Chris Willis is joined by colleagues David Anthony, Stefanie Jackman, and Jonathan Floyd to discuss the year in review and look ahead for debt collection.
In this final episode of our Year in Review series, Chris Willis is joined by colleagues David Anthony, Stefanie Jackman, and Jonathan Floyd to discuss the year in review and look ahead for debt collection. They provide crucial updates on significant developments in 2024, including the heightened regulatory focus on medical debt at both federal and state levels, and the implications of the Consumer Financial Protection Bureau's (CFPB) uncertain future. The team also explores the impact of the Supreme Court's Loper Bright decision on agency interpretations and the increasing trend of debt collection litigation moving to state courts. Gain insights into the current legal landscape, potential future developments, and practical advice for navigating these complex issues in 2025. Don't miss this essential discussion for anyone in the consumer financial services industry.
The Consumer Finance Podcast — 2024 in Review: Major Debt Collection Trends and 2025 Outlook
Host: Chris Willis
Guests: David Anthony, Stefanie Jackman, and Jonathan Floyd
Date Aired: March 6, 2025
Chris Willis:
Welcome to The Consumer Finance Podcast. I'm Chris Willis, the co-leader of the Troutman Pepper Locke's Consumer Financial Services Regulatory Practice. Today's another in our Year in Review and A Look Ahead series, in which we are going to be talking about debt collection.
But before we jump into that topic, let me remind you to visit and subscribe to our blogs, TroutmanFinancialServices.com and ConsumerFinancialServicesLawMonitor.com. And don't forget to check out all of our other podcasts. The FCRA Focus, Crypto Exchange, Unauthorized Access, Payments Pros, andMoving the Metal. All of those are available on all popular podcast platforms. Speaking of those platforms, if you like this podcast, let us know. Leave us a review on your podcast platform of choice and let us know how we're doing.
Now, as I said today, we're going to be talking about the Year in Review and Look Ahead with respect to an area that really is important for all kinds of consumer lenders, regardless of the type of product, and that is debt collection. Joining me to talk about this are my colleagues: David Anthony, Stefanie Jackman, and Jonathan Floyd. All three of them are extremely well versed in debt collection issues, both from a compliance and a litigation standpoint. So, David, Stefanie, Jonathan, welcome to the podcast.
Stefanie Jackman:
Thanks. Great to be here.
David Anthony:
Glad to be here.
Jonathan Floyd:
Absolutely.
Chris Willis:
All right. Well, colleagues, let's start by sort of recapping kind of the action that we had in debt collection during 2024. I felt like from a regulatory standpoint, there was one particular type of debt that got special attention, both at the federal level and at the state level, and that's medical debt. Stefanie, do you mind talking to the audience about what happened and all the action that we saw on that front in 2024?
Stefanie Jackman:
I'm happy to. It's an area that's had a lot of attention and I think that's going to continue to be the case as we move forward into 2025. One of the things we've seen is continued attention at the state level to proposals that impact the way that medical debt is collected, whether that is when hospitals and other health care providers are allowed to put medical debt out for collections, and certain things they need to do that go beyond what the federal law may already require for purposes of keeping their 501(r) tax-exempt status. States have been adding on additional requirements and disclosures.
We've also seen states deciding to restrict and limit credit reporting, whether it's an outright restriction from credit reporting of medical debt or if it's a limitation, you can't do it until a certain amount of time has passed, and the consumer has at least gotten a bill from you, or whatever it may be. We've also seen states starting to expand the definition of what is medical debt, or at least grapple, I should say, with what the definition of medical debt is. We think of it as money that is owed directly to a health care provider for health care services provided by that company. However, some states think it could go broader, and we've seen some laws, not the majority. But in 2024, we've seen some laws that are passed where third-party financing products that can be used primarily to finance medical-related costs have come within the purview of some of these laws.
Then, of course, we have the CFPB rule that proposed to ban the inclusion of any medical debt on a consumer report and ban users from considering any information about a medical debt contained in a consumer report, unless provided by the consumer. Of course, that – a lot has changed in the past couple of weeks, not the least of which is a lawsuit that has, or two lawsuits, I should say, that were filed one by CDIA, one by ACA, seeking to challenge that rule. And of course, the incoming Trump administration and changes and priorities there. We're hearing from members of Congress that they don't necessarily support the medical credit reporting rule that the CFPB proposed and finalized. So, I am not anticipating that it will actually come to fruition, but it was a big piece of what we were talking about in 2024, Chris.
