The CFPB’s final collections rule: gauging the potential impact of the election results

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Continuing our series of blog posts breaking down the CFPB’s final debt collection rule, we now discuss whether the November general election results are likely to have any impact on the final collection rule.

It seems clear that, though President Trump has yet to concede, Joe Biden has won the presidential election. We expect President-elect Biden will avail himself of the authority supplied by the U.S. Supreme Court in the Seila Law decision to dismiss current CFPB Director Kraninger and replace her with a new director. Whether President-elect Biden will be able to get his preferred nominee confirmed by the Senate, however, remains uncertain. Names are beginning to percolate around the industry about who that nominee may be and this week, the president-elect announced Leandra English will head his CFPB transition team. As we saw with the CFPB’s payday loan rule, a new director could reconsider, revise, or even entirely withdraw the “final rule” before its effective date. Such efforts to “redo” the rule could be quite extensive. For example, we believe a new rulemaking effort under a new CFPB director could reduce call frequency limits, apply limits to texts and email messages, or count call attempts on a per-consumer basis, and could even add new rules for creditor collections, all of which were strenuously sought by consumer advocates and a number of state attorneys general.

But as of now, Republicans will hold at least 50 Senate seats in the new term. Ultimate control of the new Senate will be determined based on the outcome of the Georgia runoff election scheduled for January 5, 2021. If either of Georgia’s two incumbent Republican senators retains their seats, then Republicans will retain control of the U.S. Senate. However, if both seats are won by Democrats, that would result in an even split between the parties in the Senate but effectively, Democratic control as Vice President-elect Kamala Harris would serve as the deciding vote in the event of a tied vote.

The folks at fivethirtyeight.com have an interesting preliminary analysis of the two runoff elections and they note that in recent decades, Georgia Republicans have considerably increased their turnout margin in runoff, special elections, averaging an increase in the margin of Republican votes by over 4.5%. It is unclear if the same relative Democratic voter drop off will occur for these two races given the national attention on them and that the balance of power in the U.S. Senate is at stake.

If Democrats do not win both Georgia runoff elections, a Republican-led Senate is not likely to go along with any efforts to override the final rule by way of the Congressional Review Act (“CRA”) or to vote for any Fair Debt Collection Practices Act (“FDCPA”) amendments.

But even if Democrats do succeed in winning both Georgia U.S. Senate seats, it still seems unlikely that Democrats would be inclined to use the CRA to repeal the entirety of the final rule and prevent the Bureau from subsequently issuing any substantially-similar rule. It does make it more likely, however, that Democrats might seek to amend the FDCPA to compel targeted changes in the final rule sought by consumer advocates, such as additional restrictions in certain collection activity and potentially expanding the scope of the FDCPA’s coverage.

In any event, we believe that under a Biden Administration CFPB enforcement is likely to be more aggressive generally and particularly likely to prioritize efforts to ensure that industry complies with the new collections rule.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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