CFPB Acting Director Asks Markets Group to Look into Pausing Debt Collection Rule

Acting CFPB Director Dave Uejio is making the rounds. Last week he shared a new direction with employees in the Supervision, Enforcement, and Fair Lending (SEFL) division. Yesterday, it was Research, Markets, and Regulations' (RMR) turn.  Last year, RMR released the seven-years-in-the-making Final Debt Collection Rule, which takes effect November 30, 2021. Uejio asked the group to explore options for preserving the status quo with respect to this rule, in order to provide the greatest possible flexibility for the incoming Director. 

Here is the full text of his letter to this group:

I want to convey my broad vision for the Division of Research, Markets, and Regulations (RMR) in the coming months, as I did for SEFL last week.

Before I do, there is one thing I want to make crystal clear. As I said last week, a change in policy direction is not a reflection on the quality of the work performed by Bureau staff over the past several years. Indeed, I have been continually impressed by the expertise and dedication of Bureau staff, not only in recent interactions, but since I joined the Bureau nearly a decade ago. Our task now is to direct that expertise squarely on the consumers this agency was created to serve, and to rededicate ourselves, once again, to the agency’s core mission.

As you know, my policy priorities for the CFPB are (1) relief for consumers facing hardship due to COVID-19 and the related economic crisis and (2) racial equity. I expect RMR’s work, as across the Bureau, to be centered on responding to those two crises with urgency and immediacy.

In doing so, we need to sharpen our focus on the consumer experience. We were as a nation too late and too slow to respond to the warning signs in the mortgage market just over a decade ago. Our agency now faces a test on whether we can, using all the tools Dodd-Frank gave us, forestall further similar economic and social catastrophes.

To be sure, we have, both individually and as a nation, suffered greatly from the pandemic already. But there is still time to course correct and prevent further lasting harm, particularly to the most economically vulnerable communities. That’s why I will rely on RMR’s rigorous, routine internal reporting on key market metrics like foreclosures, charge offs, auto loans, checking account closures, and more. These metrics will help us gauge the health of consumer finance markets and guide our focus. I will look to RMR for a robust research agenda that examines the impact of specific industry practices on consumers’ daily budget and overall bottom line in order to target effective policy interventions. I expect us to publish regular research reports addressing both COVID-19 and racial equity so that the public has the benefit of our high-quality analysis. Finally, I will be assessing regulatory actions taken by the previous leadership and adjusting as necessary and appropriate those not in line with our consumer protection mission and mandate.

Our work must be grounded in the best available data, market intelligence, and analysis. I expect us to make maximum use of the data available to us. To the extent the Bureau lacks access to data it needs, I will be authorizing use of our 1022(c)(4) data collection authority. Among the immediate steps I am asking RMR to take are the following:

• Prepare an analysis on housing insecurity, including mortgage foreclosures, mobile home repossessions, and landlord-tenant evictions;
• Prepare an analysis of the most pressing consumer finance barriers to racial equity to inform research and rulemaking priorities;
• Explicitly include in policy proposals the racial equity impact of the policy intervention; and
• Resume data collections paused at the beginning of the pandemic, including HMDA quarterly reporting and the CARD Act data collection, as well as the previously completed 1071 data collection and the ongoing PACE data collection.

I am also asking RMR to focus rulemaking on the pandemic response and to preserve, where possible, maximum policy flexibility for the president’s nominee once confirmed. To that end, I have asked RMR to:

• Focus the mortgage servicing rulemaking on pandemic response to avert, to the extent possible, a foreclosure crisis when the COVID-19 forbearances end in March and April; and
• Explore options for preserving the status quo with respect to QM and debt collection rules.

In addition to the sharpened consumer focus, I want to make sure that we are doing all we can for the small businesses across the country that are on the brink of extinction. The Bureau enforces critical laws that protect small business owners, including from harmful discrimination, in their access to and use of credit. I have pledged RMR the support it needs to implement section 1071 of the Dodd-Frank Act without delay.

Our focus is and should be preventing harm, particularly to the most vulnerable among us. Doing this great work—of ensuring competitive, transparent, and fair markets for everyone, as mandated by the Dodd-Frank Act—will take all of us working together. I know you are up to the task, and I am grateful to have the chance to do this work together.

Best,
Acting Director Uejio

insideARM Perspective

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I do not have a crystal ball.  Nobody knows exactly what Director Chopra, assuming he is confirmed for the job, will be inclined to do with the Regulation F (the debt collection rule). It's not a perfect rule from anyone's perspective -- industry or consumer advocates. Which means it's probably a good place to start.

Advocates claim that, as drafted, this rule will open the floodgates for unwanted digital communications. If one reads the fine print, of which there is a lot, one will realize that a company needs to twist itself into a pretzel to actually take advantage of "modern" channels like email and text. What's also true is that, unlike the phone channel, there are restrictions inherently built into the digital communications infrastructure that severely limit good actors from pursuing bad practices. For instance, if one sends a high volume of emails that are consistently unopened or tagged by recipients as spam, the sender will be quickly cut-off by email service providers, rendering the channel basically useless for that sender.

Everyone wants the rules to protect consumers. What nobody should want is for the rules to disproportionately enable bad actors (who, by definition, exploit but don't follow the rules) while inhibiting good actors (who count on compliance for maintaining their reputation and their business).