The heart of debt collection is communicating with consumers. If collectors communicate with consumers too much, it can be harassing, oppressive, or abusive. On the other hand, if collectors cannot communicate with consumers enough, collectors will incur higher costs during collection and sue more often, which will be reflected in increased cost and decreased availability of credit. Consumers therefore can be harmed if collectors contact them too much and if collectors do not contact them enough.
In 1977, Congress struck a balance between these two concerns in Section 806 of the Fair Debt Collection Practices Act. Section 806 of the FDCPA generally prohibits collectors from engaging in any conduct “the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of any debt.” Section 806(5) specifically prohibits collectors from calling consumers “repeatedly or continuously with the intent to annoy, abuse, or harass anyone at the called number.” Over nearly 40 years, many federal government and private actions have been brought against collectors for violating Section 806. This case-by-case enforcement, however, has not resulted in courts developing any bright line test for when collector calling behavior is unlawful.
The Consumer Financial Protection Bureau (CFPB) is considering taking a different approach to preventing consumer harm from collector contacts. The CFPB announced last summer in its Small Business Regulatory Fairness Act (SBREFA) outline that it is considering proposing rules that would mandate specific numerical limits on communications through all methods between debt collectors and consumers. The CFPB may make these limits either standards from which no variance is permitted or standards which serve as presumptions.
Using a rulemaking proceeding to develop bright line standards can have great benefits. Bright lines can make industry compliance easier and help good actors distinguish themselves from bad actors. Bright lines also can make government examination, investigation, and enforcement easier. The CFPB’s efforts to develop bright line standards for frequency of collector contact appear intended to achieve these benefits.
The CFPB, however, should abandon these efforts as an exercise in “regulatory humility.” As explained by acting Federal Trade Commission Chairman Maureen Ohlhausen, regulatory humility in essence means applying a firm recognition of the inherent limits on knowledge to decisions the government makes.
This recognition is particularly warranted when government decisions require knowledge about the future consequences of government intervention in light of changes in markets and technology.
Regulatory humility, however, does not mean there is no place for government intervention. Rather, it means that such intervention should be focused on practices that are causing real consumer harm and that private remedies cannot solve. It also means that the intervention usually should be incremental to reflect the challenges of knowing in advance what standards to apply, in particular in circumstances in which markets and technology are likely to change very rapidly.
Collector contact caps are a prime candidate for the application of regulatory humility.
As noted above, courts have decided Section 806(5) cases for nearly 40 years on the issue of if collector telephone calling behavior has been made with the intent to annoy, harass, or abuse. Courts in these cases have not been able to articulate a bright line standard for calling behavior.
In its SBREFA outline, the CFPB reported that it had reviewed consumer complaints and consumer survey results concerning collector calling behavior.
In its recent report describing some of its consumer survey results, the CFPB provided more information about the consumer survey results on which it is relying. After acknowledging that reported frequency of consumer contacts varies considerably, the CFPB sets forth information about when consumers felt they had been contacted too much. Survey data as when consumers feel they have been contacted too often, however, does not answer the question as to when collectors have called with the intent to annoy, harass, or abuse, the standard in Section 806(5).
The CFPB also reported in its SBREFA Outline that it reviewed anecdotal data about how frequently creditors permit their collectors to call consumers. Aside from being anecdotal, creditors may have legitimate business reasons for imposing limits on collector calling frequency that are below the level that would show a collector had the intent to annoy, abuse, or harass if that limit were exceeded. The CFPB’s information about collector calling frequency is too varied and uncertain to articulate bright line standards for impermissible collector calling behavior.
Regulatory humility counsels against imposing bright line standards in light of such variance and uncertainty.
Collector contact caps are even less warranted for methods of communication other than telephone calls. Telephone communication information may have little to say about when the frequency of communicating through other current methods of communication is excessive. The CFPB’s survey results show consumers differ in the methods of collector communications they prefer, which suggests that whether communication is excessive may depend on the collection method used. For example, a consumer who prefers to be contacted by email presumably is more likely to think that a collector who calls him is contacting him excessively than a consumer who prefers to be contacted by telephone. Moreover, information about the frequency of contacts using current methods of collector communication may have little to say about the appropriate frequency of communication with new methods of communications. Collectors, for instance, currently rarely use social media, and it is unclear whether information about when current methods of collector communications are excessive would apply if collectors were to commence using social media for such communications. Again, regulatory humility counsels against imposing bright line standards if the government lacks the information it needs about current and future communication technologies to draw such a line.
Regulatory humility means the CFPB should not propose bright line standards for the frequency of collector communications with consumers. Yet the government still can and should act to protect consumers from excessive collection contacts. The CFPB, the FTC, and private plaintiffs can use case-by-case FDCPA enforcement to challenge collector communications which violate Section 806. Such an incremental approach focuses on the impact of communications on consumers in specific contexts. Case-by-case enforcement is not easy, but it strikes the best balance.