From: Spencer Scheer Date: October 18, 2016 Client Alert: From the Scheer Law Group:
Subject: CFPB Consent Order with Navy Federal Credit Union is a “Shot across the Bow” for Collection Managers.
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Under a “Consent Order filed by the CFPB on October 11, 2016, the CFPB required Navy Federal Credit Union to pay $28.5 Million dollars in compensation and fines .This was based on findings of unfair debt collection practices, including findings that the NFCU:
Falsely threatened legal action and wage garnishment.
Falsely threatened to contact commanding officers to pressure service members to repay.
Misrepresented credit consequences of falling behind on a loan:
Illegally froze members’ access to their accounts.
In essence, delinquency on a loan could lead to shut down of a consumer’s debit card, ATM privileges and online access to the consumer’s checking account. The only account actions that could continue online were payments on the account.
Credit Unions are allowed statutory liens and a right of offset under both state and federal law. Using this remedy in conjunction with denying a member electronic access to accounts can be a recipe for disaster, when undertaken in conjunction with questionable collection practices.
While, the CFPB does not directly regulate “smaller credit unions” state regulators will likely take a cue from the CFPB. Every credit union Collections Manager or Loan Service Manager should review the Order and the practices found to be deceptive or abusive, and the CFPB analysis of what training or reprimands should occur.
Spencer P. Scheer is the Managing Partner of Scheer Law Group, LLP in San Rafael, California. With more than 40 years of experience, he represents clients in bankruptcy and creditor rights, real estate and property law, and business and commercial litigation. Admitted to the California Bar in 1983, he also practices before the U.S. District Courts for the Northern, Central, and Eastern Districts of California and the U.S. Court of Appeals for the Ninth Circuit. He is a Super Lawyers honoree, AV Preeminent® rated, and a Martindale-Hubbell Client Champion.
