Last Thursday, the Consumer Financial Protection Bureau (CFPB) Consumer Advisory Board (CAB) held a meeting to discuss Student Loan Servicing and Debt Collection. If the Advisory Board discussion on debt collection is any indication, then it seems as though the industry is playing against a stacked deck.
The CFPB assembled the advisory board by inviting “external experts, industry representatives, consumers, community leaders and advocates to apply.” The idea, per the CFPB, is to create a group of “crowdsourced” experts on “consumer protection, consumer financial products or services, community development, fair lending, civil rights, underserved communities, and communities that have been significantly impacted by higher priced mortgage loans,” and to tap that group as a resource on related markets, emerging practices, products expertise and consumer impacts.
The 2016-2017 members of the CAB and their bios can be found here. It is an impressive group, including law professors, bankers, leaders of well-known not-for-profit entities, and consumer advocates. But if you went looking for an intelligent discussion on debt collection, you would not find it here.
Several consumer advocates told horror stories of singular events while characterizing the entire debt collection industry as a plague. While the CFPB has many functions beyond regulating debt collectors, it is surprising that the CAB does not provide anything remotely close to a balanced perspective on this important issue.
It seemed to me that Joann Needleman, from the Clark Hill law firm, was the only member of the Board that could offer any desired “market intelligence and expertise” on the debt collection industry. While Ms. Needleman’s background would suggest that she is solely an advocate for the debt collection industry, she provided honest feedback on many issues. That honest feedback ranged from positive to neutral to negative on debt collection issues.
What was most surprising to me as a somewhat biased observer was that the discussion was so long on anecdotal stories and so short on facts and data. [Full disclosure: I have applied to be on the Consumer Advisory Board the last two opportunities and I have received the standard “Thanks, but No Thanks” response.]
With all of the talented people on the CAB one would think that the dialogue would have been more substantive and nuanced. Reciting anecdotes about bad consumer experiences is not the evolved conversation I was expecting. All that does is inflame the discussion.
CFPB Director Cordray was an active participant in the meeting. Much of his discussion centered around data and substantiation issues that have been highlighted in the Outline of Proposed Rulemaking.
In his prepared remarks talking about the rulemaking process for debt collection, Cordray noted:
“The proposal we have under consideration right now would overhaul the entire process from the moment third-party collectors first receive their debt portfolios to their very last efforts to collect. The proposal also covers many debt buyers, and as part of our work in this area, we plan to address issues with first-party debt collectors on a separate track.
Our proposal under consideration is not our first foray into the debt collection marketplace. In October 2012, we issued a rule establishing our supervisory authority over nonbank debt collectors with more than $10 million annually in consumer debt collection receipts. This covers some 175 debt collectors accounting for more than 60 percent of this market, and it was the first time the federal government had ever asserted supervisory authority over third-party debt collectors. We also have enforcement authority in this area, as do the Federal Trade Commission and state attorneys general, and we consistently work together in a group effort to police unlawful practices in the industry. Both on our own and with these partners, we have ordered companies to halt violations of law and made them refund hundreds of millions of dollars they had unlawfully collected from consumers. All of that experience creates a strong foundation for us now to proceed with our rulemaking to reform the debt collection market.
Debt can overwhelm people and leave them feeling helpless and powerless as they try to fend off harassing debt collectors. By cleaning up the integrity of this process, we can resolve many issues before they become problems.”
The CFPB will typically make the webcast available on its website. However, as of this morning it was not available. The most recent video that was on the site was from the June, 2016 meeting.