Consumer Law & Policy Blog

The CFPB proposes new debt-collection regs

The Consumer Financial Protection Bureau (CFPB) today proposed new debt-collection regulations described by the agency here. The agency's press release summarizes the proposal's key provisions this way:

• Collect the correct debt: Collectors would have to scrub their files and substantiate the debt before contacting consumers. For example, collectors would have to confirm that they have sufficient information to start collection, such as the full name, last known address, last known telephone number, account number, date of default, amount owed at default, and the date and amount of any payment or credit applied after default.
• Limit excessive or disruptive communications: Collectors would be limited to six communication attempts per week through any point of contact before they have reached the consumer. In addition, if a consumer wants to stop specific ways collectors are contacting them, for example on a particular phone line, while they are at work, or during certain hours, it would be easier for a consumer to do that. The CFPB is also considering proposing a 30-day waiting period after a consumer has passed away during which collectors would be prohibited from communicating with certain parties, like surviving spouses.
• Make debt details clear and disputes easy: Collectors would be required to include more specific information about the debt in the initial collection notices sent to consumers. This information would include the consumer’s federal rights. They would have to disclose to consumers, when applicable, that the debt is too old for a lawsuit. The proposal under consideration would also add a “tear-off” portion to the notice that consumers could send back to the collector to easily dispute the debt, with options for why the consumer thinks the collector’s demand is wrong. The tear-off would also allow consumers to pay the debt. The consumer could also verbally question the debt’s validity at any time, and prompt the collector to have to check its files again.
• Document debt on demand for disputes: If the tear-off sheet or any written notice is sent back within 30 days of the initial collection notice, the collector would have to provide a debt report – written information substantiating the debt – back to the consumer. The collector could not continue to pursue the debt until that report and verification is sent.
• Stop collecting or suing for debt without proper documentation: If a consumer disputes – in any way – the validity of the debt, collectors would have to stop collections until the necessary documentation is checked. Collecting on debt that lacks sufficient evidence would be prohibited. In addition, collectors that come across any specific warning signs that the information is inaccurate or incomplete would not be able to collect until they resolve the problem. Warning signs could include a portfolio with a high rate of disputes or the inability to obtain underlying documents to respond to specific disputes. Collectors also would be required to check documentation of a debt before pursuing action against a consumer in court. For example, collectors would have to review evidence of the amount of principal, interest, or fees billed, and the date and amount of each payment made after default.
• Stop burying the dispute: If debt collectors transfer debt without responding to disputes, the next collector could not try to collect until the dispute is resolved. The proposals under consideration also outline information that collectors would have to send when they transfer the debt to another collector so that a consumer does not have to resubmit this information to the new collector.

As part of the rule making, the CFPB issued this study on the debt-collection industry.

This DealB%k story by Susan Cowley explains how industry abuses prompted the CFPB to act.

 

Debt Collection Update: Our American Banker Op-Ed on Our Validation Notice Findings and More on the CFPB's Field Hearing

by Jeff Sovern

Here.  It has more information than the article abstract, but is a lot shorter than the article. The article itself is here. In other debt collection news, Law360.com has its preview of the debt collection rules here (behind paywall). The headline: CFPB Enforcement Actions Could Guide Debt Collection Rules.

UPDATE: InsideARM.com reports that the non-CFPB speakers at the CFPB Field Hearing tomorrow will be:

Graciela Aponte-Diaz, Director of California Policy, Center for Responsible Lending
Linda Guinn, CEO, C B Merchant Services
Jim Mastriani, President and COO, Velocity Portfolio Group, Inc.
Scott Maurer, Associate Clinical Professor, Santa Clara University School of Law
Susan Shin, Legal Director, New Economy Project
Brent Yarborough, Attorney, Zarzaur & Schwartz, P.C. 

What Will the CFPB's Debt Collection Regs Say?

The American Banker (behind paywall) and Bloomberg report speculations.

Essay on the Supreme Court's Spokeo decision

In this short essay (subscription possibly required), public-interest lawyer Arthur Bryant explains why he thinks the Supreme Court's decision in Spokeo v. Robins is good news for consumers seeking to enforce their rights to statutory damages.

