Successful marketing leads to sales, but sometimes those sales don’t result in customers making timely payments.  When that happens merchants and lenders often try to recover the cost of goods sold or loans through collections.  But what are the risk for merchants seeking to collect outstanding payments?  A lot, apparently, if two recent Consumer Financial Protection Bureau (“CFPB”) enforcement actions tell us anything.  Although “first-party” collections are largely exempt from the Fair Debt Collections Practices Act (“FDCPA”), the CFPB has begun using its enforcement powers to challenge first-party collection practices, including those used by retail merchants and other lenders.

In CFPB v. Freedom Stores, Inc., the CFPB (and several states) alleged that a Virginia-based retailer that operates near military bases nationwide engaged in unfair and deceptive collection practices by filing illegal lawsuits in distant forums, debiting consumers’ accounts without authorization, and contacting service members’ commanding officers.  To settle the allegations, Freedom Stores paid over $2.5 million in partial refunds to affected consumers.  Similarly, in In re DriveTime, a “buy-here, pay-here” car dealer paid an $8 million penalty to settle allegations that the company engaged in various unlawful collection practices.

These actions demonstrate the need for first-party creditors to implement appropriate collection policies and procedures or else risk CFPB scrutiny. At a minimum, creditors should consider the following when engaging in collections:

Continue Reading Who’s on First? The CFPB’s Recent Focus on First-Party Collections

Looking back 2014 was a year of increased government scrutiny and compliance obligations for lead generators and online marketers, and so, for 2015, advertisers will need to ramp up compliance.  Avoiding banned terms, better use of disclosures, and other web and contact center compliance enhancements – with at least some reports of 66% of website URLs containing a potential compliance violation – should be a priority for the New Year.

At least, that’s what marketing compliance company PerformLine revealed last week in its infographic titled “Compliance Trends to Watch Out for in 2015.”  The infographic is part of its periodic overview of its research on websites and “contact centers” using “banned” compliance terms or missing “required” disclosures.  The infographic shows that 66% of credit monitoring sites, 72% of credit card sites, and 91% of finance sites contain potential compliance violations.  The company didn’t release more detailed breakdowns, but it did pinpoint certain keywords and disclosures as areas of concern.

One area that caught our attention was the identified a lack of required disclosures as one of its “Five Issues Causing Potential Violations.”  As we have written previously, the Federal Trade Commission (FTC) has placed renewed emphasis on clear disclosures in its Dot.com Disclosures Guides, and marketers’ ability to use fine print disclosures may be going the way of the dodo.  However, with high rates of non-compliance across all industries measured, it appears marketers may still be struggling with how to create clear and conspicuous online disclosures without detracting from the marketing message.

Continue Reading Compliance Trends for Online Marketers

On November 13, 2014, the Consumer Financial Protection Bureau (CFPB) released a proposed rule regulating prepaid products. The proposed rule would amend parts of Regulation E, implementing the Electronic Fund Transfer Act (EFTA) and Regulation Z, implementing the Truth in Lending Act (TILA). The CFPB’s proposed rule is accompanied by a study on prepaid account agreements.
Continue Reading CFPB Proposes Rule for Prepaid Products and Releases Study on Prepaid Account Agreements

Deferred and waived interest programs, convenience checks, promotional rates, and grace periods are popular credit card features with consumer, creditors, and retailers – as well as the Consumer Financial Protection Bureau (CFPB). Last year the CFPB signaled to the industry that it had concerns about use of these loan features and doubts regarding consumer understanding of the proper use of credit containing these features. Earlier this week the CFPB issued Bulletin 2014-02, which provides more detailed guidance on the marketing of grace periods and promotional rates for credit cards.

It is important to keep in mind that although the Bulletin was directed to credit card issuers and credit card programs, it should serve as a lesson for any creditor that offers credit with similar features. Any creditor that offers deferred or waived interest programs should incorporate this guidance into their policies and procedures. 
Continue Reading 0% Interest!* Is Your Advertising Sending the Wrong Message? (*kind of)

3The Consumer Financial Protection Bureau (CFPB) turns 3 on Monday, July 21, 2014.   Created under Dodd-Frank, the CFPB already has made a significant impact on the consumer protection legal landscape and, more specifically, on how consumer financial services providers advertise and market their services.  Nevertheless, the CFPB’s track record continues to be controversial, despite

Goose and GanderA company holds a press event to tout the success of its newly introduced product. Someone in the audience asks a question, which the Company subsequently uses in its advertising for the product. However, the Company fails to disclose that it actually paid for the audience member to fly into the press event. Is this a problem under the FTC’s Endorsement Guides? Most likely yes, since the payment of travel expenses would probably be a material connection between the consumer and the company.

A recent article in American Banker converts this hypothetical into reality, except that the company is a government agency, the Consumer Financial Protection Bureau. According to the American Banker, an outspoken critic of indirect auto lenders, Harry Douglas Lane, was in the audience at a recent CFPB forum and was called upon to speak as an audience participant. However, no one in attendance or the press covering the event was informed that the CFPB had paid for Lane’s flight to the forum as well as his hotel. 
Continue Reading What’s Good for the Goose Is Not Good for the Gander: The CFPB and the Endorsement Guides