The CFPB has withdrawn its request to OMB to conduct an online survey of 8,000 individuals as part of its research on debt collection disclosures.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.

Earlier this week the CFPB released its Summer 2017 Supervisory Highlights, which covers supervisory activities generally completed between January through June of 2017. The report touts the $14 million total restitution payments consumers received due to nonpublic supervisory activities during this period-plus the approximately $1.15 million in consumer remediation and $1.75 million in civil monetary penalties resulting from public enforcement actions that grew out of or were bolstered by CFPB examinations.

The report includes discussions of the following topics:

Auto Loan Servicing: The publication addresses repossession practices by auto loan servicers, stating that in the course of examinations the Bureau found that “one or more entities were repossessing vehicles after the repossession was supposed to be cancelled,” and concluding that the servicer(s) had committed an unfair practice by repossessing vehicles where “borrowers had brought the account current, entered an agreement with the servicer to avoid repossession, or made payments sufficient to stop the repossession, where reasonably practicable given the timing of the borrower’s action.”

Credit Card Account Management: The report focuses on four alleged credit-card related practices: (1) failure to provide tabular account-opening disclosures as required by Regulation Z (the table set forth in Appendix G-17); (2) deceptive misrepresentations to consumers regarding costs and availability of pay-by-phone options; (3) deceptive misrepresentations to consumers about the benefits of debt cancellation products; and (4) noncompliance with requirements related to billing error resolution and liability for unauthorized transactions.

Debt Collection: According to the report, the CFPB uncovered various FDCPA violations in the course of examinations of larger participants in the debt collection market. These alleged violations include unauthorized communications with third parties, false representations made to authorized credit card users regarding their liability for debts, false representations regarding credit reports, and communications with consumers at inconvenient times.

Deposit Accounts: The CFPB also claims to have found a number of Regulation E and UDAAP violations in connection with deposit accounts offered by banks. The alleged violations relate to (1) the freezing of customer deposit accounts relating to suspicious activity observed by banks; (2) misrepresentations about fee waivers for deposit products subject to a monthly service fee; (3) violations of error resolution requirements under Regulation E; and (4) deceptive statements about overdraft protection products.

Mortgage Origination and Servicing: The report details the results of supervision following the CFPB’s first round of mortgage examinations for compliance with the Bureau’s “Know Before You Owe” mortgage disclosure rule. The publication states that “for the most part, supervised entities, both banks and nonbanks, were able to effectively implement and comply with the Know Before You Owe mortgage disclosure rule changes,” but notes that examiners did find some violations relating to the content and timing of Loan Estimates and Closing Disclosure. Other origination practices addressed in the report include the failure to reimburse unused portions of service deposits and the inclusion of an arbitration notice on certain residential mortgage loan notes that was held to violate Regulation Z even though the note apparently lacked an arbitration provision. On the servicing side, the report focuses on violations of Regulation X in connection with assisting borrowers complete loss mitigation applications, and the inclusion of broad waiver of rights clauses in short sale and cash-for-keys agreements as a UDAAP. The report also cites fair lending concerns identified during examinations of mortgage servicers relating to data quality issues and “a lack of readily-accessible information” concerning borrower characteristics.

Short-Term Small Dollar Lending: The CFPB cites a number of alleged UDAAP violations, such as workplace collection calls, repeated collection calls to third parties, misrepresentations in marketing about small dollar loan products, misrepresentations about the use of references provided by borrowers in connection with loan applications, and the handling of unauthorized debits and overpayments.

Statistics Regarding CFPB’s Action Review Committee Process: Another notable aspect of the report is the inclusion of new statistics about the Bureau’s Action Review Committee (ARC) process, which senior executives in the CFPB’s Division of Supervision, Enforcement, and Fair Lending use to decide whether issues that come up in examinations will be handled using a confidential supervisory action or will be investigated for possibly bringing a public enforcement action. The report includes a table detailing the total number of ARC decisions made—and the outcomes of such decisions—for fiscal years 2012 through 2016. Importantly, only a subset of CFPB matters go through the ARC process, and of these matters, 24.59% were deemed “appropriate for further investigation for possible public enforcement action.” A further 11.48% of these matters were determined to be appropriate in part for further investigation for public enforcement, and in part for resolution through confidential supervisory action. Finally, the CFPB commits in the report to publishing ARC data at the end of each fiscal year (starting with 2017 data to be published in its upcoming Fall 2017 Supervisory Highlights).

