One of America's top corporate law firms warned credit card issuers about potential consumer fallout from regulatory actions aimed at third-party debt collectors. According to a bulletin distributed by Ballard Spahr LLP, a series of communications from the Consumer Financial Protection Bureau signal a "major focus" on enforcing rules set forth in the Dodd-Frank Act. The CFPB's broad definition of "unfair, deceptive or abusive" actions could leave credit card issuers' reputations vulnerable, even after writing off defaulted balances and selling them to debt buyers.
Attorneys at Ballard Spahr noted consumer confusion about the practice of selling the rights to collect on defaulted accounts. Complaints to the CFPB often mention the original lender instead of the agency responsible for high-pressure collection tactics. The attorneys advised credit card issuers to examine their relationships with debt buyers after conducting due diligence.
The warnings from Ballard Spahr and the CFPB accompany news that the world's largest debt-collection organization will pay $3.2 million to settle Federal Trade Commission charges of consumer harassment. Texas debt collector Expert Global Solutions operates across the country through subsidiaries that include NCO Financial Systems and North Shore Agency. According to FTC officials, the company's employees kept calling consumers after being asked to stop, placing multiple calls to both work and home phone numbers. The FTC said that the defendants also failed to verify debts of consumers who disputed company records.
The FTC's complaint also targeted collectors' use of predictive phone dialing equipment and robocalling tools that left messages stating a consumer's name and the fact that a debt collector was attempting to contact them. In a statement to reporters, FTC officials said that such phone messages violated federal rules prohibiting collectors from disclosing personal information to third parties. Under terms of the agreement, Expert Global Solutions and its subsidiaries must record at least 75 percent of their collections calls as proof that they operate within the terms of the Fair Debt Collection Practices Act and the FTC Act.