Collection experts dissect CFPB’s latest proposal
While BillingTree offered some first-hand assessments from attendees who were in Sacramento, Calif., for the Consumer Financial Protection Bureau’s field hearing after the agency released its debt collection regulatory proposal, SubPrime Auto Finance News also connected with a current member of the CFPB’s consumer advisory board to gather perspective on the implications on auto financing.
While the CFPB acknowledged it plans to “address first-party debt collectors soon, but on a separate track,” Joann Needleman explained there is plenty of material contained with the bureau’s rule proposal that finance companies should watch.
“I would tell any client who was an indirect lender who either collected their own debt or sent it out to somebody else, if you didn’t have policies and procedures and compliance systems in place within your entity, you are way behind the eight ball. You certainly have to do that. If you haven’t done it, then you need to do it now,” said Needleman, a partner at Clark Hill and leader of Clark Hill’s consumer financial services regulatory and compliance group.
Neeedleman, the immediate past president of the board of directors of the National Creditors Bar Association, has extensive litigation experience in state and federal courts, successfully defending creditors against claims brought under the Fair Debt Collection Practices Act and Fair Credit Reporting Act as well as state statutes. She provides counsel, consultation and litigation services to financial institutions, law firms and debt buyers throughout the country.
During a conversation Friday afternoon, Neeedleman elaborated on the position finance companies now have if they’ve deployed policies, procedures and compliance systems with regard to collecting on delinquencies or in connection with deficiencies if repossessions and recoveries are in motion.
“If you do have established procedures and policies in place, I think the proposal is a really good outline for you to tweak that infrastructure,” she said. “Ultimately in the proposed rules there may be some tweaks and changes, but I think the CFPB has given you a very clear hint of what are their priorities, what they ultimately would like to see, and I would strongly suggest that any auto finance company ensure those policies are procedures meet the CFPB’s objectives.
“There may be different ways to get from point A to point B,” Neeedleman continued. “But I think at the end of the day, if you’re ensuring that consumers are protected and you’re providing information to consumers when they need it, there are opportunities that when consumers have concerns you address them and you monitor your frequency when you communicate with consumers, I think you’re going to be fine.
“Then when the (first-party) rules come out, you’re not going to have to blow everything up and start again,” she went on to say.
Executives from BillingTree were part of the industry members keenly interested in what the CFPB proposed, which can be viewed here. In a blog post relayed to SubPrime Auto Finance News, BillingTree made three observations:
—The in-person audience was a mix of collection agency representatives, debt buyer representatives, attorneys, consumer advocacy groups, media and government staff.
—The mood of the hearing was civil; however, it was clear there were some who were pleased with the proposals and others who see them as potentially having a detrimental impact to their well-being.
—One commonality evident from those who spoke was the desire for clarity and definition of rules.
BillingTree then hosted a reception after the CFPB’s field hearing and collected more thoughts from attendees. Among some of the highlights:
—Everyone in attendance shared the same core values — treating consumers with dignity and ensuring compliance with the law.
—Use of automatic dialing systems and adopting technology today needs to happen.
—Collectors are professional. Criminals are the scammers. The two are not the same.
The attendee reference about automatic dialing systems touched on the segment about collections that Needleman described as the “game changer.” So much communication technology has become commonplace and simply didn’t exist when the when the Fair Debt Collection Practices Act was enacted in 1977. Needleman called it “disappointing” that technology was not addressed in more detail within the CFPB proposal that she was still reviewing when SubPrime Auto Finance News connected with her.
“Back in 1977, we had rotary phones, and that’s it. No Internet. No email. No text. No portals. No voicemail. The act does need to be modernized, and I think the regulators see that,” Needleman said.
“For whatever reason when the Fair Debt Collection Practices Act was enacted in 1977, Congress did not give the (Federal Trade Commission), which was the agency that had primary jurisdiction over the FDCPA, any rulemaking authority,” Needleman pointed out earlier in the conversation. “The industry has been forced to build compliance based on their own interpretation of the statute or interpretation by the courts, which has made it very difficult.
“I think in some ways the industry is kind of happy from a very high-level perspective that we will have rules and there will be bright-line ways of doing things. Again, the debate will be 'is what the CFPB proposing workable?'” she added.
Neeedleman mentioned it took the CFPB about three years to get to the rule-proposal stage. The customary comment period is now underway and organizations such as the American Financial Services Association, the Consumer Bankers Association, ACA International and DBA International are likely to respond with recommendations.
“From the industry perspective, I don’t think it was blindsided by these rules,” Needleman said. “People in the collection industry no matter what market you’re involved in, have pretty much been prepared and rules were coming.”