The report analyzed over 30,000 complaints received between July and December 2013 in addition to complaints submitted directly to the Federal Trade Commission (FTC).

The report shows that the three top complaints are as follows:

  1. Collectors’ repeated attempts to collect a debt not owed (34% of Complaints).  The vast majority of consumers reported that collection agencies are attempting to collect a debt from them that either does not belong to them or has been paid.  Others complained that the debt sought to be collected was the result of identity theft or discharged in bankruptcy.
  2. Improper communication tactics used by debt collectors (23% of Complaints).  Many of these complaints described improper telephone calls, such as frequent and repeated calls, calls to third parties or employers, and the use of abusive or profane language.
  3. Taking/threatening an illegal action (14% of Complaints).  These complaints mainly consisted of threats of arrest and threats of jail time, threats to sue on time-barred debt, seizures or attempts to seize property, and attempts to collect exempt funds such as unemployment benefits.

The remainder of the complaints concerned false statements of representation (13%), disclosures about and verification of a debt (9%), and improper contacts or sharing of information (8%).

The CFPB sent approximately 36% of the debt collection complaints to companies for their review and response and referred 35% of complaints to other regulatory agencies.  Of the companies that received complaints directly from the CFPB, about 82% have responded. In closing, the CFPB renewed its pledge to continue to develop the complaints process this year and actively protect consumers from the “unfair, deceptive, abusive, and other unlawful conduct of some debt collectors.”  For more information, contact Nicole M. Strickler at 312-334-3442 or

How to Survive a CFPB Audit: Upcoming Webinar by Nicole Strickler

Is your organization ready for the Consumer Financial Protection Bureau (“CFPB”) audit?  Does your Compliance Management System comply with the new CFPB exam requirements?  If you can’t confidently answer “yes” to these questions, we are here to help!

The CFPB has continued to develop and hone its audit process over the past year. Prepare your organization for the audit process before the CFPB knocks on your door. Messer Strickler, Ltd. partner Nicole Strickler has paired with InsideArm to help prepare you for your organization’s first CFPB audit.

On February 25th, 2014, Ms. Strickler will present a webinar entitled “How to Survive a CFPB Audit”, where she will provide you with step-by-step guidance on what to expect and how to prepare for your upcoming exam.  She will explain the CFPB’s policies and give real-life examples of how the CFPB measures accountability. 

To register for the webinar, please follow this link. You may also contact Ms. Strickler directly at (312) 334-3442 or by e-mail

Ms. Strickler is a partner at Messer Strickler, Ltd. Ms. Strickler concentrates her practice in the defense of corporations in civil matters but particularly focus on the defense of consumer litigation throughout the country. This includes representing clients in both individual and class actions involving state and federal consumer laws, including the Fair Debt Collection Practices Act, Fair Credit Reporting Act, Telephone Consumer Protection Act and the Illinois Collection Agency Act. Her clients include corporations, lending institutions, collection agencies, asset purchasers, lawyers as well as individuals. Ms. Strickler is an active member of ACA International, NARCA, NAPBS and the Consumer Financial Division of the American Bar Association, where she holds a liaison position for Compliance Management.

Making Sure Debt Collectors Have the Correct Person, Debt, and Documentation among CFPB’s Chief Concerns

Nearly a year ago, the Federal Trade Commission (FTC) completed a lengthy investigation into debt-buyers. Some of the more interesting findings of the study include the following: • Debt buyers only pay about $0.04 per dollar on the accounts they purchase; • Debt buyers are not being told by the seller if the debt has been challenged; • Debt buyers are rarely given a breakdown of principal, interest, and fees; • Debt buyers are rarely provided supporting documents by the sellers. Moreover, sellers generally disclaim all representations and warranties with regard to the accuracy of the information provided; • At least 500,000 disputed debts go unverified each year.

