Debt Collection

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The CFPB announced last Friday that it had entered into a consent order with National Credit Adjusters, LLC (NCA), a privately-held company that owns several debt collection companies, and NCA’s former CEO and part-owner (CEO).  The consent order enters a $3.0 million judgment for civil money penalties against NCA and the CEO but suspends $2.2 million of the judgment based on the financial condition of NCA and the CEO. (NCA must pay $500,000 and the CEO must pay $300,000.)

According to the consent order, the CFPB found that NCA purchased consumer debts and used a group of debt collection companies (Agencies) to collect such debts.  Some of those companies engaged in frequent unlawful debt collection practices that harmed consumers, including by representing that consumers owed more than they were legally required to pay or by threatening consumers and their family members with various legal actions that NCA did not have the intention or legal authority to take.

The consent order also finds that the CEO determined which of the Agencies NCA would place debt with, which accounts the Agencies would collect on, and the terms under which the Agencies would collect.  NCA and the CEO continued to place debt with the Agencies for collection after NCA’s compliance personnel had recommended terminating the Agencies because of their illegal debt collection practices.  NCA also sold consumer debt to one of the Agencies as a means of convincing original creditors to approve NCA’s business practices and NCA and the CEO defended the Agencies when original creditors raised concerns about their collection practices.

The consent order makes the legal conclusions that NCA and the CEO, either through their actions or through the Agencies, directly violated the CFPA’s prohibition of unfair and deceptive acts or practices by inflating account amounts, making false threats to take legal action, and placing debts with the Agencies despite their illegal collection practices.  It also concludes that the inflation of account amounts and making of false threats by NCA, through the Agencies, constituted deceptive practices or the use of unfair or unconscionable means to collect debt in violation of the FDCPA and that such FDCPA violations also constituted violations of the CFPA.  The consent order finds further that NCA and the CEO not only directly violated the CFPA and FDCPA but also violated the CFPA by knowingly or recklessly providing substantial assistance to the unfair and deceptive collection acts and practices of the Agency to which NCA sold debts.

In addition to requiring payment of $800,000 of the judgment, the consent order prohibits NCA and the CEO from engaging in the illegal collection practices addressed by the consent order, permanently bars the CEO from working in any business that collects, buys, or sells consumer debt, and requires NCA to submit a comprehensive compliance plan to the CFPB that includes, at a minimum, certain specified elements.

It is noteworthy that, like the consent order announced last month by the CFPB that also involved alleged unlawful debt collection practices, the consent order with NCA and the CEO does not require refunds to be made to consumers.  In its Spring 2018 rulemaking agenda, the CFPB stated that it “is preparing a proposed rule focused on FDCPA collectors that may address such issues as communication practices and consumer disclosures.”  It estimated the issuance of a NPRM in March 2019.

 

 

On June 26, 2018, the Federal Trade Commission and New York Attorney General’s Office filed a lawsuit against a debt broker, debt collector and their principals to shut down a phantom debt collection scheme.  According to the complaint, debt broker Hylan Asset Management LLC and its owner, Andrew Shaevel, purchased, placed for collection, and sold phantom debts.  The complaint alleges that Hylan knew that the debts were fabricated because they were purchased from Hirsch Mohindra and Joel Tucker, two individuals who were previously sued by the FTC.  As a result of those actions, Mohindra was banned from the debt collection business and from selling debt portfolios and Tucker was banned from handling sensitive financial information about consumer debts.

The lawsuit also charges a debt collector, Worldwide Processing Group, LLC and its owner Frank Ungaro, Jr. for their role in collecting these phantom debts. The complaint alleges that Worldwide and Ungaro engaged in illegal collection practices and similarly knew that the debts were fabricated.

Hylan and Shaevel are charged with violating the FTC Act by marketing and distributing counterfeit and unauthorized debts.  Worldwide and Ungaro are charged with violating the FTC Act by making false or misleading representations that the consumers owe debts.  Worldwide and Ungaro are additionally charged with violating the Fair Debt Collection Practices Act by making false, deceptive, or misleading representations to consumers, engaging in unlawful communications with third parties, and failing to provide statutorily-required notices.