As a general matter, we should note that many of the issues discussed in the report appear to stem from system errors and failures to monitor third party vendors and service providers. Given that the CFPB now regularly conducts examinations of service providers, both banks and non-banks should pay careful attention and seek advice from outside counsel in managing their relationships with outside service providers—especially since the CFPB has taken the position that a company can be vicariously liable for violations committed by its service providers.

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.

In a recent consent order with a legal collection law firm, the Massachusetts Attorney General imposed significant restrictions on legal collection that go beyond previous CFPB consent orders, which we covered here. We believe that the Massachusetts Attorney General is likely to view at least some of the injunctive provisions in this consent order as setting standards for legal collections in Massachusetts generally, although it is possible that some provisions are unique to this particular case. The substantive provisions of the consent order will likely necessitate creation of new policies, procedures, and compliance monitoring law firms, creditors, debt collectors, and debt buyers engaged in legal collection in Massachusetts.

In addition to the injunctive provisions found in prior CFPB consent orders, the Massachusetts Attorney General consent order imposes the following requirements:

  • The firm must provide a “protected income disclosure” in the first written statement to a consumer, all written statements demanding or soliciting payment, any written statement proposing or confirming settlement, and any written statement proposing or confirming a periodic payment arrangement or court order, which states:

You may not have to pay us while your only income is any of the following: wages up to $550 per week; Social Security benefits; pensions; veterans’ benefits; child support; unemployment benefits; or workers’ compensation benefits.

Please write or call us if you receive income from the above sources or any other government benefits, and we will send you a form for you to complete regarding your income. Although you may not be legally required to pay us from any of the above sources, you may voluntarily pay us using money from any of them. Even if you do not have to pay us at this time, we may still seek a judgment in court against you, if a judgment has not already entered, but you cannot be ordered to pay the judgment from the sources of income listed above. We also reserve the right to make future inquiry about any changes in your financial circumstances.

  • The firm must provide the following oral disclosure anytime it makes an “oral demand, proposal, or request for payment”:

You may not have to pay us at this time if you make less than $550 a week or receive only social security benefits, disability benefits, pension income, child support, or certain other government benefits. Even if you do not have to pay us at this time due to the amount of wages you receive or your receipt of certain government benefits you may make voluntary payments to us using funds from these sources. Do you make less than $550 per week or receive any of these types of benefits or any other government benefits?

  • If the consumer indicates that he or she only has exempt income, the law firm must cease collection attempts and send the consumer a financial form with a pre-addressed return envelope. The law firm is then prohibited from continued collection until one of the following occurs. The law firm may, however, accept voluntary payments from the consumer.
    • The consumer does not respond within 30 days after the law firm mailed the financial form; or
    • The consumer returns the financial form and the law firm “does not have reason to believe a consumer has only exempt income and exempt assets.”
  • If the consumer only has exempt income and is either handicapped or 70 years of age or older, the law firm must cease all collection attempts, and may not file suit against the consumer.
  • If the consumer only has exempt income but is not handicapped or 70 years of age or older, the law firm “may commence and litigate to judgment a collection suit,” subject to the following restrictions:
    • If the court enters a judgment against the consumer, the law firm may only seek an updated financial form from the consumer every 90 days. If it appears from the updated financial form or a “historically reliable source” that the consumer has non-exempt income or assets, the law firm may resume collection of the judgment.
    • If the consumer does not respond to a request for an updated financial form within 30 days, the law firm may resume collection of the judgment.
  • If the law firm “has reason to believe” that a consumer only has exempt income and assets and that the financial situation is unlikely to improve for the foreseeable future, the firm must cancel any pending payment hearings or examinations in small claims court.
  • If the law firm “has reason to believe” that a consumer only has exempt income and assets but that the consumer’s financial situation may improve, the firm must request a continuance of any pending payment hearings or examinations in small claims court. If the court denies the request for a continuance, the law firm is permitted to attend the hearing.
  • If a court determines that the consumer does not have a present ability to pay a debt:
    • The law firm is enjoined from collection unless a court subsequently “enters an order requiring the consumer to pay the debt or the consumer fails to appear for and participate in a subsequent examination,” or the law firm receives a new financial form or other information “reasonably establishing the consumer presently has non-exempt income or non-exempt assets.”
    • But, the law firm may not resume collection or schedule a payment hearing “if it has reason to believe the consumer is unlikely to have a future ability to pay the debt.”
  • The firm may not seek or serve a capias warrant, or other warrant for the consumer’s arrest, while it “has reason to believe a consumer has only exempt income and exempt assets.”
  • The law firm may only submit an affidavit signed by a creditor if the firm verifies the statements in the affidavit with original account-level documentation.
  • If a consumer disputes the validity of a debt verbally or in writing, the law firm must cease collection until it:
    • Obtains and reviews original account-level documentation; and
    • Provides copies of the account-level documentation to the consumer.
  • The law firm is prohibited from filing suit on debt “that would be time-barred but for an alleged post-origination payment unless [the firm] has obtained and reviewed documentation reasonably demonstrating the existence and date of that payment contained in the business records of the party that received the payment.” In essence, the firm must verify that the debt is not time barred.

