CFPB’s Seventh Annual Report to Congress Focuses on Partnership with FTC

The agencies are working on efforts to stop unlawful debt collection practices, to implement research and to collaborate on rulemaking. ACA International strongly supports their efforts to target bad actors involved with practices that harm consumers and legitimate businesses and continues to engage with the regulators to make the industry’s voice heard.

3/23/2018 12:00 PM

NewsCFPB
CFPB’s Seventh Annual Report to Congress Focuses on Partnership with FTC

The Consumer Financial Protection Bureau has released its seventh annual report to Congress on administration of the Fair Debt Collection Practices Act, this time detailing its partnership with the Federal Trade Commission on enforcement, research and rulemaking.

The report details efforts to stop unlawful debt collection practices, including through law enforcement, education and public outreach and policy initiatives.

“From now on, we will be working closely with the FTC to enforce the FDCPA while protecting the legal rights of all in a manner that is efficient, effective and accountable,” CFPB Acting Director Mick Mulvaney said in a news release.

ACA International endorses the efforts of the CFPB and the FTC to target bad actors who engage in unlawful debt collection practices that harm consumers and legitimate debt collectors.

“ACA supports strong enforcement of collection laws in order to protect consumers from egregious debt collection practices, as well as to protect the reputation of legitimate debt collectors who are committed to compliance with myriad federal and state debt collection laws,” said CEO Mark Neeb.

Like previous versions, the report is comprehensive, touching on a multitude of debt collection-related efforts and initiatives that occurred in the last year.

“The FTC will remain vigilant in our efforts to monitor this industry and stop unlawful conduct that harms both consumers and legitimate businesses and will continue to work with our law enforcement partners, including the CFPB, on this important issue,” FTC Acting Chairman Maureen K. Ohlhausen said in the news release.

In addition to discussing the CFPB and FTC’s debt collection research and rulemaking activities, the report provides background on the debt collection market, an overview of consumer complaints, supervisory activities, enforcement actions, consumer education and outreach.

“At the bureau, our priority is to ensure free markets, innovation, and consumer choice by enforcing the law with consistency, prudence and humility. We remain committed to the execution of our responsibilities under all consumer financial laws within our statutory authority, including the FDCPA, and to educating and empowering consumers to make better informed financial decisions,” Mulvaney said in his introduction to the report. “Going forward, we want to enforce the FDCPA as written while protecting the legal rights of all in a manner that is efficient, effective and accountable.”

ACA International fully supports Acting Director Mulvaney’s commitment to tie enforcement with the actual language found in the FDCPA statute and welcomes his vision for a more restrained, statutory-bound CFPB. At the same time, given the failure of the FDCPA to keep pace with technological advancements since it was enacted in 1977, ACA continues to urge the CFPB to move forward with adopting much-needed clarifications to the FDCPA to enhance the consumer experience while at the same time protecting professional debt collectors from frivolous lawsuits.

Debt Collection Research and Rulemaking

In the report, Mulvaney stressed the CFPB is continuing its research projects to improve its understanding of the debt collection industry and its impact on consumers, notably its Survey of Consumer Views on Debt.

“These research and market monitoring activities have aided in the ongoing development of a potential debt collection rule,” Mulvaney said.

While ACA believes any potential debt collection rulemaking must be based on meaningful research and analysis, the CFPB’s debt collection research to date has been insufficient to inform new rules.

For example, the FDCPA report heavily focuses on the CFPB’s January 2017 report on findings from its survey on consumer experiences with debt collection as an example of research that can inform a potential rulemaking.

However, despite the CFPB’s repeated characterization of its consumer survey report as the “first comprehensive and nationally representative data on consumers’ experiences and preferences related to debt collection,” ACA has strongly criticized the report and the way the CFPB described its findings.

