Philadelphia, PA – Town Hall on Debt Collection on 5/8/19 — consumerfinance.gov


Good afternoon. My name is Andrew Duke. I
am the Policy Associate Director for the External Affairs Division at the Consumer Financial
Protection Bureau. Welcome to the CFPB’s Town Hall in Philadelphia, Pennsylvania, at the
University of Pennsylvania’s Houston Hall. At today’s Town Hall, you will hear from Director
Kathy Kraninger and a panel of distinguished experts who will discuss issues related to
debt collection. On behalf of the Bureau, we are delighted to be here in Philadelphia.
The Consumer Financial Protection Bureau is a 21st century agency that helps consumer
finance markets work by regularly identifying and addressing outdated, unnecessary, or unduly
burdensome regulations by making rules more effective, by consistently enforcing federal
consumer financial law, and by empowering consumers to take more control over their
economic lives. Yesterday the Bureau publicly released the Notice of Proposed Rulemaking,
or NPRM, on debt collection. Let me spend just a few minutes telling you about what
you can expect at today’s Town Hall. First, you’ll hear from the Bureau’s Director, Kathy
Kraninger, who will provide remarks about the work that is under way at the Bureau and
specifically the debt collection rulemaking. Following the Director’s remarks, there will
be a panel discussion about debt collection that includes Bureau staff as well as guest
subject-matter experts. After the discussion, there will be an opportunity to hear from
members of the public. The Town Hall will adjourn at approximately 2 p.m., so let’s
get started. It’s my privilege and honor to introduce Kathy Kraninger. Director Kraninger
became the second confirmed Director of the Consumer Financial Protection Bureau in December
2018. From her early days as a Peace Corps volunteer to her role in helping establish
the Department of Homeland Security to her policy work at the Office of Management and
Budget and now to the CFPB, Director Kraninger has dedicated her career to publish service.
Director Kraninger, the floor is yours. Good afternoon. Thank you all for coming. I am
delighted to be at my first CFPB Town Hall. Philadelphia has also been a very special
place to me, so I’m glad to be doing this here. With Independence Hall as the foundation,
this city always reminds me of the importance of democracy and public service. I could not
think of a better city to be in as the Bureau continues to focus on developing and promoting
the right policies for the American people. The Bureau issued a Notice of Proposed Rulemaking
yesterday in debt collection. Clear rules of the road, where consumers know their rights
and debt collectors know their limitations, are a step towards fulfilling the intent of
the law. The practice of debt collection predates the use of money.  Debt collection is an
important part of any credit ecosystem, and there is no doubt that a healthy credit ecosystem
is vital to the lives of most Americans. It enables us to make purchases and repay the
costs over time. It enables us to pay for services and pay in arrears. It enables us
to weather financial storms. But when consumers do not make timely payments on their debts,
they become delinquent, and they enter the collections part of that credit ecosystem.
A collections item can start as an overdue medical bill, utility bill, or any kind of
unpaid loan or invoice. Sometimes it affects a person who has overextended themselves financially,
and sometimes the individual has lost a job, fallen ill, had an accident, or something
else has happened to set them back financially. Whatever the reason, large numbers of Americans
fall behind on their debts at one time or another. During the early stages of delinquency,
creditors typically engage in in-house collection efforts. But, frequently, after a certain
period of time, creditors place debts with third-party debt collectors who specialize,
and thereby may be more efficient, in recovering what is owed. Creditors also may sell debts
to debt buyers who collect the debts for themselves or use other collectors to collect the debts. When
consumers hear about an unpaid debt from their telephone company or credit card company,
they can usually understand who is calling and why. But it can be harder for consumers
to understand why they are being contacted by a different company collecting the debt,
especially if the debt was incurred some time ago and if penalty fees or other charges have
been added to the amount that was previously billed. Consumers can find these interactions
frustrating and stressful. When consumers get a notice in the mail from a party they
don’t recognize and with limited information about the debt, they often find themselves
asking, “Who is this? Is this really the amount I owe?” In the United States, debt collectors
have hundreds of millions of interactions with consumers each year to arrange payments
or to resolve debts. Indeed, debt collection is a multibillion-dollar industry, with nearly
8,000 debt collection firms in the U.S. It touches the lives of millions of Americans,
with Bureau research finding that one out of three consumers with a credit report had
debts in collection within a 12-month period. Over the past decade, consumers have submitted
more complaints about debt collection to federal financial regulators than about any other
financial service. The Bureau receives tens of thousands of these complaints consistently
each year. Consumers also file thousands of private court actions each year against debt
collectors. Some of the friction in the market can be attributed to the fact that the governing
statute in this market is more than 40 years old. The Fair Debt Collection Practices Act,
commonly referred to as the FDCPA, is from 1977. Think about that. That’s the year the
first Star Wars movie was released, Jimmy Carter became president, and a small company
called Apple tried to introduce the world to a personal home computer. Back then, when
I was just a toddler and actually living in Philadelphia, phone booths were at almost
every corner, and the ubiquity of cell phones was not even imaginable. The FDCPA explicitly
addressed the use of postcards, collect calls, and telegrams. I don’t know about you, but
I’ve literally never received a telegram and would not know how to send it. The upshot
is that the FDCPA was written largely to address communications between debt collectors and
consumers, but it hasn’t always been easy to discern how it might apply to technologies
today. The FDCPA already prohibits debt collectors from, among other things, harassing, oppressing,
or abusing consumers; from revealing debts to third parties; and from contacting consumers
at certain times. It also requires them to provide certain disclosures, and legitimate
collectors try to comply.  But how do these rules apply in today’s age of cell phones,
emails, and text messages? What does that mean in today’s era of 24-hour, worldwide
communications? It has largely been up to the courts to decide, and they’ve come to
sometimes different interpretations of the law. This has created great uncertainty for
both consumers and for collectors. Prior to the Dodd-Frank Act, no agency had the authority
to issue substantive rules to implement the FDCPA. The Bureau was given that authority
under the Dodd-Frank Act. So we are issuing proposed rules to address the persistent issues
in debt collection that have arisen in the more than 40 years since the FDCPA’s enactment. I
want to add that the Bureau’s Notice of Proposed Rulemaking, issued yesterday, takes into account
much research and effort. As I have said before, I believe in a rulemaking process that is
transparent, that allows stakeholders to submit comments, that reflects rigorous economic
and market analysis, and that provides for judicial review. Under my leadership, the
CFPB will proceed deliberately and transparently in its rulemakings. So I am glad to say that
for more than 5 years now—before my time and across administrations—the Bureau has
been studying the debt collection market and researching the best ways to bring it much
needed clarity. Our newly proposed rules are grounded in common sense. They provide
clear rules of the road that will limit when, where, and how often collectors can communicate
or seek to communicate with consumers. And they would mandate that collectors provide
consumers with more and better information at the outset of collections to help consumers
identify debts and understand their options, including their rights in disputing the debts
or paying them. Both consumers and debt collectors would benefit from clarity regarding the requirements
of the law. The bottom line is that entities should be able to operate according to the
law, and consumers should be treated in accordance with the law. Our proposal contains a balanced
set of provisions designed to achieve those ends. Let me run through some of the specifics
of what we are proposing. First, in a world in which most consumers are accessible 24
hours a day wherever they happen to be, consumers need protection when it comes to when, where,
and how collectors communicate with them. The current law already prohibits debt collectors
from engaging in acts that have the natural consequence to harass, oppress, or abuse consumers,
and bars collectors from contacting consumers at certain times of the day or when a consumer
has said a time or place is inconvenient. But like I said, that law was written in the
time of telegrams not emails, landlines not cell phones, and postcards not texting. Many
consumers today complain about frequent or repeated phone calls and about being contacted
at inconvenient times and places. Our proposal says a debt collector would be limited to
no more than seven attempts by telephone per week to reach a consumer about a particular
debt. Once a debt collector has a telephone conversation with a consumer, the collector
would need to wait at least a week before calling the consumer again. Second, our proposal
would allow consumers to stop collectors from using specific channels to communicate with
them or from contacting them at specific times. They would, for example, be able to tell the
collectors not to call on a phone line or during work hours or not to send emails to
a particular email account. In addition, when using electronic media, such as emails and
text messages, debt collectors would have to give consumers an unsubscribe option. There
has also been a lot of misreporting in the press since we released the rule yesterday
about emails and text messages. Here are the facts. The FDCPA prohibits collectors from
harassing or abusing consumers or engaging in unfair practices. These standards apply
today and under the proposed rule. They would continue to apply. A collector who emails
or texts too frequently may face liability. But the proposed rule would provide clarity
for consumers and collectors on how the law specifically applies to newer technology and
particularly to emails. It would make clear the rules of the road for industry and consumers,
and it would add a requirement that collectors must provide in every text or email an unsubscribe
option. Consumers are accustomed to seeing and using an unsubscribe option, and they
will be able to use it to stop emails and texts. And the proposed rule makes clear that
collectors must honor requests to stop certain channels of communication so that a consumer
could simply say never text me, and the collector must comply. Our proposal would improve the
transparency of the debt collection process for consumers. When consumers are contacted
by debt collectors for a debt they do not recognize, this creates confusion.  Debt
collectors must already provide certain information either in their initial communication or within
5 days of the first communication about the debt and consumer’s rights, but our research
indicates that this information is not always sufficient or clear to consumers. So our proposal
would enhance the information consumers receive from collectors. We propose to make clear
that the required information includes an itemization of the debt to make it more recognizable
to consumers and plain-language information about how a consumer may respond. We also
propose that collectors be able to explain, in plain language rather than statutory language,
how the consumer could dispute the debt, if he wanted. Our proposal would also require
the disclosure to include a tear-off or an email reply that consumers could send back
to the debt collector to dispute or otherwise address the debt. Additionally, our proposal
would make clear that debt collectors cannot sue or threaten to sue a consumer on a debt
for which the period under a statute of limitation has expired. This is commonly referred to
as “time-barred debt.” Collectors would still be permitted to try to collect on such debts
apart from litigation and consistent with state laws. We will continue to test to determine
what disclosures, if any, would be effective and appropriate relating to debt that is time-barred.
