A Closer Look at Communications Requirements in CFPB Final Debt Collection Rule

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11/1/2020 18:00

By Colin Winkler

As ACA International previously reported, on Friday the Consumer Financial Protection Bureau released its long-awaited final rule amending Regulation F, which implements the Fair Debt Collection Practices Act.

This article—part one of a three-part series—provides an initial closer look at the component parts of the final rule. What follows here addresses general information applicable to the entire final rule and looks at notable provisions of Sections 1006.1 through 1006.6(b), including applicable “official interpretations” (comments, in the parlance of the final rule).

While there’s a lot to unpack in the final rule, this series of articles will attempt to highlight key provisions as well as notable omissions and alterations or departures from the proposed rule.

Part two of this series will explore Sections 1006.6(c) through 1006.18, including applicable comments.

Part three of this series will look at Sections 1006.22 through 1006.108, including applicable comments.

Now, before turning to the specifics of the provisions that made their way into the final rule, we should pause to note a few general and preliminary points:

1. The final rule won’t take effect until at least late October 2021. The final rule becomes effective one year after publication in the Federal Register. ACA will update members when the final rule has been published and the effective date is determined. (Publication in the Federal Register typically takes a few days. For example: On Oct. 20, the CFPB released a rule updating Regulation Z’s sunset date for the definition of certain loans; that final rule appeared in the Federal Register on Oct. 26.)
2. There’s another final rule focused on disclosures coming soon, probably in December 2020. The final rule covers what the CFPB refers to as “debt collection communications and related practices.” Much of the proposed rule released in May 2019 addressed consumer disclosures, e.g., validation notices, but those provisions do not appear in the final rule. According to the CFPB, it “intends to issue a disclosure-focused final rule in December 2020 to implement and interpret the FDCPA’s requirements regarding consumer disclosures and certain related consumer protections.” In short, while we’re all digesting this first course on communications, the CFPB is cooking up a second course that will address disclosures, potentially including validation notices. Stay tuned.
3. The bureau relied heavily on its FDCPA authority in making the final rule and did not rely at all on its UDAAP authority under Section 1031 of the Dodd-Frank Act. A fair portion of the proposed rule issued in May 2019 would have relied on the CFPB’s rulemaking authority under Section 1031 of the Dodd-Frank Act, which grants the bureau authority to make rules to identify and prevent “unfair, deceptive, or abusive acts or practices [UDAAP] in connection with . . . a consumer financial product or service.” But in the final rule, the CFPB took a more conservative approach and stuck chiefly to its FDCPA authority, holding back its more expansive UDAAP authority. That said, two small pieces of the final rule do rely on the bureau’s authority under Dodd-Frank Section 1032, which allows the bureau to make rules to ensure that the features of any consumer financial product or service are “fully, accurately, and effectively disclosed to consumers” and the record-retention provisions in Section 1006.100 of the final rule rely on the bureau’s authority under Dodd-Frank Sections 1022 and 1024.
4. The final rule requires you to look in two places for what it permits and requires. The CFPB split the final rule into the enumerated sections of Part 1006 (i.e., the sections to be codified at Subparts A and D), which run about 30 pages, and the more detailed Supplement I, which runs about 60 pages. Supplement I contains the CFPB’s official interpretations of Regulation F and the FDCPA. You must look at Supplement I to fully understand the final rule. The bureau’s section analysis of Supplement I specifically notes that Supplement I has been revised from what the CFPB published in the proposed rule “to clarify that the provisions of the commentary are issued under the same authorities as the corresponding provisions of Regulation F” and “to expressly reference the notice-and-comment procedures of section 553 of the [federal] Administrative Procedure Act.” That matters because it means the official commentary in Supplement I should be entitled to deference in federal courts under the Chevron line of case law.
5. You can request an official interpretation be added to Supplement I. The introduction to Supplement I provides that “[a]nyone may request that an official interpretation be added to this commentary and provides an address and procedure for doing so.” So, to the extent that gaps emerge in the final rule as our community digs into it, we all have the ability to seek formal clarification.

