QUESTION
I have heard that there are only certain times of the day or evenings when a lender or servicer can contact a borrower. Additionally, I have also heard that there are certain things that must be communicated and certain things that cannot be communicated. This is confusing because I do not know what those things are and why they are necessary. Can you help me to understand this better? Also, can you tell me if this applies to anyone that is not a borrower, and who may just be loan shopping?
ANSWER
The questions posed here are directly part of multiple Consumer Protection Laws. Historically, consumers have dealt with much abuse in these areas, where some lenders and servicers have contacted them by telephone, unauthorized at times, calling at inappropriate hours, and the callers not truthfully identifying themselves, making serious threats to consumers or speaking to them in an abusive and/or profane manner. Through the years, there have been a tremendous number of lawsuits against lenders and servicers because of these abuses.
Many states have written laws which prohibit lenders and servicers from violating consumers in these ways. Federal laws have been written by all of the regulating entities, GSE’s and HUD to further afford protection to consumers in the areas where these abuses have taken place. Some of the regulating entities would include the Federal Reserve (FRB), Office of the Comptroller of the Currency (OCC), Consumer Financial Protection Bureau (CFPB), Federal Trade Commission (FTC), and the Federal Deposit Insurance Corporation (FDIC). There are other agencies who concur with protecting the consumers in this same manner, and the specific laws usually contain verbiage stating “the consumer;” therefore, this would apply to all consumers, whether or not they are your company’s borrower or a consumer who happens to be shopping for a loan.
While an exhaustive list would be difficult to compile in its entirety, please find a short list of the highest risk areas and the most commonly cited in lawsuits and regulatory examination results. I am providing a list, not meant to be comprehensive, based on the following topics: Restrictions on Communications; Abuse/Harassment; False, Deceptive, or Misleading; and Unfair and Unconscionable Actions.
RESTRICTIONS ON COMMUNICATIONS
- Prohibits the making of any calls being made prior to 8:00 a.m. or after 9:00 p.m. in Potential Customers Time Zone, or at other inconvenient times to a consumer;
- Prohibits repeated calls to third parties in connection to a consumer regarding any loan product;
- Prohibits repeated calls to consumers;
- Prohibits improper calls to a consumer at their place of business, if applicable;
- Prohibits revealing a consumer’s personal information to any third parties;
- Prohibits the continued calling of a consumer after receiving a “Cease Communication” Notice from Potential Customer, either verbally or in writing;
- Prohibits contacting a consumer directly if known to be represented by any Attorney in any connection with the financial institution;
- Prohibits making telemarketing calls using an artificial or prerecorded voice to residential telephones without prior express consent.
- Prohibits making any non-emergency call to a consumer, using an automatic telephone dialing system (“auto-dialer”), or an artificial or prerecorded voice to a wireless telephone number without prior express consent. (If the call to a consumer includes or introduces an advertisement or constitutes telemarketing, consent must be in writing. If an auto-dialed or prerecorded call to a wireless number is not for such purposes, consent may be oral or written. The FCC has concluded that the Telephone Consumer Protection Act (TCPA), which restricts telephone solicitations (i.e., telemarketing) and the use of automated telephone equipment, includes protections against unwanted calls to wireless numbers, thus encompassing both voice calls and text messages, including short message service (SMS) texts, if the call is made to a telephone number assigned to such service.
- Prohibits the sending of unsolicited advertisements to telephone facsimile machines. The requirement for prior express consent and the facsimile must contain specific “opt out” instructions.
ABUSE/HARASSMENT
- Prohibits falsely threatening illegal or unintended acts to a consumer;
- Prohibits the use of any harassing, abusive and/or oppressive conduct to a consumer;
- Prohibits utilizing obscene, profane, or abusive language to a consumer;
- Prohibits any threats or violence to a consumer under any circumstance;
- Prohibits the use of any language or action that materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service; and
- Prohibits the use of language or action that 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; and
- a consumer’s reasonable reliance on a covered person (i.e., the consumer, themselves”) to act in his or her own and best interests.
FALSE, DECEPTIVE OR MISLEADING
- Prohibits failing to Identify yourselves to a consumer as company employees;
- Prohibits misrepresentation of loan character, amount, or status to a consumer;
- Prohibits falsifying any information of any kind to a consumer;
- Prohibits the act or practice which Misleads or is likely to mislead a consumer;
- Prohibits the use of any language or action that may cause a consumer’s interpretation that is reasonable under the circumstances to become confusing and/or unclear; and
- Prohibits the use of language or action that is misleading to a consumer, and results in a practice that is material.
UNFAIR AND UNCONSCIONABLE ACTIONS
- Prohibits any discussion involving unauthorized fees, interest and expenses to a consumer;
- Prohibits the use of any language that would pressure or steer a consumer into a loan.
- Prohibits any unfair language or action to a consumer that causes, or is likely to cause, substantial injury to him/her;
- Prohibits any unfair language or action to a consumer that results in the Injury that is not reasonably avoidable by him/her; and
- Prohibits any unfair language or action where injury to a consumer has been sustained and is not outweighed by countervailing benefits to them.
Michelle Leigh, CRCM, MBA
Director/Internal Audits and Controls
Executive Director/Servicers Compliance Group
