CFPB’s Debt Collection, Payday Lending Rules Come Under Fire In Congressional Hearing

Congress blasts CFPB for debt collection and payday loan policies

Payday lending practices again came under fire Wednesday (Oct. 16) from members of the U.S. Congress, as Kathy Kraninger, director of the Consumer Finance Protection Bureau (CFPB), faced lawmakers during their semi-annual review of the agency.

The hearing, before the U.S. House Committee on Financial Services, came a few days after U.S. Rep. Ayanna Pressley of Massachusetts introduced new legislation that would require the CFPB to regulate the debt collection industry. During the Wednesday hearing, U.S. Rep. Maxine Waters of California blasted the agency and Kraninger over debt collection, along with payday lending rules.

“You have helped payday lenders by moving to delay and weaken the Consumer Bureau’s payday, small-dollar and car title rule, which would have put a stop to abusive payday loans,” Waters said.  “You have helped predatory debt collectors by issuing a weak debt collection rule, giving a green light for debt collectors to intimidate consumers by sending unlimited emails and text messages and calling them seven times a week, per debt, to collect debts.”

CFPB Trends

For her part, Kraninger promoted the agency’s attempts at protecting consumers, including fair lending supervision and enforcement. “I remain committed to strengthening the bureau’s ability to use all of the tools provided by Congress to protect consumers,” she said. “Factoring in all of the input and counsel that I have received, I remain resolved that the most productive use of bureau resources is to be focused on preventing harm to consumers.”

She also delivered an update on the most recent round of consumer complaints submitted to the CFPB. From April 1, 2018 through March 31, 2019, some 321,200 consumer complaints came into the agency, a 2 percent decline from the previous period. According to her report, the “most complained about consumer financial products and services were credit or consumer reporting (39 percent of all complaints), debt collection (24 percent), and mortgages (9 percent).” Not only that, but according to agency statistics, “in 2019, the Consumer Bureau has announced 20 public enforcement actions thus far. This compares with 54 enforcement actions announced by the agency in 2015, 42 enforcement actions in 2016.”

Complaints are not the only thing decreasing at the agency. So is its spending and headcount. According to that report, “by the end of the second quarter of fiscal year 2019, it spent approximately $218.9 million. This compares to $553 million for fiscal year 2018 and $594 million for fiscal year 2017.” The agency employed 1,452 people as of the end of the second quarter. That compares to 1,689 workers at the end of last year’s second quarter.

New Rule

Debt collection stands as one of the newsiest areas for the agency at this point in 2019 — and a point of political contention. Nearly one in three Americans say at least one creditor or collector contacted them during the last year. And a 2017 survey of debt collection organizations found that 1 in 4 staff members reported that they have spoken to at least one customer in the past year who seemed serious about committing suicide over their debt.

Earlier this year, the CFPB issued a new rule that rolls back protections that prevent debt collectors from harassing Americans via phone and email. And since the beginning of the Trump Administration, more than 62,000 Americans submitted unfair debt collection complaints to the CFPB.

Last month, Pressley sent a letter to CFPB Director Kathleen Kraninger slamming the bureau’s new rule. Now Pressley has introduced the Monitoring and Curbing Abusive Debt Collection Practices Act, which would prohibit the CFPB director from issuing any rule that allows debt collectors to send unlimited emails and text messages to consumers. It also requires the agency to issue a quarterly report on debt-collection complaints, as well as any enforcement actions taken against debt collectors in the previous 12 months.

Expect ongoing focus in this area well into the new year.


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.