FDCPA Rulemaking Authority Part of Financial Reform Bill

Accounts receivables management professionals have been calling for changes to the outdated Fair Debt Collection Practices Act (FDCPA) for years, saying it doesn’t keep pace with technology and preferred consumer means of communication.

Some industry leaders have argued that at the very least, someone should have rulemaking authority so that guidelines can be set that will hold up in court.

ARM professionals may indirectly get their wish if the Dodd-Frank Wall Street Reform and Consumer Protection Act becomes law. The bill, otherwise known as the financial reform bill, creates a Consumer Financial Protection Bureau and gives it exclusive rulemaking authority over the FDCPA, said Lou Freedman, chair of the federal government affairs committee for the National Association of Retail Collection Attorneys (NARCA).

Freedman told insideARM.com that the proposal has the potential to both help and hurt the debt collection industry. For example, the bureau could set rules about what collectors are allowed to say in any communications, including messages left on voicemails. The bureau also may determine if and how debt collectors use text messaging, email or social media to do business with consumers.

“Those are the types of rules we would like to have,” said Freedman, also an attorney with Freedman Anselmo Lindberg & Rappe, LLC, in Naperville, Ill. “It gives us a road map to live by and at the same time clarifies for the courts the applications of the FDCPA in certain situations.”

But Freedman said some industry members fear that giving a government agency with no FDCPA experience the power to set rules could backfire on the industry.

“Rule making could make it difficult for us to practice within those rules,” he noted.

Adam Peterman, director of federal government affairs for ARM industry trade group ACA International, told insideARM.com that ACA stridently opposed giving the bureau rulemaking authority because it was inconsistent with the FDCPA, which was specifically written to exclude such authority by a federal regulator. ACA, along with a coalition of ARM groups, also formally pushed to keep the FTC as the industry’s exclusive federal regulator (“Accounts Receivables Management Industry Calls On Congress to Keep FTC As Exclusive Regulator,” March 19).

“Now that it is soon to be law, though, we look forward to working with the new authorities in helping them understand how an efficient, vibrant credit and collection industry benefits consumers," Peterman said.

Established in 1978, the FDCPA is essentially the ARM industry’s bible on how to go about collecting debt fairly, while allowing consumers a way to dispute or verify that debt claims are valid. Until now, the Federal Trade Commission has been the sole regulator in all matters involving the FDCPA, but its powers have been limited largely to enforcement. Although the FTC has issued opinions upon request, the FTC has not issued many opinions and the U.S. Supreme Court has ruled that FTC opinions are not binding.

The FTC had hoped lawmakers would give it rulemaking authority and over the last couple of years and has held roundtable discussions and industry workshops to gather information to better understand the industry. The financial reform bill retains the FTC as the primary enforcement agency for FDCPA. However, the CFPB will also have enforcement powers and could coordinate its efforts with the FTC.

Two days after the House and Senate hammered out an agreement, the Housed passed the bill 237-192. But the Senate has yet to act. Democrats postponed a vote until later this month after Senator Robert Byrd of West Virginia, the Chamber’s longest serving senator, died and Republican Senator Scott Brown of Massachusetts said he was withholding support for the bill over concerns about a $19 billion tax on large banks and hedge funds.

But observers believe it is just a matter of time before lawmakers come to an agreement. With widespread public support for a crackdown on Wall Street, neither party wants to go into fall mid-term elections without showing voters they have done something to address the abuses on Wall Street that lead to the mortgage crisis that crippled the economy.

“I’m sure they will work out their differences, Freedman said.

If lawmakers do, industry observers don’t expect any new proposals will negatively impact the ARM industry. Debt collection firms and attorneys dodged a bullet when lawmakers agreed to house the consumer financial protection bureau within the Federal Reserve rather than make it an independent agency. An independent agency likely would have resulted in fees on attorneys and agencies to fund its operations.

Freedman had told insideARM that a fee could have put some small firms out of business.

“It’s not as bad as it could have been,” Freedman said of the bill’s overall impact on the ARM industry.