Presentation on theme: "2011 AICCCA Summer Conference Legislation and Regulation Christopher Viale, President and CEO."— Presentation transcript:
2011 AICCCA Summer Conference Legislation and Regulation Christopher Viale, President and CEO
The Year In Legislation was a particularly active year, and keeping up with all of the changes, potential new rules and false alarms has kept all of us busy. A dozen or so states introduced new bills or revised existing laws. The Uniform Debt Management Services Act underwent significant revisions, which were ratified last week at the NCCUSL meeting in Vail. They should be available on their website: The FTCs revised Telemarketing Sales Rule began to have an effect on the debt settlement industry – contraction has begun, but good players will survive. Perhaps best of all, in the face of all this activity, a number of AICCCA member agencies came together in working groups, occasionally with our counterparts in the NFCC and ACCPros, to work for or against certain pieces of legislation. This type of cooperation will pay dividends for all of us. 2 Cambridge Credit Counseling Corp.
State Regulations Cambridge Credit Counseling Corp. 3
A REVIEW OF NEW LAWS. THE FINAL VERSIONS OF BILLS THAT HAVE PASSED ARE AVAILABLE IN AICCCAS LEGISLATIVE DATABASE. Cambridge Credit Counseling Corp. 4 New Laws
Cambridge Credit Counseling Corp. 5 North Dakota: HB 1038, which regulates debt settlement and caps completion fees at 30% of savings (based on the debt at enrollment), passed the senate on March 25, 2011 and has been signed by the governor. Missouri: HB 661, which has passed through the legislature but has yet to be signed by the governor, is only slightly better than Texass new law, allowing for credit counseling fees equal to the greater of 8% of the monthly disbursement or $35. On the settlement side, while the advance fee ban is consistent with the new TSR, there is no fee cap in place at plan completion. Colorado: HB 1206, a revision of the states existing Uniform Act, became effective on July 1. This was an odd change. It removed the certification requirements for counselors and opened the door for settlement companies to abuse Colorado residents by removing the 18% fee cap. On the credit counseling side, the bill also removed the administrators authority to adjust fees based on the rate of inflation. Mike Kerr has indicated that straightening out Colorado will be a high on his agenda, as these changes were made without so much as a courtesy call to NCCUSL.
New Laws Cambridge Credit Counseling Corp. 6 Texas: Although they claimed to be enacting legislation in line with the revised TSR, the home state of many settlement companies predictably passed bills that will do little to curb abuse. Senate Bill 141, which becomes law on September 1, still allows for advance fees under certain conditions, and removes the 30% completion fee cap whenever a settlement company doesnt charge advance fees. AICCCA presented testimony that would have supported tougher rules, but we were met with resistance from legislators and the states Consumer Credit Commission. A variety of excuses were offered for their failure to insist on stronger regulations, from the possible impact on Texas jobs to the need to present a bill that stood some chance of passing. These are two arguments often used by the settlement folks before state legislators. We know that the settlement companies spent a lot of time and money in the state, which also helped drown out our arguments.
New Laws Cambridge Credit Counseling Corp. 7 Indiana: The new Indiana law does away with the 24-month contract term limit, replacing that requirement with counselor reviews to be performed every 30 months during the clients enrollment. So far, the only problematic aspect of the new law is the disclosure requirement, which stipulates four statements that must be made on the contract. Unfortunately, two of these statements are appropriate to credit counseling agencies, while the other two are appropriate only to settlement companies. We have spoken to Mark Tarpey about this issue and, at his suggestion, made a formal written request to their legal department to address this issue. (Mr. Tarpey agreed that consumers would be unnecessarily confused by seeing all four disclosures, but he was unwilling to regulate in a way that would be inconsistent with the letter of the law.)
