With all eyes on the CFPB and its future fate, it’s easy to overlook the FTC’s activities in the consumer finance world. But that would be a mistake. The FTC, led by the Division of Financial Practices, continues to share enforcement jurisdiction with the CFPB over many industries touching consumer finance, including credit reporting, debt collection, and consumer lending; the major difference between the jurisdiction of the FTC and CFPB is that the FTC does not have authority over financial institutions regulated by federal banking regulators.
Importantly, as an independent agency with a bipartisan commission, the FTC is more insulated from the political trade winds that executive agencies confront. And, whereas the CFPB—also an independent agency—is a young agency born out of and directly caught up in the hyper partisanship that defines Washington, the FTC has a 100+ year track record. If the CFPB’s authority is significantly curtailed, we can expect the FTC to step up to partially fill the void.
This is particularly true in the debt collection space. Last week, the FTC announced a settlement with a Texas-based debt collection agency for municipal debts (court fines, traffic tickets, parking citations, fines, and debts relating to utilities, emergency medical services, and other city services) and two of its principals. The core allegations relate to the company’s collection letters, which, according to the FTC, deceptively threatened arrest.
Specifically, the FTC appears to take the position that a debt collector may not threaten any action unless it is reasonably certain the specific account has been screened for and qualified for that given action and it is reasonably certain that the collector (or owner of the debt) will pursue that action. In other words, simply knowing that the account is eligible for such action and qualifying the message so it does not suggest that the action definitely will be taken (by using “could” or “may”, for example) is not sufficient. While not out of step with recent CFPB and FTC precedent on what constitutes a reasonable basis to make debt collection claims, the details provided in this Complaint regarding the specific claims and characteristics of the accounts at issue provide a practical, real world application of an abstract legal concept.
We will continue to monitor the FTC regarding if and how it realigns its approach to the consumer financial services industry in the coming weeks and months.