Final Debt Collection Rule Issued by CFPB

Update (July 30, 2021): The Consumer Financial Protection Bureau (CFPB) announced on July 30, 2021, that the two final rules issued under the Fair Debt Collection Practices Act (FDCPA) will take effect as planned, on November 30, 2021. The CFPB issued a proposal in April 2021 that, if finalized, would have extended the effective dates to January 29, 2022. The CFPB determined that such an extension is unnecessary. For more information on the two final rules: December 2020 Final Rule (consumer disclosures); and October 2020 Final Rule (debt collection communications and clarifies the FDCPA's prohibitions on harassment and abuse, false or misleading representations, and unfair practices by debt collectors when collecting consumer debt).

CFPB Proposes Delay of Effective Date for Debt Collection Final Rules – On April 7, 2021, the CFPB proposed delaying the effective date of the Debt Collection Final Rules, extending the effective date of both the October and December 2020 rules from November 30, 2021 to January 29, 2022. The proposal was published in the Federal Register on April 19, 2021. Comments are due on or before May 19, 2021. For more details click here.

This article was updated on November 30, 2020 to reflect the publication of the Final Rule in the Federal Register on the same day.

Several years in the making, on October 30, 2020, the CFPB issued a significant debt collection final rule amending Regulation F, 12 CFR part 1006. This final rule (“Final Rule”) governs the activities of debt collectors under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., bringing much-needed clarity and uniform standards to the practices that have developed over the 40 plus years since the FDCPA was enacted.

The Final Rule, among other things, addresses electronic communications (e.g., email, text messages, and social media) and interprets and applies prohibitions on harassment or abuse, false or misleading representations, and unfair practices. The Final Rule will become effective one year after publication in the Federal Register, November 30, 2021. The CFPB also announced it intends to issue a disclosure-focused final rule in December 2020 to interpret the FDCPA’s requirements regarding consumer disclosures and certain related consumer protections.

Key takeaways from the Final Rule:

• The Final Rule applies only to “debt collectors,” as defined by the FDCPA, and does not extend to “first party” creditors.
• The Final Rule restricts the times and places at which a debt collector may communicate or attempt to communicate with a consumer, including by clarifying that a consumer need not use specific words to assert that a time or place is inconvenient for debt collection communications.
• Consumers may restrict the media through which a debt collector communicates or attempts to communicate by designating a particular medium, such as email or telephone, as one that cannot be used for debt collection communications.
• Debt collectors are presumed to violate the FDCPA’s prohibition on repeated or continuous telephone calls if the debt collector places a telephone call to a person more than seven times within a seven-day period or within seven days after engaging in a telephone conversation with the person.
• Debt collectors may use communication technologies such as emails and text messages in debt collection, and the Final Rule provides a safe harbor for collectors when they use these communication with consumers, provided that the Final Rule’s procedural framework is followed. In addition, these communications must include instructions for a reasonable and simple method that consumers can use to opt out.
• A debt collector is prohibited from communicating or attempting to communicate with a consumer in connection with the collection of any debt at a time or place that the debt collector knows or should know is inconvenient to the consumer.
• A debt collector is prohibited from communicating or attempting to communicate with a person, in connection with the collection of a debt, through a social media platform if the communication or attempt to communicate is viewable by the general public or the person’s social media contacts.
• The Final Rule defines a new term related to debt collection communications: “limited-content message.” If a message meets this definition, then it is not a “communication” under the FDCPA. Limited-content messages are limited to voice mails left with a debtor, and the Final Rule identifies what information a debt collector must and may include in such messages.
• A debt collector is prohibited from selling, transferring for consideration, or placing for collection a debt if the debt collector knows or should know that the debt has been paid or settled or discharged in bankruptcy.

The Final Rule is a major development for all participants in the debt collection market and will have a direct impact on enforcement investigations, supervisory examinations, and litigation. Announced on the eve of a presidential election, it also could be the first of several developments in the regulation of debt collection.

