Re: Comments in Response to the Notice of Proposed Rulemaking under Regulation F
Docket No. CFPB-2019-0022
Director Kraninger,
This letter is submitted by the Consumer Bankers Association (“CBA”) in response to the Bureau of Consumer Financial Protection’s (“Bureau”) notice requesting public comment on the proposed rulemaking (“NPRM”) that was published in the Federal Register on May 21, 2019 at 84 FR 23274 and proposes to amend Regulation F, 12 CFR part 1006, to prescribe rules under the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq. (the “Proposed Rules”).
CBA and its members have two significant interests in the Proposed Rules. First, CBA’s members, as providers of a variety of consumer credit products, engage in collections efforts when consumer accounts become delinquent, and therefore have a great interest in ensuring that the applicability of the Proposed Rules is explicitly limited to third-party debt collectors, and does not extend to creditors collecting their own debts. As discussed in detail below, Congress recognized that creditors’ collection efforts are very different from those initiated by third-party debt collectors. The Bureau should make this distinction clear in the final rules and ensure that it does not introduce uncertainty by creating the possibility for rules that are designed for third-party collections to be applied to creditors.
Second, CBA’s members assign accounts to third-party debt collectors, and have the responsibility to appropriately monitor such debt collectors. The Proposed Rules would impact the operations of debt collectors utilized by CBA members, and would also create new obligations for CBA members in terms of their management and oversight of collection agencies and law firms. For these reasons, CBA and its members have a strong interest in the adoption of debt collection rules that are clear and operationally feasible to implement and monitor.
Clear and feasible rules will not only make the rules easier to implement, but they will also allow the consumer protection benefits intended by the proposed rules to be realized without negatively impacting the availability and cost of credit. The Bureau acknowledged this potential consequence in the NPRM, and empirical research validates the concern that restrictions on contact with consumer debtors can have the impact of reducing access to credit, increasing consumer delinquencies and reducing consumer credit scores. As noted in the NRPM, an empirical study performed by the Federal Reserve Bank of New York found that state laws restricting debt collection
lead[] to a decrease in access to credit and to a deterioration in indicators of financial health. Specifically, we find a sizable and significant reduction in auto loan balances, a significant decline in credit card and non-traditional finance balances, a significant decrease in auto and credit card originations, a sizable and significant increase in delinquent credit card balances and non-traditional finance balances, and a small but statistically significant reduction in credit scores.
If the overall impact of the proposed rules is to significantly decrease the opportunity for contact between debt collectors and consumers – or between creditors and consumers – CBA believes that the impact on access to, and cost of, credit will be substantial, and will affect those consumers with the lowest credit scores and the least access to credit disproportionately. Fortunately, there are several revisions that the Bureau can make to the proposed rules to ameliorate these impacts, and those are discussed below.
I. THE BUREAU SHOULD MAKE CLEAR THAT THE FINAL RULES APPLY ONLY TO DEBT COLLECTORS AS DEFINED BY THE FDCPA.
Although the NPRM states that the Proposed Rules are intended to apply only to third-party “debt collectors” as that term is defined in the FDCPA at 15 U.S.C § 1692a(6), there are several aspects of the NPRM that are likely to create confusion about whether some provisions of the Proposed Rules may be applied to creditors and other parties not covered by the FDCPA. In particular, the Bureau has used its UDAAP authority under the Dodd-Frank Act to prohibit unfair, deceptive, or abusive acts or practices (“UDAAP”) to support some provisions of the Proposed Rules. This raises a question about whether those provisions would be applicable to creditors and servicers who are subject to the Bureau’s UDAAP authority.
Consistent with the FDCPA’s text, the Bureau has recognized throughout this rulemaking that the FDCPA applies to debt collectors and not original creditors or their pre-delinquency servicing partners collecting in the creditor’s name. For instance, in November 2013, the Bureau published its Advance Notice of Proposed Rulemaking, which stated: “When a consumer defaults on a debt, the first efforts to collect on that debt are often made by the creditor itself, either through in-house collectors or others collecting in the name of the creditor. In either case, first party collections are largely exempt from the FDCPA.” CFPB-2013-0033 (emphasis added). Further, as discussed in greater detail in the next section of this letter, interactions that occur between consumers and their creditors are materially different from those that occur between consumers and third-party debt collectors.
However, while publicly stating that the NPRM seeks only to address third-party collection practices, the Bureau has included several ambiguous statements that could cause confusion about its intent in the final rules. For example, in the NPRM, the Bureau proposes to expand upon the FDCPA’s non-exhaustive list of examples of unlawful conduct to outline additional unlawful acts for debt collectors. While those additions would seem to apply only to debt collectors as currently defined by the FDCPA, footnote 69 states:
Where the Bureau proposes requirements pursuant only to its authority to implement and interpret sections 806 through 808 of the FDCPA, the Bureau does not take a position on whether such practices also would constitute an unfair, deceptive, or abusive act or practice under section 1031 of the Dodd-Frank Act. Where the Bureau proposes an intervention both pursuant to its authority to implement and interpret FDCPA sections 806 through 808 and pursuant to its authority to identify and prevent unfair acts or practices under Dodd-Frank Act section 1031, the section-by-section analysis explains why the Bureau proposes to identify the act or practice as unfair under the Dodd-Frank Act.
