Gauging the Impact of the Election on the Debt Industry

We’ve arrived at the most intolerable phase of any election cycle: the immediate aftermath, in which members of the media and pundits try to guess what will happen next. Most of it is filler and grandstanding. But with the result on Tuesday, we are guaranteed to see some real change in governance.

The results of the 2014 mid-term elections have been discussed ad nauseam, so let’s just keep it brief and note that Republicans will now control both chambers of Congress. As we noted recently, the most prominent change will be in the scrutiny given to the CFPB. That additional scrutiny may lead to changes in the leadership structure of the CFPB – from a single director to a committee of five commissioners – and maybe even the Bureau’s funding source.

But there is little chance the focus of the CFPB will change. And most certainly not for the debt collection industry. No matter how business-friendly a lawmaker claims to be, there is no political will to stop regulating and supervising debt collectors. Besides, the CFPB’s rule proposals for debt collection are coming no matter what as the process is completely independent of Congress.

Pro-business candidates did win on Tuesday, however, as noted by ACA International yesterday in a wrap-up story detailing its political action committee (ACPAC) activities. The debt collection association noted that ACPAC was able to contribute more than $252,750 to 58 candidates for Congress.

This is relevant because ACPAC represents a rare opportunity for the ARM industry to directly interact with members (or potential members) of Congress on the level they most appreciate: large donations. But it’s not just contributions that move the influence needle.

In addition to the ACPAC’s direct contributions to federal candidates, ACA’s political team launched a successful Washington, D.C.-based series of fundraisers for key members of Congress, including U.S. Rep. Jeb Hensarling, (R-Texas,) the chairman of the House Financial Services Committee.

This is a critical relationship to initiate and maintain, as Hensarling’s committee will be the starting point for not only CFPB reform and oversight, but any potential FDCPA updates.

Covering another large personality among key financial services legislators, debt collection defense attorney Don Maurice noted in a blog Wednesday that Sen. Elizabeth Warren (D-Mass.) largely whiffed on her campaign support for fellow Democrats (Warren was not up for election). She stumped for Democrats in key states (Colorado and Iowa) and was brought up as in issue in other states, all of which went for Republicans.

Warren is a key figure, of course, in financial services legislation and regulation. She drafted the blueprint for the CFPB and now sits on the Senate Committee that oversees it. Even though that committee will be electing a new chair, Warren still wields influence.

Maurice also noted that Warren was little help to Martha Coakley in her run for Massachusetts Governor. Coakley is the outgoing state attorney general and had been at the forefront of state regulation of the ARM industry.

Massachusetts, however, elected another like-minded Democrat to fill her AG position, so the relaxing of state regulation of financial firms in that state seems unlikely. And that was a little bit of a trend Tuesday.

In Minnesota, Lori Swanson won a third term as attorney general. Swanson has also been very active in the regulation of the debt collection industry. Maryland elected another Democrat, Brian Frosh, as its AG after Doug Gansler left to run, unsuccessfully, for Governor. Eric Schneiderman, the New York AG that has focused on debt buying and payday loan collections, also won re-election.

On balance, the most likely changes for the debt collection industry after this election seem to be the reform of the structure of the CFPB and the possible updating of the FDCPA (and hopefully, the TCPA). But on the supervision, regulatory, and state enforcement front, it will probably be business as usual.