Real Money, Real Experts

Facets of Consumer Protection with John McNamara, CFPB

• AFCPE® and John McNamara, CFPB • Season 4 • Episode 22

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Today’s guest is John McNamara, Principal Assistant Director of Consumer Credit, Payments, and Deposits Markets at the CFPB. In this episode, John shares his professional journey from debt collection to his current role at the CFPB. He talks to us about the latest research from the Bureau, and gives us some of his favorite CFPB resources - designed to support you and your clients.  

We’re excited to have John join us on the main stage later this year. To hear more, we hope you’ll join us in NOLA or virtually:  https://www.afcpe.org/symposium/

Show Notes:
1:41 Into John's personal and professional journey
9:08 Recent findings from CFPB
14:25 CFPB and FTC collaborations
16:33 Resources for financial counselors and consumers
17:42 John's final 2 cents

Show Note Links:
Ask CFPB questions
Direct contact information with CFPB


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Speaker 1:

Welcome to Real Money Real Experts, a podcast where leading financial counseling and coaching experts share their stories, their challenges, and their advice for helping people manage money in the real world. I'm your host, Rachel De Leon , executive Director of the Association for Financial Counseling and Planning Education for A-F-C-P-E.

Speaker 2:

And I'm your co-host, Dr. Mary Bell Carlson , an accredited financial counselor, or AFC and the President of Financial Behavior Keynote Group. Every episode, we're taking a deep dive in the topics that personal finance professionals care about, helping clients, building community, and your professional growth. John McNamara is the principal assistant director of markets and the assistant director for consumer credit payments and deposit markets in research markets and regulations. Division of the Consumer Financial Protection Bureau. He leads a team of subject matter experts and analysts covering credit cards, payments, deposits, student loans, auto, small dollar marketplace, and installment lending markets, as well as credit reporting, debt consolidation, debt relief, FinTech, and the use of artificial intelligence and machine learning in consumer financial services. He also manages budget, staffing and administration of the Bureau's Markets office. John is a frequent speaker, panelists, consultant, and author addressing key issues and trends in the financial services industry. And we are thrilled to have him joining us as a keynote speaker this year at AF CPE's Symposium. Thanks for joining us today, John .

Speaker 3:

Oh , it's my pleasure. Thanks for having me,

Speaker 1:

John . We're so glad to have you here today, and we're really looking forward to your keynote address this year on the facets of consumer protection. But one of the reasons we love to have our keynote speakers on the show is to get to know them a little bit on a personal level. Would you tell us a little bit about your personal and professional journey and what drew you to this work?

Speaker 3:

