Former CFPB Deputy Director Shares Thoughts on Future of Debt Collection Rule

LAS VEGAS — Many, if not most, of the people in the accounts receivable management industry are waiting with baited breath to see what Rohit Chopra is going to do with Regulation F — the Debt Collection Rule — if he is confirmed by the Senate to be the next director of of the Consumer Financial Protection Bureau. Tom Pahl, the CFPB’s former Deputy Director, shared his predictions during the keynote address yesterday at Receivables Management Association International’s annual conference, and what he said is likely to make those in the ARM industry feel better, and worse.

Pahl retired from the CFPB in January when his boss, Director Kathleen Kraninger, resigned at the request of President Joe Biden. Pahl has worked at the CFPB and Federal Trade Commission and has been one of the key regulators at the federal level focusing on the debt collection industry.

On perhaps the most important domino that needs to fall, Pahl said that he expects that Chopra will be confirmed by the Senate, although he offered no timeline for when it might happen. The Senate did confirm Gary Gensler to be the next Commissioner of the Securities and Exchange Commission yesterday, and that is notable because Gensler and Chopra had their confirmation hearings before the Senate Banking Committee on the same day at the same time.

Pahl also questioned the proposed delay that the CFPB put forth last week in seeking to push back the effect date of Regulation F until January 29, 2022, from November 30 this year. Pahl called the move “puzzling,” saying it was “odd” to delay the implementation of a rule by 60 days when it was still seven months from going into effect.

As for what, if anything, Chopra and the CFPB might do with Regulation F if and when he is confirmed, Pahl predicted that the regulator will likely leave the rule as is and not rescind it. Rather, he said, it is more likely that the CFPB would issue an additional rulemaking to amend the provisions of Regulation F that they deem need to be changed. The most likely areas would be amending the limits on call frequency to include other forms of communication, like email and text messaging, provisions surrounding collecting from individuals with Limited English Proficiency, requirements for creditors, and dealing with time-barred debt.

“I don’t think [the regulation] will be rescinded,” Pahl said during his remarks before a packed ballroom. “It took more than seven years to get to this point. A complete rescission would be throwing out the baby with the bathwater.”

Pahl likened a CFPB run by Chopra to a “Cordray 2.0” version of the CFPB, referring to former Director Richard Cordray, who resigned from the post in 2017. That would likely mean a CFPB that is going to be “much more aggressive” and maybe even more aggressive than it was under Cordray in going after companies in the ARM industry that are deemed to be violating laws and rules.

“Based on my 30 years in public service, we are likely to see one of the largest shifts in policy we have seen during my tenure,” Pahl said.

Pahl did note that the CFPB will have many priorities if and when Chopra is confirmed, and that may also be a reason why the Bureau will not choose to fully rescind the debt collection rule. Pahl offered the following advice to help companies get ready for the rule’s enactment.

“Until the public hears otherwise, the industry should focus on being as ready as possible to comply with Regulation F,” he said. Companies should “consult closely with all compliance materials,” and he specifically mentioned the Small Entity Guide the CFPB published to help smaller companies comply with the rule. Pahl also encouraged the industry to use the CFPB’s Regulatory Guidance Implementation Helpline. Citing Ronald Reagan’s comment that “I’m from the government and I’m here to help” as the most dangerous words in the English language, Pahl said the helpline is the exception to that rule. Pahl’s final instruction was to make sure that companies document the problems and excessive costs when complying with Regulation F. Doing so can help with future rulemakings, he said.

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