New Final Debt Collection Rule Highlights

On October 30^th, the Consumer Financial Protection Bureau (CFPB) issued the first part of its long-overdue Debt Collection Practices final rule, which clarifies unfair practices by debt collectors when collecting consumer debt, such as harassment, abuse, and false or misleading representations. So, what’s the skinny regarding this massive 653-page document? How about we cover the highlights.

November 30, 2021

This new rule is set to go into effect in November of 2021. This gives all of us a little less than a year to get our stuff together to make sure our institutions are in compliance. Plus, you might actually be able to finish reading the ginormous thing by then.

December 2020

The CFPB announced that it intends to issue a disclosure-focused final rule in December that gives more details on the FDCPA’s requirements regarding consumer disclosures. As I’m writing this it hasn’t happened yet, but be on the lookout for this weird Christmas present.

First-Party Collectors

The CFPB lovingly clarifies that the Debt Collection Practices final rule does not, I repeat does not, apply to creditors and other first-party collectors. The rule applies only to debt collectors, largely as defined in the FDCPA. This definition incorporates the US Supreme Court’s ruling in Henson v. Santander Consumer USA, that a person who collects or attempts to collect defaulted debts that the person has purchased, but who does not collect or attempt to collect debts owed or due, or asserted to be owed or due, to another, and who does not have a business the principal purpose of which is the collection of debts, is not a debt collector.

The Lucky Number 7

If you want to comply with the FDCPA’s and the new rule’s prohibition on excessive calls, remember the number seven. Basically, do not place a phone call to a consumer in connection with a specific debt more than seven times within seven consecutive days, or within a period of seven consecutive days after having a phone conversation with the consumer and you’re good.

Some special things to note, the rule applies to the number of calls per debt, not per consumer (student loans serviced under a single account number being the exception). Also, calls placed to a person do not count in some circumstances if they are placed with the person’s prior consent. Lastly, the frequency standard applies only to phone calls, not electronic messages (texts or emails). But just because a debt collector doesn’t have to include electronic messages in their count of seven, consumers may still argue that excessive emails or text messages constitute harassment.

Consumer Calls the Shots

The new ruling gives the consumer greater control over how they are contacted. It effectively prohibits debt collectors from attempting to communicate with a person through a medium if the person has requested that the collector not use that medium. And it does not require the consumer to provide written notice or use specific words. Basically, if the consumer tells a debt collector to stop calling or texting or emailing, the rule bans the collector from using any of the specified methods in additional communications.

Mind the Time Place

The rule also prohibits debt collectors from communicating or attempting to communicate with a consumer at unusual times or places, or at a time or place that the debt collector knows or should know is inconvenient to the consumer. This can get a little tricky in the land of the cell phone when people carry their phone with them at all times, but just do your best. Also, any time before 8:00 am and after 9:00 pm is off limits.

Voicemails - Limited Content Messages

A debt collector may now leave a limited content message without risking that the voicemail be considered a “communication” under the FDCPA. This is huge because it effectively eliminates FDCPA litigation risk if a voicemail is overheard by a third party. It also gives collectors an alternative to the dry, lengthy voicemail message many companies use based on the script developed in Zortman v. J.C. Christensen Assoc., Inc. Be aware that debt collectors still need to follow any state laws that regulate the content of voicemails.

Texts and Emails…Finally

One of the biggest reasons for the new rule was to address text messages and emails, since they weren’t really around when the original rules were made back in 1977. The new rule provides guidelines that a debt collector can follow to communicate by email or text without risk of violating third-party disclosure. Be aware that these guidelines do not apply to social media or voicemail. Let’s jump in.

• A debt collector may send an email if they:
1. obtain direct receipt of a consumer's prior consent to use that email address and the consumer has not opted-out,
2. use an email address obtained from the creditor, the creditor notifies the consumer that the debt collector will be communicating about the debt and includes other required information in the notice, provides an opt-out period, and the email address is one available for general public use, or
3. use an email address obtained from the prior debt collector that was used for collection and the consumer did not opt-out.
• A debt collector may send a text if they:

1. use a number that the consumer used to communicate with the debt collector via text about the debt and the consumer has not opted-out of text messages and, within the prior 60 days, the consumer has sent a text message about the debt or the debt collector confirms that the number has not been reassigned, using a complete and accurate database (e.g., the FCC's Reassigned Numbers Database); or
2. receive prior consent directly from the consumer to communicate via text about the debt and, within the prior 60 days, the consumer has provided consent or the debt collector has confirmed the number has not been reassigned. Note: Following this process provides an FDCPA safe harbor, but it does not affect a debt collector's potential liability under the Telephone Consumer Protection Act.

• Every electronic communication must include an opt-out that is easy for the consumer to see and use.

Help is on the Way: The Notification System

We know that keeping up with all these communication rules and staying compliant can be hard and we want to help. Our Notification System has all the tools you need to stay in touch with borrowers without crossing any lines, including:

• Email Messages: Easily set up emails to only be sent during set hours to individuals who have opted in and provide a way for them to opt out at any time.
• Voicemails: Set up automatic phone calls that follow the limited content messages format and only go out when you want them to.
• Text Messages: Set up text messages to only be sent during approved days and hours to those who have opted in. And provide an easy way for consumers to opt out.
• Direct Mail: Use our system to send out any letter or notification through the postal service.
• Automatic Notification Setup: Easily set up texts or emails to be sent automatically according to the parameters you want.
• Compliance: Our Notification System follows all the federal rules and regulations, so you don’t have to worry about them.

November of 2021 will be here before you know it (thank goodness) and the new Debt Collection Practices final rule will go into effect. In the meantime, make sure your institution is ready