CFPB Releases Long-Awaited Proposed Debt Collection Rule

The proposed rule addresses key issues including safe-harbor procedures for the use of voicemail messages, text messages and email.

5/10/2019 11:00 AM

CFPBNewsAdvocacy
CFPB Releases Long-Awaited Proposed Debt Collection Rule

On May 7, 2019, the Consumer Financial Protection Bureau finally released its long-awaited proposed rule for the debt collection industry. The release of the proposed rule signals the biggest development in the accounts receivable management industry since passage of the FDCPA nearly 40 years ago. ACA’s CEO, Mark Neeb, and other members of the ACA executive team will attend the CFPB’s field hearing on Wednesday, May 8, where the rules will be showcased for the public. ACA staff will also be hosting a Hot Topic Webinar on the proposed rule on Thursday, May 9, 2019.

It should be stressed that this is only a proposed rule and does not currently have the force of law. The rule will be subject to a 90-day public comment period following its publication in the Federal Register. In the coming days and weeks, ACA will be providing compliance guidance to our membership regarding the potential implications of the proposed rule. The Association will also solicit feedback from our members in order to provide advocacy on behalf of the industry and guidance to the CFPB to ensure the best possible outcome for ACA members.

It should be noted that the proposed rule addresses a number of key issues about which ACA International has long sought clarity, including safe-harbor procedures for the use of voicemail messages, text messages and email. The proposed rule also provides more clarity on the requirements for a validation notice, including a model form for a validation notice. ACA is pleased that the CFPB chose to address the use of modern technology and communication, which have long been a source of great frustration for debt collectors.

In its current state, the proposed rule includes:

  • Certain disclosures, such as an itemization of the debt and plain-language information about how a consumer may respond to a collection attempt, including by disputing the debt.
  • Methods by which debt collectors may lawfully use newer communication technologies, such as voicemails, emails and text messages.
  • Methods by which collectors may provide required disclosures electronically, for example, by email or text message.
  • Call frequency limits of no more than seven attempts by telephone per week; prohibiting call attempts within 7 days of a telephone conversation.
  • Out-of-statute debt collection, by prohibiting suits and threats of suit on time-barred debts and requiring communication with the consumer before credit reporting.

What follows is a summary of some of the major points that the proposed rule would address.

Definitions

Section 1006.2 of the rule sets forth definitions which largely incorporate the definitions found in the FDCPA, but also adds to certain existing definitions and provides a few new definitions. 

Consumer GenerallyUnder § 1006.2(e), the proposed definition of consumer generally restates the FDCPA’s definition of “consumer” but interprets the term to include a deceased natural person who is obligated or allegedly obligated to pay a debt.

Consumer for Purposes of Communication – Under section § 1006.6(a), the proposed definition of “consumer” generally restates the FDCPA’s definition of “consumer” for purposes of certain communication but interprets the term to include a confirmed successor-in-interest and the personal representative of a deceased consumer’s estate.

Attempt to Communicate – Several of the proposed rule’s requirements would apply not only to communications, but also to communication attempts. For example, the proposed rule would prohibit a debt collector from communicating or attempting to communicate with a consumer at times or places that the debt collector knows or should know are inconvenient to the consumer or after a consumer notifies the debt collector in writing that the consumer wishes the debt collector to cease further communication with the consumer. In addition, the rule would generally prohibit a debt collector from communicating or attempting to communicate with a consumer using an email address that the debt collector knows or should know is maintained by the consumer’s employer or by a social media platform that is viewable by a person other than the consumer.

DebtThe proposed definition generally restates the FDCPA’s definition of “debt,” with only minor wording and organizational changes for clarity, but the rule would also add a new category of debt under § 1006.2(f) called a “Consumer Financial Product or Service Debt.” Certain parts of the rule would apply only when a debt collector covered by the FDCPA is collecting a debt related to a “consumer financial product or service” as defined in the Dodd-Frank Act.

Communication in Connection with Debt Collection

The proposed rule addresses the use of modern methods of communication, such as email, text messages, and voicemail messages, clarifies how and with whom a debt collector can communicate about a deceased consumer’s debt, and requires debt collectors to communicate with a consumer prior to reporting the debt to a consumer reporting agency.

Reasonable Procedures for Email and Text Message Communications – Under § 1006.6(d)(3), the proposed rule identifies safe-harbor procedures for debt collectors who unintentionally communicate with an unauthorized third party about a consumer’s debt when trying to communicate with the consumer by email or text message. Section 1006.6(e) of the proposed rule would require a debt collector to include, in emails, text messages, and other electronic communications, an option for the consumer to unsubscribe from future such communications. Section 1006.14(h) would prohibit a debt collector from communicating or attempting to communicate with a consumer through a medium of communication that the consumer has requested the debt collector not use, such as a specific telephone number or email address. Section 1006.6(b)(1) of the proposed rule would clarify that calls to mobile telephones and electronic communications, such as texts and emails, are subject to the FDCPA’s prohibition on communicating at unusual and inconvenient times and places.

