Topic: Fair Debt Collection Practices Act (FDCPA)
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Our bank owns a service provider that charges a fee for processing our customers’ online loan payments. Should we disclose this fee in our HELOC account opening disclosures? What about for other types of loans? We also provide other reasonable means for a borrower to make a payment and not incur a fee.
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We do not believe that Regulation Z requires you to disclose an online payment fee in the account opening disclosures, but we recommend considering disclosing the fee due to the federal banking regulators’ increasing scrutiny of add-on fees like online payment and convenience fees. It may be possible to fully disclose an online payment fee…
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Our bank has a wholly-owned mortgage subsidiary that originates residential mortgage loans. Once a loan is originated, a secondary market investor purchases the loan, and we purchase the servicing rights. Would we be subject to the Fair Debt Collection Practices Act (FDCPA) when attempting to collect this debt? Would the exception to the definition of “debt collector” related to common ownership apply since our bank would be collecting on a loan originated by our subsidiary?
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No, we do not believe your bank would be subject to the FDCPA, provided that you began servicing the loan before default occurs. The FDCPA applies to “debt collectors,” defined in Regulation F as “any person . . . who regularly collects or attempts to collect, directly or indirectly, debts owed or due, or asserted…
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We understand that a bank collecting its own debts would not be considered a “debt collector” under the Fair Debt Collection Practices Act (FDCPA), but what about third parties that collect debts for our bank, such as collection agencies or tow companies that repossess vehicles? Also, does a bank have any due diligence obligations under the FDCPA? Our contract with one of our collection agencies indicates that they must comply with all federal, state, and local laws and regulations. Is this sufficient under the FDCPA?
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Yes, third party collection agencies and tow companies that you contract with to collect consumer debts and repossess automobiles for your bank would be considered “debt collectors” under the FDCPA. Additionally, we believe that you should conduct due diligence on all third-party debt collectors to manage associated risks. Such due diligence should go beyond requiring…
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Is there a deadline for collecting on a charged off account? A customer whose overdrawn account was charged off ten years ago has now opened a new account. We never sent the old debt to a collection agency or obtained judgment against the debtor. Can we collect on it now?
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We recommend consulting with bank counsel, but in our view, any applicable statute of limitations governing your ability to collect the debt likely has expired or is about to expire. Under Illinois law, different statutes of limitations apply depending on the basis for collecting on the debt. For example, actions to collect debts based on…
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Is there any Illinois or federal law prohibiting a bank from collecting on a bank debt through a text message?
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No, we are not aware of any Illinois or federal laws that would restrict your ability to conduct debt collection efforts through text messaging. The Illinois Consumer Fraud and Deceptive Business Practices Act restricts some collection practices, such as collecting a debt from a debtor’s spouse, but those restrictions apply regardless of the medium of…
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In today’s difficult economy, we are making more collection calls than we have in recent memory. What rules govern the times of day when we can make collection calls? Are there any Illinois laws that place greater restrictions on collection calls than federal law?
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The federal Fair Debt Collection Practices Act (FDCPA) restricts the timing of collection calls to after 8:00 a.m. and before 9:00 p.m. 15 USC 1692c(a)(1). Of course, that law does not apply to banks (and other businesses) that are collecting their own debts in their own names, though your institution may voluntarily comply with its…
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Our attorney told us that the bank cannot send letters to delinquent debtors directly and that such letters must come from a debt collector or an attorney. Is that true?
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No. We are not aware of any laws or regulations that would require an attorney to perform all collection efforts on behalf of a bank, and we do not believe that a bank acting in its own name would be subject to any non-criminal laws restricting debt collection practices (though it would probably be a…