Chris Willis:
Yes, it really was. I feel like we might even see some more state legislative efforts in this direction, too. Don't you, Stefanie?
Stefanie Jackman:
I do, Chris. This is an area where I think that we will see states come in and attempt to fill whatever gaps they may perceive to exist. The thing I think is most likely is we'll see additional restrictions on credit reporting, just given the fact that I'm predicting we're not going to see the CFPB's rule ever take effect. But there could be other things that come in as well, because states just may be perceiving that absent action from them, and I'm not saying this is correct or not, but still, absent action from them, there won't be federal level protections that align with what some states may think is necessary.
Chris Willis:
Yes, that's a great segue into the next topic I wanted to talk with you all about, and that is, there's a lot going on with the CFPB right now and the future of the agency seems pretty uncertain. And it is the one that has the rulemaking and primary enforcement authority under the FDCPA at the federal level, enforcement of course shared with the FTC. And at the same time, we had the Supreme Court decide the Loper Bright case last year, which reduced the amount of deference that might be given to an agency interpretation of a statute. Jonathan, what do you think that combination of factors is going to mean for debt collection as we look forward?
Jonathan Floyd:
Chris, I would say that there's already been a lot of uncertainty with the CFPB. We saw that with the constitutional challenge that wasn't resolved until May of last year. And so, I think because of that challenge, we've seen the CFPB working more closely with states. I think we could see an influx in state enforcement actions that we might have previously seen from the CFPB. There's also the idea of there's a lot of former employees of the CFPB out there on the market right now, who are likely going to wind up with state enforcement agencies.
I think, right now, it puts the industry in a difficult spot, because one, we're going to see litigation pushing to the states, and probably not removable to the federal court under our current article pre-standing doctrines that a lot of federal circuits are starting to enforce more stringently, like the Seventh Circuit and the Second Circuit. So, we're going to see probably more state action both on the litigation front and on the regulatory front would be my guess.
Chris Willis:
David, what's your perspective on this? I mean, it seems like we're in kind of a state of uncertainty, as Jonathan alluded to. That seems like it'll be difficult for both creditors and debt collectors alike to navigate in 2025.
David Anthony:
I think so. I would first echo all of Stefanie's and Jonathan's great points. Our clients tend to like predictability, and given the uncertainty that's there, there's unpredictability. And so, that makes it challenging for people to do their jobs every day, and to come up with new financial products, and to collect on debt, and do all these kinds of things. To me, there's also several other undercurrents here, that to me, make it even more vexing.
Number one, if you think about it from the standpoint of the CFPB, one of the criticisms of the CFPB is that they were getting outside their lane and doing things that were beyond their purview. So, there were a lot of folks that, irrespective of what happened with the election, were watching very carefully as to what the CFPB had done and had said, and there were all kinds of issues and challenges that people had in mind to the activities of CFPB as to whether they were consistent with Loper Bright. I personally think that many of them would have fallen prey to Loper Bright because they got outside their lane.
Secondly, given Loper Bright, which is a federal doctrine, that meant that there was an opening for states to step in and do certain things, whether that be at the legislative level or it be at the enforcement level. So, that was another uncertainty that to me is compounded by this. Third, there has been legislation that either adds to these federal statutes like the FDCPA or the FCRA. And as Stefanie mentioned, you've seen litigation both challenging these, but also, it raises all kinds of issue of preemption. It goes along with this. If you're looking for a 50-state approach, that makes it that much more challenging to sort of do.
At the same time, you now have I think a greater likelihood that you're going to have heightened state regulatory enforcement activity that goes along with this. Then, as Jonathan said, there remains forum shopping. So, if you think about it from the standpoint of, okay, we got our wish and we have a much weakened CFPB if not neutered, we're good, right? And the answer to it is, no, not necessarily. Just as a reminder, under the old CFPB complaint portal, debt collection complaints were the highest complaints. Debt collection will remain among the most highly complained about consumer financial activities. I don't suspect that those issues are going to go quiet into the night. We all have defended matters where we believe we've been right on the law, but you get a judge who is sympathetic or favorable, because they want to impose their views on what should and shouldn't happen in the debt collection space.
You throw on top of all of that, the inflation remains high. You think back to when the meltdown occurred, and not that we're seeing the same degree of problems, say with foreclosures, but you certainly can't imagine that that will not impact the business of debt and how that's all going as debt continues to rise. So, I think it's more uncertainty, and I think, it is not going away anytime soon. I think from the defense of the industry perspective, there's some positives about this uncertainty, but there certainly are some negatives and several things that are to be determined in terms of whether it's going to be good for them, or bad for them, or how long it's going to be until there's greater certainty.
