Since the inception of the CFPB on July 21, 2011 it has done quite a bit of talking pertaining to debt collection and debt buying. This summer the CFPB was put in a position it hasn’t been quite used to, listening. When Congress created the CFPB and its, well let’s just call “unique structure,” it forced the CFPB to comply with a provision of the Small Business Regulatory Enforcement Fairness Act (SBREFA) before issuing new rules. In theory, the SBREFA process is designed to help protect the little guys from being forced out of business by over burdensome and costly regulations by having a voice and playing a part in the process. But in reality, many believe the SBREFA process is merely a figurative box the CFPB is attempting to check off as quickly as possible to move forward with their agenda and predetermined rules. Personally, I decided to approach the entire process optimistically, with an open mind, dedicating whatever time, effort, energy, and resources needed to ensure we provided the CFPB a perspective it couldn’t ignore while proposing solutions that would help accomplish its same objectives through different means. Whether or not we truly made a difference would be determined afterward, but for the time being the process was going to get everything I had to offer.
It was June of last year when I was notified that I was selected as a finalist to serve as a Small Entity Representative (SER) for the CFPB’s Debt Collection Rule Making process. One month later on July 28 I received the formal invitation from the CFPB to serve on the panel. I was honored to have been selected to serve and represent our industry at such a critical juncture. Being at the table in the midst of the largest overhaul of debt collection rules and regulation in forty years was something for which I was certainly proud and prepared to be a part.
Each SER was permitted to select an advisor to help guide them through the process. The first phone call I made was to the most knowledgeable and well-known CFPB expert in the entire industry, John Bedard, Jr. of the Bedard Law Group in Atlanta. He graciously accepted my invitation to partner with me in the CFPB SBREFA process. We were off to the races from there.
I can sum up the entire process in one word: whirlwind. Immediately after being notified of being selected to serve on the panel we received a package containing preparation materials for the in-person meeting at the end of August along with several studies conducted by the CFPB and its narrative justifying its belief for the need of additional rules for debt collection. It was clear they believed debt collectors were excessively collecting debts that were not owed while at the same time harassing consumers. Therefore, it was important as we went through the process to debunk and invalidate their completely false and erroneous presumptions. The one roadblock we ran into is it wouldn’t be the forum to do such. The objective and directive from the CFPB was clear: how will the outline of proposals impact our organizations independently and what would the financial implications be. This is ultimately where the CFPB was able to somewhat pull a bait and switch. They knew the SERs would be compelled to protect and speak the truth, but the CFPB knew they didn’t have to listen because the objective of the SBREFA process didn’t require such.
Once we dove headfirst into the Outline of Proposals it was clear that while the CFPB focused on third parties and debt purchasers, the overwhelming majority of the proposals being put forth required first-party creditor involvement. Without first-party creditors at the table, little movement, if any, would be made. While they went back and forth with their answer, two out of three times they confirmed an additional SBREFA panel would be convened with just first-party creditors at some point. Most of the SERs for this panel explained and urged the CFPB to include first-party creditors at the present time so we could have an active and engaging discussion. However, that was not accepted. Ultimately, the final list of representatives would consist of 19 individuals made up of three debt collection attorneys, two debt purchasers, and fourteen collection agencies. At the end of the day, we had less than one month to provide feedback on an outline of proposals that was four years in the making.
The first week of August we had an introductory conference call with each individual selected for the panel (several of which didn’t attend), members from the CFPB, Small Business Administration, and Office of Management and Budget from the White House. From that point on it was complete chaos. In the span of three weeks I attended dozens of conference calls organized by numerous entities, few of which any of us found productive and many of us left frustrated with the lack of organization and fundamental knowledge of the overall process. For John Bedard, Jr. and I, we were in communication multiple times per day through phone calls, emails, and texts. While I already knew he was the leading subject matter expert when it came to the CFPB and, for that matter, most any other debt collection acronym related laws, working with him for a solid month straight cemented the fact. Our approach was simple, he provided the legal aspect and considerations of the proposals while I focused on the operational and applicability. Together we put together a solid game plan that would lead us through the entire process.
As for the CFPB, it held three separate conference calls during that month. It was initially stated the calls were strictly informational to prepare SERs for the in-person meeting and ensure logistic and technical questions were answered beforehand in order to make the in-person meeting as productive as possible. That shifted quickly as the CFPB switched from providing information to inquiring about numerous aspects of the industry that hadn’t been addressed earlier. As a matter of fact, once the SERs were told how the in-person meeting would go and for what we needed to prepare, we received an email from the CFPB with 17 additional pages of questions. Some of the questions were the same but many new ones ultimately threw a curveball to everyone with less than two weeks before go time. It was back to the drawing board making sure we added all the additional questions and subsequent answers to our prep work and ensured we had answers, questions, and solutions for each.
Finally, in late August it was go time for the in-person meeting. While 17 SERs showed up in person, two attended via phone. There were several representatives from the CFPB along with a couple others from the Small Business Administration and Office of Management and Budget. The meeting was led by John Mc- Namara of the CFPB who did a great job of leading the discussion, sticking to the agenda and keeping everyone on point. As each topic was put on the screen, all SERs were then allowed to comment. The regulators remained quiet for the most part. But on some occasions they were inquisitive and asked followup questions to learn more about a particular topic. Those from the SBA and OMB were much less interested and as a matter of fact, one member of the SBA spent more time drawing a caricature picture than they did paying attention to the dialogue going back and forth. At the end of the daylong meeting we were greeted by Director Richard Cordray, followed by his deputy assistant, who came in and greeted the SERs to say a few words as he mingled with the group for a few minutes.
After the meeting, we had a little over a week to put our research, verbal remarks, analysis and comments into our formal written remarks to be submitted for public record. I went into the process encouraged and hopeful. As we await the CFPB’s final report to the SBA I remain as such. While I’m not naive to believe this process would not have happened if it were not required by Congress, I remain cautiously optimistic the time, effort, energy and resources invested in the entire process by the industry’s brightest will be of value to the CFPB, SBA and OMB. I am confident the debt collection and debt buying industry was extremely well-represented and showcased just how great our industry is, how important what we do is, and why it is in the best interest of consumers and collectors alike that the CFPB be open-minded and considerate in their rulemaking process.
Nick Jarman is the owner of RightAway Consulting & Coaching. Jarman served the last three years on the Board of Directors for ACA International and is the past President of the Missouri Collectors Association.