ACA International Statement on Outline of Proposed Debt Collection Rule Being Considered by the CFPB

7/28/2016 12:30 PM

The CFPB's outline of proposals for debt collection rules comes on the heels of a July 28 field hearing on debt collection in Sacramento, Calif., where ACA and industry participants made their voices heard.

ACA International has worked closely with the Consumer Financial Protection Bureau since its inception five years ago to ensure that regulators know and understand the critical role that debt collection plays in the U.S. economy and the complex issues that our industry faces every day. This dialogue is essential to ensure that any new debt collection regulations are well-reasoned and based on operational realities, not mere assumptions about how debt collection works. As the industry has awaited clarity from the CFPB in the process of establishing new debt collection rules, it has continued to invest in and strengthen compliance and training in order to meet the requirements of the new federal regulator. The debt collection industry continues its commitment to best practices to make debt collection as consumer-friendly as possible.

As they proceed through the process of rule-making, ACA International is particularly pleased that the CFPB will have an opportunity to hear how its debt collection proposals under consideration could affect small businesses during an upcoming panel process required by the Small Business Regulatory Enforcement Fairness Act of 1996. A core function of the SBREFA panel is for regulators to hear the perspective of small businesses that may be impacted by the new rules. Given that the overwhelming majority of companies in the industry are small businesses, this process is especially critical to be sure any debt collection rules do not unintentionally cause a disproportionate, negative impact on small business debt collectors.

Not only are the majority of debt collection companies small businesses, but those small businesses are invaluable advisors to other small businesses of all kinds, from doctor's offices and dentists to caterers and home service providers. A recent ACA International study shows that almost half of ACA International members report that an overwhelming percent of their clients are also small businesses. Many of these small businesses are a few unpaid invoices away from having to close their doors or eliminate jobs. This relationship can create a devastating domino effect: if the cost of regulation puts small debt collection companies out of business, it could also mean the small businesses they serve will go out of business as they lose access to essential collection services. In short, small businesses could be left with no real alternative to collect debts rightfully owed to them if the CFPB adopts unbalanced rules that are overly restrictive.

“It is critical that the CFPB listen to industry professionals and small businesses and get this right,” said ACA International CEO Patrick J. Morris. “ACA supports rules that will ensure consumers are treated respectfully and fairly; but if the CFPB does not take the unique perspective of small business debt collectors and the diversity of the industry into consideration, a rule intended to help consumers may instead end up harming them, as well as other small businesses and the overall economy.”

The risks to consumers in creating overly restrictive debt collection regulations can be enormous. For example, limiting the ability for businesses to collect rightfully-owed debt could result in diminished access to credit for the very people who need it most. If creditors are not able to collect rightfully-owed debts, the financial cycle may dictate that they will be less likely to extend credit to consumers who rely on credit for emergencies and other much-needed goods and services.

Finally, consumers could be at risk if they cannot receive critical financial information in a timely fashion. Communications from debt collectors are not marketing calls. They are attempts to give consumers the opportunity to restore their good credit through payment plans and other arrangements. Debt collectors are also on the front lines of identity theft and fraud. Often it is only when contacted by a debt collector that a consumer learns that their identity has been stolen and a criminal has placed charges in their name.  Because of this, we hope that the new regulations will foster respectful, two-way communication between debt collectors and consumers, not hinder it.

Today's CFPB field hearing in Sacramento continued the discussion on how the industry really works and the dangers of unintended consequences – especially for small business. Linda Guinn, President of the California Association of Collectors and ACA member company CB Merchant Services and ACA representative on the CFPB panel, told the field hearing audience “The vast majority of collectors are well-intentioned small business employers who want to follow rules and regulations, and the services we provide are important to other small businesses as many can't afford to pay for a staff to handle unpaid accounts.”

Most of the audience consisted of industry participants, including ACA board member Debra Ciskey, IFCCE, compliance officer at Wakefield & Associates, Inc. During the opportunity for public comments, the majority of those who spoke came from ACA and CAC members representing the industry. Albert Cadena, president and CEO USCB America, an ACA member, stressed to the group that “As the son of immigrants, I was always taught, since my start in the debt collection industry 34 years ago, that ethical behavior and respectful communication with consumers has always been key.”

We continue to hope that the CFPB will strike a necessary balance between the legal rights of consumers and legitimate businesses who are endeavoring to follow the myriad of state, local, and federal laws and regulations. ACA International looks forward to the critical SBREFA process and maintaining a useful and constructive conversation with the CFPB.