THE FOLLOWING BILLS WERE NOT ADOPTED. Cambridge Credit Counseling Corp. 8 Introduced Legislation
Bills Introduced – Not Passed Cambridge Credit Counseling Corp. 9 Delaware: An attempt to revise the states version of the Uniform Act was introduced in 2011 (apparently without consultation with Sherry Hoffman and the AGs office). We sent them the new version of the UDMSA, which had been released just a few days earlier, but it was too late to incorporate much of the new act in the bill. We were successful in persuading the state to remove credit counseling agencies from the requirement for separately administered trust accounts, but the 30% fee cap for settlement survived. The fee limits for CCCs are $50 initial; $10 per creditor monthly, not to exceed $50. When the states legislative session ended, HB 72 was tabled in the House Economic Development/Banking/Insurance/Commerce Committee. We remain in contact with Representative Keeley, the bill sponsor. She will work with Attorney General Biden to amend the bill, as appropriate, in January and move forward on this issue.
Bills Introduced – Not Passed Cambridge Credit Counseling Corp. 10 Florida: SB 1828 was casually dropped off by the settlement folks at Senator Richters office, as if they expected him to give it his unconditional blessing and send it along. Fortunately, the senator had other priorities, including tort and insurance reform, and he was opposed to the absence of a fee cap. We worked with the senators aide to ensure that this weak bill went nowhere, and it eventually died in committee. When we last spoke with Senator Richters aide three weeks ago, she was very interested in the prospects for the federal legislation, which would make their lives easier. If nothing happens at that level, well resume working with Senator Richter this September when committee work begins in Florida.
Bills Introduced – Not Passed Cambridge Credit Counseling Corp. 11 California: Several of us, including Sue Niemiec at Novadebt and Zynda Sellers at MMI, worked together with the Coalition for Quality Credit Counseling and the Center for Responsible Lending to support SB 708, a bill that would have very closely regulated the settlement industry. Of course, the settlement reps resorted to their usual combination of heavy spending, misleading and inaccurate information - and occasional outright lying, to force amendments to the bill. In the end, SB 708s 15% fee cap was eliminated, at which point we withdrew our support, along with Senator Corbett, the bills sponsor. The bill is dead.
Bills Introduced – Not Passed Cambridge Credit Counseling Corp. 12 New York: A number of bills were introduced in the Empire State, including the old UDMSA and a bill that would have capped settlement fees at 30%. We had been working with the staff of Senator Griffo, the UDMSA sponsor, to bring them up to speed on the new bill, but interestingly, the settlement folks dropped the proposed cap to 25% at the last minute. One complicating factor that well all soon be dealing with in New York is the fact that the Banking and Insurance Departments will be merging in October. (Good luck to us all!) Three weeks ago we spoke with the staff of Representative Joe Morelle, who had sponsored the bill with the 25% cap. Theyd prefer that the federal bill take care of this issue for them, as would most states. All bills are dead in NY now, but well be in contact with each office after Labor Day.
Bills Introduced – Not Passed Cambridge Credit Counseling Corp. 13 New Mexico: HB 313 has passed the House for several years in a row, but consistently fails in the Senate, where it has been opposed by the attorney general. Whatever happens at the federal level, well work with Representative Cervantes, the frustrated sponsor, to introduce a bill next session. Please note, however, that if a revised bill were to be introduced in the 2012 session, under New Mexicos Constitution, the Governor would have to place this issue on her call for the 30-day session. It is impossible to predict at this point whether she will do so. If she doesnt, we would have to wait until 2013 and the next 60-day session. (The state alternates the length of its legislative sessions.)
Bills Introduced – Not Passed Cambridge Credit Counseling Corp. 14 Massachusetts: House Bill 291, which had been sponsored by a representative who had resigned from the legislature to take a sheriffs position, had been presumed to be dead in committee. Even without an active sponsor, however, the bill advanced to a hearing before the Joint Committee on Financial Services on May 31. AICCCA filed testimony in opposition, and Steve Trumble of ACCC, Marty Lynch from Cambridge CC, and the local MMI office president were all on hand to testify in person against the bill, which is quite weak. A follow-up meeting was held with committee representatives on July 11, and Steve will provide us with a brief update.
Bills Introduced – Not Passed Cambridge Credit Counseling Corp. 15 New Jersey: AB 1949 is completely inconsistent with the TSR and would need significant revision for it to be advanced out of the Financial Institutions and Insurance Committee. Ohio: HB 222, which would regulate debt settlement, is currently in the Financial Institutions, Housing & Urban Development Committee. The bill contains no cap on completion fees. The Ohio legislature is not in session at this time, but it reconvenes in September. AICCCA reached out to Representative Mecklenborg, the bill sponsor, to let him know about possible movement on this issue at the federal level.
