Long-awaited debt collection regulatory changes, state and federal legislation on medical debt and data privacy, and landmark court decisions— 2021 had it all for the ARM industry.
By Shaun Ertischek Esq.
As we wrap up a noteworthy year, it’s an ideal time to review and assess all the developments that have occurred. 2021 was another dramatic and exciting year in the accounts receivable management (ARM) industry—perhaps even more than any in recent memory. The regulatory, legislative and judicial impacts were felt across the board and will have lasting effects in the coming year. From Reg F to Hunstein, and everything in between, here is an overview of what transpired in 2021:
- January 2021: The Consumer Financial Protection Bureau published part two of its debt collection rule, focused on consumer disclosures and time-barred debt in December 2020, and many in the industry spent the start of the year digesting its contents. By this point, the industry was already immersed in part one of the rule, focused largely on communication with consumers and the limited content message.
- January 20, 2021: CFPB Director Kathy Kraninger resigned at the request of the Biden administration and the president announced his nominee would likely be Rohit Chopra, who is now the new director of the bureau.
- March 11, 2021: The CFPB rescinded its “Statement of Policy Regarding Prohibition on Abusive Acts or Practices,” which was originally issued in January 2020. “Going forward, the CFPB intends to exercise its supervisory and enforcement authority consistent with the full scope of its statutory authority under the Dodd-Frank Act as established by Congress,” according to a news release from the CFPB. “The CFPB has made these changes to better protect consumers and the marketplace from abusive acts or practices and to enforce the law as Congress wrote it.” The policy statement was issued under Kraninger’s leadership and reflected industry efforts seeking clarity for the use of Unfair, Deceptive, or Abusive Acts or Practices (UDAAP). It now appears the bureau intends to give itself broader authority in this area.
- March 24, 2021: The CFPB released its Consumer Response Annual Report for 2020, which shows the CFPB handled approximately 542,300 complaints last year—a nearly 54% increase from the approximate 352,400 complaints handled in 2019. The impact of the COVID-19 pandemic on the consumer financial marketplace is reflected in the increase of complaints submitted to the CFPB. This increase in CFPB complaints carried over into 2021 and was felt throughout much of the year.
- April 1, 2021: In Facebook Inc. v. Duguid, the U.S. Supreme Court unanimously ruled that the definition of an “automatic telephone dialing system” (ATDS) under the Telephone Consumer Protection Act requires a device that must have the capacity to either store or to produce a telephone number using a random or sequential number generator. This resolved a circuit split over the interpretation of this definition. The holding means that many dialing systems will likely no longer qualify as an ATDS and be outside the purview of the TCPA. Several courts stayed decisions on similar cases until the Supreme Court issued its opinion on this landmark case.
- April 7, 2021: The CFPB issued a Notice of Proposed Rulemaking to delay the effective date of the debt collection rule for 60 days. At the time, Reg F was scheduled to go into effect on Nov. 30, 2021, meaning the proposed delay would push the effective date back to Jan. 29, 2022. According to the CFPB, extending the effective date would have allowed stakeholders affected by the pandemic additional time to review and implement the rules. ACA International submitted comments on the proposed delay, stating: “Many ACA members are small businesses. Navigating the complexities of complying with the Debt Collection Final Rules undoubtedly presents some serious regulatory burdens and resource constraints for both small and large businesses in the ARM industry. However, the CFPB has not stated that the 60-day extension of the effective date will be dedicated to addressing the compliance complexities that ACA members identified in comments on the proposed rule. Thus, it is unlikely this brief extension will have a meaningful impact on allowing companies to understand and implement the Debt Collection Final Rules. To address implementation concerns due to time and resource constraints, we urge the CFPB to commit to not engage in enforcement activity in relation to the rule for an additional six months to a year after the implementation date.”
