With all the articles we have seen on the CFPB and debt collection, I could not pass up the opportunity to write about this topic after the surprise election of Donald Trump as the next president. Please keep in mind that this article is being drafted a month before Trump actually takes office so this will be a test of my political prognostication skills. As we know, the CFPB was created in 2010 as part of the Dodd-Frank financial reform legislation in response to the behavior of many companies on Wall Street. While some of you might think Trump’s election signals the end of the CFPB, I would recommend that you don’t reassign your compliance management staff to new positions just yet.
The CFPB has been under attack since its inception and, most recently, the Court of Appeals for the District of Columbia potentially weakened the CFPB by ruling that its structure was unconstitutional. Under the ruling in the PHH case (a case involving a mortgage lender), the Court found, as structured, the CFPB director was the second most powerful official in the U.S. Government because his power was unchecked by presidential oversight. Other agencies operate at the direction of the president and thus are removable at will. As a result, the court ruled that the Agency’s director can be removed at the President’s discretion rather than “for cause” as under Dodd-Frank. This case combined with Trump’s contention that he will decrease regulations on businesses certainly leads us to believe that the next administration will decrease the regulatory impact on all of us.
In theory, these circumstances could lead to beneficial change for debt collection law firms. Notwithstanding, if I look into my crystal ball, I don’t see many changes anytime soon for a couple of reasons:
Consumer Benefit
The last few years of regulation have caused our banking clients to focus more on the consumer experience when dealing with their debt collection cases. While firms like mine have always treated consumers with dignity and respect, this treatment now is all part of standard practice. It is written in standard operating procedures and its effectiveness is audited by our clients. No matter what happens with the CFPB, this treatment is here to stay.
Consent Orders
We have seen a number of Consent Decrees involving companies and law firms over the past two years that impacts the manner in which we collect debt. For legal debt collections, the requirements are far in excess of what is required by our state codes of civil procedure (and please don’t get me started with the discussion of how the CFPB can override a code of civil procedure or a state’s right to regulate its own legal professionals). Nonetheless, the impact of this regulation on law firms is the increased amount of documentation that we now add to all complaints versus what is actually required by state law.
Hopes for Reduced Regulation
For me, I have always been in favor of helping the consumers navigate their financial problems. They should know the nature of their debts and we should work with them towards resolution. No one, not our clients or our firms want to file suit; we would rather resolve matters prior to going through the time and expense of a lawsuit. But, in the end, if the legal process must be exercised to enforce the collection of legitimate debts, then so be it. The problem today is that collection law firms are small and medium sized businesses just like any other business. Increased regulation is a cost that is very hard for most businesses to afford as it does not produce any revenue. In my firm, we have a number of call monitoring associates, an internal audit team, a compliance counsel and a group dedicated exclusively to client external audits. I know that all of you have the same needs to address in your offices as well. All of those positions cost significant money and, combined with increased taxes, put a heavy strain on businesses to maintain profitability. All of our employees want salary increases, bonuses and increased benefits just like all other employees and consumers do. I’m hoping the change in administration will help level the playing field so that costs of regulation to the business are considered before legislation is enacted or new rules are issued.
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.