CFPB Releases Final Debt Collection Rule, Part 1

Financial Services Law

On October 30, 2020, the Consumer Financial Protection Bureau (CFPB or Bureau) released the first part of its long-awaited final Debt Collection Rule, which substantially updates and modernizes Regulation F, the implementing regulation for the federal Fair Debt Collection Practices Act (FDCPA). The final rule, which spans 653 pages inclusive of all commentary (the regulation text itself comes in at 15 pages, with 59 pages of Official Interpretations) varies in many respects from the proposed rule issued in 2019, particularly with respect to rules for collecting debts using email and text messages. The rule also addresses communication frequency, limited-content messages, use of social media and other topics discussed below, but it leaves other matters—such as validation notices, disclosures regarding time-barred debts and credit reporting by debt collectors—for Part 2, which is expected to be released in December 2020. Part 1 generally applies only to third-party debt collection and will take effect one year after publication in the Federal Register.

What Happened

The final rule provides much-needed guidance for debt collectors, particularly on using technologies that did not exist when the FDCPA was enacted in 1977, while also offering additional protections for consumers.

Regarding new technologies, the final rule confirms that the FDCPA’s prohibitions on certain communications, such as at times or places that are unusual or known to be inconvenient to the consumer, apply to communications via email and text message. It requires debt collectors to provide reasonable and simple ways to opt out of these forms of communication, and also specifies the circumstances under which debt collectors can raise a bona fide error defense for unintentional third-party disclosures via emails and text messages. Notably, the defense can be based on consumer consent provided to the creditor or a prior debt collector for email, but not for text messages. There are additional requirements such as the consumer not revoking consent or opting out and, for text messages, following certain procedures to ensure that the telephone number was not reassigned. Regarding social media, the rule prohibits debt collectors from posting debt collection messages viewable by others on consumers’ social media pages, and it regulates the use of private messaging.

Another focus of the rule is communication frequency. The rule confirms that the FDCPA’s prohibition on harassing, oppressive or abusive conduct applies to electronic communications in addition to phone calls. It also establishes a rebuttable presumption of compliance if the debt collector calls a consumer seven or fewer times within seven consecutive days and not within seven consecutive days of speaking with the consumer about the debt, as well as an inverse presumption of violation. The rule provides a non-exhaustive list of factors that may rebut these presumptions, making compliance a highly fact-specific determination.

The final rule retains the proposed rule’s safe harbor for “limited-content messages,” but only for voicemail messages and not for live third-party calls or electronic communications. The safe harbor permits debt collectors to leave specified messages (essentially asking for a return call without identifying themselves as a debt collector) without violating the FDCPA’s prohibitions on third-party disclosure.

Another new and important restriction easy to miss on a quick read is the detailed gloss on calling consumers at inconvenient times. The regulation text itself says very little about this—generally just prohibiting knowingly inconvenient call attempts—but the official interpretations go far beyond the regulatory text and impose duties of near-precognition on the part of the debt collector. For example, CFPB states that debt collectors should not call if, “depending on the facts and circumstances, the debt collector knows or should know that a time or place is inconvenient even if the consumer does not specifically state to the debt collector that a time or place is inconvenient.” Official Interpretation to Reg. F § 1006.6(b)(1).

Other provisions of note include:

  • Sec. 1006.6(b)(2)(i)—allowing communication directly with a debtor, even one who is known to be represented by an attorney if the attorney “[f]ails to respond within a reasonable period of time to a communication from the debt collector.” Subsection (4)(ii) likewise allows communication with a represented debtor with the “express permission” of a court.
  • Sec. 1006.6(c)(2)—allowing limited contacts even after a cease communication from the debtor, to advise that collection efforts are terminating or that the debt collector or creditor “may invoke specified remedies that the debt collector or creditor ordinarily invokes,” or a specific remedy.
  • Sec. 1006.6(b)(1)-2.iii—prohibiting a debt collector from assuming a time is convenient for the debtor, if the debtor has said the time is inconvenient, even if the debtor then affirmatively contacts the debt collector or creditor at that time (with a limited safe harbor for the collector to respond “once,” such as “by sending an automated email message reply generated in response to the consumer’s email message”).
  • Sec. 1006.6(b)(1)(i)—allowing one response to a debtor making contact from a source the debtor previously told the debt collector or creditor not to call, but prohibiting further contact to that source even when initiated by the debtor.
  • Sec. 1006.18(e)(4)—requiring mini-Miranda disclosures to be made in the “same language or languages used for the rest of the communication in which the debt collector conveyed the disclosures.”
  • Sec. 1006.100—implementing a three-year record retention requirement, including for telephone call recordings, running from the later of the debt collector’s last communication or attempted communication with the debtor or the date of settlement, discharge or transfer of the debt.

Items from the proposed rule not included in Part 1 of the final rule include a safe harbor under which an attorney debt collector would be considered to have had meaningful involvement so long as the attorney personally reviewed the applicable document, and the legal and factual statements in the document satisfied a standard similar to that of Fed. R. Civ. P. 11. The final rule dropped the safe harbor based on what CFPB characterized as “a large number of comments . . . from a variety of commenters, almost all of whom opposed the proposal,” though the Bureau may revisit the issue. Likewise on hold is the extensive rewrite of debt validation procedures, including new model templates for notices; the Bureau decided not to finalize the proposal to allow for “additional, qualitative disclosure testing . . . to further validate” the new forms there proposed. Among other issues remaining to be decided is whether the validation notice will be required to list the original creditor (some consumers commented that this helps them in recognizing the debt) or merely grant the consumer the right to request that information. Further CFPB proposals in this area are expected in December 2020 or early 2021.

Why It Matters

Part 1 of the final rule provides helpful clarity on how the FDCPA applies to new technologies and useful guidance on what is and is not permitted, while also providing additional protections for consumers. It should bring more uniformity to FDCPA litigation and predictability in examination and enforcement positions, at least as to issues that are already hotbeds of litigation and compliance questions.

The rule leaves open a number of important issues, some of which may be addressed in Part 2, including whether the Bureau’s UDAAP authority may be used to apply FDCPA requirements to entities not currently subject to that statute. The answer to that question may well depend on the outcome of the presidential election.

In short, there is a lot to dig into here, especially the finer points of the official interpretations. Stay tuned as we continue to keep you updated.

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