It is no surprise then that among the Consumer Financial Protection Bureau’s (CFPB) chief concerns is making sure debt collectors have the correct person, debt, and documentation. In its recent notice of proposed rulemaking, the CFPB noted: “It is widely recognized that problems with the flow of information in the debt collection system is a significant consumer protection concern.” As explained in the FTC study, often when a debt is sold for pennies on the dollar, the sale doesn’t include a lot of information about the debtor or his debt. In fact, the documentation might include nothing more than the person’s name, last known address, social security number, and amount of debt. Even ACA International, a trade group for the consumer debt collection industry, believes some updating of the collection laws is in order, stating: “Current federal debt collection laws are woefully outdated when it comes to areas such as communication, documentation, verification, and statutes of limitation.”

To combat the issue, the CFPB is currently considering rules for the debt collection market. Ultimately, it appears, the CFPB is looking to require specific and standardized proof as part of the sale of debt. But before it writes any new regulations or strengthens current legislation, the agency wants the public to weigh in. The first set of questions contained in the agency’s 114-page rulemaking proposal, seems to get to the heart of the issue for consumers, which is: what information is transferred during the sale of debt or the placement of debt with a third-party collector?

Consumers can submit comments at Consumers may also learn about the issues and submit comments at, which is run by the students and staff at Cornell Law School. The CFPB is working with Cornell Law School to make it simpler for people to learn about the rulemaking proposal and submit comments. Comments submitted to will be summarized and submitted to the CFPB at the end of the official public comment period.

For more information about the CFPB’s rulemaking proposal, please contact Katherine Olson at 312-334-3444 or

CFPB Ombudsman Suggests Improvements for CFPB

On December 3rd, the CFPB Ombudsman’s Office released its second annual report. The CFPB Ombudsman’s Office’s goal is to informally assist the CFPB in resolving process issues by assisting all of the stakeholders. In its report this year, the Ombudsman’s Office addresses improvement of process issues such as the ways the CFPB shares information; the examination process and experiences that financial entities have with it; and the caller experience with the CFPB contact center. The majority of the individual inquiries received were from consumers and were connected to the products, processes, entities and services under the CFPB’s jurisdiction. Many of these inquiries were about the consumer complaint process as the consumers did not understand completely how it worked. The Ombudsman recommended that the CFPB’s Office of Consumer Response provides frequently asked questions on CFPB’s website ( and further clarify information in correspondence to consumers. As is stated in the report, with this increased transparency in communications “consumers know what to expect from most of the process.”

Contact center and the caller experience was another big topic discussed in the report as 7% of individual complaints addressed this topic. The CFPB’s contact center is used by the public to submit a consumer complaint, provide feedback, ask questions and learn more about the CFBP. Consumers mainly complained that they didn’t receive requested information. Based on these complaints, the Ombudsman specified several areas where more information would be helpful, such as describing the CFPB’s authority. Consumer Response accepted these recommendations on the contact center and suggested meeting monthly to receive the Ombudsman’s feedback.

Financial entities expressed their concerns regarding the CFPB’s supervisory examinations and suggested the following recommendations: further clarifying what a financial entity may expect during an examination; sharing how a financial entity may elevate the examination process by providing information on who composes the examination team; clarifying what may be expected during the examination cycle by: “including citations to the examination manual in written communications to a financial entity, where relevant; describing in the opening letter the document an entity may expect at the end of the examination process; reaching back to inform the entity of the examination status at regular intervals after the conclusion of the onsite portion of the examination; and co-locating the appeals bulletin with the examination manual on”

The Ombudsman also noted that last year its office recommended the CFPB review the presence of Enforcement Attorneys and a few months later the CFPB eliminated this practice entirely. Going forward, the Ombudsman developed an 18-24 month strategic plan that included goals such as to: - Develop and implement an effective outreach strategy to engage both external and internal stakeholders; - Provide specific deliverables to inform stakeholders of the work the Ombudsman’s Office does; - Streamline internal workflow processes to maximize the effectiveness and efficiency of Ombudsman; - Develop Ombudsman resources to offer various options to address common concerns.

