“Is this a product you would sell to your grandmother?” Edwin Chow from CFPB talks at the CCN Conference
Taking a brief break from our Compliance series to pass on some timely information. I attended the Credit and Collections News Conference near San Francisco last week and a featured speaker was Edwin Chow, head of the Western Regional Office of the Consumer Financial Protection Bureau. Here are some highlights from his talk:
- To his audience of debt collection companies: “Debt collection is critical to the healthy functioning of the credit markets.” And: “Consumers should pay back the debts they incur.”
- Many debt collectors play by the rules. Others do not, and they hurt consumers and the good actors in the industry.
- CFPB has several roles, including rulemaking for several laws (e.g., Fair Credit Reporting Act, Debt Collection Act, etc.), consumer financial education, and to serve as a hub for financial complaints. But its primary focus at the moment is conducting examinations of various industries to ensure compliance with existing regulations.
- They “don’t do surprise examinations”
- In preliminary calls, they will outline the examination process.
- The examination guide is available online and is the “decoder ring” that explains exactly what examiners are asked to look for.
- They rate companies on a 1-5 scale. 1 or 2 are acceptable and the goal for all companies. Ratings of 3 or below require a plan to remedy. 5 means “totally unacceptable.” Ratings are kept confidential.
- When issues are found in an examination, CFPB expects the financial institution to do the following:
- “Square up” the customer who was affected by the specific situation – i.e., refunded or compensated for the issue, or brought back into an application process as appropriate.
- Find and address the source of the problem.
- Any additional customers also affected are “squared up.”
- From CFPB’s perspective, compliance is good for business. Companies that are poor in compliance:
- Expose themselves to legal liability
- Expose themselves to financial risk and uncertainties
- Absorb unnecessary costs to remedy problems after the fact
- Why did CFPB focus their initial discretionary attention on the credit reporting and collections industries? Because in most consumer financial situations, consumers can choose their products – in credit reporting and collections, consumers don’t get to choose.
Final thoughts from Edwin Chow – 90% of compliance situations can be self-diagnosed by answering the following question: “Is this a product or service you would sell to your grandmother?”