On July 28, 2016, the CFPB released its outline of proposals it is considering for debt collection regulation prior to convening a small business review panel. The Small Business Regulatory Enforcement Fairness Act (SBREFA) requires that CFPB convene such a panel when proposed rules may have a significant impact on a substantial number of small businesses.
The Numbers
In its outline of proposed rules, the CFPB noted the importance of debt collection to our overall economy. However, the CFPB indicated the largest amount of complaints on its portal comes from debt collection activities. While I have been in favor of a mechanism giving consumers an opportunity to express complaints, since the onset, I have always been concerned about the integrity of the data being submitted and the use of the reporting. As of now, the CFPB’s portal only collects complaints. It does not verify the correctness of the data. It seems like every week new data is used to justify new regulations. I would like to see this data verified and reviewed prior to using it as a basis of new industry rules.
The Proposals
I have written extensively about the CFPB and consent decrees over the past few years. For collection law firms with robust compliance programs, the majority of proposals are not much different than what we have already been doing. Some of the key points are as follows:
Substantiate the Debt Before Contacting Consumers - Collectors would have to confirm they have sufficient information to start collections, such as the full name, last known address, last known telephone number, account number, date of default, amount owed at default, and the date and amount of any payment or credit applied after default.
Limit on Communication - The CFPB has stated it received a vast amount of consumer complaints regarding being repeatedly contacted by debt collectors. The CFPB wants to limit the number of calls and frequency of calls to consumers.
Consumer Understanding and Dispute Process - The CFPB proposes a new series of disclosures to assist consumers in understanding and recognizing the debt. These disclosures are also meant to inform consumers about their rights, including the right to dispute the claim. The proposals contain a new form of an initial demand letter which includes a “tear-off” portion consumers can send back to the debt collector with check-off boxes to identify a dispute or indicate willingness to pay the debt. The CFPB also mentioned having a portion of the initial demand indicate the name and address of the CFPB and the manner to file a complaint. My concern would be that this type of notification would only increase the number of complaints. This would make a complaint verification process even more important!
Stop Collecting or Suing on Debt Without Proper Documentation - If a consumer disputes the validity of the debt in any way, collectors would have to stop collections until the necessary documentation is checked. Collecting on debt that lacks sufficient evidence would be prohibited.
Other Topics
Somewhat surprisingly, the proposed rules did not seem to want to tackle the 40-year-old provisions of the FDCPA relating to communication with consumers. In my experience, many consumers would prefer to deal with their accounts via email or text. Frankly, I feel this would be a huge consumer benefit that must be part of the discussion. The vast majority of consumers want to pay their bills; however, they do not want to have to spend time on the phone dealing with a cumbersome process. Think about it, each time a consumer calls our office, we need to go through the same verification and disclosure process that the regulators and our clients require.
In addition, there was discussion about the application of the FDCPA to first-party debt collectors. The CFPB said this topic would be address in the near future.
Finally, it will be interesting to follow the progress of the rule making through the SBREFA panel and into 2017. It does not seem likely that rules will be issued any time soon. All of the major collection industry groups have chimed in on the issues. Debt collection truly has a major impact on our nation’s economy. Many small companies will be impacted by these rules. I’m hoping the CFPB really weighs true consumer benefit to major small business hardship when issuing rules.
Fred N. Blitt, Esq., is a partner with Blitt and Gaines, PC in Illinois and Couch, Conville and Blitt in Louisiana. He is past president of NARCA.