With that background under our collective belt, let’s dive in:

1006.1 – Authority, purpose, and coverage

As noted above, the CFPB cut parts of the proposed rule that would have relied on its UDAAP authority under Section 1031 of the Dodd-Frank Act. In that vein—and despite an entreaty from consumer advocates and a group of state attorneys general—the bureau declined to include first-party debt collectors (creditors) in the scope of the final rule. At the same time, however, the bureau declined to clarify whether particular actions by first parties who are not subject to the FDCPA are covered under the bureau’s UDAAP authority.

1006.2 – Definitions

In the final rule, the bureau made some changes to the definitions in its proposed rule, but for the most part the definitions adopted in the final rule reiterate those set forth in the FDCPA.

Some definitional issues in the final rule stand out:

“Attempt to Communicate”

The final rule narrows the definition of “attempt to communicate.” The more tailored definition in the final rule includes the phrase “about a debt,” which means that “general marketing and advertising directed to groups of consumers or the general public, as well as personal communications” ought not to be considered “attempts to communicate.” In that same vein, this refinement means when a consumer accesses a debt collector’s website and encounters general information, that’s not an “attempt to communicate.”

“Communicate”

The final rule refined the proposed definition of “communicate” and relocated the exclusion of a “limited-content message” from Section  1006(2)(d) to comment 2(d)-2 in an effort to clarify “the status of limited-content messages” and the fact that “marketing or advertising messages that do not contain information about a specific debt” do not qualify as communications under the FDCPA.

Under the final rule, a limited-content voicemail directed to the consumer and not knowingly left for a third party—if and only if it includes all of the required content specified in Section  1006.2(j)(1), any of the permitted content in 1006.2(j)(2), and no other content—will not be deemed to be a communication.

“Consumer”

The bureau essentially restated the statutory definition of “consumer” but left itself an opening to “further define the term by regulation to clarify its application when the consumer is deceased.” For now, the final rule simply includes a cross-reference to Section 1006.6(a), which covers executors or administrators of deceased consumers’ estates in the same fashion as in FDCPA Section 805(d). More on that below in the discussion of Section 1006.6(a).

“Consumer Financial Product or Service Debt”

With the decision to remove Dodd-Frank Section 1031 UDAAP rulemaking from the final rule, the bureau no longer needed to include this proposed term, so it does not appear in the final rule.

“Debt”

The final rule responds to industry concerns and clarifies, in new comment 2(h)-1, that “debt subject to the FDCPA is limited to debt incurred by a natural person.” That clarification may help those who collect commercial debt sleep a little sounder.

“Debt Collector”

The final rule includes debt buyers in the definition of “debt collector” under the “principal purpose” prong, as originally proposed. The only change reflects a clarification, set forth in comment 2(i)-1, that a debt buyer that does not collect or attempt to collect debts and whose principal business purpose is not the collection of debts would not be a debt collector under the act or the final rule.

Additionally, the bureau expressly declined to exclude licensed attorneys and mortgage servicers from the definition of debt collector.

“Limited-Content Message”

Time to refocus your eyes and pay attention: The addition of the term “limited-content message” to the FDCPA lexicon reflects the bureau’s attempt to set up a Zortman-type message to allow debt collectors to leave voicemails for consumers without worrying about violating any of the provisions of the FDCPA that have historically been in tension with voicemail practice. For the uninitiated, the Zortman case effectively yielded a court-approved voicemail “script” of sorts that walked the fine line between providing meaningful disclosure of the caller’s identity under the FDCPA but avoiding third-party disclosure. See Zortman v. J.C. Christensen & Assocs., 870 F. Supp. 2d 694 (D. Minn. 2012) holding that a voicemail message stating “We have an important message from J.C. Christensen & Associates. This is a call from a debt collector. Please call 866-319-8619,” which voicemail did not contain the consumer’s name, did not constitute a communication with a third party and therefore did not violate the FDCPA.

Because the final rule sets forth voicemail as the only currently permissible medium by which to provide a limited -content message, we refer to these messages as limited-content voicemails (LCVMs) in this article, even though that’s not what the final rule calls them. It makes it clearer that when you’re talking about a limited-content message, you have to mean voicemail—for now.

A LCVM contains all the information required by Section 1006.2(j)(1); any of the optional information set forth in Section 1006.2(j)(2); and no other information. The LCVM must be directed to the consumer’s voicemail, but a limited-content message left on a third party’s voicemail will be deemed a LCVM (and therefore not a communication under the FDCPA) unless done knowingly, i.e., where the debt collector knew that the voicemail did not belong to the consumer. With the right script, it should be reasonably easy to craft a compliant voicemail.

