The CFPB, UDAAP and the Credit and Collection Industry

The CFPB’s mounting reliance on the authority given it under the Unfair, Deceptive and Abusive Acts or Practices (“UDAAP”) provision of the Dodd-Frank Act has caused confusion and difficulty for those in the credit and collection industry. The Dodd-Frank Act granted the CFPB the ability to identify and prohibit unfair, deceptive or abusive acts and practices (UDAAP).  The CFPB has made some of their enforcement matters public, half of which have included alleged violations of the UDAAP provision.

The CFPB has published two bulletins on UDAAP.  The July 2013 bulletin included some examples of what it considers UDAAP violations.  These include:

■ Collecting or assessing a debt and/or any additional amounts in connection with a debt (including interest, fees, and charges) not expressly authorized by the agreement creating the debt or permitted by law.

■ Failing to post payments timely or properly or to credit a consumer’s account with payments that the consumer submitted on time and then charging late fees to that consumer.

■ Taking possession of property without the legal right to do so.

■ Revealing the consumer’s debt, without the consumer’s consent, to the consumer’s employer and/or co-workers.

■ Falsely representing the character, amount, or legal status of the debt.

■ Misrepresenting that a debt collection communication is from an attorney.

■ Misrepresenting that a communication is from a government source or that the source of the communication is affiliated with the government.

■ Misrepresenting whether information about a payment or nonpayment would be furnished to a credit reporting agency.

■ Misrepresenting to consumers that their debts would be waived or forgiven if they accepted a settlement offer, when the company does not, in fact, forgive or waive the debt.

■ Threatening any action that is not intended or the covered person or service provider does not have the authorization to pursue, including false threats of lawsuits, arrest, prosecution, or imprisonment for non-payment of a debt.

Due to the CFPB’s increased activity in the credit and collection industry and its reliance on its authority under UDAAP, collectors should enact and enforce policies to avoid UDAAP violations in addition to violations of the FDCPA, TCPA, FCRA and state consumer protection laws.  Collectors should review CFPB guidance and monitor the CFPB’s enforcement.  Consent Decrees issued pursuant to CFPB enforcement actions can serve as roadmaps to assist collectors to avoid repeating conduct that could create CFPB liability.

The most troubling aspect of the CFPB’s enforcement actions are the potential penalties.  Those penalties can reach $25,000 per day for unintentional violations and $1,000,000 per day for intentional violations.  Since initially the question of what constitutes a UDAAP violations is up to the CFPB, it pays to monitor the CFPB’s enforcement activities.

For more information about the CFPB or the UDAAP provision of the Frank-Dodd Act, please contact Joseph Messer at 312-334-3440 or