I recently spoke at two different conferences for credit unions. During both speeches, I asked the audiences (approximately 125 people at one and 105 at the other) if they were aware that the CFPB was considering rules to regulate first-party collections. I also asked if they were aware of the current proposed rules for both first-party and third-party collections, which include rules on debt substantiation and transfer of data. Only five to 10 people raised their hands at each session.
The CFPB’s proposed debt collection rulemaking has been in the works since November 2013, when the Advanced Notice of Proposed Rulemaking was posted. The ANPR was a series of more than 160 questions, aimed at both the credit/collections industry and individual consumers. A period of time was allowed for comments and more than 10,000 flowed in.
Between December 2014 and March 2015, the CFPB conducted a debt collection survey with 10,876 consumers. It received 2,132 responses, which were taken into consideration during the creation of collections rulemaking.
Then, on July 28, 2016, the CFPB posted their proposed debt collection rules. This was followed by a Small Business Regulatory Enforcement Fairness Act panel meeting with 22 small businesses in the collections industry. The intent of this meeting was to ask these small businesses how the proposed debt collection rules would impact their business.
In the CFPB’s proposed rules, it suggests rules for collection agencies, debt buyers, collection law firms and loan services. However, in section B, “Scope of Proposals Under Consideration” the CFPB states that, “The bureau expects to convene a second proceeding in the next several months for creditors and others engaged in collection activity [emphasis added] who are covered persons under the Dodd-Frank Act but who may not be ‘debt collectors’ under the FDCPA.”
And yet, in June of this year, in what many considered to be a surprise move, the CFPB announced that it was going to change the content of the proposed rules, announcing that it will just address verification of debt and that the rule will cover both first-party and third-party collections at the same time. In his announcement about this change, former CFPB Director Richard Cordray said: “As we evaluated the feedback we received on the proposals under consideration, one thing became clear, writing rules to make sure debt collectors have the right information about their debts is best handled by considering solutions from first-party creditors and third-party collectors at the same time. First-party creditors like banks and other lenders create the information about the debt and they may use it to collect the debt themselves or they may provide it to companies that collect the debt on their behalf or buy the debt outright. Either way, those actually collecting on the debts need to have the correct and accurate information. All of the parties must work together to ensure they are collecting the right amount of debt from the right consumer.”
From all this, given the number of hands raised at the conferences I attended, it’s clear that too many in our industry are simply unaware of what the CFPB is up to. But, in addition to the debt collection rulemaking, many companies also tend to forget about another part of the Dodd-Frank Act, the Unfair Deceptive Abusive Acts or Practices. This is the focus of the CFPB’s bulletin from July 2013. Under the Dodd-Frank Act, all covered persons or service providers are legally required to refrain from committing UDAAPs. In its 2013 bulletin, the CFPB describes certain acts or practices that could be, depending on the fact and circumstances, considered a UDAAP.
The CFPB also gives examples of UDAAPs, which everyone should take a good look at. The bulletin lists 12 examples of situations/actions it considers a UDAAP, and I have seen many of these show up, both in suits and as the basis of enforcement actions that have been taken by the CFPB. So, this bulletin is an excellent document to review to make sure your credit union is not in violation of Dodd-Frank, as it pertains to UDAAPs.
Credit unions large and small need to be aware of what’s going on with the regulations. Being aware is not only a good business practice, it’s also good for your members. We all know that credit unions are member focused and member friendly, and they pride themselves on having close relationships with members. But that doesn’t mean that they’re off regulators’ radars.
Linda Straub Jones is Director of Collections Compliance at LexisNexis Risk Solutions. She can be reached at linda.straub@lexisnexisrisk.com.
