Posts tagged ‘Fair Debt Collection Practices Act’

Three Things You Need To Know To Start Your Credit Union Day

Good news!  I just heard that Ted Lasso is coming back for another season starting July 23rd.  Nothing at all to do with your credit union day but I’m passing this on as a public service to those of you with Apple+ who want to watch an above average show that’s almost family friendly. 

House Passes SAFE Act, Again.

Yesterday the House Of Representatives passed legislation, supported by CUNA and NYCUA, permitting financial institutions to legally provide banking services to cannabis businesses as a matter of federal law in states such as New York where the sale and possession of marijuana is legal.  Similar legislation was passed last year only to die in the Senate.  It would appear that with 50 Democrats in the senate odds for Senate passage this time around have improved but this is by no means a sure thing.  The legislation may get caught up in a larger debate about criminal justice reform… stay tuned.

It’s a Watershed Moment For CDFIs

 That is the gist of this American Banker article which points out that recent months have seen a dramatic increase in funding for CDFIs.  Once again your credit union should at least take a look at whether or not it qualifies for a CDFI designation and if it does it should consider the costs and benefits of getting and maintaining this designation.

CFPB Issues Emergency Rule To Block COVID Related Evictions

Yesterday the CFPB issued an interim regulation mandating that debt collectors provide tenants information about the CDC’s eviction moratorium which bans tenants from being evicted while COVID emergency orders remain in effect.  The CFPB is taking this step out of concern that “…consumers are not aware of their protections under the CDC Order’s eviction moratorium and that FDCPA-covered debt collectors may be engaging in eviction-related conduct that violates the FDCPA.” 

I’m sure a few of my Compliance hotshots are squirming right now because they know that the Fair Debt Collection Practices Act and its accompanying Regulation F does not apply to employees of creditors provided that they are collecting on a loan they originated or that was not delinquent at the time it was purchased (15 USCA § 1692a).  But I think you are well advised to track developments in this area particularly if your credit union provides credit to commercial landlords. 

Enjoy your day folks.

April 21, 2021 at 9:47 am Leave a comment

What do debt collectors and hemp producers have in common?

The answer is absolutely nothing, but I figured this was a good way of getting your attention on something other than the presidential election; besides, recently regulations were introduced on both subjects which could have an indirect impact on your credit union’s operations. 

As for debt collectors, on Friday, the CFPB finalized regulations updating restrictions on the conduct of debt collectors under the Fair Debt Collection Practices Act. Full disclosure: I have not yet gotten through the 653-page rule in its entirety, but I did want to make sure that the core focus of the law and regulation remains third-party debt collectors and not banks and credit unions, which provide loans to consumers. I’m happy to report that under the final regulations, a debt collector is defined as any person or business, the purpose of which is for the collection of debt, which is “owed or due to another.” In addition, the regulation goes on to explicitly include employees of financial institutions who are collecting debts owed to the institution. 

The distinction is, of course, a key one since the purpose of the Fair Debt COllection Practices ACt was never to keep creditors from collecting debts owed to them.

Does this mean that you can simply ignore these regulations? Absolutely not. At a practical level, I know many credit unions model their practices after the Act. Furthermore, as CUNA pointed out yesterday, credit unions have an interest in ensuring that the debt collection process is “effective, fair and efficient.” 

New York’s Department of Health Issues State-Level Hemp Regulations

Last week, Governor Cuomo announced proposed regulations implementing a legislative framework for the sale and production of hemp. The proposed regulation is the latest legal development in an area of the law that continues to get more confusing, even as the country as a whole moves towards legalization of marijuana. It’s worth noting that the difference between hemp, which is now perfectly legal, and marijuana, which remains a schedule I drug under federal law comes down to the level of THC present in a given product sample. A THC concentration that exceeds 0.3% is illegal, while everything below that is considered hemp, a legal product.

Over the summer, the Drug Enforcement Agency issued its own interpretation of the federal law. Under the DEA’s interpretation, hemp is only a legal product so long as it does not exceed the 0.3% THC threshold at any point during the production process. In contrast, producers had assumed that the THC concentration level would be judged at the conclusion of the process.

Why does this matter to credit unions? Because many of you have expressed an interest in providing safe banking services to producers in this industry. As noted by the ICBA, “there is a significant risk to producers from having to destroy an entire crop if the THC levels are too high. There is also a risk of vendors, processors or purchasers not meeting the terms they agreed to with producers or not standing by their agreement to purchase a producer’s crop.”  

On the face of it, the issue shouldn’t be all that confusing. In 2018, Congress legalized the production and sale of hemp in states which chose to legalize this process. In 2019, the US Department of Agriculture issued interim final regulations. The State Legislature has also passed state legislation designed to comply with the new federal law, and these regulations are intended to implement that legislation. The bottom line is this. Those of you who are either considering providing hemp banking services, or are already doing so, must have the resources to ensure that you can appropriately monitor this developing industry in order to protect yourselves and your collateral.

November 3, 2020 at 9:45 am Leave a comment

What Timeshares, Debtors and Debt Collectors Have In Common

imagesCAFITDJBMany of us know someone who knows someone who got stuck with a timeshare in New Orleans.  You know how it goes.  Rekindled romance and one too many mojitos made the normally level-headed lovebirds decide that New Orleans was a great place to spend summer vacations.  In the old days when you woke up from your hangover, you sheepishly paid off a mortgage and warned others against your folly.  But today, you refuse to pay and instead bring a class action lawsuit when the debt collector comes calling.  It would be amusing except these types of cases make borrowing more expensive for everyone.

Which brings me to the subject of today’s blog.  A recent ruling by the Court of Appeals for the Second Circuit gave the court the opportunity to address an issue for the first time.  The court held that the federal Fair Debt Collection Practices Act does not require debtors to contest their debts in writing after they receive notice from a debt collector of a past due debt.  In Hooks v. Forman, Ms. Hooks and a friend were visiting Atlantic City in December of 2009 when they attended a presentation on vacation time shares sponsored by Windham Vacation Resorts.  The presentation was apparently a good one because the plaintiffs agreed to purchase a time share.  The plaintiffs subsequently explained that they didn’t realize that the document they had signed was a mortgage, which explains why neither of them made any required payments.

Eventually, Windham called in the debt collectors who sent the plaintiffs a notice explaining that unless they notified the debt collectors “in writing within 30 days after receipt of this letter” that the debt is disputed, the debt would be presumed valid.  Here comes the issue of first impression, the plaintiffs sued in federal district court in New York stating that the notice violated the Act because debtors are not required to dispute a debt in writing.  The trial court actually dismissed this claim; however, on appeal the circuit court not only reinstated the lawsuit but effectively held that the law in this area was so well settled that the defendants should have known they were violating the statute.  The lawsuit was allowed to go forward.  Incidentally, the Third Circuit, which has jurisdiction over New Jersey, reached the opposite conclusion in a previous lawsuit.

I understand times are tough and I am not advocating the return of debtors prison, but a huge cultural shift has taken place in this country.  Not only has the stigma of delinquency faded away, but almost every day is replete with new examples of a court system and legal structure that views debtors as victims to be compensated.  Whether its foreclosures, statutory exempt accounts, or debt collection, this cultural shift is ultimately in no one’s interest.  Since when did the “can do” nation become the “can’t pay and don’t have to” nation?

June 4, 2013 at 8:09 am 4 comments

Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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