Episode 09: An Inside Look into Regulation F
What you’ll learn about in this episode:
The Consumer Financial Protection Bureau issued a final rule to restate and clarify prohibitions on harassment and abuse, false or misleading representations, and unfair practices by debt collectors when collecting consumer debt. The rule focuses on debt collection communications and gives consumers more control over how often and through what means debt collectors can communicate with them regarding their debts. I believe many in the industry were also hopeful the rule would also clarify how the protections of the Fair Debt Collection Practices Act (FDCPA), which was passed in 1977, apply to newer communication technologies, such as email and text messages. However, as we’ll discuss, that seems to be a topic that was kicked down the road a bit.
The rule is the result of a deliberative, thoughtful process spanning more than seven years and reflects engagement with consumer advocates, debt collectors, and other stakeholders. In developing the final rule, the Bureau considered the more than 14,000 comments received during the public comment and rulemaking process
In this episode Joann tells the inside story of the process to update the final rule. We talk about the potential risks and new opportunities in the rule including consumer preference, and using Email and SMS Text to open preferred digital communication channels. FInally we speculate what the landscape will look like as the new rule take effect November 30th and beyond.
Guest: Joann Needleman
Joann Needleman leads the firm’s financial services regulatory and compliance practice and advises banks, financial institutions, and financial services entities on regulatory compliance matters.
Joann prepares and represents these same financial institutions during state and federal supervisory examinations and regulatory investigations before agencies such as the Consumer Financial Protection Bureau (CFPB), Federal Trade Commission (FTC) and the Office of the Comptroller of Currency (OCC) as well as state financial services regulators and attorneys general.
A former member of the Consumer Financial Protection Bureau’s (CFPB) Consumer Advisory Board, Joann provides her clients with useful strategies and common-sense solutions in order to prepare for areas of regulatory scrutiny.
Joann is the host of the podcast “Credit Ecosystem to Go: Curbside Thought Leadership for Financial Services.” Listen to recent episodes here.
Company LinkedIn: https://www.linkedin.com/company/clark-hill-law/
LinkedIn: Personal: linkedin.com/in/joannneedleman
Lex Patterson 0:09
kindred force media
the Consumer Financial Protection Bureau or CFPB, issued a final rule to restate and clarify prohibitions on harassment and abuse, false or misleading representations and unfair practices by debt collectors when collecting consumer debt. The rule focuses on debt collection communications, and gives consumers more control over how often and through what means debt collectors can communicate with them regarding their debts. The rule also offers opportunities to utilize digital communication technologies, such as email and text messages. The rule is a result of a deliberative thoughtful process spanning over seven years, and reflects engagement with consumer advocates, debt collectors and other stakeholders. In developing the final rule, the bureau considered more than 14,000 comments during the public comment and rulemaking process. Our guest today, Joanne Needleman has played an important part in this process throughout the seven year journey. In this episode, we’ll explore the process, the outcome, and the opportunities and challenges that lie ahead. We’re on the eve of this new rule going into effect and Joanne, you’ve been in this process from the beginning. You’ve helped bring clarity and insight even back when I think of it in the comment collection process. And you’ve been helping companies prepare for the changes that will come into effect November 30. Ever since I’m so excited to have a conversation with you about the ruling. Thank you for joining the podcast.
Joann Needleman 2:01
Lex. It’s so it’s so good to be here. It’s so good to talk to you. The last time I saw you or talk to you. I was actually
Lex Patterson 2:10
right. Right. Yeah, actually helping a DAX with the conference. Yeah. And roundtable stuff in that. Yeah. So yeah, very cool. Yeah. Yeah, reconnect and see you. Yeah. So before we get started, and because we’re going to be speaking about regulation, I feel like I need to give the standard disclaimer that this podcast and the discussion we’re having represents the opinions of the parties and the information provided should not be considered as legal advice on any subject matter, you should seek your own legal advice before acting on any of the content provided. Okay, we got that out of the way. So now, tell us about your journey. Joanne, and your relationship with this process?
Joann Needleman 2:59
Well, thank you know, wasn’t until I talked to you a couple days ago that I realize it’s it really has been a journey I’ve been to, it’s gone by pretty quickly, but it’s taken a long time. So, you know, I think in context of this rule, um, I was, I mean, I’ve been a lawyer for many, many, many, many years in the CO I’ve been a collection lawyer for many years. And then I did a lot of litigation around fair debt and their credit reporting for years. And then I do this all at the same clients, but evolving needs, you know, really fight. It’s weird. And so, you know, it’s been the last decade or so that I’ve been involved really in the regulatory side of it, because it was always clear that you’ve been in this business forever. You know, we were working with a statute that was just ineffective, poorly written, poorly drafted, didn’t achieve what it was supposed to achieve. I mean, if it did, why are so many people complaining about that collection? Right. I mean, there’s a statute, you would think that that would cure the problems, but it doesn’t, it just creates problems. So it’s just been a really, it’s a challenging industry. And, but there’s so many great people, and so many smart people. And the irony that I’ve always thought about this industry is, you know, everyone says debt collection, bad, bad practices bad this. I don’t know, too many industries, where people devote so much time to comply. Well, I mean, who spend conferences and webinars and articles. I mean, we spend so much of our day, learning about what’s going on in the world and going on in our industry and understanding the law and trying to make some headway. It’s, you know, this industry devotes a lot of time to education, with tremendous amounts of education. But besides all of that, the FDCPA and debt collection has been a problem And when I was very involved with, then it was called Narco now called National creditors bar. And I had been a member of the organization since 1996. But I moved on to the board in 2006, of then Norka. And one of my tasks as a board member by then president, though was I relief skirt, and then mark off was, you know, we should really think about being in DC more and engaging with the FTC and engaging with the Hill, because it’s an industry that gets a lot of bad negative criticism, but nobody knows what to do. So part of my journey was to develop an advocacy, kind of part of NCBA, you know, looking at what ACA has done, and some other trade associations have done. And in doing that, you know, I started to have relationships with the FTC, there was no CFPB that FTC was the primary regulator of debt collectors, because we were a trade. And we weren’t really thought of as financial services, we were just, you know, this was this was the type of industry that we were in. So back in 2008, the FTC started to look at debt collection, again, because the FDCPA now, at that point was 30 years old, or 35 years old, and there was no wish to start dusting off the books and taking a look at it. And the FTC did report, quote, challenges of change. And it made recommendations about how to improve the debt collection, industry. And as part of that report, they had these series of field hearings, where they went all over the country, they went to California and Chicago, and they went to Washington, DC. And it was in Washington, DC, where I was asked to be on a panel. And as we started talking about debt collection, and we started talking about the problems with debt collection, and how to fix it, and the FTC, you know, work