Over the past year, the Consumer Financial Protection Bureau (CFPB) has been on the minds of collection agencies, banks and other major creditors. A few months ago, the CFPB published Advance Notice of Proposed Rulemaking (ANPR). ANPR is a commentary on new rules and contains 162 questions that solicited comments from private industry, collection agencies and trade associations in order to develop new regulations for the collection of debts. As I read through the CFPB’s commentary and questions and prepared our response this fall, it occurred to me that many creditors may not be aware of the pending changes that could substantially affect how they place debts for collection and how they respond to disputes.
Here are a few examples of questions posed by the CFPB that relate to creditors:
1. Should a creditor be required to send a letter to consumers notifying them that the debt has been placed for collection?
2. Should a creditor be required to inform collectors that the debtor does not speak English?
3. Should creditors be required to obtain, transfer and store data about consumers and their debts for longer periods of time due to technological innovations.
4. Asks questions regarding what types of monitoring do the creditors take after placement.
5. Asks questions with regard to providing documentation when requested by the debtor and questions if creditors be required to provide documentation on disputed debts.
6. Asks if the original statement of account or invoice be provided when an account is placed and the initial validation letter is sent to the debtor.
7. Should the debt be itemized when placed and that information be included as part the validation notice sent to the consumer. There is a concern that consumers do not understand or recognize the bill when placed for collection
8. Requests information on how long a creditor retains records on accounts placed and their ability to provide that information in cases of dispute.
9. Asks what specific records are retained to verify debts.
The industry responses to ANPR are now being reviewed by The CFPB and the answers to these questions can be reviewed at http://www.consumerfinance.gov/newsroom/cfpb-considers-debt-collection-rules/. At some point, probably this year, the CFPB will issues new regulations based on the comments and answers it has received. Some of these new rules may impact how creditors and collection agencies interface and what additional steps might be necessary going forward for compliance. This inclusion of creditors and creditor responsibilities is a fundamental shift from how creditors were viewed by the regulators in the past.
Over the years, the collection process has been largely regulated and enforced by the Federal Trade Commission (FTC). The FTC was primarily concerned with the actions of collection agencies. The CFPB has a wider mandate. As a result, it is drilling down into the basic fundamentals of debts and debt collection in order to attempt to address every possible reason why a consumer might not pay their bill. They have a significant focus on the potential that a debt may not be valid and/or may not have the proper documentation behind it to be legally binding. Many of the questions posed would make debt collection very difficult on agencies and creditors by creating cumbersome processes and regulations. It is therefore important that every creditor be it commercial or consumer have a CFPB compliance person that is responsible to stay up to date with the changing landscape and inform your organization of any pending rulemaking.