The Consumer Financial Protection Bureau officially delayed issuing new debt collection rules until at least December, after expecting pre-rule activities to last through this past April. The CFPB revealed the delay in an Spring Rulemaking Agenda update released late Friday.
The delay was widely expected given the CFPBs decision to move ahead with mapping out payday lending rules first. The Bureau didnt set a specific deadline to issue a proposal for payday loans but said that pre-rule activities are taking place this month.
The announced December date for collection rulemaking does not necessarily mean the CFPB will finalize a proposal for collection rules at that time. The CFPB is working on qualitative testing to determine what information is useful for consumers to have about collections and how that information should be offered.
While work on collection rulemaking has been slow, the CFPB expects the key agenda items will be the same - including deciding whether rules governing the collection of debts are warranted under the Fair Debt Collection Practices Act. Rulemaking could include language governing disclosures and address acts and practices of collection activities.
The agenda likely will include references to a CFPB survey sent to consumers to gather information about their experiences with debt collectors. The CFPB received more than 23,000 comments in response to its advance notice of proposed rulemaking on debt collection released in November 2013.
Next up in the rulemaking process likely involves convening a panel under the Small Business Regulatory Enforcement Fairness Act of 1996.
ACA International, the largest association representing collection agencies, has previously asked the CFPB to:
Recognize that the collection market is varied in the types of debt collected and the nature and size of the nations collectors encompasses a broad scope.
Appropriately tailor requirements to the specific circumstances for which any perceived problem exists when imposing additional regulatory requirements on industry participants.
Address outdated, unnecessary or unduly burdensome legal requirements under the Fair Debt Collection Practices Act.
- Strive for maximum clarity in any regulations to ensure the compliance obligations of industry participants are certain, and to develop model language, disclosures, forms and examples of compliant behavior to create appropriate safe harbors from regulatory enforcement and private civil litigation that seeks to exploit legal and regulatory uncertainty to the detriment of collectors.
Installment and Title Loan Rules
The Bureau's semiannual rulemaking agenda also mentioned a new rule to supervise certain lenders offering installment and title loans by January 2016.The CFPB was expected to look into this area because it was a topic of discussion mentioned in a proposal on how to regulate payday loans. But the CFPB's spring rulemaking agenda, posted on a blog, was the first time the agency set a public timeframe to issue a rule specific to such loans.
Isaac Boltansky, an analyst at Compass Point Research & Trading, said in a note, "With this release, the CFPB is announcing that it will begin the rulemaking process to designate certain installment and vehicle title lenders as Larger Participants and thereby expand its supervisory reach to those firms. While we had expected this rulemaking, and the payday [small business panel] outline intimated that it was on the horizon, this is the first public estimate of when the rulemaking effort will enter the next phase.
Kelly Cochran, the CFPB's assistant director of regulations, in a blog post, wrote: "We recently released an outline of proposals we're considering in connection with regulating payday loans, auto title loans and certain other longer-term credit products. We consulted with a panel of small lenders, under the Small Business Regulatory Enforcement Fairness Act, who may be affected by the rulemaking. . . . We plan to issue a Notice of Proposed Rulemaking later this year after completing additional outreach and analysis.
Overdraft Rules Many industry observers believe the CFPB ultimately will issue a rule on overdraft programs. "We're continuing to analyze issues relating to overdraft services on checking accounts," Cochran added. "We're conducting additional research and assessing whether rulemaking is warranted."Boltansky said he believes the CFPB's overdraft rule will focus on issues such as transaction reordering, general nonsufficient fund practices and overdraft opt-in disclosures.
Another area many observers believe will lead to rulemaking is on the use of mandatory arbitration clauses on consumer credit. The CFPB already has issued two reports that industry observers said indicated the CFPB's stance against mandatory arbitration. The most recent agenda sets pre-rule activities on arbitration for around September.
"We're now evaluating feedback we received and are considering whether rules governing arbitration clauses may be warranted," Cochran said.