Consumer Financial Protection Bureau releases Supplemental Notice of Proposed Rulemaking outlining additional model language and forms for time-barred debt disclosures. Editor’s note: This article is available for members only.
2/24/2020 9:00
Another piece of the proposed debt collection rulemaking puzzle from the Consumer Financial Protection Bureau is in place after the bureau released its 103-page Supplemental Notice of Proposed Rulemaking (SNPRM) concerning out-of-statute debt, which ACA has been expecting and preparing for over the past several months. ACA is reviewing the proposal and will seek feedback in the wake of its previous calls for guidance concerning the collection of out-of-statute debt.
The CFPB announced the additional proposed disclosure requirements for out-of-statute debt in the SNPRM released Feb. 21. Comments are due June 5, 2020, after an extension from the CFPB.
“ACA has previously urged the bureau to develop a plain and clear statement for collectors, with a corresponding safe-harbor, regarding the possibility of a lawsuit on late-stage debt and that the consumer may have certain legal defenses to such litigation, such as the statute of limitations,” said CEO Mark Neeb. “Such a safe-harbor disclosure would be appropriate because it would ensure that the collector adequately warns the consumer about the consequences of nonpayment and it allows the collector and consumer to engage in legitimate communications about resolving the account. ACA looks forward to carefully reviewing the supplemental proposal, seeking feedback from our members, and commenting on behalf of the accounts receivable management industry.”
According to the Fast Facts: Supplemental Debt Collection Proposal on Time-Barred Debt issued by the CFPB:
- The supplemental proposal on time-barred debt would require debt collectors who are collecting debts that they know or should know are time barred to provide time-barred debt disclosures and, if applicable, revival disclosures to consumers.
- The supplemental proposal on time-barred debt sets forth proposed timing and formatting requirements and includes a proposed safe harbor for debt collectors who use the bureau’s model forms when making the time-barred debt and revival disclosures.
- The May 2019 proposed rule defines a time-barred debt as a debt for which the applicable statute of limitations has expired.
The CFPB conducted research and testing on consumer disclosures related to out-of-statute debt that were not included in the May 2019 proposed rule for the industry.
“The bureau proposes to prohibit collectors from using non-litigation means (such as calls) to collect on time-barred debt unless collectors disclose to consumers during the initial contact and on any required validation notice that the debt is time-barred,” according to the Feb. 21 news release from the CFPB on the SNPRM. “Consumer research conducted by the bureau found that a time-barred debt disclosure helps consumers understand that they cannot be sued if they do not pay. That can help consumers make better informed decisions whether to pay the debt or not.”
ACA is evaluating and will be seeking member feedback on whether the supplemental proposal, including the model language and forms, provides the necessary guidance and clarity for the ARM Industry and consumers related to the collection of out-of-statute debt.
ACA, among many other commenters in its membership and industry groups, focused on time-barred debt in comments to the CFPB after the release of its May 2019 proposed rule for the debt collection industry. In fact, the CFPB received more than 14,000 comments on the proposed rule before the September 2019 deadline, including a comprehensive response from ACA and many submissions from members.
View more background on the CFPB’s proposed rule for the debt collection industry through ACA’s Advocacy Resource Center and stay updated on news from ACA by subscribing to ACA Daily.