The Federal Trade Commission’s (“FTC”) Christopher Koegel sent a shot across the bow to companies who collect on debts in a blog post dated December 8, 2015 and posted on the FTC’s website. Koegel, who is the Assistant Director of the FTC Division of Financial Practices, warned that certain actions by creditors and others could put them squarely within the FTC’s jurisdiction. See https://www.ftc.gov/news-events/blogs/business-blog/2015/12/think-your-companys-not-covered-fdcpa-you-may-want-think?utm_source=govdelivery.
Discussing Section 803(6) of the Fair Debt Collection Practices ACT (“FDCPA”), Koegel wrote that most creditors read the definition of “debt collector” and stop reading because they believe the FDCPA does not apply to them. However, Koegel suggests that doing so is a mistake because Section 803(6) of the FDCPA goes on to say “the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts.” Citing a particularly egregious case where the FTC went to court to challenge FDCPA violations by a company that used another name to collect, Koegel’s blog clearly implied that the FTC would be looking into similar type actions against other companies.
After discussing the collection of debt using another name, Koegel reminded creditors that Section 803(6)(F)(iii) of the FDCPA also makes the FDCPA applicable to creditors when they obtain debt that is in default at the time it is obtained. Making reference to the FTC-CFPB settlement with Green Tree (now Ditech), Koegel points out that when Green Tree acquired accounts to service that were in default, it then “donned the additional hat of “debt collector” subject to the FDCPA. Finally, Koegel closes by reminding creditors that even if the FDCPA does not apply, collection activity is still covered by Section 5 of the FTC Act’s prohibition against deceptive or unfair practices.
The FTC and Consumer Financial Protection Bureau have been flexing their muscles to protect consumers. Both have shown that they are willing to take on creditors and others who have traditionally been thought to be outside their scope of jurisdiction. Creditors should examine and review their practices and procedures and ensure they are in compliance. The opinions in this blog are solely the author’s and any comments, replies or suggestions should be sent to John@jrjoneslaw.com.