CFPB Opts to Split Debt Collection Rulemaking Process
On July 28, 2016, the Consumer Financial Protection Bureau ("CFPB") released a partial outline of debt collection proposals under consideration ("Proposals"), focusing on the third-party debt collection industry. Despite the CFPB's initial focus, the Proposals have clear implications for banks and other first party creditors.
The CFPB issued its Advanced Notice of Proposed Rulemaking ("ANPR") for debt collection in November 2013. In seeking information about both first- and third-party collection issues, the CFPB indicated that it would be conducting a rulemaking under its authority to prevent unfair, deceptive or abusive acts or practices ("UDAAP") under Title X of the Dodd-Frank Act and the Federal Debt Collection Practices Act ("FDCPA"). This approach will enable the CFPB to regulate the debt collection activities of banks and other first-party creditors (that are generally not covered by the FDCPA, but would be covered by the CFPB's UDAAP authority) and debt collectors subject to the FDCPA. In a move unexpected by many agency observers, the Proposals, which were released in advance of a field hearing on debt collection in Sacramento, California, included only those proposals the CFPB is considering that would affect third-party debt collectors and others covered by the FDCPA. The CFPB reportedly expects to release another set of proposals that would apply to first-party creditors and collectors not subject to the FDCPA in the next several months, which would be under consideration pursuant to the CFPB's UDAAP authority.
By withholding those proposals under consideration that would cover first-party creditors and collectors, the CFPB is requesting industry participants to comment on the Proposals without fully understanding how the agency intends to regulate the role of banks and other first-party creditors when: (1) collecting debt in-house, (2) placing debt with collection agencies or collection law firms, or (3) offloading the debt to debt buyers. Thus, the industry must evaluate the Proposals without the benefit of insight into how the other part of the CFPB's debt collection proposals, which will be based solely on its UDAAP authority, would be integrated or how the yet-to-be released proposals would operate within the agency's oversight of the debt collection industry.
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