Certification Program Exceeds Requirements in Consent Orders

On April 25th, the Consumer Financial Protection Bureau issued Consent Orders in the Matters of Pressler & Pressler, LLP and New Century Financial Services in response to the agency’s assertions regarding the filing of “mass-produced” lawsuits against consumers.

DBA International has reviewed these Consent Orders and while we have significant concerns with the retroactive nature of the Consent Orders, we support most of the requirements contained in the consent orders as they are consistent with the requirements of DBA International’s Receivables Management Certification Program. Among the requirements:

  • Comply with the Fair Debt Collection Practices Act (FDCPA) and sections 1031 and 1036 of the Consumer Financial Protection Act of 2010 (CFPA) – This is a requirement of the DBA Certification Program. The DBA Certification Program also mandates compliance with the Fair Credit Reporting Act, the Telephone Consumer Protection Act, the Servicemembers Civil Relief Act, the United States Bankruptcy Code, section 5 of the Federal Trade Commission Act, and all other local, state, and federal consumer protection laws and regulations. (See DBA Certification Standard #1)
  • Original Account-Level Documentation reflecting the Consumer’s name, the last four digits of the account number associated with the Debt at the time of Charge-off, the charge-off balance, the claimed amount, and the contractual terms and conditions – These are requirements of the DBA Certification Program. The DBA Certification Program also mandates eleven additional data and documentation criteria. (See DBA Certification Standard #17)
  • A chronological listing of the names of all prior owners of the Debt and the date of each transfer of ownership of the Debt, beginning with the name of the Creditor at the time of Charge-off – This is a requirement of the DBA Certification Program. (See DBA Certification Standard #18)
  • A certified or otherwise properly authenticated copy of each bill of sale, or other document evidencing the transfer of ownership of the Debt at the time of Charge-off to each successive owner – DBA International considers this a best practice which is referenced as such in DBA International’s White Paper The Value of Resale on the Receivables Secondary Market. This requirement will be added as a standard in version 4.0 of the DBA Certification Program which will be released later this year.
  • Affidavits, if used, must accurately describe relevant facts including the individual executing the affidavit has personal knowledge of the debt or if not, has reviewed documentation related to the debt – This is a requirement of the DBA Certification Program. (See DBA Certification Standard #16)

The prospective nature of DBA International’s Certification Program recognizes a fundamental premise absent in the consent orders which is you should not punish companies for widely accepted business practices that were legal at the time they occurred. DBA’s heightened certification standards which by and far exceed state and federal requirements take effect upon certification and do not contain any retroactive provisions. The recent CFPB Consent Orders, however, continue a pattern of “rulemaking through enforcement proceedings,” a practice of punishing companies for past practices based on present day expectations.

Additionally, DBA is concerned with the appearance of new undefined terminology contained in the recent consent orders such as “summary data” and “certified or otherwise properly authenticated”, as well as new restrictions on pre-judgment discovery. These new requirements have only served to create additional confusion within the industry as companies and law firms struggle to interpret how and if these apply to the rest of the industry. It has been noted that the pre-judgment discovery limitations may result in higher levels of litigation.

The long anticipated CFPB rules will likely be issued later this year. It remains to be seen how far the CFPB can go in seeking control of litigation practices and attorney oversight which are traditionally within the realm of the state judiciary.

DBA International will continue to meet and work with the CFPB to ensure the Bureau’s rulemaking process results in reasoned and balanced regulations that protect consumers while allowing companies to collect on legitimately owed obligations. DBA’s recognition as the comprehensive voice of the receivables management industry and our work on creating and enforcing the standards outlined in our Receivables Management Certification Program has gained considerable traction and credibility with the CFPB as well as other regulatory and legislative bodies.

This Alert is intended for Members of DBA International and is for informational purposes only and is in no way intended to provide legal advice. Members are encouraged to consult with an attorney of their choice for legal advice concerning this matter.