ANALYSIS: The federal Fair Debt Collection Practices Act (FDCPA) is not new. Designed to curb abusive collections practices, the FDCPA has governed debt collectors’ activities since 1977. But a lack of guiding regulations to help implement the FDCPA has led to decades of litigation and confusion over how it should be applied.
And so, several years ago, Congress told the CFPB to step in. Late in 2020, the CFPB issued final rules that will regulate debt collection activities in more detail than the FDCPA alone. The new rules – found in the CFPB’s Regulation F – will take effect on Nov. 30, 2021. Though they don’t generally apply to credit unions’ own collections staff, you should be aware of what they say.
Why should CUs learn about the new rules?
Neither the FDCPA nor Reg. F directly cover a credit union when collecting its own loans and using its own name. Instead, they cover “debt collectors,” which is defined to mean third-party collectors, like collection agencies or attorneys collecting debts on behalf of others.
Why is The League alerting you about these new Reg. F rules if they don’t directly apply to credit unions? We believe that credit unions should be familiar with them for several reasons:
- Some action may be required on your part. For example, as explained later in this Courier, credit unions may need to send notices to members if a debt collector wants to use an email address that a consumer had previously provided to the credit union.
- Various federal and state laws prohibit unfair, deceptive or abusive acts or practices (“UDAAPs”). The new rules set out broad prohibitions on using UDAAPs to collect a consumer debt. The prohibitions under the FDCPA and Reg. F could inform authorities’ views of whether a credit union’s own collection conduct has been unfair, deceptive or abusive. As a result, credit unions and their own collections staff may choose to follow all or part of Reg. F to reduce their risks of engaging in UDAAPs when collecting debts.
- The debt collectors you work with may ask the credit union for new information to comply with the rules. For example, they will soon be required to itemize account balances, starting from a specific “itemization date.” (The itemization date can be one of five possible dates: the last statement date, the charge-off date, the last payment date, the judgment date, or the transaction date.) Collection agencies should provide guidance on the information they need from you and work with you to determine which itemization date to use.
- Credit unions that hire third-party debt collectors have vendor oversight responsibilities, which include evaluating a vendor’s ability to comply with relevant laws. Credit unions need some background on Reg. F to perform due diligence on collection agencies they work with.
The remainder of this Courier will summarize some of Reg. F’s key compliance requirements and provide links to helpful resources.
Modern communication methods
Reg. F lets debt collectors use modern communications methods to contact consumers – like text messages and emails – as long as the debt collector can ensure that they are reaching the correct person.
All digital communication must include a reasonable and simple opt-out method.
Using the right email address/text number
The regulation sets limits and conditions on the use of texts and emails. For example, the rules answer a basic question: What email address or text number can the debt collector use? It’s important because unintentional disclosure of debt collection activity to third parties could violate Reg. F.
For emails, the regulation provides three “safe harbors,” generally letting a debt collector use an email address:
- That the consumer has either previously used to communicate with the debt collector (provided the consumer hasn’t since opted out) or that the consumer has provided prior express consent for the debt collector to use (provided that the consent hasn’t been withdrawn); or
- That was used by the creditor – such as the credit union – subject to certain conditions; or
- That was used by a prior debt collector, subject to certain conditions.
The regulation allows for text messaging subject to two even narrower safe harbors.
Note that the second safe harbor allows a debt collector to use an email address that the original creditor (e.g., the credit union) used to communicate with the consumer – if certain conditions are met. This option requires the credit union to send what some people are calling a “handoff letter.” As the original creditor, the credit union would have to send an opt-out notice that informs the consumer that the debt has been or will be transferred to the debt collector, that the collector might communicate using the consumer’s email address, and that if others have access to the email address, such communications could be seen. The creditor must then provide a simple and reasonable method for opt-out and a deadline that is no sooner than 35 days after notice is sent. This opt-out notice can be sent to the email address for which transfer of consent is sought.
This article by a nationally known law firm provides a good overview of these safe harbors for obtaining email addresses and text message numbers.
Stopping or limiting communications
If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or wants the debt collector to cease further communications, then the debt collector must stop communicating with the consumer about that debt.
In addition, at a consumer’s request, a debt collector must stop using a particular method of communication (e.g., all phone calls or texts to a particular number). The consumer’s request to limit communication via certain methods can be made orally.
