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Back to the Future: CFPB Prioritizes Prevention Over Enforcement with Debt Collection Rules on the Horizon

By Joann Needleman, Ann E. Lemmo / Apr 18, 2019

Consumer Financial Protection Bureau (CFPB or "the Bureau") Director, Kathleen L. Kraninger, spoke yesterday at the Bipartisan Policy Center regarding her outlined vision for the Bureau. Kraninger discussed her findings from her three month listening tour, and how she plans to use the Bureau’s tools to meet the expectations expressed on her tour. Kraninger also provided a preview of  the anticipated proposed rule to implement the Fair Debt Collection Practices Act (FDCPA) that is expected this spring.

1. The Listening Tour

During Kraninger’s three-month listening tour, she met with over 400 interested communities, industries, advocates, and consumers. The common viewpoints were:

  • The CFPB’s mission and the agency itself are critical to our economy and are not going away.
  • A level playing field amongst financial services providers is an important goal.
  • Bad actors harm consumers and undermine the integrity of markets; they should be held accountable.
  • All stakeholders expressed a strong interest in protecting consumers, though they differ on the best way to accomplish that mutual interest.

Kraninger’s vision emphasizes how the Bureau will continue to address these viewpoints using these tools:

  • Consumer education
  • Rulemaking
  • Supervision
  • Enforcement

2. Consumer Education

Kraninger emphasized  redefining a “consumer-centric definition of financial well-being that goes beyond income and credit scores.” She also emphasized the importance of consumer control over day-to-day and month-to-month personal finances and a consumer’s ability to withstand financial shocks.

Specifically, Kraninger discussed the Bureau’s goal to create a coalition to “increase the level of emergency savings.” The Bureau plans to promote effective approaches to emergency savings through its recently launched Start Small, Save Up Initiative. This program offers tools, tips, and information to help consumers build savings for emergencies. The Bureau wishes to have all interested communities continue to help educate consumers in regards to emergency savings and other areas of consumer protection.

3. Rulemaking

Rulemaking will continue to focus on prohibiting acts that “prevent consumers from choosing products and services that are best for them.” Kraninger emphasized the importance of setting general standards through the rulemaking process rather than enforcement actions, “[b]ecause rules are general standards, they are not best articulated on a case-by-case basis through enforcement actions.”

As for the anticipated proposed rule to implement the FDCPA, according to Kraninger, the Bureau is proposing to provide:

  • clarification to better enable the use of modern communications technology in collection activity;
  • a bright-line limit on the number of calls that consumers may receive from debt collectors on a weekly basis;
  • clarification regarding how collectors may communicate using new technology, such as email or text messages; and
  • requirements that collectors provide consumers with more information at the outset of collection to help consumers understand their options.

4. Supervision

Kraninger believes that supervision “is the heart of this agency.” She has tasked the Bureau’s staff with reviewing the entire process of supervision, including frequency of exams, size of exam teams, days onsite, and time to complete an exam and deliver a report.

She would also like to strengthen coordination and collaboration with sister regulators as they review the same information and institutions.

5. Enforcement

Kraninger would hope that the “emphasis on prevention will mean that we need our enforcement tool less often.” Her strategy for enforcement includes pursuing cases that will “reinforce clear rules of the road and prevent harm…”

6. Outcomes and Transparency

Kraninger hopes to deemphasize the statistics that come from the outcomes of enforcement while  emphasizing prevention. Kraninger stressed that statistics provide a poor understanding of the context and actual progress of the Bureau’s efforts to cull harmful acts or practices to consumers.  

Finally, Kraninger provided her plans to continue to engage with the outside community. The Bureau plans to organize a symposia series over the year regarding topics related to the Bureau’s mission. The first topic will be about clarifying the meaning of abusive acts or practices under Section 1031 of the Dodd-Frank Act.

Last summer, then Acting Director, Mick Mulvaney, issued numerous Requests for Information (RFIs) on a variety of topics including those discussed in Kraninger’s speech. It is clear that many of the comments and suggestions submitted by industry in response to the RFIs have now been incorporated into future CFPB policies.  The desire to write rules first and enforce second is a departure from the CFPB under Director Richard Cordray and should be a welcome sign for the financial services industry.

As for the proposed debt collection rules, industry has been waiting since 1977 for clarity around the FDCPA. However, it was somewhat surprising that Director Kraninger indicated that the rules will include “bright-line limits on the number of calls [consumers] may receive from debt collectors on a weekly basis.” The data on call frequency has not been well established and is mostly  anecdotal.  The Bureau’s own metrics from its complaint portal show that in 2018 there were only 5,500 complaints from consumers regarding communications tactics, which include complaints about call frequency.  

Buckle up Marty McFly, it is going to be a busy summer.