Specifically, in a white paper released in March 2017, “An Overview of the Analytical Flaws and Methodological Shortcomings of the CFPB's Survey of Consumer Experiences with Debt Collection,”  ACA asserted that the data obtained by the CFPB through the consumer survey is insufficient at best and fundamentally flawed at worst. Furthermore, the CFPB's report failed to provide critical context for its findings or any clear analysis of the data. As a result, the survey data cannot be used as the basis to properly inform the Bureau’s debt collection rulemaking efforts.

The report also cites research presented by CFPB economists that “found no effect of the state laws on credit card interest rates but found that the new restrictions on debt collection in these states reduced, by a very small magnitude, access to credit cards and credit limits on average.” Specifically noting that while new restrictions on debt collection were most likely to impact subprime borrowers, the effect of these restrictions “is equivalent to an error that lowers consumers' credit scores by eight points or less.”

The report once again fails to account for limitations of this research. This analysis was limited to four separate debt collection restrictions across four states, a severe limitation, both in sample size as well as the universe of regulatory restrictions. Additionally, credit card accounts are essentially treated as a proxy measure for access to consumer credit. This is an extremely limited understanding of both consumer credit and access to credit, particularly as it relates to the debt collection industry, and further reduces the generalizable nature of the research findings. Again, while ACA supports the CFPB in collecting data to better understand the industries it regulates that research must be more robust and representative before it can be used as the basis to properly inform the Bureau’s debt collection rulemaking efforts.

In addition, according to the report, the CFPB is continuing to engage stakeholders as it moves forward in developing a potential debt collection rule.  ACA is actively involved in this process, making clear it supports well-reasoned debt collection rules to bring balance and clarity to the marketplace.

Supervision and Enforcement Activities

The CFPB reports it found a number of actions deemed to be violations of the FDCPA through its supervisory examinations in 2017.

According to the report, the CFPB announced four new law enforcement actions in 2017 related to unlawful collection conduct in violation of the FDCPA. The CFPB continues to be involved in active litigation on one FDCPA matter filed in 2015 and one filed in 2016.

In addition, based on its authority to review activity at firms with more than $10 million in annual receipts from consumer debt collection activities, the CFPB found a number of FDCPA violations in 2017 through its supervision of debt collection companies.

The report notes violations related to impermissible communications with third parties, the use of false representations or deceptive means to collect or attempt to collect any debt and communicating with consumers at a time known to be inconvenient.

However, as is true with the CFPB's Supervisory Highlight reports, while this type of information is useful as a reminder to agencies to ensure their practices are compliant, without more information about the context or frequency of these violations, it is difficult to have a real understanding of the magnitude of these issues. 

The bureau resolved one FDCPA enforcement case in 2017, and five others remain pending. The bureau also filed briefs as amicus curiae in two cases in the federal courts of appeals arising under the FDCPA.

The FTC also completed enforcement actions using its authority under the FDCPA and FTC Act in 2017. From Jan. 1 through Dec. 31, 2017, the FTC filed or resolved 10 cases against 42 defendants and obtained more than $64 million in judgments. It also banned 13 companies and individuals who “engaged in serious and repeated violations of law from ever working in debt collection again.”

In many of these cases, the companies and individuals engaged in egregious “phantom” debt collection practices or impersonated legitimate small businesses and debt collection companies. These egregious practices do not reflect the compliance-focused legitimate debt collection industry and, as such, cause substantial harm to both consumers and the professional debt collection industry as a whole.

As a result, ACA commends the FTC and CFPB for using its enforcement authority to stop the intolerable practices of fraudulent debt collection schemes and highlighting the distinction between these scammers and legitimate debt collection businesses. ACA looks forward to continuing to work with the CFPB and the FTC to continue to rid the marketplace of bad actors that have no intention of complying with the law.

Consumer Complaints to the CFPB

In 2017, the bureau handled approximately 84,500 debt collection complaints, according to the report.

From Jan. 1, 2017 through Dec. 31, 2017, the CFPB sent approximately 48,800 (58 percent) of the 84,500 debt collection complaints it handled during that time to companies for review and response.

