Today's Headlines

    Debt Buyers Not Subject to FDCPA, says SCOTUS

    AFSA Staff

    This week, in a unanimous decision, the U.S. Supreme Court held that debt buyers are not subject to Fair Debt Collection Practices Act. Justice Gorsuch wrote the opinion.

    The opinion stated, “A company may collect debts that it purchased for its own account, like Santander did here, without triggering the statutory definition in dispute. By defining debt collectors to include those who regularly seek to collect debts “owed . . . another,” the statute’s plain language seems to focus on third party collection agents regularly collecting for a debt owner—not on a debt owner seeking to collect debts for itself.”

    In rejecting one of the petitioners’ arguments, Gorsuch wrote, “But it is not this Court’s job to rewrite a constitutionally valid text under the banner of speculation about what Congress might have done had it faced a question that, on everyone’s account, it never faced.”

    AFSA joined with other trades in an amicus brief in the case. The amicus argued, “The FDCPA’s history and purpose confirm what the statutory text plainly provides. The legislative history makes clear that the Act was intended to cover independent debt collectors—third parties that collect debts owed to someone else. Members of Congress pointed to evidence that existing state and federal laws were insufficient to address complaints about independent debt collectors’ collection activity. And members consistently distinguished those independent collectors from the types of parties that, by design, would not be covered: banks, retailers, credit unions, and finance companies. Yet petitioners’ reading of the FDCPA would sweep in such companies, despite the care Congress exercised in excluding them.”

    NY Fed Releases Study, Shows Collection Restrictions Lead to Credit Retractions

    AFSA Staff

    The Federal Reserve Bank of New York released a study in May entitled Access to Credit and Financial Health: Evaluating the Impact of Debt Collection. The study finds consistent evidence that “restricting collection activities leads to a decrease in access to credit and a deterioration in indicators of financial health. Moreover, our estimated treatment varies considerably with the borrower's age and baseline credit score, with effects concentrated primarily among borrowers with the lowest credit scores.”

    The study delves extensively into the background of debt collection, relevant academic text on the topic and regulations that have both helped and hindered the industry and consumers. The study also illustrates its methodology and results for review.

    The study delved into other areas of consumer credit, including payment cards and “non-traditional finance.” The entire study is available at the New York Fed’s website.

    Banking Committee Holds Economic Growth Hearing

    AFSA Staff

    On June 8, the Senate Banking Committee held a hearing entitled, “Fostering Economic Growth: The Role of Financial Institutions in Local Communities,” focused on regulatory reform for community banking institutions. On the same day that the House passed its sweeping rewrite of the Dodd-Frank financial reform law, the Senate took a step towards its own bill that is expected to be far more narrow in scope and gain the support of some moderate Democrats. Chairman Crapo pointed to relief from Basel II capital requirements and exemptions from Home Mortgage Disclosure Act reporting as two areas of possible bipartisan compromise. Meanwhile, moderate Democrats – including Sens. Heidi Heitkamp (D-ND), Jon Tester (D-MT), and Joe Donnelly (D-IN) – offered mild support for regulatory relief from the Consumer Financial Protection Bureau (CFPB) and seemed open to compromise.

    The hearing was also timed with the release of the committee’s collection of public proposals to boost economic growth. The 130 submissions (including AFSA’s), which can be found here, came from a range of trade groups, think tanks, and businesses as the committee begins to craft its regulatory relief package.

    Treasury Report Calls for AFSA Supported Financial Regulatory Reforms

    AFSA Staff

    The U.S. Treasury Department released its first of four reports in response to President Trump’s executive order requesting a comprehensive review of financial regulations. The report, which focuses mainly on the depository system, proposes many legislative and regulatory changes AFSA advocated for in its communications with the Treasury Department and Trump Administration. These include the following:

    • Restructuring the Consumer Financial Protection Bureau (CFPB) by placing it under a bipartisan commission or make the Director removable at will by the president, as well as bringing it under the Congressional appropriations process and removing its supervisory authority;
    • Limiting the CFPB’s consumer complaint database to federal and state agencies, not the general public;
    • Clearly defining the unfair, deceptive, and abusive acts or practices standard;
    • Reforming the CFPB’s civil money penalty fund;
    • Mandating that the CFPB promulgate regularly review all its regulations;
    • Coordinating regulatory tools and examinations across federal and state agencies;
    • Requiring a rigorous cost-benefit analyses for financial regulations;
    • Repealing section 1071 of Dodd-Frank;
    • Modifying the CFPB’s mortgage rules, delaying implementation of the HMDA reporting requirements, and placing a moratorium on an additional mortgage servicing rule; and
    • Amending the SEC’s Reg AB II as it applies to registered securitizations to reduce the number of required reporting fields.

