My in-laws live in Texas, so I have spent a considerable amount of time there over the last 40 years or so. A colloquialism used there, and no doubt in other places as well, is “fixin’ to”, as in, “I’m fixin’ to get to the market.” It means preparing to do something, or considering to do something. As I read through the CFPB’s July 28 document titled “Outline of Proposals Under Consideration and Alternatives Considered,” I got that “fixin’ to” kind of feeling, as in this document is what the CFPB is “fixin’ to” consider doing related to rule making for the debt collection industry. I have a number of opinions about its content, but in this article I want to point out areas of concern we need to think about in terms of “if we had to change how we do this, how could we do it effectively and efficiently?” This document should spur thinking, brain-storming, creativity and discussion in the executive offices, IT departments, compliance departments, and operational units, separately and together. This should be done while we have the time to do so, should these proposals, or even amended versions of them, come to pass. (The entire proposal can be found at http://files.consumerfinance.gov/f/ documents/20160727_cfpb_Outline_of_proposals.pdf)
The most challenging proposals, in my opinion, are those that require or encourage a response from a consumer. For example, the example initial notice provided in Appendix F of the document, provides a tear off form for the use of the consumer to dispute the debt or to enclose with payment. We all use stubs on our first notices already, so no issue there. However, we can all attest that we see very few of these coming back. Consumers are much more likely to call than return the stub with payment. Consumers are also more likely to call with a dispute than they are to send something back in the mail, even if the letter is pre-written for them with check boxes related to the reason for their dispute.
Even more problematic is the proposal to require an obsolescence disclosure to consumers on old debt, obsolete for credit reporting, and the subsequent proposed requirement for the consumer to provide written acknowledgment of receipt of the disclosure before the debt collector may accept payment of the debt. Just how is that going to work? Thinking caps on!
The other proposal related to credit reporting by debt collectors relates to what the CFPB calls “passive collection” or “debt parking.” The proposal is based on the Bureau’s conclusion that debt collectors use a cost v. benefit calculation (cost of actively attempting to reach consumers exceeds the expected return from engaging in collections) to determine which accounts to send an initial notice and which will receive a notice only after contact; which is primarily a contact to the debt collector by the consumer related to a collection account on his credit report. The proposal would prohibit furnishing a debt by a debt collector unless the debt collector has communicated directly about the debt to the consumer, e.g. sending a validation notice. The proposal does not address returned mail, misdirected mail or other instances in which the consumer may not have received the initial notice.
The proposal, in appendix D, defines categories of disputes and describes what could constitute validation for each type. This summary may spur discussion.
|Dispute Category||Description||Proposed Validation|
|Generic Dispute||Disputes in which the consumer
provides no details.
|Consumer’s full name, address, and account number with original creditor,
date of default and last payment date, name and address of creditor at time of
default, balance at default and post-default interest and fees, and description
of the amount owed.
|Dispute as to the amount
of the debt
|Consumer challenges the amount
sought to collect.
|Amount of the principal, interest or fees disputed, including terms and
conditions related to post-default interest and fees, the date and amount of
each payment (or other credit) after default, any other specific information
required to respond to the specific dispute.
|Collecting from wrong
|Consumer asserts he/she did not
incur the debt or the collector is
contacting the wrong person.
|Information the consumer provided to the creditor such as consumer’s date
of birth and the consumer’s addresses throughout the life of the account.
Identifying numbers uniquely identifying the consumer, e.g. taxpayer ID
number, SSN, EID, ITIN. Copy of credit application, new patient form, etc.
|Wrong collector||Disputes in which consumer asserts
the debt collector is not the owner
of the debt or not entitled to collect
|Bill of sale or assignment of the debt.|
While it could be helpful to have comprehensive definitions related to validation, sending information described in the “wrong person” category to the actual wrong person invites identity theft and further problems for the actual consumer. Often, a dispute we might label as “I did not incur this debt” is very different from “you are collecting from the wrong person.” Processes and procedures for responding to disputes in these categories will be required. The “wrong collector” category goes far beyond the intention of the Fair Debt Collection Practices Act. Any debt collector with the ability to create a legitimate validation notice for a debt must be assumed to be the right debt collector. Scammers do not provide consumers with a validation notice.
This is not a comprehensive review of the proposal. The document should be studied and discussed, even though it is merely a peek into what the CFPB is “fixin’ to” do. Think about the feedback you would be willing to provide the CFPB when the actual proposed rules are published—there will be a comment period. Finally, think about and discuss ways in which you can be “fixin’ to” comply, when and if we get to that stage with these initial proposals.
Debra Ciskey is the Compliance Officer at Wakefield & Associates. Inc. She is a member of the board of directors and a certified instructor for ACA International.