On November 6, 2013, the Consumer Financial Protection Bureau (CFPB) issued an Advance Notice of Proposed Rulemaking (ANPR) directed at the debt collection industry. The CFPB is seeking comments, data and information from the public regarding a variety of rules proposed to govern collection agencies as well as first-party debt collectors, such as banks and other entities who collect their own consumer debts. This ANPR has been anticipated by the debt collection industry since the CFPB’s announcement in July that it was considering “whether regulations may be appropriate to address concerns raised about debt collection.” The 90-day comment period closes on February 4, 2014.
Significantly, the ANPR also indicated that the rules could encompass parties that collect their own debts, entities that are, under most circumstances, not subject to the Fair Debt Collections Practices Act (FDCPA).
CFPB Director Richard Cordray noted that the agency is looking for feedback in three broad areas: (1) accuracy of the information collectors use, (2) ways to ensure that consumers have a clear understanding of their rights in the debt collection process, and (3) the communication tactics used by debt collectors to contact consumers.
More specifically, the ANPR seeks information on:
- The transfer of information or access to information upon sale or placement of debts;
- Validation notices, disputes, investigation, and verification of disputes;
- The conduct of collectors in interacting with consumers in trying to recover on debts through the collection process;
- Collector communications seeking location information about consumers, interacting with consumers themselves, disclosing debts to third parties, and use of newer technologies;
- Unfair, deceptive, and abusive acts and practices, including issues concerning sections 806, 807, and 808 of the FDCPA;
- The collection of debts that are beyond the statute of limitations;
- Debt collection activities that implicate issues relating to State law;
- Debt collection litigation;
- Exemptions under Federal law for State debt collection systems under section 817 of the FDCPA, as well as for private entities that operate bad check diversion programs under contracts with State and local district attorneys under section 818 of the FDCPA; and
- Recordkeeping, monitoring, and compliance.
In January 2013, the CFPB began regulating any firm that generates $10 million in receipts from consumer debt collection activities. The CFPB is making good on its previously signaled intention to draft rules that broaden the scope of the entities falling under its regulatory supervision, in particular, its intent to cast a net to cover first-party debt collectors, including banks and other consumer credit issuers that collect their own debts. In a conference call with reporters, one senior CFPB official noted that these early rules are “likely to focus on creditors and first party debt collection.” This falls in line with recent indications that the CFPB was looking to broadly assert its enforcement powers against companies traditionally viewed as outside of such regulation, given their FDCPA exemption. (See Troutman Sanders report here.) Through this ANPR, the CFPB is beginning a dialogue to seek input and guidance on the bounds of its new oversight, which could fundamentally change the collection industry’s regulatory landscape.
The ANPR also highlights the CFPB’s focus on the use of new communication technology for debt collection, particularly cell phones, email, and other systems and technologies not contemplated when the FDCPA was passed. While such guidance could clarify certain difficult issues that have plagued debt collectors in recent litigation, the new rules may have a dramatic effect on the way in which debt collectors currently run their businesses. Ultimately, once finalized, the rules will likely require a major overhaul of compliance practices within the debt collection industry.