To learn more about the CFPB’s Ombudsman’s office report and recommendations, please contact Joseph Messer at, or by calling Joe at (312) 334-3440.

Consumer Protection Bills that Bring Transparency and Accountability to CFPB Have Been Approved

Yesterday, the House Financial Services Committee approved six bills which will bring accountability, transparency and oversight to the Consumer Financial Protection Bureau (CFPB).  The questions regarding the CFPB’s overall accountability were raised during the CFPB President’s presentation of the CFPB’s semi-annual report before the Financial Services Committee in September of this year which was discussed in a previous blog. The bills will reform the CFPB’s structure by replacing the CFPB director with a five-member bipartisan commission; promote greater transparency and accountability at the CFPB; prohibit the CFPB from collecting personal financial information about consumers without their prior consent; and other issues.  Below is a brief summary of each bill.

H.R. 3519, the Bureau of Consumer Financial Protection Accountability and Transparency Act, subjects the CFPB to Congressional oversight through the regular appropriations process, thus promoting greater accountability and transparency.

H.R. 2446, the Responsible Consumer Financial Protection Regulations Act of 2013, replaces the CFPB’s single director with a bipartisan five-member commission appointed by the president.  This commission will promote more stable and reasoned rule-making.  Other federal agencies that are in charge of investor and consumer protection are led by multiple individuals, and this type of leadership is consistent with many federal banking regulators.

H.R. 2571, the Consumer Right to Financial Privacy Act of 2013, prohibits the CFPB from collecting personal financial information about consumers without their prior consent or knowledge.  Since the CFPB collects confidential financial information on millions of Americans, this bill protects consumers’ private financial lives from intrusion by their government.

H.R. 3183, a bill to provide consumers with a free annual disclosure of information the Bureau of Consumer Financial Protection maintains on them.  This bill was introduced when it was revealed that the CFPB collects millions of consumer’s private financial records.  The disclosure will be provided annually to all consumers at no charge.

H.R. 3193, the Consumer Financial Protection Safety and Soundness Act of 2013, requires the CFPB to be considerate of soundness and safety of financial institutions in its rulemaking.  The bill provides an oversight of CFPB rules and regulations that may undermine the soundness and safety of financial institutions.

H.R. 2385, the CFPB Pay Fairness Act of 2013, achieves pay parity for CFPB with comparable product regulatory agencies by setting the basic rates of pay for CFPB employees on the General Services scale.  Currently, CFPB employees’ basic pay rates are set by the CFPB Director.

As said Chairman Jeb Hensarling (R-TX), “These are the modest, common-sense bills that bring a modicum of accountability and transparency to the CFPB.”  To see the Memorandum of Committee on Financial Services that reflects a description of the bills, please click here.

For more information on these approved bills and their interpretation, please contact Joe Messer at or by calling Joe at (312) 334-3476.

CFPB Begins Debt Collection Rulemaking Process

The Consumer Financial Protection Bureau (“CFPB”) issued an Advanced Notice of Proposed Rulemaking on November 5th, thus starting to exercise its rulemaking authority by taking a step towards the adoption of debt collection rules.  Under the Dodd-Frank Act, the CFPB is the first federal agency with authority to issue rules under the Fair Debt Collection Practices Act (“FDCPA”).  The CFPB is also authorized by the Dodd-Frank Act to issue rules prohibiting unfair, deceptive or abusive acts or practices. The CFPB announced the Advance Notice which will seek public comments on how to regulate the multi-million dollar debt collection industry.  The CFPB is looking for feedback from the public on rules which may require accuracy of documents shared between all collection parties, such as settlement firms and buyers; establish new restrictions on originating creditors; and update rules on how collectors communicate to consumers.

In a call with reporters the CFPB Director Richard Cordray said: “Updating the legal framework to protect today’s consumers and to allow fair and appropriate use of modern technology is a high priority for the Consumer Bureau, which motivates this Advance Notice of Proposed Rulemaking.   We are seeking to hear from the public- consumers, consumer advocates, creditors, debt buyers, and debt collectors- about what works and what does not in the current debt collection market.”