In this Article

Background

Overview of the Final Rule

1. Coverage
2. Organization

Key Conduct Rules and Clarifications

1. Definitions
2. Communications Provisions

Consumer Disclosure Provisions (Section 1006.42)

Additional Key Conduct Rules and Clarifications

Topics Not Included in the Final Rule

1. Provisions Covered in Forthcoming Disclosure Focused Rule (December 2020)
2. Attorney Involvement

What’s Next for Debt Collection Regulation?

Background

From 1938 to 1977, the federal government primarily protected consumers from debt collection abuses through Federal Trade Commission (FTC) enforcement actions under section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices. The FDCPA, enacted in 1977, expressly prohibits debt collectors from engaging in unfair, deceptive, abusive, and other unlawful collection practices. However, no federal agency was vested with authority to issue general implementing regulations prior to the creation of the Consumer Financial Protection Bureau (CFPB) more than 30 years later.

The FDCPA generally provides that a debt collector is any person who (1) uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts (i.e., the “principal purpose” prong) or (2) regularly collects, or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due to another (i.e., the “regularly collects” prong). The FDCPA also sets forth several exclusions from the general definition.

Although it could not issue rules, FTC attempted to implement the FDCPA by publishing various guidance and interpretive materials, and brought numerous enforcement actions addressing collection activity under the FDCPA and other applicable laws. Then, in 2010, the Dodd-Frank Act provided the CFPB with the authority to prescribe rules with respect to the collection of debts by debt collectors. The FTC and CFPB share government enforcement authority under the FDCPA and coordinate on matters related to debt collection.

Starting in November 2013, the CFPB began considering whether rules governing the collection of debts were warranted and, if so, what types of rules would be appropriate. At that time, the CFPB issued an advance notice of proposed rulemaking (ANPR) seeking comment, data, and information from the public about a wide variety of both first- and third-party debt collection practices. In 2016, in advance of a joint panel with the Office of Management and Budget and the Small Business Administration convened to address the Small Business Regulatory Enforcement Fairness Act (SBREFA), the CFPB released an outline of debt collection proposals under consideration.

Building on feedback from the SBREFA process and the ANPR, in 2017 the CFPB decided it would issue a proposed rule later concerning FDCPA collectors’ communications practices and consumer disclosures. The CFPB also announced an intention to follow up separately at a later time about concerns regarding information flows between creditors and FDCPA collectors and about potential rules to govern creditors that collect their own debts.

In May 2019, the CFPB published a proposed rule (Proposed Rule) concerning the communications practices and consumer disclosures for debt collectors under FDCPA. Between the Proposed Rule and this Final Rule, the CFPB released a supplemental notice of proposed rulemaking in February 2020 that would, as part of the amendments to Regulation F, require debt collectors to make certain disclosures when collecting time-barred debts.

Overview of the Final Rule

Coverage

The Final Rule covers “debt collectors,” as that term is defined in the FDCPA. “Debt collector” is defined in the FDCPA, subject to certain exceptions, as “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” A creditor “who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts” is included in the definition.

The CFPB declined to expand the rule to apply to first-party debt collectors who are not FDCPA “debt collectors.” The CFPB also stated the Final Rule is not intended to address whether activities performed by entities that are not subject to the FDCPA may violate other laws, including the prohibitions against unfair, deceptive, or abusive practices (UDAAP) in the Dodd-Frank Act.

The Final Rule restates nearly all of the FDCPA’s substantive provisions largely in the order in which they appear in the statute, which is intended to provide industry and consumers with a single source for accessing information about the statute and Final Rule. Except where specifically stated in the rule, the restatement of the statutory text is not intended to codify judicial interpretations of the statute.

Organization

The CFPB’s announcement is divided into several sections, including a summary, background and rulemaking process, a section on the CFPB’s legal authority, a substantive section-by-section analysis, and the publication of the rule text. Substantively, the Final Rule has four subparts:

• Subpart A contains generally applicable provisions, such as definitions that apply throughout the regulation;
• Subpart B contains rules for FDCPA debt collectors;
• Subpart C is reserved for any future debt collection rulemakings; and
• Subpart D contains certain miscellaneous provisions.

