Massive revisions to the Fair Debt Collection Practices Act (FDCPA), and its implementing Regulation F, have been unfolding over the past few years. The final rule is effective on November 30, 2021, although the CFPB has proposed to extend the effective date to January 29, 2022.
Many banks want to operate under the assumption that the FDCPA and Regulation F do not apply to their operations. We have steadfastly maintained that the law and regulation impact every financial institution, either directly or indirectly.
- Banks that collect third-party debt or collect their own debt using an assumed name are covered directly.
- Banks that use third-party collectors have vendor management responsibilities to assure compliance with the law and regulation.
- We have also maintained that a financial institution that is not covered directly, is covered indirectly, in that practices that are identified as unfair or deceptive under the FDCPA are also likely to be violations of the Unfair, Deceptive Acts or Practices (UDAP) provisions of Section 5 of the Federal Trade Commission Act.
Now we have confirmation that unfair or deceptive collection practices are violations of UDAP. On May 6, 2021 the Federal Deposit Insurance Corporation:
- Determined that the Umpqua Bank of Roseburg, OR has engaged in violations of Section 5 of the Federal Trade Commission Act; and
- Has ordered the bank to pay a penalty of $1,800,000.
The Bank has engaged in violations of Section 5 of the Federal Trade Commission Act in the commercial finance and leasing products issued by its wholly owned subsidiary, Financial Pacific Leasing, Inc., by engaging in deceptive and/or unfair practices related to certain collection fees and collection practices involving excessive or sequential calling, disclosure of debt information to non-borrowers, and failure to abide by requests to cease and desist continued collection calls.
This action by the FDIC confirms that practices deemed to be unfair or deceptive under the FDCPA are also violations of Section 5 of the Federal Trade Commission Act. All banks still have plenty of time to implement a full compliance management system, including training appropriate staff, to implement the provisions of Regulation F.