through those issues through 2010. But then when the CFPB came along, all of their work then got moved over to the CFPB. And, and, you know, for good, better and different the bureau finally, you know, one of the problems that I think that always frustrated the FTC is that while they were the primary regulator over the FDCPA, they had no rulemaking authority. They could they can only enforce, but they like us recognize that it was a statute that they couldn’t interpret it just nobody kind of understood what it meant. And so it was very frustrating for the FTC. But then when the CFPB came along through Dodd Frank, the CFPB, not only was given primary jurisdiction over the Fair Debt Collection Practices Act, but they were giving rewriting authority, which I think was really important. Now, you can argue that it’s taken 10 years to write a rule. And that’s what happens. And along the way, they tried to write rules through enforcement and try to craft rules through through complaints and actions against industry members. But it’s a really key point and a very transition, you know, really turning point in the industry. And here we are 10 years later, we’re on the eve of finally getting what we’ve all kind of wanted, for so long. And that was what everybody in the industry says, tell us what to do, no matter what we do fine. Tell us what to do. And they have now everybody doesn’t like it. But
yeah, so I, you know, it’s a really interesting time, and it’s been an evolution. And, you know, it started. So, you know, it took some time for the Bureau to get its feet wet. And they had a lot that housing crisis on their hands and a lot of consumer protection issues they had to deal with, but they eventually got around in 2013, to start the process of letting debt collection rules and reason I know this is at the time I was. I became NCBA president in October, mid October 2013. And a week after I became president, the what was called the NPR advanced notice of proposed rulemaking was issued. And that was 400 Questions about the debt collection industry. And I was and I, you know, now had to like organize the whole association to answer the questions. It was it was quite a nightmare. But it really gave everybody an idea of where the bureau was going to go. As far as what were the issues of the debt collection industry that were concerned with the Bureau, and where do they want to focus rules. And now it’s almost, you know, nine years later, and here we are, and you know, what, the majority of what they were focusing on back in 2008 2013, and to this day, are the same it’s about making sure you’re collecting the right amount from the right consumer and that you are honoring consumer preferences and you know, respect thing, consumers ability to communicate with debt collectors. That’s really what it all comes down to.
Lex Patterson 10:06
Yeah. Well, I appreciate you sharing all that Joanne. I mean, it’s it’s quite a journey, like you were saying, and you’ve been involved with it. And so I’m, I’m just really excited to have you on the show here. And I’ve been, I’ve also been listening to your, your podcast, credit ecosystem to go, you’re doing an outstanding job trying to bring the so many topics to the forefront and tell these stories. And I’m really enjoying it. So kudos, I know, it’s not easy.
Joann Needleman 10:35
It’s not easy. A lot of time as you
Lex Patterson 10:38
get guests and also to produce, you know, a quality show, which I know you’re you’re passionate about that too. And so I was recently listening to the episode demystifying the debt collections rule at that episode with former CFPB director Tom Paul, which I found very interesting. In, in your discussion, he said that he felt the new role was very focused on trying to maximize protections for the consumer, and less focus on facilitating newer technologies and decreasing costs. So let’s talk about that for a minute. As someone who’s been so involved with this, as you have and based on your understanding at this point, what do you feel the main needles, the Bureau, the Bureau is trying to move with this new rule.
Joann Needleman 11:32
So I think, if you really listen to Tom, I mean, I, I agree, that’s what he said. But I think you have to kind of put it into context. Okay. Understand first, the CFPB is about consumers. And Tom spin, you know, Tom was a lifelong FTC guy. And actually, that was his second, he went to the bureau twice. He was at the FTC for many years came over to the bureau, you know, when the bureau was formed, and he left right when the outline of proposal came out, which was great, which was bad in 2016. And then he kind of went into private practice, went back to the FTC, who’s actually the head of the Consumer Protection Bureau of the FTC. And then when Mick Mulvaney came in, he then was pulled over as a policy unit director, who was appointed position by Mick Mulvaney. So it was pretty high up. And then when Kathy kraninger came in, he then switched to associate director, so she was part of her leadership team. So I mean, he really has been the point person for debt collection, even in the FTC days, I mean, he did challenges change, and he was involved in all of that. So he has a very robust consumer protection background, it is always have to be about the consumer. Um, so I think, and Rich Cordray used to say this a lot, um, that one of the issues that the CFPB and, and for the most part consumer advocates had with that collection, is that consumers can’t pick their debt collector. You know, if I want to get a mortgage, I decided which mortgage company I want to go to, if I want to buy a car, I want to lease a car, I want to get a finance company, you know, I’ll pick that can’t pick your debt collector. And so that was always an issue for Courtright, heavy consumers be able to think that their feet and to give them that opportunity. And I do think that the wall allows, in some respects consumers to do that. And I think that’s what Tom’s talking about. If you really drill down the wall, there’s a lot of consumer protections baked into the rule. I don’t want to hear no advocate, the advocates think the rules harmful, I completely disagree. I don’t know how a model can be harmful is a very robust, very strict set of guidelines of how to collect that. But one of the most important things I think that came out of the war is this idea that consumers can voice their preferences about how and when they want to be communicated with under the statute, it was only there was this nebulous idea that you can’t contact a consumer and it can be inconvenient time sensitive to speak anything about alternative forms of communication. So now consumers can can opt out of, you know, certain types of communication. They can tell you, when it’s inconvenient, you have to honor it. They can tell you which mediums they want you to contact, they can change their mind. I mean, it’s not it’s not one and done. It’s it’s an ongoing evolution. And I think that is really important. And I think we’re consumers. I don’t think consumers understand that now. But as we go through the process of developing the rules and integrating them into day to day operations and consumers when they start to engage with debt collectors after November 30, will really start to understand that they have a lot of power to dictate how they want to be communicated with. And I think that’s a huge victory, not necessarily for the Bureau, but a victory in administrative law that you were able to craft something that gave consumers that kind of ability, at the same time, outlined very specific ways to do that. So, and I think that’s really what Tom’s talking about, is not the CFPB job to help vendors. It’s not I mean, that’s the first and foremost, it’s consumers. So when he says, It’s not about technology, it isn’t. It’s first about achieving the objective. And the objective here is to protect consumers and give them control over their ability of how to be communicated with now, if we can figure out ways to do that using technology. But I don’t think it’s the, you know, it’s not the Bureau’s job to open up the doors and say, okay, technology, you can come in there, we’re gonna come in anyway. Have you seen this Lex in the past year, the amount of investment, new companies, mergers, acquisitions, everybody’s jockeying in the technology space around debt collection right now. So maybe that wasn’t the CFPB goal. I think it was inevitable. But I think that the goal that they wanted to achieve was achieved.