All of the defendants, including those individually named, are charged with violations of New York General Business Law § 349 by engaging in deceptive acts or practices in connection with conducting their debt sales and collection businesses, along with violations of New York State Debt Collection Law by engaging in prohibited debt collection practices under the statute, including, disclosing or threatening to disclose information affecting the debtor’s reputation for credit worthiness with knowledge or reason to know that the information is false and claiming, or attempting to enforce a right with knowledge or reason to know that the right does not exist.

This lawsuit is part of the FTC’s and State Attorneys General continuing efforts to crackdown on phantom debt schemes.

The CFPB announced that it has entered into a consent order with Security Group Inc. and its subsidiaries (Security Group) to settle an administrative enforcement action that charged the companies with having engaged in unlawful debt collection and credit reporting practices.  The consent order requires Security Group to pay a civil money penalty of $5 million.

The consent order states that Security Group owned and operated approximately 900 locations in 20 states.  According to the consent order, certain Security Group entities were primarily in the business of making consumer loans and other entities were primarily in the business of purchasing retail installment contracts from auto dealers. The consent order concludes that Security Group engaged in debt collection practices that constituted unfair acts and practices in violation of the Consumer Financial Protection Act and credit reporting practices that violated the Fair Credit Reporting Act and Regulation V.

The consent order finds that:

  • The unlawful debt collection practices in which Security Group engaged included the following:
    • Visiting consumers’ homes and places of employment, as well as the homes of their neighbors, and visiting consumers in other public places, thereby disclosing or risking disclosure of consumers’ delinquencies to third parties, disrupting consumers’ workplaces and jeopardizing their employment, and humiliating and harassing consumers
    • Routinely calling consumers at work, sometimes calling consumers on shared phone lines and in the process speaking with co-workers or employers and thereby disclosing or risking disclosure of consumers’ delinquencies to third parties, and also calling after being told that consumers were not allowed to receive calls at work and that future calls could endanger their employment
    • Failing to heed and properly record consumers’ and third parties’ requests to cease contact or to give personnel access to cease-contact requests logged by employees in other stores, thereby resulting in repeated unlawful calls to consumers and third parties
  • The unlawful credit reporting practices in which Security Group engaged included the following:
    • Failing to establish and implement any reasonable policies and procedures regarding the accuracy and integrity of information furnished to consumer reporting agencies (CRAs)
    • Failing to address in policies and procedures how to properly code customer account information or responses to consumer disputes using the Metro 2 Guide and not ensuring that its monthly furnishing system was coordinated with its consumer dispute furnishing practices
    • Regularly furnishing information to CRAs that it had determined was inaccurate based on information maintained in its data base or other information, such as information provided by consumers as part of a credit reporting dispute or information provided to CRAs

The consent order appears to indicate that first-party collectors that engage in conduct that the FDCPA would prohibit as unfair conduct by third-party collectors continue to be at risk for violating the CFPA’s UDAAP prohibition.  It also appears to indicate that the CFPB continues to disfavor in-person debt collection activities and that companies that do so remain in great peril.  In December 2015, the CFPB issued a bulletin to provide guidance to creditors, debt buyers and third-party debt collectors about compliance with the CFPA UDAAP prohibition and the FDCPA when conducting in-person debt collection visits, such as visits to a consumer’s workplace or home.

In addition to imposing the $5 million civil money penalty, the consent order prohibits Security Group from engaging in the debt collection practices found to be unlawful, and requires it to:

  • implement and maintain reasonable written policies and procedures regarding the accuracy and integrity of the information furnished to CRAs
  • correct or update any inaccurate or incomplete information furnished to CRAs
  • provide a prescribed notice to customers affected by inaccurate information furnished to CRAs
  • update its policies and procedures to include a specific process for identifying when information furnished to CRAs is inaccurate or requires updating (which must include at a minimum the monthly examination of sample accounts and monitoring and evaluation of disputes received from CRAs and customers)
  • submit a compliance plan to the CFPB to ensure that Security Group’s credit reporting and collections comply with applicable federal consumer financial laws and the terms of the consent order (which includes a list of items that, at a minimum, must be part of the compliance plan

It is noteworthy that while the consent order imposes a $5 million civil penalty on Security Group, unlike a 2015 CFPB consent order that required the respondents to refund amounts collected through in-person visits found to be unlawful, the consent order does not require Security Group to make refunds to consumers.

