The CFPB has issued its annual Fair Debt Collection Practices Act report covering the CFPB’s and FTC’s activities in 2020.  Debt collectors should expect increased scrutiny from the CFPB in 2021, with both Acting Director Uejio and Director-nominee Rohit Chopra having identified unlawful debt collection practices as a CFPB priority target.

In addition to a description of the FDCPA-related findings from the Bureau’s Summer 2020 Supervisory Highlights and Special Edition of Supervisory Highlights on COVID-19 Prioritized Assessments, the report includes the following information:

  • According to the report’s section on complaints, the CFPB received approximately 82,700 debt collection complaints in 2020 (which was 7,500 (approximately 10%) more than in 2019).  As in 2019 (and all prior years since the Bureau began accepting debt collection complaints in 2013), the most common complaint was about attempts to collect a debt that the consumer claimed was not owed (with more such complaints involving identity theft than in 2019).  The second and third most common complaint issues were, respectively, written notifications about the debt, and taking or threatening a negative or legal action.
  • In 2020, the CFPB announced four new FDCPA enforcement actions.  Two of those actions resulted in consent orders and the other two actions are still pending.  The pending actions consist of :
    • An action filed in September 2020 by the CFPB and New York Attorney General against five debt collection companies and four individuals who own and manage the companies in which the complaint alleges the defendants used deceptive, harassing, and otherwise improper methods to induce consumers to make payments to them in violation of the FDCPA and CFPA.
    • An action filed in December 2020 in which the complaint alleges that the defendant violated the FDCPA and CFPA in connection with its operation of bad-check pretrial-diversion programs on behalf of more than 90 district attorneys’ offices throughout the United States.  Such programs require the writer of a dishonored check to pay the debt and also enroll in, pay for, and complete a financial education course.
  • The actions that resulted in consent orders consist of:
    • A lawsuit filed in September 2020 in which the complaint alleged that the defendants engaged in various unlawful practices in violation of the FDCPA, the CFPA, and a 2015 administrative consent order between the defendants and the CFPB.  Among the practices that the Bureau alleged the defendants engaged in that violated the consent order was suing consumers without possessing documentation as required by the consent order, using law firms and an internal legal department to engage in collection efforts without providing disclosures required by the consent order, failing to provide consumers with loan documentation upon request as required by the consent order, and attempting to collect on debts for which the applicable statute of limitations had run without providing disclosures required by the consent order.  The consent order requires the defendants to pay $79,308.81 in consumer redress and a $15 million civil money penalty.
    • The resolution of an FDCPA investigation of a New Jersey debt buyer that was found by the Bureau to have threatened and sued consumers to collect debts in states where it did not have a legally required license. The Bureau concluded that the debt buyer had falsely implied that it had a legally enforceable claim for payment and threatened to take action that could not legally be taken by threatening litigation in the demand letters and filing debt-collection lawsuits without the required licenses in violation of the FDCPA and CFPA.  The consent order requires the debt buyer to pay a civil money penalty of $204,000.

The Bureau states in the report that, in addition to its pending enforcement actions, it “is conducting a number of non-public investigations of companies to determine whether they engaged in collection practices that violate the FDCPA or CFPA.”

The CFPB’s report incorporates information from the FTC’s most recent annual letter to the CFPB describing its FDCPA activities.


The CFPB has created a student loan infographic to highlight the state of student loans in the pandemic.  Among the statistics included in the infographic is that, based on Department of Education data current as of September 2020, 87% of federal student loan borrowers had their federal student loans in administrative forbearance.

The CFPB published its graphic on the heels of a memorandum released by a group of think tanks and student loan borrower and financial aid administration interest groups which makes recommendations for transitioning federal student loan borrowers back into repayment after administrative forbearance ends (currently scheduled to expire after September 30, 2021).  Noting that borrowers may “fall[] through the cracks and into delinquency and default,” the groups recommend that the Department of Education (ED) and its office of Federal Student Aid (FSA) do the following:

  • Focus outreach on “borrowers who are most at risk of delinquency and default and take steps to ensure they get the help they need to enroll in income-driven repayment (IDR) plans;
  • Carefully consider whether servicers should resume automatically debiting payments (for those borrowers who were enrolled in auto-debits before the payment pause), warning that doing so, particularly without adequate notice, could create significant financial hardship for borrowers whose financial situation worsened during the pandemic;
  • Allow additional short-term, penalty-free periods of non-payment after forbearance expires;
  • Streamline the IDR enrollment process, at least temporarily, to permit servicers to enroll borrowers in IDR without requiring extensive paperwork;
  • Ensure that federal student loan servicers are staffed appropriately and maintain a skilled workforce;
  • Minimize confusion and upheavals in federal loan servicing contracting while the transition back into repayment occurs; and
  • Work on longer-term repayment reform, including facilitating IDR enrollment and recertification by enabling data sharing with the IRS and “re-thinking” loan default consequences and the role of private collection agencies.

