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    "To Everybody from the Acting Director:" CFPB to Prioritize Debt Collection Rulemaking

    On Wednesday, the 24th of January, the Consumer Financial Protection Bureau (CFPB) staff received an email with the subject line: To Everybody from the Acting Director. The contents of this message solidify speculation that Acting Director Mick Mulvaney does indeed plan on restraining the Bureau's infamous and zealous approach toward consumer protection. The memo asserts that the CFPB will no longer exceed the bounds of the Dodd-Frank Act and will, instead, "exercise, with humility and prudence, the almost unparalleled power given to us to faithfully enforce the law in furtherance of the mandate given to us by Congress. But we go no further."

    Acting Director Mulvaney stresses that the CFPB serves the American people first – and, that means it must protect both consumers and financial service providers alike (Supporters of the CFPB will counter that there are plenty of entities going to bat for bankers, and the Bureau should focus exclusively on consumer protection). 

    The memo reiterates several points Mulvaney has made before: He intends to enforce consumer protection laws; He plans to review all investigations, current enforcement actions, etc.

    Mulvaney writes: "When it comes to enforcement, we will be focusing on quantifiable and unavoidable harm to the consumer. If we find it exists, you can count on us to vigorously pursue the appropriate remedies. If it doesn't, we won't go looking for excuses to bring lawsuits." 

    He continues: "On regulation, it seems that the people we regulate should have the right to know what the rules are before being charged with breaking them. This means more formal rulemaking on which financial institutions can rely, and less regulation by enforcement."

    In other words, this seems like pretty good news for your Financial Institution. Hooray!

    Mulvaney then explains that the Bureau will be "prioritizing" rulemaking and enforcement actions based on consumer complaints. And, this is where the good news begins to sour for first-party collectors. That's because in 2016, nearly one-third of all consumer complaints reported to the CFPB related to debt collection. Other industries that received prior rulemaking attention account for a negligible percent of complaints—prepaid cards: 0.9%; payday lending: 2% -- so, it makes sense that the Bureau would focus on regulating the collections industry.

    Although a timeline has not officially been announced (and despite the fact that debt collection was the next target on former Director Richard Cordray's hit-list), one can surmise that debt collection is currently the first item on the CFPB's Rulemaking Agenda.

    Speaking of the former Director, knowledgeable sources allege that Bureau attorneys had already begun reviewing a Notice of Proposed Rulemaking (NPR) on collections when Cordray resigned in November. This review would have been suspended as part of Mulvaney's 30-day moratorium on all agency actions, but the Bureau could resume its efforts any day – and, they may have done so already. (Granted, Mulvaney may scrap all of Cordray's efforts and begin anew).

    Although the prospect of new debt collections rules sounds irritating, it may in fact be a blessing in bureaucratic disguise. The Fair Debt Collections Practices Act (FDCPA) is antiquated and unfit for modernity – there wasn't an internet for you to even read this post when the FDCPA went into effect! It was passed before cell phones, high deductibles, Snapchat, self-driving cars… a full decade before this author's birth.

    In other words, the rules on debt collection need to be rewritten to reflect society as it exists today. And, if we're going to get new rules, which would you prefer: (1) a set of potentially prohibited practices cobbled together from facts outlined in enforcement actions; or, (2) clear guidance derived from a rulemaking process?

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