Effective November 30, 3031, the Consumer Financial Protection Bureau (CFPB) will enact Regulation F to 12 C.F.R. 1006, which will be the first comprehensive federal debt collection regulations interpreting the Fair Debt Collection Practice Act (FDCPA).
The FDCPA was enacted in 1977 “to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.” 15 U.S.C. § 1692(e) (emphasis added). The FDCPA only applies to “debt collectors,” not creditors, mortgagors, or mortgage servicing companies. In addition to traditional debt collectors, attorneys who collect debts on behalf of creditors are also considered “debt collectors’ under the FDCPA. A “debt collector” is defined as:
any person who uses any instrumentality or interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.
15 U.S.C. § 1692(a)(6).
Just like the FDCPA, Regulation F applies to debt collectors as defined by the FDCPA. It adds additional consumer rights which require debt collectors (1) to provide additional requirements to the initial notice to consumers provided at the outset of debt collection to include a validation notice and disclosures; (2) to identify actions which must be taken before a debt collector can report information to a consumer reporting agency; and (3) refrain from collecting on time-barred debt.
There are two parts amending Regulation F, 12 C.F.R. 1006. Communications to consumers are addressed in part one, 85 Federal Register 76,735 (Nov. 30, 2020) and disclosures to consumers are addressed in 86 Federal Register 5766 (Jan. 19, 2021).
In an effort to address concerns regarding communication methods under the FDCPA and to also address communication methods by newer technology, Regulation F provides consumers with the ability to stop collection calls and/or text messages.
After speaking to a debtor, a debt collector will now have to wait a week before contacting a consumer about the same debt. However, the debt collector can make up to seven (7) attempted calls to the consumer, and can contact the consumer’s family or friends to obtain contact information. Debt collectors may also contact consumers through emails and text messages.
85 Fed. Reg. 76,735 (Nov. 30, 2020).
Validation Notice and Disclosures
Under the current language of the FDCPA, within five (5) days of the initial contact with a consumer in which a debt is being collected, debt collectors must send written notice to consumers which contain the following information:
- the amount of the debt;
- the name of the creditor to whom the debt is owed;
- a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector – this notice of dispute does NOT have to be in writing;
- a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
- a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
15 U.S.C. § 1692g(a)(1)-(5).
Then, pursuant to section 1692g(b), if a consumer “notifies the debt collector in writing” that the debt is disputed, the debt collector must “cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt … and a copy of such verification … is mailed to the consumer by the debt collector.” 15 U.S.C. § 1692g(b). Currently, the verification of the debt requires little additional information from the initial notice, and may not be enough information for the consumer to recognize the debt.
Under new Regulation F, debt collectors are required to provide consumers with a Validation Notice at the initial communication, or within five (5) days of the initial communication, delivered in writing or electronically. In addition to the FDCPA requirements, the following additional information must be provided:
- Debt collector communication disclosure;
- Name and mailing information of debt collector;
- Name of creditor as of the itemization date, if debt is related to a consumer financial product or service (i.e., credit card debt, mortgage debt);
- Account Number
- Itemization of current amount of debt, including interest, fees, payments, and credits since itemization date:
- “Itemization date” can be one of the following five (5) reference dates:
- Last statement date;
- Charge-off date;
- Last payment date;
- Transaction date; or
- Judgment date
- Current amount of debt;
- Information about consumer protections:
- Consumer’s right to dispute debt
- Consumer’s right to request original creditor information
- Date validation period expires
- Information regarding Consumer Protection Bureau’s website for more information, for consumer financial product or service debts
- Consumer-response information:
- Prepared statement, such as a tear-off form, that consumer may detach and return to the debt collector to dispute the debt; or
- Information on how to dispute debt electronically
- Safe-Harbor/Optional Content:
- Debt collector’s telephone contact information;
- Reference code used by debt collector to identify consumer or debt;
- Payment disclosures;
- Electronic communication information;
- Spanish-language disclosures;
- Merchant brand, affinity brand, or facility name associated with the debt; and
- Disclosures specifically required under any other applicable law
86 Fed. Reg. 5766 (Jan. 19, 2021).
However, while disclosures were previously required to be made in writing and by mail under the FDCPA, disclosures may now be sent by electronic means or may be made orally to the consumer. Validation Notices also do not need to be made in the first language of consumers.
Actions Which Must be taken Prior to Credit Reporting
Prior to reporting a consumer debt to a credit reporting agency, the debt collector must now actually speak with the consumer about the debt, either on phone or in person, mail the consumer a letter about the debt and wait a reasonable period of time to receive a notice of undeliverability, or send the consumer a message by electronic communication and wait a reasonable period of time to receive a notice of undeliverability. The purpose of this amendment is to avoid the practice of debt collectors from reporting debts to collection agencies and then waiting for the consumer to contact them after the negative credit reporting is discovered by the consumer.
86 Fed. Reg. 5766 (Jan. 19, 2021).
Under Regulation F, debt collectors are barred from bringing or threatening to bring legal actions against consumers for debts in which the statute of limitations has expired. It is important to note that debt collector can still pressure the consumer to making a payment on a time-barred debt, at which time the debt will be revived.
Proofs of claims filed in connection with bankruptcy proceedings are not included in this prohibition.
86 Fed. Reg. 5766 (Jan. 19, 2021).
As set forth above, while the new Regulation F provides many new rights to consumers and clarifies many of the provisions of the FDCPA, it also creates opportunity for abuse by consumers, and there is still much room for continued abuse by debt collectors.