In its Spring 2018 rulemaking agenda, the CFPB stated that it “is preparing a proposed rule focused on FDCPA collectors that may address such issues as communication practices and consumer disclosures.”  It estimated the issuance of a NPRM in March 2019.

The CFPB has issued a new report, “Complaint snapshot: Debt collection,” which provides complaint data as of April 1, 2018.  The report represents the CFPB’s first complaint report since Mick Mulvaney was appointed Acting Director.  The CFPB’s last regular monthly complaint report was issued in May 2017 and provided complaint data as of April 1, 2017.   (Subsequent complaint reports issued prior to former Director Cordray’s departure were “special edition” reports.)

The new report is different from prior monthly complaint reports in several significant respects:

  • While the new report includes overall complaint volume information by product and state that was previously part of the CFPB’s monthly complaint reports, it does not include complaint volume information by company (i.e. the “top 10 most-complained about companies.”)
  • It does not highlight complaints received in a particular state as did prior monthly reports.
  • It provides context for certain complaint data.  More specifically, as described below, the new report provides context for the complaint categories showing the greatest percentage changes over the three month periods compared in the report and for the debt collection data highlighted in the report.  (In the RFI seeking comment on potential changes to the CFPB’s practices for the public reporting of consumer complaint information, the CFPB has asked for comment on whether it should change the amount of context it provides for complaint information, particularly with regard to product or service market share and company size.)

Also noteworthy is that the new report was not accompanied by a press release or blog containing editorial spin about the report information.  Rather, the blog post accompanying the new report provides an objective overview of the report information.

General findings include the following:

  • As of April 1, 2018, the CFPB handled approximately 1,492,600 complaints nationally, including approximately 30,300 complaints in March 2018.
  • Credit reporting complaints and debt collection complaints represented, respectively, approximately 37 and 27 percent of complaints submitted in March 2018.
  • Credit reporting, debt collection, and mortgage complaints collectively represented about 74 percent of the complaints submitted in March 2018.
  • Money transfer or service and virtual currency complaints showed the greatest percentage increase from January-March 2017 (352 complaints) to January-March 2018 (1,000 complaints), representing an increase of approximately 184 percent.  The CFPB comments that the increase was “driven by a spike related to virtual currency” and that in the complaints submitted from January-March 2018 “consumers described issues with the availability of funds held at virtual currency exchanges during periods of price volatility for the most active virtual currencies.”
  • Credit reporting complaints showed the second greatest percentage increase from January-March 2017 (4,848 complaints) to January-March 2018 (11,107 complaints), representing an increase of approximately 129 percent.  The CFPB comments that improvements to its complaint submission process in April 2017 allowed consumers “to submit consumer reporting complaints about concerns they are having with data furnishers that supply consumer information to consumer reporting agencies, contributing to this increase in [credit reporting] complaints.”
  • Student loan complaints showed the greatest percentage decrease from January-March 2017 (monthly average of 3,273 complaints) to January-March 2018 (monthly average of 974 complaints), representing a decline of approximately 70 percent.  The CFPB comments that the decline “is likely because student loan complaint data was elevated in 2017 following the Bureau’s enforcement action against a student loan servicer.”

Findings regarding debt collection complaints include the following:

  • The CFPB has received approximately 400,500 debt collection complaints since July 21, 2011, representing 27 percent of all complaints.
  • The CFPB has referred approximately 40 percent of the debt collection complaints it has received to other regulators.  The CFPB states that it typically makes such referrals when a complaint is about a first-party collector, where the debt did not arise from a financial product or service, or when the company complained about does not appear to be a third-party collector of a financial product or service-related debt.
  • The CFPB comments that “debt collection complaints submitted by consumers can be more meaningful when considered in context with other data, such as the number of consumers who have an account in collection.”  The CFPB observes that according to its most recent annual FDCPA report, “millions of Americans” are affected by the debt collection industry, according to its Consumer Credit Panel, “about 26 percent of consumers with a credit file have a third-party collection tradeline listed.”
  • The most common concerns identified by consumers were attempts to collect a debt not owed (39 percent), written notification about debt (17 percent), and communication tactics (17 percent).
  • Based on its review of the narrative descriptions in complaints, the CFPB observed that:
    • Consumers complained about debts appearing on their credit reports without prior written notice of the existence of the debt and not receiving additional information requested about such debts from companies.
    • Consumers complained about communication tactics, such as frequent and repeated calls and calls before 8 am and after 9 pm and calls after having requested no further telephone contact about the debt.