For instance, under the LCVM provisions, your agency can now leave the consumer a CFPB-approved voicemail such as: “Hi, this is Robin Smith calling from ABC Inc. It is 4:15 p.m. on Wednesday, September 1. Please contact me or any of our representatives at 1-800-555-1212 today until 6:00 p.m. Eastern time, or any weekday from 8:00 a.m. to 6:00 p.m. Eastern time.”

Critically, the company name left in the LCVM must not indicate that the caller is in the debt collection business. As a result, some agencies may need to establish appropriate registered trade names in jurisdictions in which they intend to leave LCVMs. That said, the LCVM commentary makes clear that a debt collector who leaves a LCVM would not violate the meaningful disclosure requirements of Section 1006.14(g).

Note that the final rule does not include the consumer’s name as either required or optional information for a LCVM, as had originally been proposed.

While the bureau states in a footnote to its analytical commentary its finding that “voicemail messages include ringless voicemail messages,” thus suggesting in that context that LCVMs may include ringless voicemails, it failed to expressly state in the final rule that for the purposes of an LCVM, a ringless voicemail complies. In contrast, the bureau stated in comment 14(b)-1 that “for the purposes of § 1006.14(b)(1) through (4), placing a telephone call includes conveying a ringless voicemail.” (Emphasis added). It would have been comforting to have that same express language in the LCVM provision.

In a similar vein, members need to be aware that the LCVM opportunities may be limited by more restrictive state laws, meaning that in some circumstances debt collectors may not be able to leave LCVMs. Again, it would have been nice for the CFPB to take the reins—particularly considering its finding that LCVMs benefit both consumers and industry—and preempt state laws with respect to this provision.

Similarly, members should be aware of the interplay between the LCVM provisions and the information displayed on a consumer’s caller ID. Without the right protocols in place, it seems that an LCVM could become a “communication” under the act if the consumer’s caller ID displays information not permitted to be contained in the LCVM.

“Person”

Noting that the “FDCPA frequently uses, but does not define, the term person,” the final rule adopts the definition provided in 1 U.S.C. Section 1, which includes “corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals.”

Section 1006.6 – Communications in Connection with Debt Collections

According to the CFPB’s analysis of this provision, the definition of “consumer” for the purposes of Section 1006.6 constitutes one piece of the bureau’s effort to “finaliz[e] an approach consistent with the [Federal Trade Commission’s]Policy Statement on Decedent Debt.” Until then, debt collectors will have to rely on the comfort of the definition provided in Section 1006.6(a)(4), which includes “the executor or administrator of the consumer’s estate, if the consumer is deceased,” as well as comment 6(a)(4)-1, which helpfully adds “personal representative” to the mix, defining it to mean “any person who is authorized to act on behalf of the consumer’s estate.” That matters because it grants debt collectors clearer guidance and broader latitude in determining who they can speak with about a decedent’s debt and therefore avoid the hassle (for both the collector and the consumer’s estate) of a forced probate.

In a similar vein, the final rule clarifies that “consumer” includes a consumer’s surviving spouse or the parent of a deceased minor consumer.

Note here that with respect to the timing of communications after a consumer’s death, the bureau declined to impose a rule about how long after the consumer’s death would constitute a de jure inconvenient time. This suggests that in these sensitive situations, members may want to consider scripting that all-important question: “Is now a good time to talk about this?”

Similarly, the CFPB clarified in Section 1006(a)(5) that for purposes of a residential mortgage (looking at you, mortgage-servicer debt collectors!), a consumer’s “successor in interest” includes successors in interest as defined in Regulation X and Regulation Z.

The final rule makes clear that there’s no burden on the consumer to utter any magic words to invoke the “inconvenient time or place” provision, although the final rule does allow that where a consumer’s designation may be ambiguous, a debt collector can ask follow-up questions.

In a similar vein, the final rule requires debt collectors not to send email to addresses or call landlines associated with inconvenient locations, but in light of the proliferation of mobile devices in modern society, the bureau clarified in comment 6(b)(1)-1 that a debt collector may ask a consumer to identify times associated with an inconvenient place.