A 90-day comment period began on November 6th and the public may visit to participate.  The Regulation Room project was created by joint efforts of the CFPB and the Cornell University e-Rulemaking Initiative to facilitate the commenting process and to make it easy and user-friendly.  The public may also comment on the Advance Notice by following the instructions on .

Cordray is optimistic in regards to the regulations the CFPB will make and their effect on the industry: “It will take some time to change this industry in a lasting way.  But we will work closely with stakeholders to achieve a better markletplace.  Both consumers and responsible businesses stand to benefit by improved debt collection standards.”

Potential CFPB Reforms

The Subcommittee on Financial Institutions and Consumer Credit held a hearing this week to discuss potential reforms to the Consumer Financial Protection Bureau (“CFPB”).  Replacing the CFPB director, Richard Cordray, with a bipartisan five-member commission, was discussed among the legislative proposals.  This proposal raises questions as Cordray was only recently (in July of this year) appointed for this position. CFPB’s data collections practices were also examined by the House subcommittee, which is a part of the Financial Services Committee.  The members of the subcommittee requested more accountability and transparency in these practices: “These measures [proposals on CFPB’s reform]attempt to provide more accountability and transparency to an agency whose structure makes it susceptible to regulatory overreach and unbalanced rule writing,” as expressed by Shelley Moore Capito, Subcommittee Chairwoman.

In September, Cordray presented the CFPB’s semi-annual report before the full Financial Services Committee.  After the presentation, questions were raised about the CFPB’s data collection practices and overall accountability.  The Committee’s Chairman, Rep. Jeb Hensarling, said: “The CFPB is arguably the single most powerful and least accountable federal agency in the history of America.”

Thus, the need for the CFPB’s reform which led to the recent subcommittee meetings (another meeting was held in the beginning of October), didn’t come as a surprise to the industry.  At the latest meeting, witnesses representing credit unions, community banks and other employers, testified about the need for the CFPB’s reform.

CFPB Claims They Will Go After Individuals and Not Just Their Companies. Is Their Bark Worse Than Their Bite?

Regulatory agencies are changing the way they handle enforcement actions in response to pressure from lawmakers to go after financial misdeeds more aggressively.  This past Wednesday, Richard Cordray, director of the Consumer Financial Protection Bureau (“CFPB”), stated that the agency will seek admissions of wrongdoing not only from the companies that commit violations, but also from individuals who are in positions of power in these companies.  Cordray commented “I’ve always felt strongly that you can’t only go after companies.  Companies run through individuals, and individuals need to know that they’re at risk when they do bad things under the umbrella of a company.” In reality, however, the CFPB is subject to the same limitations as everyone else when it comes to obtaining individual liability against corporate officers, shareholders, and employees of collection agencies.  Courts have repeatedly rejected attempts to hold owners, officers and employees of debt collectors personally liable under the FDCPA.  “Because such individuals do not become ‘debt collectors’ simply by working for or owning stock in debt collection companies, [courts have] held that the Act does not contemplate personal liability for shareholders or employees of debt collection companies who act on behalf of those companies, except perhaps in limited instances where the corporate veil is pierced.”  Pettit v. Retrieval Masters Creditors Bureau, Inc., 211 F.3d 1057, 1059 (7th Cir. 2000).  Accordingly, unless some basis for piercing the corporate veil is met, the CFPB may find it difficult to obtain individual liability from corporate officers, shareholders, and employees of collection agencies.

By Joseph S. Messer and Katherine Olson

CFPB No Longer Sends Enforcement Lawyers to Examinations

The Consumer Financial Protection Bureau (“CFPB”) recently announced its decision to pull its enforcement lawyers out of examinations of financial institutions.  The banking industry has opposed this practice since its initiation, saying that the presence of enforcement attorneys inhibited open communication with examiners and was perceived as a threat. In the past, the CFPB deputy director, Steve Antonakes, justified the practice by claiming it was meant to give enforcement lawyers “a firsthand understanding of the issues arising in examinations.” However, the policy drew criticism not only from the banking industry, but also from the U. S. Chamber of Commerce, which called the practice “counterproductive” and hampering communications in its letter to the CFPB Director this February.

