CFPB Proposes “Drastic Overhaul” of Debt Collection
On July 28, 2016, the Consumer Financial Protection Bureau (“CFPB”) released an outline of proposals that it is considering to, in Director Richard Cordray’s words, “drastically overhaul the debt collection market” (the “Proposals”). The CFPB is unveiling key provisions of the Proposals for presentation to a Small Business Regulatory Enforcement Fairness Act (“SBREFA”) panel, a crucial step toward publication of a proposed rule. The Proposals are limited to third party debt collectors, debt buyers and others (“collectors”) subject to the Fair Debt Collection Practices Act (the “FDCPA”). The CFPB warns, however, that it plans to address issues involving first-party debt collectors and creditors on a separate track as part of its overhaul of the debt collection marketplace. Moreover, the Proposals’ demand for collectors to conduct extensive substantiation and documentation of debt at multiple steps in the collection process would translate to corresponding demands and costs in transactions between creditors, debt buyers and collectors as well.