For decades, creditors have effectively utilized unannounced personal visits at the homes of debtors, and at the debtors’ workplace when they’ve fallen behind on their payments. As a young paperboy in my small town, the most difficult part of my job was convincing a consumer to pay for next month’s paper delivery. I endured customers who fell behind on their newspaper bills. It was my job to knock on their respective doors and have the debt paid up. More often than not, the consumers paid up. It was hard for them to turn me away. The debtor cannot toss a personal visitor in the garbage like they can a letter in the mailbox. The debtor cannot fully ignore a personal visitor as they can ignore a ringing telephone. However, times have changed.
Consumers are protected from ‘In-Person Debt Collection’ because it causes them substantial harm. In conjunction with the announcement of a $10.5 million agreement with Texas-based, EZCORP, a small-dollar lender that visited borrowers’ homes and places of employment, the Consumer Financial Protection Bureau (CFPB) announced EZCORP ran afoul of federal law by disclosing consumers’ debts to third parties when they visited their debtors’ places of employment. They were also cited for causing adverse employment consequences and for employing other illegal debt collection practices.
This enforcement action by the CFPB triggered a Compliance Bulletin from the Bureau about the risks of in-person collection of consumer debt. Intended to provide guidance to creditors, debt buyers and third-party collectors, Compliance Bulletin 2015-07 sets forth collection activities prohibited by federal laws. This bulletin is important for all creditors to understand. The bulletin cautions that certain in-person collection visits may cause or be likely to cause substantial consumer injury.
The bulletin advises first or third party debt collectors. The CFPB wrote, “…run a heightened risk of committing unfair acts or practices in violation of the Dodd-Frank Act when they conduct in-person debt collection visits, including to consumer’s workplace or home.” Pursuant to the statute, an act or practice is unfair “when it causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers and is not outweighed by countervailing benefits to consumers or competition.”
Depending upon the circumstances, in-person collections can easily meet this definition, the CFPB claims. Arriving in person at a consumer’s home or place of employment may result in coworkers, supervisors, customers, roommates, landlords or neighbors learning that the consumer has a debt.
“When such information is revealed to such third parties, it could harm the consumer’s reputation and, with respect to in-person collection at a consumer’s workplace, result in negative employment consequences,” the CFPB wrote. Even if such information is not revealed to third parties, injury could still occur, the agency added, if “a collector goes to a consumer’s place of employment when the consumer’s employer prohibits the consumer from having personal visitors there, which could result in negative employment consequences.” If the CFPB determines that a company has engaged in acts or practices that violate federal law, it will take appropriate supervisory or enforcement actions to address the violations and seek all appropriate corrective measures.
The bulletin’s clear message is that the CFPB does not like creditors, debt buyers, or third-party debt collectors to engage in the practice of in-person collection activities and that companies behaving this way do so at their extreme peril.
A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners. Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 10 years.