With Mulvaney at the Helm, CFPB Debt Collection Rule Faces Elimination

The Consumer Financial Protection Bureau was expected to announce its rule governing debt collection by third parties “any time now,” but with the reaffirmation of Mick Mulvaney as the agency’s interim director, the rule could be voided or drastically changed, said Christopher Willis, partner at Ballard Spahr LLP.

“I would expect that any industry-wide pronouncements that the agency would make would now be filtered through the director and likely impacted by the identity of the new director,” Willis told Auto Finance News, noting Mulvaney’s record of deregulation. “I’d be surprised if that proposed [debt collection] rule comes out at all now, and if it does, it would be delayed and modified significantly from the outline released a year ago.”

The CFPB originally sought to equalize the standards for third-party debt collectors and lenders. Former CFPB Director Richard Cordray had announced over the summer that the rule making would be done in two parts, starting with guidance for third parties sometime this quarter or next.

However, Mulvaney has already instituted a 30-day moratorium on all rulemaking and hiring at the bureau. If the new director decides to move forward with the debt collection rule, he might look to increase the number of times a debt collector can reach out to a borrower, said John Redding, partner at Buckley Sandler LLP.

“Under the last iteration it was six total contacts in a week, and three to any one number,” Redding said. The rule could clarify some areas of ambiguity, such as, “Does an answering machine pick-up count as a contact? Does simply connecting with the number count as a contact? Or, do I, in fact, have to reach the person for it to count?” he said.