Thursday, March 28, 2019

National Consumer Protection Week

We are a large mortgage lender, with multiple offices through the United States. Because the first week of March was designated as National Consumer Protection Week (NCPW), we decided to recognize NCPW as a nationally coordinated campaign to help consumers understand their rights, while giving them access to free educational materials. Our company provided training to compliance officers and employees on the pitfalls our customers might face. We are going to provide Best Practices training semi-annually to employees and to new hires. I am writing you to give us some feedback on areas that we could include in our upcoming training. We want to concentrate on complaints and fraud. So, what are some important some consumer complaints and fraud scams?

I appreciate that you took note of National Consumer Protection Week (“NCPW”). This initiative, developed by the Federal Trade Commission (FTC), ran March 3-9, 2019. Participating were many banks and nonbanks as well as state and federal agencies. Various materials were offered, such as articles, social media images and messages, and military outreach information.

It is a good idea to discuss consumer complaints and fraud scams, inasmuch as the FTC has made a firm commitment to reduce these attacks on consumers. Each year, the FTC issues a report categorizing the consumer complaints it receives. The method consumers use to complain about businesses is fairly simple: access is made through the FTC Complaint Assistant and then they select the category that matches the complaint criteria. Also, if the consumer has received a phone call or email from someone claiming to be from the government, the consumer can report it to the FTC Complaint Assistant. 

In all, the FTC received nearly 3,000,000 complaints from consumers in 2018.

Government impostors top the list of consumer complaints submitted in 2018. These impostors are individuals who falsely claim to be from the Internal Revenue Service, Social Security Administration, or another government agency. Their scam is to convince people to turn over money or personal information. For a frame of reference, government impostors made up nearly half of the 535,417 impostor scam reports to the FTC in 2018, with reported consumer losses totaling nearly $488,000,000 to all types of impostor scams in 2018.

Unfortunately, many of these calls are aimed at seniors who depend on their social security checks to get by each month. So, your employees should know that if any of your older account holders mentions a phone call from a "government individual," they should assure the account holder that the Social Security Administration will never initiate a call, ask for a social security number over the phone, or direct somebody to send money in order to keep receiving benefits.

Debt collection complaints dropped to the number two spot after topping the FTC’s list of consumer complaints for the previous three years. Identity theft was the third most common complaint, but it consistently ranks among the top consumer complaints made to the FTC.

As in previous years, wire transfers and credit cards were the first and second most widely reported form of payment for fraud. In 2018, however, a growing number of consumers reported that scammers demanded to be paid with gift and reload cards. The number of consumers who said they paid with a gift or reload card grew from over 28,000 in 2017 to more than 41,000 in 2018, while the total amount paid using a gift or reload card to scammers nearly doubled to $78 million.

I note that your financial institution is in all fifty states, so you may be interested in demographics. To see the top complaints in your state, you can look at the FTC’s data book, which has a state-by-state listing of top reports in each state. The top states in 2018 reporting fraud and other consumer issues were Florida, Georgia, and Nevada. The FTC also releases consumer complaint data on a quarterly basis. You can find all of this data on the FTC’s Website.

Jonathan Foxx, PhD, MBA
Managing Director
Lenders Compliance Group

Thursday, March 21, 2019

UDAAP Best Practices

Hi, my friends at LCG! I love your FAQs and we discuss them all the time. I am on a small compliance team at a regional mortgage lender. We have come to the conclusion that, although UDAAP has many prongs, there seems to be no single, coherent regulation devoted to it. So, we have been building our own policies and procedures for UDAAP.

We think there is one section in the UDAAP policy that is needed, though – a section devoted to Best Practices. What we want is a Best Practices section that can be a list of bullet points, which can be put onto one page and distributed throughout our company. I know this may be a lot to expect, but I hope you can help.

Can you provide a list of some Best Practices for UDAAP that would be both a training aid and a one-page hand-out?

Also, we are now reviewing our policies and procedures, so please send me a link where I can contact you for help in drafting them. We will contact you soon.

Again, thanks for your dedication to mortgage compliance!

When I get an inquiry like this one, I feel very grateful to the mortgage community for recognizing our commitment to safe and reliable compliance. We get emails from readers from all over the country and many express their support for what we offer in our subscriptions. Thank you for subscribing!

Regarding your interest in having us draft or assist in drafting your policies and procedures, please contact us at

Although you are correct in the challenge of providing a set of bullet points for Unfair, Deceptive, or Abusive Acts or Practices ("UDAAP"), I do think it is certainly possible to provide a core list of Best Practices to be used in the context of a training aid or a hand-out. In fact, we do have some guidance from various agencies, such as the Federal Reserve Board and the FDIC, among others.

In my view, a list of twelve bullet points on Best Practices for UDAAP can be set forth to address some areas with the greatest potential for unfair, deceptive, or abusive acts or practices. While the list would not be comprehensive, it certainly would be suggestive of a policy section as well as useful as a training aid and a hand-out to employees of a financial institution.

