The House Financial Services Committee announced yesterday that a subcommittee met to examine several pieces of legislation aimed at providing much needed regulatory relief for community financial institutions. The list included nine bills; among them is the “Stop Debt Collection Abuse Act of 2017 (H.R. 864).”  

The announcement provided these key takeaways from the hearing:

  • Community financial institutions are getting buried under red tape.
  • Consumers and hardworking taxpayers bear the brunt of cost-hiking, job-killing, opportunity-choking red tape.
  • To preserve consumer choice and financial independence, Congress must tackle regulatory reform and simplify rules.

The following is the list of legislation that was considered:

  •  “Stop Debt Collection Abuse Act of 2017 (H.R. 864)” – Introduced by Representative Love, this bill amends the Fair Debt Collection Practices Act (FDCPA) to redefine “creditor,” “debt,” and “debt collector” to subject debt collectors, working on behalf of federal agencies, to the FDCPA.  H.R. 864 would also classify debt buyers as debt collectors under the FDCPA and require that debt collectors, working on behalf of the federal government, cannot charge fees that are more than 10 percent of the amount collected from a consumer.  H.R. 864 also requires the Government Accountability Office (GAO) to study debt collection practices at the federal, state and local levels.
  • “Financial Institutions Due Process Act of 2017 (H.R. 924)” – Introduced by Representative Rothfus, this bill amends the Federal Financial Institutions Examination Council Act of 1978 to establish a three-judge independent examination review panel to mediate examination findings, compel timely completion of final examination reports, and compel timely completion of written determinations for permission, regulatory interpretation, or reporting guidance.
  • “Making Online Banking Initiation Legal and Easy Act of 2017 (H.R. 1457)”  Introduced by Representative Tipton, this bill authorizes a financial institution, with an individual's consent, to record personal information from a swipe, copy, or image of such individual's driver's license or personal identification card and store the information electronically for the purpose of verifying the identity of a customer and preventing fraud or criminal activity.
  • “Community Lending Enhancement and Regulatory Relief Act of 2017 (H.R. 2133)” – Introduced by Representative Luetkemeyer, this bill contains fifteen sections to amend the Truth in Lending Act (TILA) and other rules in a variety of ways that provide relief to smaller lenders. It also amend the Consumer Financial Protection Act of 2010 to repeal the authority of the Consumer Financial Protection Bureau (CFPB) to take action to prevent a covered person or service provider from committing or engaging in an abusive act or practice under federal law in connection with any transaction with a consumer for a consumer financial product or service, or the offering of one.  The bill also prohibits the CFPB from taking any action against a covered person or service provider without first consulting with such person's primary financial regulatory agency.  The CFPB must comply with the same rules as govern the Federal Trade Commission (FTC) regarding unfair or deceptive acts or practices in or affecting commerce. 
  • “Clarifying Commercial Real Estate Loans (H.R. 2148)” – Introduced by Representative Pittenger, this bill amends the Federal Deposit Insurance Act to clarify capital requirements for certain acquisition, development, or construction loans.
  •  “Privacy Notification Technical Correction Act (H.R. 2396)” – Introduced by Representative Trott, this bill amends the Gramm-Leach-Bliley Act to exempt from its annual privacy policy notice requirement any financial institution which: (1) has not changed its policies and practices with regard to disclosing nonpublic personal information from those disclosed in the most recent disclosure sent to consumers, (2) makes its current policy available to consumers on its website and via request, (3) notifies customers of the availability on periodic billing statements or electronically, and (4) posts all notices if it maintains more than one policy.
  •  “Access to Affordable Mortgages Act of 2017 (H.R. __)” – To be introduced by Representative Kustoff, this bill amends the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 and the Truth in Lending Act to exempt from property appraisal requirements certain higher-risk mortgage loans of $250,000 or less if such a loan appears on the balance sheet of the creditor of the loan for at least three years.
  •  “Ensuring Quality Unbiased Access to Loans Act of 2017 (H.R. __)” – To be introduced by Representative Hollingsworth, this bill would repeal the Office of the Comptroller of the Currency (OCC) ‘‘Guidance on Supervisory Concerns and Expectations Regarding Deposit Advance Products’’ (78 Fed. Reg. 70624; November 26, 2013), and the Federal Deposit Insurance Corporation (FDIC) ‘‘Guidance on Supervisory Concerns and Expectations Regarding Deposit Advance Products’’ (78 Fed. Reg. 70552; November 26, 2013).  The bill would also require the OCC and FDIC to follow a transparent process when issuing any subsequent deposit guidance.
  •  “To simplify the process for national banks to obtain deposit insurance, and for other purposes (H.R. __) – To be introduced by Representative Tenney, this bill amends the Federal Deposit Insurance Act to simplify the process for national banks and federal savings associations to obtain deposit insurance.

insideARM Perspective

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To be clear, this was just a subcommittee hearing, so the legislation described is far from becoming law. With that said...

What the ARM community may note is that, while most of the bills sound like they are designed to achieve the stated goal of regulatory relief, the first item, introduced by a Republican from Utah -- aimed at debt collectors and debt buyers -- doesn't sound like it has this same intention. 

I found three things I thought worth pointing out about this proposed bill.

First:

“Before transferring or selling a debt described in section 803(5)(B) to a debt collector or contracting with a debt collector to collect such a debt, a Federal agency shall notify the consumer not fewer than 3 times that the Federal agency will take such action."

The practice of notifying a consumer that their account is going to be sent to a debt collector -- especially if it states which debt collector -- is one that some creditors have begun to adopt (though to my knowledge, not 3 or more times), and would help to reduce the skepticism consumers have when first contacted by a legitimate collector.

Second: The requirement for a study of debt collection practices by yet another Agency:

Study.—The Comptroller General of the United States shall commence a study on the use of debt collectors by State and local government agencies, including:

(1) the powers given to the debt collectors by Federal, State, and local government agencies;

(2) the contracting process that allows a Federal, State, or local government agency to award debt collection to a certain company, including the selection process;

(3) any fees charged to debtors in addition to principal and interest on the outstanding debt;

(4) how the fees described in paragraph (3) vary from State to State;

(5) consumer protection at the State level that offer recourse to those whom debts have been wrongfully attributed;

(6) the revenues received by debt collectors from Federal, State, and local government agencies;

(7) the amount of any revenue sharing agreements between debt collectors and Federal, State, and local government agencies;

(8) the difference in debt collection procedures across geographic regions, including the extent to which debt collectors pursue court judgments to collect debts; and

(9) any legal immunity or other protections given to the debt collectors hired by State and local government agencies, including whether the debt collectors are subject to the Fair Debt Collection Practices Act (15 U.S.C. 1692 et seq.).

Report.—Not later than one year after the date of enactment of this Act, the Comptroller General of the United States shall submit to Congress a report on the completed study required under subsection (a).

This would not be an easy task. insideARM published a report in 2011 on collections in the government sector.  I suspect those charged with conducting this study would find an extremely fragmented system, with many jurisdictions employing outdated technology and/or disparate policies. These differences make general conclusions or apples-to-apples comparisons quite challenging. 

Third:  The bill would classify debt buyers as debt collectors under the FDCPA. This is interesting, in light of the recent Supreme Court decision in Henson v. Santander Consumer USA Inc.., which held that a debt purchaser collecting its own debt is not subject to the FDCPA. As RMA International noted, however, that decision did not consider whether a purchaser of defaulted debt is engaged “in any business the principal purpose of which is the collection of any debts.” §1692a(6).


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