The CFPB’s proposal outline and SBREFA panel

Last week, TrueAccord participated in the SBREFA panel for the CFPB’s proposal outline for upcoming debt collection rule. The CFPB invited Small Entity Representatives (SERs) to discuss how the outline could influence their businesses. The industry expects a more fleshed out proposal quite early in 2017. One thing is clear: this rule will change the debt collection industry forever. Creditors, collectors and buyers should take note and start adapting to, rather than fighting the rule.

While this isn’t the final proposal, we can observe hints of the huge changes to come; it’s such a departure from current practices that applying this proposal retroactively may erase the majority of the debt buying industry. We don’t believe this is what the CFPB is aiming for. We see true desire to change operating principles in the debt collection and buying space, while showing a path forward. The outline included explicit references to new technologies, and some discussion of proper use of email. It also signaled the CFPB’s intent to provide safe harbor where it can, promoting best practices in the process. You can read our initial response here.

How should the industry respond to the CFPB’s proposal outline?

The industry’s responses to the outline have been mixed. While some SERs came to the panel prepared to discuss key issues (with tremendous help from the Debt Buyers Association), some focused on dissenting or simply pleading with the CFPB. However the time to dissent has passed. The outline’s broad strokes won’t change. These are our top suggestions for dealing with the coming changes:

1.     Collectors must prepare for a world with almost no phone calls. Between the FCC’s TCPA ruling and the CFPB’s proposed rule, calling en masse is going away. The CFPB could issue a hard limit on calls or simply significantly increase litigation risk, by defining more than 6 calls a week as harassment. Either way, collectors must start adopting better data science for call prioritization and moving to alternative channels like email. There will be a significant reduction in the number of Right Party Contacts as the industry currently defines the term.We discussed in the past how using an integrated, multi channel approach can match and exceed current collection rates.
2.     Collectors must prepare for a fundamental change in consumer interactions. One of the SERs noted that “[collection companies’ role] is to get the consumer on the phone.” The CFPB is changing that by mandating more data requirements, easier disputes, and improved consumer understanding initiatives. Clearly, collectors’ role is shifting from a glorified call center to a sophisticated service that guides consumers through repaying their debt, with more flexible payment options and much more information exchange. This model won’t support large call centers making millions of calls and commission based compensation.
3.     Creditors must prepare for changes to their first party operations, while also changing the way they provide data to their agencies. Data integrity will become an even bigger issue when working with collectors, and old systems may not be a fit anymore. Using eDisputes, collecting feedback from consumers and making account data easily available in collections all require big changes – but will result in a leaner and better collection funnel.

Bottom line

We see early adopters already thinking ahead about these changes. Our clients work with us to adopt advanced servicing models for consumers, better data availability and flexible options across multiple channels. Still, many are behind, refusing to adopt new technologies or experiment with better customer care in the debt collection process. Clearly, the CFPB is ushering change and is not shy about it. It’s time to adopt before a new rule comes into effect.

Want to learn more about TrueAccord’s perspective and how we can help you adapt to this new world? Get in touch with our team!