Today's Trends in Credit Regulation

Words Matter
By Michael A. Benoit

In November, the Consumer Financial Protection Bureau issued a press release announcing that it had entered into a consent order with DriveTime Automotive Group, Inc. The CFPB alleged that DriveTime's servicing and consumer reporting practices violated federal consumer financial laws. The Bureau imposed an $8 million civil money penalty on DriveTime. Notably, the CFPB found no compensable harm to consumers.

What's interesting about this consent order is that it is the first one in which the CFPB has publicly admonished an auto finance company for its servicing practices, and it signals that the CFPB will use its unfair, deceptive, and abusive acts and practices authority to treat first-party creditors more like debt collectors. If we were to assume that the allegations in the consent order are true, most of us would probably agree that those practices would not survive UDAAP scrutiny. However, we don't know that the allegations are actually true. In a settlement like this one, nothing has been proven in a manner that would meet constitutional muster. That being the case, it would be fairer for everyone if the CFPB approached its press releases in a way that accurately reflects what the consent order represents. More on that in a minute.

Practices that the CFPB alleged to be unfair under the Consumer Financial Protection Act included:

  • Calling customers at their places of employment after the customers requested that the calls stop or when DriveTime's systems indicated that the customers did not want to receive calls at work.
  • Calling third-party references after being requested to stop by the customers or the references.
  • Calling wrong numbers repeatedly.
  • Failing to maintain an effective system for preventing repeated calls to wrong numbers.

The CFPB alleged that these practices "had the effect of annoying, abusing, or harassing consumers and third parties." Note that the standard for third-party collectors under the Fair Debt Collection Practices Act is that one intend to "annoy, abuse, or harass consumers and third parties;" it appears that the UDAAP standard is a bit squishier. The CFPB also alleged that the practices "caused or were likely to cause substantial consumer injury that was not reasonably avoidable by consumers or outweighed by countervailing benefits to consumers or to competition."

The latter allegation is more or less the accepted standard for "unfair practices" under both the CFPA and the Federal Trade Commission Act, and the consent order includes examples of the activities the CFPB alleged to be unfair. Some of the examples appear to be outliers, or rare occurrences:

  • "[O]ne consumer was called 30 times at work after her [do not call] request."
  • "Another consumer, who had been called by DriveTime at her workplace eight times after her DNC request, was fired because of her receipt of those calls."
  • "Other consumers were reprimanded by their bosses or threatened with termination as a result of their receipt of DriveTime collection calls to their cell phones while at work."

I'll take these statements at face value, but it's easy to raise questions. For example, "30 calls" is a nice round number, but easily verified with call logs. However, if it was the customer's cell number that was called, one would also need to verify that the customer was physically at work when those calls occurred.

Did the CFPB verify with the employer that the consumer was fired "because of" those calls? Or were there notes in her employment file that would indicate that there were other reasons for her termination? Did the CFPB verify with the other consumers' employers that the consumers were reprimanded or threatened with termination because of collection calls?

There are always lots of questions when a process doesn't include an objective fact finder. Agencies know it - that's why consent orders almost always include a stipulation that the target of the investigation neither admits nor denies any findings of fact or conclusions of law. In reality, whatever findings or conclusions appear in the consent order are allegations. Of course, consent order allegations could be true, but they've never been subjected to the scrutiny that due process requires to reach that conclusion. Yet the CFPB routinely issues press releases that conveniently ignore that fact.

In announcing the DriveTime consent order, Director Cordray said, "Our action today forces DriveTime to pay the price for its illegal debt collection tactics." Later, the press release claims, "The CFPB found that DriveTime violated federal consumer financial laws and harmed consumers through illegal actions."

Were I the director, I would have been more likely to say, 'Our action today requires DriveTime to revise its debt collection practices and pay a significant civil money penalty as a result of the alleged harm it caused consumers.' Were I in the press office, the release would have been more likely to state, 'The CFPB alleged that DriveTime violated federal consumer financial laws and harmed consumers through illegal actions.'

Maybe I'm naive, but I've always felt that it is important to be precise in one's speech. Lord knows, I don't always achieve that goal, but I do try pretty hard. Evidently, I am not alone. In the CFPB ombudsman's 2014 Annual Report to the Director, the ombudsman's office notes that external stakeholders have raised issues about the "difference in the language used as between consent orders and their corresponding CFPB press releases," with a footnote indicating that it will conduct an independent review of consent orders and their corresponding CFPB press releases in FY2015.

I'm looking forward to reading the results of that review.

Michael A. Benoit is a partner in the Washington, D.C., office of Hudson Cook, LLP. Michael can be reached at 202-327-9705 or by email at

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