Last week Bureau of Consumer Financial Protection (Bureau) Acting Director Mick Mulvaney announced the appointment of Paul Watkins to lead the new Office of Innovation. He said,
“I am delighted that Paul Watkins is bringing his deep expertise, track record of protecting consumers, and commitment to innovation to the Bureau,” said Acting Director Mulvaney. “I am confident that, under his leadership, the Office of Innovation will make significant progress in creating an environment where companies can advance new products and services without being unduly restricted by red tape that belongs in the 20th century.”
Acting Director Mulvaney recently created the Office of Innovation to focus on encouraging consumer-friendly innovation, which is now a key priority for the Bureau. The work that was being done under Project Catalyst will be transitioned to this new office. The Bureau intends to fulfill its statutory mandate to promote competition, innovation, and consumer access within financial services. To achieve this goal, the new office will focus on creating policies to facilitate innovation, engaging with entrepreneurs and regulators, and reviewing outdated or unnecessary regulations.
According to the Bureau's announcement, Watkins is making the move from the Arizona Office of the Attorney General, where he was in charge of the office’s fintech initiatives. He managed the FinTech Regulatory Sandbox, the first state fintech sandbox in the country, which allows a company limited access to the marketplace in exchange for relaxing some regulations. Watkins was also the Chief Counsel for the Civil Litigation Division. In that role, he managed the state’s litigation in areas such as consumer fraud, antitrust, and civil rights. Previously, Watkins practiced at Covington & Burling LLP in San Francisco and Simpson, Thacher & Bartlett LLP in Palo Alto, Calif. He is a graduate of Hillsdale College and Harvard Law School, and a former clerk for Judge Dennis W. Shedd on the United States Court of Appeals for the Fourth Circuit.
So. Mr. Watkins, you may not be intimately familiar with the rules governing the practice of debt collection, but here is something worth understanding:
There is a catch-22 situation within the Fair Debt Collection Practices Act (FDCPA). The rule says debt collectors are prohibited from communicating with a third party about a debt. So they have to first confirm that they have the right person on the phone. And because of conflicting court decisions over the last few decades, they have become loathe to leave a voicemail message (because it may be considered too revealing and get them sued). But then consumers assume they are being harrassed (because collectors try calling back multiple times instead of leaving a message), and if they DO answer the phone, there is this super-awkward "who's on first" dance that ensues as everyone tries to verify the legitimacy of the other party.
Mobile phones, the TCPA, and robocall blocking innovations complicate this even further. Before deciding whether to pick up the phone, consumers want to know who is calling and why. Mobile devices are perfectly suited to display all sorts of information that would assist. Also, if more interactions could take place on a mobile device, it would allow for a variety of less obtrusive identity verification options than giving the other person your social security number or birthdate (neither of which are terribly private anyway). But. Nope. Not for debt collectors. So, as the world evolves and more robust data is inevitably displayed with each passing week, businesses that are legitimate will be forced to look shady.
I recognize the Office of Innovation will not make policy, but I gather it will work in tandem with those that do. And to the extent the Bureau is looking to foster innovation, I wanted you to know that there is this industry under the jurisdiction of the BCFP which is currently limited largely to US postal mail and landline telephones.
Everyone is concerned with financial services innovations that provide new forms of credit. Few people acknowledge that an inevitable part of this business will require managing defaulted accounts. This process also demands innovation.
Thanks for listening.