QUESTION
We are a mid-sized bank in the Northwest. Last year, we were cited for misleading
representations in collecting debts. Now we just learned that we are being
scheduled for another regulatory examination and this problem is sure to come
up again. What “misleading representations” are prohibited in collecting a
debt?
ANSWER
Regulators are perennially active in evaluating a financial
institution’s compliance with the Fair Debt Collection Practices Act (FDCPA).
The use of the phrase “misleading representations” – sometimes written as
“false and misleading representations” – is meant to be a catch-all phrase for
courts to sanction false, deceptive, or misleading conduct that does not fit
into the many specific prohibitions. The FTC Act refers to this conduct as
“deceptive acts or practices.”
Under the FDCPA, there are sixteen specific false or misleading
representations that are prohibited in connection with the collection of a
debt. I will provide a brief outline here, cautioning you also to work with a
competent compliance professional to understand how best to proceed in being
prepared for the forthcoming examination.
To make this outline as helpful as possible, I am also going to assume that you are the debt collector.
For purposes of this answer, I will be paraphrasing Section 1692e of the FDCPA.
[15 USC §§
1692e(1)-(16)]
Sixteen False and Misleading Representations
1)Falsely represent or imply that you are vouched
for, bonded by, or affiliated with the United States or any state, including
the use of any badge, uniform or facsimile thereof;
2)Give a false representation of:
a.The character, amount or legal status of any
debt, or
b.Any services rendered or compensation that may
be lawfully received by you (or any debt collector) for the collection of a
debt;
3)Give false representation or implication that
you are an attorney or that any communication is from an attorney;
4)Falsely represent or imply that nonpayment of
any debt will result in the arrest or imprisonment of any person or seizure,
garnishment, attachment, or sale of any property or wages, unless such action
is lawful and you intend to take such action;
5)Threaten to take any action that cannot be
legally taken or that is not intended to be taken;
6)Falsely represent or imply that a sale,
referral, or other transfer of any interest in a debt would cause the consumer
to:
a.Lose any claim or defense to payment of the
debt, or
b.Become subject to any practice prohibited by the
FDCPA;
7)Give false representation or implication that
the consumer committed any crime or other conduct in order to disgrace the
consumer;
8)Communicate or threaten to communicate to any
person credit information that is known or that should be known to be false,
including the failure to communicate that a disputed debt is disputed;
9)Use or distribute any written communication that
simulates or is falsely represented to be a document authorized, issued, or
approved by any court, official, or agency of the United States or any state,
or that creates a false impression as to its source, authorization or approval;
10)Use any false representation of deceptive means
to collect or attempt to collect any debt or obtain information concerning a
consumer;
11)Failure to disclose that you are attempting to collect a
debt and that any information obtained will be used for that purpose, such
disclosure being required in the initial written communication with the
consumer and even if the initial communication with the consumer is oral - and,
in addition, failure to disclose in subsequent communications that the communication is
from you, as debt collector [viz., the disclosure requirements do not apply to a formal pleading made in
connection with a legal action];
12)Falsely represent or imply that accounts have
been turned over to innocent purchasers for value;
13)Give false representation or implication that
documents are legal process;
14)Use any business, company, or organization name
other than the true name of your business, company, or organization;
15)Falsely represent or imply that documents are
not legal process forms or do not require action by the consumer; and,
16)Give false representation or implication that
you, as debt collector, operate or are employed by a consumer reporting agency
(as defined in the Fair Credit Report Act).
Jonathan Foxx
Managing Director
Lenders Compliance Group