Chris Willis:
So, David, the thing about Loper Bright is, there is a good bit of certainty that might come from a regulation, like Regulation F, the CFPB's debt collection regulation, the only one that's ever existed under the FDCPA. And it's not just defendants who might challenge those regulations, it could be plaintiffs too. I feel like that might usher in some uncertainty for industry as well, as plaintiffs try to say, "Oh, no, the Reg F is not consistent with the statute, so therefore, the FDCPA actually imposes this different standard." What do you think about that?
David Anthony:
Yes. I mean, that's something that we've seen before, I think as an example. There's been litigation over the years about the interplay between compliance with Metro 2, and whether or not that is or is not a fair credit reporting act violation. I think, one of the things that I have seen is that, whenever there is a CFPB pronouncement, or advisory opinion, or enforcement action, then magically, all of this language begins to appear in complaints that attempts to say, "Here's the new norm, and here's the new standard within the debt collection industry or some other industry." So, yes, I do think that there's going to be some picking and choosing that goes along with all this. I do know that there was a lot of criticism to the process by which the CFPB undertook the debt collection rules, and I don't suspect there was a hue and outcry from the plaintiff's bar that their voice was not heard in this process, unlike on the defense side.
I think that you're right though, the plaintiffs' counsels are learning, and whether it be in terms of strict construction's views of legislation, which you're beginning to see more and more of coming from the plaintiff's side as well. Certainly, I would expect that they would either want to take the parts of all of this that would benefit them, an attempt to exploit that or to create more uncertainty. I mean, we all know that many of the cases that we defend are in gray areas, and those gray areas create exposure and risk for clients. Savvy regulatory enforcement lawyers and plaintiffs' counsel are very good at identifying those gray areas. And unfortunately, given the number of gray areas that seem to be expanding in some areas that perhaps were considered to be settled are now unsettled. There will more likely be a greater number of gray areas than there had been.
Chris Willis:
There's one more source of, I think, uncertainty coming to the industry, that I'd like to talk to the three of you about, and that is the movement of a lot of debt collection litigation into state court under state law theories. Jonathan, would you just talk to the audience about what's been happening there, and then we can discuss the implications of it.
Jonathan Floyd:
Absolutely. This is kind of a combination of factors. First, we've had the Article III Standing analysis that have been applied across the country, and are largely taking a lot of cases out of federal court, or making cases not removable to federal court because of a lack of a concrete injury. And thus, we're dealing with merely procedural violations of the FDCPA, or the FCRA, or the TCPA, or similar statutes that are being forced into state courts. Sometimes in state small-claim courts, and it's really limited the ability of the industry to what I would call is to resolve or attack certain lines of cases or theories of liability. Because instead of being in a federal court now, where you can go to the court of appeals and largely get resolution across three, four, five, six states.
Now, we're in a variety of courts, where even courts within the state may disagree with each other. So, it's really made things difficult for the industry, because we're now fighting those battles not only across states and federal circuits, but sometimes, within, within states in and of themselves. Where you may have a state court of appeals that differs, or you may have an opinion that's only binding on certain jurisdictions within the state, and has led to a broader range of outcomes, and cases that probably could have more quickly been resolved in federal court. And has caused a rise in litigation expense, and has caused a rise, I believe, because you see a lot fewer of these claims being brought as class actions, a larger number of what I would consider smaller cases.
Chris Willis:
So, David, Stefanie, having heard what Jonathan just said, what does that mean for the industry going forward, that we have all this litigation going on in state court, and sometimes, under state laws. Where the state courts feel freer to write on a blank slate than perhaps a federal court would?
David Anthony:
Well, it reminds me of many years ago when there were questions about CAFA and the extent to which cases were removed. There were purposeful efforts by many plaintiffs' counsels to say, "I'm not asking for $75,000 in an effort to keep it as something that's not removable." I would just characterize it this way. I think it's another variable and another tool in the toolbox of the plaintiff's counsel that add to the complexity and uncertainty.
When you have state court judges, perhaps, that do not have the same experience with federal causes of action, or at least the consistency to apply them across broader jurisdictions, that's not a great thing for the industry. But at the same time, at the end of the day, most plaintiffs' counsels want to file a lawsuit that gets settled and doesn't make them try the case. So, I think whether that ultimately proves to be successful is probably still to be decided, but there's no question that, as Jonathan pointed out, it has made things more difficult.