Director Kathleen L. Kraninger
Office of the Executive Secretary
Consumer Financial Protection Bureau
1275 First Street, NE
Washington, DC 20002
Email: 2019-NPRM-DebtCollection@cfpb.gov
Re: Comments in Response to the Notice of Proposed Rulemaking under Regulation F
Docket No. CFPB-2019-0022
Director Kraninger,
This letter is submitted by the Consumer Bankers Association (“CBA”) in response to the Bureau of Consumer Financial Protection’s (“Bureau”) notice requesting public comment on the proposed rulemaking (“NPRM”) that was published in the Federal Register on May 21, 2019 at 84 FR 23274 and proposes to amend Regulation F, 12 CFR part 1006, to prescribe rules under the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq. (the “Proposed Rules”).
CBA and its members have two significant interests in the Proposed Rules. First, CBA’s members, as providers of a variety of consumer credit products, engage in collections efforts when consumer accounts become delinquent, and therefore have a great interest in ensuring that the applicability of the Proposed Rules is explicitly limited to third-party debt collectors, and does not extend to creditors collecting their own debts. As discussed in detail below, Congress recognized that creditors’ collection efforts are very different from those initiated by third-party debt collectors. The Bureau should make this distinction clear in the final rules and ensure that it does not introduce uncertainty by creating the possibility for rules that are designed for third-party collections to be applied to creditors.
Second, CBA’s members assign accounts to third-party debt collectors, and have the responsibility to appropriately monitor such debt collectors. The Proposed Rules would impact the operations of debt collectors utilized by CBA members, and would also create new obligations for CBA members in terms of their management and oversight of collection agencies and law firms. For these reasons, CBA and its members have a strong interest in the adoption of debt collection rules that are clear and operationally feasible to implement and monitor.
Clear and feasible rules will not only make the rules easier to implement, but they will also allow the consumer protection benefits intended by the proposed rules to be realized without negatively impacting the availability and cost of credit. The Bureau acknowledged this potential consequence in the NPRM, and empirical research validates the concern that restrictions on contact with consumer debtors can have the impact of reducing access to credit, increasing consumer delinquencies and reducing consumer credit scores. As noted in the NRPM, an empirical study performed by the Federal Reserve Bank of New York found that state laws restricting debt collection
lead[] to a decrease in access to credit and to a deterioration in indicators of financial health. Specifically, we find a sizable and significant reduction in auto loan balances, a significant decline in credit card and non-traditional finance balances, a significant decrease in auto and credit card originations, a sizable and significant increase in delinquent credit card balances and non-traditional finance balances, and a small but statistically significant reduction in credit scores.
If the overall impact of the proposed rules is to significantly decrease the opportunity for contact between debt collectors and consumers – or between creditors and consumers – CBA believes that the impact on access to, and cost of, credit will be substantial, and will affect those consumers with the lowest credit scores and the least access to credit disproportionately. Fortunately, there are several revisions that the Bureau can make to the proposed rules to ameliorate these impacts, and those are discussed below.
I. THE BUREAU SHOULD MAKE CLEAR THAT THE FINAL RULES APPLY ONLY TO DEBT COLLECTORS AS DEFINED BY THE FDCPA.
Although the NPRM states that the Proposed Rules are intended to apply only to third-party “debt collectors” as that term is defined in the FDCPA at 15 U.S.C § 1692a(6), there are several aspects of the NPRM that are likely to create confusion about whether some provisions of the Proposed Rules may be applied to creditors and other parties not covered by the FDCPA. In particular, the Bureau has used its UDAAP authority under the Dodd-Frank Act to prohibit unfair, deceptive, or abusive acts or practices (“UDAAP”) to support some provisions of the Proposed Rules. This raises a question about whether those provisions would be applicable to creditors and servicers who are subject to the Bureau’s UDAAP authority.
Consistent with the FDCPA’s text, the Bureau has recognized throughout this rulemaking that the FDCPA applies to debt collectors and not original creditors or their pre-delinquency servicing partners collecting in the creditor’s name. For instance, in November 2013, the Bureau published its Advance Notice of Proposed Rulemaking, which stated: “When a consumer defaults on a debt, the first efforts to collect on that debt are often made by the creditor itself, either through in-house collectors or others collecting in the name of the creditor. In either case, first party collections are largely exempt from the FDCPA.” CFPB-2013-0033 (emphasis added). Further, as discussed in greater detail in the next section of this letter, interactions that occur between consumers and their creditors are materially different from those that occur between consumers and third-party debt collectors.
However, while publicly stating that the NPRM seeks only to address third-party collection practices, the Bureau has included several ambiguous statements that could cause confusion about its intent in the final rules. For example, in the NPRM, the Bureau proposes to expand upon the FDCPA’s non-exhaustive list of examples of unlawful conduct to outline additional unlawful acts for debt collectors. While those additions would seem to apply only to debt collectors as currently defined by the FDCPA, footnote 69 states:
Where the Bureau proposes requirements pursuant only to its authority to implement and interpret sections 806 through 808 of the FDCPA, the Bureau does not take a position on whether such practices also would constitute an unfair, deceptive, or abusive act or practice under section 1031 of the Dodd-Frank Act. Where the Bureau proposes an intervention both pursuant to its authority to implement and interpret FDCPA sections 806 through 808 and pursuant to its authority to identify and prevent unfair acts or practices under Dodd-Frank Act section 1031, the section-by-section analysis explains why the Bureau proposes to identify the act or practice as unfair under the Dodd-Frank Act.
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