Recently, Jennifer Howard, a spokeswoman at the CFPB, said that the practice of sending enforcement lawyers to exams “wasn’t efficient”.  “Instead, we have decided that enforcement attorneys will continue to coordinate with examiners offsite,” said Howard.   As a result, the financial industry, which has vehemently opposed the policy, will finally feel some relief.

Renewed Focus on Data Furnisher’s Duty to Investigate Credit Reporting Disputes

Recent guidance from the Consumer Financial Protection Bureau (CFPB) underscores the need for effective procedures for handling disputes from consumer reporting agencies (CRAs) and stresses furnisher’s responsibility in this matter. In its September 4, 2013 bulletin, the CFPB reminded the public about several requirements listed in the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681.  Under these requirements, a CRA is to notify a furnisher when a consumer disputes the completeness or accuracy of any information provided by the furnisher to the CRA.  The CRA must also timely provide the furnisher all relevant information regarding the dispute.  In turn, the furnisher must review the disputed information, conduct an investigation regarding the matter, and respond appropriately based on the results of the investigation.  The CFPB states that it expects furnishers and CRAs to comply fully with these requirements, thus supporting CFPB’s effort to keep the information in the consumer reporting system (e-OSCAR) complete and accurate.

The bulletin addresses CFPB’s expectation that furnishers have reasonable systems and technology available to receive and process information regarding the disputes forwarded by CRAs, as well as the expectation that every furnisher review and consider all relevant information relating to the dispute.  The CFPB stressed in the bulletin that it expects furnishers to comply with the FCRA in the following ways:

  1. Maintaining a system capable of receiving information and supporting documentation from CRAs;
  2. Conducting an investigation of the disputed information to include information from the CRA and the furnisher’s own information;
  3. Reporting the results of the investigation to the CRA that sent the dispute;
  4. Providing corrected information to all CRAs if the information is inaccurate;
  5. Modifying, blocking, or deleting information if it is inaccurate, incomplete or cannot be verified.

The CFPB further states in the bulletin that immediate steps should be taken to comply with these requirements if a furnisher doesn’t have them already in place.  The CFPB warns that it will appropriately address violations in appropriate way and seek corrective measures from those furnishers who fail to comply with these requirements.

Referrals by CFPB Bring First Indictment

In May, the Consumer Financial Protection Bureau (CFPB) proved itself to be an active enforcement agency when the first indictment stemming from its referral was filed.  The U.S. Attorney’s Office for the Southern District of New York charged Mission Settlement Agency, a debt settlement services provider, Michael Levitis, who allegedly operated Mission, and three of Mission’s employees with mail and wire fraud for systematically defrauding and exploiting individuals with credit card debt out of millions of dollars.  See United States v. Mission Statement Agency, 13-CR-00327 (S.D.N.Y. May 1, 2013).  Two of Mission’s employees pleaded guilty in separately filed matters.  See United Stated v. Shirinov, 13-CR-00319 (S.D.N.Y. April 26, 2013); United States v. Lemberskiy, 13-CR-00325 (S.D.N.Y. April 20, 2013).  As stated in the indictment, approximately 2,200 customers paid Mission over $13 million for assisting them in obtaining relief from their credit card debt between mid-2009 and March 2013.  Allegedly, Mission failed to make payments to the creditors of 1,200 of its customers, keeping $9 million in fees and paying only about $4.4 million to its customers’ creditors. According to the indictment, Mission and its employees promised individuals struggling with credit card debt to reduce their debt by up to 45 percent.  Allegedly, among other tactics, Mission sent mail solicitations to its potential customers that were addressed from the “Reduction Plan Administrator” of the “Office of Disbursement”, bearing the seal of the United States.  A forfeiture action was also brought by federal prosecutors against Rasputin Restaurant and Nightclub in Brooklyn and other entities owned by Levitis that received the proceeds of the alleged fraud.  See Complaint, In re Rasputin Restaurant/Nightclub, 13-CV-03069 (S.D.N.Y. May 7, 2013).

