On August 22, the U.S. District Court for the Western District of New York refused to dismiss Consumer Financial Protection Act (CFPA) and Fair Debt Collection Practices Act (FDCPA) claims. These claims, brought by the Consumer Financial Protection Bureau (CFPB), alleged violations related to misrepresentation made to debtors by debt collectors.
The complaint alleged that defendants purchased defaulted consumer debt and then placed it for collection with, or sold it to, a network of debt collectors. The CFPB further claimed that these debt collectors consistently violated consumer protection laws by making false statements to debtors
While the court ruling reinforces that debt buyers’ actions are within the purview of the FDCPA and CFPA, the firms involved will likely face greater scrutiny from both public and regulatory bodies. Shining a spotlight on the validity of debtor communication tactics offers insights for all actors in the debt collection space and emphasizes the importance of accurate communication with debtors.
Legal firms representing corporations with large debt portfolios should take note of this development. Ensuring adherence to the principles of the FDCPA and CFPA is no longer optional, but a business necessity. Compliance with these rules will likely become a major topic of discourse and, potentially, a significant area of litigation moving forward.