Depending on the results of that research, we may propose disclosures and take public
comment on those later in the process. And lastly, we would prohibit debt collectors
from furnishing information about a debt to a consumer reporting agency unless the debt
collector has communicated about that debt to the consumer, such as by sending the consumer
a letter. Our proposed rules are designed to provide clarity where it has been lacking
so consumers know their rights and collectors know their limitations. As the CFPB moves
to modernize the legal regime for debt collection, we are keenly interested in the views of stakeholders
and look forward to engagement. The public will have 90 days to submit written comments
before we make a decision on issuing final rules. When we hear all sides of an issue,
we truly benefit.  So all of the proposals that I have outlined for you today are ones
upon which we expect and hope and want comments on, and I know that many of you in this room
will be writing those comments and submitting them. Thank you again for joining us today.
I very much look forward to the conversation. Thank you, Director Kraninger. At this time,
I’d like to invite the panelists to take the stage, and while they’re doing so, I’ll briefly
introduce the CFPB staff and guest panelists. CFPB staff include Brian Johnson, who is our
Acting Deputy Director for the Bureau. He is joined by Tom Pahl, Policy Associate Director
for the Bureau’s Research, Markets, and Regulations Division; and David Silberman, Associate Director
for the Bureau’s Research, Markets, and Regulations Division. Our guest panelists are Mark Neeb,
CEO of ACA International; Stephanie Eidelman, Director of the Consumer Relations Consortium;
Jan Steiger, Executive Director of RMAI; April Kuehnhoff, staff attorney, National Consumer
Law Center; Patricia Hassan, president and CEO of Clarify; and Michael Froehlich, managing
attorney, Community Legal Services of Philadelphia. Tom, you have the floor. Thank you, Andrew.
Let me explain how the panel portion of the Town Hall today will proceed. First, I’ll
invite our guest panelists to provide a couple minutes of introductory remarks. Then David
Silberman, my colleague, will facilitate a discussion among the panelists, including
addressing questions from the audience. Members of the Public have had a chance to write-in
questions on cards when they came in. David will incorporate some of those questions into
the panel discussion, which we will have. So, with that, I’d like to discuss each of
our guest panelists to make brief introductory remarks, and let’s start with Mark Neeb. Thank
you, Tom. Good afternoon, Director Kraninger, CFPB staff, and my fellow panelists. I’m honored
to be here with you today during this important time for consumers and the accounts receivable
management industry with the Bureau’s landmark release of the first ever rules for the Fair
Debt Collection Practices Act. I’m here on behalf of ACA International, the largest trade
association for credit collection professionals, representing approximately 2,500 members,
including credit grantors, third-party collection agencies, asset buyers, attorneys, and vendor
affiliates, and their more than 230,000 employees worldwide. ACA members include both large
and small businesses and are an important part of local economies, creating employment
opportunities, generating tax revenue, and providing services for other area businesses
and creditors. The accounts receivable management industry has been seeking clear regulatory
guidance on the FDPCA since its enactment in 1977. Notably, we’re one of the first industries
to welcome new rules from the CFPB and have worked closely with the Bureau since its inception
on our shared goal of helping consumers carefully and efficiently resolve debts. ACA members
play a critical role in ensuring that consumers can continue to access credit and other services,
and as an academic study about the impact of debt collection noted, losses from uncollected
debts are passed on to other consumers in the form of higher prices and restricted access
to credit. In short, consumer harm can result in several ways when unpaid debt is not addressed
and ACA members work to help consumers understand their financial situations and what can be
done to address and improve them. ACA is analyzing the proposed rule that was just released yesterday
and plans to provide comprehensive formal comments in response to it. We’ll be reviewing
it through a lens of supporting a fair, objective, and well-supported Bureau rulemaking. ACA
members want to follow the rules and likewise do not want to be penalized by opaque interpretations
of the law that vary throughout the country, and creating safe harbors is beneficial to
both consumers and the industry so that everyone knows what the rules are and how to play by
them. So thank you again for the opportunity to participate today as we continue to work
toward our shared goal of helping consumers achieve the most successful possible outcomes
when facing an unpaid debt. Thank you, Mark. I think next we’d like to hear from Stephanie.
Thanks so much, Tom. I’m honored to have been asked to participate in this discussion today.
I’m Stephanie Eidelman, CEO of the iA Institute. iA produces handcrafted news events, education,
and connection for the consumer and commercial credit collections industry. We believe high-quality
communication with all stakeholders leads to good things, including better mutual understanding,
better regulations, better technology, and better business results. So we work hard to
create the conditions for this kind of interaction in everything we do. You may recognize us
for our flagship publication, Inside Arm. Another of our key initiatives is the Consumer
Relations Consortium, or CRC, for which I serve as the executive director. Founded in
2013, the CRC is an innovative industry working group of about 60 organizations, including
creditors, technology companies, and large debt collection agencies. One of our core
priorities is proactive engagement with consumer groups. We invite stakeholders to gather in
a neutral setting for extended dialogue that gets past the public talking points and promotes
understanding. Over the last 5 years of hosting these sessions, I have come to appreciate
that, by definition, 100 percent of the debt collection cases that consumer advocates see
are negative. After all, why would someone who had a positive experience need to contact
an advocate? On the other hand, legitimate debt collectors see a full range of circumstances,
including consumers whose intention is to game the system, the vast majority of consumers
who want to resolve accounts, and those who truly can’t pay. So this different view of
the landscape is a real disconnect which has led to a very complicated situation for those
tasked with sorting it out. And, in my humble opinion, it is probably part of why debt collection
rulemaking has taken so many years. Rules should absolutely protect those most vulnerable
and they should also not create an undue impediment for the majority. So thank you again for having
me today. I look forward to the discussion. Thank you, Stephanie. And we will move on
to Jan Steiger, of the Receivables Management Association. Thanks, Tom, and thank you for
including the association on the panel today. Thank you, Dr. Kraninger, for participating.
But I not only want to thank you for our participation today. I want to thank you for literally 5
years of meetings and listening and input and being receptive to the industry perspective.
It is not just today; it has been a long time getting here today. The Receivables Management
Association International is a trade association of 550 members, comprised of debt buyers,
originating creditors, third-party collection agencies, law firms, and vendors who provide
products and services. The association’s primary focus, though, while we represent all, is
for debt buyers who purchase, sell, and resell contractual obligations, both performing and
nonperforming. RMAI is known for our strong comment to fair and balanced laws and regulations.
Our flagship program is our certification program, which is really consumer focused.
And I think thanks to the creation of the CFPB, the industry really has changed its
focus to putting consumers first and making sure that consumers are treated fairly and
have adequate protections, at the same time as not putting up artificial barriers to the
collection of legitimate debt. So it is our pleasure to participate with you today. We
look forward to the discussion, and thank you. Thank you, Jan. Now we will move to the
other end of the table, and would like to hear from April. Thank you, Tom. My name is
April Kuehnhoff and I am a staff attorney at the National Consumer Law Center, which
is a national nonprofit that advocates on behalf of low-income consumers. We appreciate
the opportunity to be here today, but we do come here with concerns, concerns about the
proposed rule that was released yesterday and concerns about the ability of the proposed
rule to live up to the CFPB’s task of protecting consumers. We highlight that this proposed
rule will impact an estimated 71 million Americans, and we also want to highlight that although
regulators receive hundreds of thousands of debt collection complaints around the country
every year, the proposed rules will do little to address some of those top concerns and
behaviors that trigger these consumer complaints. Instead, some of our top concerns are we see
the rule as sanctioning excessive debt collection phone calls, by allowing seven unanswered
calls per week, per debt, which could add up to dozens of calls per week for consumers
with multiple debts in collection. The rule would allow emails and text messages without
consumer opt-in and without any assurances that the consumer can even access information
in that particular format and media. The rule would allow critical information about the
consumer’s debt to be sent by a hyperlink in a text message or an email, without the
consumer’s consent to those electronic disclosures. And it would also undermine key privacy protections
by, for example, permitting limited content messages to be left with third parties who
might answer phones. We also see the rule as failing to protect consumers from abusive
practices related to the collection of time-barred debts. These rules will shape the future of
American debt collection for decades. The current proposal hasn’t done enough to protect
consumers, but it is critical that the CFPB get this right. We will be raising these and
other concerns in the upcoming comment period and we urge others to join us. Thank you.
