Senate, CFPB Director Discuss Clarity on Debt Collection Rule


CFPB Director Kathy Kraninger clarifies purpose of communication parameters in rule, due in October 2020, in testimony before Senate Banking Committee.

7/29/2020 16:30

Consumer Financial Protection Bureau Director Kathy Kraninger testified before the Senate Committee on Banking, Housing and Urban Affairs Wednesday, fielding some questions about the bureau’s pending debt collection rules.

The hearing discussion also focused on the bureau’s final rule on small-dollar lending and credit reporting requirements during the COVID-19 pandemic.

ACA International appreciates that Congress and financial regulators continue these hearings and focus on issues impacting the accounts receivable management industry that are an equal focus of ACA’s advocacy efforts.

Debt Collection Rule

U.S. Sen. Chris Van Hollen, D-Md., asked Kraninger for clarity on the bureau’s plans to regulate communication with consumers in the debt collection rule as well as protections against wage garnishment for consumers during the COVID-19 pandemic.

“Sen. Chris Murphy, D-Conn., and I just introduced a bill yesterday that says that during this pandemic a hospital system and major medical providers getting many millions of dollars in taxpayers assistance … should not be garnishing wages for medical debt. Have you considered issuing any emergency protections against practices like garnishment of wages or seizing bank accounts for [the] collection of medical debt?” Van Hollen asked Kraninger.

Kraninger noted the bureau has provided very clear direction that accommodation of consumers and borrowers during this time is paramount and, even as the debt collection rule is finalized, the bureau is focused on the enforcement of unfair, deceptive, or abusive acts or practices.

For example, in April the CFPB provided credit reporting guidance for companies and data furnishers during the pandemic as well as guidance for consumers to protect their credit.

Kraninger also clarified a critical purpose of the debt collection rule in dialogue with Van Hollen.

“The current drafts of these rules would make it easier for debt collectors to ‘harass’ people via text messaging and instant messaging, is that true?” he asked.

“It’s not harassing contact, because that again continues to be precluded. What we’re trying to at least support is clarity around how consumers can be contacted and letting consumers frankly dictate how they would like to be contacted,” Kraninger said. “There are a measure of consumers who would prefer a text to a phone call or would prefer an email to a phone call, and so it’s using the contact mechanism that the consumer used with their creditor before that we’re trying to provide some clarity around. No final decision has been made on what that threshold is. It’s very much something that we got a lot of comments on, which I welcome. We’re poring through those comments.”

Credit Reporting

Regarding credit reporting, U.S. Sen. Tim Scott, R-S.C., raised the provision in the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act that would suppress reporting of adverse debt amid the pandemic recovery, expressing concern that market distortion may result in less available credit.

Scott said, “If we suppress bad debt, especially indefinitely after the pandemic is over, don’t we start distorting the market, and if we distort the market, doesn’t that make it harder for decision makers at institutions to make good sound judgment? If that happens won’t many creditors decide to pull back away from extending credit as opposed to leaning into creditworthy folks because there is clarity in the marketplace?”

Kraninger responded, noting the public comment opportunity for the qualified mortgage rule on how income and debt should be treated during the pandemic, suggesting other ways to achieve balance than by reducing credit reporting.

“That is why accuracy is so important in the law with respect to the credit reporting system,” Kraninger said. “We are, to your point, at least making some accommodations. I would also note any action that Congress takes on this that becomes law is something we would enforce.”

“Ultimately, I hope that the CFPB will commit to ensuring that absent any congressional action they will administer no rule that requires credit market participants to suppress or delete data,” Scott said. “That will make it harder for credit worthy borrowers, not easier, in the long run.”

ACA Advocacy

ACA submitted a letter to the committee in advance of the CFPB hearing focused on advocacy efforts to urge the CFPB to finalize key aspects of its Notice of Proposed Rulemaking (NPRM) to implement the Fair Debt Collection Practices Act (FDCPA), which will allow for more timely and efficient two-way communication with consumers. The letter notes in part:

  • The limited content message is important to provide clarity for leaving voicemails and should be finalized through rulemaking authority or regulatory guidance.
  • Consumers increasingly prefer modern electronic communications—like emails and text messages—to snail mail and phone calls. Consumers now more than ever are reliant on modern technologies, which are more efficient for communicating critical information from the accounts receivable management industry during these unsettling times when two-way communication is paramount.

“We ask that the Senate consider that consumer welfare depends on open communication with creditors and collectors, and it is important to have policies that provide consumers with more options that will allow them to continue to access credit and services,” ACA CEO Mark Neeb said in the hearing letter. “This is critical due to the uncertainty about the length and severity of the economic impact related to COVID-19.”

Kraninger presented her semiannual report to Congress during the hearing, noting the bureau’s plans for the debt collection rulemaking:

“In May 2019, the bureau issued an NPRM, which would prescribe rules under Regulation F to govern the activities of debt collectors, as that term is defined under the Fair Debt Collection Practices Act. The bureau’s proposal would, among other things, address communications in connection with debt collection; interpret and apply prohibitions on harassment or abuse, false or misleading representations, and unfair practices in debt collection; and clarify requirements for certain consumer-facing debt collection disclosures. The proposal builds on the bureau’s research and pre-rulemaking activities regarding the debt collection market; the conduct of debt collectors remains a significant source of complaints to the bureau.”

The bureau has also engaged in testing of out-of-statute debt disclosures that were not addressed in the May 2019 proposal. In February 2020, after completing the testing, the bureau issued a supplemental NPRM related to out-of-statute debt disclosures.

The final debt collection rule is due to be released in October 2020 and comments on the supplemental NPRM related to out-of-statute debt are due Aug. 4.

Discussions with Kraninger and members of Congress will continue in a hybrid hearing, “Protecting Consumers During the Pandemic? An Examination of the Consumer Financial Protection Bureau” at 12:30 p.m. EDT Thursday before the House Financial Services Committee.

ACA submitted a letter for the House Financial Services Committee hearing and will provide coverage in ACA Daily.

For more information on how the ACA Licensing staff can assist with your licensing needs, please contact us at [email protected]  or call (952) 926-6547.

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