A series of proposed new rules designed to regulate the collection of consumer debt is up in the air now that Donald Trump has been elected president.
The president-elect has not specifically addressed the proposed rules, which were first unveiled in July. But based on negative comments he has made about the 2010 federal Dodd-Frank consumer protection legislation—which imposed stricter regulations on Wall Street and lending institutions in the wake of the Great Recession—experts say it’s unlikely the consumer debt rules will go into effect any time soon.
“We don’t know what the Trump administration will do,” says Chris Odinet, an assistant law professor at the Southern University Law Center, and the author of a recent article on the proposed regulations. “But there’s a good chance the regulations will never see the light of day.”
That may come as a welcome relief to both debt collectors and to creditors like banks and hospitals, which often sell their debt to collection agencies at a discount to get it off their books. The proposed rules would regulate when debt collectors can contact debtors, how they can make contact, and what they must say to debtors—all of which are expected to increase the cost of doing business for debt collection agencies.
What’s more, the proposed rules create an additional regulatory burden on banks, hospitals and other creditors, Odinet says.
“There is a lot of language about the type of identifying information that must be passed from the creditor to the debt buyer or debt collector because currently there is very poor information transfer,” Odinet says. “So this would attempt to clean that up, but it would also impose a lot of obligations—and, potentially, cost—on the creditors.”
Still, even if the rules never go into effect, the uncertainty may cause concern for businesses until it’s clear what the new administration plans to do.
Says Odinet: “Whether they like these regulations or not, what they like even less is a whipsaw regulatory environment, where the rules are promulgated one year and then the next year all of that is out the window.”
Read Odinet’s article on the regulations, which is forthcoming in the Review of Banking and Financial Law.
—Stephanie Riegel