Thank you, April. If we can move on to Patricia. Thank you. Good afternoon. Thank you for asking
me to participate on this panel today. As indicated, I am president of Clarify. We are
a regional financial counseling organization based in Philadelphia with 15 offices in 3
states. We provided, last year, about 10,000 one-on-one counseling sessions and another
5,000 clients were served through 350 educational workshops. So we work directly with clinics
who are impacted with a variety of financial counseling issues, among them housing, credit,
credit reporting, and financial health appointments. We partner with over 300 community-based organizations
that refer clients to us, and many of our offices are in partner locations. For this
reason, 90 percent of our clients would be considered low to moderate income. In March
of this year, we affiliated with GreenPath Financial Wellness, based in Detroit, Michigan.
GreenPath is the second-largest nonprofit credit counseling organization in the U.S.
They serve 205,000 households and currently have about 43,000 clients paying back unsecured
debt through debt management plans. I bring that up to show the extensive experience not
only regionally, that we bring to this topic, but at a national level now. So as an inaugural
member of the Consumer Advisory Board for the CFPB, I had the opportunity early on to
provide input and voice concerns in the debt collection space in the past. I look forward
to providing input in the proposed rules today and in the future, and I really appreciate
the time and effort, because I saw it first-hand, that went into developing these rules. I,
like April, have grave concerns about many of the provisions in these rules, and on the
impact for the consumers that we work with struggling with debt. One of our partner locations,
CareerLink—think about it. These are people who are trying to get back into the workforce
to get a minimum wage job. They are struggling with debt and our counselor, Rena, who works
one-on-one with them, to help them see a future to getting out of that debt, had a client
who was paying $100 a month in time-barred debt. In the meantime, they had other debt
that they could have been working on that was on their credit report, that could have
helped them to improve their financial situation and improve their credit score, which ultimately
will improve their financial situation. It is disheartening to counselors to see clients
in that situation, because somebody contacted them and screamed the loudest at them. So
they are the type of experiences that we see firsthand. Thank you. Michael? Thank you,
Tom. My name is Michael Froehlich and I am the Managing Attorney of the Home Ownership
and Consumer Rights Unit at Community Legal Services here in Philadelphia. Every year,
CLS represents thousands of low-income Philadelphians with a whole range of civil-legal issues.
And if you come to our office—I work in the North Philadelphia office—if you come
to our office any Monday, Wednesday, or Friday morning, you’ll see 30 or 40 or 50 or more
low-income Philadelphians waiting to receive free legal help, and many of them come to
us because they have received letters from debt collectors regarding debts that they
don’t recognize, from creditors that they’ve never even heard of before. Some of these
clients were hoping to attend today, and I believe there are a few in the room today,
and hopefully we will have a chance to hear from them during the public comment portion
of today’s town hall, but I also wanted to recognize my colleagues, Kerry Smith and Laura
Smith, who are also here, who lead our legal work defending individuals who are facing
wrongful or unlawful or predatory debt collection. I want to take just a quick moment, if I could,
to tell you the story of a client that came to see us back on March 13th. His name is
Mr. Alfred Gilbert. He is 80 years old. He lived most of his life up in Brooklyn, and
then, in my personal opinion, smartly moved to Philadelphia. He lives in a small apt down
in Southwest Philly, about 2 or 3 miles from where we are holding our town hall today.
And he came because he had been sued, in the Court of Common Pleas here in Philadelphia,
on a $12,000 debt from a credit card company. It was a credit card company that he never
heard of, and it was a debt that he knew nothing about. Now we looked into and we found that
the charges were from online businesses, like GrubHub and Groupon, and Mr. Gilbert does
not now, and has never used the internet. He told us that he was terrified about this
debt, about being sued, and about how he couldn’t afford to hire an attorney. Luckily, CLS was
able to get involved and defend him in this lawsuit, but he should not have needed to
have a lawyer for this situation because the situation should never have existed in the
first place. I very much welcome the opportunity to be here today to talk about our clients’
experiences with debt collection, and respond to the proposed rule yesterday. I will say,
just very briefly because I know we will have a moment to talk in more depth later, but
in general, on behalf of our clients we feel that this is just a huge missed opportunity
to really address some of the predatory and unlawful actions that our clients face every
day, and further, rather than create the clear rules of the road that we are looking for
for debt collections I’m sure the debt collectors were looking for themselves, may create even
more ambiguity. Thank you so much. Thank you. And now we’ll move on to a moderated discussion
amongst the panelists, which will be run by my colleague, David Silberman. Thank you,
Tom. Good afternoon, everyone. Let me first thank the panelists for their opening remarks.
I think you’ve framed some important issues for discussion, and I looking forward to a
lively discussion and interchange. I have some questions. We worked with the Bureau
staff and then we received a number of questions from members of the audience, which we will
try and get to today as well. So let’s start by talking about the parts of the proposal
that deal with contact caps and different communication channels. As April mentioned,
the proposal contained on a cap on the number of attempts that can be made to call a consumer
during a given week, and also has a separate cap on the number of times that a collector
can speak to a consumer in a week. At the same time, it has some provisions allowing,
under certain conditions, the use of other more modern forms of communication, like email
or text message. And so I’d like to start by asking how this combination of proposals
would—let’s start on the industry side and ask how it would affect collectors’ current
policies and procedures and their ability to collects debt. So who on this side would
like to start? I was voted, David. Thank you. With regard to call caps, as we continue to
review the proposed rule, we’ll be analyzing the new proposed limit of 7 calls per week.
Whether or not it’s been based on rigorous cost benefit analyses and supported by clear
data, it’s one of the things that, you know, within 24 hours has kind of bubbled to the
surface for us. We don’t believe that one size fits all in debt collection. The number
of times needed to connect with the consumer may vary depending on the market and the type
of debt and age of debt and the extent to which it’s been worked, et cetera. So arbitrarily
limiting phone contacts does not really serve consumers, in our mind. The ability to connect
with the consumer is in their best interest, and impeding this will likely force creditors
to turn to litigation or credit reporting instead. The simulation research used by the
Bureau to arrive at a specific number is acknowledged, even by the Bureau, as best a rough approximation
of the effects of the proposed provision, both because it relies heavily on the assumptions
made and because it’s based on the data of one particular debt collector. And so it may
not be representative of other firms in the industry, and that is quote by the Bureau.
So, obviously, I think there is a little bit of room there for discussion. As a not-for-profit
trade association we will be seeking comment from our members and then, of course, communicating
those comments, in large part, in one comment back, I guess, a response back to the Bureau.
Let’s see. I would just also add while there is no question that consumers dislike the
annoyance of illegal or fraudulent robocalls, the Bureau must work with other regulators
such as the FCC and the FTC to do more research on consumer harm that results when legitimate
calls are impeded. That includes important information about your financial health and
safety that could impact your ability to access credit. So at a high level, that would be
our initial comments for now. Hi. I would just reiterate the importance of consumer
communication, in that the ability for the collector to communicate with the consumer
is paramount in resolving the issue, in determining if there is any dispute to determining if
there is an identity theft situation. So limiting that communication is difficult and is often
harmful to the consumer. The other thing I would just bring—and again, we just saw
the rule yesterday—is that often times when a debt buyer or a collection agency gets an
account it may come with 7 to 10 phone numbers. And so if you are limiting the calls to seven
a week, you may take well over a week to even call each phone number, to determine what
is the good phone number. And so, you know, I think our comments, when we go back and
analyze it and speak to our members, and maybe we can come up with a solution on how best
we can actually get to that consumer in the most efficient way. I would add just a few
points. One is I think no one would prefer, more than debt collectors, to be able to send
a letter and be responded to, and that would be that. One communication—that would be
the ideal. Unfortunately, it doesn’t tend to happen that way. It’s a huge step to have
opened up the opportunity to be able to communicate in a way consumers prefer. So they may not
prefer phone calls, and now being able to communicate in other ways might be helpful.
