CFPB Sets July 28 Debt Collection Event as Industry Awaits Rule

By Jeff Bater

July 15 — The Consumer Financial Protection Bureau (CFPB) may unveil a long-awaited proposal to regulate debt collection practices at a July 28 field hearing in Sacramento, Calif., industry watchers say.

The CFPB announced the field hearing July 15, with planned remarks from CFPB Director Richard Cordray on debt collection, followed by a panel discussion with consumer advocates and industry representatives. The CFPB regularly holds such events around the U.S. as a vehicle to unveil regulatory proposals and gather feedback from stakeholders.

“The CFPB's history suggests that it will be releasing a SBREFA outline in conjunction with this event which will be the public kickoff to a multi-year rulemaking,” Isaac Boltansky, an analyst at Compass Point Trading & Research in Washington, told Bloomberg BNA in an e-mail.

Before it can issue formal proposed rules, the bureau is required to submit its plans to a Small Business Regulatory Enforcement Fairness Act (SBREFA) panel required by the Dodd-Frank Act. The panel will vet the CFPB's regulatory outline for potential negative impacts on small entities — such as debt collection firms or community banks — that would have to comply with the potential new regulation.

David Anthony, a partner at Troutman Sanders in Richmond, Va., said consumer advocates and industry groups will be active participants in the July 28 field hearing, and the public will be given the opportunity to ask questions. “I would imagine there will be a robust debate on where regulation should be, how far it should go, what the problems are, what the solutions are,” Anthony said in a phone interview with Bloomberg BNA.

“The CFPB has been working on rulemaking, an ANPR on debt collection, for some time,” Anthony said. “It wouldn't surprise me for there to be some peek at that. The industry's been waiting for a long time and the deadlines have been kind of punted back a little bit.”

Impact Consumer Finance

The CFPB said in a November 2013 advance notice of proposed rulemaking (ANPR) that improving the integrity and accuracy of debt collection system “is of critical importance” to the regulator (144 BBD, 7/28/14).

The bureau is attempting to craft the first regulations under the Fair Debt Collection Practices Act (FDCPA), a federal law that applies mostly to debt collection firms.

The CFPB is also exploring whether FDCPA-type restrictions and requirements should apply to banks and other first-party creditors collecting debts in their own names. Since the law largely excludes creditors, the CFPB would have to use its Dodd-Frank Act authority against unfair, deceptive or abusive acts or practices (UDAAP) as the basis for potential rules on banks' debt collection operations.

“The CFPB's debt collection rulemaking is important not just because it's the first significant update to the FDCPA since its enactment in the 1970s but because it could meaningfully impact the entire consumer finance space,” Boltansky said.

In its spring 2016 rulemaking agenda, the CFPB said the federal government, for many years, has received more consumer complaints about debt collectors than about any other single industry. The bureau has been conducting surveys about consumer experiences with debt collectors, along with qualitative testing to determine what information would be useful for consumers to have about debt collection, according to the agenda.

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