Lex Patterson 16:27
And we’ll wrap back in a minute on some of those technology pieces I just want to touch on with Yeah, because that’s my, that’s what I most. Yeah. But I appreciate that clarification. So let me ask you one other question then regarding that. I mean, so the rule took seven years, as you mentioned, and maybe even 10. I don’t know, if it was seven or 10 hours. It was a long time. And you know, and of course before that not touched at all for decades. Right. Right. And so do you feel the plan is to continue to update and tweak regulation or inlet? Or? Or do you think they’re going to kind of let it settle down for a while and gather some more? I mean, are we looking at another seven year process? Or do you think they’re going to be more involved going? Okay, well, let’s tweak it here. Tweak it there. What’s your thoughts on that?
Joann Needleman 17:14
Yeah, I mean, it’s a good question. And there’s so much chatter right now, because we are in the eve of a new CFPB. Director, it’s taken a while for Mr. Chopra, to kind of go through the traps of political appointments and Senate confirmation hearings. But the word on the street now is whatever jockeying they were doing, his nomination will start to go through. Um, and with him coming in, of course, now, there’s a lot of chatter, because as you know, consumer advocates do not like the rule, and they want the rule changed. And they were the ones that wanted to delay it really a delay in implementation because they think the rule is bad. So as we’ve seen with other regulations, so the most significant piece of regulation that the bureau did, I think, before debt collection, which took the longest was there changes to Truth in Lending, and RESPA, which is around the mortgage industry. And, you know, that was the Bureau’s primary concern, when it was when the agency opened doors, because we
Lex Patterson 18:17
brought the CFPB together really, right. Dodd Frank and,
Joann Needleman 18:20
exactly. And so, you know, those were massive rewrites of existing regulations that had been around for a long time, you know, 2030 years. And what we saw, and I think you have to take the cues from that. So what we saw with tailwind, RESPA was, you know, a huge overhaul of those regulations. And, you know, that that industry was just on its, you know, it that just industry got imploded and turned upside down. You know, it was 1000s and 1000s, of pages, and people had to really understand what was going on. But I will say they get the bureau credit, um, over the course of the like, two years, following the implementation of Tila RESPA. The mortgage industry spent a lot of time with the Bureau, going back and forth with them and saying, Okay, this works, this doesn’t work, you need to tweak this. And in the period of two years, there were four to five significant amendments to Tila RESPA, one of them had to do with the FDCPA. Because I won’t go too deep into this, but part of when a mortgage goes into default, a consumer has the ability to reach out to the servicer to try for what is called loss mitigation options, you know, forbearance figure out ways to not go into foreclosure or after the foreclosure how to get out of it. And that is mandate, the servicer must communicate with the consumer to provide those loss mitigation options. Well, if a mortgage is in default, defaulted debt, like anything else, the FDCPA kicks in. And if a consumer says to a servicer, I don’t want you don’t call me. I don’t want to talk to you. The servicer then was unable to communicate loss mitigation options to the consumer. So they went back to the bureau and they said, What are we supposed to do? And they they made a fix, they made an amendment said that, you know, Tila RESPA wins. FDCPA doesn’t, because this is more important. So, I think, you know, so there’s a lot of chatter that Oh, no, Raul is going to come in, he’s gonna change the wall, he’s gonna lower the caps, you’re not going to be able to email email, it’s going to be in the caps, there’s going to be time barred. And he may do all of that. But I do think there are some more significant problems that the Bureau has got to deal with, I think there’s a renter, there’s going to be rental crisis, you know, there isn’t one now, I think they’re very concerned about fair lending. There’s just a lot of things on their plate, I think after seven years, I don’t know debt collection is high up on the food chain, I really, really don’t, which is fine. As a token, they’re not going to ignore it. So I think they’re going to let, I think they’re going to let the rule implement, they’re going to give it six months, I think there’s going to be there already have teams out there who are meeting with industry, and trying to understand what the pre employment challenges are today, I think they’re going to have meetings with industry post November 30, to see what the post implement challenges are going to be. And I think there’ll be tweaking, but it’s, it’s, you know, it’s you have to go through the Administrative Law process to tweak a rule, you have to put a notice of proposed rulemaking to say the rules gonna change, you got to get noticed in common. And then the Bureau’s got to make a decision, and they have to issue a final rule. So it’s not going to be instantaneous. And I think they’re just going to, I think they’re going to allow it to kind of flow for the next year and see how it
Lex Patterson 22:04
which is, which is okay. I mean, what I was getting out there was the, the, just the process of what they’re thinking, you know, in terms of, of the involvement of it, because I think that that landscape might be changing a little bit, you know, with more involvement, and the fact that the rules take a little longer to implement is really good, could be a great thing for the industry, in general, because it takes a minute to implement, to understand to implement to catch up, as we know, you know, as we’ve been through this, it’s, it’s not something that you can turn on a dime a lot of times with some of the changes. So that’s, that’s really cool. The other thing I wanted to just touch on as you were talking Joanne, as I was looking at their, the CFPB annual report, and I followed that for the past couple years a little bit, just looking at the complaints and how they categorize and whatnot. And it’s interesting to notice on that that credit reporting, actually is quite a bit higher on that list than even debt collection by a pretty wide margin. So they do see other areas, and then, you know, with all the changes that came in effect with the latest changes that have gone on with credit reporting, and how agencies are supposed to report with total drops, and, and, you know, that process, it’s, it seems like it’s brought about some even more complaints, and we’re there. And of course, we’ve got fraud and, and you know, all those things that are on the list there. So it’s interesting with that, yeah. So, um, catch us up maybe a little bit on any guidance on. And again, just your opinion or your observation with, are there some safe harbors that, that we can take advantage of there that are new or different?