The CFPB has indicated that it intends to move forward on debt collection rulemaking.  Its Spring 2018 rulemaking agenda states that the Bureau “is preparing a proposed rule focused on FDCPA collectors that may address such issues as communication practices and consumer disclosures” and estimates the issuance of a NPRM in March 2019.

 

The CFPB (referring to itself as the Bureau of Consumer Financial Protection) has filed what appears to be its first amicus brief since former Director Cordray’s departure.

The amicus brief was filed in Lavallee v. Med-1 Solutions, LLC, an appeal to the U.S. Court of Appeals for the Seventh Circuit in which the issue before the court is whether the defendant sent the plaintiff a written validation notice containing the disclosures required by the FDCPA in 15 U.S.C. Section 1692g(a).  The defendant claimed that it satisfied the FDCPA requirement when it sent the plaintiff two emails relating to two medical debts that each included a link to a webpage on which the plaintiff could open a “secure package” that would then take the plaintiff to another webpage on which she could open (or save to her computer) the validation notice which was in electronic Portable Document Format (PDF).  There was undisputed evidence that the plaintiff never viewed or accessed either of the two secure packages containing the validation notices for her two medical debts.

The district court granted summary judgment to the plaintiff, finding that the defendant had violated Section 1692g(a) because it had not “sent” validation notices to the plaintiff.  The court stated that if a notice “is not sent in a manner in which receipt should be presumed as a matter of logic and common experience, then it cannot be considered to have been ‘sent.'”  The district court also questioned whether in light of the frequent warnings consumers receive that email attachments can contain viruses, the use of a click-through attachment was a method likely to accomplish a consumer’s receipt of a validation notice.  In addition, it found no evidence that that plaintiff had given her email address to the defendant or anticipated it would have her address.

In its amicus brief, which was filed in support of the plaintiff/appellee, the Bureau argues that if the Seventh Circuit reaches the question of whether the validation notices purportedly sent to the plaintiff complied with the “written notice” requirement of Section 1692g(a), the court’s analysis should address the applicability of the E-SIGN Act.  The E-SIGN Act applies to any statute that “requires that information relating to a transaction or transactions in or affecting interstate or foreign commerce be provided or made available to a consumer in writing.”  It allows “the use of an electronic record” to satisfy a written notice requirement if the consumer has given prior, informed consent to receiving electronic notices in lieu of paper, and if the Act’s other conditions are satisfied.

The Bureau argues that, for purposes of the E-SIGN Act, a debt collector’s actions in collecting consumer debt involves a “transaction” and the FDCPA’s validation notice requirement is a requirement for information to be provided “in writing.”  Thus, according to the Bureau, because the E-SIGN Act’s requirements serve “as an overlay on other laws,” the Seventh Circuit cannot assess the defendant’s argument that it provided a written notice under Section 1692g(a) without determining whether such requirements were satisfied.  The Bureau observes that the summary judgment record before the district court contained no evidence that the E-SIGN Act’s requirements were satisfied and suggested that the defendant had not complied with the Act.

In its amicus brief, the Bureau notes that the topics addressed in the advance notice of proposed rulemaking regarding debt collection that it published in November 2013 included the electronic delivery of validation notices and requested information about collectors’ current practices and experience with the “consent regime under the E-Sign Act…for electronic delivery of validation notices.”  The Bureau states that “the next step in the rulemaking-issuance of a  proposed rulemaking—is currently being considered by the Bureau.”  It also notes the authority that the E-SIGN Act grants to federal regulatory agencies to “exempt without condition a specified category or type of record from the requirements relating to consent” and comments that “any policy concerns related to the application of the E-SIGN Act to validation notices are more appropriately addressed through the exercise of that statutory authority.”

