Consumer Financial Protection Bureau Moves to Regulate Debt Collection

Washington, D.C. (May 7, 2019) - In a surprise move a day before a scheduled “town hall” on debt collection, the Consumer Financial Protection Bureau (CFPB) released its long-awaited proposed debt collection rule. Key elements of the proposal include call caps (limits on the number of times debt collectors can contact debtors), clarity on allowable use of electronic communications, and disclosure requirements on information to be communicated to consumers.

The proposed rule will cover third-party debt collectors and not debt collection efforts conducted directly by creditors such as credit card companies, medical service providers, and merchants. The proposal, which runs to more than 500 pages, solicits comments on many issues; interested parties will have 90 days in which to comment, starting from the date on which the proposed rule is published in the Federal Register.

Key points in the proposal include:

• Imposition of a call cap limiting debt collectors from contacting debtors by phone more than seven times within a seven-day period or within seven days of talking with that same person by phone. Other provisions cover restrictions on the times and places at which consumers may be contacted.
• Clarification – sought by many parties who have long argued the 1977-era Fair Debt Collection Practices Act (FDCPA) needed to recognize newer technologies, such as emails and text messages – that these media may be used in debt collection, so long as these contacts include instructions that would allow consumers to opt out of receiving further emails or text messages. The proposal would allow liberal used of these technologies and protect debt collectors who follow these procedures from liability for unintentional violations of the regulations.
• Addition of a new definition for “limited-content messages,” which would identify what information a collector must and may include in a message left for a debtor, in order to keep the contact from qualifying as a “communication” and triggering potential liability under the FDCPA, an issue that has been the subject of considerable litigation and legal vulnerability for debt collectors.
• Disclosure requirements on what information must be provided to debtors within five days of an initial communication with respect to the debt and actions the consumer may take in response. These requirements would include a model validation notice and provide a safe harbor if the debt collector follows prescribed steps when delivering the validation notice within the body of an email that is the initial communication with a consumer.
• Prohibitions against suing to collect time-barred debt and sending a debt to a consumer reporting agency before communicating with the debtor, along with procedures for dealing with deceased debtors’ estates. 

Interested parties will need to dedicate significant time to assessing the proposal’s full implications in order to submit meaningful comments. The most effective comments will focus on providing strong legal and factual support, including data where possible, in favor of or opposition to particular points in the proposal, and offer specific recommended changes where appropriate. The final rule is almost certain to be challenged in court; judicial review will be based on what is in the administrative record of the rulemaking, and the importance of well-reasoned and supported comments cannot be overestimated. To learn more, contact Jane Luxton or another member of the Lewis Brisbois Environmental and Administrative Law Practice.

Authors:

Jane C. Luxton, Partner, Co-Chair of Environmental & Administrative Law Practice