At a Glance: Responses to the CFPB Debt Collection Rulemaking Proposal

It’s been nearly two weeks since the Consumer Financial Protection Bureau closed the comment period on its Advance Notice of Proposed Rulemaking for the debt collection industry. So far, there are more than 1,600 comments posted between regulations.gov and RegulationRoom.org, a new private-public partnership site that made the comment process more user-friendly for consumers.

When taking a first look at some of the responses posted by major debt collection industry groups, a few key trends stick out.

If the CFPB develops uniform language for collection notices or communication, that language should come with safe harbor protection. This means if agencies use the prescribed language, they get the benefit of the doubt from the CFPB when it comes to compliance. In its response, the National Association of Retail Collection Attorneys (NARCA) specifically noted that safe harbor language from a 2000 case in the Seventh Circuit Court is currently used by many of its members.

Reform the rules for communication under the Fair Debt Collection Practices Act and the Telephone Consumer Protection Act. Debt collectors should be able to communicate with the consumer in the mode that the consumer prefers best. This could open the door for mobile calling and email, which the industry thinks should not be restricted as an official communication.

Providing a specific example, the Consumer Relations Consortium (CRC) noted in its comments that email would be a great channel for verification documents, as they would reach the consumer quicker and carry lower costs to the collector. The group said that when it was collaborating with consumer advocacy groups, there was support for electronic communications on the consumer side.

Make time-barred debt less confusing and scary. While ACA International’s response suggested getting rid of the term “time-barred debt” altogether, and replacing it with something more user-friendly, DBA International had an entirely different suggestion. They proposed that any CFPB Final Rule should preempt conflicting or inconsistent state law, even when the state law is theoretically “more” consumer protective. Since the statute of limitations varies widely from state to state, this could have huge implications for when and how agencies can let consumers know about debts that are past the statute of limitations.

Don’t forget about the good guys. Much of the data provided by ACA International and DBA International focused on how rarely “good” collection agencies (or their members) did anything outside the law. “The overwhelming majority of consumers recognize their debt under current procedures,” ACA International stated in their ANPR response.  ”On average, less than one percent of consumers dispute the debt.”  NARCA’s data from a survey of its members also supported this idea, noting that only three percent of its cases are disputed.

Both ACA and DBA argued that if the CFPB adopts nationalized standards for debt collection, then it should look to the standards that industry associations already have in place for their members as a place to start.

Official Consumer Responses

The vast majority of responses received by the CFPB were from consumers. But most were very brief anecdotes from individuals. The National Consumer Law Center (NCLC) submitted a 200+ page response on behalf of its organization and many other consumer advocacy groups. While the ARM industry might not approve of some of the recommendations, there was some common ground.

The NCLC response is comprehensive, but there is a lot of focus on the data used within the debt collection system, specifically, the information passed from original creditor to third party collectors, debt buyers, and attorneys. With the attention being paid to account information on the part of regulators and concessions made by all of the ARM industry responses, it seems very likely that account-level information required will be codified in new debt collection rules. Responses from consumer and industry groups roughly align on this matter.

The NCLC also recognized that newer and emerging communication technologies might have more appeal to consumers. It writes, “Text messages and emails should be treated as telephone calls – and allowable times should be governed by the statutory restrictions in 15 U.S.C. § 1692c(a)(1).”

But the NCLC makes recommendations that fall outside of what the debt collection industry would like to see.

On the issue of call volume and frequency, the NCLC response calls for specific call limitation standards in new debt collection rules. “The CFPB should limit [collection] calls to three per week and actual contact to once a week,” the group writes. “Calls that are more frequent can have no purpose other than harassment.”

The group also takes a hard line on the collection of time-barred debt. It makes a recommendation to completely outlaw any collection activity on accounts beyond the statute of limitations, writing, “the CFPB should go further and prohibit all efforts to collect old debt that is beyond the statute of limitations. The collector could be permitted to accept a voluntary, unsolicited payment, but no affirmative collection activities should be permitted.”

The response seemingly concedes that this is unlikely noting that if the CFPB continues to allow non-court collection on time-barred debt, it should be “only under strict rules,” including the banning of “re-aging” if a consumer makes a payment on the debt. In addition, it recommends blunt language on collection letters for time-barred accounts, including disclosures of “We CANNOT SUE YOU to collect this debt, because it is too old” and “This debt is too old to be included in your credit report. Paying this debt will not help your credit record or score.”

To learn more about how the industry responded to the ANPR, and how that differs from the consumer response, be sure to sign up for Tuesday’s information-packed webinar, insideCompliance: Assessing the Impact of CFPB Rules on Debt Collectors. Learn from top compliance experts what debt collection agencies can do right now to get ready for more CFPB oversight. You’ll also have the chance to ask our expert panel (Ron Canter, John Rossman and Linda Straub-Jones) questions during the live Q&A portion of the webinar. Registration is still open; don’t miss out!