Given that many servicers have offered forbearance options to borrowers of privately-held FFELP loans and private student loans that mirror those granted to federal student loan borrowers, we expect a similar focus on the above issues across the student loan servicing industry generally. Additionally, we expect that advocacy groups and regulators will continue to focus on servicers’ credit reporting practices during the pandemic (see, for example, NCLC’s letter to the CFPB requesting that it rescind guidance allowing CRAs and furnishers to exceed FCRA deadlines for disputes).

NACA is one of the plaintiffs in the Massachusetts lawsuit challenging the CFPB’s creation of its Taskforce on Federal Consumer Financial Law.   Mr. Rheingold discusses the legal basis for the lawsuit, NACA’s views on how the CFPB should approach modernization of federal consumer financial laws, and NACA’s support for federal legislation or new CFPB rulemaking restricting mandatory arbitration.

Ballard Spahr Senior Counsel Alan Kaplinsky hosts the conversation.

Click here to listen to the podcast.

On March 23, Illinois Governor Pritzker signed into law SB 1792, which contains the Predatory Loan Prevention Act (the “Act”).  The new law became effective immediately upon signing notwithstanding the authority it gives the Illinois Secretary of Financial and Professional Regulation to adopt rules “consistent with [the] Act.”

The Act extends the 36% “all-in” Military Annual Percentage Rate (MAPR) finance charge cap of the federal Military Lending Act (MLA) to “any person or entity that offers or makes a loan to a consumer in Illinois” unless made by a statutorily exempt entity (SB 1792 separately amends the Illinois Consumer Installment Loan Act and the Payday Loan Reform Act to apply this same 36% MAPR cap.)

Under federal law, the MLA finance charge cap only applies to active-duty servicemembers and their dependents. However, the Act effectively extends this limit to all consumer loans.  The MAPR is an “all in” APR, and includes, with limited exceptions: (i) finance charges; (ii) application fees or, for open-end credit, participation fees; (iii) any credit insurance premium or fee, any charge for single premium credit insurance, any fee for a debt cancellation contract, or any fee for a debt suspension agreement; and (iv) any fee for a credit-related ancillary product sold in connection with the credit transaction for closed-end credit or an account of open-end credit.

The Act provides that any loan made in excess of a 36% MAPR is considered null and void, and no entity has the “right to collect, attempt to collect, receive, or retain any principal, fee, interest, or charges related to the loan.”  Each violation of the Act is subject to a fine of up to $10,000.

The Act’s definition of “loan” is sweeping and includes money or credit provided to a consumer in exchange for the consumer’s agreement to a “certain set of terms,” including, but not limited to, any finance charges, interest, or other conditions, including but not limited to closed-end and open-end credit, retail installment sales contracts, and motor vehicle retail installment sales contracts.  The Act excludes “commercial loans” from its coverage but does not define the term “commercial loan.”

The Act also contains a broad definition of the term “lender” and applies to loans made using a bank partnership model.  While the Act exempts state- and federally-chartered banks, savings banks, savings and loan associations, and credit unions from its coverage, the Act contains an anti-evasion provision under which a purported agent or service provider is deemed a “lender” subject to the Act if: (a) it holds, acquires, or maintains, directly or indirectly, the predominant economic interest in the loan; (b) it markets, brokers, arranges, or facilitates the loan and holds the right, requirement, or first right of refusal to purchase loans, receivables, or interests in the loans; or (c) the totality of the circumstances indicate that the person or entity is the lender and the transaction is structured to evade the Act’s requirements.  Factors to be considered under this “totality of the circumstances” analysis include whether the entity indemnifies, insures, or protects an exempt lender for any costs or risks related to the loan; predominantly designs, controls, or operates the loan program; or purports to act as an agent or service provider for an exempt entity while acting directly as a lender in other states.