In addition, the Final Rule contains appendices and a supplement:

• Appendix A establishes procedures and criteria that states may use to apply to the CFPB for an exemption for a class of debt collection practices within the state from the provisions of the Act;
• Appendix B is reserved;
• Appendix C provides information on how a debt collector may request an advisory opinion and states that “[a]ny act done or omitted in good faith in conformity with any advisory opinion issued by the Bureau, including advisory opinions referenced in this appendix, provides the protection afforded under section 813(e) of the Act;” and
• Supplement I contains the official interpretations for the rule, divided by subparts in the same manner as the main rule text.

Key Conduct Rules and Clarifications

Definitions

The Final Rule generally restates definitions from the FDCPA with some wording and organizational changes for clarity or to support a substantive clarification (for example, the definition of “consumer” has been clarified to include a “deceased natural person”).

While this article does not address every definition in the Rule, it is worth noting that the Final Rule expressly distinguishes between a “communication” and an “attempt to communicate.” For example, a debt collector who places a telephone call to discuss a consumer’s debt that goes unanswered by the consumer has attempted to communicate with the consumer. Likewise, leaving a “limited-content message” (a voice mail message for a consumer that includes specific content, such as the business name of the collector, without indicating that the collector is in the debt collection business and includes nothing else) would be an attempt to communicate, but not a communication.

Communications Provisions

The bulk of the Final Rule is made up of numerous communications provisions, expanding on and clarifying the FDCPA limits. FDCPA section 805 generally limits how debt collectors may communicate with consumers and third parties when collecting debts. The Final Rule addresses concerns that debt collection communications may constitute unfair practices, may contain false or misleading representations (FDCPA section 807), or may be harassing or abusive (FDCPA section 806), either because of the content of the communications or because of the manner in which they are made. The CFPB also sought to clarify the use of new communications technologies that have become available since the FDCPA’s passage.

Below, we highlight some of the notable communications provisions.

Time and Place Restrictions (Section 1006.6(b)) – The Final Rule clarifies restrictions on the times and places at which a debt collector may communicate or attempt to communicate with a consumer, including by clarifying that a consumer need not use specific words to assert that a time or place is inconvenient for debt collection communications.

The CFPB has interpreted the language in FDCPA section 805(a)(1) that a debt collector should assume that the convenient time for communicating with a consumer is after 8:00 a.m. and before 9:00 p.m. local time at the consumer’s location, unless the debt collector has knowledge of circumstances to the contrary.

The Final Rule adopts a safe harbor to facilitate compliance with the time and place restriction when the debt collector has conflicting or ambiguous information regarding a consumer’s location. The safe harbor would apply in circumstances in which the debt collector does not have knowledge of the consumer’s actual location.

• Specifically, a debt collector is not required to determine where the consumer is located when communicating or attempting to communicate with the consumer.
• Knowledge that a telephone number is associated with a mobile telephone does not, without more information, create conflicting or ambiguous information about time and place restrictions.
• However, a debt collector may know or should know that it is inconvenient to communicate or attempt to communicate with a consumer at a time outside of the presumptively convenient times (8:00 a.m. to 9:00 p.m.) in any of the time zones in which the consumer might be located.

The Final Rule also allows consumers to designate times and places as being inconvenient based on a “reasonableness” standard:

• The consumer does not need to specifically use the word “inconvenient” to designate a certain time or place as inconvenient.
• The CFPB does not outline a bright-line rule, but instead permits—but does not require—the collector to ask follow-up questions regarding whether a time or place is convenient to clarify statements from a consumer.
• There is no requirement for a consumer’s inconvenience designations to be transferred from a creditor or a previous debt collector to the current debt collector. However, if the current debt collector is made aware of the designations, they must be honored.

Communication Media Restrictions (Section 1006.14(h)(1)) – The Final Rule clarifies that a consumer may designate a particular medium as one that cannot be used for debt collection communications, and the debt collector must honor that designation.

• A debt collector must provide a clear and conspicuous disclosure on the method by which the consumer can opt out of electronic communications to a particular email address, telephone number, or other electronic-medium.
• Unlike a written cease communication request (Section 1006.6(c)(1)), a request not to use a specific medium of communication may be oral.
• The Final Rule does not specify a time period afforded to a debt collector to update its systems to reflect a request. The CFPB notes that depending on the circumstances, the FDCPA’s bona fide error defense to civil liability may apply.
• There is no requirement for a debt collector to transfer a person’s preference to a creditor or subsequent debt collector.