What Should Courts Do About Validation Notices?

by Jeff Sovern

We now have reason to believe that validation notices fail to convey to consumers the information Congress wants consumers to have. If the CFPB addresses validation notices in its regulation, courts can simply follow the Bureau's lead. But it could be years before that regulation takes effect.  What should courts do in the meantime?  As we explain in the new version of our validation article, which went up on SSRN today:

One option would be to continue the existing approach. But that would overlook the problems with validation notices and essentially write the requirement that validation notices be effective out of the law. Another option would be to adopt an approach similar to the Federal Trade Commission’s Advertising Substantiation Policy. That Policy obliges advertisers making claims about their products to have a reasonable basis for the claims before they disseminate the advertisement. Rather than guessing or requiring consumers to demonstrate after the fact that a validation notice has not succeeded, courts should require collectors to have evidence before they use a validation notice that it will achieve Congress’s goals. Otherwise, collectors will continue to receive a free pass for frustrating the legislative goals.

I would be curious to hear any comments people may have about that suggestion. 

 

FCC chair urges phone companies to offer free robocall blocking

The Hill reports that the chairman of the Federal Communications Commission on Friday told phone companies that they should start providing free technology for their customers to block robocalls and spam texts.

Last year, The Hill explains, the FCC told wireless carriers that they could provide robocall-blocking technology said without running afoul of any rules. Wheeler’s letters on Friday puts pressure on the industry to take action on the issue. The companies have 30 days to respond.

The full story is here.

Robertson Article on the First Amendment and Advertising "Off-Label" Drugs

Christopher T. Robertson of Arizona and Harvard's Petrie-Flom Center for Health Law Policy, Biotechnology, and Bioethics has written A Trojan Horse? How Expansion of the First Amendment Threatens Much More than the Regulation of Off-Label Drugs, forthcoming in the Ohio State Law Journal.  Here is the abstract:

Scholars, advocates, and courts have begun to recognize a First Amendment right for drugmakers to promote their products “off-label”, without proving safety and efficacy of new intended uses. Yet, so far, this debate has occurred in a vacuum of peculiar cases, where convoluted commercial speech doctrine underdetermines the outcome. Review of the seven arguments deployed in the off-label domain finds that they cannot be so limited. Instead, if they were valid, they would undermine the FDA’s entire premarket approval regime, reopening the door to a snake oil market where hype replaces science. Even more, if valid, this First Amendment logic would undermine a wide range of statutory regimes that have similar intent-based structures and rely on speech as evidence of intent. Ultimately, with relevance to First Amendment theory, this article reveals a broad and longstanding coherence in the law.

Revisions Coming to the FDCPA Validation Article . . .

by Jeff Sovern

We need to make some revisions to our validation article discussion draft, in Part V A.1., beginning on page 27, and captioned "Did Respondents Understand that The Letter Said They Could Dispute the Validity of the Debt?" Consequently, please don't use that part of the article until the new version is on the web. It should be next week. I apologize for any inconvenience.

"The CFPB Turns 5 Today. Here’s What It’s Done (and What It Hasn’t)"

Time has this article, reporting that the Consumer Financial Protection Bureau "has reshaped the mortgage market and issued hefty penalties. But there is much to be done."

Education Department to implement improved customer service and enhanced protections for student loan borrowers

The U.S. Department of Education yesterday outlined a series of enhanced protections and customer service standards to guide the future of federal student loan servicing practices. The policies were outlined in a memorandum to Federal Student Aid (FSA) and developed in consultation with the Department of the Treasury and the Consumer Financial Protection Bureau.

The new system includes:

• Department of Education-branded communication that is standard–eliminating differences that now exist among multiple servicers that co-brand borrower communications–and that will help borrowers stay on top of their debt and avoid confusion about who is servicing their loan.
• A streamlined borrower experience via a single web portal through which all borrowers can find the latest information about their loans, make payments and apply for benefits–eliminating the need to know the name of their servicer.
• Better customer service practices that will be common for all borrowers and that meet high standards to ensure borrowers’ needs are met consistently, regardless of what contractor is providing that customer service.
• Reduced, and, to the extent practical, eliminated loan transfers and other borrower disruptions that can make it hard for borrowers to keep current with their loan payments and seek help when they need it.
• Enhanced oversight and accountability that will ensure that borrowers are treated fairly and given clear, actionable information at every step of the repayment process, including enhanced customer service practices and a new complaint system to empower borrowers when something is not right.
• A single platform for all Federal student loans allowing for a more seamless connection for future customer service centers.

The Department is also launching an FSA Feedback System for borrowers with complaints about student loans or institutions of higher education.

The Department's press release is here, and its blog post is here. The Hill covered the announcement, here.