CFPA Debated in Committee this Week; Experts Weigh In on ARM Impact
A House committee is expected to move legislation this week creating a new regulator for the financial services industry. Leaders at top ARM organizations weigh in on what they'd like to see in the new agency.
A committee in the U.S. House of Representatives was expected to move forward this week with legislation that would create a new regulator, the Consumer Financial Protection Agency (CFPA), which could supplant the Federal Trade Commission as the primary regulator for collection firms.
A bill currently before the House Financial Services Committee, H.R. 3126, would also take regulatory powers from the Federal Reserve and other agencies and place it in the hands of independent regulators who would oversee products such as credit cards and other financial services. As such, the CFPA would oversee the Fair Credit Reporting Act (FCRA) and the Fair Debt Collection Practices Act (FDCPA).
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The idea has gained quite a bit of traction after the failure of bank regulators to catch many of the recent abuses in the financial services industry that led to a meltdown in the sector last year. But the Fed, along with much of the financial services industry, opposes the legislation.
ACA International, the association of credit and collection professionals, is also very concerned about the proposal. “The industry is very concerned about how this will work in practice,” said Adam Peterman, the group’s government affairs director. “It seems to me when you have the overall financial system governed by various regulators, you’re able to take into account all of the necessary parts of the economic cycle.”
Under the current system, the Federal Reserve handles economic growth; the Office of the Comptroller of the Currency (OCC) within the Treasury Department handles solvency and the FTC handles consumer protection, Peterman explained. “You are accurately considering the entire economy, and that provides for a healthy cycle. With the Consumer Financial Protection Agency, they will be trying to handle consumer protection in the financial arena.”
But some promoting the adoption of the new agency want to limit the development of any new financial products to ones that are “plain vanilla.” If limited to such products, the financial industry would stagnate, according to Peterman. He pointed out that the limited amount of financial products and services available in the 1970s would be insufficient in today’s economy. Similarly, products and services available now could very well be insufficient in 40 years.
Some in the accounts receivable management industry are taking a pragmatic approach to a potential CFPA, viewing it as inevitable. They are actively working to make sure the agency considers the position of the ARM industry.
“One regulator for both originating creditors and debt buyers could eliminate confusion for the financial services industry and consumers alike,” DBA International President Roger Knauf wrote in a letter to the editor Friday in the Wall Street Journal. “CFPA must be given pre-emptive rule-making authority over states, or this super agency will be an ineffective paper tiger with little authority to create protection for consumers nationwide.”
DBA International is an association of debt buying professionals.
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Comments
Comment from Susann Bouchillon, Professional Collector llc on October 21, 2009 at 10:58AM EST
It is my opinion that the new regulatory agency is inevitable. Financial Services, as a whole, is being vilified and the public wants blood. Collection agency suits and collector complaints are at an all time high under mounting financial pressures and reduced recoveries. Our politicians are not going to miss an opportunity to "appear" as if they are taking aggressive action. This new agency will happen. How it happens... is up to us.
Instead of fighting this new agency, it is my opinion, that we should embrace and support it. We must offer to serve in it's formation and design of operating standards over our industry.
Collection agency giants were asked to serve as advisers and text writers to draft the FDCPA in the 70's. The law served to cull abuse and increased recovery by re-defining standard practices. This further resulted in attracting true business leaders to this industry. The thug and gangster became cliche...almost. We still have work to do.
This is yet another opportunity for our progressive leaders to raise their hands and lend their talents, or just "take it" when the next auditor shows up with an absurd set of requirements drafted by a bureaucrat.
Sincerely, Susann Bouchillon, CEO The Professional Collector, llc sbouchillon@professionalcollector.net
Comment from KenACSI on October 21, 2009 at 2:11PM EST
I agree with Susann that the financial services industry is being vilified and have said myself for some time that the public wants "blood". Unfortunately anyone who can be considered "corporate America" is lumped into one pile by a willing media, the public, and grandstanding politicians who want to appear to care. With any new regulatory entity, there will be stress and confusion. Personally, I think we have what we need if it were enforced and practiced; however, I do agree that if it is inevitable then we need to be very proactive in it's formation and guidelines when possible.
Comment from Laurence Wilkinson on October 21, 2009 at 3:54PM EST
I completely agree that we must become very involved in any formative process regarding this potential new agency. Whether it happens or not, we have to be inclusive to the process to assure that whatever the outcome, it does not further impede the vital collections industry.
That the FDCPA is grossly outdated is self evident. This is an opportunity to revisit this law and address it in the light of current technologies and practices; to give the regulatory agency rule making authority, and to limit the ability of activist jurists to make law on a whim of personal opinion. That the FTC has refused to issue guidance on the issue of whether to violate the 'mini-Miranda' rule or to violate the 3rd party disclosure rule shows me that we need an agency willing to step up and tackle the difficult issues.
CFPA may not happen. But even if it doesn't, we can still be heard and perhaps establish the groundwork for necessary change that will impact the FTC.
Comment from MJ on October 22, 2009 at 11:03AM EST
After so long in this industry, I've become as sincerely cynical about the government's involvement in our industry as I have with those who pound their chest and say "we need to get involved". I'm glad some say they are willing to try, but I'm afraid they are just good sounding words on an industry blog. Everyone nods in approval, then goes back to their daily routine waiting for someone else to do something. If someone has time to really do something, let me know and I'll be there to lend a hand...but it won't happen and I won't waste my time trying alone. Goodness knows the ACA won't do it. Will you? As for the CFPA...I quote an old Who tune, "Meet the new boss, same as the old boss".