Yesterday, the Consumer Financial Protection Bureau (CFPB or Bureau) hosted a debt collection town hall in Philadelphia to discuss its newly-released Notice of Proposed Rulemaking (NPRM). Director Kathleen Kraninger and a handful of senior CFPB representatives were present. Panelists included:
- Stephanie Eidelman (CEO, the iA Institute & Executive Director, Consumer Relations Consortium)
- Mark Neeb (CEO, ACA International)
- Jan Steiger (Executive Director, RMA International)
- Michael Froehlich (Managing Attorney, Community Legal Services of Philadelphia)
- April Kuehnhoff (Staff Attorney, National Consumer Law Center)
- Patricia Hassen (President & Executive Director, Clarifi)
Director Kraninger delivered opening remarks which provided context for the NPRM and the upcoming discussion between industry and consumer advocates. She noted that debt collection is an important part of any credit ecosystem, and acknowledged how confusing it can be to be contacted by a company you don’t recognize. She added,
“Some of the friction in the market can be attributed to the fact that the governing statute in this market is more than 40 years old. The Fair Debt Collection Practices Act (commonly referred to as the FDCPA) is from 1977. Think about that. That’s the year the first Star Wars movie was released, Jimmy Carter became president, and a small company called Apple was trying to introduce the world to personal, home computers. Back then, when I was just a toddler, phone booths were on almost every corner and the ubiquity of cell phones wasn’t even imaginable. The FDCPA explicitly addressed the use of postcards, collect calls, and telegrams. I don’t know about you, but I’ve literally never received a telegram and wouldn’t even know how to send one. The upshot is that the FDCPA was written largely to address communications between debt collectors and consumers but it hasn’t always been easy to discern how it might apply to technologies today.“
Kraninger remained silent during the panel discussion but was attentive and appeared to take copious notes. Research, Markets & Regulations Policy Associate Director Tom Pahl and Associate Director David Silberman moderated. The following is a summary of the major topics discussed.
The NPRM includes a limit on the number of attempts and communications a debt collector can make. The debt collector may only make 7 attempts to call a consumer per week (7 consecutive days) for each particular debt and, once a telephone conversation occurs, the debt collector may only call the consumer once a week.
Before the panel discussion began, Director Kraninger addressed the misconception in major news headlines reacting to the NPRM. She noted that many predicted a crisis where debt collectors would send unlimited emails and texts, since the provision limiting number of attempts only applies to phone calls. Kraninger pointed out that the provisions against harassment and abuse are still in place, which will put a natural cap on the number of electronic messages sent.
For the most part, the entire panel was lukewarm on the allowed number of call attempts. As Eidelman pointed out, it would be ideal if consumers would respond to the initial letter sent to them so that there would be no need for multiple call attempts, but that is not reality since many consumers ignore communications from debt collectors.
On one hand, industry members are glad for some sort of clarity, but a “one size fits all” approach for the entire debt collection ecosystem is not ideal. Neeb mentioned that consumers behave differently depending on the age and type of debt, and the number of attempts required to reach the consumer varies.
The consumer advocates all suggested that 7 call attempts is too many, especially for consumers who may have multiple debts in collections at the same time. Kuehnhoff recommended a call attempt cap of 3 calls per consumer, rather than per account.
In response to the consumer advocates’ argument, the CFPB moderator mentioned that the proposed new rules permit consumers to opt-out of particular communication channels and request a cease in communication all together. Kuehnhoff stated that this is a step in the right direction, but would still be difficult for a consumer who is being contacted by multiple debt collectors or when the debt is transferred to another agency. She also suggested that consumers are sometimes wary of invoking the opt-out right because it may lead to worse consequences.
Limited Content Message
When the discussion turned to the limited content message, the reaction was mixed.
The industry was glad to finally have a Foti fix—referring to a decade-long litigation battle over what is and is not appropriate for a voice message from a debt collector, stemming from the case Foti v. NCO Financial Systems— and that having the ability to leave voice messages will reduce the number of call attempts needed to contact the consumer. Consumer advocates were worried about privacy and that limited content messages can be left with third parties.
Regarding the privacy issue, Eidelman pointed out that the concept of privacy today is very different than what it was when the FDCPA was released in 1977. The new reality is that people are demanding transparency; they want to know who is calling and why. Due to the way the current laws are written, debt collectors are in a modern-day Catch-22 situation. They can’t reveal who they are or the purpose of their call until the consumer confirms their identity; but consumers, who are instructed to be leery of calls from numbers they do not know, are unwilling to provide personal information to a person who will not first disclose where they are calling from and what the call is about.
Form Validation Notice
All sides agreed that a form validation notice, with clear instructions about what must be included, is a positive thing. Unfortunately, once the discussion got into the details, this unity devolved.
Neeb pointed out that the content of letters and phone calls has led to the onslaught of litigation about hyper-technicalities like comma placements, which overall do not help consumers.
Eidelman and Steiger pointed out the benefit of including fewer disclosures in order to make the form easier to understand for consumers. Eidelman stated that the disclosures required in letters today are fairly sophisticated and, when collected together, far exceed the reading level of the least sophisticated consumer (which is who consumer groups and many courts have determined they should be designed for). Including the most important disclosures in the letter and a hyperlink to a trusted source such as the CFPB helps alleviate this issue and creates consistent education and training across the board. Steiger agreed, pointing out that most people who receive a credit card form in the mail usually discard the multi-page, fine print disclosure form without reading it.
Consumer advocates expressed disappointment about the lack of prominent disclosure of consumer rights in the model form, which had been included in the 2016 Outline of Proposed Rules. Consumer advocates also took issue with the hyperlink, stated that not all consumers had easy access to the internet.
Another divergent topic was that of collecting on time-barred debt. The NPRM proposes a prohibition on filing or threatening to file a lawsuit on debt that is beyond the applicable statute of limitations. One consumer advocate stated that there should be a flat-out prohibition on collecting time-barred debt; Steiger argued that this would have unintended consequences.
Froehlich took issue with the “knew or should have known” standard in the NPRM’s prohibition. He states that this relaxes the current strict-liability law within the Third Circuit and would put the burden of proof on consumers, requiring them to hire attorneys, which many cannot afford.
The public forum was followed by two roundtables with Director Kraninger and senior staff members. First was a session with consumer groups, then one with industry. Attended by 16 representatives from ACA International, the Consumer Relations Consortium, the National Creditors Bar Association, and RMA International, Stephanie Eidelman reported that the industry roundtable was a very productive and interactive discussion that offered an opportunity to provide more in depth feedback.
(Pictured, from left to right: Jim Beck, MRS BPO; Leslie Bender, BCA Financial; Michael Kraft, The CCS Companies; CFPB Director Kraninger; Stephanie Eidelman, the iA Institute; Ralph Liberio, NCB Management Services.)
(CRC members pictured, from left to right: Michael Meyer, MRS BPO; Michael Kraft, The CCS Companies; Leslie Bender, BCA Financial; Ralph Liberio, NCB Management Services; Stephanie Eidelman, the iA Institute; Bob Obringer, Phillips & Cohen; Jim Beck, MRS BPO. Also in attendance were Andrew Blady, NCB Management Services and Joann Needleman, Clark Hill)