Comments show the need for more clarity on the bureau’s ability to preempt existing state laws and suggest modifications to the proposal. ACA members also responded to the proposal.
8/10/2020 15:30
ACA International is advocating for updates to the Consumer Financial Protection Bureau’s Supplemental Notice of Proposed Rulemaking (SNPRM) on out-of-statute debt with the goal to minimize the risk of negative consequences for collectors and consumers.
The proposed updates are outlined in ACA’s comments to the CFPB on the SNPRM filed Aug. 4, 2020.
The bureau announced additional proposed disclosure requirements for out-of-statute debt in the SNPRM released in February 2020.
The SNPRM supplements the bureau’s May 2019 proposed rule on debt collection practices. The new proposal would impose disclosure requirements with respect to out-of-statute debt and provides model language and forms that debt collectors could use to comply with the proposed disclosure requirements.
ACA also provided comments on the bureau’s Notice of Proposed Rulemaking to implement changes to the Fair Debt Collection Practices Act on Sept. 17, 2019, and incorporates those comments by reference into the out-of-statute debt comments.
“ACA welcomes the bureau’s acknowledgment that the current state of the law is unclear, with varying requirements among jurisdictions across the country that cause confusion to collectors and consumers, and generates ongoing, wasteful litigation,” said CEO Mark Neeb and Vice President and Senior Counsel of Federal Advocacy Leah Dempsey in the out-of-statute debt comments. “ACA also appreciates the bureau’s effort to propose alternatives that would clarify what is required in satisfying the FDCPA’s obligations with respect to out-of-statute debt.”
However, ACA is concerned that the SNPRM may result in a new layer of obligations for the accounts receivable management industry as well as a continued lack of clarity and litigation unless the CFPB is able to preempt existing state laws and the accumulation of court decisions interpreting these requirements.
“ACA therefore does not support the bureau’s proposed rule. Alternatively, it believes that additional regulatory requirements in this area are more likely to make matters worse rather than better while imposing new burdens and onerous requirements on the regulated community,” Neeb and Dempsey said.
ACA also offers several suggestions to modify the proposal if the bureau decides to establish new requirements with respect to out-of-statute debt:
- ACA urges the bureau to withdraw its SNPRM and focus on previously identified outdated sections of the FDCPA to align with its mission to ensure that consumers have access to markets for consumer financial products and services that are fair, transparent and competitive.
- ACA appreciates the bureau’s consideration of a standard of knowledge requirement, as opposed to the type of strict liability standard more appropriate for criminal law and intentional tort cases. State laws prohibit the provision of legal advice by non-lawyers, and the bureau may not impose such an obligation on non-lawyer collectors. To ensure compliance with these laws, any new set of requirements must include a warning that the collector is not providing legal advice.
- The model disclosures and forms, while well-intentioned and appropriately tied to a safe harbor for collectors who use them, offer too many options to be effective. A better approach would be for the CFPB rule to select a single disclosure, based on an existing state or city model, for use as a safe harbor. ACA provided a sample disclosure in its comments, or recommend the bureau adopt New York City’s language on disclosures.
- ACA has serious concerns about requiring an oral disclosure and the bureau should consider clarifying that one is not required. Given the high potential for litigation in this context, the final rule must provide clear guidelines and a safe harbor for oral disclosures.
Read ACA’s complete comments on the SNPRM here.
What ACA Members Are Saying
In all, the bureau received 89 comments on the SNPRM.
Here are some ACA members’ reactions to the proposal submitted through the Federal Register:
“In the supplemental NPRM, the bureau proposed disclosure language on reviving debt that would be confusing and misleading to many consumers. The bureau’s stated intent behind the proposed disclosure is to clarify for consumers that, in some states, collectors are legally allowed to sue on debt past the limitations period if the consumer makes a payment or acknowledges the debt. Without such a disclosure, the bureau expressed concern is that consumers will make a payment or acknowledgement on a time-barred debt, and unwittingly revive the debt collector’s ability to sue that consumer. While well-intended, the bureau’s proposed disclosure addresses one problem by creating another problem. For consumers who live in a state that does not allow for revival, or for consumers working with a debt collector whose policy is to not revive the limitations period on time-barred debt, the proposed revival disclosure creates a significant likelihood of confusion and misinformation.”
-Tamar Yudenfreund, senior director, public policy of Encore Capital Group Inc., on behalf of Encore Capital Group Inc. and its subsidiaries, including Midland Credit Management Inc.
“PRA submitted comments to the NPRM on September 18, 2019. In those comments, PRA indicated it supports adoption of a disclosure that informs consumers that because of the age of the consumer’s debt, the debt collector will not sue the consumer to recover the debt. As PRA stated in its previous comments, as a result of the bureau’s enforcement actions, the major debt buyers in the industry include time-barred debt disclosures in communications involving a debt where the statute of limitations has lapsed. Requiring all industry participants to include such a disclosure is an opportunity for the bureau to ‘level the playing field and ensure that certain participants are not competitively disadvantaged as a result of a higher compliance standard. Additionally, given the increasing number of states that are enacting legislation requiring time-barred debt disclosures, a specific disclosure from the bureau, which serves as a safe harbor, facilitates adoption of a national standard and reduces complexity and confusion associated with multiple state variations. For these reasons, PRA appreciates the SNPRM and the bureau’s attempt to provide guidance to the industry on this issue. We are pleased to have the opportunity to provide our response to the bureau’s request for comments. As discussed in more detail below, PRA proposes revisions or clarifications to the SNPRM in support of a uniform compliance standard, which serves to enhance consumer protections while promoting fairness in the market.”
-Elizabeth Kersey, vice president of communications and public policy, Portfolio Recovery Associates LLC.
“The requirement to disclose to consumers that their account is beyond the applicable statute of limitations has long been a topic of debate. Regardless of the position one takes on the topic, it is abundantly clear that legitimate collection agencies continue to pine, regardless of the topic or legal issue, for clarity. In this sense, a well-reasoned and well-written rule will likely be well received by the industry. In addition to the desire for clarity, legitimate collection agencies welcome the notions of model language and safe harbor. In this regard, the proposed rules are well-positioned to achieve their intended outcome: enhanced consumer protections as well as bright-line rules for legitimate agencies to follow. Several points of discussion remain unclear, however, and Capio [Partners] welcomes the opportunity to submit these comments for the bureau's consideration. The penultimate issue is the form and content of the disclosures, which present questions as the federal disclosures themselves relate to the underlying state laws triggering which disclosures are to be utilized. Of paramount importance is first understanding which statute of limitations is to be used and then determining when it expires.”
-Robert Ridgeway, attorney, Law Offices of Mitchell D. Bluhm, on behalf of Capio Partners.
“I write today to ask the CFPB to accelerate its NPRM and swiftly push the industry to rely predominantly on digital communications for the purpose of debt collection. We need to continue to communicate with consumers through their channel of choice, in a non-intrusive manner, allowing them to easily manage their finances while controlling who they want to interact with. We need to continue to allow them to access their accounts and make adjustments to fit their personal circumstances. Through this last week consumers have continued to set up customized payment plans on a daily basis, at a rate comparable to pre-tax season behavior. These are consumers acting on their own, responding to our low-frequency digital contact efforts. Finances aren’t one-size-fits-all, and a digitally native collection service supports this variety even in these trying times.”
-Ohad Samet, CEO of One True Holding Company and president of TrueAccord Corp.
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