Consumer advocates raised a host of concerns related to the proposed debt collection rule and collections in general in a meeting with leadership of the Consumer Financial Protection Bureau, including issues with call caps, not cooperating with credit counseling agencies, and a possible increase in the number of bankruptcy filings.
The concerns were raised during a meeting between 19 consumer advocates and seven representatives from the CFPB, including Director Kathy Kraninger, Acting Deputy Director Brian Johnson, and Policy Associate Director Tom Pahl. The meeting was held on May 8 in Philadelphia, on the same day the CFPB held a Town Hall meeting to discuss its proposed debt collection rule. The summary of the meeting was submitted as a comment to the proposed debt collection rule. Along with discussing debt collection, the advocates also discussed the CFPB’s Reconsideration Proposal on Payday, Vehicle, Title, and Certain High-Cost Installment Loans.
What advocates are thinking in relation to the proposed debt collection rule is valuable information for the credit and collection industry in developing thoughtful responses to the concerns being raised. Comments from consumers are vastly outnumbering comments from industry through the first couple of weeks that the comment period has been open, so industry comments must be directed at the topics being raised by advocates in order to blunt their arguments.
Among the issues raised by the advocates at the meeting were:
- Encouraging the CFPB to allow an exception and ensure that medical debt is covered by consumer, rather than by debt, under the Bureau’s proposed telephone contact cap.
- Seeking clarity regarding whether the CFPB would consolidate multiple student loan account numbers under the same company of a single consumer and treat it as one account.
- Starting that many debt collection agencies have sufficient identifying information about consumers to amalgamate multiple debt accounts so they should be made to consolidate the debt under one account.
- Discussing the need to validate the debt and ensure that vulnerable consumers like senior citizens are not paying debts that do not belong to them.
- Encouraging the CFPB to do more to limit text and phone communication to consumers since older Americans tend to be more vulnerable and susceptible to abusive debt collectors.
- Highlighting the need for fines for violations under the Fair Debt Collection Practices Act to keep up with inflation.
- Commenting on the imbalance of power between a collector and the collector’s lawyer versus the consumer and that the collector and collector’s lawyer have the information in their files to determine whether or not a debt is time-barred.
- Pointing out that debt collectors are not cooperating with nonprofit credit counseling agencies since they refuse to provide information to credit reporting agencies that the consumer is repaying the debt through a credit counseling program or debt management plan.
- The proposed rule may have the unintended consequence of driving consumers to deceptive debt settlement companies who may be targeting consumers with TV and other media ads, especially if consumers are receiving a number of calls, emails, and/or texts.
- Placing the burden of proving or substantiating the debt on the debt collector rather than on the consumer to disprove the debt. Certain local courts may do little in reviewing default judgments such that collectors may be able to obtain judgments on time-barred debts and noting that there could be harm in incentivizing collectors to know less about debts in collection.
- Stating that another unintended consequence of the Bureau’s proposed rule would be the increase in more consumers filing for bankruptcy and therefore not paying any of the good debt they owe either.