Joann Needleman 23:45
Yeah, I mean, I think the most significant if it is going to be a true Safe Harbor is the model validation notice. I mean, I think that the industry has wanted to get, I mean, you and I have sat in zillions of meetings, you tell us what you want to say the letter, you know, it’s so I think that that is a significant sea change for many people. It’s not 100% Safe Harbor, it’s a safe harbor if you use the form, and if the information in the form is correct. So, you know, the Bureau has put out this kind of Very Vanilla notice. And there’s one, you know, you got to put a name and an address and some and some account numbers and identify the creditors, and then you have to do this whole itemization which is really been a challenge for a lot of people. That’s it. I mean, and I’ve looked at a lot of that model validation notice and people are trying to get cute with them. And I say to them, you got to stick with the script. I mean, so it’s you don’t have just because you use it You’re there scot free, you got to use it. And you got to make sure the information is accurate, if you don’t use it, bureau said, That’s okay. As long as it’s substantially similar to the notice that we have provided. Now they haven’t defined with substantially similar needs. And so I think that’s where people think, Alright, well, I can make my changes, I really am not comfortable in talking with people who are making really significant changes to the notice, because I think they lose the protections of what the bureau is doing. And I think they’re going to spend a long time arguing whether the notice is substantially similar. And I don’t think that that is an argument that many agencies can afford to
Lex Patterson 25:47
do. Well, that’s interesting.
Joann Needleman 25:48
So, so there. So there’s a safe harbor in the model validation, notice there’s a safe harbor, I think the most concrete thing that the Bureau has done was exploding, you know, fix, you know, can I leave a message here, I said, you know, what, you can leave a message, here’s the message, they’re very specific, you leave this message, you say, x, y, and z, we, the Bureau are going to deem that not a communication. So therefore, it’s not subject to the FDCPA. And, you know, the liability goes well, as long as you use the specific, limited content message. The bureau had originally proposed to allow text as a limited content message. And they took that away in the final rule, and I think that was there’s a mistake in the rule, I think it’s a mistake in their decision making. I think it was that I thought that allowing a limited content, content text was was a really good way as a, to provide a gateway for consumers, to drive them to websites, portals, and really do that open an opportunity for consumers to communicate with debt collectors in a very secure medium, but also pushing them more to self service. The bureau took that away. So I don’t think leaving a message does. And I don’t know how many people still use limit, you know, leave messages anymore. So I’m not I joked with Dawn today on our other webinar, we could do a whole webinar on.
Lex Patterson 27:38
Out away, do you have any idea?
Joann Needleman 27:41
Yeah, I mean, I have my I have my guesses. And my thoughts? I think part of it is, I think there was a couple compromises in the, in the rule with what consumer advocates wanted, and what industry want them. And one of them was consumer advocates are not they they do not want consumers to be contacted by email, text. They don’t even want them to be contacted by telephone, but they’re very opposed to electronic communication, they think that there’s going to be, you know, abuse in that area, and consumers are going to be exposed to spam. And there’s, you know, all kinds of reasons, I think it was a little bit of a compromise with advocates on that issue.
Lex Patterson 28:30
Interesting. We’ll see. Yeah, well, we’ll switch back to the technology part of this that we were talking on before, you know, and I just misses something that I just wanted to kick around with you. So if we go back to your podcast, and and I want to provide a link to that episode in my show notes on this page, too, so people can listen to that it’ll it’ll point in there. But the former director mentioned this.
Tom Pahl 28:56
I mean, one of the real challenges I would say that the bureau encountered in dealing with newer communications technologies is the lack of real world experience, especially for someone like director kraninger, who has got a very pragmatic streak. A lot of what you’re trying to look at is what will work in the real world. And one of the difficulties with newer communication technologies is that many of them such as text and email had had been used only infrequently by the debt collection industry, primarily because of litigation risk concerns, but the challenge is that you don’t have a very good factual record as to what the costs and benefits of various options are. And so a lot of what you were trying to do in rulemaking is to strike the right balance where the information is lacking as one of my great hopes is that notwithstanding the limited ability to use neuro communication technology is reflected in regulation F, that the debt collection industry will We’ll, in fact use those document their experience, because I’m, I’m confident that a lot of the use of those newer technologies is not going to give rise to either basically prevalent consumer protection problems, and therefore lay the groundwork for greater use of them in the future. But one of the things is that, as I noted was difficult with coming to to a conclusion and a final rules in 2020, is, there just wasn’t much of a record as to exactly how these could be used, you know, for the under, under the effects if they are used with understandable recognition that that’s because they hadn’t been used because of uncertainty. So there’s a bit of a chicken in the egg problem there. But I hope that the regulation s provisions and the industry’s use of them can help establish a predicate for moving forward, I think what we were trying to do in coming up with the final rule was to empower consumers to easily protect themselves, because we knew the communications had to keep flowing, if you’re going to have a collection system that works. And so if you want to facilitate those communications continuing, the best way to do it is to really have collectors being engaged with an empowered consumer on the other end, I think some people philosophically think that it would just simply be better off not to have the communications occur at all. And for folks like that, no amount of consumer empowerment is likely to satisfy them. But philosophically, I don’t think that’s where the bureau was coming from in 2020, which was much more of, we need to find ways of enhancing these communications going forward to make them more prevalent, but to make sure that there are not consumer protection problems, especially where you don’t have a lot of real world experience, trying to establish what those might be, and how prevalent they might be. The best thing you can do to protect customers is not prohibit the communication, but empower consumers to control it.
