The Consumer Financial Protection Bureau (CFPB) has issued a Notice of Proposed Rulemaking (NPRM) to amend Regulation F, 12 CFR Part 1006, which implements the Fair Debt Collections Protection Act (FDCPA). The FDCPA was enacted in 1977 and governs the activities of third-party debt collection. There have not been any significant changes or revisions to the regulation since its enactment and the proposed rules would provide clarification of the number of weekly calls debt collectors can make to consumers, how collectors may communicate lawfully using newer technologies, and require collectors to provide additional information to consumers to help them identify debts and respond to collection attempts. The FDCPA established certain consumer protections; however, there have been questions within the act that have been met with uncertainty, particularly those related to communication technologies that did not exist at the time the FDCPA was enacted, such as cellphones, email and text messaging. This has been the subject of discussion due to inconsistent court decisions, resulting in legal uncertainty and additional cost for the debt collection industry as well as risk for creditors who rely on debt collectors for third-party debt collection.
The following are the proposed rules to implement FDCPA:
- Rule on limiting call attempts and telephone conversations: This would limit debt collectors to no more than seven attempts by telephone per week to a consumer about a specific debt. Once a telephone conversation between the debt collector and consumer has been established, the debt collector must wait at least a week before calling the consumer again.
- Consumer protection requirements for certain consumer-facing debt collection disclosures: This would require debt collectors to send consumers a disclosure with certain information about the debt and related consumer protections. This information would include, for example, an itemization of the debt and plain-language information about how a consumer may respond to a collection attempt, including how to dispute the debt. Additionally, the disclosure must include a “tear-off” that consumers could send back to the debt collector to respond to the collection attempt.
- How debt collectors can communicate with consumers with newer communication technologies: This would clarify how debt collectors may lawfully use newer communication technologies, such as voicemail, email and text messaging, to communicate with consumers and would protect consumers who do not wish to receive such communications by, among other things, allowing them to unsubscribe to future communications through these methods. The proposed rule would also clarify how collectors may provide required disclosures electronically under the Electronic Signatures in Global and National Commerce Act. In addition, if consumers want to limit ways debt collectors contact them, for example, at a specific telephone number, while they are at work, or during certain hours, the rule clarifies how consumers may easily do so.
- Prohibit suits and threats of a suit on time-barred debts and require communication before credit reporting: This would prohibit a debt collector from suing or threatening to sue a consumer to collect a debt if the debt collector knows or should know that the statute of limitations has expired. The proposed rule also would prohibit a debt collector from furnishing information about a debt to a consumer reporting agency unless the debt collector has communicated about the debt to the consumer, such as by sending the consumer a letter.
Creditors and servicers, including but not limited to banks, credit unions, automobile and private student loan lenders, mortgage servicers, and credit card issuers, that engage with third-party debt collectors and debt buyers should be aware of the proposed rules, and conduct a thorough third-party oversight as part of their vendor management program. Since its inception, the CFPB has received thousands of complaints related to debt collection. Many of the complaints are related to practices addressed in the proposed rule. Additionally, the CFPB has brought numerous cases and public enforcements against third-party debt collectors. In the most recent annual report, the CFPB highlighted that it handled approximately 81,500 debt collection complaints related to first- and third-party collections and engaged in six public enforcement actions related to FDCPA violations in 2018. One action resulted in an $800,000 civil penalty, and four cases remain in active litigation. Additionally, the Federal Trade Commission and state regulators have brought numerous actions against debt collectors related to FDCPA.
Lastly, creditors and servicers should consider reviewing their internal collection practices to determine if they could potentially create or constitute an unfair, deceptive, or abusive act or practices (UDAAP) under section 1031 of the Dodd-Frank Act. Although the FDCPA oversees third-party collections, the CFPB has made it clear within the NPRM and CFPB Bulletin 2013-07 that certain provisions of the FDCPA could be applied to all covered persons and service providers under UDAAP in the Dodd-Frank Act.
Comments from the public must be submitted within 90 days of the date the proposed rule is published in the Federal Register with a possible extension of 60 days. The rule would take effect one year from the date the final rule is published in the Federal Register.
