Bridgeforce Law, P.C. and Bridgeforce Inc. provide some perspectives and
recommended actions on UDAAP in response to the recent Department of Education
release of collection agencies for acts that violated UDAAP.
Chadds Ford, PA, March 4, 2015 – Bridgeforce Law, P.C. and Bridgeforce Inc. respond to the recent
announcement by the U.S. Department of Education that it was suddenly
ending its relationship with five of 22 private student loan collection
agencies due to UDAAP violations. The agencies are tasked with pursuing
borrowers who have become delinquent on loan payments. According to Brian
Reiss, President of Bridgeforce, “The biggest take away is that
the Department of Education is going to be highly focused on regulatory
compliance and preventing customer harm going forward.”
UDAAP, created under the Dodd-Frank Wall Street Reform and Consumer Protection
Act (Dodd-Frank), added an “Abusive” prong to supplement earlier
versions of a similar protection. Acts and practices are deemed abusive
if they are considered to mislead or take unreasonable advantage of a
consumer. The Department indicated that the acts by the five collection
agencies that violated UDAAP include the following:
- providing borrowers with materially inaccurate representations about the
loan rehabilitation program
- providing inaccurate information at unacceptably high rates about the program’s benefits
- providing misleading information about the waiver of certain collection fees
The Department stated that it will provide enhanced UDAAP and Fair Debt
Collection Practices Act monitoring and guidance for the remaining 17
private collection agencies to ensure that borrowers are consistently
provided with accurate information regarding their loans. The Department
will also increase internal training, expand the private collection agency
manual, and augment its internal escalation practices.
There was apparently no prior warning provided to the five terminated collection
agencies in advance of the Department’s February 27th announcement.
A National Recoveries representative stated the company “had no
warning,” while a Pioneer Credit Recovery representative indicated
that the agency was “blindsided” by the Department’s
decision. The 17 private debt collection contractors that remain under
contract following the Department’s review are now on notice.
UDAAP principles are not limited to the education lending sector, but are
expansive throughout the financial services industry. The Department’s
actions illustrate that there are real consequences to not strictly abiding by UDAAP.
“Collection agencies from all sectors must heed the Department of
Education’s recent decision to terminate its relationships with
agencies that violate UDAAP. This is likely only the beginning of a more
expansive UDAAP crackdown throughout the financial services industry,”
warns Kurt Kline, Managing Partner of Bridgeforce Law.
“UDAAP is a principle-based tool the CFPB uses on a case-by-case
basis; the definitions of unfair, deceptive and abusive acts and practices
focus primarily on what a debt collector cannot do, while placing the
onus for compliance on the collection entity itself,” notes Brian Reiss.
Bridgeforce Law and Bridgeforce both unequivocally recommend that any organization
providing collection services under CFPB Supervision conduct an immediate
UDAAP Risk Assessment to identify risks and prioritize Compliance Management
System control enhancement needs. Additionally, it is recommended that
lenders also prioritize UDAAP Risk Assessments across all areas of the
lending cycle to ensure they are not inadvertently at risk for UDAAP violations
in these other critical areas. UDAAP is more ambiguous than other Federal
or State Collections Laws, and as such, Bridgeforce Law and Bridgeforce
have jointly developed a multi-tiered approach to determine potential
UDAAP risks and recommendations to further improve the quality and consistency
of collections operations.
For more information about the Department of Education and its review of
all private collection agencies, go to the February 27, 2015 announcement
at the Department of Education's website. http://www.ed.gov/news/press-releases/us-department-education-end-contracts-several-private-collection-agencies
About Bridgeforce Inc.
Bridgeforce is a specialized multi-national consulting firm serving a variety
of clients involved in almost all aspects of the consumer and small business
lending and payments space. Over 75 percent of Bridgeforce consultants
come directly from client-side leadership positions across multiple parts
of the credit lifecycle. Combined with subject matter expertise in operations,
technology, strategy and regulatory issues, Bridgeforce has the knowledge
and experience to make the hard choices in developing and implementing
best-fit solutions that are both achievable and lower the risks of execution
to ensure sustainability. Bridgeforce success can be attributed to a culture
fostering innovation and evolving experienced-based best practices recognized
within the industry. For more information, visit
About Bridgeforce Law, P.C.
Bridgeforce Law is a boutique law firm focused on financial services,
working with a variety of companies with legal and/or operational issues
related to consumer and small business lending and payments. Bridgeforce
Law works collaboratively with clients to provide legal and practical
solutions, and will frequently call upon consultants when real-life operational
experience will provide an enhanced client experience and help move business forward.