Finally, comment 6(b)(1)-2 provides some clarity on how debt collectors may reply when a consumer initiates contact at a time or place previously designated inconvenient.

Specifically, comment provides that “[I]f a consumer initiates a communication with a debt collector at a time or from a place that the consumer previously designated as inconvenient, the debt collector may respond once at that time or place through the same medium of communication used by the consumer.” After that one permitted response, the debt collector must revert to honoring the consumer’s prior designation of an inconvenient time or place unless or until the consumer notifies the debt collector otherwise. The comment provides several instructive examples to illustrate the application of this rule.

Although the proposed rule did seek comments about whether debt collectors should be saddled with a duty to inquire about inconvenient times and places, the bureau ultimately agreed that it would be impractical and unnecessary to impose such a duty. That provision has been left on the cutting room floor.

In regard to the timing of electronic communications (e.g., texts and emails), the final rule resolves a longstanding ambiguity, establishing in comment 6(b)(1)(i) that an electronic communication will be deemed to be have been made at the time the debt collector sends it, not at the time the consumer receives or views it.

In addition, with respect to the timing of communications, the final rule provides the following “safe harbor” for the circumstance in which a debt collector has “conflicting or ambiguous information” about a consumer’s location and therefore cannot determine the (presumptive or actual) inconvenient time. The safe harbor provides that a debt collector will be deemed to comply with the final rule if it makes the communication “at a time that would be convenient in all of the locations” where its information indicates the consumer might be located. The bureau notes in its analysis that this safe harbor does not require the debt collector to “determine where the consumer actually is located” nor does it suggest that the knowledge that a consumer has a mobile phone would, without more, constitute “conflicting or ambiguous information.” And, once the debt collector has knowledge of a consumer’s location—e.g., by asking after making contact—the ambiguity or conflict would be resolved and the debt collector can rely on the location provided by the consumer upon inquiry.

The bureau did not adopt the proposed provision that would have established “presumptively inconvenient” locations.

The communications provisions and comments cover when and how a debt collector may communicate with a consumer the debt collector knows to be represented by an attorney, but the bureau declined to adopt a bright-line waiting period for a reply from a consumer’s attorney after which the debt collector may infer that the representation has ended or otherwise gone amiss and contact the consumer directly, so that will remain a “facts and circumstances” judgment call.

With respect to workplace communications, the bureau declined to adopt an outright ban on contacting consumers at their workplace, reiterating the statutory mandate that a debt collector not communicate with a consumer at the consumer’s place of employment only if the debt collector knows or has reason to know that the consumer’s employer prohibits the consumer from receiving such communications at work. But, again, the final rule does not require the consumer to utter any “magic words” to invoke this provision; rather, the consumer may state that he or she cannot take personal calls at work. The debt collector may draw a non-communication inference from those words alone or may ask follow-up questions to clarify.

As with other “inconvenient location” communications, the debt collector should associate certain channels of communication—e.g., an address, a work email, a work landline—with the consumer’s employment location and—for other channels of communication, e.g., a mobile phone—should draw inferences from additional data about when the consumer might be at an inconvenient location. If the consumer cannot be contacted at work, the final rule suggests that the debt collector inquire with the consumer about when the consumer expects to be at work so that the debt collector can refrain from calling the consumer’s mobile phone during the consumer’s work hours.

Statutory exceptions to time-and-place limitations on communications with consumers were as discussed in the proposed rule. The notable addition here to the statutory material would be the clarification on the “prior consent” exception, which now requires that the prior consent not be given during an inconvenient communication (although the debt collector may ask when a good time would be to take up the communication again). Beyond that, the final rule restates the FDCPA’s requirement that prior consent be given directly to the debt collector, who cannot rely on “prior consent” given to the creditor or a previous debt collector.

As part of ACA’s analysis of the rule, staff will be hosting an ACA Huddle webinar at 2 p.m. CST, Monday, Nov. 2, as well as an upcoming series of daily webinars for members sponsored by Hinshaw & Culberston LLP, Ontario Systems, Venable LLP and RevSpring Inc.  Click here to register.

Next up in part two of this article series: Email Rules, Call Caps, and more.

Colin Winkler is ACA International's corporate counsel.