The Act applies to “any person or entity that offers or makes a loan to a consumer in Illinois.”  Accordingly, it would apply to a “loan” made by a lender located outside of Illinois to a consumer who enters into the loan agreement while the consumer is located in Illinois (e.g. in an online transaction).  However, the Act would not apply to a cross-border “loan” made to an Illinois resident who travels to a bordering state that allows lending at a higher rate than is permitted by the Act and who enters into a loan agreement in that state.


The White House officially announced yesterday that President Biden intends to nominate Lina Khan to serve as an FTC Commissioner.

Ms. Khan is currently an associate professor at Columbia Law School, where she teaches and writes about antitrust law, infrastructure industries law, and the antimonopoly tradition.  She previously served as counsel to the House Judiciary Committee’s Subcommittee on Antitrust, Commercial, and Administrative Law where she helped lead the Subcommittee’s investigation into digital markets.  She also served as a legal advisor at the FTC to Rohit Chopra, President Biden’s nominee for CFPB Director.

If confirmed by the Senate, Ms. Khan will fill the FTC seat vacated by former FTC Chairman Joseph Simons.  We understand that the White House is likely to seek a delay in Mr. Chopra’s confirmation as CFPB Director until Ms. Khan is confirmed to avoid the 2-1 Republican majority that would result if Mr. Chopra were to resign from the FTC before Mr. Simons’ seat is filled.

According to media reports, because Ms. Khan has been a prominent critic of Big Tech, her nomination is seen as a significant victory for progressive Democrats who believe the FTC has not done enough to police major technology platforms on antitrust and privacy issues.

The Department of Education announced last week that it is changing how it determines relief for borrowers who assert “borrower defense claims.”  Such claims allege that the borrower was misled by his or her school or that the school engaged in other misconduct in violation of certain laws.  Borrower defense claims only apply to federal loans made under the William D. Ford Direct Loan Program.  ED anticipates that this change will impact approximately 72,000 borrowers and result in $1 billion in loan cancellation.

Under ED’s new approach, a borrower will receive full loan relief when evidence shows that the school engaged in certain types of misconduct that impacted the borrower’s decision to apply to or remain enrolled in that school.  In making the change, ED plans to rescind the formula used by the ED under the Trump Administration for calculating partial loan relief.  (Based on information on ED’s website, that formula calculated the amount of borrower defense discharge relief by comparing the earnings of those who completed the same or a similar program at a borrower’s school to the earnings of those who completed the same or a similar program at other schools.)

An article published in The Hill reports that, according to an ED representative, after reviewing the formula used under the Trump Administration, ED determined that it did not result in appropriate relief for borrowers.  The Hill article indicates that in order to grant full relief to eligible borrowers, ED will reimburse amounts paid on the loans, request credit bureaus to remove negative reporting associated with the loan, and reinstate federal student aid eligibility.

ED’s announcement states that full relief “will apply to borrower defense claims approved to date; the change applies to claims for which borrowers only received partial loan relief and for applications approved to date that have yet to receive a relief determination.”

The changes, while not unexpected, presage ED’s tougher stance toward for-profit institutions under new Secretary of Education Miguel Cardona.  Attorneys in our Consumer Financial Services and Higher Education groups are working with for-profit colleges and universities, as well as non-traditional bootcamps and other training programs, to prepare for additional regulation by both ED and the CFPB.



The FTC has provided its annual update to the CFPB on the FTC’s FDCPA activities.  The latest update covers the FTC’s 2020 activities.  In addition to remaining an FTC focus, unlawful debt collection practices have been identified as a CFPB priority by Acting Director Dave Uejio and Director-nominee Rohit Chopra.  In the letter, the FTC indicates that it will continue to work closely with the CFPB to coordinate consumer protection activities related to debt collection.