The CFPB also initiated civil proceedings against Levitis, Mission, Levitis’s Law office, a second law firm, and a consulting firm that allegedly took part in misleading Mission’s customers about fees charged and services offered by Mission. See Complaint, CFPB v. Mission Settlement Agency, Civ. No. 13-CV-3064 (S.D.N.Y. May 7, 2013).  The CFPB is alleging violations of the Consumer Financial Protection Act of 2010, the Telemarketing and Consumer Fraud and Abuse Prevention Act, and the Telemarketing Sales Rule.  The bureau seeks disgorgement of profits, civil penalties, restitution of unlawfully collected fees, and attorney’s fees.

To see CFPB v. Mission Settlement Agency Complaint, please follow the link:

To see United Stated v. Shirinov Complaint, please follow the link:

To see United States v. Lemberskiy Complaint, please follow the link:

What is the Creditor Liability under the FDCPA?

When a debt collector or another entity violates the Fair Debt Collection Practices Act (FDCPA), a question arises: who is liable- the debt collector or the creditor?  On many occasions, a company can be held liable for its agents’ or employees’ actions and violations, or in other words, it holds vicarious liability.  Vicarious liability occurs when a principal or a creditor has the responsibility or the ability to control actions of the agent or debt collector which committed the violation.  Even though creditors are exempt under the FDCPA for liability, creditors can still be sued for being vicariously liable either for controlling debt collection partners too much, or for negligent hiring or supervision of a collection partner.  It’s a tough spot to be in and it is hard to maintain a safe balance, but let’s look at each of these vicariously liabilities closer. An “agency relationship” may be established if creditors are exercising too much control over a debt collection partner.  Once this relationship is established, it imputes the actions of the debt collector upon the creditor, thus making the creditor vicariously liable according to the principles of agency law. This issue may be solved by hiring an independent contractor, whose actions generally will not be imputed upon the principal (i.e., the creditor).  However, when the rubber hits the road and the violation of the FDCPA occurs, an independent contractor may be considered an agent of the creditor if the creditor exercised too much control over the contractor.

There are certain practices creditors must be aware of that increase or decrease creditor liability.  For example, if the creditor controls the content of communication between the collection agency and the consumer; if the consumer’s payments go to the creditor; or if the agency has no authority to negotiate debts- these practices will increase creditor liability.  On the other hand, practices that will decrease creditor liability include, among others, cases where the agency provides follow-up services; where it retains and manages information about the customers, or where there is a direct contact between the consumer and the agency.  Therefore, collectors should try to have less control over the collection process and legal relationships since it will decrease their chances of being vicariously liable.

Another type of vicarious liability a creditor may incur is liability for the negligent hiring or supervision of a collection partner.   The Consumer Financial Protection Bureau (CFPB) - a federal agency that enforces the FDCPA- holds responsible any company they supervise for employees hired by that company to do work on its behalf.  Basically, the CFPB is saying that the creditors must oversee what the agencies are doing and that the creditors can be held responsible for the agencies’ and its employees’ actions.   Since the CFPB holds the creditor responsible for what the collection agency does, the creditor should know the agency’s policies and procedures very well.

This makes it hard for collectors to keep a balance between not controlling their collection partners too much to avoid vicarious liability and yet overseeing these agencies enough to avoid liability for negligent hiring.  Since the violations of the FDCPA may cause serious repercussions for creditors, creditors must cover all of the above-mentioned circumstances by carefully creating their business contracts and by being proactive with their policies.  The price is too high to pay, especially if FDCPA violations lead to class-action lawsuits.

For more information, please contact Joseph Messer at or by calling (312) 334-3440.