On October 30, 2020, the Consumer Financial Protection Bureau (CFPB or Bureau) issued the final amendments to Regulation F (Debt Collection Rule) which implements the Fair Debt Collection Practices Act (FDCPA). The amendments prescribe Federal rules governing the activities of debt collectors as defined in the FDCPA. The final rule focuses on debt collection communications and related practices by debt collectors. The final rule is effective on 11/30/2021.
Debt collection efforts usually begin with attempts by a debt collector to reach a consumer. However, debt collection communications also may constitute unfair practices, may contain false or misleading representations, or may be harassing or abusive either because of their content (for example, when debt collectors employ profanity) or because of the way they are made (for example, when debt collectors place telephone calls with the intent to harass or abuse).
To address the concerns about debt collection communications and to clarify the application of the FDCPA to newer communication technologies that have developed since the FDCPA’s passage in 1977, the final rule, in general:
- Clarifies restrictions on the times and places at which a debt collector may communicate with a consumer, including by clarifying that a consumer need not use specific words to assert that a time or place is inconvenient for debt collection communications.
- Clarifies that a consumer may restrict the media through which a debt collector communicates by designating a particular medium, such as email, as one that cannot be used for debt collection communications.
- Clarifies that a debt collector is presumed to violate the FDCPA’s prohibition on repeated or continuous telephone calls if the debt collector places a telephone call to a person more than seven times within a seven-day period or within seven days after engaging in a telephone conversation with the person. The final rule also provides non-exhaustive list of factors that may be used to rebut the presumption of compliance or of a violation.
- Clarifies that newer communication technologies, such as emails and text messages, may be used in debt collection, with certain limitations to protect consumer privacy and to protect consumers from harassment or abuse, false or misleading representations, or unfair practices. For example, the final rule requires that each of a debt collector’s emails and text messages must include instructions for a reasonable and simple method by which a consumer can opt out of receiving further emails or text messages.
- Defines a new term related to debt collection communications: limited-content message. This definition identifies what information a debt collector must and may include in a voicemail message to consumers (with the inclusion of no other information permitted) for the message to be deemed not to be a communication under the FDCPA.
CFPB plans to issue a disclosure-focused final rule in December 2020 (disclosure-focused final rule) to clarify the information that a debt collector must provide to consumers at the outset of debt collection and to provide a model notice containing the information required by FDCPA section 809(a).
As mentioned above, the final rule will apply to activities of debt collectors as defined in the FDCPA. This definition encompasses several types of businesses, which can be generally categorized as: (1) collection agencies, (2) debt buyers, (3) collection law firms, and (4) loan servicers. Although creditors that collect on debts they own generally will not be affected directly by the rule, they may experience indirect effects.
Some provisions of the final rule will likely change the way debt collectors communicate with consumers, and these provisions are likely to interact with each other in ways that make their net impact difficult to predict.
Contact us to learn more about how Compliance Core can help you determine the implications of the final rule to your business and manage the implementation effort – from performing an impact analysis, conducting current and future state gap assessment, developing an implementation plan to address gaps, and managing the implementation effort.
Jacqueline Maduneme, CEO of Compliance Core and Compliance & Risk Management Consultant has 25+ years of experience in financial services compliance and risk management. She has led and managed the end-to-end implementation of numerous regulatory initiatives, including, but not limited to, the Volcker Rule, HMDA Rule, Military Lending Act, Mortgage Servicing Rule, FDIC Recordkeeping Rule, DOL Fiduciary Rule, Treasury’s Qualified Financial Contract Recordkeeping Rule, AML Beneficial Ownership Rule, and numerous tax regulations. With her experience and expertise, Compliance Core is well positioned to assist clients efficiently and effectively in managing regulatory changes, so you can focus on running your business without worry.