Collection agencies continue to respond to and resolve complaints effectively and efficiently. According to the CFPB report, companies responded to 92 percent of the approximately 48,800 complaints they received for response.

Remaining complaints were sent to other regulatory agencies, found to be incomplete or are pending with the consumer or CFPB.

The report notes that a majority of consumers submit complaints that the debt is not their debt (57 percent) or that it was paid (27 percent.) The remaining consumers report that the debt is the result of identity theft (11 percent) or was discharged in bankruptcy and no longer owed (5 percent.)

“In response to many of these complaints, third-party collectors close and return the account to their clients or provide the consumer with additional information about the account,” according to the report.

While the CFPB report reflects companies’ timely and comprehensive responses to complaints, the broad definition and characterization of complaints fails to reflect that they represent a small percentage of consumer contacts made by the debt collection industry.

In January, ACA International released a white paper, “A Review of Debt Collection Complaints Submitted to the Consumer Financial Protection Bureau’s Complaint Database in 2017,” which provides an analysis of the quantitative data on debt collection complaints available from the CFPB’s consumer complaints database. The findings indicate that while the overall raw number of complaint submissions appears high for the debt collection industry, once the data have been properly contextualized, the number of consumer complaints is remarkably low, despite the CFPB’s overly broad characterization of what constitutes a complaint.

Notably, ACA found that the total number of debt collection complaints received by the CFPB represents an incredibly small number of consumers (0.005 percent) who had contact with the debt collection industry during 2017 and are remarkably consistent with other financial services industries. Further, the complaints account for only 0.06 percent of all Americans estimated to have a debt in collection.

The activities of the CFPB and FTC related to the FDCPA are central to the members of ACA International. It is therefore crucial that debt collection regulation, supervision and enforcement is done in a fair and transparent manner. ACA will continue to advocate on behalf of the credit and collection industry to ensure that federal regulators act in a well-reasoned and evidence-based way when engaging in efforts that impact the debt collection market. 


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org. Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse.

Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training page to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Subscribe to ACA Daily NEWSROOM

CFPB’s Seventh Annual Report to Congress Focuses on Partnership with FTC

The Consumer Financial Protection Bureau has released its seventh annual report to Congress on administration of the Fair Debt Collection Practices Act, this time detailing its partnership with the Federal Trade Commission on enforcement, research and rulemaking.

The report details efforts to stop unlawful debt collection practices, including through law enforcement, education and public outreach and policy initiatives.

“From now on, we will be working closely with the FTC to enforce the FDCPA while protecting the legal rights of all in a manner that is efficient, effective and accountable,” CFPB Acting Director Mick Mulvaney said in a news release.

ACA International endorses the efforts of the CFPB and the FTC to target bad actors who engage in unlawful debt collection practices that harm consumers and legitimate debt collectors.

“ACA supports strong enforcement of collection laws in order to protect consumers from egregious debt collection practices, as well as to protect the reputation of legitimate debt collectors who are committed to compliance with myriad federal and state debt collection laws,” said CEO Mark Neeb.

Like previous versions, the report is comprehensive, touching on a multitude of debt collection-related efforts and initiatives that occurred in the last year.

“The FTC will remain vigilant in our efforts to monitor this industry and stop unlawful conduct that harms both consumers and legitimate businesses and will continue to work with our law enforcement partners, including the CFPB, on this important issue,” FTC Acting Chairman Maureen K. Ohlhausen said in the news release.

In addition to discussing the CFPB and FTC’s debt collection research and rulemaking activities, the report provides background on the debt collection market, an overview of consumer complaints, supervisory activities, enforcement actions, consumer education and outreach.

