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Financial Empowerment Center Counselor
Training Curriculum
Topic 5: (Appendix) Consumer Protection and Debt
Collection-The Regulatory and Legal Environment
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Major Federal Regulatory Agencies
with Oversight of Consumer Rights
Numerous federal agencies have jurisdiction over
consumer protection. Two primary agencies are:
I. Federal Trade Commission (FTC)
II. Consumer Financial Protection Bureau (CFPB)
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Federal Trade Commission
Enforces Fair Debt Collection Practices Act (FDCPA )
which applies to the following debt collection activities:
1.
2.
3.
4.
5.
6.
7.
Personal
Family and household debts
Car purchase
Medical care
Retail financing
First and second mortgages
Credit card accounts
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Federal Trade Commission Fair Debt Collection Practices Act
If a creditor fails to provide validation letter, consumer can make demand – can
be oral, but recommend that it be done in writing
After request for validation, unless collector provides adequate verification of
the debt, a collection agency:
a) Cannot contact you or your employer about the debt. See statute below;
[15 USC 1692c(a)(3)]
b) Cannot make any written attempts to collect the debt. See statute below;
[15 USC 1692g(b)]
c) Cannot report the debt to the credit reporting agencies. (This was
established in the case of Twyla Boatley vs. Diem Corporation, No. CIV 030762 United States District Court for the District of Arizona, 2004. The
courts ruled that reporting a collection account is indeed considered
collection activity).
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Federal Trade Commission Fair Debt Collection Practices Act
FDCPA Section 809. Validation of debts [15 USC 1692g (a)]
(a) Within five days after the initial communication with a consumer in connection with
the collection of any debt, a debt collector shall, unless the following information is
contained in the initial communication or the consumer has paid the debt, send the
consumer a written notice containing—
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice,
disputes the validity of the debt, or any portion thereof, the debt will be assumed to be
valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the
thirty-day period that the debt, or any portion thereof, is disputed, the debt collector
will obtain verification of the debt or a copy of a judgment against the consumer and a
copy of such verification or judgment will be mailed to the consumer by the debt
collector; and
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Federal Trade Commission –
Fair Debt Collections Practices Act
FDCPA Section § 809. Validation of debts [15 USC 1692g(a)] cont’d
(5) a statement that, upon the consumer’s written request within the thirty-day
period, the debt collector will provide the consumer with the name and address of
the original creditor, if different from the current creditor.
FDCPA Section § 809. Validation of debts [15 USC 1692g(b)]
(b) If the consumer notifies the debt collector in writing within the thirty-day period
described in subsection (a) that the debt, or any portion thereof, is disputed, or that
the consumer requests the name and address of the original creditor, the debt
collector shall cease collection of the debt, or any disputed portion thereof, until the
debt collector obtains verification of the debt or any copy of a judgment, or the
name and address of the original creditor, and a copy of such verification or
judgment, or name and address of the original creditor, is mailed to the consumer by
the debt collector.
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Federal Trade Commission - Enforcement
Enforcement is through the FTC’s Bureau of Consumer
Protection
• Guard against "unfair methods of competition," and
prevention of "unfair or deceptive acts or practices.”
• Enhances consumer confidence by enforcing federal laws that
protect consumers.
• Empowers consumers with free information to help them
exercise their rights and spot and avoid fraud and deception.
• Wants to hear from consumers who want to get information or
file a complaint about fraud or identity theft.
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Federal Trade Commission – Enforcement
FTC’s Bureau of Consumer Protection has 7 divisions, each with
its own area of expertise:
1. Advertising Practices protects consumers by enforcing truth-in
advertising laws, with emphasis on claims for food, over-thecounter drugs, dietary supplements, alcohol, and tobacco and on
conduct related to high-tech products and the Internet; and by
enforcing the Children’s Online Privacy Protection Act.
2. Consumer and Business Education plans, develops, and
implements creative campaigns to alert consumers to their rights
and to explain the science of compliance to industry.
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Federal Trade Commission – Enforcement
FTC’s Bureau of Consumer Protection – 7 Divisions
3. Enforcement litigates civil contempt and civil penalty actions to
enforce FTC federal court injunctions and administrative orders on
consumer protection issues, including advertising and financial
practices, data security, high-tech fraud, and telemarketing and
other scams. Coordinates FTC actions with criminal law
enforcement agencies through its Criminal Liaison Unit; litigates civil
actions against those who defraud consumers; and develops,
reviews, and enforces a variety of consumer protection rules.
4. Financial Practices protects consumers from deceptive and unfair
practices in the financial services industry, including protecting
consumers from predatory or discriminatory lending practices, as
well as deceptive or unfair loan servicing, debt collection, and credit
counseling or other debt assistance practices.
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Federal Trade Commission – Enforcement
FTC’s Bureau of Consumer Protection – 7 Divisions
5. Marketing Practices leads response to Internet, telecommunications,
and direct-mail fraud; deceptive spam; fraudulent business, investment, and
work-at-home schemes; and violations of the Do Not Call provisions of the
Telemarketing Sales Rule.
