A former enforcement attorney at the Consumer Financial Protection Bureau has published a scathing indictment of the agency’s debt collection proposals, accusing the agency of going after headlines by chasing large settlements with large collection agencies and debt buyers and by not going after the “sleazy, small-time: debt collectors who are actually the problem in the industry.
The bureau’s reluctance to investigate sleazy, small-time debt collectors relegates tens of thousands of their victims to its Internet complaint database. Ironically, the CFPB uses the inflated complaint statistics it gathers there to justify new regulations aimed at big companies that buy delinquent debt portfolios.
The writer, Richard L. Rubin, says he was assigned to one of the CFPB’s first debt collections investigations, the targets of which were chosen because “they were the country’s largest debt buyers and collectors.”
The CFPB’s strategy was, and still is, to produce dramatic headlines by suing “choke points”—i.e., the leading firms in every consumer financial business.
By putting consumers in control of how and when they are contacted is not how the Fair Debt Collection Practices Act needs to be updated, Rubin argues.
However, the CFPB’s proposed solution is a hopelessly complex system of debt validation requirements and procedures—with rounds of notices, statements, information requests, and document transfers between debtors, creditors, and debt collectors. The new rules will create so many loopholes that debtors with lawyers half as clever as my former colleague will never pay a dime, and may even get rich suing collectors.
Rubin advocates for the creation of a debt registry, which would eliminate mistaken collection attempts and reduce litigation costs. The registration process would be the responsibility of the creditors, which would have to register the debts prior to placing any account with a third-party agency. But the CFPB would oppose the creation of any type of registry, Rubin argues.
First, like the bureau’s Internet complaint database, it would be a big project. The agency might have to repurpose the tens of millions of advertising dollars it spends promoting itself each year. Second, the registry would eliminate uncertainty and make it harder for consumers to avoid paying legitimate debts. Heaven forbid.