ACA International submitted an amicus brief in support of the defendant/appellant in which it urges the Seventh Circuit to reverse the district court and thereby provide guidance “which would establish that email can be ‘written notice” within [Section 1692g(a)’s] meaning, and that the [FDCPA] applies to email in the same way that it applies to postal mail.”  ACA also observes in its brief that if the Seventh Circuit affirms the district court, the district court’s approach “raises several questions about which guidance from this Court would be very helpful to the credit and collection industry” and lists such questions.

 

 

On April 4, Georgia Attorney General Chris Carr (“AG Carr”) announced an $8.5 million settlement with a national debt collection company, resolving alleged Fair Debt Collection Practices Act (FDCPA) and the Georgia Fair Business Practices Act violations.

Specifically, AG Carr alleged that the company harassed and deceived consumers by falsely representing to consumers that they were attorneys or otherwise affiliated with government entities, that the consumers had committed a crime and could be imprisoned because of nonpayment, failed to disclose they were debt collectors, attempted to collect illegal payday loans, and divulged information to third-parties without authorization.  The settlement required the company to stop collecting on nearly 12,000 accounts, totaling over $8.5 million in consumer debt, pay a $20,000 civil penalty, and agree to comply with the FDCPA and Georgia Fair Business Practices Act.  Any subsequent failure to do so will cause the company to owe an additional $240,000 civil penalty.

While it may not surprise the collections industry to see a state Attorney General take issue with the alleged actions above, seeing this sort of settlement come out of a Republican attorney general in a solidly Republican state is slightly more interesting.  It is yet another example of significant state-level enforcement but this time, out of a state that is generally not thought of as being particularly active within the collections arena.  Coming after confirmation from the CFPB that it plans to move forward with a third-party collections rulemaking, this recent settlement demonstrates that regardless of party, federal and state regulators continue to be interested in collections and addressing perceived violations arising under both federal and state law.

The CFPB has issued its seventh annual Fair Debt Collection Practices Act report covering the CFPB’s and FTC’s activities in 2017.

The CFPB’s previous FDCPA annual reports began with a message from former Director Cordray.  Unlike those reports, the new report begins not only with a message from CFPB Acting Director Mick Mulvaney but also has an opening message from Maureen K. Ohlhausen, the FTC’s Acting Chairman.

While the new report incorporates information from the FTC’s annual letter to the CFPB describing its FDCPA activities during the year covered by the report, the text of the letter is not included as an appendix to the report as it was in prior reports.  In addition, unlike in prior years, the FTC did not issue a press release about its annual letter concurrently with the issuance of the letter.  Instead, the FTC’s letter on its 2017 FDCPA activities (which is dated February 8, 2018) is linked to a press release issued by the FTC about the CFPB’s report.

Both the CFPB and FTC press releases about the report quote Mr. Mulvaney’s statement that “[f]rom now on, we will be working closely with the FTC to enforce the FDCPA while protecting the legal rights of all in a manner that is efficient, effective, and accountable.”  Mr. Mulvaney’s statement, and the prominence given to Ms. Ohlhausen in the report, perhaps signal that both the CFPB and FTC will continue to take an active, and possibly more coordinated, approach to FDCPA enforcement under the Trump Administration.

With regard to the CFPB’s debt collection rulemaking, the report provides no new insights into the CFPB’s rulemaking plans.  It reviews the CFPB’s debt collection rulemaking activities to date, including its November 2013 Advanced Notice of Proposed Rulemaking, its July 2016 publication of an outline of proposals under consideration in anticipation of convening a SBREFA panel, and its August 2016 convening of the panel.  The report states only that the CFPB “is continuing to consider the feedback it received through the SBREFA panel and from other stakeholders subsequent to the publication of the Outline” and is also “engaged in research and market outreach.”

It is widely thought that the CFPB will not entirely abandon its debt collection rulemaking activities under the Trump Administration.  Continued debt collection rulemaking would be consistent with recent statements by Mr. Mulvaney, such as to the National Association of Attorneys General earlier this month, in which he highlighted the high volume of debt collection complaints and indicated that complaint volume will be a significant factor in how the CFPB sets its priorities.  In his introductory message in the new report, Mr. Mulvaney observed that in 2017 debt collection was “one of the most prevalent topics of complaints about consumer financial products or services received by the Bureau.”

