Panel of CFPB, OCC, and FTC Regulators Addresses Banker Questions

On Tuesday, Senior Vice President at Wells Fargo Bank Larry Tewell moderated a discussion titled “Implications for Default Management” among a panel of regulators at the Consumer Bankers Association national conference, CBA Live. The panel included:

• Daniel Dwyer, Attorney in the Division of Financial Practices at the Federal Trade Commission (FTC)
• Grovetta Gardineer, Deputy Comptroller for Compliance Policy in the Office of the Comptroller of the Currency (OCC)
• Tom Pahl, Managing Counsel in the Office of Regulations at the Consumer Financial Protection Bureau (CFPB)

The OCC’s November 2013 guidance for managing risks associated with third-party relationships was an early focus of the conversation. Gardineer explained that, while not official policy, this was really a “re-fresh” of existing guidance and came as a result of their surprise over the fact that management of third-parties hadn’t yet become something that institutions thought (or at least demonstrated) was important to do. She reminded the audience that the OCC wants to see attention to the whole cycle of a relationship, and not just a one-time box check exercise at the time of contract.

Related to the prevalence of complaints lodged about debt collection attempts made to the wrong person or about the wrong amount, Tewell asked the panel to shed light on the disconnect between industry data, which tells CBA members that 98% of their data is right… yet “the next day” in the hands of a third-party it becomes wrong.

Tom Pahl responded that they are learning how problems arise up and down the chain. He noted there are many potential causes over time, and they are seeking to understand which might be appropriate to address with regulation. One thing they are looking at is whether there should be standard documents required for sale, and how/whether those need to vary based on debt type.

Dan Dwyer – a primary author of the FTC’s 2013 study on debt buying – said their research found that many buyers didn’t receive dispute data or a breakdown of the balance by original amount, interest, and fees. He raised the concept of “prior substantiation” that the claims you are making are accurate.

Moving on, Tewell asked Pahl to describe the process for vetting the thousands of comments received by the CFPB in response to its ANPR on debt collection. His overview:

1. The team is in the process of reviewing and summarizing the comments
2. Follow up with various commenters, academics, and others to fill in gaps and see how discrepancies might be resolved
3. Conduct a large scale consumer survey in an attempt to infuse data (versus solely anecdotal/experiential input) into the process
4. Also considering disclosure testing
5. With the above inputs, we will outline where we are going
6. Conduct a SBREFA panel (here is an example) to evaluate potential effects on small business
7. Put out a report on what we’ve found through the SBREFA panel and what we will do about it
8. Put out a Notice of Proposed Rulemaking (NPR), with the text of proposed rules, for comment

While Pahl couldn’t specify an exact timeline, it was clear to all in the room that this would not be a swift process.

Worthy of note: Regarding disclosure testing, Mr. Pahl didn’t elaborate on a proposed process, but Tewell informally asked the audience for a show of hands for who will be volunteering to participate. Not a hand in the crowd was raised. While this of course was not an official request or response, it underscores the challenge of true live testing in a litigious environment. A similar response has been provided by many collection agencies who would like to participate, but feel at the end of the day that the risk of lawsuits over technical FDCPA violations is too great.

The panel also addressed the topic of communicating with consumers through newer technology than allowed by current law. Dwyer commented that he does believe consumers should be able to communicate [with collectors] in new and preferred ways, with the caveats that collectors can’t deceive, they must give proper disclosure, they can’t disclose to third-parties, and consumers can’t be charged for the communication.

Tom Pahl agreed, but added that collectors need to be able to communicate in order to resolve debts, and no methods are inherently off the table. He said we need to look at each communication, in each context, identify what kinds of risks there are, and how to address those risks.