Washington, DC 20001
RE: SBREFA Panel for Fair Debt Collection Practices Act Dear Director Cordray:
On behalf of America’s credit unions, I am writing regarding the Consumer Financial Protection Bureau’s (CFPB) recent release of the proposals for a Small Business Review Panel in accordance with the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) for the Fair Debt Collection Practices Act (FDCPA). Credit Union National Association (CUNA) represents America’s credit unions and their more than 100 million members.
Thank you for recognizing the very significant differences between the relationships consumers have with first party creditors versus third party debt collectors, as indicated by the exclusion of first party creditors in the initial debt collection SBREFA process. We hope this reflects the CFPB’s understanding that Congress purposefully exempted first party creditors, including credit unions, from the FDCPA and therefore, it would be unlawful to extend any rulemaking pursuant to this statute over them.
As you proceed with your work in this area, we urge you to keep in mind that Congress repeatedly has urged the CFPB to narrowly tailor its rules to specific consumer abuses. Credit unions look forward to the opportunity to provide feedback, which must be considered when engaging in SBREFA and the Regulatory Flexibility Act analysis, for this or any future proposal that will have a substantial impact on small credit unions.
Credit Unions and For-Profit Debt Collectors Have Different Considerations When Communicating with Consumers
Credit unions have and continue to oppose unscrupulous and abusive business practices, including those related to debt collection. However, first party creditors such as credit unions and other small financial institutions, who are collecting payments on loans they originate or service, are very different from those in the business of collecting debt for a profit.
Credit unions take a more holistic collection approach when working with their member-owners. They are not just interested in short-term efforts of collecting a debt; instead, they try to find out the specific cause of their member’s financial challenge, such as whether the member is distressed for a short amount of time, or if there will be a longer-term affect due to unemployment, divorce, death, and other life circumstances. Depending on the member’s
scenario, credit unions will then modify their efforts to meet their member’s needs such as offering free financial education, moving a payment due date to coincide with a new job, offering a workout loan, or offering other debt relief efforts.
As the CFPB has recognized in other circumstances, it is essential for credit unions to be able to communicate with their members about account information and to help their members to be financially healthy and manage debt in responsible ways. Members expect to have ongoing communications with their credit union. The earlier that a member is contacted about a late payment, the more options a credit union is able to offer to its members, and the more likely that any other credit options are not detrimentally impacted. Limiting the frequency of this communication would not be beneficial to members. Rigid and technical requirements are not necessary for credit unions, who already provide good service to member-owners to maintain relationships that are vital to the livelihood of the credit union.
Congress Has Not Provided Authority to Include Credit Unions Under FDCPA Rules
When Congress enacted the FDCPA and for decades since, it clearly recognized that including credit unions in rules addressing abusive debt collection practices is not necessary because credit unions are not only highly regulated and supervised but they also have a built-in and longstanding relationship with their members. Since the enactment of the FDCPA, no subsequent law, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), has changed this directive.
Further, Congress recently urged the CFPB to tailor its rules so financial institutions acting responsibly are not unnecessarily hampered by additional compliance requirements. Congress provided this authority expressly in Section 1022 of the Dodd-Frank Act when clearly outlining,
“The Bureau, by rule, may conditionally or unconditionally exempt any class of covered persons, service providers or consumer financial products or services from any provision of this title, or from any rule issued under this title . . . .”
Nearly 75 percent of Congress has conveyed this concern to the CFPB over the past several months, with 329 Members of the House of Representatives and 70 Senators urging the CFPB to use its authority to tailor rules to specific consumer abuses.
CUNA continues to strongly urge the CFPB to use this tool to help protect credit union members from the burdens associated with creating one-size-fits-all rules that are inappropriate for the different structure of credit unions. Credit union members benefit from open communication with their financial service provider. Unnecessary compliance burdens on that relationship that could force credit unions to instead rely more on third parties are not in the best interest of members. Furthermore, credit unions are already regularly providing detailed account information to their members, which can be as easily accessible for a member as looking on their cellphone. Accordingly, concerns about the process of contacting consumers and the amount of information a consumer is provided by a debt collector in many instances are not applicable, or may be different, for credit union members.
Credit Union Feedback on Debt Collection Rules Must Be Considered, as Required by SBREFA
In our review of the CFPB’s proposals for the debt collection SBREFA panel aimed at third party debt collectors, we believe there are aspects of the proposal that will affect credit unions. For example, the highly technical substantiation and oversight requirements will impact credit unions. As another example, mortgage servicers will unquestionably be subject to many duplicative requirements and face considerable increased compliance costs and burdens if a rule resembling the SBREFA proposals is finalized.
Accordingly, CUNA reminds the CFPB that small credit unions must have an opportunity to weigh in on all aspects of this proposal impacting them, and must have their recommendations considered as part of a SBREFA analysis and report. The CFPB has informed CUNA that credit unions will have this opportunity in the future, and we look forward to providing more detailed analysis about the CFPB’s debt collection proposals at that time.
On behalf of America’s credit unions and their more than 100 million members, thank you for your consideration.
Chief Advocacy Officer
Cc: Jennifer A. Smith, Assistant Chief Counsel, Small Business Administration, Office of Advocacy
Darryl L. DePriest, Chief Counsel, Small Business Administration, Office of Advocacy Howard Shelanski, Administrator, Office of Information and Regulatory Affairs