Although the CFPB was expected to propose a debt collection rule under former Director Cordray that covered both first- and third-party collections, the debt collection rule proposals outlined for the SBREFA panel only covered third-party debt collectors.  Accordingly, while the CFPB’s debt collection rulemaking is likely to continue, it is also likely that any debt collection rule proposed by the CFPB under Mr. Mulvaney or a new Director appointed by President Trump would similarly be limited to third-party debt collectors and not cover first-party collections.

Other information set forth in the report includes the following:

  • According to the report’s section on complaints, the CFPB handled approximately 84,500 debt collection complaints in 2017 (which was 3,500 less than in 2016).  The most common complaint was about attempts to collect a debt that the consumer claimed was not owed.  The second and third most common complaint issues were, respectively, written notifications about the debt and communication tactics.
  • In the report’s section on the CFPB’s supervision of debt collection activities engaged in by banks and nonbanks subject to CFPB supervision, the CFPB described the following FDCPA violations found by its examiners:
    • Impermissible communications with third parties due to the supervised entity’s failure to adequately confirm that it had contacted the correct party before beginning to discuss the debt
    • Deceptively implying that authorized credit card users were responsible for a debt
    • Falsely representing to consumers the effect on their credit scores of paying a debt in full rather than settling it for less than the full amount
    • Communicating with consumers outside of the hours of 8 a.m. to 9 p.m. or at times the consumers had previously indicated were inconvenient due to the supervised entity’s failure to accurately update account notes and the use of autodialers that based call parameters solely on the consumer’s area code, rather than also considering the consumer’s last known address
  • The CFPB continues to be in active litigation in one FDCPA matter filed in 2015 and another filed in 2016.  In addition, the CFPB “is conducting a number of non-public investigations of companies to determine wither they engaged in collection practices that violate the FDCPA or the CFPA.”
  • In 2017, the CFPB’s public enforcement actions involving debt collection resulted in over $577,000 in consumer relief and over $78,000 paid into the civil penalty fund.  (In dramatic contrast, these amounts in 2016 were, respectively, $39 million in consumer relief and over $20 million paid into the civil penalty fund.)

The CFPB has withdrawn its request to OMB to conduct an online survey of 8,000 individuals as part of its research on debt collection disclosures.  Last month, the CFPB published a notice in the Federal Register that it was submitting its request to OMB and solicited comments which were due by December 14, 2017.

The CFPB’s withdrawal of its request appears to reflect the 30-day regulatory freeze announced by Mick Mulvaney, President Trump’s appointee as CFPB Acting Director.  The withdrawal notice states that “Bureau leadership would like to reconsider the information collection in connection with its review of the ongoing related rulemaking.”

In July 2016, in anticipation of convening a SBREFA panel for the CFPB’s debt collection rulemaking, the CFPB issued an outline of the proposals it was considering.  The proposals included revisions to the form and content of the validation notice, new disclosures for time-barred debts, and a new “obsolescence disclosure” informing the consumer whether a time-barred debt can appear on a credit report.  The coverage of the CFPB’s SBREFA proposals was limited to “debt collectors” that are subject to the FDCPA.

When it issued the proposals, the CFPB indicated that it expected to convene a second SBREFA panel in the “next several months” to address a separate rulemaking for creditors and others engaged in debt collection not covered by the proposals.  However, in June 2017, former CFPB Director Cordray announced that the CFPB had decided to proceed first with a proposed rule on disclosures and treatment of consumers by debt collectors and thereafter write a market-wide rule in which it will consolidate the issues of “right consumer, right amount” into a separate rule that will cover first- and third-party collections.

When former Director Cordray announced the CFPB’s change in rulemaking plans, some observers had theorized as a possible rationale that CFPB leadership believed a rule dealing only with third party debt collectors might face less Republican opposition.  Whether debt collection rulemaking by the CFPB will move forward at all under Mr. Mulvaney or a permanent CFPB Director appointed by President Trump is an open question.

