CFPB Launches Debt Collection Rulemaking Process
The Consumer Financial Protection Bureau has taken a significant step towards the adoption of debt collection rules by issuing an Advance Notice of Proposed Rulemaking (ANPR). The CFPB is soliciting comments on an array of issues relating to the debt collection practices of third-party debt collectors and debt buyers as well as those of creditors collecting their own debts.
Under the Dodd-Frank Act, the CFPB became the first federal agency with authority to issue substantive rules under the Fair Debt Collection Practices Act (FDCPA). The Dodd-Frank Act also authorized the CFPB to prescribe rules prohibiting “unfair, deceptive, or abusive” acts or practices (UDAAPs).
Based on the CFPB’s discussion of its rulemaking authority in the ANPR’s supplementary information, in proposing debt collection rules, the CFPB can be expected to rely on not only its FDCPA and UDAAP authority, but also on its more general Dodd-Frank rulemaking authority. This includes the authority to prescribe disclosure rules for consumer financial products and services.
The supplementary information also indicates that the CFPB’s rulemaking proceedings will be far-ranging in scope. The CFPB plans to consider issues as diverse as how key FDCPA terms should be defined, whether a Dodd-Frank rule should address the conduct of creditors collecting debts in their own names, and what types of debt (such as certain medical debt) do not involve a consumer financial product or service and therefore are not subject to the CFPB’s UDAAP authority.
As the CFPB acknowledges in the supplementary information, because the FDCPA does not apply to debt collection by original creditors, the CFPB would need to use its UDAAP authority or its authority to prescribe disclosure rules to regulate such activity. If the CFPB were to do so, it would represent the CFPB’s first use of these new powers under Dodd-Frank. Given the significance of the issues that the CFPB plans to address and the potential impact of its rulemaking, it is critical that members of the consumer financial services industry weigh in on the ANPR. Comments must be submitted within 90 days of the ANPR’s publication in the Federal Register.
The ANPR contains 162 questions that focus on the following general topics:
- Transfer of debt information from original creditors to debt collectors and debt buyers and information provided to consumers upon sale or placement of debt (for which the CFPB is considering the development of documentation and disclosure requirements)
- FDCPA validation notices and the FDCPA and Fair Credit Reporting Act dispute processes
- Debt collection communications with consumers and third parties (with the CFPB directing several of its questions on this topic at the compliance challenges faced by debt collectors in leaving recorded messages and using other technologies such as caller identification and electronic communications)
- Use of the CFPB’s rulemaking authority to further clarify and specify conduct prohibited by the FDCPA and address collection activity by original creditors, as well as the CFPB’s application of the Dodd-Frank provision prohibiting UDAAPs by service providers
- Collection of time-barred debts
- Debt collection litigation process and procedures
- FDCPA exemptions for state debt collection systems
The CFPB already has expansive supervisory authority in the debt collection arena. Under its “larger participant” rule, the CFPB can supervise debt collectors and debt buyers with more than $10 million in annual receipts. The Dodd-Frank Act gave the CFPB supervisory authority over service providers to large insured depository institutions as well as service providers to nonbank mortgage originators, payday lenders, and private student loan lenders. Those service providers can include third-party debt collectors, regardless of the collector’s size.
The CFPB also can supervise mortgage servicers and servicing by large banks, and it has proposed to supervise nonbank servicers of private and federal student loans as “larger participants.” In addition, the Dodd-Frank Act authorizes the CFPB to supervise any nonbank—regardless of its size—that the CFPB has reasonable cause to determine "is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services." This authority extends to such a nonbank's affiliate service providers.
Members of Ballard Spahr’s Consumer Financial Services Group regularly consult with their clients engaged in consumer debt collection on compliance with the FDCPA and state debt collection laws and are experienced in assisting clients in the preparation and filing of comments in agency rulemaking proceedings. The Group has created a team of lawyers who are helping clients prepare for CFPB examinations and respond to CFPB civil investigative demands.
For more information, please contact Practice Leader Alan S. Kaplinsky at 215.864.8544 or email@example.com, John L. Culhane, Jr., at 215.864.8535 or firstname.lastname@example.org, or Collection Documentation Task Force Chair Christopher J. Willis at 678.420.9436 or email@example.com.
Copyright © 2013 by Ballard Spahr LLP.
(No claim to original U.S. government material.)
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.
This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.