© January 23, 2013 Cities for Financial Empowerment Fund All rights reserved.

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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 CommissionEnforces Fair Debt Collection Practices Act (FDCPA ) which applies to the following debt collection activities:

1. Personal 2. Family and household debts3. Car purchase4. Medical care5. Retail financing6. First and second mortgages7. 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 03-0762 United States District Court for the District of Arizona, 2004. The courts ruled that reporting a collection account is indeed considered collection activity).


http://www.creditmattersinc.com/Credit%20Library/Collections%20and%20Charge%20Offs/Debt%20Validation/boatley_v_diem.html




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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 ActFDCPA 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 - EnforcementEnforcement 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 – EnforcementFTC’s Bureau of Consumer Protection has 7 divisions, each with its own area of expertise:

1. Advertising Practices protects consumers by enforcing truth-inadvertising laws, with emphasis on claims for food, over-the-counter 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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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.

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.

Federal Trade Commission – Enforcement FTC’s Bureau of Consumer Protection – 7 Divisions




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.




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.




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




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 dispute3. Based on agreement of the parties – consent often in credit application 4. Where cause of action arose5. Other (examples: treaty, specific statutes)




Court SystemMulti-level Courts

1. Federal Courtsa) District Court (trial court)

i. Bankruptcy Courtb) Circuit Courts of Appealc) US Supreme Court

2. State Courtsa) Trial Court (usually has power over cases involving real estateb) Appellate Courtc) Highest Court of Appeals

3. Local Courts (Municipalities, Town, Village, etc.) including Small Claims Courts

4. Administrative Courts (e.g. traffic court)




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




Collection and Legal Process – Litigation Phase1. Commencement of Lawsuit

a. Service of Summons and Complainti. 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




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.

Collection and Legal Process – Litigation Phase




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 costsiv. Other relief as Court may deem appropriate

Collection and Legal Process – Litigation PhaseHow Service Can Be Effectuated




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”





4. Pre-trial proceedings e.g. motions, discovery

5. Trial: proving the case before judge or jurya. Provide evidence – documentsb. Witnesses

6. Verdict or Judgment

7. Recording judgment

8. Enforcement of Judgment (unless there is an appeal)



© January 23, 2013 Cities for Financial Empowerment Fund All rights reserved.

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