In what the Consumer Financial Protection Bureau characterized as a step toward enhancing consumer protections in connection with debt collection, including under the 1977 Fair Debt Collection Practices Act, the agency recently released an Advance Notice of Proposed Rulemaking on a broad array of issues relating to debt collection.
“Debt collection . . . has more salience today than perhaps at any time in our country’s history,” CFPB Director Robert Cordray said in a statement. He noted that since the agency began accepting consumer complaints about debt collection in July, “debt collection is quickly becoming the topic that draws the most complaints of all of the consumer financial products and services covered by our consumer response team.”
The CFPB’s rulemaking authority is grounded in the Dodd-Frank Wall Street Reform and Consumer Protection Act, which for the first time granted an agency the power to promulgate substantive rules under the FDCPA, as well as authorizing the CFPB to adopt regulations prohibiting “unfair, deceptive, or abusive” acts or practices and requiring disclosures in connection with financial products.
These additional powers to regulate “UDAAP” will come in handy if the CFPB decides to regulate debt owners and debt collection by original creditors, something not covered by the FDCPA, and an important topic in the ANPR. Earlier this year, the CFPB began oversight of entities that take in $10 million or more in receipts from consumer debt collection activities, about 175 companies or 60 percent of the total industry. But the CFPB in the ANPR indicates that it may go further, adopting rules that would cover, among other things, the duties of debt owners providing information to debt collectors.
To launch the rulemaking process, the agency published the 114-page ANPR, which includes 162 questions open for comment, ranging from the definition of terms in the FDCPA to what types of debt are not subject to the CFPB’s authority.
Specifically, the CFPB asked members of the financial services industry and the general public to weigh in on issues such as:
- Should first-party collectors be regulated like third-party collectors, or should the regulations differ depending on who is collecting the debt?
- What specific documents or information should be transferred by a debt owner with the sale or placement of a debt with a third-party collector?
- When a debt is sold or placed for collection, should a requirement exist to notify the consumer?
- What should the format and content of FDCPA validation notices and Fair Credit Reporting Act dispute processes look like?
- Particularly in light of technological advancements like the rise of mobile technology, how should communications between the industry and consumers be regulated?
- What should the role of the CFPB be in state debt collection litigation?
From the CFPB’s perspective, the agency stressed three issues: correct person, correct amount and correct documentation. Accuracy of account information – particularly when passed from original creditor to debt buyers or debt collection firms – poses a concern for the agency, which could lead to regulation on what documents are transferred upon the sale of a debt.
The CFPB also emphasized that new rules should ensure that consumers understand the debts they owe, their rights under the law and the options they have. For the financial services industry, this means an agency focus on notice procedures and the debt validation and dispute processes.
Finally, a large number of the questions posed by the CFPB pertain to communication between debt collectors and consumers. The FDCPA regulates the communications between debtors and certain debt collectors, but the CFPB said the law needs updating in the era of modern communication channels like social media and text messaging.
With the release of the ANPR, the CFPB also announced that it will now post consumer complaints about debt collection in the agency’s public Consumer Complaint Database. Since the agency began accepting complaints about debt collection on July 10, it has received 5,000 complaints to date, accounting for approximately 30 percent of total complaints in that time period.
Consumer complaints range from collection activities like harassing or unwanted phone calls to the lack of verification of the underlying debt or being contacted about debt that has already been paid to credit report issues, like being unable to remove a collection from their report, the agency said.
To read the CFPB’s Advance Notice of Proposed Rulemaking, click here.
To visit the Consumer Complaint Database, click here.
Why it matters: With the release of the ANPR, the agency appears poised to tighten regulations and increase scrutiny on a broad range of issues not just for third-party debt collectors but original creditors and other debt owners as well. The CFPB encouraged members of the financial services industry to weigh in on the agency’s questions, including whether they may impose unnecessary burdens on the industry. Public comment will be accepted until February 10, 2014. Given the potential ramifications of the agency’s rulemaking, industry members should consider submitting comments, keep a close eye on and get themselves involved in the process, while becoming prepared for substantive changes down the road.