But I think notwithstanding the fact that any bright line may not apply as ideally to
every single debt type, that is really hard to find that number. But, nonetheless, having
clarity is really helpful. So having clarify versus no clarity is good. So let me just
turn the same question or topic around to folks on this side of the table, and think
about this from—April, you raised the question—from the perspective of how you feel the combination
of the limit on number of calls per week, number of actual voice communications per
week, plus permission for some other types of communications, under clear guidelines,
how you feel that would affect consumers and the ability to communicate with respect to
debts. So, as I mentioned, we work with clients around debt management plans. On average,
there are about seven to eight unsecured debts on that debt management plan, and that doesn’t
count student loans, auto, possibly a mortgage. So if you take that seven and you multiply
it by seven a week, or seven or eight, you’re already starting at 49 to 56 calls a week,
and then if you add any of the other debt it, student loan in particular, you are now
up to 70, 80, 90 calls a week. I don’t know about you but I don’t answer my phone anymore
when I can’t identify the number. In fact, a State Senator called me yesterday from Pennsylvania.
I didn’t answer his call. So when I called him back I kiddingly told him, “I was just
talking to the counselors about debt collection calls, and you were my Exhibit A on why we
don’t answer calls anymore when we can’t identify the caller.” So I don’t even see how that
many calls is going to have impact and get people to answer the phone. And you mentioned—this
was written in the day of telegrams, so I’m only going to take it back 10 years to the
day of the actual home phone. We had a client, 10 years ago, who started the debt management
plan, and the reason they came in to clean up their debt was because of the debt collection
calls they were receiving, at home. They said, “I couldn’t have holiday dinners. I couldn’t
invite people into my home because the phone was ringing constantly with collection calls,
and leaving voicemails, and it was too embarrassing.” So can you imagine that in today’s world,
with your cell phone being carried around, whether it’s ringing or buzzing, nonstop,
from collection calls? So I think that, you know, limiting it to seven, I would implore
you to go lower. Sure. I mean, I think I share some of Patty’s same concerns. I know I share
some of Patty’s same concerns. On Monday morning I was meeting with a young mother, talking
about a mortgage foreclosure case that she was facing, and we were looking at her credit
report together. And she, like a lot of people—I’m sure many folks in this room as well—had
a lot of student loan debt. And she had attended a Philadelphia-area university—not this
august institution but another one down the road—and she had about $120,000 in student
loan debt with eight different account numbers. Now under this proposed rule, debt collectors
can call her 56 times per week on the student loan debt alone. She is facing a mortgage
foreclosure. Her priority right now—I mean, if you disagree with it, and I know there
are many people from the industry in the audience—you can disagree with that if you want about whether
her priorities should be paying back her student loan or whether her priority should be keeping
her home for her and her kids, but she was choosing to keep the home for her and her
kids. And if you don’t have the money, you don’t have the money. Now for her, the 10th
call is not going to change that, and the 20th call is not going to change that, and
the 30th call is not going to change that, and the 40th call, and the 50th, and the 56th
call is not going to change that. I think one of the things that Stephanie said a moment
ago is that communication is paramount, and I think we would agree with that as well.
But at what point does communication just become harassment, and I would argue that
seven calls a week, per debt, per account, crosses the line between communication and
just outright, unnecessary harassment. Let me pursue the conversation a little further
on this part. Part of the proposal says that consumers can opt out of receiving communications
via particular channels, so they could say “don’t call me on this cell phone” or “don’t
call me at work” or opt out of communicating at particular times, and that is on top of,
of course, the cease communication rights the statute had. To what extent do you think
those provisions of the proposal would ameliorate some of the issues you’ve talked about? And
I’ll come over here in a minute and ask you how you think that’s going to affect your
ability to operation collections systems. So I would say that I think it’s a step in
the right direction, absolutely, to be able to turn off particular communication channels.
So being able to say “don’t call me at this number.” One significant concern I had in
my admittedly cursory review in the past 24 hours, is how are consumers going to know
that they have this right? One thing that is no longer included in the proposal, that
was dropped from the outline from 2016, was a statement of rights, which would have hopefully
outlined this type of right. And so one significant concern is how is the consumer going to know
about this and be able to use this? I think another very frustrating thing for consumers
is if you have multiple debts and collection you may be dealing with multiple different
collectors, and it can be very frustrating to feel like, “Oh, well, I just told you don’t
call me at this number,” and perhaps it’s a different debt collector, and so you can
be cycling through a lot of repetitive conversations or you could be dealing with a situation where
your debt is being transferred from one debt collector to another. So I think that it’s
a step in the right direction but I think that there are a lot of questions about implementation
and how to make it a really usable tool for consumers. So let me, unless— Well, I just
want to also maybe take that opportunity as well to talk about the new proposal for the
limited content messages. So under the rule there is new latitude to leave messages about
your debt with third parties, in so-called limited content messages, and I think that
this also goes too far. It allows debt collectors to leave messages, so-called limited content
messages, with third parties about a debt, the idea being that because they are limited
in content that it doesn’t necessarily disclose that the person is in debt, right? But the
limited content message that would be allowed—and if I could just read this really quickly,
and if you’re following along at home this is on page 495 of the proposed rule— Commentary
on page 523. There you go. It says, “Hi. This message is for Sam Jones. Sam, this is Robin
Smith. I’m calling to discuss an account. It is 4:15 p.m. on Wednesday, September 1st.
You can reach me or Jordan Johnson at 1-800-555-1212 today until 6:00 p.m., Eastern, or weekdays
from 8:00 a.m. to 6:00 p.m., Eastern.” Is there anyone in the room who would think that
if they got a message like that that it wasn’t from a debt collector? It’s so clear that
this is a message from a debt collector. I think allowing these types of messages to
be used in the manner in which they’re being proposed strikes against the consumer’s privacy.
And just one quick thing, and it’ll be quick. As our clients—another experience that I
heard about yesterday is they often—so if I were to say, “Stop calling me at this number,”
they have seen instances where they have called the individual’s mother, and they’re like,
“Oh, we’re trying to track down.” So now you have this person feeling guilty that now my
mom is getting phone calls about my debt collection, and it’s forcing them to get back to them.
So just stopping that phone call itself, or them saying, “Stop calling me,” they are going
to hit other angles which will put that person in a precarious situation that, you know,
leads them to other challenges as well. So let me, again, swing back here, and ask if
you want to comment either on the question of the parts of the proposal that deal with
control over channels or types of communication or the limited content message issue that
Michael just raised? Yes. Thank you. So I think just sort of to maybe take it back up
a little bit higher, at a higher level, I think that there is nobody in the room who
would disagree with the fact that legitimate debt should be repaid, and that, in general,
consumers do not go into debt with the intent not to repay. As the Director mentioned, I
call it a personal recession. Something happened in their life that caused them to not be able
to repay these obligations, as they anticipated, and want to. But I would also mention that
in the United States and the U.S. credit-based economy that credit is a privilege and not
a right, and with a privilege comes some responsibility. And so when a consumer ends up with a defaulted
account or in debt collection there is some obligation to communicate with the person
who is collecting a legitimate debt. So I would say that, you know, whether an consumer
wants to receive the phone call, or doesn’t want to receive the phone call, really is
a byproduct of the fact that the consumer is in a situation that needs some resolution,
and communication is the key to getting to that resolution, whether it is a reduction
in the account, a payment plan. Whatever it is that works for that consumer, that only
happens through communications. I will say that we, our certification program, does have
a standard that our members have to comply with, and that is that once a consumer indicates
that the account is in dispute or is a result of identity theft or fraud, that that account
cannot be sold or resold or collected upon until the issue is resolved. And I will tell
you that standard came directly out of communication with the CFPB staff, realizing that a consumer
does not want to be in a position where they work with a collection agency, they let them
know that it’s defaulted or whatever, then that account gets sold to somebody else and
they have to start the communication all over. So that account does not move on. And so I
think that safeguards such as that helps the consumer to not have to repeat their story
over and over. I’d like to add something about, a little bit addressing what Michael talked
about, the limited content message, and really the bigger issue of privacy. You know, protecting
the privacy of the consumer, as it was conceived in the FDCPA, it was a different world at
the time. I’m not suggesting privacy should go out the window at all. There is a new reality,
though, today, where people are really demanding transparency at the same time as we are demanding
privacy, in a way that just didn’t exist then, and it’s very, very difficult to balance.
You know, people want to know who’s calling and why. I want to know who’s sending me an
email. I want to know who’s sending me a text. I want to know who’s sending me a letter.
