Director says “clarity” is the goal of the proposed debt collection rule.
10/16/2019 9:00
All eyes were on Capitol Hill Wednesday morning as CFPB Director Kathy Kraninger appeared before the House Financial Services Committee to answer a slew of questions including those related to the proposed debt collection rule.
The purpose of the hearing titled, “Who is Standing Up for Consumers? A Semi-Annual Review of the Consumer Financial Protection Bureau,” was to hear testimony from Kraninger in reference to the Semiannual Report of the Bureau of Consumer Financial Protection ”.
Kraninger will testify before the Senate Banking, Housing and Urban Affairs Committee at 10 a.m. Thursday, Oct. 17.
One of the most interesting exchanges occurred when U.S. Rep. Blaine Luetkemeyer, R-MO., asked “how will consumers affected by the debt collection industry benefit from the proposed [debt collection] rule?” Kraninger responded with an answer welcome to the industry, and it began with the word “clarity.”
“The clarity that the rule provides is what we are proposing,” Kraninger said. “There were 162 questions that we asked for comment on—and this is an incredibly challenging area to provide a bright line rule test on. We will continue to talk about the frequency of contacts and the mode of contact. But, the goal of the rulemaking is to provide clarity for consumers and collectors so that everyone understands the rules.”
As a quick reminder, ACA International submitted comprehensive comments Sept. 17 in reference to the CFPB’s first-ever proposed rule for the Fair Debt Collection Practices Act. ACA has long sought clarity in the rules, so to hear the nation’s top consumer financial regulator indicate that she’s interested in clarity is a positive step for the industry.
Other committee members weren’t so positive when discussing or extracting information from Kraninger, who assumed the role of director in December 2018. In her opening remarks, Committee Chairwoman Maxine Waters, D-Calif., told Kraninger “the record shows that you are undermining protections for consumers and letting bad actors off the hook,” and you “issued a weak debt collection rule that gives debt collectors the green light to intimidate consumers by sending unlimited text messages and emails, and to call them seven times a week per debt.” While it is true that the CFPB’s original proposed rules contain language noting a “proposed call cap of no more than seven calls in seven days,” ACA believes this proposal is arbitrary and not supported by evidence that it provides any consumer benefit.
Regarding text messages, U.S. Rep. Patrick McHenry, R-N.C., asked if the current regulations allow debt collection agencies to text customers, to which Kraninger replied—“yes,” adding that the proposed rule aims to clarify the issue. ”[Under the current or old rules] a debt collector could only text a consumer if that consumer had provided that number and communicated with their creditor via that text messaging mechanism. That is not written in statute. Texts are not in the statute. It’s a real issue and something that we’re addressing in the rule,” she said.
CFPB’s Leadership Structure
As is often the case in Congressional hearings (regardless of which party holds the majority) Kraninger had difficulty answering some questions due to interruptions from members.
Within 15 minutes of Chairwoman Waters banging the gavel to open the meeting, Kraninger was responding to comments about the constitutionality of the CFPB’s leadership structure. This issue continues to pop up as it wiggles through the court system, most recently appearing in the news when the CFPB’s attorneys and the U.S. Department of Justice filed a brief asking the Supreme Court to take up Seila Law v. Consumer Financial Protection Bureau. It has long been understood that many Democrats support the current structure of the bureau, which includes a director removable only “for cause.”
When pressed by several members about this issue, Kraninger referred to her notes stating that the issue is currently within the court system and regardless of the outcome or delay in a ruling, it will not impact the bureau’s work.
While others criticized this response, U.S. Rep. Andy Barr, R-Ky., praised Kraninger for her efforts and thanked her for supporting the many members of Congress who believe the structure of the CFPB is unconstitutional.
Consumer Complaint Database
And in her written testimony, Kraninger provided the following information about the consumer complaint database.
“The most recent Semi-Annual report notes 321,200 consumer complaints for the April 2018-March 2019 period. The report also notes that 82 percent of these complaints were received via the Bureau website, 5 percent via phone calls, 8 percent via referrals from other state and federal agencies, and the remainder via mail, email, or fax. The Consumer Bureau estimated that about 95 percent of the complaints it sent to companies received a response. Additionally, the Consumer Bureau highlighted that the most complained about consumer financial products and services were credit or consumer reporting (39 percent of all complaints), debt collection (24 percent), and mortgages (9 percent). According to a May 2019 analysis of the CFPB’s consumer complaint database since its creation in 2011, more than 223,000 complaints resulted in relief for consumers, including more than 75,000 who received monetary relief from the companies they complained about. Furthermore, Kraninger recently announced her intent to keep the consumer complaint database public, though with some modifications.”
ACA International will cover the Senate hearing Thursday, Oct. 17.