Like many of you, I have spent the past several days thinking, reading, digesting and visiting with colleagues and advisors about the impact of Trump’s election to the presidency. One of my investor friends shared the most compelling of all perspectives and is worthy of further consideration: “While many things are promised on the campaign trail, all newly elected Presidents enter with a constrained ability to enact their agenda unilaterally. As a result, immediate and sweeping political changes are a process, which give markets and the American public time to digest and react. Although often derided by partisans, the inability of a President to swiftly change policies is a strength of our political system, not a weakness of it. The current market volatility is not because Trump was elected President, as markets do not have political affiliations. Rather, it reflects the market’s adjustment to a surprise presidential winner and the market’s tentativeness regarding the vast uncertainty over which of President-elect Trump’s stated policies he will be able to enact.”
Though the newspaper ink announcing Trump as our president elect has barely dried, I am confident there are at least six things we know for sure about the election’s impact on the ARM industry.
- The Agenda: We can be certain the first major step toward clarity about the future of the CFPB will surface with Trump’s choices for key administration officials. His selections will give a better sense of the priorities for the Trump administration. This should provide some path to further understanding of his agenda and calm the business community both here and abroad. This will also let us know if he plans to take on the CFPB as a federal agency, suspend its rulemaking activities, or simply replace the director.
- Make up of Congress: For the first time in 10 years, one party has control of the Presidency and both houses of Congress. This may solve some problems and exacerbate others. The fact both the House and the Senate are dominated by a single party is a bright light for the future of our industry. In my past life I logged several thousands of hours on Capitol Hill working on behalf of the collection industry. Along with my colleagues and members of ACA International, we managed to pass amendments to the FDCPA and the FCRA, and positively influence the actual text of the HIPAA Privacy Rule in favor of business associate collection agencies and several IRS Regulations.While passion and hard work may have contributed to our success, the real reason had to do with the make-up of Congress. With Republican majorities in both the House and Senate it is time to seriously resume our advocacy work, fund the PACs, hone our message, tell stories about our good work, and seize the moment to realize real change.
- Industry’s New Legislative Agenda: Other than facing a party log jam in Congress, the next most challenging hurdle for industry groups to overcome when pushing a legislative agenda is determining the agenda items they should push. Rather than wasting two years arguing over the role of government in regulating the collection industry, seize this moment to amend the TCPA and the FDCPA. Use the CFPB’s SBREFA outline as a place to start. Choose the proposed items they have already put to paper that suit the industry (e.g. voice mail safe harbor), throw in a few consumer-friendly items for good measure, and then run to Capitol Hill. And if you are really ambitious, hire a professional lobbying team, grab a few banks, cell phone companies and credit grantors along the way and try to pass some decent legislation. My guess is we have a two year window to make some real progress.
- Reorganize the CFPB: Unless overturned or stayed, the October decision in PHH Corp. v. Consumer Financial Protection Bureau by the U.S. Court of Appeals, D.C. Circuit, arms Trump and Senate Republicans with the opportunity to remove Cordray at will and appoint a new director. Moreover, and if it suits their pleasure, they may use this opportunity to reorganize the CFPB under a five-person commission in the same way most other Federal agencies are governed and subject them to a budget appropriated by Congress.
- Resurgence of the Small to Mid-Size Agency: It’s my bet the election of Trump as President may lessen the reluctance banks, credit card companies and all large credit grantors have of the small, unsupervised, not-subject-to-examination collection agency. Buoyed by Trump’s message suggesting he intends to reduce regulation over banks, I expect many creditors will go back to hiring the smaller, boutique, specialized collection agency in lieu of the supervised LMP. They will assume if the CFPB’s rulemaking authority is diminished, the CFPB’s current focus on service provider management will not tilt the scale toward hiring only LMPs.
- Healthcare Receivables: With or without the Affordable Care Act, high deductible health plans are here to stay. This means the millions of Americans who are insured will be responsible for an ever increasing percentage of their healthcare expenses and our hospitals’ dependency on the revenue generated by copays and deductibles will similarly increase. This spells continued opportunity for healthcare collections.
- Compliance: Should a weakening of the CFPB or its outright elimination occur, I do believe it will amount to the full employment act for consumer attorneys. Remember, most of the 19 consumer financial laws subject to CFPB enforcement include a private right of action. During the past several years, the CFPB has initiated hundreds of enforcement actions against members of the credit and collection industry that would have otherwise been brought first by consumers. If the CFPB is neutered, consumer plaintiffs who were previously usurped by the enforcement arm of the CFPB will once take center stage as the enforcers of the consumer financial laws.
My advice to members of the industry is to remain ever vigilant about their commitment to compliance. Any relaxation in compliance standards within an organization will only lead to a resurgence in lawsuits and damage awards.
Stay tuned as we keep our eyes on this major sea change in U.S. governance, and as our industry evolves to meet its new challenge.
By Rozanne M. Andersen