Consumer Law & Policy Blog

Compilation of Media Coverage of CFPB Debt Collection Proposal

Here.

Guardian Article on How the Election Could Affect the CFPB

Here. Excerpt:

Even before the November election, warning lights were flashing. Jeb Hensarling, the Republican member of Congress who chairs the House financial services committee, has declared he won’t rest until he tosses post-financial crisis reforms like the Dodd-Frank Act “on to the trash heap of history”. Hensarling is also a fierce opponent of the CFPB, which has calls a “dangerously out-of-control agency”.

Hensarling’s plan to repeal Dodd-Frank and replace it with a patchwork quilt of lightweight, bank-friendly rules, unveiled in June, would gut the CFPB. It would deprive the agency of the right to scrutinize some kinds of lending altogether (such as auto loans), and it would politicize the entire process. Right now, the CFPB is about as independent as any Wall Street agency can be: its head is appointed by the president and left to get on with his job, with independent funding received from the Federal Reserve.

If Hensarling gets his way, the CFPB would become completely accountable to Congress, having five commissioners appointed by party leaders, and having to fight for an annual budget. In other words, the same politicians who receive lobbying funds from Wall Street would be deciding who runs the agency that protects consumers from Wall Street – and how much money that agency should get. That hasn’t always worked out terribly well for the SEC, which has battled for its budget, and which is still waiting for the Senate to confirm two nominees to its five-member commission.

Some First Thoughts About the CFPB's Validation Proposal

by Jeff Sovern

Brian posted this morning on the CFPB's debt collection proposal.  I wanted to focus just on the validation requirements.  Appendix F to the Bureau's proposal speaks to the validation notice.  The Proposal indicates that the Bureau has conducted and continues to conduct extensive consumer testing of validation notices.  I don't know what that testing showed, but it appears the model form in the proposal is the product of such testing.  Without knowing what that testing indicated, it's hard to be certain, but the model form certainly seems dramatically easier to read and understand than, for example, the dunning letter we tested in our study, which was based on a letter in a Seventh Circuit case.   I also should note that I don't know much about how much latitude the Bureau has in promulgating FDCPA regulations. With the understanding that some of what I would like to be done may exceed the Bureau's authority (and so require an amendment to the statute), here are some comments:

Overall, the Bureau's model form seems like a huge improvement over where things stand now.  That being said, it isn't perfect. The Bureau’s model form indicates that the Bureau is considering requiring a “tear-off’ at the bottom which consumers could remove, fill out, and return to the collector to request verification and indicate the nature of the dispute.  This would certainly be much better than the current system, which requires consumers either to create their own form or find one elsewhere, such as on the web. But many people find it more convenient to communicate via telephone call, email, or the web.  In other contexts in which consumers have had to send mailings to obtain a benefit—such as to secure rebates—they often don’t bother and forego the rebate.  Consumers redeem rebates at rates of as low as 4%, and while rebates are different from debt collection, that's not the only case in which consumers don't bother filling out forms to obtain a benefit.  Accordingly, the Bureau should consider alternative ways for consumers to communicate verification requests if the statute can properly be so interpreted. If that's not possible, because it exceeds the Bureau's authority, Congress should amend the statute.

Another concern: our study found that a non-trivial number of consumes believed that if they didn't dispute the debt within the thirty day time frame, they would either have to pay the debt or would lose their ability to defend against a suit to collect the debt, even as to debts they didn't owe. The Bureau should consider adding language to the model form that indicates that a failure to dispute the debt within thirty days would not have that effect. The model form now says "If we do not hear from you, we will assume that our information is correct," but I wonder if consumers will interpret that as meaning that they can still contest payment. Maybe the consumer testing will offer reassurance on that score.

The Bureau also wants collectors to give consumers a one-page statement about their rights.  A great idea, but I wonder about information overload. Probably the Bureau tested for that in the consumer testing, but if they didn't, I hope they will.  In that regard, I also hope that if their discretion permits, they limit the amount of extraneous statements collectors can make (like saying we haven't made up our mind whether to sue and this could result in a judgment against you, etc.) when giving the validation notice.

In the past, when the Bureau has tested disclosures, they have examined whether consumers can understand them, but not whether consumers would actually use them. That is to say, they show them to consumers and ask questions to see if consumers get the right answers, but they don't verify, for example,  that consumers who are being dunned by a debt collector would take the time to read them and act on them.  That latter is much harder to test, but if the disclosures are perfect, they still don't do any good unless consumers use them. We need to find ways to convey information so that consumers use it, not just give them perfect disclosures that they ignore.  So I hope they tested the extent to which consumers would use the forms. How many consumers who think they don't owe the debt will actually use the tear-off?  I don't know, but I hope the Bureau does.

Just my two cents.  Our article has more.

 

 

 

 

 

 

What Will the CFPB's Debt Collection Regs Say?