Telephone Call Frequency Limits (Section 1006.14) – The Final Rule includes a rebuttable-presumption framework for the FDCPA section 806(5)’s prohibition against “causing a telephone to ring” if the natural consequence is to harass, oppress, or abuse any person.

• The Final Rule clarifies that this prohibition relates to “placing telephone calls.” Of note, the commentary also provides that “placing a phone call” for purposes of this presumption includes conveying a ringless voicemail but does not include sending an electronic message (e.g., text message or email) that may be received on a mobile telephone. The Final Rule also provides nonexhaustive lists of factors that may be used to rebut the presumption of compliance or of a violation.
• A debt collector is presumed to violate the FDCPA if the debt collector places a telephone call to a person more than seven times within a seven-day period or within seven days after engaging in a telephone conversation with the person. Conversely, a debt collector is presumed to comply with that prohibition if the debt collector does not exceed the telephone call frequencies.
  • The telephone call frequency limit has three exclusions:
    • Calls placed with a person’s prior consent (Section 1006.14(b)(3)(i)),
    • Calls that do not connect to the dialed number (Section 1006.14(b)(3)(ii)), and
    • Calls placed to certain professional persons (Section 1006.14(b)(3)(iii)).
  • Furthermore, the CFPB adopted a per-debt approach to counting for the call frequency restriction and declined to adopt a per-consumer approach. Of note, the Final Rule aggregates student loan debts serviced under a single account number at the time the debts were obtained by a debt collector, although it declines to aggregate medical debts by account number, for purposes of counting telephone call frequencies.
• A debt collector could violate the rule and FDCPA if the natural consequence of another aspect of its telephone calls, unrelated to frequency, is to harass, oppress, or abuse any person in connection with the collection of a debt.

Electronic Communications Generally (Section 1006.6) – The Final Rule clarifies that newer communication technologies such as emails and text messages may be used in debt collection, with certain limitations to protect consumer privacy and to protect consumers from harassment or abuse, false or misleading representations, or unfair practices:

• Time and Place Restrictions for Electronic Communications (Section 1006.6(b)(1)) –The Final Rule clarifies that the statutory prohibition under FDCPA section 805(a)(1) against communicating at inconvenient times or places applies to electronic communications.
• Electronic Communication Frequency Limits (Cumulative Communications) (Section 1006.14) – The CFPB declined to impose numeric limits on a debt collector’s use of electronic communication or of a combination of telephone calls and electronic communication media. That said, the CFPB adopts two comments to clarify that the general prohibition on harassing conduct applies to debt collectors’ use of communication media other than telephone calls, including cumulative communications involving telephone calls and other media, such as text and e-mail. The CFPB said it will be actively monitoring the market and gathering information to determine whether numeric limits on such communications are necessary and warranted.
• Option to Unsubscribe (Section 1006.6(e)) – The Final Rule requires that each of a debt collector’s emails and text messages includes instructions for a reasonable and simple method for consumers to opt out of receiving further emails or text messages. A debt collector may obtain a safe harbor from civil liability for an unintentional third-party disclosure if the debt collector follows the procedures identified in the rule when communicating with a consumer by email or text message.
• Use of Workplace Email Addresses (Section 1006.22(f)(3)) – Recognizing that the risk of third-party disclosure is particularly high for communications sent to employer-provided email addresses, the Final Rule prohibits debt collectors from communicating or attempting to communicate using an email address that the debt collector knows is provided by the consumer’s employer.
• Social Media Platforms (Section 1006.22(f)(4)) – The Final Rule prohibits a debt collector from communicating or attempting to communicate with a person, in connection with the collection of a debt, through a social media platform if the communication or attempt to communicate is viewable by the general public or the person’s social media contacts. The Final Rule does not, however, prohibit a debt collector from sending a message through a social media platform if the message is not viewable by the general public or the person’s social media contacts. The definition of “person” includes a consumer, which under the FDCPA is any natural person obligated or allegedly obligated to pay any debt. According to the CFPB, it will not be possible for debt collectors to leave limited-content messages using social media as was contemplated in the Proposed Rule. The CFPB notes that the relevant question is whether the communication or attempt to communicate is viewable, not whether the platform itself is viewable.

