The Consumer Financial Protection Bureau (CFPB, the Bureau) today issued a Notice of Proposed Rulemaking (the Proposal) to establish implementing regulations for the Fair Debt Collection Practices Act (FDCPA). Although it has been more than 40 years since President Jimmy Carter signed the FDCPA into law, if implemented, these would be the first authoritative regulations to clarify key aspects of what is permissible under the federal debt collection laws.
Key Provisions of the Proposal
- Bright-line limits on the number of phone call attempts and conversations. The Proposal includes a bright-line rule that would prohibit attempting to contact a consumer more than seven times per week. Following an actual phone conversation with the consumer, debt collectors would have to wait one week before calling again.
- Use of voicemails, emails, and text messages. The Proposal expressly authorizes the use of voicemails, emails, and text messages, subject to certain limitations, including permitting consumers to unsubscribe from future communications through these methods. Consumers would also be able to restrict at which phone numbers or during which hours a debt collector may contact them.
- Required debt validation disclosures/“Tear-Off” response form. The Proposal requires that debt collectors send to consumers a debt validation disclosure containing an itemization of the debt and plain-language information on how the consumer may respond to the debt collection attempt. Such a disclosure would be required before a debt collector could furnish information for use in the consumer’s credit report. Also required is that the disclosure include a “tear-off” form that consumers may return to simplify their response, including to dispute the debt.
- Prohibition on suits on time-barred debts. The Proposal would prohibit a debt collector from suing or threatening to sue to collect on a consumer’s debt if the debt collector knows or should know that the statute of limitations has expired. The Proposal notes that, at a later point in time, the Bureau may issue model disclosure language that debt collectors could use when collecting on a time-barred debt.
- The proposed frequency limits on telephone contact attempts, i.e., seven per week, apply to attempted contacts of “a particular person in connection with the collection of a particular debt.” In turn, the proposed definition of “particular debt” is “each of a consumer’s debts in collection.” This would appear to allow for seven contact attempts per week for each of the consumer’s debts. However, the CFPB has requested comment on this proposed definition and on the proposal to apply the frequency limits on a per-debt, as opposed to per-person, basis. Accordingly, there remains some ambiguity in how these frequency limits will apply, especially in situations where a single customer may have multiple accounts in collection.
- In addition, the Bureau proposes to define “particular debt” differently in the context of collections on student loans, i.e., as all student loan debts owed by the consumer under a single account at the time the debt collector obtained the debts.
- As currently proposed, the frequency limitations would not apply to email and text message contacts. However, consumers could opt out of being contacted through those methods. The allowance for the use of emails and text messages, both relatively low-cost options as compared to live phone calls, may make it more economically viable for debt collectors to collect on small dollar amounts.
- Relatedly, of paramount importance will be the availability of high quality compliance software to ensure that the number of contact attempts made via email and text message technologies, in addition to live phone calls, are limited in accordance with the rule.
- The Proposal sets forth a safe harbor of sorts through which debt collectors could leave a voicemail for a consumer that contains only certain allowed content, without risk of violating the FDCPA’s prohibition on communicating about the debt with a person other than the consumer. The ability to leave voicemails may itself reduce the number of phone call attempts made by debt collectors, many of which have been leery in the past to leave voicemail messages with consumers at all.
- On the whole, this Proposal provides meaningful and clearer direction to debt collectors because it aims to do what rulemaking should: resolve ambiguities in the statute that have become overly burdensome. For example, the clear authorization of the use of voicemails, emails, and text messages in debt collection efforts should help eliminate decades of uncertainty surrounding their use.
- This Proposal is much more limited than the 2013 Advance Notice of Proposed Rulemaking (ANPR) under former CFPB Director Richard Cordray. Most notably, the Proposal does not expressly include first-party collectors subject to the Bureau’s authority to prohibit unfair, deceptive, or abusive acts or practices (UDAAP).
- The primary additional compliance obligations in the Proposal relate to (i) the limitations on contact frequency for debt collection phone calls; and (ii) the required “tear-off” form to facilitate consumer responses to FDCPA debt validation disclosures.
- In recent years, the US Supreme Court has narrowed the reach of the FDCPA, e.g., through refining who qualifies as a “debt collector” under the statute. However, the rules set forth in the Proposal will provide helpful guidance not only in the FDCPA context but also by enabling more concrete risk assessments as to the application of various state consumer protection laws and the use of federal UDAAP authority.
- As stated in CFPB Director Kathy Kraninger’s statement accompanying the Proposal, the CFPB is likely to listen carefully to industry comments and actually consider them. To that end, if any provisions are inadvertently unduly burdensome, or if there are missed opportunities for further clarity, the industry should be sure to point that out.