In prepared remarks today, Richard Cordray, the director of the Consumer Financial Protection Bureau, referenced the agency’s work on its debt collection rule. The topic for Cordray’s speech, given before the Chamber of Commerce Annual Capital Markets Summit, was on the topic of how regulation affects the consumer marketplace.
While not necessarily providing any new information, Cordray used the Bureau’s efforts on updating debt collection rules as a “prime example of where we seek both to clarify existing legal requirements and to adapt them to our rapidly changing world for the benefit of all stakeholders.”
Rightfully so, Cordray points to the absence of a major update of the Fair Debt Collection Practices Act during the 40 years since it became law a problem point for the collections industry. The lack of an update has led to precedents in the legal system having the effect of law, and conflicting precedents make following those de facto laws more difficult.
Moreover, as new forms of technology have emerged, many questions have arisen as to how to apply the law. For example, the statutes explicitly address the use of postcards, collect calls, and telegrams – but are silent about the use of voicemail, email, and text messages.
Cordray also tackled how the agency should be writing its rules: short and sweet? Or long and comprehensive.
There are competing approaches here. Some prefer short and simple rules, which may seem more elegant and flexible, though one shortcoming is that much is left to interpretation. This means people must bear the uncertainty of their own interpretations until others, such as the courts, develop their own potentially thick body of law through expensive litigation over a longer period. Others put a premium on having more specific and comprehensive language from the outset, though it may be unreasonable or even superhuman to suppose that all hard problems can be anticipated and solved at once.
This more prolix culture is the one I found in federal consumer finance when I came here from my previous experience in state government. Federal banking agencies are sometimes derided for writing long and complicated rules. Yet the plain truth is that many businesses prefer more comprehensive language that answers questions explicitly up front, leaves less terrain undefined and uncertain, and minimizes the prospect of protracted and costly litigation. They do not want the meaning and application of broad legal standards to get sorted out in court over many years. They do not want to have to make educated guesses initially and bear the risk of later being found to have gotten things wrong. Clarity and certainty are held at a special premium.
Without getting into details about the status of the debt collection rule, and any how it will address the issues he raised, Cordray switched gears, to discussing how regulation should be implemented.
In the end, rulemaking is simply a tool like any other. It can be used wisely, it can be misused, and it can be over-used. How to strike the right balance is a difficult judgment that everyone simply has to make as best they can. But clearly we can learn much from a process of vigorous engagement with all stakeholders. The rules should be focused. Streamlining and providing ease of use are key priorities to consider very carefully. These methods can help us achieve what I believe is a shared vision: a highly competitive economy that works for Americans in both the short run and the long run.
At the Consumer Bureau, we envision a consumer financial marketplace where reasonable and evenhanded oversight promotes better functioning of markets, where consumer protections and business opportunities complement one another, and where institutions lead by establishing long-term and sustainable relationships with their customers. We do not have any one-sided aim to maximize consumer protection or industry deterrence at all costs. There is such a thing as doing too little, and there is such a thing as doing too much. We quite simply are focused on getting things right, as far as we can manage to do so.