The CFPB’s Spring 2017 rulemaking agenda has been published as part of the Spring 2017 Unified Agenda of Federal Regulatory and Deregulatory Actions.  The preamble indicates that the information in the agenda is current as of April 1, 2017.  Accordingly, the agenda does not reflect the issuance of the CFPB’s final arbitration rule on July 10 or other rulemaking actions taken since April 1 such as the proposed changes to the CFPB’s prepaid account rule and various recent mortgage-related developments.  In addition, the agenda and timetables are likely to be significantly impacted should Director Cordray leave the CFPB this fall to run for Ohio governor as has been widely speculated.

The agenda sets the following timetables for key rulemaking initiatives:

Payday, title, and deposit advance loans.  The CFPB released its proposed rule on payday, title, and high-cost installment loans in June 2016 and the comment period ended on October 22, 2016.  The Spring 2017 agenda gives a June 2017 date for completing the initial review of comments (which the CFPB states in the preamble numbered more than one million) but does not give an estimated date for a final rule.  There has been considerable speculation that a final rule will be issued by the end of next month.

Debt collection.  In November 2013, the CFPB issued an Advance Notice of Proposed Rulemaking concerning debt collection.  In July 2016, it issued an outline of the proposals it is considering in anticipation of convening a SBREFA panel.  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, Director Cordray announced last month 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.

In the Spring 2017 agenda, the CFPB gives a September 2017 date for a proposed rule.  Presumably, that date is for a proposal that will deal with disclosures and treatment of consumers by debt collectors.  The new agenda gives no estimated dates for the convening of a second SBREFA panel or a proposed second rule.  In the preamble to the new agenda, the CFPB states only that it “has now decided to issue a proposed rule later in 2017 concerning FDCPA collectors’ communications practices and consumer disclosures.  The Bureau intends to follow up separately at a later time about concerns regarding information flows between creditors and FDCPA collectors and about potential rules to govern creditors that collect their own debts.”

Larger participants.  The CFPB states in the Spring 2017 agenda that it “expects to conduct a rulemaking to define larger participants in the markets for consumer installment loans and vehicle title loans for purposes of supervision.”  It also repeats the statement made in previous agendas that the CFPB is “also considering whether rules to require registration of these or other non-depository lenders would facilitate supervision, as has been suggested to the Bureau by both consumer advocates and industry groups.”  (Pursuant to Dodd-Frank Section 1022, the CFPB is authorized to “prescribe rules regarding registration requirements applicable to a covered person, other than an insured depository institution, insured credit union, or related person.”)  The new agenda estimates a June 2017 date for prerule activities and a September 2017 date for a proposed rule.

Overdrafts.  The CFPB issued a June 2013 white paper and a July 2014 report on checking account overdraft services.  In the Spring 2017 agenda, as it did in its Fall 2015 agenda and Fall and Spring 2016 agendas, the CFPB states that it “is continuing to engage in additional research and has begun consumer testing initiatives related to the opt-in process.”  Although the Fall 2016 agenda estimated a January 2017 date for further prerule activities, the new agenda moves that date to June 2017.  As we have previously noted, the extended timeline may reflect that the CFPB feels less urgency to promulgate a rule prohibiting the use of a high-to-low dollar amount order to process electronic debits because most of the banks subject to its supervisory jurisdiction have already changed their processing order.

