What will the Consumer Financial Protection Bureau post to its website late Wednesday night? Will the CFPB post a proposed debt collection rule? Will it be the outline for the Small Business Regulatory Enforcement Fairness Act hearing? Will it be something different?
The Consumer Financial Protection Bureau’s field hearing on debt collections will be held on Thursday and speculation has been running rampant since the agency announced the event what it will announce beforehand. The agency’s strategy has been to schedule a field hearing and, on the eve of the hearing, make a major announcement. So everyone in the industry wants to know what the CFPB will announce on Wednesday night.
More specifically, people want to know the level of detail that will be included in whatever is announced. Will the announcement be a high-level overview of its thoughts and plans? Or will the release include detailed specifics about how collectors and debt buyers will have to behave?
At least one published report thinks that there will be a high level of specificity in the release, and that the CFPB will follow a growing number of state laws that place limits on the number of times individuals can be contacted by debt collectors.
David Anthony, a partner at Troutman Sanders in Richmond, Va., pointed to Massachusetts rules as a possible influence for the CFPB in its rulemaking.
Massachusetts debt collection regulations limit phone calls, text messages and voicemails to two a week. Another state, Washington, refers more broadly to a “communication” and limits contacts to three times a week.
“It wouldn’t surprise me at all if the CFPB adopts limitations on contact frequency,” Anthony said. “Some of the more aggressive states have done that.”
WHAT THE ADVOCATES SAY
Consumer advocates say that the CFPB needs to articulate a limit that restricts how many times a collector can contact an individual, whether by phone, text message, email or mail.
The National Consumer Law Center (NCLC) said the CFPB needs to adopt a regulatory limit on the number of permissible calls that strikes a balance between allowing debt collection communications and preventing harassment. The nonprofit group recommends that collectors be allowed to call consumers up to three times a week. However, only one of those contacts can be a direct conversation with the debtor.
“Every time the consumer’s phone rings, we’re proposing that that counts as a call,” said Margot Saunders, of counsel to the NCLC.
Those quoted for the article did understand the impact of limiting the number of times that a collector can contact an individual: more lawsuits.
If banks have no alternative in terms of contacting the consumer and getting a settlement or working out a payment plan, then that means the creditor has only one choice: a lawsuit, said Ballard Spahr’s [Christopher] Willis, chair of the firm’s Consumer Financial Services Litigation Group.
“So the worry is, by clamping down on contact frequency, you push more consumers into debt collection litigation, which is not better for them, and you extend the period of time within which they are experiencing adverse credit reporting,” he said. “So I personally don’t believe a reduction in contact frequency is even good for consumers, but it is one of the things that is under consideration.”