Regulation F (Reg F) is the most significant change to the ARM industry in over 40 years and the Reg F effective date is coming up in just 15 days. In addition to the regulatory issues created by Reg F, you can also expect that consumer attorneys will file a landslide of lawsuits to test Reg F’s limits.
By now, you should already understand how your operations will be affected by every section of the new rule, including the model validation notice, communicating with consumers, call volume / the 7-in-7 rule, limited content messages, text and email, credit reporting, disputes / requests for validation, and more. But, the rule is really big and complicated and not every company is ready for the implementation deadline.
Are you ready for the Reg F final rule deadline? If not, you can still take these critical last-minute steps to help minimize your risk and safeguard your operation.
Let’s get right to it. Here are the top 3 things you can do to prepare for Reg F quickly and protect your company from regulatory actions and lawsuits:
1. Triage Your Plan
There is almost no time left to get ready for Reg F, so at this point, you should be in triage mode, taking care of what is most important for your company’s safety. Look at your business model. Which parts of Reg F apply to your business today and which don’t. Decide what needs to be addressed right now and what can wait. Where does your company face the most exposure, where is it limited? This should not be a prolonged exercise; truly treat it like triage. Some Examples:
Are you texting and emailing today? If not, don’t start until after you have the rest of your compliance for Reg F in effect.
Are you making outbound calls or credit reporting? If not, don’t start until you can be Reg F compliant (note: credit reporting and outbound calling are addressed below).
2. The Model Validation Notice:
Reg F provides a model validation notice and states that if you include all of the items required by the Model Validation Notice (MVN), your company will have a “safe harbor” indicating compliance with the rule. The word version and other formats available are here. To use the safe harbor protection of Reg F, initial notices should be updated to mirror the MVN (yes, including the tear-off portion and the state disclosures on the back). While the rule says that “substantially similar” modifications will receive safe harbor protection, “substantially similar” is a nebulous term. Rest assured, if consumer attorneys receive a letter that doesn’t match the MVN, suits will be filed.
All of the requirements for the MVN are set out in Reg F. Some of the more prominent examples of information required by the MVN are as follows:
The Itemization Date. As we explained in this article a few weeks ago, this is one of 5 specific dates that will come from your client in most circumstances. Note that “other” is not part of the allowable dates; the Itemization date is these five dates, and these five dates only. Thus, regardless of any rumors you’ve heard, you cannot use the placement date or any other date you may think may apply.
Note: I heard anecdotally last week that someone was planning on using the effective date of Reg F as the itemization date. This is an extremely dangerous suggestion, and this approach could not possibly be less compliant with Reg F. I have no idea where this idea originated, but if you want to avoid class-action lawsuits, do not do this.
The Itemization of the Debt: this must run from the itemization date. Your client should provide you with a complete itemization of all transactions since the itemization date.
The Validation Period. The Model Validation Notice requires you to notify the consumer of the date the Validation period will end. Per Reg F, this is considered to be five days, excluding weekends and holidays plus the 30-day dispute period.
3. Procedures to capture inconvenient time/place notifications:
This applies to all entities which speak to consumers, regardless of whether they make outbound calls. Reg F highlights that consumers can designate a time or place as inconvenient or even go so far a’s to say, “I can only accept calls between 2-3 pm on a Tuesday.” Any entity that speaks to consumers via inbound or outbound calling should be prepared to capture and abide by calling time requests made by consumers.
Credit Reporting: if your agency is credit reporting and you are not ready to comply with Reg F's notice requirements, this should go in the #3 spot above. Reg F prohibits debt parking, meaning delinquent debt cannot be reported unless specific criteria are followed. If your company isn’t prepared to comply, legal advice should be sought immediately.
7-in-7 rule: If your company makes outbound calls, it should have measures in place to abide by this rule. If your technology vendor isn’t prepared to handle this yet, consider manually tracking via status code.
Looking for more details on the 7-in-7 rule, credit reporting or any other aspect of Reg F? Get them in How to Implement Reg F in a (Very) Short Timeframe - a Roadmap from iA.
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