Looking Ahead to 2024

Enforcement actions related to debt collection and debt settlement will continue to manifest as a result of a significant recent increase in the acquisition of consumer debt, which is now $2.5 trillion higher than at the end of 2019 and which has mostly been driven by increased consumer credit card balances.

Key Trends From 2023

State and federal enforcement agencies continued to aggressively enforce consumer debt collection protections during 2023. In 2023, Goodwin tracked 22 enforcement actions related to debt collection and settlement. This marks an increase from the 16 actions reported in 2022. However, the total recovery amount in this space (about $37.5 million) is lower than the $42.6 million recovered in 2022 and is the lowest recovery amount in the past eight years. The primary tool that enforcement agencies used in 2023 was the Fair Debt Collection Practices Act, although agencies also relied on the Telemarketing Sales Rule (TSR), Federal Trade Commission Act (FTCA), and CFPA and their state-law analogues.


In the News

During 2023, the CFPB continued to rely on the FDCPA to bring enforcement actions against debt collectors for allegedly unlawful debt-collection practices. The CFPB also continues to investigate and respond to consumer complaints that allege improper debt-collection practices through both supervisory and enforcement actions. Most of these debt-collection-related consumer complaints to the CFPB have recently been in the context of credit card debt, with consumers most frequently complaining that they did not actually owe the debt in question.

In 2023, the CFPB also issued specific guidance on debt collectors threatening to foreclose on homes with mortgages past the applicable statute of limitations, indicating that a debt collector that files a mortgage foreclosure action on a debt that is time-barred may be in violation of the FDCPA. The CFPB noted that this guidance was being issued "in light of a series of actions by debt collectors attempting to foreclose on silent second mortgages, also known as zombie mortgages, that consumers thought were satisfied long ago and that may be unenforceable in court." The CFPB also reminded debt collectors that the FDCPA applies even if the debt collector did not know that the debt was time barred.

In its summer 2023 edition of "Supervisory Highlights," the CFPB described key debt-collection-related trends it observed in conducting examinations of supervised entities over the prior year. For example, examiners at the CFPB found that debt collectors advised consumers that if they paid the balance in full by a date certain, any interest assessed on the debt would be reversed. The debt collectors then failed to credit the consumers' accounts with the accrued additional interest, resulting in the consumers paying more than the agreed-upon amount. Examiners found this practice to be deceptive and in violation of the CFPA. Additionally, the CFPB continued its focus on medical-debt-collection practices and explained that debt collectors' attempts to collect on work-related medical debt after receiving sufficient information to render the debt uncollectible under state workers' compensation law violates the FDCPA.

The FTC has also continued to invoke its enforcement authority in the debt-collection and debt-settlement space. In a letter dated February 17, 2023, the FTC informed the CFPB that one of the FTC's priorities was the protection of small businesses from deceptive and unfair debt collection, which is made possible pursuant to the FTCA. The FTC also noted that another priority was public outreach and consumer and business education on debt collection through a variety of English- and Spanish-language print and online materials.

2023 Enforcement Highlights

CFPB Reaches $22 Million Settlement With Credit Card Debt Relief and Credit Repair Company

In May, the CFPB announced a settlement with Burlington Financial Group, a Maryland-based debt relief and credit repair company, resolving allegations that the company deceived consumers by falsely promising to lower or eliminate their credit card debts and improve credit scores in violation of the Telemarketing and Consumer Fraud and Abuse Prevention Act and the TSR, the CFPA, and the Fair Business Practices Act (FBPA). Under the consent order, the company agreed to refund $30.5 million to damaged consumers, and as of May 2023, $22.3 million in refund checks had been issued.

FTC Files Complaints Against Debt Relief Companies Alleged to Have Feigned Affiliation With the Department of Education

In April, the FTC filed complaints against three loan forgiveness and debt relief companies — SL Finance LLC, BCO Consulting Services Inc., and SLA Consulting Services Inc. — alleging that they falsely claimed to be affiliated with the Department of Education and engaged in other conduct in violation of Section 5(a) of the FTCA, the TSR, the COVID-19 Consumer Protection Act, and the Gramm-Leach-Bliley Act. The FTC complaints allege that the companies targeted low-income borrowers with high student debt and tricked them into paying illegal upfront fees since at least 2019. The complaint further alleges that the companies marketed their programs as legitimate loan repayment programs that would forgive the consumers' student loans in whole or in part and that most or all of consumers' payments to the companies would be applied to their loan balances. The companies allegedly further made representations that the Department of Education would eventually assume the servicing of the loans. According to the FTC, the companies collected approximately $12 million in illegal fees and had no affiliations with or contracts with the Department of Education. In early October 2023, the companies entered into a settlement agreement with the FTC in which they agreed to permanently exit debt relief industries.

California DFPI Enters Into Settlements With Several Debt-Collection Agencies

In June 2023, the DFPI announced that it had entered into settlements with three unlicensed debt-collection agencies — Allen and Associates, Blackrock Legal Group, and RM Legal — for alleged violations of California's Debt Collection Licensing Act (DCLA) and the California Consumer Financial Protection Law (CCFPL). The enforcement actions alleged that these entities engaged in debt-collection practices without a license, sought to collect debts that had previously been settled, made false claims about their authority to collect a debt, made false claims about the nature of the underlying debts, omitted mandatory language in communications with consumers regarding the enforceability of time-barred debts, and made false representations to consumers' families that a lawsuit would be forthcoming unless the debts were paid, among other violations of California state law. The settlements secured civil money penalties against these entities totaling $85,000 and further ordered them to cease and desist from engaging in similar behavior that would violate California's consumer-protection statutes.

Washington State Attorney General Takes Action Against Three Student Loan Debt Adjusters

Also in October, the Washington State Attorney General (AG) announced that over the course of 2023, his office had recovered approximately $360,000 in restitution resulting from investigations of three out-of-state debt adjusters for alleged predatory student debt adjustments in violation of the Debt Adjustment Act. The three companies that the AG investigated, Skyway Financial Group, Student Aid Group, and Allied Financial, allegedly charged several hundred dollars to thousands of dollars in upfront and monthly fees in excess of the legal limit set by the Debt Adjustment Act. Some of the companies also allegedly made several false claims, such as claiming affiliation with the Department of Education, claiming expertise in student loans when they had no such experience, and claiming the ability to expedite loan consolidation without any such ability.

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