Lex Patterson 32:09
And you know, as a technology person, it was interesting to me just to note that the CFPB, and director, Paul, in that communication in that podcast, use the word newer communications technologies, because, you know, email is anything but new. I mean, that’s been around since the 80s. SMS text first introduced in 1992, became widely adopted upon the arrival of the smartphone. So this is still 15 years ago. So you know, and so 15 years is an eternity in technology time. But But in fairness to the director, and also the CFPB, you know, he did use the word, he did say that the CFPB is aware that communication is key in resolving a collection matter. So I want to go back to this data piece, you know, regarding the data, I just like to kick that around what, you know, because I think this speaks really to, in my opinion, what one of the cruxes of the problem is, and maybe maybe the elephant in the room, which is that consumers want to and expect to interact with businesses. And I’m talking about any business, not just collection businesses with the smartphone that’s sitting in their pocket. I mean, generally, that’s what we all do, you know, not just letters, a snail mail letter, or, or a phone call to a landline, and especially, you know, and so there’s been this this ambiguous regulation, as you talked about, for so long in place, you’ve over 40 years and, and yet, this, this means of connecting people so that they can resolve business matters is something that I think the clarity on that will actually lower the complaints, it would seem to me that it would and also bring better service to both the consumer and to the creditors that are trying to so I mean, let’s, what are your thoughts on that? I mean, what clarity did you think the bureau needs? Or was after here and the data? Was it litigation date? I mean, what are they after here?
Joann Needleman 34:25
I mean, it’s, it’s, let’s unpack this a little okay. You have to understand that when you step away from the Bureau and you’re in the world, in the real world, there’s different lenses right, there’s there’s lenses, okay. And when I was on the advisory board, I never met really, I knew consumer advocates and I’ve been with them I’ve ever spent time with them. I mean, I’ll tell you they’re there people just wrote us Yeah, I mean, I you know, add wine with friend my friends at NCLC. And, you know, when we’re when we’re in cash settings, everything is fine when you’re in that world. We all have different perspectives. Um, you know, the, and certainly when Kathleen kraninger was director, her lens was very different than Richard Cordray, and I’m sure it was going to be very different than Mr. Chopra and Mr. Wiggio, who’s near acting, you know, they it’s, it’s where do you get your information from? Right. So, you know, when Cordray was director, he was getting his information from advocates, advocates get their information from the people that they see every day, their clients, now they, you know, we know that they don’t represent the majority of the population, but they are the most vulnerable. And the story and the people that they interact with every day, are the most egregious situations, the most, you know, unfortunate situations. But this is, this is the perspective that they’re coming from. And advocates take the position, for the most part, I mean, I, some of the jokes, you know, joke with them. And then I said, Can we start with the premises, they don’t think people should pay their debts, and we just start, you start there. I start here, and let’s figure out what we can get to decide because, oh, yeah, you know, gotta recover. It’s party credit. You know, this is why I started credit, you gotta go. I talked about the credit ecosystem all the time. Oh, you gotta have debt collection, it’s part of the credit economy. And then it all starts to go downhill after that, you know, they just, um, I will tell you, I was on a call that a month or so ago, with some advocates to talk about red gas. And I made the comment, I said, Listen, I think it’s great that there are other opportunities for consumers to use email and text, because everybody’s got a smartphone. And this is the way they can get all the things that you’ve just said, you know, what they said to me? Oh, no, there’s a digital divide. Not everybody has access to cell phones. Not everybody has access to email, and oh, no, we’ve got to take, we’ve got to worry about when there’s equality in digital access, then and only then will we say, okay, you can email or, you know, oh, no, we there’s too many. We see too many instances of abuse, you know, it’s it is it, these are conversations that are gonna take a long time over the years to kind of go through. And, you know, we’re going into lezzy fender, and I always joke about this, we’re going into the new all of the old new CFPB right now. And we’re going back to a CFPB. That was when it got started, I think was really Chopra was very much in the leadership team, under Cordray, very much a core disciple. No lawyer, very bright, very, very smart guy. But clearly has a point of view, clearly has an agenda clearly answers to different people.
Not industry folks. So you know, the thought around this is going to be very skewed about, you know, the minority population, and not look at the holistic view of what is best not to say what’s best for consumers, but how consumers want to interact in this space. And, you know, I think we’re kind of stuck with that. Now, time will tell you made a really great point a couple minutes ago, debt collection complaints. Not only is credit reporting number one debt collection is now down to four. It used to be, oh, we got more debt collection complete and CFPB is to parade around that statistic. We’re getting all these debt collection complaints. It’s the number one complaint that we get. Not anymore. And it’s been like that really since COVID. Right? Even before and it’s trending downward. Yeah, so that means a couple things. Number one, the industry is more compliant. So the CFPB has oversight over the industry, even pre roll is working. Um, you know, one of the things that maybe the bureau didn’t expect or anybody expected, but during COVID people, what do people use send this money for? Right now their desks. person didn’t go out and buy large screen TV. Yeah. They pay down their debt. They got their financial houses in order now. I can’t speak for rent people in rental situations. I can’t speak for people necessarily, you know, we’re in bad straits because of losing a job. Yeah, I can’t speak to the mortgage industry. But overall, people pay down their debt. So it’s just going to be so important. We can speak logically about this. But the reason that sometimes the bureau wants data all the time, is because for the most part, the Bureau has listened to advocates and listen to their stories. They haven’t supplied data. But those are the stories that they want to listen to. So basically, they’re challenging industry to say, All right, if you don’t think that story is true, show the data, show the opposite data to get us there. Okay. So to your point about technology, um, and we, yes, email texts have been around for a while, but we don’t have the data to say how effective email has worked. I hope that through the pandemic, because you’ve seen such an uptick in the use of alternative channels, that industry has gotten together and maybe pulled some of that data together and showing how it works, I think it’s going to be really important for us to continue to do that. Because I think those those forms, those mediums are going to be challenged in the next couple of years. There’s going to be limits around. Yeah. And we have to, we have to make sure that we show the bureau that alright, that’s fine, you want to limit it, but that’s the preferred channel. And if the consumer can email, you know, you when they want to email you, because you reached your cap, you know, the How are you protecting the consumer? Yeah, there’s gonna be a lot of work
Lex Patterson 41:17
on that. Yeah. Yeah. And I, I think that’s, that’s a great segue into looking at the glass half full, and maybe the opportunities that lie ahead with the, with the ruling there. But before we go there, I just have to mention one thing, that maybe someone listening to this podcast, that’ll stand out, but it was really important, what Director Paul said, and I think it could be a mantra for the industry, as we start to move into this new opportunity, let’s call it that, that communication is key, right? in resolving a collection matter. I agree, I mean, that any way that we can facilitate better communication between the consumer and the creditor, the consumer, the collector, that you know, business, to business, business to consumer, any of that is going to improve, it’s gonna it’s going to drive down complaints, it’s going to improve that because once you’re on the phone, and you’re communicating, it’s person to person, you know, or it’s, you know, and self service is really important. I get all that there’s a lot of people that want to do that. But the more ways that we can open that up for choice, and to improve that and facilitate that communication. Wow, I just think that’s a key.
