One day after announcing its notice of proposed rulemaking regarding the Fair Debt Collection Practices Act (FDCPA), the CFPB held a town hall at the University of Pennsylvania to discuss the major aspects of the proposal, gauge stakeholders’ reactions, and field comments from the public. The town hall consisted of opening remarks by Director Kraninger, a panel discussion with Bureau staff, industry representatives, and consumer advocates, and an open question and answer segment with members of the community.
In her opening remarks, Director Kraninger emphasized that the Bureau endeavored to create “clear rules of the road” in which consumers know their rights and debt collectors know their limitations. She also noted that the rulemaking provides long-needed guidelines for the application of the FDCPA to new technologies that allow twenty-four hour personal communication—the statute is more than forty years old and was written when the “ubiquity of cell phones was not even imaginable.” According to Bureau statistics cited by Director Kraninger to underscore the need for clarity and modernization, the Bureau receives “tens of thousands” of debt collection complaints, there are more than eight thousand debt collection firms in the U.S., and one out of three persons with a credit bureau report has had debts in collection in a twelve-month period.
In explaining the Bureau’s rulemaking priorities, and its focus on debt verification, Director Kraninger noted that consumers frequently struggle to understand debt collection communications because of the addition of unexplained charges, the age of the underlying debts, and the addition of the a previously unknown third party collector. She also acknowledged that the rule seeks to address the thousands of private court actions faced by debt collectors as a result of the FDCPA’s ambiguities and that those ambiguities have been resolved differently by different federal courts. In her opinion, the resulting proposal is a “balanced set of provisions” “grounded in common sense” and resulting from “rigorous economic market analysis” created “deliberately and transparently” through the Bureau’s rulemaking process over the past five years.
Bureau Research, Markets and Regulations Associate Director David Silberman moderated the discussion that followed and External Affairs Policy Associate Director Andrew Duke provided introductory remarks. Participating in the discussions for the Bureau were Acting Deputy Director Brian Johnson, Research, Markets, and Regulations Policy Associate Director Tom Pahl, and Director Kraninger. Industry representatives included Mark Neib of ACA International, Stephanie Eidelman of the iA Institute, and Jan Steiger of the Receivables Management Association International. Consumer advocates included April Kuehnhoff of the National Consumer Law Center, Patricia Hasson of Clarify, a regional credit counseling service, and Michael Froehlich of Consumer Legal Services of Philadelphia.
Generally, 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. In particular, industry representatives emphasized that a “one size fits all” approach to communications limitations was misguided because of the different rates of consumer responses and engagement between different types and ages of debt. Industry representative emphasized that any final rule must address consumers who are looking to pay, as well as those who are looking to “game the system.”
They also argued that any inefficiencies created by the proposed rule will result in higher credit prices and restricted access to credit. When prompted for specific improvements to the proposed rule, including communications limitations, industry representatives deferred, indicating that they intend to address those issues in the written comments they will submit after they have had the opportunity to consult with their membership. Generally, however, industry representatives agreed that limiting communications does not serve the interests of the consumer because debt buyers may receive a handful of potential numbers for a consumer and speaking with consumers is the most effective means of resolving unpaid debts.
In contrast, consumer advocates largely viewed the rulemaking as a missed opportunity to protect consumers, objecting to a proposed rule they saw as allowing excessive communications, sanctioning the implicit disclosure of debts to third parties through “limited purpose” communications, and permitting the use of hyperlink electronic communications without appropriate consent or assurance that consumers can access information through that medium. Consumer advocates also noted that the proposed rule may weaken protections regarding the collection of time-barred debt. (The proposed rule prohibits threatening litigation when the collector knew or should have known the debt was outside of the statute of limitations when some federal courts have interpreted the FDCPA to provide strict liability for such conduct.) Consumer advocates also generally criticized the Bureau for dropping certain 2016 proposals, including a statement of rights and specific information about what will happen with a debt after the initial 30-day dispute period has passed.
The Bureau was asked whether its rulemaking had altered the scope of the FDCPA. The Bureau responded by noting that it attempted to adhere to the statutory language wherever possible and did not attempt to alter the Supreme Court’s ruling in Henson v. Santander that a debt buyer does not become a debt collector merely by purchasing defaulted debts because it does not collect debts due another. The panelists seemed to want to reserve judgment on the scope issue. They did agree that it was unclear whether the proposed rule would increase consumer complaints. Community members suggested that debt collectors be licensed and addressed the concept of “zombie debt” through several personal anecdotes.
The proposed rule will be subject to public for ninety days from publication in the Federal Register.