And at the end of the day, if plaintiff's counsel can bring more cases, however it is that they need to collect whatever amount of money they want to collect, whether that's bringing more cases or being more selective in the cases. I certainly think that that's something that we will expect to see more of.
Stefanie Jackman:
It also brings an overlay of not only do we have to continue to manage legislative happenings and regulatory happenings at the state level, that I'm sure we'll get to in just a minute, but we've all been predicting we're going to continue to see into 2025. But you also have to be very mindful of two different areas of case law as well, and state courts, and how they are, or are not going to defer to existing FDCPA-related interpretations of what that statute means, and how it should apply to things that federal courts have been setting up for the last 50 years.
To David's point and to Jonathan's, it's just adding another difficult layer of complexity that ultimately will make it challenging to provide nationwide services if you're in the collection space. I think we will see, and we already see it to some degree, but I think we'll see it even more where you have specialists too. This is the firm or this is the agency that really knows everything, the ins and outs of this state and that state. David, to your point, it's like it was back in the eighties and nineties, where you had a lot of this already in state court.
David Anthony:
Yes. I mean, one thing too that I would add, because it's something I could think about an experience that one of our clients had this past year, which is, on top of all of these things, the appellate process for each state is different too. So, if you can imagine, maybe it's easier, maybe it's more difficult to appeal or what the standards are or different, or whether you're dealing with a pro se litigant or not. I live in Virginia and it's only a recent phenomenon that we have had a right of appeal for civil cases to intermediate courts of appeal in the state of Virginia. There's been a real rush of appeals to the Virginia Court of Appeals.
But again, for the clients that we have, representing them in a lot of different state appeals at the same time is just, again, another wrinkle on top of all of the other uncertainties or differences that they've had in the past.
Chris Willis:
So, why don't we close out the podcast? I'm going to give each of you an opportunity to give your takeaway in terms of what's the thing to watch, or what should industry do looking forward into 2025. Jonathan, let me start with you.
Jonathan Floyd:
I guess my focus would be, don't count out the CFPB. I think a lot of folks in the industry have considered the CFPB is all, but gone. But I'll say, the complaint portal still exists and is in operation. And that's the number one source of enforcement actions for the CFPB because it provides a lot of data and specific examples of consumer complaints, directly to the CFPB. It's interesting to me that it remains open. I think it just remains to be seen what we're going to see from the CFPB going forward. It's going to look different, but it's likely still going to exist.
Chris Willis:
David, how about you?
David Anthony:
I would, I guess, reiterate what I have viewed as the theme of our conversation, which is debt collection, enforcement, and litigation action is going nowhere. And I think it's a different challenge for in-house folks, because there was a period of time where I wouldn't say it was set it and forget it. If you think about sort of pre-CFPB, how things were, but post-CFPB, how things are. I do think, if you look back, five years, eight years, there was less uncertainty than there is today. I think that if you are a corporate in-house department, what you have to deal with today is much different than what you dealt with five years ago. I think, I would encourage you to have a plan for all of these variables and not just assume that it's going to be the same old, same old. Because whether it's the CFPB, or the state AGs, or the state legislatures, or state litigation, or state appeals of litigation, or differing standards, or preemption issues, or whatever, there's a lot of things that are out there. I think if you're not doing so purposefully, you may have some problems.
Chris Willis:
All right, Stefanie, I'm going to give you the closing words. What would you say to the industry?
Stefanie Jackman:
In addition to the excellent observations of my colleagues, pay attention to the states. I think a lot of the things we're going to need to grapple with as well as a lot of the opportunities are going to be at the state level. Whether it's new legislation that seeks to restrict what we can do with certain debt types, whether it's assessing how we're going to regulate AI. The next 12 months are going to be really important to be attentive to at the state level.
Chris Willis:
Okay. Well, thank all three of you for being on the podcast today. And, of course, thanks to our audience for listening as well. Don't forget to visit and subscribe to our blogs, TroutmanFinancialServices.com and ConsumerFinancialServicesLawMonitor.com. While you're at it, why not visit us on the web at troutman.com and add yourself to our Consumer Financial Services email list. That way, we can send you copies of the alerts and advisories that we send out, as well as invitations to our industry-only webinars that we hold from time to time. Of course, stay tuned for a great new episode of this podcast every Thursday afternoon. Thank you all for listening.
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