Federal consumer financial protection laws require companies to treat people honestly and fairly. They also protect honest businesses from being forced to compete with those who break the law.
For debt collectors, that means following the Fair Debt Collection Practices Act. The Act prohibits debt collectors from making false statements. Importantly, people can sue debt collectors who break the law by lying or providing wrong information.
The Consumer Financial Protection Bureau is the administrator and a primary enforcer of the Fair Debt Collection Practices Act. We are committed to making sure that debt collectors follow the law. For instance, debt collectors are responsible for ensuring the accuracy of information they put on credit reports. The CFPB has also confirmed on several occasions that it may violate the Fair Debt Collection Practices Act to tell consumers that they owe a debt or an amount of money that they don’t actually owe, and we recently highlighted the critical importance of this point with respect to medical debt collection. Today, the CFPB filed an amicus brief in the U.S. Court of Appeals for the First Circuit to help ensure consumers can hold debt collectors responsible when they make false representations.
In this case, an individual filed for bankruptcy, so collection efforts against the person should generally have stopped. However, a debt collector still sent the person a letter to collect on the debt and said that the consumer could be sued if they didn’t pay it. Because of the bankruptcy rules, that statement was false—the consumer couldn’t actually be sued. The individual sued to hold the debt collector accountable for the misrepresentation, but the debt collector pled ignorance. The debt collector claimed that they were only responsible under the law when they intended to say something false.
The debt collector’s argument is wrong. As our amicus brief explains, a debt collector can be liable under the Fair Debt Collection Practices Act even if they claim that they did not know that their statement was false. A debt collector will not be held responsible in a lawsuit brought by an individual if they can show that they didn’t intend to make the false representation and that they had effective procedures in place designed to prevent the mistake. But debt collectors cannot just stick their heads in the sand and claim ignorance. This interpretation has been upheld by numerous courts, and it is what Congress clearly intended. Our brief also explains that consumers generally do not lose the law’s important protections when they file for bankruptcy.
Congress made clear in the Fair Debt Collection Practices Act that debt collectors must tell the truth to consumers. It also empowered consumers to act when debt collectors break the law.
We will continue working to ensure that federal consumer financial protection laws are applied as Congress intended so that companies follow the law and meet their responsibilities.
The case is Carrasquillo v. CICA Collection Agency, No. 23-1225 (1st Cir.).
If you have encountered problems with debt collection, you can submit a complaint with the CFPB.