The enforcement activities highlighted by the FTC in its annual letter include the following:

  • The settlement of the FTC’s first enforcement action targeting the practice of “debt parking.”  This practice, also referred to as “passive debt collection,” involves the placing of purported debts on consumers’ credit reports without first attempting to communicate with consumers about the debts.   In its lawsuit, the FTC alleged that since 2015, Midwest Recovery Systems reported more than $98 million in purported debts to credit reporting agencies.  Such debts allegedly included debts for unauthorized or counterfeit payday loans, debts subject to unresolved fraud claims, debts in bankruptcy, debts in the process of being rebilled to consumers’ medical insurance, and debts already paid to the defendants.  According to the complaint, the defendants continued to attempt to collect such debts despite various red flags about their validity, including numerous consumer complaints and disputes and an inability to validate numerous debts.  The FTC alleged various FDCPA violations by the defendants as well as alleged violations of the FCRA and FCRA Furnisher Rule.  The settlement included a $24.3 million judgment, which was partially suspended based on the defendants’ inability to pay.  We note that the second part of the CFPB’s final Debt Collection Rule issued in December 2020 prohibits furnishing information to credit reporting agencies without first making contact (or attempting to make contact) with the consumer about the debt.
  • A nationwide initiative (titled “Operation Corrupt Collector”) in partnership with the CFPB, other federal agencies, and state law enforcement authorities addressing “phantom debt collection” and abusive and threatening debt collection practices. Phantom debt collection (also known as fake debt collection) covers a range of practices, including attempts to collect on obligations that consumers never took out or received, as well as efforts to recover loans without authorization from the creditor.  The FTC filed three lawsuits as part of this initiative.

Although centered on FDCPA enforcement, the update includes a discussion of a lawsuit filed by the FTC against two companies engaged in small business financing.  The FTC’s complaint alleged that the defendants deceived small businesses by misrepresenting the terms of merchant cash advances, and used unfair collection practices, including confessions of judgment that the defendants used unfairly to seize personal and business assets in circumstances not expected by customers and not permitted by the financing contracts.  Small business financing, particularly merchant cash advances, has been an FTC focus and, based on comments made by CFPB Director-nominee Chopra, is expected to receive increased scrutiny from the CFPB.


In its third lawsuit filed under the leadership of Acting Director Uejio, the CFPB, earlier this week, sued Student Loan Pro (SLP), a student loan debt relief company, its owner, and its manager, for alleged violations of the Telemarketing Sales Rule (TSR) and the Consumer Financial Protection Act.  The CFPB’s complaint, which was filed in a California federal district court, also names FNZA Marketing, LLC (FNZ) as a relief defendant.  

According to the complaint, from 2015 to 2019, SLP, Judith Noh, SLP’s owner, and Syed Giliani, SLP’s “manager and owner-in-fact,” charged unlawful advance fees to borrowers to file paperwork on their behalf to access free debt-relief programs available to consumers with federal student loans.  The CFPB alleges that Noh formed FNZA, which conducted no business and provided no services to SLP, and that Giliani transferred advance fees received by SLP to FNZA’s bank account and withdrew the fees to pay his personal expenses.  It also alleges that in 2017, SLP settled an investigation conducted by the Washington Attorney General concerning fees charged by SLP and that the settlement required the payment of restitution to consumers. 

The complaint charges SLP, Noh, and Giliani with engaging in abusive telemarketing acts or practices in violation of the TSR through SLP’s acceptance of advance fees and Noh’s and Giliani’s knowing or reckless disregard of SLP’s unlawful acceptance of advance fees.  Noh and Giliani are also charged with violating the TSR by assisting and facilitating SLP’s TSR violations.  In addition, the complaint charges SLP, Noh, and Giliani with violating the CFPA based on their alleged TSR violations.  The complaint seeks injunctive relief, consumer redress, and civil money penalties against SLP, Noh, and Gilani, and seeks disgorgement from FNZ of the funds it received from SLP. 

Having been the target of numerous CFPB lawsuits under the leadership of former Director Cordray, student debt relief companies continued to be a CFPB target under the leadership of former Director Kraninger.  As more distressed borrowers seek to modify student loans and other debt when current pandemic-related moratoriums end, we expect the CFPB under its new leadership to increase its scrutiny of student debt relief companies as well as companies offering debt relief for other types of credit.  

Student debt relief companies have also been a continuing FTC target.  In addition, last month, the California Department of Financial Protection and Innovation (DFPI) announced that it had launched an investigation into whether student debt relief companies operating in California are engaging in illegal conduct under the California Consumer Financial Protection Law and Student Loan Servicing Act (SLSA).  Under the SLSA, “servicing” includes “[i]nteracting with a borrower related to that borrower’s student loan, with the goal of helping the borrower avoid default on his or her student loan.”  In what appears to be a novel reading of the term “servicing” by a state regulator, the DFPI indicated that debt relief companies acting as intermediaries between student loan borrowers and their lenders or servicers must be licensed under the SLSA.