And the rules around debt collection really sort of require that debt collectors kind
of look shady, because you have to send an envelope without your name on it, if you name
suggests you’re a debt collector. You know, you can’t have a caller ID if it just betrays
you as a debt collector. And so while we want to follow the rules and disclose and not disclose
at all the right time, it does make you look shady, right? And so there’s this one industry
that’s really in quite a new Catch-22 situation that didn’t use to exist. So, you know, leaving
a voicemail, yeah, if you’re getting so many of them I could see the volume being an issue,
but simply the fact that you’re getting a message, which, by the way, should cut down
on the volume, because if you can’t leave a message then you’ve just got to call and
call and call until they answer. So which one are you going to go with? But I think
that privacy versus transparency discussion is huge on a lot of front. You’ve covered
most of what I wanted to say, but just a couple of comments. Nothing beats an old-fashioned
conversation by phone with a consumer, and I imagine we’ll talk about electronic means
of communication here in a little bit, but still, phone calls are still omnipotent. The
ability to communicate live with a consumer really helps solve problems. And, at the same
time, there is no incentive for a debt collector to indiscriminately call and call and call,
and waste time and efficiencies in their own organizations. And so I think we have that
joint responsibility to make sure that, on our end we’re not taking too many liberties
with those phone calls, and on the consumer’s end, please answer the phone. Now one other
thing that came up a little bit earlier, that I’d like to dispel a bit, and that is this.
An example given—I think it was multiple debts. Well, most collection agencies pool
their debts and don’t call every account, one account at a time. And so I’m not disputing
the fact that a lot of consumers get a lot of phone calls, but almost never does a collection
agency contact a consumer, or attempt to, for each individual debt in their system.
Maybe student loans, but I think that would be about it. And then, ultimately, the consumer
still has the right to seize or file a dispute. So we just urge consumers to pick up the phone
and have a conversation with a collector, because we’ll get a lot done in a short amount
of time and reduce future phone calls. So let me ask one more question on this topic
before we sort of move on, and that is really, we’ve talked about contact caps, we’ve talked
about control over particular methods of communication or time of communication, and we’ve talked
about limited content messages. How would you improve these aspects of the rule? We’ll
move later to other topics. I don’t want to ask sort of an omnibus question, but for the
areas we’ve been talking about, what would you recommend to improve or change these provisions
that we’ve been talking about so far? I don’t know if anybody, since we started on my left
before—Mark, anybody on this side have recommendations you would make for changing this part of the
proposal? I think for RMAI we would like the opportunity to go back to our members, do
some data, do some surveying to find out, you know, how many calls they need to make
and when it’s sufficient and when it’s over the line. So I think at this point it would
be too early for us to comment. Sure. Thanks, David. Yeah, I would just add to that, to
a comment made earlier, the different types of debt really don’t give rise to a one-size-fits-all
call cap. A fresh—and fresh, what I mean is a very early, recently charged off health
care debt, for example, the consumer will behave much differently than a tertiary credit
card account that maybe has been sold a time or two. The number of attempts, the effort
it takes to get a hold of that consumer is very much different in those two bookend examples.
So we, too, will be talking to our members about data and trying to come up with some
alternative ideas to offer back through comment on how to handle potential call caps in different
types of debt. And how about over here? Do you have specific recommendations at this
point, or do you want more time to digest first? So, I mean, I think a lot of our recommendations
remain the same as those that we’ve put out there before, that we would like to see lower
call caps. We’ve suggested no more than three calls per week per collector, calling to the
consumer, not per debt. We’ve also opposed the exemption for limited content messages,
opposed exempting them from communications. So we think all types of communication should
be included. We agree with the proposal where it’s stated that once you’ve talked to someone
you shouldn’t be able to talk to them again for another week. We think that that is a
reasonable limit that is in the proposal now. So I think that those proposals haven’t changed,
and, you know, as I said before, being able to stop calls to a particular communication
channel, whether it be phone calls or other types of communication channels, we continue
to believe is very important. We have plenty of other comments on other portions of the
rule as well. Do you want us to go into those or— Let’s wait, when we come to other topics.
Okay? Yeah. Can I just say one other thing that hasn’t come up is that my reading of
the proposed rule was that the seven calls per week would also apply to third parties
who are being contacted for location information, and that seems really, really high to me,
to have somebody who is not involved in any way with this, who is just getting contacted,
potentially repeatedly by somebody who is trying to ask about the whereabouts of someone
else, to be able to collect their debt. Okay. So let’s switch down to a different part of
the rule, the disclosure or the transparency provisions of the rule. So the proposal contains,
as I’m sure you’ve seen, requirements for what’s called the “validation notice,” including
provisions that would require itemization of the debt, more information, account number,
more information about the creditor, and some plain-language disclosures about consumer
rights, and what we call a tear-off to enable consumers—how they respond to the debt.
So really I want to talk about, first, how well you think the current system of the validation
notice to consumers receiving are working, and how you think the proposal might help
in making consumers better able to recognize debt and to understand their rights. And,
Michael, since you raised this in your opening maybe we’ll start with you on that. Okay?
Sure. And I guess first just to start by saying that, you know, in theory, the idea of a model
form for validation notice with clear and conspicuous language I think is one that many
consumers would welcome. The model form for validation notice that was included in the
proposed rule—and again, for those folks that are following along at home, that’s page
491—has a lot of problem, a lot problems, and I think a lot of problems that could be
fixed fairly easily. In the preliminary proposal, back in 2016, it included a lot of things
which were stripped out of this one. So, for example, in the preliminary proposal of 2016,
it had language that said if you dispute this within the next 30 days, here’s what’s going
to happen, and then it said, if you dispute it after 30 days you can still dispute it,
but this is what’s going to happen. In the new proposed form they take out that second
bit, making it sound like if you miss the 30 days to dispute it, you’re done for. There’s
nothing you can do. In the old draft it explains why this company is collecting this debt for
that original creditor. That part is taken out. In the original proposal it was proposed
to include a know-you-debt-collection-rights brochure. That has been taken out. And it’s
really a missed opportunity to educate consumers about their rights and responsibilities for
debt collection by not including that information. There used to be options that said, you know,
I already paid this debt it full, or I settled it, or you are not the right person to pay.
Those things have been taken out. And so if a consumer gets this notice and believes one
of those two things, there’s no option there to explain that. There is, I should note,
a Spanish translation error. It says [speaks Spanish]. The CFPB got it right on the top,
where it says [speaks Spanish] but “forma” is the wrong word to use down there, so I
think that needs to be corrected. And I hope that the font size, which was included in
here, which looks like to be about 8-point font, is just for the formatting, but that
needs to be increased as well, especially for some of our clients, like myself, who
have bifocals or who have problems reading, who won’t be able to read that as well. You
know, the bigger picture here, though, is it’s confusing to both demand payment but
also to offer options to dispute the debt. So if somebody sees this, you know, as Stephanie
said a moment ago, or maybe it was Janet—sorry, my notes were unclear—you know, consumers
who owe valid debts that have a legal right to be collected should pay their debts. I
don’t think that’s a terribly controversial thing to say. But we would not want to trick
a consumer into sort of reviving a debt that was time-barred because they’re trying to
do the right thing, even though they dispute the fact that they owe this debt. And I think
we should spend some additional time trying to parse out on how we can make this validation
letter a little better. Let me turn to Mark or Stephanie, Jan. Do you have any comments,
thoughts, about the validation notice, ways to improve it, or concerns about it? Sure,
David. Just briefly, the lack of clarity on the wording of letters and the content of
voicemails has been the bane of the collection agency for a long, long time, with thousands
and thousands of frivolous, meritless lawsuits being brought against agencies, simply for
wording ambiguities. And so we, as an association, applaud the effort to come to some sort of
agreed-upon language in the validation notice that can be used and relied upon by debt collectors.
Do we think it can be approved upon? Yes, and we look forward to that conversation throughout
the comment period. But at a high level right now, we’re very glad that that topic has been
raised and addressed. I would add one comment about disclosures. Over the years, as we tried
to—actually, we worked with some consumer groups years ago on what the actual validation
notice would say, and we learned a number of things. One is, it’s a pretty sophisticated
concept—dispute, validation, you know, these terms are not sixth-grade terms. And so that’s
challenging to begin with. What we also learned was the more disclosures you have, as a group,
the harder it is to understand the whole. So it just raises the grade level every time
you add more disclosures. Even though each individual disclosure may be understandable,
the collection of them makes it harder. So, you know, we definitely recognize the challenge
to include disclosure after disclosure after disclosure, so that’s difficult. What I do
notice is that there is a link, of course, if you deliver it electronically, especially,
to the CFPB, love, that you can send people to a trusted source that doesn’t appear biased,
that can provide things like a bill of rights of consumers, or, you know, more information
about your rights. That’s a good thing. I think anybody would be happy to be able to
have a place that we know you can trust to send consumers to get consistent information,
and that training and education could be consistent across the board. So those are my comments.
