Are Debt Collectors Missing a Chance to be "Inside" the CFPB?

Stephanie Eidelman

The Washington Post yesterday ran a fascinating front page article by Robert Kaiser titled “The Secret Handshake that Foiled the Banking Lobby.” The article tells the story of how a handshake deal between Rep. Barney Frank (D-Mass.) and Camden Fine, head of the Independent Community Bankers of America (ICBA), is what really paved the way for the existence of the Consumer Financial Protection Bureau (CFPB).

I found this so interesting for a number of reasons; primarily, because I had recently noticed that the CFPB has three formal Advisory Boards. One is the Consumer Advisory Board; this certainly makes sense. The others are the Community Bank Advisory Council and the Credit Union Advisory Council. I had wondered why, among all of the financial services that the CFPB oversees, the community banks were singled out to have a formal advisory body. After reading Kaiser’s article in the Post, I understand.

Back in 2009 when lawmakers were pushing for financial regulatory overhaul, Barney Frank knew that the big banks would vehemently oppose new government oversight. And, indeed, he saw even his Democrat peers beginning to succumb to the overwhelming lobbying effort on the part of big banks. He needed an ally who could sway his Congressional colleagues in spite of the lobbying power of the American Bankers Association. He found that in the ICBA, with 5,300 members who represented “Main Street” across the country. The agreement they came to was a brilliant strategy – both by Rep. Frank, and by the ICBA’s Fine.

The independent debt collection industry has a similar number of entities – approximately 5,000, give or take. Debt collectors average a similar number of employees per company as community banks (20-30, according to the article). And just like the small banks, they are in every state in the country and are constituents of every Congressperson.

Collection agencies, like community banks, provide a really important service to the local and national economy. Yet clearly the community bankers are on the “inside.” Debt collectors are not.

How can the debt collection industry leverage these similarities to have a similar voice within the CFPB?

Is this even possible? Can the ARM industry ever position itself to be heard by people that control its regulation? In short, yes, because it’s happened before.

When the IRS was battling to keep its private debt collection program going, there were lawmakers that championed the program, most notably Senators Charles Grassley (R-Iowa) and Max Baucus (D-Mont.). And Rep. Frank himself introduced collector-friendly legislation last year after industry lobbying efforts.

So there is precedent. Now the ARM industry must decide how to approach regulators and lawmakers. Does anyone have a suggestion? Please reply in the comments below.