By Kevin J. Cummings –
On Friday, April 15, 2022, the Consumer Financial Protection Bureau (“CFPB”) delivered its annual report to Congress on the Fair Debt Collections Practices Act (“FDCPA”).
The CFPB oversees the majority of federal regulations involving consumer debt, or debt incurred for personal, family, or household expenses. The FDCPA is the primary statute that governs the consumer debt collection industry and was crafted to protect consumer debtors from abusive collection practices.
The FDCPA does not regulate commercial debt collection; however, there is a growing undercurrent that indicates this could someday change. Commercial debt can be generally categorized as any expense incurred by a business, including personal guarantees by the business owners. While not subject to the FDCPA, there are numerous state and federal laws that can control, or limit actions taken by commercial debtor collectors.
Within the annual FDCPA Report, the CFPB highlighted a growing concern about abuses within the commercial collection industry handling small-business debt. According to the CFPD, small businesses comprise 99.9% of the nearly 31.7 million businesses within the United States. As the Country rebounds from the Pandemic, the CFPB is seeing an uptick in collection abuses impacting small businesses. The CFPB is working in conjunction with the Federal Trade Commission (“FTC”) to monitor small business debtor complaints and compile data on the alleged abuses.
The CFPB’s interest in the commercial collection industry was further reinforced by a Blog Post titled, “Protecting Families and Honest Businesses from Debt Collection Abuses”, authored by Director of the CFPB, Rohit Chopra. Director Chopra reiterated that the CFPB is keenly aware of the abusive collection practices that small businesses are encountering post-Pandemic. Director Chopra further implored lawmakers to develop additional regulations to curb abusive or deceptive commercial collection practices impacting small businesses.
Cleary, the CFPB has the commercial collection industry in its crosshairs. Theoretically, based on the Director’s statements, the CFPB will take the next year or two to develop data points on specific allegations of abuse or deceptive commercial collection activities. These data points will then be used to buttress a platform for new Federal regulations impacting the commercial collection community.
The continued abuses, by a minority of the commercial collection community has created fertile ground for new regulations to blossom.
For well over fifty (50) years, consumer collections have been subject to a number of amorphous standards forged by law or court decisions that have handcuffed aspects of the collection industry and cost collectors and servicers millions of dollars in civil penalties. The FDCPA and the various court decisions interpreting its meaning and application, have created a narrow sliver hovering between aggressive collection practices and abusive collection practices. The slightest shift in collection strategies can create an avalanche of liability.
Presently, commercial debt collectors are afforded a much wider latitude than their consumer counterparts. The ability to collect commercial debt fairly and efficiently is being threatened by a narrow segment of the commercial debt collection community, whose action created an invitation for wide-ranging regulations. To combat future regulations, the holders of commercial debt should evaluate their vendors’ behavior to determine if the vendor’s baseline performance is constructed on sound ethical and compliance-based metrics.
The ultimate result on an individual file has been the default factor in continuing a business relationship. Now, with the auspices of the looming CFPB action, a more nuanced review of the performance of a third-party vendor or even internal policies may be warranted. It is no longer going to be a determination of whether the end justifies the means but rather, whether the means will end the ability of the commercial collection community to resolve debts in a fair and free matter.
As the federal regulatory landscape of commercial collections begins to shift, large and small businesses alike can find solid ground with the Attorneys at Bernstein-Burkley, P.C. For more than 50 years, the attorneys at Bernstein-Burkley, P.C. have served creditors and servicers in a variety of cases in state and federal court actions and bankruptcy proceedings. Outside of the courtroom, Bernstein-Burkley’s attorneys counsel clients on regulatory compliance with the various rules and regulations impacting the commercial and consumer collection industry. Please contact us for more information.
 Fair Debt Collection Practices Act, CFPB Annual Report, Section 2.5, Page 12.
 Protecting Families and Honest Businesses from Debt Collection Abuses; April 15, 2022; Https://www.consumerfinance.gov/about-us/blog/protecting-families-an-honest-business-from-debt-collection-abuses/