Yeah. I would concur, Stephanie, that the inclusion of a website with consumer rights
is a key component, and I think a very welcome opportunity. I don’t know how many of you
get your credit card bill at home, and you pull the credit card bill out and you take
all of the rest of the whatever, 20 pages of disclosures and privacy, and you toss them.
So I think you are dealing with a situation where you need to make sure that what you
have is important information, it’s digestible, and that other information is certainly available.
I can assure you that if a consumer was confused or didn’t know, they can certainly call the
collection agency and get clarification, but a website at the CFPB is ultimate. I am thrilled
to see that some of the data—I am thrilled to see, and thank you, thank you, thank you
for a model notice. We want to work on a notice that meets the consumer need but isn’t just,
as Mark said, just a document that is subject to being sued for leaving off a comma, saying
“the debt” instead of “a debt” and things like that. Those technical violations of the
FDCPA do nothing to help the consumer, it doesn’t provide any more understanding for
them, and it certainly doesn’t help the industry or move anything forward. I’m happy to see
many of the data items that are included on the model notice, especially the brand of
the credit card. I think sometimes a consumer doesn’t recognize the debt because they might
call it their Macy’s card, or their Home Depot card. They don’t realize that that is, you
know, a Citibank card or something like that, underwriting. So I think that’s a key piece
of information, and I would note that in our certification program our standards do require
the 14 points, that you do include. So I really appreciate you including those. Thank you.
So I’m going to move now to some of the questions we received from members of the audience.
Some of them are quite general, some of them are quite specific and aimed, and I’ll try
and cover some of each. And I’ll assure the panelists that at the end I’ll give you sort
of a last opportunity to cover anything that we haven’t gotten to that wanted to raise,
in terms of concerns or suggestions. Okay? So the first question I want to raise is one
of the more general questions, and the question is, do you anticipate that consumer debt collection
complaints will skyrocket if the proposed rules were to be adopted as proposed? And
the floor is open to anyone who wants to grab that one. I’d just say that clarity and clarity
in the rules, I would expect complaints to go down, because everyone would understand
what the rules of the game are. I would say everyone in industry and consumer interface
are groups like ours. I’m not quite sure the consumer would clearly understand all of these
rules, and that would impact their ability to understand how they pay back debt and how
they manage the debt load that they have. So I don’t see that they would go down, and
potentially they could go up. Yeah. I would just say that the data we received from the
FTC last year showed that the number of calls was the number one complaint category that
they were collecting from all different sources. And so certainly I would anticipate that trend
would continue and even grow with this proposed rule. Okay. Next question, of a more specific
nature. And this is a question about the parts of the proposal regarding time-barred debt,
and specifically the proposal says that collectors cannot sue or threaten to sue on debt that
they know, or should have known as time-barred. The question that’s posed is whether that
represents a weakening of the current standard and how it would affect consumers. So who
wants to—Michael, it looks like you’re loaded for bear on this one. Go ahead. In Pennsylvania
it would be a terribly weakening of the standard, and in the entire third circuit, which is
where I practice, which is the rules that I know. And maybe this actually ties into
the previous question, because I think that if the know or should-have-known proposed
rule does go into effect that, indeed, it would increase litigation. So current, in
Pennsylvania and in the third circuit, our courts have held that filing a lawsuit or
threatening to file a lawsuit to collect on a time-barred debt violates the FDCPA full
stop. It’s strict liability. But this proposed rule weakens that standard and introduces
lots of ambiguity by stating that it only applies if the debt collector knows, or should
have known, that the statute of limitations has expired. So it almost—I mean, I don’t
want to overstate this, but it almost grants immunities to debt collectors who sue on these
debts, and incentives the debt buyers and debt collectors to know less about the debt
that they’re purchasing, not more. You know, as a consumer rights attorney, it means that
I have to now prove what is in the head of the debt collector and to find out whether
they knew, or should have known, that it was time-barred or not. It’s not enough to prove
that it was time-barred. I’ve got to sort of like get in their head. And so how do I
do that, as a consumer rights attorney? I have to depose people, right? I’ve got to
seek depositions of corporate officers. I need to seek depositions of collection agents.
I need to prove their knowledge. So there’s lots we could say about time-barred debt,
and I don’t want to take up the whole rest of the panel on this question, but that part
of the rule would, in fact, you know, increase the litigation, and it would increase the
costs to our consumers, because they would need to hire lawyers. We can’t do all of these
cases as free legal services folks. And I think it’s something that the industry doesn’t
really—I can’t imagine that the industry wants this rule, because it would increase—and
maybe the lawyers in the room who are representing industry are like, “Yes, we want this rule,”
but I don’t think you want that either, because it would increase the exposure for your clients
on this front. So, you know, we believe, as consumer rights advocates, that the CFPB should
explicit prohibit debt collectors from filing lawsuits or threatening to file lawsuits on
time-barred debt. Keep the current rule as it currently exists, in the third circuit,
at least. But it also should prohibit any attempts to collect on time-barred debts as
consumers may be misled about the legal status of the debt. There shouldn’t be one rule for
like in-court collections and another rule for out-of-court collections. It should all
be the same rule. I think that would set up clear rules of the road, clear expectations,
for both the industry and what consumers can expect. So again, to my right here, comments,
both on the proposal, with respect to time-barred debt, but also now on the question that Michael
raises, the broader question of whether the proposal should go further and restrict collection
efforts with respect to time-barred debt? David, I was going to respond to your first
question, and that is simply, I think, to us, is that subject of time-barred debt is
pretty complicated. I think it’s one that we should slow down on and really do a deep
dive in, not the least of which is because there are different statutes of limitations
in different states. And so, all of a sudden, now with the transient nature of consumers,
what state statute applies? Incur a debt in Pennsylvania but move to California—what
does that mean? And so, to me, it almost seems like it’s a states issue more than a federal
issue. But we look forward to more conversations about it, because I think it’s a valid conversation
to have. I would just add, also, the complication of determining which statute does apply. But
I would add a couple of comments are on certification programs. So our members are prohibited from
bringing legal actions on time-barred debt, and also, we have sort of a slang of “once
out of stat, always out of stat.” So minimal payment does not restart the statute of limitations,
and so I think that’s a real consumer-friendly standard that we do monitor. I would suggest,
though, I would be remiss if I didn’t say that extinguishing debt or expunging debt
after the statute of limitations also has a lot of unintended consequence of having
a consumer with a debt on their credit report, that they can’t pay it off because it’s been
expunged, and things like that. And, quite frankly, there is personal financial responsibility
to repay your debt, whether the statute of limitations has run or not. I think that that
really just takes sort of tool out of the toolbox, versus expunging the debt. I guess
I would be remiss if I didn’t also note that the Bureau has indicated that it’s intending
to do further research with respect to potential disclosures that would be given in connection
with the communication of collection of efforts on time-barred debt, and has indicated that
if we conclude that there are additional proposals that are worth putting out there we will put
that out and invite comment on those. So that remains an open issue from the Bureau’s perspective.
So here is a very general question we received. How do you think industry companies will be
able to comply with the new rules? And let me start over here and see if any of our panelists,
from an industry perspective, have thoughts on that. Sure. Thanks, David. I think that’s
a really good question. I appreciate the fact that we’ve got a 90-day comment period, and
then I think I read 1 year for implementation. I think that’s going to be really necessary.
I think debt collectors are pretty good at adapting. It’s been a while, but I know that
back in the ’70s there was a lot of kicking and screaming, and now we want a rule. So
I think our members are eager for that, and members of industry are for it. I would also
say, though, however, that three-fourths of the members of ACA International have less
than 50 employees, and so they don’t have a lot of resources and a lot of brain power.
They don’t have R&D departments. You know, it’s difficult to effect change. And so the
1-year period, I think, will be very beneficial for members of our trade association to adapt
to the final rule, whatever it ends up being. I would just say that industry has been looking
forward to this rule, and I would say that all of us have been putting on a lot of educational
programs to bring our members up to speed. Our certification program, you know, requires
detailed policies and procedures. And so I think that they understand how to comply.
They have chief compliance officers on their staffs who, I think, will, you know, certainly,
starting next week, probably start looking at what changes need to be made, what policies
have to be changed. Yeah, 538 pages of things to implement—we just didn’t quite cover
it in the last 24 hours. But I think, yes, the industry has been begging for clarity,
and so we would be silly to say the industry would not be able to implement, generally,
these rules. They are, you know, anxious to have clarity and to move on that. And will
there be certain things that would be difficult? Sure, but we’ll raise that in due time. I
just wanted to make sure. Does anybody—good. Okay. So the next question, as framed as a
question for, really, about the proposal and the Bureau, so we’ll try and take that. But
then it opens up a conversation we can have. So the question is whether the proposal would
change, in any way, the definition of a debt collector, or the interpretation of the definition,
as set out by the Supreme Court’s decision in Henson v. Santander Consumer USA. I’m going
to ask my colleague, Tom Paul, to just address that from a factual matter, in terms of the
proposal, but then I invite the panel, if you have thoughts as to whether the proposal
should—are there areas of confusions with respect to who is and is not covered that
you think the proposal should address. We could have a little conversation about that.
