FORT LAUDERDALE, Fla. -
And not knowing it can cost them a boat load of money, according to Franklin Drake, an attorney with Smith Debnam Narron Wyche Saintsing & Myers.
"I'm here to inoculate you all with knowledge," he said during his presentation at NASCUS State Summit. "If you have been part of a merger or acquisition, and you have acquired any delinquent or defaulting loans, the Fair Debt Collection Practices Act applies to those loans. And all those bankruptcy, I mean borrower's/consumer's rights attorneys are ready to sue you for technical violations to make for the lost business due to the slow-down in bankruptcy filings."
Those technical violations can add up at about $1,000 a pop. "What happens is, the credit union sues the member for default, the member countersues, and if you have any violations, your member is going to get a free ride on that loan they didn't pay off."
Drake outlined four steps a credit union can take to protect itself:
1) Adopt an explicit policy of compliance through a board resolution.
2) When acquiring accounts through merger, winnow out those that are already in default and flag them as FDCPA accounts so your collections officers know they must follow all FDCPA rules.
3) The very first communication with these accounts must include the FDCPA validation notice. If it doesn't, you have five days in which to correct the situation-if not, you've got your first violation right there.
4) Adopt the "Mini Miranda": "The purpose of this communication is to collect a debt" language needs to be on every single collection communication with an FDCPA account, and it's typically a $2,000 fine for every time it is omitted.
The attorneys who help borrowers with these types of suits have some tricks up their sleeves to find violations, Drake said. For example, the credit union may receive a letter from an attorney saying the attorney has been retained to represent the CU member and that all communication regarding the member's account should be directed to him. "Then you try to contact the attorney and can't ever get a hold of him, so you call the member, and bingo, you've just violated the act," Drake explained.
So what do you do? Simply write a letter to the attorney acknowledging receipt of the letter and that if you do not hear back from the attorney within 10 days, you will presume the attorney no longer represents the debtor. At that point, either the attorney is going to get back in touch with you, or contacting the member is once again fair game.
Some other tricks:
* You cannot call a member on his cell phone for the purpose of collections. If you believe you've dialed a cell phone, hang up.
* At least four states don't allow garnishment, and any reference to garnishees is a violation in those states, so make sure that neither you nor your member resides in one of those states.
* If you can show that you had in place a policy of compliance (step one mentioned previously) and a policy of educating staff about FDCPA, you may get a pass if there is a violation.
Federal violations have a one-year statute of limitation, so you only have to worry about sins you have made in the last year.
The bankruptcy attorneys have a listserv, and on it they share what they call a "Patsy List" of institutions that have had violations with the goal of drumming up a class action-and that can cost $100,000 or 5% of assets plus attorneys' fees.
