Point-Counterpoint: Looking at What the CFPB Should Do With the Collections Industry

The Consumer Financial Protection Bureau is going to fix everything. FINALLY, consumers are going to have a voice and everything that’s wrong with the accounts receivable management industry is going to be cataloged and categorically corrected. Also, that weird itch? Gone, thanks to the CFPB. The CFPB will also attend to that unsettling smell in the back of your ‘fridge even though you’ve taken just about everything out you can possibly think of as a culprit. (I love how cheese can age for years until it reaches my house, where at most it has a shelf-life of 15 minutes before I start having to be worried about it).

Of course, consumer advocates are a little worried that the CFPB won’t go far enough. (Their Perfect World scenario: debt collection is now illegal.) I thought it might be interesting to look at some general guidelines from the consumer side, and compare those with the guidelines put forth proactively by the ACA. See where the overlap is (at least two points, as far as I can see); see where the overlap isn’t (everything else).

For the consumer side, I picked this blog post by Gerri Detweiler over at Credit.com. Detweiler suggests six things the newly-created CFPB should put on its To-Do list. The post is definitely worth your time; while I can imagine many in the industry not being entirely happy with her six items, I think she presents them clearly and with arguments to back up each of her points.

Let’s get started.

Where both Credit.com and the ACA agree — and the only place where they seem to agree — is in customer communications. Except they don’t entirely agree about what a communication is.

Credit.com is really only looking at written communications (and more on that in a moment). The ACA, however, is looking at the entire spectrum of communications between a collector and a consumer.

Credit.com would like to see a standard form letter that all agencies use. A debt collector could then “just plug in the numbers.” All letters should contain the complete details of the debt and contain a summary of the consumer’s rights. Then, you know, you just make that hand-clap “Done!” motion and Bob’s your uncle.

Credit.com’s ultimate goal is to restrict all debtor-communication to mail. (And, probably, not email. Postal mail.) Notification and disclosure should, in their argument, all be done via letter. Later interactions can be through the phone (still no email); but primarily it’s old-fashioned letters.

The ACA, as I mentioned earlier, is looking at the broader scope of communications. What they’d like is for the FDCPA to contain the exact language that should be used in all consumer communications. (Meanwhile, it historically has worked like this: Collection agencies have been turning to the ACA for some kind — any kind — of guidance on communication matters. In turn, the ACA has been wanting the government to tighten up the FDCPA and provide the necessary language. The FDCPA, while all this has been going on, has just been quietly aging and making no moves towards modernizing. This is probably one of the reasons why the ACA has been pointing fingers at the FDCPA: it knows that the government is loath to move with anything resembling a quickness.)

The only other place where we can legitimately strain the chords of similarity is in Credit.com’s call to “rein in reckless debt buyers” and in the ACA’s “ensure the proper documentation of debts for collection purposes.”

The ACA has had a Sam/Diane relationship with debt buyers. Both Credit.com and the ACA would like to see “[Improved flow] of information by clarifying the specific debt information that must be maintained by creditors and asset buyers in order to allow debt collectors to provide documentation responsive to a consumer’s dispute regarding the amount of the debt, to whom the debt is owed or who is responsible for paying the debt.” That language is pulled from the ACA.

Credit.com follows with this: “As ACA International recommends, this documentation should be provided to the consumer when he or she requests verification of the debt, as permitted under the FDCPA. As it stands now, this verification process is often a joke. When challenged, debt buyers just produce another letter that doesn’t provide enough information for the debtor to figure out whether her or she owes the debt, the amount is inflated, or the debt is too old.”

And…that’s it. Credit.com and the ACA go their separate ways. The ACA wants to see more language about modern technology — email, text messages, replicants. Credit.com wants to see collection agencies communicate (in writing, again) before it sends a consumer’s account to a credit reporting agency.

Each list has its Bad Idea. Here are my two nominees:

Credit.com’s Bad Idea: Debt Collection Do-Not-Call List. Almost all of the reforms that Credit.com is proposing are towards restricted communications between consumers and collection agencies. Detweiler has a point when she mentions the irritation of wrong-party contact where someone who isn’t the debtor gets the brunt of all the debtor’s calls. But a Debt Collection Do-Not-Call list seems to be the wrong way to attend to this. Better documentation is what will put an end to a lot of these wrong-party contacts.

The ACA’s Bad Idea: Adopt a Federal Seven-Year Statute of Limitations for Debt Litigation. This doesn’t serve anyone except collection agencies. It almost feels like it’s a present the ACA wants to give to collection agencies for supporting the other four points.

The CFPB has only just put someone in its top position. Once the organization begins to operate in earnest, it’ll be interesting to see what it picks for its own To-Do list.