Here is a list of possible Best Practices relating to UDAAP:

Thursday, March 14, 2019

Collection Calls and Portfolio Retention

We service loans on our own portfolio and want to expand. Our Collection Department needs advice regarding collection call restrictions. When borrower’s do not have “optimal” loans, we are concerned they may seek better refinancing elsewhere. We want to keep these customers in-house, so we leave auto-dialer collection messages when loans are 15-45 days past due, offering potentially better refinancing.

We have been advised we cannot leave such information on an answering machine because of 3rd party disclosure. So, we changed the recording to “…. we have important business to discuss, including potential refinance.”

But now we have been advised that we should not use collection call recordings for this information.

We think our borrowers may respond quicker if they receive this information early on and will possibly refinance past due loans if they can qualify. 

Can you provide guidance on the regulatory compliance requirements?

Also, what are some restrictions?

Direct answer: No. The company may not leave prerecorded messages that offer potential refinances during a collection call attempt.

Although other regulations are applicable within your stated scenario, this particular issue is regulated under the Telephone Consumer Protection Act (“TCPA”). This Act governs telemarketing calls, auto-dialed calls, prerecorded call, text messages, unsolicited faxes and the National Do-Not-Call-List. The Federal Communications Commission (“FCC”), its parallel, Federal Trade Commission (“FTC”) and other multi-state laws have a complex set of compliance regulations that covers this broad area. These rules result in steep penalties imposed on a “per violation” basis, even if there is no actual injury to a consumer.

Restrictions apply to collection calls that may include no overt telemarketing. This scenario appears to be a combination of both a collection call and a telemarketing call. To combine calls with these two purposes is prohibited by law.

Thursday, March 7, 2019

"Direct Drop” Voicemails and the TCPA

We are interested in rolling out “direct drop” voicemails to people who have already called us and have expressed an interest in getting approved. We would like to do the same for our previous clients. None of the clients are on the “Do Not Call” list nor are any the target of debt collection. All intended recipients are past leads and clients. What guidance can you provide for this initiative?

A very interesting scenario! And one for which, unless you are lending in the Western District of Michigan, there is no clear-cut answer.

“Direct drop” voicemail is a method by which a third-party vendor utilizes technology to reach the consumer’s voicemail through a “back door”. Essentially, the technology allows a company to deliver a prerecorded message to a consumer’s voicemail without actually calling the consumer’s phone number.  Whether “direct drop” voicemail is subject to the Telephone Consumer Protection Act (TCPA) has been an issue for years. In 2014 and 2017, companies petitioned the Federal Communications Commission (FCC) for guidance on this issue; however, the FCC has yet to provide same.

Until this past year, we had very little guidance on this issue. In July, 2018, the District Court for the Western District of Michigan issued a seminal opinion on the issue finding that a company’s use of “direct drop” voicemail constituted calls under the TCPA, thus requiring the called party’s consent. [Saunders v. Dyck O’Neal, Inc., 319 F. Supp. 3d 907 (W.D. Mich., July 16, 2018)]  As to the binding effect of the opinion, note that a Federal District Court opinion does not serve as binding precedent on other District Courts, and, arguably, does not even serve as binding precedent in that District (although it is considered “persuasive”).

Under the TCPA, it is unlawful to “initiate any telephone call to any residential line using an artificial or prerecorded voice to deliver a message without the express prior consent of the called party unless . . . exempted by rule or order of the Commission under paragraph 2(B)”. [47 U.S.C.  s. 227(b)(1)(B)] There is no exception for “established business relationships” nor is the restriction limited to debt collection efforts. 

The ­Saunders case involved the use of direct drop voicemail in connection with debt collection. The key issue in the case was whether the company needed the consumer’s “prior express consent” to utilize the direct drop voicemail system. In order to address this issue, the Court needed to determine if the direct drop voicemail constituted a “telephone call” as defined under the TCPA.

Relying upon prior decisions in which the courts have found that voicemail and text messages are subject to the same TCPA restrictions as traditional telephone calls, the Court found that the term “call” includes direct drop voicemail. The Court stated that “the statue itself casts a broad net – it regulates any call, and a “call” includes communication, or an attempt to communicate, via telephone. Both the FCC and the courts have recognized that the scope of the TCPA naturally evolves in parallel with telecommunications technology as it evolves . . . “ [Saunders at 911] The Court further noted that “voicemails are arguably more of a nuisance of consumers than text messages” and that limiting the TCPA to instances wherein a company specifically dialed the consumer’s number and then left a voicemail but to exclude a company’s “back door” ability to reach the consumer’s voice mailbox would be an “absurd result”, as the TCPA “was created to limit the harassment and nuisance that automated calls and messages place on consumers . .. “. [Saunders at 911]

Thus, if you contemplate using direct drop voicemail to reach consumers in the Western District of Michigan, you should obtain the consumer’s prior consent. Outside of the District, it is still a grey area. However, there is no doubt that other Districts will consider the Saunders opinion in addressing the issued. 

Joyce Wilkins Pollison, Esq.
Executive Director &
Director/Legal & Regulatory Compliance