Sure. Thanks, David. You know, in the rule what we made a conscious decision to do was
track much of the statutory language from the FDCPA to make sure that it was covered.
There are some circumstances where we thought it was necessary to interpret that language
and incorporate it into the rule to serve particularly a policy goal. But for the most
part what we did is essentially use the same language verbatim from the FDCPA in the rule,
including as to the definition of debt collector, and by doing so, essentially, we are incorporating,
like, for example, the Supreme Court’s decision in Henson. I think the issue that might be
useful to hear from the panel is are there other areas where essentially what the proposed
rule does is cut and paste from the FDCPA where there have been court decisions or other
interpretations where having more specific incorporation of interpretations into the
rule text would be helpful. So, okay. I have this specific question about the definition
of debt collector and Tom poses an even broader question about areas where the proposal incorporates
FDCPA language, where you think we might provide more clarity. Let me start here. It’s only
be 15 hours and 20 minutes since the rule has been released. But you’ve quoted us from
pages. Sure. I have my book up here. Did you read this left to right or right to left?
No. I appreciate the opportunity that the Bureau will provide everybody with 90 days,
that’s published in the Register, and I’m sure, with April and Patty and other folks
throughout the country, that we’ll be responding. I don’t know, although April probably knows
the answer to that. I don’t know the answer to this question. In fact, I kind of wanted
a redlined version of the proposal so that it could be red if it was different and black
if it was exactly the same. So I guess I have to go create my own redline. But I think that,
you know, Henson v. Santander, the important thing to note is that buyer coverage is still
available under one prong of the definition of debt collector, and my quick reading was
that nothing in what was proposed yesterday would change that. And, you know, the other
Supreme Court decision that addressed the definition of debt collector was, of course,
the recent Obduskey decision, and I didn’t see anything that seemed to alter any of that,
but again, I would have to go back and check more details. Actually, you are correct that
there is not any specific language in the proposal that deals with either of those two
cases. Mark, anybody, anything you want to add on this question? I would just say that
for the organization representing the debt buyer, I don’t think there was even one second
that we believed that we would no longer be covered by the FDCPA because we certainly
under the primary purpose. We’re nearing the end of our time. So let me give everybody
a last chance to, I guess, anything you want to add, but I ask you to focus on ways in
which either things we think we haven’t talked about where you think we got something right
and you would like to make sure it sticks or things where we missed the mark and you
want us to be rethinking about. As indicated, there is a comment period, and we’re open
to all those comments, but at this stage, based on your first review, things we haven’t
talked about where you would like to call to attention and suggest, as I say, stick
or change. Since we begin right to left, why don’t we start left to right here. Michael,
if you will start. Sure. I’ve said a lot of the specifics that my colleagues, Laura Smith
and Carrie Smith and I and others at the Community Legal Services have been talking a lot about
regarding this issue. I guess one comment on context, which is that Community Legal
Services, most of our clients are people of color, and Philadelphia is a majority minority
city, and I think I would be remiss if I didn’t mention at some point during this panel that
a disproportionately high number of people of color have debts in collection. In Pennsylvania,
for example, 60 percent of residents of predominantly non-white ZIP Codes have a debt in collection
on their credit report, while only 26 percent of residents of predominantly white ZIP Codes.
Especially as I look around in this room and I think through about who our clients are,
I felt some obligation to at least mention the disproportionate effect that debt collection
rules and debt collection in general have on people of color in the United States and
in Philadelphia, where we work. Thank you, Michael. Since we partner so well together,
I appreciate you bringing that point up because our client base is very similar. The one thing
I didn’t hear come up was about the opting. Right now, you have to opt-out of text and
email, and I would prefer that you have to opt-in to allow that. I think one of the words
that was used is you can easily unsubscribe. I don’t know about you. I went to a Tampa
Ray game when I was on vacation. So I’m getting communication from them because I bought the
tickets online. I, for the life of me, got another email today. I cannot unsubscribe.
So those marketers have figured out in a lot of instances—and I know everyone in this
room has had that experience. You keep trying to unsubscribe. Send them a telegram, Patty.
I may have to. I may have to. So, quite frankly, there will be ways that will be found around
that, and that’s my concern, and I think that the consumer should be in control of their
phone and of their email and should have the option to say, “Yes, you can do that to me.”
So I have a “keep” and a “do differently.” So, in the “keep” category, something that
we haven’t talked about yet today is the prohibition on parking debts on credit reports without
first notifying the consumers about those debts. I think that’s really important, in
particular. It comes up in the context of medical debts a lot with smaller debts that
are first reported on a credit report without the consumer having actual notice and an opportunity
to evaluate that debt. So I very much appreciate that being in the proposed rule. The issue
I wanted to highlight in the “do differently” category is these electronic disclosures via
hyperlink, and I’m still sorting out the flowchart and exactly everything that was in there.
But we just have real concerns about the fact that not everyone has easy access to the internet
on a computer with a printer, where they can go and print out their validation notice and
sit there and look at it. Some people are going to have sporadic internet access. Their
primary access is going to be on their phone. Even if they do click through, they’re going
to be trying to read that 8-point font on the phone. We just have real concerns about
disparities and access and providing validation notices to consumers who haven’t opted in
specifically to receiving that electronically. Jan? Yeah. I think that, certainly, the clarity
and the safe harbors and the models are welcome from the industry who wants nothing more than
to know what the rules are so that they can abide by them. I would suggest that the devil
is in the details, as everyone has said, and so since we haven’t had a chance to really
look at it, I think that once we do, I think we’ll all have—I think they were all constructive
solutions to the agreement that legitimate debt should be repaid. I would say keep the
Foti fix, as the industry has dealt with that for over a decade now, a lawsuit on both sides,
and I think it’s very refreshing to know that there is a safe harbor in a message, a voice-mail
message. I would echo the things that Jan said. I would also add, first of all, we appreciate
how clear, how much thought there has been behind the rule and how much of the thought
is articulated in the rule, which is very, very much appreciated. It will make it easier
to respond. What we also really appreciated was the intention to work with advisory opinions
in the future. We have been wanting to have advisory opinions, and that will be very valuable.
There is one thing that is not addressed, as is my common bailiwick, this I just want
to bring up. So there’s a dynamic in debt collection, which is that in order to prevent
disclosure to a third party, you have to confirm you’re speaking with the right party before
you can disclose any information. One reason we’ve been so anxious to be able to communicate
with those consumers who wish to communicate electronically is because once you get in
a digital platform, what opens up are opportunities to authenticate the consumer that all kinds
of other companies have, like banks and other creditors, so they can determine that the
consumer is who they say they are, without the consumer having to give up their Social
Security number or something like that to a stranger. So those things can now happen
in the background, much less friction, much more comfortable. But when you’re on the phone
on an outbound call that collectors may do to consumer, what happens today is you start
out. You say, “Is this Stephanie Eidelman?” “Well, who’s this?” “Well, I can’t really
tell you. I need to confirm you’re Stephanie Eidelman before I can really tell you why
this is.” Well, you can imagine how this goes. “Well, if you could just give me your Social
Security number of your birth date, then I can tell you why I’m calling.” Well, no. So
the miracle that just occurred is that a consumer and a collector actually did get on a phone
together. It’s often cut short with bad feelings and hang-ups and probably a complaint filed
saying this was a scam, and it wasn’t. But that was actually a textbook example of a
debt collector following the law. So I would love to see—the FDCPA does not provide guidance
as to how to authenticate the consumer, and so creditors dictate this to their clients,
and they typically require things like confirmed last four digits of the Social Security number.
So one idea—of course, we could get into others, perhaps—is could you take the consumer’s
word for it. “Are you Stephanie Eidelman?” “Yes, I’m Stephanie Eidelman.” “You need to
confirm you’re Stephanie Eidelman. This is personal information.” “Yes, I’m Stephanie
Eidelman.” “Okay. Here you go. Now I’m going to give you the information.” The reality
is if I’m a roommate or a parent or a child, I may very well be able to give you the Social
Security number or birth date of someone I live with. So what did that really save us?
Just one thing here. I just would urge the Bureau throughout its continued work and finalizing
the rule to continue collaborating with the FCC on issues such as TCPA, call-blocking,
call-labeling. Those issues are going to continue to bubble to the surface, and to the extent
that our regulators can work in concert with one another, I think it will benefit both
industry and consumers because it’s a problem, and everybody knows it’s a problem. No particular
debt collection rule is going to make that problem go away all by itself. So I’m going
to urge you to continue your efforts there. That concludes our discussion. Let me turn
the program back to Tom Pahl. Sure. Thank you very much, everyone, for a lot of insights.