Way back in 1983 when Ronald Reagan was president, I was outta college and was looking for a new job, and I took a job as a collector trainee, mainly because they were willing to train me. So I got into the collections business with a company based outta Phoenix, Arizona. Stayed with them for quite a long time and sort of rose through the ranks as a debt collector. And then along that journey as a debt collector, I , I sort of realized early on that I, I sort of had a better way to treat consumers who were struggling with their debt. And, and at one point in my career at this, what was the one point, the largest debt collector in the world nationwide credit, I was in charge of writing, training and development materials for both collectors and managers. And I was able to put in some ideas about treating consumers with dignity and respect. And I sort of, I guess from the earliest day as a brand new collector, I thought there's a better way to do this. It sort of preserves the dignity of consumers. But anyway, my approach was very successful. I did well with that company, rose through the ranks eventually to senior Vice president of Retail and Markets, and that was for First Data Corporation. They had, they had purchased us from there. I moved on and did a stint as the Chief Operating Officer for asset management outsourcing, another debt collector, and then actually started my own business, like right before the Great Recession in , in probably the worst possible time to start a business. And it was a small debt collection agency. So I , I learned what it's like to be a small business owner in the debt collection space. I knew what it was like to be a collector for a large national agency. And then in 2009 or two , late 2008, I actually joined software, a cloud startup software company called Live Ox . And they were a provider of telephony services based on from the cloud. And so it was when cloud was early and scary, and I was their chief marketing officer and did a lot of product development work for them. And, and even then I was , uh, the , our main customers were debt collectors and servicers. So as the chief marketing officer, I was really pushing , uh, the sort of development of we , I guess it was pre RegTech, but we didn't realize it was RegTech, but we were building the software to provide ways for users to sort of adjust to change in compliance. And during that time, the CFPB was, was , uh, you know, Dodd-Frank passed in 2010. The CFPB was on its way to standing up. And I gave quite a bit of, did quite a bit of speaking about what the CFPB might look like and how there'll be a fast learning organization and there'll be a force to rec be reckoned with. And certainly anyone in the debt collection space or anyone dealing with consumers who were struggling should really pay attention. So as the chief marketing officer at Live Ox , and most of my customers who were debt collectors were terrified of the CFPB and what it might mean to their business. And then I guess probably about 2013, I realized that they were thinking about writing a implementing regulation for the Fair Debt Collection Practices Act, which covers the behaviors of, of debt collectors. So right about that time, I got a call from a friend of mine who worked at the CFPB, and I guess he wasn't that good of a friend because Live Ox , we would've been considered a servicer for a large market debt collectors. But in 2013, he called me and said, the CFPB wants to talk to you, John, full stop. And he left it hanging there. And I like, I think in that 30 seconds, it was probably only 10, but it felt like 30 seconds or a full minute, I mentally replayed every egregious thing I had done since kindergarten <laugh>. And then, and then this friend said, listen, I am leaving the CFPB , I am the , uh, debt collections program manager. This job is ideal for you. You should apply. And so I, I looked at it, what was entailed in the job, and , and then I looked at my LinkedIn and I thought, oh my gosh, this job sort of is literally written based on my experience and my professional journey and what I want to do. And so I applied that was, I got the job, actually went home and I said to my wife, what do you think about giving myself a huge pay cut and moving to a higher cost of Living City to do policy work? And she looked at me and she said, she said, go for it. And , um, so, so I did, I applied for the job eventually I got it. I started in June of late June of 2014 as the debt collections program manager working on Regulation F working on monitoring and watching for bad behavior and bad consumer outcomes in the debt collection space. And then at the time, I, I thought, wait a minute, I wanna deal not just with, with folks who are dealing with debt collectors, but I'm also interested in any consumer that's sort of facing that tough decision, thinking about bankruptcy. They might be thinking about going to credit repair or for-profit debt settlement, or non-profit consumer credit counselors, that just really, really vulnerable population that's making tough decisions. So we expanded the market monitoring and debt settlement debt relief while I was there. And then my boss left the CFPB . And my, my, my boss at the time, David Silverman, encouraged me to apply for the assistant director job. And it's, it's funny, I really thought I wasn't worthy. It's like David, David was a Harvard JD had done really well in the credit card industry. He had clerked for Thurgood Marshall, and I'm like, I'm not worthy, and I wasn't even gonna apply. And, you know , he encouraged all kinds of great candidates to apply for the job. But then it occurred to me of all the people at the CFPB , I have probably talked to tens of thousands of at-risk consumers. And so I have a life career experience, no one at the bureau has. Um , so I applied and , and I got the job and became assistant director. And, you know, roll forward to, now I am the principal assistant director. And by the way, thank you for going through that description of what I do. I know it's a mouthful, <laugh>, I tried , I tried to change my title to principal, assistant director of markets for everything except mortgage and small business lending. Those are the two areas. I don't cover <laugh> , but the team covers everything else. There was a time where , where acting was in front of it too, so the title was even longer.

Speaker 2:

Wow. Wow. <laugh> . But,

Speaker 3:

And it's funny , uh, so I, I gave myself a big pay cut, moved to Washington dc it's been nine and a half years, don't regret it because I was able to see that the kind of work the team has been able to do , do in terms of protecting consumers. And I've seen the kind of work the CFPB has done, you know, especially with this current director, director Chopra, just all the good work we're doing to try to try to give consumers a fair shake.

Speaker 2:

No, that's great. It does cover quite a bit of ground. Now I have to ask, how does a wife feel about this? Is she happy in dc <laugh>,

Speaker 3:

We never banked on how much we would like DC And so my, my wife works for a nonprofit here in DC and , and she, she may love DC more than I do.

Speaker 2:

Oh, well that's a win all the way across then. I love it. Let me ask you, you're coming to this year's symposium. You're gonna be one of our keynote speakers there, and you're gonna be talking to us about some of the latest research that CFPB has put out. Are there any recent findings that you're excited to share?

Speaker 3:

