The American Bankers Association, Financial Services Roundtable and Consumer Bankers Association recently wrote a letter to the CFPB urging the agency to maintain the distinction between first- and third-party debt collectors as it moves forward in its regulation of the entities.
The CFPB issued an advance notice of proposed rulemaking in November. It seeks to modernize and update the Fair Debt Collection Practices Act as it moves forward in its supervision of debt collectors, an authority granted to the agency under the 2010 Dodd-Frank Act.
The groups said that while they support the agency’s efforts in gathering information related to the industry, they “strongly oppose placing FDCPA-like restrictions and requirements on first-party creditors,” saying doing so is “unwarranted and incongruent” with the lender-borrower relationship.
“Unlike the relationship between third-party collectors and debtors, the lender-borrower relationship is usually a longstanding one, covering the entire lifecycle of a loan,” the groups said in the letter. “The creditor also has strong business incentives to foster the relationship as in many instances it has a multi-faceted relationship with the consumer. As a result of these important principles, the FDCPA’s exclusion of an original creditor collecting in its own name was a carefully considered Congressional decision, and nothing in the Dodd-Frank Act suggests that Congress intended to reverse that judgment.”
The groups also urged the agency to “prioritize and sequence its policy initiatives” by the risk presented to consumers.
“Given that complaint data show that consumer concerns are several times more likely to be expressed about third-party debt collectors than first-party creditors, priority should be assigned to reforming that segment of the industry first,” the groups said.
Additionally, the groups stressed the importance of consumer engagement with creditors in preventing harm to consumers’ credit reports, avoiding account closures and late fees.
“[I]t is essential that any new rules promote, not inhibit, customer engagement with the first-party creditor,” the groups said. “In addition, the Associations urge the Bureau to initiate educational and public service campaigns designed to encourage consumer to take responsibility for reaching out to their creditor when they have experienced a financial reversal.”