“At the bureau, our priority is to ensure free markets, innovation, and consumer choice by enforcing the law with consistency, prudence and humility. We remain committed to the execution of our responsibilities under all consumer financial laws within our statutory authority, including the FDCPA, and to educating and empowering consumers to make better informed financial decisions,” Mulvaney said in his introduction to the report. “Going forward, we want to enforce the FDCPA as written while protecting the legal rights of all in a manner that is efficient, effective and accountable.”

ACA International fully supports Acting Director Mulvaney’s commitment to tie enforcement with the actual language found in the FDCPA statute and welcomes his vision for a more restrained, statutory-bound CFPB. At the same time, given the failure of the FDCPA to keep pace with technological advancements since it was enacted in 1977, ACA continues to urge the CFPB to move forward with adopting much-needed clarifications to the FDCPA to enhance the consumer experience while at the same time protecting professional debt collectors from frivolous lawsuits.

Debt Collection Research and Rulemaking

In the report, Mulvaney stressed the CFPB is continuing its research projects to improve its understanding of the debt collection industry and its impact on consumers, notably its Survey of Consumer Views on Debt.

“These research and market monitoring activities have aided in the ongoing development of a potential debt collection rule,” Mulvaney said.

While ACA believes any potential debt collection rulemaking must be based on meaningful research and analysis, the CFPB’s debt collection research to date has been insufficient to inform new rules.

For example, the FDCPA report heavily focuses on the CFPB’s January 2017 report on findings from its survey on consumer experiences with debt collection as an example of research that can inform a potential rulemaking.

However, despite the CFPB’s repeated characterization of its consumer survey report as the “first comprehensive and nationally representative data on consumers’ experiences and preferences related to debt collection,” ACA has strongly criticized the report and the way the CFPB described its findings.

Specifically, in a white paper released in March 2017, “An Overview of the Analytical Flaws and Methodological Shortcomings of the CFPB's Survey of Consumer Experiences with Debt Collection,”  ACA asserted that the data obtained by the CFPB through the consumer survey is insufficient at best and fundamentally flawed at worst. Furthermore, the CFPB's report failed to provide critical context for its findings or any clear analysis of the data. As a result, the survey data cannot be used as the basis to properly inform the Bureau’s debt collection rulemaking efforts.

The report also cites research presented by CFPB economists that “found no effect of the state laws on credit card interest rates but found that the new restrictions on debt collection in these states reduced, by a very small magnitude, access to credit cards and credit limits on average.” Specifically noting that while new restrictions on debt collection were most likely to impact subprime borrowers, the effect of these restrictions “is equivalent to an error that lowers consumers' credit scores by eight points or less.”

The report once again fails to account for limitations of this research. This analysis was limited to four separate debt collection restrictions across four states, a severe limitation, both in sample size as well as the universe of regulatory restrictions. Additionally, credit card accounts are essentially treated as a proxy measure for access to consumer credit. This is an extremely limited understanding of both consumer credit and access to credit, particularly as it relates to the debt collection industry, and further reduces the generalizable nature of the research findings. Again, while ACA supports the CFPB in collecting data to better understand the industries it regulates that research must be more robust and representative before it can be used as the basis to properly inform the Bureau’s debt collection rulemaking efforts.

In addition, according to the report, the CFPB is continuing to engage stakeholders as it moves forward in developing a potential debt collection rule.  ACA is actively involved in this process, making clear it supports well-reasoned debt collection rules to bring balance and clarity to the marketplace.

Supervision and Enforcement Activities

The CFPB reports it found a number of actions deemed to be violations of the FDCPA through its supervisory examinations in 2017.

According to the report, the CFPB announced four new law enforcement actions in 2017 related to unlawful collection conduct in violation of the FDCPA. The CFPB continues to be involved in active litigation on one FDCPA matter filed in 2015 and one filed in 2016.

In addition, based on its authority to review activity at firms with more than $10 million in annual receipts from consumer debt collection activities, the CFPB found a number of FDCPA violations in 2017 through its supervision of debt collection companies.