Joann Needleman 42:29
It is key. And that’s something that we can spray much against. And you can put the you can you can add the Domino’s together to figure out why. Yeah, but Tom, you know, remember, Tom was a very kind of center, right type of regulator, I think we need more and a little bit, you know, moderate republican, he was not a progressive Democrat, but he was very much committed to consumer protection. So sure, just because you’re a Republican doesn’t mean you’re not a consumer advocate. Right, we can certainly be a consumer app. Right. He was a big believer in that. And I mean, I remember over the years, the struggles, and the in the discussions, arguments, I used to, you know, with advocates, about the dispute process, you know, think about how silly the dispute, think about before ragout. How silly the dispute process was, yeah. Because the statute says, you know, you can dispute, you know, you don’t dispute, we’re gonna assume it’s valid. I mean, if you want, you know, the name of the original creditor or whatever, you know, send it to us in writing. Well, I mean, that’s not a dispute process. You know, if you want to contact Amazon, because you don’t like what you bought, you go on to Amazon, you give them a list of reasons why you don’t like it, you know, they contact you dispute gets resolved a problem with your credit card company, call them up and say, You know what, I didn’t make that charger. And they’re gonna say, All right, do you have something to show? You’re right, there’s got to be some sort of communication. Yeah. You know, advocates and the consumer attorneys, we’re training consumers to right, call, I dispute click, how does that help? Yeah, right. It doesn’t. So I think that the, both the model validation notice, and the ability to use technology to your point is going to be I think, the most significant. I hope outcomes of this will be to have a more robust dispute process. and I were talking to Mary Specter, who runs a, you know, like a clinic down at the Deadman Law School, which is at SFO, and you know, as much as she would are very, very close. And I was I was in a meeting with her once I’m like, Look, you have communication. She prospect goes up and widow, she’s like, exactly, exactly. I get that has to happen. So, you know, Tom got that. Yeah. And you know, he really did and he he thought a lot, but the first time He left the bureau because he was a lone wolf in a sea of people that said debt collection bad. And, you know, it got to a point where he was just, you know, he, you know, my voice isn’t going to make a difference anymore. And that was the reason that he left. So he’s had many battles with advocates and people the bureau that that, but you’re absolutely right. And and I do think that this rule provides opportu more communication opportunities with consumers, and puts a little bit more I dare I say, some responsibility on consumers to articulate what it is that they don’t like. Because we’re not my views. And and I think that a common ground and theme that we can that we would all agree is that we wanted disputes to be resolved. Right. Right. We don’t want to waste our time, contacted consumer if they have a legitimate dispute, if they’re a victim of fraud, I would want to know that right away. Right. Right. So I think he, he got Yeah, and it took a change of leadership, and getting him at the right place, and really being the steward of this whole process, to really open up that opportunity to make disputes more robust. The dispute process, I should say, more robust.
Lex Patterson 46:25
Yeah, I just feel like if we can continue to move along that path is an industry with that truth, that facilitating that communication. And then the other thing, and you and I touched on this the other day, when we talked about is maybe trying to look at this glass, half full instead of half empty. Yeah, you know, and we think about, we think about all the regulations that are coming down, or the changes in the regulations, let’s put it that way. And, and how, you know, cumbersome that can be and you know, and all of the risk, or the fear, maybe is a better way to say it, not the risk. But But Joanne, you know, and you had mentioned to me, and this really was enlightening to me that wait a minute, why don’t we look at the opportunities that are here with, you know, now we’re able to collect consent, are able to gather the data that maybe will tell our story in a better way. So from that perspective, that just, there’s there is some opportunity there. I agree. I mean, did I miss anything that on
Joann Needleman 47:20
that? No, I think it is, I think the challenge is, right now we’re seeing it is the investment. And the nobody loves change, right? Everybody’s change resistant. And so there is just this kind of disruption right now, in, in looking at, you know, for a lot of people, this is a completely different way of how their business is going to operate. And that’s, that’s significant. And I think one of the most significant things for any buddy, I don’t care what size agency you are, what size creditor you are, is you’re going to have to retrain your staff. If you’re communicate to your point, if you really want communication to work, under this whole staff has to be different, you gotta listen, you’re gonna have to listen a lot more to what consumers are saying and react to it, and capture it. And that’s not where we are today. I mean, you know, I’m not going to take away there’s some great call centers, and there’s great people in this industry, who have been trained to talk to people, but there’s a there’s going to be half, there’s different things you need to listen for now that we’re going to have to get ready for. So yeah, there are opportunities there. And I think I’m kind of somewhat excited to see what happens with all of this and how industry can make it work.
Lex Patterson 48:41
Yeah, me too. Yeah. Yeah, I do. Like, like I say, you know, you you helped change my perspective on that a little bit. So, let’s talk about then let’s shift gears a little bit. So with this new rule coming out, and, and, you know, what do you think the landscape is going to look like? On the legal side? Maybe just what do you think? How do you think this is going to play out? If you were just in this, it just kind of looking into the crystal ball and just your feelings and thoughts, but what do you think is gonna happen when
Joann Needleman 49:12
you say the legal side? You mean, you know, challenges to the wall? And
Lex Patterson 49:16
yeah, lawsuits and, and, and well, and complaints, even one of the other things that was kind of running through my mind, too, is this rule, there are sections of it that are pretty complex terms of in terms of, you know, the seven and seven rule and, you know, okay, the debtor, the account, the, you know, all of this, and I was thinking, like on the enforcement side, even like, Okay, so the complaint comes in, how is this gonna be like, because, you know, I was in city government for quite a number of years. And one of the things that we always consider when we were passing some sort of new law or, or covenant or something in the city was you know, okay, it’s great. We see the need for it, but the enforcement side of it, how do you enforce it? You know, because and it just seems like there are some areas that might be pretty in the way.