The CFPB has published a notice in the Federal Register that it has submitted to OMB its request to conduct an online survey of 8,000 individuals as part of its research on debt collection disclosures.  Comments must be received on or before December 14, 2017.  In June 2017, the CFPB had published a notice in the Federal Register announcing its plans to seek OMB approval for the survey and soliciting comments.

In July 2016, in anticipation of convening a SBREFA panel for the CFPB’s debt collection rulemaking, the CFPB issued an outline of the proposals it is considering.  The proposals included revisions to the form and content of the validation notice, new disclosures for time-barred debts, and a new “obsolescence disclosure” informing the consumer whether a time-barred debt can appear on a credit report.

In support of its request to OMB, the CFPB has filed Supporting Statements Parts A and B.  As described in Supporting Statement Part A, the survey would test a number of questions related to the disclosures the CFPB is developing in conjunction with its rulemaking, especially with regard to time-barred and “obsolete” debts.  The research will be conducted by a contractor retained by the CFPB that will subcontract with a survey research firm to assist with the administration of the survey.  The CFPB states in the supporting statements that it plans to share aggregated findings from the survey with the public “as appropriate, for example, in a future study on debt collection or in connection with any potential rulemakings related to debt collection.”

The CFPB had included the sample survey questions in the supporting materials filed in connection with its June 2017 notice but did not include the disclosures.  At that time, the CFPB stated that the disclosures were still under development.  In its new Supporting Statement Part A, the CFPB states that the disclosures “continue to be under consideration and development.”  It also reports that several commenters had expressed concern about the absence of the disclosures from its earlier submission materials.

In response, the CFPB states that it “has concluded that the information contained in the Bureau’s proposed Information Collection is sufficient to allow meaningful comment on the disclosure testing research project, including the research methodology and survey instrument.”  It further states that “[t]he information collection for which the Bureau is seeking OMB approval at this time is for the testing project itself, not the specific content of the draft disclosure forms.  The Bureau believes that the specifics of particular test forms are not needed to comment on the general research methodology and survey instrument.”

The coverage of the CFPB’s SBREFA proposals was limited to “debt collectors” that are subject to the FDCPA.  When it issued the proposals, the CFPB indicated that it expected to convene a second SBREFA panel in the “next several months” to address a separate rulemaking for creditors and others engaged in debt collection not covered by the proposals.  However, in June 2017, Director Cordray announced that the CFPB has decided to proceed first with a proposed rule on disclosures and treatment of consumers by debt collectors and thereafter write a market-wide rule in which it will consolidate the issues of “right consumer, right amount” into a separate rule that will cover first- and third-party collections.

When Director Cordray announced the CFPB’s change in rulemaking plans, some observers had theorized as a possible rationale that CFPB leadership believed a rule dealing only with third party debt collectors might face less Republican opposition.  Since the decision whether to move forward with debt collection rulemaking will be made by a CFPB Director appointed by President Trump, that theory will be put to the test.

Much attention has been devoted to the issuance very soon of the CFPB’s small-dollar lending rule.  I thought that once that rule was issued, Richard Cordray would soon thereafter resign as Director to return to Ohio to run for Governor.  However, based on a very reliable source, I now believe that Director Cordray will issue a Notice of Proposed Rulemaking regarding Part I of the debt collection rule (“NPR”) before he resigns.  I believe that the NPR will be issued during September.  Perhaps, that shouldn’t be considered a surprise since the CFPB’s Spring 2017 rulemaking agenda did give a September 2017 estimated date for the issuance of a proposed debt collection rule.  Since the CFPB has a track record for missing estimated deadlines in its rulemaking agendas, I did not think that the CFPB would meet the September 2017 deadline for the proposed debt collection rule.

On June 8, 2017 during the last meeting of the CFPB’s Consumer Advisory Board, Director Cordray revealed a new plan regarding the debt collection rulemaking.  He indicated that Part I of the debt collection rulemaking will concern disclosures by third-party debt collectors and how consumers are treated by third-party debt collectors.  Part II of the debt collection rulemaking will cover the subject of collecting the right amount from the right consumer.  Part II is expected to cover both first-party and third-party debt collectors.