The report notes violations related to impermissible communications with third parties, the use of false representations or deceptive means to collect or attempt to collect any debt and communicating with consumers at a time known to be inconvenient.

However, as is true with the CFPB's Supervisory Highlight reports, while this type of information is useful as a reminder to agencies to ensure their practices are compliant, without more information about the context or frequency of these violations, it is difficult to have a real understanding of the magnitude of these issues. 

The bureau resolved one FDCPA enforcement case in 2017, and five others remain pending. The bureau also filed briefs as amicus curiae in two cases in the federal courts of appeals arising under the FDCPA.

The FTC also completed enforcement actions using its authority under the FDCPA and FTC Act in 2017. From Jan. 1 through Dec. 31, 2017, the FTC filed or resolved 10 cases against 42 defendants and obtained more than $64 million in judgments. It also banned 13 companies and individuals who “engaged in serious and repeated violations of law from ever working in debt collection again.”

In many of these cases, the companies and individuals engaged in egregious “phantom” debt collection practices or impersonated legitimate small businesses and debt collection companies. These egregious practices do not reflect the compliance-focused legitimate debt collection industry and, as such, cause substantial harm to both consumers and the professional debt collection industry as a whole.

As a result, ACA commends the FTC and CFPB for using its enforcement authority to stop the intolerable practices of fraudulent debt collection schemes and highlighting the distinction between these scammers and legitimate debt collection businesses. ACA looks forward to continuing to work with the CFPB and the FTC to continue to rid the marketplace of bad actors that have no intention of complying with the law.

Consumer Complaints to the CFPB

In 2017, the bureau handled approximately 84,500 debt collection complaints, according to the report.

From Jan. 1, 2017 through Dec. 31, 2017, the CFPB sent approximately 48,800 (58 percent) of the 84,500 debt collection complaints it handled during that time to companies for review and response.

Collection agencies continue to respond to and resolve complaints effectively and efficiently. According to the CFPB report, companies responded to 92 percent of the approximately 48,800 complaints they received for response.

Remaining complaints were sent to other regulatory agencies, found to be incomplete or are pending with the consumer or CFPB.

The report notes that a majority of consumers submit complaints that the debt is not their debt (57 percent) or that it was paid (27 percent.) The remaining consumers report that the debt is the result of identity theft (11 percent) or was discharged in bankruptcy and no longer owed (5 percent.)

“In response to many of these complaints, third-party collectors close and return the account to their clients or provide the consumer with additional information about the account,” according to the report.

While the CFPB report reflects companies’ timely and comprehensive responses to complaints, the broad definition and characterization of complaints fails to reflect that they represent a small percentage of consumer contacts made by the debt collection industry.

In January, ACA International released a white paper, “A Review of Debt Collection Complaints Submitted to the Consumer Financial Protection Bureau’s Complaint Database in 2017,” which provides an analysis of the quantitative data on debt collection complaints available from the CFPB’s consumer complaints database. The findings indicate that while the overall raw number of complaint submissions appears high for the debt collection industry, once the data have been properly contextualized, the number of consumer complaints is remarkably low, despite the CFPB’s overly broad characterization of what constitutes a complaint.

Notably, ACA found that the total number of debt collection complaints received by the CFPB represents an incredibly small number of consumers (0.005 percent) who had contact with the debt collection industry during 2017 and are remarkably consistent with other financial services industries. Further, the complaints account for only 0.06 percent of all Americans estimated to have a debt in collection.

The activities of the CFPB and FTC related to the FDCPA are central to the members of ACA International. It is therefore crucial that debt collection regulation, supervision and enforcement is done in a fair and transparent manner. ACA will continue to advocate on behalf of the credit and collection industry to ensure that federal regulators act in a well-reasoned and evidence-based way when engaging in efforts that impact the debt collection market. 


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org. Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse.

Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training page to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Subscribe to ACA Daily NEWSROOM

Loading...

Loading...

Scroll to Top