CFPB Hosts Debt Collection Town Hall

Inside Subprime: May 22, 2019

By Aubrey Sitler

Earlier this month, the Consumer Financial Protection Bureau (CFPB) hosted a town hall at the University of Pennsylvania focused on debt collection practices.

As some sources predicted, the town hall fell just one day after the consumer watchdog agency released its notice of proposed rulemaking (NPRM) on the Fair Debt Collection Practices Act (FDCPA), and it was framed as a discussion of the proposal.

The event began with a speech from CFPB Director Kathleen Kraninger, which she opened by noting that the debt collection NPRM aims to make concrete what has been ambiguous until now, stating: “Clear rules of the road, where consumers know their rights and debt collectors know their limitations, are a step towards fulfilling the intent of the law.”

After Kraninger’s remarks, the rest of the time was dedicated to gauging stakeholders’ reactions to the NPRM and taking comments and questions from the public. There was a panel discussion with CFPB staff, people representing various companies in the debt collection industry, and consumer advocates.

Kraninger explained that the new debt collection rules, as proposed, intend to provide guidance for applying the FDCPA to new technologies that were far from existing at the time of the FDCPA’s original issuance more than 40 years ago. While the FDCPA imposes some limits on debt collectors—they are prohibited from harassing, oppressing, or abusing consumers, and they are required to protect consumer privacy in certain terms—its application was intended for what are now more archaic forms of communication. “But how do these rules apply in today’s age of cell phones, email, and text messages?” Kraninger posited in her opening remarks. “What does that mean in today’s age of 24-hour, worldwide communications? It has largely been up to the courts to decide, and they’ve come to sometimes different interpretations of the law.”

These new rules, Kraninger said, intend to clear up some of the issues that are central to the ten thousand or more debt collection complaints that the CFPB receives annually. “Both consumers and debt collectors would benefit from clarity regarding the requirements of the law. The bottom line is that entities should be able to operate according to the law; and consumers should be treated in accordance with the law. Our proposal contains a balanced set of provisions designed to achieve those ends.”

The public response to the proposed rulemaking varied. Consumer advocates expressed concern over the rulemaking’s misfire—it could have been an opportunity to protect consumers, but instead allows what they view as excessive communications and loopholes to be able to disclose consumer information to third parties through “limited purpose” communications.

Debt collection industry representatives “praised the Bureau for its engagement with industry through the rulemaking process, although they questioned whether the resulting proposal was based on a thorough cost-benefit analysis and sufficiently supported by data.” They questioned whether or not this rule’s one-size-fits-all approach to communication regulation would be effective for all types of consumers.

Upon publication in the Federal Register, the proposed rule will be open for public comment for 90 days.

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