FDIC Finishes Bank $ 1.8 Million For UDAP Violation During Trade Debt Collection – Consumer Protection


United States: FDIC fines bank $ 1.8 million for UDAP violation in trade debt collection

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Yesterday, the FDIC announced a settlement with Umpqua Bank that involved collection practices related to commercial equipment financing offered by the bank’s wholly owned subsidiary. The order stipulated for paying a civil fine requires the bank to pay a CMP of $ 1.8 million.

The practices that the FDIC found to be contrary to Section 5 of the FTC Act were as follows:

  • Charge various undisclosed collection fees to borrowers with overdue accounts, such as collection appeal and letter fees and third party collection fees.
  • Make excessive and sequential pickup calls to customers, even when customers have asked the branch to stop these calls.
  • Disclosure of information about customer debts to third parties.
  • Inform borrowers that the subsidiary would report defaults on trade debts to consumer reporting agencies, while its policy and practice was not to report such defaults to consumer reporting agencies.

The bank also voluntarily paid approximately $ 1,628,000 in restitution to the 16,902 customers who were billed for the undisclosed collection costs.

We think this regulation is important for two reasons. First, this is an example of the FDIC taking UDAP enforcement action based on collection practices, which has not been a common theme of FDIC actions in the past. But more importantly, the enforcement actions have taken concepts applicable to consumer debt collection and applied them to commercial loan accounts, which we see as another sign that regulators are viewing commercial borrowers through a lens closer and closer to the consumer. We will certainly be monitoring whether the FDIC, or other regulators, will continue to import consumer protection concepts into commercial lending, but we believe this is a trend that is likely to continue.

On May 25, 2021, from 1:00 p.m. to 2:00 p.m. EDT, lawyers for Ballard Spahr will host a webinar entitled “The Consumerization of Small Business Lending: Significant Developments and Trends.” For more information and to register, click here.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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