The next step in the Consumer Financial Protection Bureau’s debt collection rulemaking process will take place later today in Washington, D.C., when representatives from the CFPB, the Small Business Administration, and the Office of Management & Budget will gather, along with more than two dozen representatives from small businesses in the collections industry to discuss a series of proposals that the agency released late last month.
The hearing is a requirement of the Small Business Regulatory Enforcement Fairness Act (SBREFA), which intends to provide small businesses with the chance to weigh in and be heard when certain areas of the federal government seek to implement new rules and regulations. The CFPB is one of three federal agencies, along with the Environmental Protection Agency (EPA) and the Occupational Safety & Health Administration (OHSA) which must conduct a SBREFA panel prior to enacting new rules.
Kelly Knepper-Stephens, the general counsel and chief compliance officer for Stoneleigh Recovery Associates is one of the 28 industry representatives from the collections industry, called SERs, that will be in attendance. The 28 representatives will have the chance to share their insights and opinions on the proposals put forth by the CFPB in late July. Those 28 representatives will have to submit their reports to the SBREFA panel by Sept. 9. The SBREFA panel has 60 days from the date of the hearing to submit its report to the CFPB. After reviewing the SBREFA panel’s recommendations and reports, the CFPB can then move forward with publishing a proposed rule.
The outline of proposals put forth by the CFPB was 117 pages long and covered many different aspects of the business, from the steps collectors and debt buyers must take prior to collecting or contacting an individual about a delinquent debt to data that must be transferred after an account has been closed. The outline provides clarification in some areas that the industry has been waiting for, like leaving voicemail messages for consumers and what documents to provide to satisfy a dispute. Industry organizations like DBA International, ACA International, NARCA and the Consumer Relations Consortium have been analyzing the proposal and gathering data the SERs can present to show the economic impact of the rule on the industry, with a particular emphasis on small businesses.
The CFPB included a template for a standard validation letter in its proposal that attempts to use plain, simple language to provide the validation notice required by the Fair Debt Collection Practices Act. However, the proposed letter does not include any of the language that different states require in validation notices sent to individuals in their respective states. As well, the validation notice is aimed at individuals with credit card debt and would need to be changed for other types of debt, like utility, auto, and medical debts. The CFPB also proposed adding a second page — a statement of consumers’ rights — to be included with the initial demand and resent to consumers 180 days after placement. Adding the statement of rights, an additional page of paper, will increase the expenses for collection agencies. These are all areas of the proposals where Knepper-Stephens and the other SERs will attempt to articulate the likely consequences of the outline, should the CFPB propose it as the final rule.
One group of industry members not represented at SBREFA are first-party creditors, Knepper-Stephens said, concerned that her clients and potential clients might not have a chance to weigh in on the outline under consideration prior to it becoming a proposed rule. Stoneleigh Recovery Associates is a debt buyer and third-party collector, and relies on accounts from first-party creditors.
“The outline contains proposals that directly impacts creditor grantors, maybe the large companies are not going to be impacted as much, but the smaller creditors are likely going to experience significant costs. They should have an opportunity to explain the impact to their business,” Knepper-Stephens said. “I’m concerned because without soliciting feedback from smaller creditors, a rule could be proposed that ultimately puts those small creditors out of business. It could have a disproportionate effect on them and as their servicer that would have a negative economic impact on my business too.”
Knepper-Stephens also said that one of her objectives is to make sure that the CFPB understands the increased expenses and resources that will be incurred should agencies be required to comply with the proposals as currently stated.
Said Knepper-Stephens: “I hope the CFPB will take our concerns under consideration. We are decent, legitimate businesses that provide a great service to the economy that includes giving more people access to credit.”