Summary Cambridge Credit Counseling Corp. 16 AICCCAs Legislative Committee is always available for questions regarding these issues and theyre always looking for help if you have time (and even if you dont!). If youre looking for an organized list of bills, dont forget to access the Legislative Database on AICCCAs website. Kevin Porter has done a great job with that section of the site, where you can find links to the full text of any bill you have an interest in.
Cambridge Credit Counseling Corp. 17 Consumer Financial Protection Bureau
18 Who Will The CFPB Regulate? Several meetings were held on July 7 th with representatives of the debt relief industry and the CFPB. Most of the feedback has been similar? What is the make-up of the industry? Who are the major players? Should the CFPB regulate the industry? Cambridge Credit Counseling Corp.
Who Will The CFPB Regulate? Cambridge Credit Counseling Corp. 19 The chance that credit counseling will be left unregulated is slim. Debt settlement lobbyists will work hard to subject us to the same oversight. Current regulation of our industry is a mixed bag – tough in many states, lax in others. The CFPB will take note of this inconsistency. In the absence of state law, its role will be to protect vulnerable consumers through regulation. Our efforts to make new regulation appropriate and manageable should follow two tracks: Demonstrate how complying with regulations in tough states extends protections to consumers in relatively unregulated states. A best-practices approach, as embodied by the AICCCA standards, could be offered as a model for the CFPB to adopt. The costs of compliance should also be emphasized, though not overly so, to let our focus on consumer protection remain in the forefront. We must ensure that the CFPB knows and understands credit counseling as distinct from debt settlement. We have not achieved this in the states. We cannot let our work be confused with theirs.
Working With The CFPB Cambridge Credit Counseling Corp. 20 We have two choices: Work with the CFBP to establish effective and responsible oversight, or… Make an assertion that debt relief does not require CFPB oversight Inaction can create unintended consequences: Onerous regulations Unachievable metrics of success
Public Comments On The Debt Relief Industry Cambridge Credit Counseling Corp. 21 The CFPB is required to issue an initial larger participant rule (defining who to govern in the debt relief space) no later than July 21, 2012, one year after the designated transfer date. This notice and request for comment (Notice) seeks public comment on the development of such a rule. After considering any comments on this Notice and other relevant information, the CFPB will draft and publish a proposed rule for public comment. Comments must be received by August 15, Comments can be made online
How Will The CFPB Regulate Our Industry? Many staffers are already familiar with credit counseling and debt settlement, which could be a positive factor. Many staffers are already familiar with credit counseling and debt settlement, which could be a negative factor. What can we do to help them form a better opinion of credit counseling? 22 Cambridge Credit Counseling Corp.
23 We Need To Control How Credit Counseling Is Portrayed. Debt settlers have successfully confused regulators, legislators and consumers. Weve continued to blame poor DMP results on the nature of the consumers were dealing with. While true in some ways, this argument will not resonate. We must look within our own agencies, innovate when necessary, and share good results. CFPB will be looking for accurate, reliable data that has been independently verified. Cambridge Credit Counseling Corp.
Transparent Data Disclosure Will Most Likely Be Required Cambridge Credit Counseling Corp. 24 Our industry needs to define the value we provide. 70% to 85% of our counseling efforts are tied to our core mission and charitable purpose of financial education and empowerment. What benefit does the counseling / budgeting / education process provide a consumer that does not enroll in a plan? Is the offer of benefits in a DMP solution truly realized by consumers? What is the typical client experience, as supported by agency data? What is the likelihood of plan acceptance by creditors? What rate reductions and savings are actually achieved? How many clients fail to complete their plan, and why? Definitions of success and data must be standardized through working groups.
Summary Cambridge Credit Counseling Corp. 25 Preparation for CFPB regulation begins now. Working groups should be formed ASAP to determine reporting standards. Independent data verification is required. (Your local college may be a low-cost alternative.) We each employ plenty of talented individuals. Bringing them together on these issues will benefit AICCCA and our industry.
Thank You Christopher Viale President and CEO Cambridge Credit Counseling Corp