Seven years, two presidents, and three agency directors later, the Consumer Financial Protection Bureau's (CFPB) long-awaited final debt collection rule—also known as Regulation F—is finally here. The CFPB released the final rule this afternoon. Below is a quick summary of hot-button issues for the industry.
Before getting into the nitty-gritty of the rule’s content, there’s a more pressing question that should be answered first. By when does your organization have to be compliant with the new rule? According to the document, the rule becomes effective one year after it is published in the Federal Register. insideARM will monitor the Federal Register and provide an update when the rule is officially published.
One of the most-discussed—and most debated—topics from the Notice of Proposed Rulemaking (NPRM) was the groundwork laid to allow debt collectors to communicate with consumers through electronic means. This was applauded by the industry, as it is a way to reach consumers through their preferred communication medium, given that the CFPB itself found the majority of consumers prefer to be contacted via email.
So, what does the final rule look like in regards to email and text messages? They are allowed, and procedures are laid out. And, to send required disclosures via electronic methods, there does seem to be talk of the E-SIGN Act. We'll provide further detail on electronic communications once we've had a chance to dig deeper into it.
Model Validation Notice
In the NPRM, the CFPB provided a model validation notice form which, if used, would act as a safe harbor for debt collectors. The thought behind the model notice was appreciated—finally, something debt collectors can implement to protect them from what has been a constant rush of FDCPA lawsuits alleging that the validation letter violated the FDCPA in one way or another. Digging into the weeds, however, many industry groups pointed out the practical issues with the model notice (including the Consumer Relations Consortium, whose comments can be found here).
So, what did the CFPB do with the model notice? Were industry concerns taken into account? Well, we don't know. The CFPB punted the issue, stating that it will release another final rule specifically related to disclosures in December 2020.
Contact Caps With a Twist
The CFPB caused ripples on both sides of the aisle with its NPRM regarding how often debt collectors may communicate with consumers. The industry frowned on the telephonic communication caps, but applauded the ability to freely use electronic means of communication. Consumer advocate frowned all around: they didn’t like the contact caps (too many calls) nor the lack of a cap for electronic communications.
What was the outcome? The CFPB issued their proposed call cap: 7 calls within a 7 day period, and then once every 7 days after that. However, the cap is no longer a bright-line rule. There is now a rebuttable presumption—7 or fewer calls is presumed lawful, more than 7 calls is presumed unlawful, but either way, the presumption can be rebutted by evidence of harassment.
As for electronic communications, the CFPB did not extend a specific numerical limit of communications. Instead, the standards of prohibitions on harassment and abuse apply.
Time-Barred Debt Disclosures
Initially left as a placeholder, the CFPB released a supplemental NPRM specifically related to time-barred debts. Everybody wondered if the time-barred debt provision would be ready in time to be released along with the remainder of the final rules. Ends up, it wasn't. The time-barred debt portion of the rules is set to be released at a later date.
It’s hard to believe that we are actually here, final rule in hand. It’s been one heck of a journey, and a tremendous effort on the part of the CFPB—and all those who provided input throughout the process—to get to this point.
Ultimately, the rule does (for the most part) what the industry has wanted for a long, long time: it lays out clear rules of the road for debt collectors. Or, at least, clearer rules of the road than we’ve had before.
The iA Institute, via its leadership of the Consumer Relations Consortium, has been honored to participate in the process of gathering stakeholders, engaging in meaningful dialogue with CFPB representatives and consumer advocates, giving thoughtful consideration to dozens of issues, and proposing solutions. We extend our appreciation to our many members who devoted countless hours over the last 7 years to arrive at this milestone. We came a very long way.