I really found it fascinating, especially after spending many, many years working on
this rulemaking. And I really look forward to the many public comments that we are going
to get in the future laying out a lot of your thoughts in even more detail and giving us
suggestions as to what we should do going forward, and so thank you very much to all
of our panelists for a very interesting, spirited discussion. With that, at this time, I would
like to invite our guest panelists to rejoin the audience, and I am going to turn over
the mic to Zixta Martinez from the Bureau. Good afternoon. My name is Zixta Martinez.
I serve as the Associate Director for the External Affairs Division at the Consumer
Financial Protection Bureau. An important part of how the Bureau helps consumer finance
markets work is to hear directly from consumers, from industry, from our federal, state, and
local partners, and from community advocates across the U.S. One of the ways that the Bureau
hears form folks is through events such as these. At these events, we not only hear from
experts in the field; we also invite the public to participate. A number of you have signed
up to share comments and observations about today’s discussion on debt collection. Each
person who signed up to provide comments will have about 2 minutes to do so. What we hear
from you is invaluable, and we want to hear from as many of you as signed up to provide
observations. So we ask that you please observe your time. With that, I will call our first
commenter, and please wait until staff brings you a mic. Our first commenter is Michael
Kraft. Thank you. Michael Kraft. I’m with the Consumer Relations Consortium. I just
want to say that in my initial review of the rules, I found them to be rather balanced,
comprehensive, and most importantly, I think it’s clear that the Bureau has listened to
all the stakeholders. And we very much look forward to working with the Bureau and helping
to answer the very many questions that you folks ask within the comments. Thanks. Thank
you, Mr. Kraft. Darnetta Arce? Good afternoon. My name is Darnetta Arce, and I’m here with
Community Legal Services. I’m here because my parents were a victim of fraud, and a bogus
debt basically that went back 30 years ago saying that they had a mortgage—that’s just
my comment. I’m just making a comment that they were a victim of a bogus debt that stated
that they owed a mortgage over 30 years ago. They never received a notice, never made a
payment, never received a billing statement, but we had to go through a whole lot of things
to get this straightened out. My parents are 93 and 80 years old. My father is now blind.
So he couldn’t even see the report, and he has hearing loss, so he can’t hear you over
the phone. They don’t use email. They don’t use text. So the only way these organizations
were getting in touch with them was by mail, and it looked bogus. I saw it, and I’m fairly
educated. I read it, and I was like, “Oh, this is phishing. They’re phishing for information.
Don’t answer this. This probably is not legitimate.” However, they received another one, and that’s
when I got in touch with Community Legal Services. So I’m here, and I just think there has to
be something done different. Maybe these debt collector agencies need to be registered,
and their registration needs to be validated through Consumer Protection or something,
so a consumer can call and say, “Hey, is this person on your registry? Are they legitimate?”
That’s just my thoughts from today. I’m Carrie Smith. I’m a legal aid attorney with Community
Legal Services. I just wanted to highlight and thank the Bureau for allowing us to comment
today. As Darnetta explained, we are very concerned about zombie debt, and we are concerned
about the fact that the rule really fails to protect consumers who are dealing with
zombie debt in and out of court. And I think Doris and Adolph Muir, my clients who are
elderly homeowners here in North Philadelphia, they’ve been living in their home for over
40 years. They bought it with cash for $4,500 in 1978, lived there, raised a family, retired.
And then out of the blue in 2017, they received letters from a law firm claiming that a debt
collector they had never heard of was going to sell their home at a sheriff’s sale for
a mortgage they knew nothing about. The mortgage was purportedly signed in 1983 for $4,500.
It was supposed to be paid over 3 years with $255 monthly payments, and they have absolutely
no recollection of the mortgage, of borrowing $6,500. And for over 34 years, they didn’t
receive any account statements, no collection calls, nothing. And then, all of a sudden,
they were facing a foreclosure. In such cases, Pennsylvania law is clear. The mortgage is
presumed paid unless the lender has something other than the mortgage to show that it’s
unpaid. So, in effect, this mortgage was time-barred, but in the Muirs’ case, the Muirs had—the
debt collector had absolutely nothing other than the mortgage itself, and they suffered
great anxiety and stress over being subject to foreclosure action. After getting legal
help from CLS, we were able to get the foreclosure case dismissed, but under the CFPB’s proposed
rule, debt collectors can continue to collect on zombie debt like this. And they should
not. When debts are beyond the statute of limitations, there’s too much risk for errors
and deception, and we encourage you to strengthen that rule. Thank you, Ms. Smith, and thank
you, Ms. Arce, for your comments today. Michael Donovan is next. Michael Donovan here. I practice
in Philadelphia, and I’m also a member of the National Association of Consumer Advocates.
My comment, since I haven’t had an opportunity to read all the rule, is, What is the likely
impact on the bona fide error defense in the FDCPA? It seems to me that much of the language
of the rule will expand the opportunities for debt collectors, to assert bona fide errors,
either “Oh well. It as an error for us to call 14 times instead of 7 times” or “It was
an error for us to call on every one of these accounts” or “It was an error for us not to
unsubscribe you.” It seems to me that there needs to be some elaboration that the bona
fide error defense will not apply to certain aspects of this proposed rule, and a delineation
that says, “Sorry. You’re out of luck if you violate these minimum terms of this rule,”
you cannot assert bona fide error defense, and I think there’s a problem with that because
that may not be authorized by the statute either. So that’s my concern. Thank you. Thank
you, Mr. Donovan. We encourage you to publicly comment on the rule. We will fully and carefully
consider all the comments that we receive before moving forward with the final rule,
and as the Director stated, we look forward to hearing all points of view as to how to
protect consumers while at the same time continuing our work of protecting consumers and not imposing
unnecessary, undue, or antiquated restrictions on debt collection. Our next commenter is
Kenneth Bigos. Hello. Kenneth Bigos. I’m the director of the Affordable Housing Centers
of Pennsylvania. My concern is that once these rules have been implemented, how are we going
to be able to actively enforce some of the new rules and the fact of, like as Michael
was mentioning at Community Legal Services, the prevention of harassment of the consumers?
So that’s my concern. Thank you, Mr. Bigos. Colonel William Harris? Hi. I’m retired Army
Colonel Bill Harris with 36 years of military service. I’ve been an active volunteer with
the military veterans groups across the state since I retired 19 years ago, and including
the Pennsylvania Council of Chapters of the Military Officers Association which I served
as state president for 2 years. We represent 10,000 active duty National Guard, reserve,
retired, and former officers throughout the Commonwealth. We’re part of a larger organization
called the Pennsylvania War Veterans Council, which basically consists of all the veterans
organizations in the state. We represent 900,000 Pennsylvania citizens that are veterans. We’re
the fourth largest veterans-population state in the country. Our mission is to speak for
a strong national defense and protect the interest of all our men and women in uniform
whether currently serving, formerly serving, or retired. This includes their families and
their survivors. Listening to the stories about debt collection today, I am relieved
that our veterans do not have to worry about unfair debt collection regarding high-cost
payday loans. Fortunately, Pennsylvania veterans are protected by a strong state law that caps
the interest in fees on consumer loans and keeps predatory payday lenders out of our
state’s borders. For the past 7 years, the Pennsylvania War Veterans Council has been
working tirelessly to keep these protections in place. Every year, the out-of-state payday
lenders hire lobbyists to try to convince our state legislature to legalize high cost,
unaffordable payday loans in Pennsylvania. We then have to spend a significant amount
of time and resources to educate our representatives about the harms of those loans. The payday
lenders are certainly resilient. They’re the Whack-a-Mole of the debt creation business.
They just keep popping up. It’s a lot of work, but we do it because we know how devastating
300 percent interest rate loans would be to our vulnerable veterans, and being called
56 times in 1 week would really be devastating to them. We already know that payday loans
have harmed our younger active duty soldiers. In the mid-2000s, the Defense Department,
due to feedback from its military services, investigated the effect of payday lending
on our active duty servicemen and -women. They concluded that this financial product
had a negative effect on readiness and working with Congress passed a law in 2006 that capped
APR at 36 percent for these kinds of loans. Abusive debt collection and predatory loans
are truly a toxic combination. Thank you. Thank you, Colonel Harris, and thank you for
your service to our country. The payday rule is also open for comment, and we encourage
you to file comments. We will evaluate all comments received, weigh the evidence, and
deliberate carefully before we issue final rule. Thank you for being here today. And
I want to thank all of you who joined us today in Philadelphia. Thank you to everyone that
provided comments and provided questions during our panel discussion. Thank you to the panelists,
and thank you to all those watching via live stream at consumerfinance.gov. That concludes
the CFPB’s Town Hall in Philadelphia. Have anything great afternoon.

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