Safe Harbor Using Email, Telephone Numbers for Text Messages (Sections 1006.6(d) and 1006.22(g)) – The Final Rule sets forth procedures that debt collectors may use to reduce their risk of civil liability for unintentional third-party disclosures when communicating with consumers by email or text message.

• When communicating by email, the Final Rule adopts three procedures that a debt collector may use to obtain a safe harbor:
  • Procedures based on communication between the consumer and the debt collector:
    • The consumer used the email address to communicate with the debt collector about the debt and the consumer has not since opted out of communications to that email address; or
    • The debt collector has received directly from the consumer prior consent to use the email address to communicate with the consumer about the debt and the consumer has not withdrawn that consent.
  • Procedures based on communication by the creditor:
    • A creditor obtained the email address from the consumer;
    • The creditor used the email address to communicate with the consumer about the account and the consumer did not ask the creditor to stop using it;
    • Before the debt collector used the email address to communicate with the consumer about the debt, the creditor sent the consumer a written or electronic notice, to an address the creditor obtained from the consumer and used to communicate with the consumer about the account, that clearly and conspicuously disclosed:
      • that the debt has been or will be transferred to the debt collector;
      • the email address and the fact that the debt collector might use the email address to communicate with the consumer about the debt;
      • that, if others have access to the email address, then it is possible they may see the emails;
      • instructions for a reasonable and simple method by which the consumer could opt out of such communications; and
      • the date by which the debt collector or the creditor must receive the consumer’s request to opt out, which must be at least 35 days after the date the notice is sent.
    • The opt-out period provided has expired and the consumer has not opted out; and
    • The email address has a domain name that is available for use by the general public, unless the debt collector knows the address is provided by the consumer’s employer.
  • Procedures based on communication by the prior debt collector.
    • Any prior debt collector obtained the email address in accordance with the procedures set out in the Final Rule;
    • The immediately prior debt collector used the email address to communicate with the consumer about the debt; and
    • The consumer did not opt out of such communications.
• When sending a text message to a telephone number, a debt collector may obtain a safe harbor from civil liability for an unintentional third-party disclosure:
  • If the consumer used the telephone number to communicate with the debt collector about the debt by text message, the consumer has not since opted out of text message communications to that telephone number, and within the past 60 days either (1) sent the text message or a new text message from that telephone number; or (2) the debt collector confirmed, using a complete and accurate database, that the telephone number has not been reassigned from the consumer to another user since the date of the consumer’s most recent text message to the debt collector from that telephone number; or
  • If the debt collector received directly from the consumer prior consent to use the telephone number to communicate with the consumer about the debt by text message, the consumer has not since withdrawn that consent, and within the past 60 days the debt collector either (1) obtained the prior consent or renewed consent from the consumer or (2) confirmed, using a complete and accurate database, that the telephone number has not been reassigned from the consumer to another user since the date of the consumer’s most recent consent to use that telephone number to communicate about the debt by text message.

The above procedures effectively create an opt-in system for the use of text messages.

The safe harbor procedures are more fully set forth in the rule, and are the subject of extensive commentary, including sample opt-out notice language. The CFPB recognizes that depending on their size, the scope of their operations, and other business-specific facts, different debt collectors may take different approaches to reasonably confirming and documenting compliance with the safe harbor steps. The CFPB states that the Final Rule identifies neither the only circumstances in which a debt collector may communicate with a consumer electronically nor the only technologies a debt collector may use to do so. It also says the Final Rule does not identify the only procedures that may be reasonably adapted to avoid a violation of the prohibition on third-party disclosures.

General Marketing and Advertising (Section 1006.2(d)) – The CFPB found that general marketing and advertising directed to groups of consumers or the general public, or a debt collector’s personal communications, should not be considered attempts to communicate, because the debt collector has not conveyed information regarding a debt. These messages or activity may not raise the same consumer protection concerns that motivated other provisions of the Final Rule regulating attempts to communicate.