    According to Senate Banking Committee Chairman Crapo (R-ID), the report’s recommendations will be used to craft legislation to bolster economic growth. AFSA previously submitted a proposal to Senate Banking Committee containing many of these suggestions.

    TCPA Reform Key Issue in Congressional Hearing

    AFSA Staff

    On June 13, the House Judiciary Subcommittee on the Constitution and Civil Justice held a hearing entitled Lawsuit Abuse and the Telephone Consumer Protection Act (TCPA). The hearing focused on a growth in litigation related to communications from the businesses to consumers without their consent. The TCPA as currently written results in a very ambiguous compliance environment for businesses and allows trial lawyers to pursue class action lawsuits against companies.

    AFSA has long pushed for TCPA reform, noting that the law as currently in place, makes it difficult for businesses to communicate legitimate messages to their consumers. Full Committee Chairman Bob Goodlatte (R-VA) echoed AFSA’s argument and spoke strongly in favor of TCPA reform, saying that it “disturbs me that this law should be used to stop people trying to communicate for legitimate purpose.”

    AFSA submitted a letter to the committee in support of TCPA reform. The letter notes that the TCPA serves an important purpose, protecting consumers’ privacy. However, the law is 26 years old, does not consider modern technology and has been used to benefit plaintiff’s attorneys, not consumers.  As of 2014, the average TCPA plaintiff was awarded $4.12, while the average attorney payout was $2.4 million.

    House Energy & Commerce Subcommittee Holds Fintech Hearing

    AFSA Staff

    On June 8, the House Energy and Commerce Subcommittee on Digital Commerce and Consumer Protection held a hearing “Improving Consumer’s Financial Options with Fintech.” The hearing focused on consumer financial service has needs, whether the fintech industry is offering financial products and services that meet these needs, and how issues in the fintech realm can be addressed as technology continues to develop. The panel – consisting of fintech industry professionals – offered their perspectives on the current issues within the realms of current fintech advancements, the current regulatory framework, and the consumer experience as these technologies continue to expand their footprints.

    Much of the questions from the members of the committee focused on the Office of the Comptroller of the Currency’s (OCC) recent Fintech Charter. The members pressed the panel for feedback on the risks, rewards, and challenges faced for blockchain companies.

    Democrats and many panelists stressed the importance of the Consumer Financial Protection Bureau (CFPB) and its role as the consumer watchdog as fintech companies continue to expand their footprint. A bipartisan group of members expressed concerns regarding fintech’s role in providing access to banking services for underbanked and unbanked consumers. Members suggested that partnerships between traditional and startup financial firms may be helpful in bridging the gap and panelists noted that rural broadband and broadband expansion generally would vastly improve fintech accessibility.

    House Passes CFPB Overhaul Legislation

    AFSA Staff

    Last Thursday, the U.S. House of Representatives passed H.R. 10, House Financial Services Committee Chairman Jeb Hensarling’s (R-TX) Financial CHOICE Act, by a party-line vote of 233-186. The CHOICE Act would overhaul the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), providing much needed regulatory relief for the financial services industry and ensuring greater accountability and transparency at the Consumer Financial Protection Bureau (CFPB).

    On Tuesday, the Trump Administration issued a statement of administration policy supporting passage of the legislation, specifically highlighting the provisions affirming the president’s authority to remove the CFPB director at will, subjecting the CFPB to the congressional appropriations process, and requiring broader use of a cost-benefit analysis by financial regulators.

    The Financial CHOICE Act contains many other AFSA-supported initiatives, including:

    • Removal of the CFPB’s supervisory authority;
    • Prohibiting the bureau from regulating small-dollar credit;
    • Repealing the CFPB’s unfair, deceptive, or abusive acts or practices (UDAAP) enforcement authority;
    • Eliminating the bureau’s power to regulate arbitration clauses;
    • Prohibiting the publication of the consumer complaint database, and;
    • Nullifying the CFPB’s 2013 indirect auto finance guidance.

    AFSA will continue advocating for the CHOICE Act as it moves to the Senate.