6. Planning & Information collects, analyzes, and makes data available to
law enforcement consumer fraud, identity theft, and National Do Not Call
Registry complaints; assists in distribution of redress to consumers; and
provides cutting-edge technological investigative and litigation support.
7. Privacy and Identity Protection safeguards consumers' financial privacy;
investigates breaches of data security; works to prevent identity theft and
aids consumers whose identities have been stolen; and implements laws
and regulations for the credit reporting industry, including the Fair Credit
Reporting Act.
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Federal Consumer Financial Protection
Bureau (CFPB)
Created July 21, 2010
• Regulate fairness and transparency in the prices, terms and risks of
non-bank financial services such as credit cards and basic loans.
• Examine the practices of six non-bank financial industries that
remain unregulated. These industries include payday lenders, debt
collectors, prepaid cards, consumer credit, debt relief services and credit
reporting services. By adhering to the kinds of regulations followed by
other financial industries, the consumer will better be able to trust these
services.
• The Office of Service Member Affairs will directly handle issues
dealing with financial services and military personnel.
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Federal Consumer Financial Protection
Bureau (CFPB)
Assumes to a significant degree the consumer financial protection
functions of :
• Federal Reserve Board
• Federal Deposit Insurance Corporation
• National Credit Union Administration
• Office of the Comptroller of the Currency, and
• Former Office of Thrift Supervision
• Department of Housing and Urban Development ("HUD") with
respect to HUD's authority pursuant to the Real Estate Settlement
Procedures Act, the S.A.F.E. Mortgage Licensing Act, and the Interstate
Land Sales Full Disclosure Act.
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Federal Consumer Financial Protection
Bureau (CFPB)
• MOU signed with FTC because of overlap of enforcement
jurisdiction
• Law creating the CFPB required FTC and CFPB to resolve
issues
• Does not prevent either or both from going forward even
if one is already investigating or otherwise taking action
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Court System
Basis for Jurisdiction (which court has power over
the subject matter or over the parties):
1. Residence of the parties
2. Amount of the dispute
3. Based on agreement of the parties – consent often
in credit application
4. Where cause of action arose
5. Other (examples: treaty, specific statutes)
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Court System
Multi-level Courts
1. Federal Courts
a) District Court (trial court)
i. Bankruptcy Court
b) Circuit Courts of Appeal
c) US Supreme Court
2. State Courts
a) Trial Court (usually has power over cases involving
real estate
b) Appellate Court
c) Highest Court of Appeals
3. Local Courts (Municipalities, Town, Village, etc.) including
Small Claims Courts
4. Administrative Courts (e.g. traffic court)
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Federal Courts
Federal jurisdiction arises:
1. US Constitutional issue
2. Federal statute or regulation (example: Bankruptcy,
federal tax case)
3. Diversity of state residence of parties and “amount
in controversy is $75K or more
4. International treaties/governments
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Collection and Legal Process –
Litigation Phase
1.
Commencement of Lawsuit
a. Service of Summons and Complaint
i. Process servers usually must be 18 years or older; if
serve more than a certain number of times a year,
may have to be licensed (cannot be the plaintiff)
Personal service – handed directly to defendant.
b. How service can be effectuated
i. Substituted service – left with a person at home or at
work, of suitable age and discretion; mail within 20
days, by ordinary mail and certified mail
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Collection and Legal Process –
Litigation Phase
How Service Can Be Effectuated
ii. Conspicuous Place Delivery a/k/a “Nail and Mail” – cannot
effectuate person or substitute service after 3 attempts,
affix to door, mail within 20 days.
iii. Publication – obtain court order where defendant cannot be
located.
c. Server will have to file an affidavit of service, describing how
service was effectuated, location, date, time and description of
parties served where applicable.
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Collection and Legal Process –
Litigation Phase
How Service Can Be Effectuated
d. Private right of action against process servers - In some jurisdictions,
consumers may have a cause of action against a process server and
his/her employer, who fails to follow the laws & regulations {RCW 18.180
- http://apps.leg.wa.gov/RCW/default.aspx?cite=18.180&full=true} for:
i.
Compensatory and punitive damages in cases where the alleged
service did not take place
ii. Injunctive and declaratory relief (Court can order process server
and employer to cease behavior or comply with rules, and
declare that they are in non-compliance)
iii. Attorney’s fees and costs
iv. Other relief as Court may deem appropriate
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Collection and Legal Process –
Litigation Phase
2. Complaint must establishing a prima facie case
a. Allege all of the elements needed to establish case
3. Time for defendant to answer
a. Defendant must answer within 20 days if personal service
unless served outside jurisdiction – then has 20 days from
date of filing affidavit of service with court
b. Defendant must answer 30 days from date affidavit of
service is filed in court if substituted service or
conspicuous place delivery
c. Once an answer has been submitted, the issue is
“joined”
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Collection and Legal Process –
Litigation Phase
4. Pre-trial proceedings e.g. motions, discovery
5. Trial: proving the case before judge or jury
a. Provide evidence – documents
b. Witnesses
6. Verdict or Judgment
7. Recording judgment
8. Enforcement of Judgment (unless there is an appeal)
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