Joann Needleman 50:10
They’re gonna Well, you know, I certainly don’t want to be a complete bearer of bad news, but I do think for the first six months, it’s gonna be, you know, it’s gonna be hard to see Ness, it’s, you know, I think that a lot of consumer attorneys are just kind of sitting around and waiting, who only a little bit, because they’re looking at, they’re looking at the rule from the perspective of their consumer, not from the perspective and industry trying to comply. So they’re looking at the impact upon the consumer. And I think that there’s a laundry list of issues that we haven’t even thought of that, that they’re going to come out, and they’re going to try to push. Now, I, as I said, I can never stop, someone wants to see you, they’re going to see you, especially in this industry. But it’s so important for industry now, and post November 30, to make sure that you have your ducks in a row, show how decisions were made, show how you’re complying with those decisions and the rules so that if you do get to use the wait a second, here’s the rule. Here’s what I did, all into the letter of the wall, you know, tell me judge tell me what the problem is, or, or or attorney, maybe we have a rule 11 issue, or maybe you need to think twice about that. Now, I’m not gonna say that they’re going to walk away. But industry needs to have to be very, very organized and clear. When they response to that when they respond to these claims. And I think there’s going to be a lot of them. I don’t think that the bureau is going to come out in December and start sending CIDs you know, an investigation of industry, you know, 30 days, postable they’re not going to do that, but comes six months. A year? Sure. That’s exactly what, that’s exactly what Yeah, so yeah, and I think that we’ve already said just saw today, um, you know, California has come out with a lot of laws, you know, credit, consumer new consumer protection laws now that in a debt collection, licensing I just saw today, the California sued an agency under their debt parking rule. So this is there’s a debt parking rule in the federal energy gap. But there’s California has its own rule that it’s only been, you know, I think it came out January 1, it’s only been eight months. So I think that we’re going into an era era of very aggressive regulation and oversight, I need to be, as I said, be the bearer of bad news, the best way to fight that is making sure that your, your ducks in a row. And that’s what everybody needs to be done.
Lex Patterson 52:52
Yeah. Do you? Do you have any ideas or thoughts on certain areas that might be more problematic or that agencies ought to be geared up on a little bit more, because you can see that maybe there might be more chance or more risk in certain areas of the new rule?
Joann Needleman 53:14
Well, as we’ve talked about, throughout this podcast, abiding by consumer preferences is going to be crucial. And I don’t know, the level of sophistication for a particular agency or organization that’s going to be able to do that. As I said before, it’s going to be a lot of training. I think there’s going to be a lot of I told them not to email me that they you know, I opted out and a still texted, I told them that call me at three o’clock, and yet they call me at three o’clock. So I think there’s going to be a fortunately, you’re going to be a lot of baiting when when consumers, you know, the the internet’s going to be ripe with Patti obey the deputy, you know, you just there’s been tremendous opportunities to trip up debt collectors in the early stages of this implementation, because we’re all just trying to figure out what’s going on. Yeah. And I was right. Yeah. I mean, it’s, it’s, it’s an I mean, I see that a TCPA matters. And I see that and fair credit reporting that I mean, they’re if they’re opportunistic people out there, there’s nothing I can do about it, but you can do about it. But that’s that to me, I think is going to be the biggest challenge for agencies in complying with the rule. You know, frequency, there’s states that have frequency limits, most clients have frequency limits. Now, that’s that really anything new. There’s nuances to that, that they’re going to have to pay attention to. But I think abiding by consumer preferences is going to be the new He Said, She Said, type of matters.
Lex Patterson 54:49
Yeah. Okay. Well, Joanne, we’ve covered red gas. And as I said early on in our discussion, you’ve been involved in this process from the start and how have as good a grasp on the process as anyone I can think of. For a moment, though, I’m curious. And this is maybe coming out of left field on yet. But I’m curious if there’s anything in that seven year process that you believe, maybe could have been improved or that you wish maybe would have gone a little differently, maybe advice that you would give back to the people that were involved or even to yourself, you know, like, um, what’s something that is there anything that that stands out there?
Joann Needleman 55:28
Well, and this is i, this is something I can’t change, because this was the law. So in as with any rule? Well, no, and I shouldn’t say that’s not with any rule, the CFPB, like OSHA, and the EPA, are subject to what is called the sub brief of process, which is the small business, regular, small business, regulatory, regulatory fairness acts something along regulatory enforcement, if you’re at something along those lines, I’m getting my acronyms wrong. And I’m, so what that does is. So we had a, an NPR, which was the 400 questions that came out in 2013. And everybody answered those questions. And then from those questions, the bureau put out what was called an outline of proposal, which, pretty much except for email, um, pretty much mirrored the NPR and the final rule. And so it’s an outline to say, this is how we think that she did, um, there were some things that they ultimately took out. And so they send out this outline. And it’s 100 Some pages, and they say, Okay, we’re going to have a hearing on this, um, in 30 days. Then they say, You, you, you, you and you, and then they went through all the industry people, you, you, you, you knew you’re going to come in, and you’re going to be what is called a serve a subject, you know, you’re going to be a small business representative, a small entity representative. So I was very involved in that process with ACA, they were very kind to bring us in. And it was a very tedious process, where you literally, you know, they went through like, all these proposed rules, and we spent a day locked in a room from eight o’clock in the morning to five o’clock in the afternoon, going through each proposal. Everybody had a comment, everybody makes a comment of that? Yeah, I just get the sense. I didn’t learn anything from that. It was just a monumental waste of time. It was just it was, it was it was really, it was very, very unfortunate. And so from that, that, to me, was the one area of the process, which I just think did not move the needle. one bit. rulemaking on well, I shouldn’t say unlike legislation, legislation is impossible, never gonna happen. So unfortunately, we’re stuck with making which can take, you know, three to 10 years through that process. So if I mean, that’s, that’s the unfortunate part about it. And there were aspects that the rule doesn’t touch. No, not verified yet, because I still don’t know what it means to verify that that was that’s not, you know, anywhere in the final rule. Now, email texts were not discussed during the refurb. But they were smart enough to put in, so that’s good. They tried very, very, very, very hard to craft a rule around substantiation. And it fell apart, it just fell apart, because that’s really about the clients. Not any account. I didn’t create the deck. I didn’t you know, so they really wanted, they really wanted to do something about that. No, it really doesn’t address, which is something, you know, been my life for a long time legal collections. And the issues around legal collections. It’s real collections is a different animal. There’s, you know, the court system is a different process, then you’re working with an agency that really wasn’t addressed at all the rule. And it’s it is a big part of that. Yeah, that wasn’t addressed. So, I mean, it’s wording, probably a stretch of the imagination, but I think that they, it was certainly clear to me that when they started to do this, they realize they thought it was going to be easy peasy. And I think when they first did that initial ANPR with them 600 questions or whatever it was, I think they realize that they’ve stepped into something that is bigger than they then than they ever thought possible. And so I think it’s still workable. Progress.
