Credit Reporting Issues and False Threats from Debt Collectors—Featured Topics in CFPB's Supervisory Highlights

Last week, the Consumer Financial Protection Bureau (CFPB) released the summer edition of its Supervisory Highlights, and it sounds like one debt collector got hit particularly hard for practices related to credit reporting. Overall, the Highlights discussed the CFPB's observations from September 2019 through December 2019 and also made mention of the CFPB's activity related to COVID-19 and its fallout. Read on for a summary.

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Several FCRA-related violations for a now-shuttered third-party debt collector

The Highlights start off with a bang by discussing several credit reporting-related violations by a third-party debt collector that has since ceased operations. The issues deal with the date of delinquency reported and the requirement to conduct reasonable investigations of disputes. 

Regarding the date of delinquency, the CFPB notes that at least this particular debt collector guessed as to the date of delinquency. For example, they'd use the date that a telecommunications company cut off service or the charge off date when, in fact, those two steps usually occur several months after the first delinquency. What can our readers do about this? Get the date of delinquency from your creditor clients, and this advice is straight from the Highlights:

In one or more examinations of third-party debt collection furnishers, examiners found that the furnishers failed to establish and follow reasonable procedures to obtain the actual date of first delinquency from their clients.

The CFPB also noted that one or more third-party debt collectors—including the now-defunct one—failed to conduct reasonable investigations of both direct and indirect disputes. A statement from the Highlights shows what the CFPB expects regarding such investigations:

In one or more examinations, examiners found that, for both direct and indirect disputes, the furnishers failed to review underlying account information and documentation, account history notes, or dispute-related correspondence provided by the consumer to assess what reasonable investigative steps would be necessary.

The CFPB notes that staffing and high daily dispute resolution requirements prevented the debt collector from fulfilling this requirement. While later in the Highlights the CFPB discusses the flexibility it is providing to companies during the COVID-19 pandemic—including flexibility with credit reporting dispute resolution timeframes so long as the entity is making a good faith effort—the violations referenced above occurred in Q4 of 2019, which is prior to COVID-19's impact.

Debt collection highlight—threats everywhere

There were three specific findings in the Highlights related to the debt collection/FDCPA topic, and they all revolved around different types of threats and credit reporting. There were false threats of litigation when the entity could not legally file a lawsuit, and also misrepresentations made about the litigation process. There were also false threats to credit report if the debt was not paid by a certain date when the debt collector did not credit report for the specific creditor client in question.