In December 2020, the CFPB completed its multi-year effort to provide collection companies with new debt collection rules. In 2013, the CFPB embarked on an ambitious journey to write regulations to interpret the 40-year-old Fair Debt Collections Practices Act. This effort was designed for the protection of consumers.
The New Debt Collection Rules
Until the Dodd-Frank act was passed, no federal agency had the authority to interpret the FDCPA through rule writing. The Dodd-Frank Act allowed for a federal regulator to take a look at abusive, deceptive, and unfair debt collection practices and to interpret the FDCPA through rule writing. This was assigned upon the creation of the CFPB.
While as with everything around the FDCPA and FCRA, the rules may be confusing. Here is a quick list of the rule breakdowns.
A summary of these Disclosure Focused Rule disclosures and restrictions are as follows:
- Time-Barred Debt – The CFPB has interpreted the FDCPA to prohibit debt collectors from taking or threatening any legal action on a debt where, under state law, the statute of limitation has expired. This is a strict liability standard. The CFPB expressly defers to state laws for determining whether or not statutes of limitations have lapsed causing the use of legal or other means to collect to be “time barred.” Many states already require debt collectors to disclose whether or not a state statute of limitations has run in regard to a particular debt, and the Bureau’s approach respects state law in this area. Also, Part 2 does not pre-empt any state law that may restrict or bar any collection activities related to time-barred debt.
- Prohibition against Passive Debt Collection sometimes called “Debt Parking” – The Disclosure Focused Rule requires debt collectors to communicate with a consumer “about a debt” before furnishing information about a debt to a consumer reporting agency (“CRA”). This practice is often called “debt parking.” Part Two of the Rule requires a debt collector to inform the consumer (either by phone or in writing, including electronic communications) “about a debt,” which could be in the prescribed initial collection notice and wait a reasonable time (14 days) before the debt collector can furnish data to the CRAs. The debt collector must monitor whether the initial communication “about a debt” is undelivered before furnishing data to the CRAs.
- Providing Validation Information in a Validation Notice – The most significant aspect of the Disclosure Focused Rule was the finalization of specific validation information that must be included in a validation notice as required under 15 U.S.C. §1692g of the FDCPA. The Bureau provided a Model Form of the validation notice in Appendix B of Part Two. Disclosure of the required validation information, including some optional language, by use of the Model Form or in some other variation that is “substantially similar,” including electronically, will provide the debt collector with a safe harbor for compliance with the Rule. Although state debt collection regulators had filed a comment with the CFPB requesting that the Model Form include references to any licenses or NMLS reference numbers a collection agency held, that data point is not in the Model Form. Perhaps this would be a “substantially similar” modification to the Model Form that would not disrupt debt collectors’ safe harbor or an opportunity to seek an advisory opinion from the CFPB.