Oh my gosh. Well, as you might know from my introduction about my career journey, it's probably hard to shut me up <laugh> . So <laugh> , be careful. I , you know, I am really excited about the work that the markets team as well as the Office of Research has done, and our office of consumer populations around the impacts of medical debt. And the, you know, it started with a report that the team put out on medical debt burden. Um , and we used that report to really shine a light on sort of the arbitrary and capricious nature of debt collection, trade lines . And what we really wanted to do, the assumptions were that the trade lines were used more as a coercive form of debt collections. And it wasn't like collectors were trying to, you know, bolster the underwriting system or make it more predictive. So we used that report to really talk about how many Americans had these things on their credit reports, how often , uh, there are complaints about the accuracy of those. And we also wanted to paint a picture for most Americans, you know, who don't sort of live in policy that, that unlike say, credit card or mortgage information on your credit report, many, many healthcare providers, maybe even most don't furnish. And so, you know, 99.4% of medical trade lines are furnished by somebody other than the person who owns the debt, which is just this really weird dynamic where the healthcare provider gives the stuff to a debt collector, says, Hey, furnish this and just trust me that it's accurate. So we issued that report and then we followed up on it with some additional research that showed that unlike most trade lines , these trade lines are not persistent if you thought someone was using it to coerce people to pay the data basically is completely consistent with that. Smaller balances are more persistent and bigger balances. Most of the balances disappear after a year or two instead of, you know , the seven years that it takes before most trade lines become obsolescent. And shortly after the report, like the National Credit reporting companies, Equifax, TransUnion, Experian announced they were getting rid of half of these things, which was, you know, kind of a jaw dropping, but also I think cool for consumers. But I think a lot of policy makers were like, well, what about the other half? You know, if the balances under 500 are problematic, what about the balance is over? And then if you look, if you've been following what we've been up to, we just we're in the very early stages of a proposed rulemaking on the Fair Credit Reporting Act that would actually ban the use of medical information for underwriting and the furnishing of that, which, which, you know, maybe could possibly, the outcome of that rule could be that all medical debt trade lines are off consumers credit reports. And during this time, we also noticed that both FICO and Vantage score, the two big providers of scores were progressively devaluing medical debt anyway, I think realizing that really wasn't predictive of whether a consumer might default in the future. And then Vantage score took an , a step of going so far, I think is announcing that it's latest versions, version 3.0 and 4.0 would not use medical debt at all in its underwriting. So, but listen, I could go on and on. We're about to release, we're about to release our Card ACT report, which we do every two years, which, you know, I think I wanna say something like 80 million Americans or more have credit cards, and most of them have multiple cards, but that report is just rich with data for policy makers , including behaviors of debt buyers, debt sellers. I think we've got information on there about sort of the behavior of credit card issuers and, and their customers by FICO band . So, you know, that that's a report the team puts out every two years that we're really proud of, and it's, it's big and it's complex. Oh, and buy now, pay later, the team used our 10 22 authority to issue a report on the buy now pay later business. My senior program manager, Laura UDIs and senior fellow Martin Kleinbard drove that work along with the help of , of Jack Sallows. And it's, it's really probably the only look you can get at the Buy now pay later industry. And , um, to me, I think it's a wonderful use of the 10 22 authority that were granted through Dodd-Frank, the ability to look at a new entrant into a space that, that may have benefit, it may have harm, but actually to gather information and share just what's going on there.

Speaker 1:

Yeah, I think that's great. And I think there's a lot our professionals can learn from all of this research and this findings as they work with their clients as well. I know the buy now pay later industry, it feels like it came on quickly and you see it everywhere.

Speaker 3:

Yeah. It really went from zero to 60 in like one second.

Speaker 1:

Mm-Hmm . <affirmative> . Yeah.

Speaker 3:

So, and it's, you know, credit cards have also offered sort of their version of it. As you may know, apple rolled out Apple Pay in for, so it's, it's, they've actually changed the behavior of some of the incumbents.

Speaker 1:

John , I'm curious. CFPB works collaboratively with the Federal Trade Commission to coordinate research efforts and protect consumers. Can you tell us a little bit about that relationship?

Speaker 3:

I was fond of saying when I, I spoke publicly in my earliest bureau days, CFPB days, that there was a lot of F-T-C-D-N-A at the CF pb MM-Hmm mm-Hmm . <affirmative> , and now, you know, roll the clock forward 11 years and , and or 12 years. And it's sort of both. They've got, they've got some of, of , of the C-A-P-B-D-N-A, we've got some of theirs. As you know, our current director was a commissioner, the Federal Trade Commission. But we work very, very closely with them , especially on matters of debt, settlement, debt collections , uh, credit repair in those areas. And I, I think we also produce a report each year on the administration of the Fair Debt Collection Practices Act, which we, we administer along with the Federal Trade Commission. So I would say there's very little daylight between sort of these two cops on the beat when it comes to consumers and a number of areas like credit reporting, like debt collections, like credit repair.

Speaker 2:

Totally. In fact, it's small. I've lived in the DC world as well, and it's amazing to see how small that world is after a while .

Speaker 3:

And sometimes I still, like, it's been a very, you know, almost a sign feldy in semi symmetry sometimes for me. But the second doc, in 1983, when I started as a debt collector, the second document I signed was a consent decree from the Federal Trade Commission.

Speaker 2:

Oh, wow. It's amazing how it all comes full circle <laugh>.

