We have written many times about how debt collection complaints by consumers seem to drive the agenda of the CFPB. That is, the various loan products and industries that the CFPB has focused upon often derive their “attention” because of the fact that consumers are complaining mightily about the actions of debt collectors. Often the focus of the complaints is not on the loan product itself or even on the debt, but on the debt collector.
Well, last week, the CFPB released its Outline of Proposals Under Consideration and Alternatives Considered for Debt Collector and Debt Buyer Rulemaking. This 100+ page release does not bode well for the 3rd Party Debt Collection industry.
Recall that in March of 2015, the CFPB released its Outline of Proposals for Potential Rulemakings for Payday, Vehicle Title and Similar Loans. That release was 57 pages long. And, that Release resulted in the subsequent 1334-page Notice of Proposed Rulemaking issued June 2, 2016 to which we are responding with comment letters. So, we anticipate that the Rulemaking to come out of the CFPB's recent Debt Collection Outline of Proposals—probably not until next year—will also be a tome.
Here are the high points of the Debt Collection Outline of Proposals:
- The CFPB's Outline amounts to first-time regulation of the Fair Debt Collection Practices Act (“FDCPA”)—something heretofore non-existent. That is, unlike other federal consumer credit protection laws that have regulations (Truth-In-Lending, Equal Credit Opportunity and Fair Credit Reporting for example), the FDCPA has not.
- The CFPB proposes to address 3rd Party Debt Collectors and Debt Buyers; not 1st Party Debt Owners. However, in the Outline, the CFPB makes clear that it will be looking at and considering regulating 1st Party Debt Owners under the agency's UDAAP authority given to it under the Dodd-Frank Act.
- There will be regulations addressing the substantiation of claims of indebtedness, the review and transfer of certain information between debt owner and debt collector, and another validation notice and statement of rights.
- There will be regulations addressing the consumer's understanding of the debt collection process, including a litigation disclosure, and a substantive prohibition against collecting time-barred and obsolete debt.
- There will be regulation of collector communication practices, including the general time, place and manner of communication.
- There are a number of other points addressed in the Outline such as consumer consent, decedent debt and recordkeeping.
One good thing we saw in the Debt Collection Outline of Proposals is that the CFPB recognizes that “Debt collection is a critical part of the consumer credit market infrastructure…[that] reduces the costs that creditors incur…The reductions in creditors' costs, in turn, may allow creditors to extend more credit at lower prices.” This is a welcome recognition. The Bureau goes on to say though that since 3rd Party Debt Collectors are incentivized by their compensation structure, there is a disincentive for them to eliminate abusive debt collection practices. That's a warning shot across the bow.