CFPB Releases Outline of Proposals to Overhaul Debt Collection

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By William J. Denius

In late July, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) released its outline of proposals which – according to the Bureau – “would drastically overhaul…debt collection…” The proposals under consideration would apply to small entities acquiring debts in default (collection agencies, debt buyers, collection law firms and loan servicers). In other words and as stated at the July 28, 2016 Field Hearing on Debt Collection in Sacramento, California (“Field Hearing”), the “rules would apply to third-party debt collectors and to others covered by the Fair Debt Collection Practices Act.” And while these particular rules would not apply to the traditional auto creditor taking assignment of retail installment contracts at origination, or later acquiring contracts not in default; the CFPB notably “expects to convene a second proceeding for creditors and others engaged in collection activity who are covered persons under the Dodd-Frank Act but who may not be ‘debt collectors’ under the FDCPA.” As part of the CFPB’s overhaul, the Bureau “also plan[s] to address first-party debt collectors soon, but on a separate track.” The CFPB’s plan to address first-party collectors – those who collect their own debts – was made clear at the very outset of the Field Hearing when Director Richard Cordray opened by noting that California’s own version of the Fair Debt Collection Practices Act generally applies “to first-party creditors as well as third-party contract collectors, a premise we will be considering carefully ourselves as we proceed.” Because the CFPB has signaled that its proposals may very well end up applying to third-party and first-party creditors alike, auto creditors should pay close attention to the Bureau’s current outline of proposals.

Also at the inception of the Field Hearing, Director Cordray continued: “today, we continue to hear about serious problems with debt collection” including “calling at all hours of the day or night.” Notably, the Bureau’s separate press release regarding the proposals begins by announcing that the “New Protections Would Limit Collector Contact.” The press release further announced that the new protections would also “help…ensure that companies collect the correct debt.” Because auto creditors frequently find themselves in the crosshairs of claims, lawsuits and actions alleging excessive contacts – an area of the law that has historically lacked clarity – this article focuses on the specific contact limitations proposed by the CFPB.

The CFPB is considering proposing regulations that would, first and foremost, limit contact with consumers; and secondly limit contact with third parties. With regards to the limitations on contacts with both consumers and third parties, the Bureau’s outline of proposals limits contacts “per account per week” and breaks down the limitations into two main categories: one where the collector has “confirmed consumer contact,” and the other where the collector has not. The Bureau reasons that once the collector has reached the consumer and confirmed that certain contact information is effective, the collector will know how best to reach the consumer and need not attempt to initiate contact as frequently. “Confirmed consumer contact” specifically exists once any collector (whether the current collector or a prior one) has communicated with the consumer about the debt, and the consumer has answered when contacted that he or she is the debtor. The limitations on contacts with both consumers and third parties are further broken down into three main subcategories: 1) contact attempts per unique address or phone number; 2) total contact attempts; and 3) live communications. The CFPB is specifically considering limiting contact as set forth in the following charts:

Permissible Number of Consumer Contacts (or Contact Attempts) Per Account Per Week

Collector ActivityNo Confirmed Consumer ContactConfirmed Consumer Contact
Attempts per unique address or phone number32
Total contact attempts63
Live communicationsN/A1

Permissible Number of Location Contacts (or Contact Attempts) Per Third Party and Per Account Per Week

Collector ActivityNo Confirmed Consumer ContactConfirmed Consumer Contact
Attempts per unique address or phone number30
Total contact attempts60
Live communications (total, not weekly)10

As noted above, the proposals “would drastically overhaul…debt collection.” A review of the contact limitations above makes this point clear. As set forth in the charts above, even when a collector has previously “confirmed consumer contact,” the collector would only be able to actually speak with the consumer once per week; would only be able to attempt to contact the consumer a total of 3 times per week; and would not be able to attempt to contact third parties at all. And where the collector has not previously “confirmed consumer contact” with a consumer, the collector may only attempt to contact the consumer a total of 6 times per week; may only attempt to contact a third party a total of 6 times per week; and may only actually speak with a third party once, period. The Bureau also notes that it is considering whether a consumer could consent to a greater frequency when the collector has confirmed consumer contact. Regardless, the limitations under consideration are – in the CFPB’s own words – drastic.

The Bureau is also considering categorizing the following as presumptively inconvenient places to communicate with consumers: (1) medical facilities/places of treatment of serious medical conditions; (2) places of worship; (3) places of burial or grieving; and (4) daycare or childcare facilities. On the flip side, the Bureau is not currently contemplating proposing the consumer’s workplace as a presumptively inconvenient place because “it could…result in only permitting contact attempts during relatively brief periods before and after work at consumers’ homes.” The Bureau is, however, considering proposals that would generally prohibit collectors from using a consumer’s workplace email for debt collection communications.

This article, again, focuses on the aforementioned specific contact limitations currently under consideration by the CFPB. Notably, the Bureau’s outline of proposals under consideration also cover a wide variety of other debt collection topics not covered here, including but not limited to protections to help ensure the correct debt is collected, disclosure requirements and collecting on decedent debt. The outline of proposals may be found at:

http://files.consumerfinance.gov/f/documents/Outline_of_proposals_under_consideration_and_alternatives_considered_embargoed.pdf

William J. Denius is a Shareholder with the law firm of Killgore, Pearlman, Stamp, Denius & Squires, P.A. in Orlando, Florida. Mr. Denius can be reached at 407-425-1020 or via email at wjdenius@kpsds.com. This article is provided for informational purposes and is not intended nor should it be taken as legal advice.