Small business lending data.  Dodd-Frank Section 1071 amended the ECOA to require financial institutions to collect and maintain certain data in connection with credit applications made by women- or minority-owned businesses and small businesses.  Such data includes the race, sex, and ethnicity of the principal owners of the business.  The new agenda estimates a June 2017 date for prerule activities.  The CFPB repeats the statement made in the Fall 2016 agenda that it “is focusing on outreach and research to develop its understanding of the players, products, and practices in business lending markets and of the potential ways to implement section 1071.  The CFPB then expects to begin developing proposed regulations concerning the data to be collected and determining the appropriate procedures and privacy protections needed for information-gathering and public disclosure under this section.”

Mortgage rules.  Earlier this month, the CFPB issued a proposed rule dealing with a lender’s use of a Closing Disclosure to determine if an estimated charge was disclosed in good faith.  The Spring 2017 agenda gives a March 2018 estimated date for issuance of a final rule.  This past March, the CFPB issued a proposal to amend Regulation B requirements relating to the collection of consumer ethnicity and race information to resolve the differences between Regulation B and revised Regulation C.  The Spring 2017 agenda gives an October 2017 estimated date for a final rule.

 

 

In his prepared remarks for today’s Consumer Advisory Board meeting, Director Cordray discussed CFPB initiatives in four areas.  In addition to the CFPB’s letter to the top retail credit card companies encouraging them to use zero-interest promotions instead of deferred-interest promotions and its new report on consumers transitioning to credit visibility, Director Cordray discussed the CFPB’s RFI on the small business lending market and its debt collection rulemaking.   

Last month, in conjunction with a field hearing, the CFPB issued the RFI, together with a white paper on small business lending.  In his remarks, Director Cordray revealed that, in response to requests for additional time to respond to the RFI (which currently has a July 14, 2017 comment deadline), the CFPB is extending the comment period by 60 days.  He also indicated that the CFPB has “been hearing from congressional officials who want to see more progress made on [the Section 1071] rulemaking” and that the CFPB is “now moving forward.”   

With regard to the CFPB’s debt collection rulemaking, Director Cordray discussed the debt collection proposals under consideration by the CFPB which it released last July in anticipation of convening a SBREFA panel.  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. 

In his remarks, Director Cordray described the proposals as focused on three primary issues: “mak[ing] sure that collectors are contacting the right consumers, for the right amount”; “mak[ing] sure that consumers clearly understand the debt collection process and their rights”; and “mak[ing] sure that consumers are treated with dignity and respect, particularly in their communications with collectors.”  He indicated that when the CFPB evaluated “the feedback we received on the proposals under consideration” (presumably the report of the SBREFA panel on the input received from the small entity representatives who met with the panel), it became clear that “[w]riting rules to make sure debt collectors have the right information about their debts is best handled by considering solutions from first-party creditors and third-party collectors at the same time.”  He observed that “[f]irst-party creditors like banks and other lenders create the information about the debt, and they may use it to collect the debt themselves.  Or they may provide it to companies that collect the debt on their behalf or buy the debt outright.  Either way, those actually collecting on the debts need to have the correct and accurate information.” 

He commented that because “breaking the different aspects of the informational issues into pieces in two distinct rules was shaping up to be troublesome in various ways,” the CFPB has decided to write a market-wide rule in which it will “consolidate all the issues of ‘right consumer, right amount’ into the separate rule we will be developing for first-party creditors, which will now cover these intertwined issues for third-party collectors and debt buyers as well.”   He indicated that this approach will allow the CFPB “to move forward more quickly with a proposed rule focused on the remaining issues” concerning disclosures by debt collectors and how consumers are treated by debt collectors and that “[o]nce we proceed with a proposed rule on these issues, we will return to the subject of collecting the right amount from the right consumer, which is a key objective regardless of who is collecting the debt.”

 

 

In recent remarks, CFPB Director Richard Cordray noted, albeit passingly, the significant role debt collection activities play in the healthy maintenance of consumer credit markets.  “Responsible debt collectors that do their work with care and treat consumers with respect are a natural and even an essential part of the financial marketplace.” (emphasis added.)  A Staff Report that was just released by The Federal Reserve Bank of New York (“FRBNY”) serves to highlight just how essential that role is.  In their Report, Access to Credit and Financial Health: Evaluating the Impact of Debt Collection, the FRBNY staff found that “restricting collection activities leads to a decrease in access to credit and a deterioration in indicators of financial health.”  The staff reached these conclusions after looking at the extent to which certain state statutes reduced collection activity and then looking at the impact that change in collection activity had on consumers.

