CFPB Seeks More Information To Support Rulemaking

Stephanie Eidelman

In a seemingly endless debt collection pre-rulemaking process, John McNamara from the Consumer Financial Protection Bureau’s (CFPB) Division of Research Markets & Regulations has circulated a questionnaire with approximately 60 questions to a random sample of debt collection firms and service providers. This is part of the so far nearly two-year debt collection rulemaking process.

A cover letter describes the scope and intent of the survey but to summarize, the Bureau is “attempting to better understand the benefits and costs of various policy proposals.” They predict it will take approximately 60 minutes to complete the survey.

High level topics covered include:

• Employees
• % of Net Revenue by debt type
• Age of debt collected
• Do you own the debt you collect?
• Number of accounts placed with you last year
• Accounts in inventory
• Face value of accounts in inventory
• Accounts in active collection last month
• Maintaining and using account information
• Calling consumers
• Written communications
• Disputes
• Payments and charges
• Skip tracing and otherwise supplementing account information
• Furnishing data to credit bureaus
• Litigation
• Compliance topics
• Other significant operational costs

The letter stresses that the process is voluntary, and that non-response will in no way affect the Bureau’s view of the firm, and will not be used for supervisory or enforcement purposes. It also describes the confidentiality of the program and the fact that institutions will not be identified.

In February 2014 the Bureau received thousands of responses to its Advance Notice of Proposed Rulemaking (ANPR), which included 162 questions. The ensuing months have included many meetings in many forums with many industry groups to try to put the comments in perspective and gain a better understanding of the complex debt industry.

The likely next formal step in the process is for the CFPB to convene a SBREFA panel.

Under SBREFA, when developing rules that may have a significant economic impact on a substantial number of small businesses, the CFPB, in conjunction with the Small Business Administration (SBA) and the Office of Management and Budget (OMB), is required to form a Review Panel to obtain input from a group of small business representatives. The Panel is selected by the CFPB in consultation with the SBA.

The Panel then meets with the selected group of representatives from small business (Small Entity Representatives or SERs). The SERs provide the Panel with feedback on the potential economic impacts of complying with any proposed regulations.

No timeline has been announced for the SBREFA panel but based on past experience, it seems that the process includes an announcement of the panel, followed approximately 30 days later by the panel convening, and then 45 days for the panel to report its opinions to the Bureau.

insideARM Perspective

There is not a specific timeline to get from where rulemaking is today to a final debt collection rule, but Bureau representatives have said one might look to other complex CFPB rulemaking agendas for guidance. In the case of Mortgage Regulations X and Z, this was a multi-year process of pre-rule activities, followed by a few years of tweaks to the initially “final” rules.

Based on my own interactions with the Bureau, it’s clear that the team has found the industry to be more complicated than originally expected, and true data that helps to paint the situation as black or white is either non-existent or very hard to come by. So in my opinion, the continuing process of asking questions is in an effort to gather enough qualitative information to draw conclusions that are in any possible way rooted in “science.” 

In this particular case, I have gathered that the Bureau has gleaned what they can from the primarily group-based aggregated responses to the ANPR, and they are now looking to hear directly from individual companies, especially including smaller firms, and firms that collect a range of debt types. This is important, as many in the industry have pointed out, operational tactics such as call volume or letters have different effectiveness with different debt and balance types.

While responding to repeated and/or detailed requests for information may seem too time-consuming to address amidst client and other demands, this is an opportunity to speak directly to the Bureau. For those firms who have been invited to participate, I’d suggest taking your seat at the table.