Workplace Email – Under §1006.22(f)(3), the proposed rule would prohibit a debt collector from contacting a consumer using an email address that the debt collector knows or should know is provided by the consumer’s employer. For example, if a debt collector knows where the consumer works and the email address appears to be a work email address, the debt collector would know, or should know that the email address is provided by the consumer’s employer.

Social Media – Section 1006.22(f)(4) of the proposed rule would prohibit debt collectors from contacting consumers through social media platforms except through a private messaging function.

Limited-Content Message – Section 1006.2(j) of the proposed rule would define, and provide example language for, a “Limited-Content Message” that a debt collector could send by, for example, by voicemail or text. The content of a Limited-Content Message would not be considered a “communication” and, if heard or observed by a third party, it would not constitute a prohibited third-party disclosure.

Decedent Debt – The prosed rule would clarify how and with whom a debt collector can communicate about a deceased consumer’s debt, as well as how the requirements regarding validation notices and disputes would apply after a consumer passes away.

Certain Other Prohibited Practices

The proposed rule incorporates the existing FDCPA prohibited practices, but adds certain additional prohibitions discussed below.

Communicating Before Credit Reporting – Section 1006.30 of the proposed rule would prohibit a debt collector from reporting collection items to a consumer reporting agency unless the debt collector has already communicated with the consumer, for example, by sending a letter to the consumer.

Call Cap – Under § 1006.14(b), the proposed rule includes a limit on the number of calls a debt collector may place to a person about a particular debt within a seven-day period, subject to certain exceptions. The proposed rule would prohibit a debt collector from calling a person about a particular debt more than seven times within a seven-day period. The proposed rule would also prohibit a debt collector from placing a telephone call to a person within a period of seven days after having had a telephone conversation with such person about a particular debt. A debt collector who stays within the proposed limits would not violate § 1692d(5) of the FDCPA, which prohibits calling any person repeatedly or continuously with the intent to annoy, abuse, or harass such person.

Debt Transfers – Subject to certain exceptions, the proposed rule would prohibit a debt collector from transferring a debt to another debt collector if the debt collector knows or should know that: (1) the debt has been paid or settled; (2) the debt has been discharged in bankruptcy; or (3) an identity theft report has been filed with respect to the debt.

Time-Barred Debt – Section 1006.26 of the proposed rule would prohibit a debt collector from suing or threatening to sue on a debt if the debt collector knows or should know that the applicable statute of limitations has expired.

Proposed Disclosures

The proposed rule includes a framework for providing electronic disclosures, additional clarity on the contents of a validation notice, as well as information regarding the use of Spanish and other foreign languages in a validation notice. The proposed rule also provides a model form for a validation notice. These disclosures are summarized below.

Electronic Disclosures – Under § 1006.42(b)-(d), the proposed rule would require a debt collector to provide required disclosures in a manner that is reasonably expected to provide actual notice, and in a form that the consumer may keep and access later. A debt collector who provides the required disclosures electronically would need to comply with either the E-SIGN Act or a set of alternative procedures. The proposal also includes requirements relating to the delivery and format of required electronic disclosures. For more information on this aspect of the proposal, see the “Debt collection proposed rule electronic disclosure options” flowchart on the CFPB’s website.

Validation Notice – Section 1006.34 would require a debt collector to include in the validation notice certain information about the debt including: (1) the account number and an itemization of the debt; (2) certain information about consumer protections, including information about the right to dispute a debt; and (3) a consumer response form that consumers could use to take certain actions, including submitting a dispute or requesting original creditor information.

Spanish and Foreign Language Notices – Section 1006.34 of the proposed rule would also permit a debt collector to include statements in the validation notice informing consumers how they may request the notice in Spanish, if the collector chooses to provide a Spanish-language translation. The proposal would permit a debt collector to provide a validation notice translated into any language, if the debt collector also sends an English-language validation notice in the same communication or if the debt collector previously sent an English-language validation notice.

Model Validation Notice – Finally, under Appendix B of the proposed rule, a debt collector may comply with the FDCPA’s § 1692g validation notice and § 1006.34 of the proposed rules disclosure requirements by using Model Form B-3.

Conclusion

Members are encouraged to review the proposed rule (text of rule starting on page 447). As previously noted, in the coming days and weeks, ACA will be reaching out to its membership for reactions and feedback on the proposed rule. ACA will continue to work closely with the CFPB to advocate on behalf of the accounts receivable management industry and to ensure that the final rule will be beneficial for the debt collection industry and consumers alike. Please stay tuned to ACA’s Daily Newsletter for more information.

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