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The Consumer Financial Protection Bureau (CFPB) recently released their Notice of Proposed Rulemaking (NPR) for the debt collection industry. Even if creditors have heard about this news, not all are likely to have read the hefty document. However, if your business or department handles AR billing, there are elements of the new proposed rule that will impact first-party operations you should know about.
What is in the CFPB’s proposed debt collection rule?
As industry experts have discussed since its release, the NPR is dense and clarifies many trouble areas for third-party debt collectors. The proposal covers topics like how many calls a collector may make to a consumer, how they may use new technologies to contact consumers, and what types of information they are required to disclose.
Why should the new rule matter to creditors?
The proposed rule is not intended to govern creditors. However, many businesses do contract debt collection agencies to help them recover unpaid debts. If your office leans on an agency to help you collect on unpaid accounts, you should understand the major change the industry is about to experience.
Third-party collectors need you
If your office plans on using third-party collectors any time in the future, you’ll need a basic understanding of the new requirements the Bureau is proposing they follow. Why? Because it’s information you, as the creditor, will now be expected to pass along so they can do their jobs.
While some of the validation information is nothing new, like the name and address of the debt collector and consumer, some additional information will need to come from the creditor.
New information required via the CFPB Proposed Debt Collection Rule is:
First-party efforts can improve
New technologies like email and text messaging are becoming more popular with consumers – especially younger generations. This trend and the rise in call blocking apps has caused many businesses to look for new, convenient ways to interact with the consumers they serve.
Getting consent for digital communication while obtaining the other information your debt collectors will require can benefit you in the short-term. By gaining permission to email and text message consumers, you can send invoices and payment reminders before handing over delinquent accounts, increasing your first-party receivables and saving you money.
Preparing for the changes
The NPR is just a proposal right now, so there is no need to immediately change your day-to-day operations. Once the rule is finalized, though, your business will need to make some adjustments if you wish to continue using third-party collectors to help you recover unpaid funds.
- Meet with your collectors, ask where you can help
- Identify the new information you will need to provide to collectors
- Review your policies and procedures, make adjustments where necessary
- Prepare your staff for the changes
Shaping the NPR
The proposed rule will impact how creditors interact with consumers. It may change how you run your office and the type of information you gather and provide to your debt collection agencies. The CFPB wants to know what this means for you. They have opened a public comment period for the NPR, seeking input from anyone who may be affected by this proposal.
Inform yourself on what changes may mean for creditors, and make a comment. Input is crucial to creating a final rule that’s good for creditors and third-party collectors as well as the consumers they serve.
For additional information on the CFPB Proposed Debt Collection Rule, register for our July 11 webinar, Enhancing the Consumer Experience Under the CFPB’s Notice of Proposed Rule. Credit and Collection attorney, Joann Needleman of Clark Hill Law and President of Pacific Credit Services and former California Association of Collectors President, Kelly Parsons-O’Brien will be the guest panelists.