Senate Hearing on Debt Collection Could Provide Clues on FDCPA Reform

A Senate subcommittee hearing on debt collection laws Wednesday yielded little in the way of new information. But the questions posed to the panelists could indicate the direction one Senator is leaning in considering how to amend the Fair Debt Collection Practices Act (FDCPA).

The hearing, before the Senate Banking Committee’s Subcommittee on Financial Institutions and Consumer Protection, was attended mostly by only one Senator: Sherrod Brown (D-Ohio) who organized the session. Sen. Pat Tommey (R-Pa.) joined Brown briefly to ask a question.

The panel consisted of Corey Stone of the Consumer Financial Protection Bureau (CFPB) and Reilly Dolan of the Federal Trade Commission (FTC). In prepared remarks, both outlined their agencies’ powers and previous actions with regard to debt collection and provided a general landscape for the ARM legal and regulatory environment.

Interestingly, Stone noted that private sector financial products – like credit cards — have fallen behind other types of debt – specifically medical and student loans — as the primary focus for debt collection agencies.

In questions directed to the two regulators, Senator Brown seemed particularly interested in the idea of data exchange standards for charged-off account assignments and sales, the primary topic of the FTC/CFPB joint workshop last month. Brown also asked a very pointed question about the legality of collecting on time-barred debt. Stone noted that it is legal to ask for the money, but the FDCPA prohibits collectors from suing or threatening to sue on out-of-statute accounts.

Although FDCPA reform was not stated as the explicit purpose of the hearing, Stone noted in his prepared remarks that the law was very old and needed an update. Brown had also previously mentioned that hearings were needed to explore FDCPA reform.

Brown, chairman of the subcommittee, also last month sent a formal letter to CFPB Director Richard Cordray urging the federal watchdog to issue rules and regulations to tighten oversight of the debt collection industry.

That rulemaking authority was the focus of Toomey’s only question to the CFPB’s Stone Wednesday. He wanted to know why the CFPB was issuing bulletins rather than writing rules for debt collection practices. Stone noted in the case of the debt collection bulletins, the primary purpose was to formally explain that the practices outlawed by the FDCPA also apply to creditors.

The hearing is the first in a two-hearing series on debt collection laws. The second session will be held in September. At that hearing, other stakeholders and industry representatives will be called on to testify.