On July 10, 2013 the Consumer Financial Protection Bureau (CFPB) released CFPB Bulletin 2013-07 Prohibition of Unfair, Deceptive, or Abusive Acts or Practices in the Collection of Consumer Debts. CFPB Bulletin 2013-07 outlined some of the practices the CFBP deems to be Unfair, Deceptive, or Abusive Acts or Practices (UDAAPs) as determined by the Dodd-Frank Act and the Fair Debt Collection Practices Act (FDCPA). Footnote 5 of CFPB Bulletin 2013-07 states that “The FDCPA also covers, as a ‘debt collector,’ a creditor who, in collecting its own debts, uses any name other than its own which would indicate that a third person is attempting to collect the debts.” Furthermore, the Bulletin notes that “[o]riginal creditors and other covered persons and service providers involved in collecting debt related to any consumer financial product or service are subject to the prohibition against UDAAPs in the Dodd-Frank Act.”
Unfair Act or Practice
According to CFPB Bulletin 2013-07, under the D0dd-Frank Act “an act or practice is unfair when:
1. It causes or is likely to cause substantial injury to consumers;
2. The injury is not reasonably avoidable by consumers; and
3. The injury is not outweighed by countervailing benefits to consumers or to competition.” [footnote omitted].
CFPB Bulletin 2013-07 stated that to determine whether a substantial injury occurs the Bureau will look at the totality of the circumstances. While monetary damage will be a huge factor, the Bulletin also states that “[a]lthough emotional impact and other subjective types of harm will not ordinarily amount to substantial injury, in certain circumstances emotional impacts may amount to or contribute to substantial injury.” [footnote omitted]. Furthermore, a consumer will not have to prove actual harm, if there is a significant risk of concrete harm, a consumer can prove that a collector used an unfair act or practice.
Deceptive Act or Practice
The Bulletin also describes what conduct would be a deceptive act or practice by a business according to Dodd-Frank. The determining factors are:
1. “The act or practice misleads or is likely to mislead the consumer;
2. The consumer’s interpretation is reasonable under the circumstances; and
3. The misleading act or practice is material.” [footnote omitted].
Just like with the unfair act or practice, the CFBP will look at the totality of the circumstances to determine if the collector mislead the consumer. CFPB Bulletin 2013-07 did note that representations and omission can constitute misleading a consumer.
CFPB Bulletin 2013-07 stated that “[t]o determine if the consumer’s interpretation of the information was reasonable under the circumstances when representations target a specific audience, such as older Americans or financially distressed consumers, the communication may be considered from the perspective of a reasonable member of the target audience.” [footnote omitted]. A further caveat to this is that if a significant minority of a group is deceived by the act or practice, then the act or practice is misleading. If a business makes a representation that could have two meanings and one of the meanings if false, it will be deemed a violation of the Dodd-Frank Act as a deceptive act or practice.
Abusive Acts or Practices
CFPB Bulletin 2013-07 also outlined what would constitute an abusive act or practice by a business under the Dodd-Frank Act. The factors to determine if the conduct is abusive are:
1) Materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service; or
2)Takes reasonable advantage of –
a) a consumer’s lack of understanding of the material risks, costs, or conditions of the product or service;
b) a consumer’s inability to protect his or her interests in selecting or using a consumer financial product or service; or
c) a consumer’s reasonable reliance on a covered person to act in his or her interests.” [footnote omitted].
CFPB Bulletin 2013-07 states that each of these abusive acts are judged by a separate legal standard.
Do you have Questions regarding how CFPB 2013-07 affects you? Contact our New Jersey business attorneys, The Jayson Law Group LLC.