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.
