Late last year, the CFPB announced a proposed rule to create a registry of “repeat offenders” (Proposed Rule). However, according to the Consumer Relations Consortium (CRC), the Proposed Rule is fatally flawed and must be withdrawn. Further, the CRC suggested that instead of perpetuating myths and falsehoods about the debt collection industry by publicizing alleged bad actors, the CFPB should help consumers by exercising its congressional mandate to publish a list of legitimate debt collectors.
Legal Advisory Board members John Rossman of Moss and Barnett, Joann Needleman of Clark Hill, Stefanie Jackman of Troutman Pepper, and Jonathon P. Floyd, also of Troutman Pepper prepared the CRC's March 31, 2023 comments and raised the following concerns:
Failure to Follow Applicable Law. The CFPB failed to convene a Small Business Review Panel (Review Panel) before seeking comments on the Proposed Rule. The Small Business Regulatory Enforcement Fairness Act (SBREFA) requires a Review Panel when a rulemaking effort is expected to have a significant economic impact on a substantial number of small entities. The Proposed Rule meets this threshold since it will impact all non-banks subject to a final order from a court, state, or federal agency. The failure of the CFPB to consider input from small entities is a complete disregard of the Administrative Procedures Act.
Improper Attempt to Designate Personal Liability. The Proposed Rule attempts to designate personal liability upon “attesting executives.” In a constantly changing legal environment, such as the nebulous, mostly undefined concepts in the Unfair, Deceptive or Abusive Acts or Practices (UDAAP), the Proposed Rule would require attesting executives to foresee the future to avoid liability. This is a violation of due process and is not prudent or appropriate. The proposal is highly unique when compared to any other industry, and Congress has expressly disavowed attempts to single out individuals in the way the CFPB contemplates here
A “Shame” List is Not Approved by Congress And Contrary to Public Policy. An agency’s role is not to pick winners and losers. With this Proposed Rule, the CFPB aims to highlight who they believe to be bad actors and personally name individuals associated with those organizations. Congress did not provide the CFPB the authority to take these actions.
The Proposed Rule Unlawfully interferes with State Law. The CFPB was created to provide a single point of accountability for enforcing federal consumer financial laws. The Proposed Rule, however, creates the potential for the CFPB to enforce state and local laws outside its authority. Further, the CFPB has no legitimate interest in requiring companies to report on their compliance with orders issued by other federal or state agencies.
The CFPB Should Create a List of Responsible Debt Collectors. The single most asked question by a consumer when determining how to respond to a collection agency is, “Is this a legitimate company.” Conveniently, the Consumer Financial Protection Act (CFPA) authorizes the CFPB to prescribe rules to ensure that supervised nonbanks "are legitimate entities and are able to perform their obligations to consumers."* The CFPB has this information since it has already required all debt collectors to register with it to respond to consumer complaints. The CFPB should honor its obligations pursuant to the CFPA and provide consumers with this information in a published and accessible list of all the legitimate debt collectors operating in the U.S.
The CRC’s full comment can be found here.
*CFPA section 1024(b)(7)(A)-(C)
About the Consumer Relations Consortium
The Consumer Relations Consortium (CRC) is an organization comprised of more than 60 national companies representing the diverse ecosystem of debt collection including creditors, data/technology providers and compliance-oriented debt collectors that are larger market participants. Established in 2013, CRC is evolving the debt collection paradigm by engaging stakeholders—including consumer advocates, Federal and State regulators, academic and industry thought leaders, creditors and debt collectors—and challenging them to move beyond talking points and focus on fashioning real-world solutions that actually improve the consumer experience. CRC’s collaborative and candid approach is unique in the market. CRC is managed by The iA Institute.
About the Legal Advisory Board
The Legal Advisory Board (LAB) is an exclusive membership group of outside counsel with expertise in the accounts receivable industry who have each pledged their time and resources to support the mission of the CRC. The LAB is limited to ten law firms and is comprised of fourteen total attorneys. The 2023 members can be found here. Throughout the year, the LAB serves as a legal resource to the CRC membership and assists in fulfilling the mission of promoting forward-thinking approaches to the issues raised by regulatory policy and technology innovation in the accounts receivable industry.