CFPB Begins Rulemaking Process for Debt Collection Industry

The Consumer Financial Protection Bureau (CFPB), the federal regulator overseeing debt collectors in the U.S., announced Wednesday that it has started to exercise its rulemaking authority by formally issuing an Advance Notice of Proposed Rulemaking. The Bureau is seeking feedback from the public on any rules it may make to govern debt collectors.

Citing a need to update and supplement the 36-year old Fair Debt Collection Practices Act (FDCPA), the CFPB said that a 90-day comment period will begin today and all stakeholders are encouraged to weigh in.

“Updating the legal framework to protect today’s consumers and to allow fair and appropriate use of modern technology is a high priority for the Consumer Bureau, which motivates this Advance Notice of Proposed Rulemaking,” said CFPB Director Richard Cordray.  “We are seeking to hear from the public – consumers, consumer advocates, creditors, debt buyers, and debt collectors – about what works and what does not in the current debt collection market.”

Cordray noted that the Bureau is looking for feedback in three broad areas: accuracy of the information collectors use, ways to ensure that consumers have a clear understanding of their rights in the debt collection process, and the communication tactics used by debt collectors to contact consumers.

The full 114-page Advance Notice goes into more detail about what the Bureau is looking for in the comment period.

Although the Bureau noted that it has not yet decided the precise scope and nature of rulemaking it may conduct concerning debt collection, a conference call with reporters gave some indication of where initial rules may focus.

A senior CFPB official commented that early rules are “likely to focus on creditors and first party debt collection.” The FDCPA exempts credit grantors from its restrictions when collecting on behalf of themselves.

The Bureau has been very consistent, however, in noting that it wants creditors to also abide by the rules in the FDCPA. In a bulletin issued in July, the CFPB said that any entity subject to the Consumer Financial Protection Act of 2010, whether a third-party collector or a creditor collecting its own debts, can be held accountable for any unfair, deceptive, or abusive practices in collecting a consumer’s debts.

CFPB officials also noted that there is a need to include new communication technology in debt collection rules, using cell phones as a specific example.

The Bureau could not offer a timetable for the proposal of any debt collection rules. After the comment period is closed, regulators must take them into account before formally proposing new rules.

To facilitate the commenting process, the CFPB is working with the Cornell University e-Rulemaking Initiative to make it easier for the public to comment through a project called Regulation Room. Regulation Room provides an online environment for people and groups to easily learn about, discuss, and react to proposed rules or notices by federal agencies. Visit www.regulationroom.org on Wednesday to begin participating.

Consumers, consumer groups, debt collectors, industry representatives, and other stakeholders can also comment on the notice by following the instructions on www.regulations.gov.

The CFPB also announced that they would be publicly releasing some 5,000 debt collection complaints it has received since July.

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