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Jonathan L. Pompan Alexandra Megaris
What to Expect in a Narrowed CFPB Debt Collection Rulemaking
The scope of a Consumer Financial Protection Bureau (CFPB) proposed rule on debt collection will be narrower than initially planned and focus on third-party debt collectors. In comments made on June 8, 2017, CFPB Director Richard Cordray described how the proposed rule would focus only on consumer disclosures and communications by third-party collectors, and will not address data and documentation needed to substantiate debt as originally anticipated by the Outline of Proposals under Consideration and Alternatives Considered released in July 2016 (Outline).
The announcement also confirmed that the debt collection rulemaking will be bifurcated, although not along the same lines as initially projected. Previously, the CFPB indicated that it would issue separate rules for first-party and third-party collectors. According to the recent announcement by Director Cordray, the CFPB will first propose rules that (1) will apply only to third-party collectors subject to the Fair Debt Collection Practices Act (FDCPA) and (2) address only disclosure and communication requirements. The CFPB will then proceed with developing a separate rule applicable to both first and third parties to address documentation and substantiation requirements, which has been an area of focus in CFPB examinations and enforcement actions. A date was not provided for the release.
The CFPB reached the decision to consolidate all of the issues of documentation and substantiation into a separate rule applicable to first-party creditors and third-party collectors upon "evaluat[ing] the feedback we received on the proposals under consideration." According to Director Cordray, "[w]riting rules to make sure debt collectors have the right information about their debts is best handled by considering solutions from first-party creditors and third-party collectors at the same time."
Based on the announcement by Director Cordray, the forthcoming proposed rulemaking will likely address the following topics covered by the Outline.
Transfer of Information Provided by Consumers during Collections
The Outline contemplated a requirement that certain information provided by a consumer to a collector must be transferred to and reviewed by subsequent collectors. The types of information would likely include those that either i) affect collectors' obligations to comply with the FDCPA and other federal consumer protection laws, or ii) facilitate collector behavior that may be beneficial to consumers.
Updated Validation Notice and Statement of Rights
The Outline addressed a potential requirement for all validation notices to contain certain types of information about the debt and to be accompanied by a Statement of Rights with information about consumers' rights under the FDCPA and other federal and state consumer protection laws. The Proposals also included a model validation notice and Statement of Rights.
Litigation Disclosure
The Outline contemplated requiring collectors to provide a brief "litigation disclosure" in all written and oral communications in which they represent, expressly or by implication, an intent to sue.
Restrictions on Collecting Time-Barred Debt
The Outline considered a requirement that collectors disclose the status and nature of time-barred debt to consumers and waive any right to sue on time-barred debt for which the statute of limitations was revived by a consumer payment. Suits and threats of suits on time-barred debt would also be prohibited.
Limited Content Voicemails
The Outline discussed giving specific permission for collectors to leave limited-content voicemails (often referred to as "Foti messages") or messages with third persons, provided the voicemail conveys only certain types of information that do not disclose the nature of the call, and particularly that its purpose is debt collection.
Limits on Contact Frequency
The Outline addressed a requirement that would impose specific numeric restrictions on the frequency of communications with consumers. In particular, collectors would be limited to placing a total of three contact attempts per week per address or phone number, and would be prohibited from making more than six total contact attempts per week. In addition, if the collector speaks with the consumer, it would be prohibited from making further contact attempts that week, without permission.
Limits on Location Contacts
The Outline included a requirement that would impose specific numeric restrictions on the frequency of contacting third persons to acquire location information. Collectors would be limited to placing a total of three contact attempts per week per address or phone number, and would be prohibited from making more than six total contact attempts per week. If the collector actually contacts the consumer, he or she would be prohibited from making further contacts with third persons to acquire location information.
Clarification Regarding Inconvenient Times, Places, and Methods of Communication
The Outline addressed possible standards for determining whether a time, place, or method of communication is inconvenient for a consumer in violation of the FDCPA. For example, if a consumer has a mobile phone number in one time zone and a street address in another, a time could be considered inconvenient in all of the locations in which the consumer might be.
Narrowing the scope of the initial debt collection rulemaking likely will enable the CFPB to issue a Notice of Proposed Rulemaking (NPRM) earlier than if the CFPB proceeded with a rulemaking encompassing documentation and substantiation by third-party collectors.
As a reminder, the CFPB initially released an Advanced Notice of Proposed Rulemaking (ANPR) for debt collection back in November 2013. The ANPR indicated that the rulemaking would cover first-party creditors pursuant to the CFPB's rulemaking authority to prevent unfair, deceptive, or abusive acts or practices (UDAAPs), and third-party collectors pursuant to the CFPB's rulemaking authority under the FDCPA. In July 2016, the CFPB announced that it would "convene a second [SBREFA] proceeding in the next several months for creditors." However, proceeding with distinct rules for creditors and debt collectors appeared to cause a delay in the rulemaking process, with Director Cordray stating that "breaking the different aspects of the [documentation and substantiation requirement] into two distinct rules was shaping up to be troublesome in various ways."
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