At the outset, the Report examined two different state legislative schemes to determine their impact on debt collection activities.  Not surprisingly, both legislative schemes lead to an overall decrease in debt collection activities, having “a significant impact on the number of debt collection employees in the state.” (p. 10).  First, the Report found that state legislation increasing licensing and bonding requirements for debt collectors had a tendency to increase the number of small decentralized debt collection agencies, while overall decreasing the number of debt collectors in the state.  Second, the analysis showed that state legislation providing for stricter penalties and increased private remedies for non-compliance with debt collection legislation tended to wipe-out smaller collection agencies and concentrate the practice in establishments with 50 or more employees.

Next, the Report examined the impact of restricted debt collection practices on both access to credit and financial health.  On auto-loans, the report found that originations were “significantly reduced following a tightening in state-level collection legislation” particularly among younger borrowers with low credit scores.  (p. 13).  A similar sizable impact was found on the limits in non-traditional finance (a category of debt including retail cards, personal loans, and various other non-traditional loans).  As a result of these reductions to credit access, the Report found that financial health tended toward a “moral hazard channel.”  In other words, as collection activity and debt recovery decreased, consumer demand for credit increased and individuals who could do so took on more risk and/or over borrowed.  Restricting debt collection activities therefore resulted both in an increase in the number of people with delinquent balances and in the duration of their delinquencies.  While the report found the impact greater on individuals with poor credit, the results were consistent across the credit spectrum.

The Report provides strong empirical support for the position that debt collection, through allowing better enforcement of contracts and increasing the supply of credit at lower interest rates, is an essential part of a healthy consumer credit market.  We urge the CFPB and other federal and state regulators and legislators to be mindful of these conclusions.

In a notice published earlier this week in the Federal Register, the CFPB announced that it plans to seek OMB approval to conduct an online survey of approximately 8,000 individuals as part of its research on debt collection disclosures.  Comments must be received on or before August 4, 2017.

Last July, 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 panel met with small entity representatives to discuss the proposals last August.  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 the OMB request, the CFPB has filed a sample of the survey questions and Supporting Statements Part A and Part B.  As described in Supporting Statement Part B, 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.

Through the survey, the CFPB intends to test consumers’ comprehension and decision making using updated versions of disclosures previously used by the CFPB in a study.  The sample survey questions do not include the disclosures, which the CFPB states are “currently being developed.”

The coverage of the CFPB’s SBREFA proposals was limited to “debt collectors” that are subject to the FDCPA.  Despite the CFPB’s statement when it issued the proposals last July that it expected to convene a second SBREFA panel in the “next several months” for creditors and others engaged in debt collection not covered by the proposals, it has not yet done so.

 

Significant changes to West Virginia’s debt collection law will take effect on July 4, 2017.  Senate Bill 536, approved by the state’s governor on April 21, 2017, includes the following amendments:

  • The definition of “debt collector” is amended to exempt attorneys “representing creditors provided that the attorneys are licensed in West Virginia or otherwise authorized to practice law in the State of West Virginia and handling claims and collections in their own name as an employee, partner, member, shareholder or owner of a law firm and not operating a collection agency under the management of a person who is not a licensed attorney.”
  • The time period after which a debt collector may not communicate with a consumer represented by an attorney is increased from 72 hours to “three business days after the debt collector receives written notice from the consumer or his or her attorney that the consumer is represented by an attorney specifically with regard to the subject debt.”  The amendment also requires the notice to “clearly state the attorney’s name, address and telephone number and be sent by certified mail, return receipt requested, to the debt collector’s registered agent, identified by the debt collector at the office of the West Virginia Secretary of State or, if not registered with the West Virginia Secretary of State, then to the debt collector’s principal place of business.”
  • The requirement to include specified disclosures in a written communication with the consumer regarding a debt that is beyond the statute of limitations for filing a legal action for collection is extended to all written communications (instead of only the initial written communication).
  • Creditors and debt collectors are given a right to cure violations.  Before bringing an action for a violation of the debt collection law, a consumer must send a written notice to the creditor or debt collector identifying the alleged violation and factual basis for the alleged violation and give the creditor or debt collector 45 days to make a cure offer.  A cure offer not accepted by the consumer within 20 days is deemed refused or withdrawn.  If a collection lawsuit has already been filed against the consumer and a violation of the debt collection law is asserted as  counterclaim, the creditor or debt collector has 20 days to make a cure offer.  Related issues such as the tolling of the statute of limitations while a cure offer is pending and the admissibility of a cure offer in an action for a violation of the debt collection law are also addressed in the amendment.