With the election of Donald Trump, new leadership will soon be in place at the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC). Both of these agencies have the authority to bring enforcement actions against debt collectors. The new leadership at the agencies ought to consider allocating to the CFPB primary enforcement responsibility for debt collectors who are larger participants in the market and to the FTC primary enforcement responsibility for debt collectors who are not. Such an allocation would provide industry with more clarity and decrease burdens, and it would make government enforcement more efficient and accountable.
The FTC is the federal government’s oldest consumer protection agency, having spent many decades implementing and enforcing laws to protect consumers, including consumers of financial goods and services. In 2010, Congress, through the Dodd-Frank Act, created the CFPB and gave it broad new powers over consumer financial protection.
Congress included a number of provisions in the Dodd-Frank Act assigning different powers and roles of the FTC and the CFPB. Congress, however, chose in some circumstances for the FTC and the CFPB to have concurrent authority. For example, both the FTC and the CFPB can bring enforcement actions against debt collectors who violate the Fair Debt Collection Practices Act (FDCPA) or who engage in unfair or deceptive acts and practices. Concurrent authority creates a risk that the two agencies may duplicate efforts, articulate conflicting standards, or impose unnecessary burdens.
To address these concerns, Congress mandated in the Dodd-Frank Act that the FTC and the CFPB enter into an agreement to coordinate their enforcement activities. In 2012, the CFPB and the FTC entered into a Memorandum of Understanding (MOU) establishing an elaborate set of procedures the agencies would follow to coordinate their enforcement. The CFPB-FTC MOU did not seek to allocate responsibility for specific types of entities or laws to one agency or the other. Because the CFPB was a new agency in 2012, it is understandable that the MOU was procedural, not substantive. The procedural mechanisms in the CFPB-FTC MOU appear to have been useful to the agencies in coordinating their work. Accordingly, in 2015 the two agencies reissued their MOU largely unchanged.
With more than five years of experience, the time is ripe for the FTC and the CFPB to consider revising their MOU to include a substantive division of enforcement responsibilities where they have concurrent authority. One proposal would be to allocate agency enforcement more clearly in markets for which the CFPB has defined by rule larger participants. The CFPB would have primary enforcement responsibility for larger participants in these markets, while the FTC would have primary enforcement responsibility for everyone else.
Debt collection may be a useful market in which to consider the implications of such a proposal. The CFPB has defined by rule larger participants in the debt collection market to be firms which receive more than $10 million in annual receipts from the collection of debts. Larger participant debt collectors are subject to CFPB supervision as well as CFPB and FTC enforcement. Other debt collections are not supervised by the CFPB but are subject to CFPB and FTC enforcement.
Because the annual receipts of debt collectors typically are not public information, it is not possible to determine definitively in which enforcement cases defendants were larger participants in the debt collection market. The CFPB, however, appears to have brought actions against both debt collectors who are larger market participants and those who are not. The FTC, on the other hand, appears to have brought actions almost exclusively against debt collectors who are not larger market participants.
The main FTC and CFPB enforcement overlap has been with regard to the mid-sized and smaller debt collectors. FTC enforcement is sufficient without overlapping CFPB enforcement; FTC enforcement against these mid-sized and smaller debt collection firms would play to the FTC’s traditional strengths in bringing injunction actions in federal court litigation and in working with state attorneys general. Removing the CFPB layer of enforcement would allow the agencies to avoid many of the costs and inefficiencies that arise from them having to coordinate case-by-case enforcement decisions about these firms. Allocating primary enforcement responsibility to the FTC would allow mid-sized and smaller firms to focus on the FTC and make the FTC more clearly accountable for protecting consumers from their conduct.
The enforcement overlap between the FTC and the CFPB with regard to larger market participant debt collectors seems to be more potential than actual. Nevertheless, there would be advantages in assigning to the CFPB primary enforcement responsibility for these collectors. Larger participants have to comply with CFPB reporting requirements and are subject to CFPB examinations, and such supervision often is comprehensive, extensive, and burdensome. These firms also are subject to CFPB enforcement, often as a consequence of the information the agency obtained during the supervision process. Adding a layer of FTC enforcement for these firms on top of CFPB supervision and enforcement is not necessary. Eliminating the layer of FTC enforcement also permits the agencies to avoid many of the costs and inefficiencies that arise from them having to coordinate case-by-case enforcement decisions about these firms. Assigning primary enforcement responsibility for these firms to the CFPB would allow larger market participants to focus on the CFPB and make the CFPB more accountable to protecting consumers from their conduct.
This proposal would allocate primary responsibility to one agency but it would not allocate exclusive responsibility to it, because there are circumstances in which one agency may need to investigate or bring an enforcement action against a firm over which the other agency has primary responsibility. For instance, an agency may be concerned about the conduct of a group of related firms and it may make sense for one agency to deal with all of them together. There also are circumstances in which it is not clear which agency has primary responsibility, for example, a firm is close to the thresholds the CFPB has set to be a larger participant in a market, and, therefore, it may make sense for an agency to investigate and challenge its conduct even if it eventually transpires that the firm was not one for which it was primarily responsible. Primary but not exclusive enforcement responsibility allows some wiggle room for these types of circumstances.
The CFPB is now a young agency, no longer a new agency. The CFPB and the FTC should have sufficient experience with each other’s law enforcement work to know how best to divide up their responsibilities. Dividing enforcement responsibilities along the lines in the proposal above would provide clarity, reduce burden, and promote government efficiency and accountability. The CFPB and the FTC can divide up their respective enforcement responsibilities without a change in the law; a simple amendment of their MOU could do the trick. The new leadership at the CFPB and the FTC should consider modifying their MOU to divide up their enforcement responsibilities in markets like debt collection.