Speaker 3:

Oh, yeah, actually I was two , I was in Washington DC and I was, my wife and I were, it was her first trip to dc this is in 2010. And we literally stumbled onto a , uh, and of course during that, as part of my job at Live Ox , I've been talking a lot about the CFPB and what it was, what, what it might be like. Um, and I literally stumbled into the , uh, um, the press gathering with Senator Dodd and Congressman Frank. You know, it was the day that the Dodd-Frank , uh, wall Street Reform and Consumer Financial Protection Act was ratified. So, you know , that little , little did I realize four years later I'd actually be working here.

Speaker 2:

So let me ask you, the Bureau offers a lot of great resources, not only for consumers, but for financial professionals. Would you recommend someone who's new? Maybe give us some ideas of your outline, of your resources.

Speaker 3:

Okay, so for consumers and and financial counselors, I couldn't recommend enough the ask CFPB questions. I think they're really well done, they're well thought out. We, we update them on a fairly regular basis. So you can go to that site and just ask a question. And there's a wealth of information that's been highly vetted and it's, it's written really for consumers, but, but obviously if you're a counselor, you're interacting with them, I think that's a ready, ready go-to resource for, for any, any consumer or any consumer counselor. Um , and if they're a consumer counselor, I would sort of, not a web resource, but I'd highly encourage them to, to reach out to us directly , uh, between, you know, the, the folks on consumer populations and markets. We have a wealth of subject matter expert expertise that we , we absolutely, I mean , not only we love sharing it, we kind of feel like it's our job.

Speaker 1:

John , one question we ask at the end of every interview is to share their 2 cents. If you had one piece of advice to leave with our listeners, what would it be?

Speaker 3:

Yeah, I, I'd say you're not alone. I mean, consumers that are struggling, I think it's a lonely place. Some collectors will even try to make 'em feel like they're the only person in the world who owes $500 to, you know, this hospital or that payday lender. Lots of people owe, lots of people are struggling. You're in really good company and there's lots and lots of help, and there's lots and lots of people that want to help you.

Speaker 1:

I love that. Great advice.

Speaker 2:

John , thank you so much for joining us on the show today. Will you tell our listeners where they can connect with you?

Speaker 3:

My email is John dot mcnamara@cfpb.gov counselors who are sort of interacting with, with the kind of people that, that we were stood up to take care of. They have sort of firsthand knowledge of what's going on out there in terms of bad behaviors and good behaviors. So we enjoy hearing what they're hearing to give us sort of an early tell on what kind of risk might be coming down the road for consumers.

Speaker 1:

Yeah. And John , where do you recommend counselors share some of that feedback with you?

Speaker 3:

I would say they can email us directly. We actually have an office of public engagement too , that, that sets up meetings regularly where we gather together folks who have that experience to share it with us. And my office, along with the Office of Research, we spend a lot of time thinking about what consumer balance sheets look like and how they're faring. You know, the , uh, obviously student loans repayments just started, that's for 44 million consumers. You've got the interest rates that are, that are really, really high on top of record, high credit card balances. So it just seems like there's a lot of stressors on consumers balance sheets.

Speaker 1:

Well, and I think you're in for a tree just next month when you come to the symposium. We have a really engaged and excited community, and I know they're gonna be looking forward to hearing more about the research that the Bureau is doing, and we'll be eager to talk to you directly. So we're really thrilled that you're gonna make it.

Speaker 3:

I'm excited to share and I'm, I'm excited to learn at that event. So thanks for having me.

Speaker 1:

Yeah, absolutely. Thanks for coming on today. It

Speaker 3:

Was my pleasure. Mary,

Speaker 1:

I'm really looking forward to John's session at the A-F-C-P-E Symposium this year. I think it's really important for our professionals and our community, you know, to really engage with the CFPB , to hear about the work that is going on in the field, to hear about the data and the research that they're doing, the protective measures that they have in place. And to really engage one-on-one with the Bureau. They come every year to provide resources and in terms of their fin Next community, I know they're a great source of knowledge and resource to our community, but I think, you know, going a little bit deeper and hearing about some of the trends , uh, is gonna be really important. One of the things I really liked about John , his history is really interesting. You know, he is boots on the ground in the, in the debt collection industry, but he also, I really like his lens of preserving the dignity of consumers. And I think that really resonates with the work that our community does. It will be really interesting to kind of hear about a lot of these things at the symposium this November.

Speaker 2:

I agree. I appreciate John's transparency. Honestly, I feel like he's very reachable. It's trying to do the best he can and have as much boots on the ground as he mentioned, to be able to help. And I appreciate that government agencies open and willing to listen to consumers and really the day-to-Day struggles that everyday consumers are going through. I also look forward to hearing about the resources. You know, you give us a very high level of maybe some ways to reach out. And I'm looking forward to, in the symposium, maybe getting a little more tactical and getting some direct resources that you can put into play as financial professionals with your clients. We hope to see you soon this year at AF CPE's Symposium in New Orleans.