- April 21, 2021: In Hunstein v. Preferred Collection and Management Services, Inc., the 11th Circuit (covering Florida, Georgia and Alabama) found that sending consumer information to a third-party letter vendor was an impermissible third-party disclosure under the Fair Debt Collection Practices Act (violating Section 1692c(b)). The result of this decision has been a deluge of class-action lawsuits against debt collectors for using an outside letter vendor, many even outside the 11th Circuit.
- April-June 2021: States focused on data privacy and medical debt legislation. Washington, Virginia and Colorado introduced state data privacy legislation and Maryland, Nevada and New Mexico enacted medical debt legislation.
- July 21, 2021: The CFPB reached a milestone as it turned 10 years old. Members have seen many changes at the bureau impacting the ARM industry in those 10 years and it remains a focus of ACA’s advocacy efforts.
- July 30, 2021: The CFPB announced that Reg F will go into effect on Nov. 30 as originally planned and it would not delay the effective date of the rule until January 2022. “The CFPB has now determined that such an extension is unnecessary,” the bureau said. “Following this announcement, the CFPB will publish a formal notice in the Federal Register withdrawing the April 2021 proposal.”
- Sept. 1, 2021: The new California debt collection license application became available online with the requirement that it must be submitted to the state before the end of the year.
- Sept. 23, 2021: Washington, D.C., enacted the “Protecting Consumers from Unjust Debt Collection Practices Temporary Amendment Act of 2021” (D.C. Law 24-40) as emergency and temporary legislation limiting collection activities. The law was designed to be effective for 225 days and requires call frequency limitations (i.e., no more than 3 calls in 7 days), that documents are on hand to validate the debt, that a payment schedule is sent within seven days, that itemization information is available, and that new disclosures are utilized. Since then, the Washington, D.C., City Council has proposed similar permanent legislation.
- Sept. 30, 2021: After months of limbo, the U.S. Senate confirmed Rohit Chopra as director of the CFPB. He was subsequently sworn in and has assumed leadership of the agency. Prior to his nomination, Chopra served as a commissioner on the Federal Trade Commission. Before serving at the FTC, Chopra was the CFPB’s assistant director and separately, the CFPB’s student loan ombudsman.
- Nov. 1, 2021: The Federal Communication Commission’s Reassigned Numbers Database was launched, which lets callers know if a consumer’s cellphone number was disconnected or reassigned (which will assist with TCPA and Reg F compliance). According to the FCC: “Callers can check before making a call to find out if the phone number may have been reassigned. If the database wrongly indicates that the number has not been reassigned, the caller may be protected against TCPA liability when placing the call.”
- Nov. 8, 2021: New York enacted the Consumer Credit Fairness Act (S.153/A.2382), which creates new requirements regarding the filing of collection lawsuits and reduces the statute of limitations from six years to three years.
- Nov. 17, 2021: The 11th Circuit announced that the entire panel of judges will rehear arguments en banc in the case of Hunstein v. Preferred Management & Collection Services, vacating the prior opinion. That prior opinion had a vote tally of 2-1 in favor of the plaintiff (after being previously reissued by the court). This now means a majority of the 12 judges voted to rehear the case, which is a promising development. New briefs will be filed, and oral arguments are scheduled for February 2022. This will take several more months to play out and the industry remains hopeful for a positive result.
- Nov. 30, 2021: Reg F took effect as agencies started to use a new validation notice with debt itemization and limitations on call frequencies were imposed (among a variety of other requirements and safe harbors).
As we ring in a new year, the impact of many of the above measures are only starting to be felt. What will 2022 bring? Only time will tell but suffice it to say that 2021 was an active and interesting year by any measurable standard.
Shaun Ertischek serves as chief compliance officer and general counsel for Sequium Asset Solutions LLC based in Marietta, Georgia. In that role, he oversees all aspects of compliance management, litigation, and regulatory and contractual matters for the company. He holds ACA International’s Credit and Collection Compliance Officer and the International Federation of Certified Collection Executives designations.
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