Limits on call frequency
Any phone call made with the intent to harass, oppress, or abuse a consumer violates the FDCPA. The new regulations set some clear limits on when calls can be made. Debt collectors cannot call a consumer during inconvenient times, such as before 8 a.m. and after 9 p.m. consumer time – unless the consumer has asked the debt collector to do so. No more than seven call attempts are allowed within seven days. If contact is made, that consumer cannot be contacted again for seven more days (except at the consumer’s request).
“Limited-content” voicemail messages
Debt collectors can leave only a “limited-content” voicemail message for a consumer. These messages must include 1) the business name (as long as it doesn’t state that it is from a debt collector), 2) a request for the consumer to respond, 3) contact names, and 4) contact numbers. For example: “This is Robin Smith calling from ABC Inc. Please contact me or Jim Johnson at 1-800-555-1212.”
The message may also include a salutation, date and time of the call, suggested dates and times to follow up, and a statement that the consumer can speak to any company representative about the call. For example: “Hi, this is Robin Smith calling from ABC Inc. It is 4:15 p.m. on Wednesday, September 1. Please contact me or any of our representatives at 1-800-555-1212 today until 6:00 p.m. Eastern time, or any weekday from 8:00 a.m. to 6:00 p.m. Eastern time.”
No additional information can be provided when leaving a limited-content voicemail message.
If a debt collector leaves a voicemail message for a consumer with just the required information (and optional additional content), the debt collector will not be in violation of Reg. F if a third-party hears it. To take advantage of this provision, the debt collector may not identify the consumer or reference any “account.”
A debt collector should not leave a limited-content message (or any other message) when a debt collector’s call results in a live connect with an unauthorized third-party – i.e., if someone else answers the phone. Instead, the debt collector should simply say that they will call back another time.
Debt validation notices
Under Reg. F, debt collectors must give consumers “clear and conspicuous” debt validation notices in writing or electronically when starting debt collection communications. The notices must include a statement that the communication is from a debt collector, along with additional information such as itemization-related information, the current amount of debt, consumer protection information, and information for consumers who may choose to dispute the debt or take other actions.
Reg. F includes a model debt validation form that debt collectors can use. Using the model form is not required, but a debt collector that uses it (or a substantially similar form) gets safe harbor protections. The final rule also describes certain optional disclosures that can be made in the validation notice without losing the safe harbor protections.
The debt validation notice is required in the initial communication with a consumer or within five days of that initial communication (unless the consumer has paid the debt within that five-day period).
Debt collectors who choose to give validation notices in other languages must include an English-language notice in the same communication.
Reporting to credit bureaus
Reg. F requires debt collectors either to speak to a consumer in person, send an email or letter, or try to speak with a consumer by telephone before furnishing any information to a credit bureau. Communications sent via email or letter require a 14-day waiting period to allow for a “reasonable period of time” to receive a notice of undeliverability.
Time-barred debts
Reg. F prohibits debt collectors from suing or threatening to sue consumers when attempting to collect time-barred debt – i.e., after a statute of limitations has passed. Proofs of claim filed in connection with a bankruptcy proceeding are not included in this prohibition.
Deceased consumers
Reg. F expands the definition of “ consumer” under Reg. F to include deceased people. This effectively extends the protections in Reg. F to people who are authorized to act on behalf of a deceased consumer’s estate, like a personal representative.
Record retention
Generally, debt collectors must retain records of compliance or noncompliance with the FDCPA and Reg. F until three years after their last collection activity on a given debt. Debt collectors are not required to record collections telephone calls, but if they do, they must retain the recordings for three years after a call’s date.
Resources
This Courier only summarizes some of the key points under Reg. F. The CFPB has several resources to help explain its new rules in detail:
- Executive summary of Part I of the rules, issued in October 2020.
- Executive summary of Part II of the rules, issued in December 2020.
- Frequently Asked Questions on debt collection limited-content messages and call frequencies.
Apart from the FDCPA and Reg. F, other existing laws impact what credit unions can do when collecting on their own debts. For example, The League’s ii Release No. 0121 explains Wisconsin’s debt collection laws and consumer protection rules.
Users of CUNA CU CMS compliance management system can access their overview of Reg. F online here.