Lex Patterson 1:00:01
Yeah. Well, we can put a cap on it with that. I got one more question. I want you though. And this has nothing to do with with REG F. But this is just coming out of left field again. I’m I’m was wondering is, you know, with the pandemic and everything. Has there been a silver lining? Are you
Joann Needleman 1:00:17
very much? No, I, you know, my life was I got up at six o’clock in the morning, I got on a train, went to work, work till 530 got on a train and my train ride was 45 minutes, came home. But I did continue to work. And that was my days, five days a week and then usually twice a week, twice a month, I was on a plane somewhere, you know, going to a conference. Yeah. Right. And then the pandemic happened. And I didn’t have to do any of that. And I got to be on my peloton. 567 days a week. And I’m working out more than I’ve ever worked out in my entire life. And I’m now on the best shape, but I’m the heaviest. But, um, but no. You know, I’ve been doing this for many, many, many years. And I was prior to the pandemic, I was starting to have the, the discussion in my head. The voices in my head, were talking to me saying, you know, alright, what’s the next? What’s your chapter two? What what do you write what you know, you’re going to do this forever. My son is out of the house. He’s in graduate school. Now we are empty. We’ve been empty nesters for five years. And I love it. I’m not shy to say about that. But the pandemic really allowed me to focus on you know, I’m myself in my work. And this is the first time in many, many years where I really enjoy practicing law. I love it. Yeah, I have it. I come downstairs when I come downstairs. I do my work. I still work till 1112
Lex Patterson 1:01:54
For sure. But it’s on your terms.
Joann Needleman 1:01:58
My terms. I’m extraordinarily happy doing it. I’m busier than I’ve ever been. Yeah, thank God. But that’s because of reg F and who knows next year, but it really I am. And I yesterday, I had to go to my office and I gotta tell you, it was miserable. I had to go in I met folks for dinner, which I was happy to do but getting up getting dressed getting I don’t I don’t take the train anymore. I’m done with that. So are you driving into work, getting in my office setting myself up, oh, I got to go to the bed. I gotta go here. I got it. You know, it just I got nothing done. And all I wanted to do was come home. I just I would I just wanted to get out of the office to come home. I love my partners and beautiful office. I love my firm. But this right now my you know, my pod right now is really where I’m very, I’m the happiest, and I want to do my work. And it never would have happened without the panda. Never.
Lex Patterson 1:02:51
Well, and it’s it’s funny, you know, I was talking to Mike Ginsburg about this a little bit too. And you know, it’s just funny, because this connection, like when was the last time like you were saying last time we talked was before the other day was? What? A couple years ago? Yeah, I mean, and so, but But you know what Joanne, I feel like we’ve connected in the past couple times that we’ve talked in this format, probably as good or better than we did, even when we were face to face and together, you know, it’s just, you, you blank out this time for it, you box it out, and you have this connection that you can have, and the technology is really there. So that’s really cool. Yeah, I was like to hear what the silver lining is because there are silver linings, you know,
Joann Needleman 1:03:37
you know, it’s not for everybody, you know, I think the folks of my generation, I will tell you all my all the partners in my firm, we all kind of feel the same way. You know, we’ve been, we’ve been grinding it out for years. And it’s not like it’s a vacation, I’m gonna say it’s a vacation. But to me, it’s a much better quality of life. Yeah, much better quality of life. And nobody thought that in the professional services world. You could do this. I mean, I have friends who are accountants are like, I’m never going back to the office, I doing my Epson at home. So it’s, um, it’s interesting, I think it’s, I think it’s going to be a real struggle for a lot of companies moving forward. I know, for my firm, it’s been a struggle in trying to develop younger lawyers and look the future of your firm and the other youth that come in and we’re all not around to do that. How are they going to do that? And it’s there, they’re really concerned about it.
Lex Patterson 1:04:30
Well, yeah, there’s some things that you know, you’ve I’ve seen some studies, Microsoft, Apple, you know, a lot of the technologies companies coming out and saying that culturally, you know, and the stuff you’re talking about mentorship, teamwork, innovation, things where you have to bring people together to kind of mirror you know, because that’s how they are, right? They’re, they’re learning for watching that and if they’re isolated, and you’re isolated, how we’re getting all this to happen, you know, so there’s still some things to figure out but I but I agree with you, you know, and maybe hybrid comes into this. And this is where what solves it, you know, but man, we’re at a, we’re sure to a place of some great opportunity for big shift. I think so I
Joann Needleman 1:05:09
think so. I think so it’s, you know, it’s gonna be a challenge. But you’re right. I mean, we talk more in the last three weeks, and we’ve talked in two years. is great. I mean, that’s the thing. It was. Yeah, you know, Zoom has been around for a long time. I never used zoom before the pandemic. I know what I did, I would never put the video on if I vary. Now, I’ll never talk to anybody on the phone. You know, I used to, I used this. It’s like, I want to see somebody want to talk to them.
Lex Patterson 1:05:40
Yeah, yeah. So cool. Well, thank you for being on the podcast. And I hope we hope it doesn’t take us two years to catch up again here. So moving to Utah, so. Right, for sure. Look me up when you do.
Joann Needleman 1:05:59
Have a good evening. Thank you so much.
Lex Patterson 1:06:03
Thank you to take care.
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