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FTC Bureau Chief: Lack of Debt Collection Rule a ‘Missed Opportunity’

LAS VEGAS — The acting director of the Federal Trade Commission’s Bureau of Consumer Protection sat down and shared some of his perspectives at this week’s RMA Conference, saying that the agency will continue to focus on identifying and going after the worst of the worst when it comes to debt collection scammers.

Thomas Pahl, who re-joined the FTC last year, also shared his thoughts about the Consumer Financial Protection Bureau and the FTC are working together under new CFPB acting director Mick Mulvaney, the delays associated with the CFPB’s proposed debt collection rulemaking process, and how the FTC can help the collection industry modernize itself to accommodate new and emerging communication methods.

One of the more interesting developments that will be occurring at the FTC is a changing of the guard at the top of the agency, which could have an impact on how the FTC regulates and enforces the Fair Debt Collection Practices Act. Current acting chairman Maureen Ohlhausen has announced her resignation following a nomination to become a judge with the U.S. Court of Federal Claims, which is where companies can sue the federal government.

President Trump has named four new commissioners for the FTC, who each have to be approved by the Senate. That includes Joseph Simons, who will become the agency’s new chairman, once confirmed.

“It’s difficult to speak about where the agency is headed given the organization is changing,” Pahl said during his session, adding that he expects the FTC to continue going after the most “egregious” actors. That area of the business has been the FTC’s “sweet spot” in the area of enforcement, Pahl said, and he does not see that changing.

“We’re definitely looking at the worst of the worst,” Pahl said. “It’s beneficial to the industry. It allows legitimate players to distinguish themselves. I anticipate it will continue under new leadership.”

Speaking of new leadership, Pahl also shared his thoughts about the CFPB under acting director Mick Mulvaney. Pahl noted that one of his deputies has been detailed to the CFPB for six weeks to provide some perspective about how the FTC would handle certain cases. Pahl noted that he expects “higher” levels of coordination than in the past, pointing to how the CFPB appears to be taking a page from the FTC in making regulations less burdensome.

“When acting director Mulvaney came in, they asked if there are there things the CFPB should be doing to lessen burden of investigations,” Pahl said. “And they’re using changes that have been made at the FTC as a blueprint for whether CFPB should do something comparable.”

One thing that was clear was that Pahl was not a fan of former CFPB director Richard Cordray’s strategy of using enforcement actions as a means of regulating the debt collection industry. Pahl noted that consent orders are not public and are not subject to the comment process, which should make them optional to be followed, not required.

“The problem with using consent agreements is essentially you undermine all those important protections that Congress put in place to make sure all those who are regulated have a say in the process,” Pahl said. “They should be optional. They should be used as guidance. There should be no obligation to follow it.”

Pahl also said that the years it has taken to try and get a rule regulating the debt collection industry has been a “missed opportunity” because rules can “improve clarity.”

One area of the business that could use more clarity is communications. Getting in touch with individuals is harder than it has ever been. And the likely outcome of that difficulty, Pahl noted, is more lawsuits against consumers. And even consumer advocates can agree that more lawsuits is not what anyone wants. Pahl suggested how the industry might better frame its argument for communicating more via email and text messages.

“It is valuable for collectors to communicate with consumers,” Pahl said. “And there is value in recognizing that collectors can’t communicate. What is likely to follow is a lawsuit, which is in nobody’s interest.

The industry should be “Talking about the potential downside risks in using particular technology methods. There is value in communicating in a particular channel compared with the probable harms.”


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