After examining why TCPA cases alleging autodialer claims have fallen into disfavor with plaintiffs’ attorneys, we discuss the increasing volume of TCPA cases involving do-not-call (DNC) claims.  Topics include how the DNC registries operate, coverage of the TCPA DNC prohibitions, elements of a DNC claim, exceptions and defenses, penalties and other available relief, and arguments available to defendants for defeating DNC class actions.

Chris Willis, Co-Chair of Ballard Spahr’s Consumer Financial Services Practice Group, hosts the conversation, with Joel Tasca, a partner in the firm’s Consumer Financial Services Litigation Group, and Lindsay Demaree, Of Counsel in the Litigation Group.

Click here to listen to the podcast.

The U.S. Court of Appeals for the Third Circuit has held that the Equal Credit Opportunity Act does not preempt New Jersey’s common-law doctrine of necessaries whereby a spouse is jointly liable for necessary expenses incurred by the other spouse.  As a result, the plaintiff could not rely on preemption as the basis for her claim that the defendant law firm violated the Fair Debt Collection Practices Act by attempting to collect a debt from her that she did not owe for her deceased husband’s medical expenses.  

In Klotz v. Celentano Stadtmauer and Walentowicz LLP, the plaintiff’s deceased husband incurred a debt to a hospital for medical expenses that he did not pay before he died.  The husband left no estate and the hospital retained the defendant law firm to collect the debt from the plaintiff.  The plaintiff sued the law firm for violating the FDCPA by sending her letters to collect a debt she did not owe.  The law firm successfully moved to dismiss the lawsuit, arguing that the plaintiff owed the debt under New Jersey’s common-law doctrine of necessaries because her husband incurred the debt for medical treatment.   

On appeal, the plaintiff argued that the law firm’s collection letters violated the FDCPA because the ECOA preempts the doctrine of necessaries.  Specifically, she argued that the doctrine of necessaries conflicts with the ECOA prohibition of discrimination against an applicant on the basis of marital status and the implementing Regulation B provision that prohibits a creditor from requiring the signature of an applicant’s spouse if the applicant is independently creditworthy.  According to the plaintiff, because the doctrine of necessaries effectively treats her as a spousal co-signer on the debt in violation of the spousal-signature prohibition, the prohibition preempts the doctrine.   

In affirming the district court’s dismissal of the lawsuit, the Third Circuit held that the ECOA does not preempt the doctrine of necessaries because the debt is “incidental credit”’ exempt from the spousal-signature prohibition.  (The Third Circuit indicated that, for purposes of its analysis, it was “[p]utting aside questions such as whether the [law firm] is a ‘creditor’ and [the plaintiff] an ‘applicant’ under the spousal-signature prohibition.”)  The Third Circuit observed that the ECOA gave the Federal Reserve Board authority to exempt certain categories of transactions from the ECOA’s scope “after making an express finding that the application of…any provision…would not contribute substantially to effecting the purposes of [the ECOA].”  In 2003, the Fed exercised this authority by exempting “incidental credit” from the spousal-signature prohibition.   Regulation B defines “incidental credit” as “extensions of consumer credit…(i) [t]hat are not made pursuant to the terms of a credit card account; (ii)[t]hat are not made subject to a finance charge…and (iii)[t]hat are not payable by agreement in more than four installments.” (The Third Circuit noted that the Fed’s rulemaking authority under the ECOA was generally transferred to the CFPB in 2011.) 

The Third Circuit found that the plaintiff’s medical debt qualified as “incidental credit” because it satisfied all three definitional criteria.  Since the spousal-signature prohibition did not apply, the Third Circuit held that the ECOA and Regulation B  did not preempt the doctrine of necessaries as a matter of conflict preemption because the plaintiff could not show either that the doctrine of necessaries makes compliance with the ECOA impossible or stands as an obstacle to the accomplishment of the ECOA’s purposes.  According to the Third Circuit, the law firm’s use of the doctrine (1) complied with the ECOA because medical debt is “incidental credit” exempt from the spousal-signature prohibition, and (2) did not frustrate the ECOA’s purposes which are focused on ensuring the availability of credit rather than the allocation of liability between spouses.