An obscure bureaucratic step may be a harbinger that the Consumer Financial Protection Bureau (CFPB), under new leadership, is rethinking a major planned rulemaking aimed at the debt collection industry.
Until last week, the CFPB was accepting comments on its proposal to conduct a survey on debt collection disclosures. This survey was closely linked to the CFPB's planned debt collection rule that would impose additional restrictions and burdensome regulations on the debt collection industry. However, on December 14, 2017 – the last day to submit comments – the CFPB abruptly withdrew its proposal to survey consumers. In explaining the reason for the withdrawal, the CFPB stated that its leadership decided to reconsider collecting information in connection with its "ongoing related rulemaking" – a clear reference to the debt collection rule.
The CFPB had planned for this survey as early as December 3, 2013, when the CFPB announced that it was assessing the need for regulations in debt collection and would test consumer disclosures in connection with that aspect of its rulemaking agenda. The consumer disclosures survey was a long-standing endeavor and was mentioned along with the development of the debt collection rule in CFPB's rulemaking agenda blog posts during 2014 to 2016. This web-based survey of 8,000 individuals was intended to "explore consumer comprehension and decision making in response to debt collection disclosure forms."
The rule on debt collection as a totality was justifiably viewed with trepidation by the industry when it was first announced over four years ago. According to the CFPB's outline of proposals issued on July 28, 2016, debt collectors would become subject to new strict limits and prohibitions in virtually all areas of debt collection:
- Substantiation of Debt: Debt collectors would be required to substantially prove a debt is valid before starting collection, which would include obtaining information on the complete chain of title from the debt owner at the time of default to the collector and each charge for interest or fees imposed after default and the contractual and statutory authority source for such interest and fees.
- Limits on Contact: The new rules would limit live communications to once per week if the collector has confirmed consumer contact. A collector would also be limited to no more than six communication attempts per week if the collector does not have confirmed consumer contact or three per week if the collector has confirmed consumer contact.
- Consumer Disputes: The proposed rules would also require collectors to provide clearer and easier ways for that person to communicate the grounds for their dispute. This includes a proposed "tear off" portion of a collection notice or a telephone call. Additionally, under the proposed rules, if a disputed debt is sold, the new collector would inherit the dispute and would still have to provide validation.
In total, the proposed rule, at least as it was envisioned in July 2016, would have created a long list of compliance requirements for debt collectors. Furthermore, in the outline of its proposals, the CFPB emphasized that it considered "future rulemaking ... [that] would apply to first-party debt collectors (i.e., creditors collecting their own debt excluded from coverage of the FDCPA)." The CFPB thus encouraged these "first-party debt collectors [to] carefully consider their own business practices in light of the proposals."
What has changed is the control of the CFPB. The CFPB's inaugural Director, Richard Cordray, resigned, and President Trump appointed Mick Mulvaney, director of the Office of Management and Budget, as interim director. Mulvaney immediately put all rulemaking on pause, and had made critical comments of the CFPB's activism.
This pivot on the survey could well indicate a reversal of plans to develop the rule, at least on a pace that could have led to the rule being issued early next year.
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