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

American Banker: The CFPB's Impact, Five Years On

Here (behind paywall). The article consists mostly of quotes and statistics.  Some excerpts (for some reason, I couldn't get the paragraph breaks to work correctly):

* * * Republican lawmakers continue to gun for the CFPB. More than 50 bills pending in Congress have sought to defund, change or somehow restrict the agency. * * * Beyond promulgating rules, the CFPB has issued more than 120 enforcement actions against a wide range of companies, including credit card issuers, banks, payday lenders and debt collectors. Banks have paid roughly 65% of the more than $11 billion in relief that has gone to consumers.

What Does the Republican Platform Say About Consumer Protection?

The full platform is here.  Here are excerpts on consumer protection issues:

The Republican vision for American banking calls for establishing transparent, efficient markets where consumers can obtain loans they need at reasonable rates based on market conditions. Unfortunately, in response to the financial institutions crisis of 2008-2009, the Democratic-controlled Congress enacted the Wall Street Reform and Consumer Protection Act, otherwise known as Dodd-Frank. They did not let the crisis go to waste but used it as an excuse to establish unprecedented government control over the nation’s financial markets. The consequences have been bad for everyone except federal regulators.

Rather than address the cause of the crisis — the government’s own housing policies — the new law extended government control over the economy by creating new unaccountable bureaucracies. Predictably, central planning of our financial sector has not created jobs, it has killed them. It has not limited risks, it has created more. It has not encouraged economic growth, it has shackled it.

Since the enactment of Dodd-Frank, the number of community banks has significantly declined, and the cost and complexity of complying with the law has created impediments to the remaining banks’ ability to support the customers they serve. From 13,000 community banks in 1985, only 1,900 remain. * * *

The worst of Dodd-Frank is the Consumer Financial Protection Bureau, deliberately designed to be a rogue agency. It answers to neither Congress nor the executive, has its own guaranteed funding outside the appropriations process, and uses its slush fund to steer settlements to politically favored groups.

Its Director has dictatorial powers unique in the American Republic. Its regulatory harassment of local and regional banks, the source of most home mortgages and small business loans, advantages big banks and makes it harder for Americans to buy a home. Its one-size-fits-all approach to every issue threatens the diversity of the country’s financial system and would leave us with just a few enormous institutions, as in many European countries.

If the Bureau is not abolished, it should be subjected to congressional appropriation. In that way, consumer protection in the financial markets can be advanced through measures that are both effective and constitutional. Any settlements arising from statutory violations by financial institutions must be used to make whole the harmed consumers, with any remaining proceeds given to the general Treasury. Diversion of settlement funds to politically connected parties should be a criminal offense. * * *

Because regulations are just another tax on the consumers, Congress should consider a regulatory budget that would cap the costs federal agencies could impose on the economy in any given year.

Will the CFPB Also Release a Debt Collection Study on July 28?

by Jeff Sovern

As we have previously noted, the CFPB has scheduled a July 28 debt collection field hearing, and could announce the beginning of the SBREFA process, leading to a rule-making, that day.  NCLC's April Kuehnhoff speculates that the Bureau will also release the results of its debt collection studies then.  The Bureau's arbitration study substantially added to what we know about that subject, and it would be great if the Bureau, which has been looking into debt collection for some time, did the same for debt collection.  Given how pervasive debt collection is in our country--one third of Americans are reported to have debts in collection--the more we can learn about debt collection, the better-informed policy-making and those of us who study consumer law can be. 

CFPB Announces Debt Collection Field Hearing July 28; Sneak Peak at the New Rules?

Here.  The Bureau is likely to announce the Small Business Regulatory Fairness Enforcement Act (SBREFA) proceeding that day, which will entail giving some information about what its proposed debt collection rules are likely to look like.

American Banker Story: Pence's Statements on the CFPB and Other Banking Issues

The story is headlined Pence VP Pick Could Shape Trump's Banking Policy (free content).  Here is what the article says about Pence's view of the CFPB:

When the Consumer Financial Protection Bureau was just a legislative proposal, Pence objected to giving a new agency so much power; he would likely support efforts to reform the structure of the agency. Republicans have been pushing to replace the bureau's single director with a five-person commission and to require that the bureau consider credit availability as well as consumer protection.

"The bill allows bureaucrats to determine the types and terms of credit products offered to consumers, through the establishment of the so-called Consumer Financial Protection Agency," Pence said in the speech to the New York Hedge Fund Roundtable.

"An unelected 'credit czar' would be empowered to dictate what financial products could be offered and at what terms, drastically reducing the number of financial products available and driving up the cost of credit generally, at a time when families and small businesses can least afford it," Pence added. "Agencies need the ability to consider safety and soundness and consumer protection together to ensure that a balance is achieved and neither responsibility is neglected."

Consumerist Report on How the House Appropriations Bill Would Hurt Consumers by Preserving Class Action Waivers and Crippling the CFPB

Here.