Limited Content Messages & Voicemail (Section 1006.2(j)) – The Final Rule defines a new term related to debt collection communications: “limited-content message.” If a message meets this definition, then it is not a “communication” under the FDCPA. Limited-content messages are limited to voicemails left with a debtor, and the Final Rule identifies what information a debt collector must and may include in such messages. No information other than what is specified in the definition may be included in the voice mail for it qualify as a limited-content message.

The required content is the consumer’s name, a request that the consumer reply to the message, the name(s) of natural persons whom the consumer can contact to reply, a telephone number to reply to, and, if applicable, the opt-out notice. By using a qualifying limited-content message, a debt collector may leave a voice mail message for a consumer that is not subject to the more burdensome requirements and restrictions applicable to a “communication” under the Final Rule.

Consumer Disclosure Provisions (Section 1006.42)

The FDCPA requires that a debt collector provide certain disclosures to the consumer. The Final Rule clarifies the standards a debt collector must meet when sending the required disclosures in writing or electronically.

• In the Proposed Rule, a debt collector would have been required to obtain a consumer’s consent in accordance with the Electronic Signatures in Global and National Commerce Act (E SIGN Act) to communicate electronically for all disputes.
• In the Final Rule, E-SIGN Act consent is necessary only for debt collectors to respond electronically to consumers’ initial, nonduplicative disputes. This means there may be situations where a debt collector must respond to the initial dispute in paper form, but where subsequent duplicative disputes may be responded to electronically. The Final Rule does require, however, that certain validation and disclosures must comply with E-SIGN Act section 101(c).
• To comply with E-SIGN Act, the Final Rule requires Regulation F disclosures to be sent in writing or electronically (1) in a manner that is reasonably expected to provide actual notice to the consumer and (2) in a form that the consumer may keep and access later. The use of the term “send” instead of “provide” is intentional, and the CFPB clarifies that the rule is for debt collectors to send the disclosures in a manner reasonably expected to provide actual notice. If a consumer has opted out of debt collection communications to a particular email address or telephone number, then a debt collector cannot use that email address or telephone number to send required disclosures. The commentary sets forth several factors for determining whether electronic communications comply with Regulation F, and the electronic notice and form standards.
• The Final Rule sets forth a number of safe harbors for disclosures sent by mail, including a printed copy of a disclosure mailed to the consumer’s last known address or P.O. box, unless the debt collector knows or should know at the time of mailing that the consumer does not currently reside at, or receive mail at, that location.

Additional Key Conduct Rules and Clarifications

The Final Rule addresses several other consumer protection concerns in the debt collection market, including:

Communication Prior to Furnishing Information (Section 1006.30(a) – The CFPB is reserving this section in the Final Rule, and it intends to address this issue in its forthcoming December 2020 rule.

Record Retention (Section 1006.100) – This provision requires a debt collector to maintain records that are evidence of compliance or noncompliance with the FDCPA and Regulation F, starting on the date that the debt collector begins collection activity on a debt until three years after the debt collector’s last collection activity on the debt or, in the case of telephone call recordings, until three years after the dates of the telephone calls.

A debt collector need not create and maintain additional records, for the sole purpose of evidencing compliance that the debt collector would not have created in the ordinary course of its business in the absence of the record retention requirement.

The Final Rule does not require a debt collector to record telephone calls, but if calls are recorded, the recordings are considered evidence of compliance or noncompliance with the FDCPA, and the recording of each such call must be retained for three years after the date of the call.

Prohibiting the Sale, Transfer for Consideration, or Placement for Collection of Certain Debts (Section 1006.30(b)): – Subject to narrow exceptions, the Final Rule prohibits a debt collector from selling, transferring for consideration, or placing for collection a debt if the debt collector knows or should know that the debt has been paid or settled or discharged in bankruptcy.

The Final Rule expressly states this restriction pursuant solely to the CFPB’s FDCPA authority based on a determination of unfairness or unconscionability because the debt collector receives or expects to receive compensation. This restriction does not apply to creditors, except to the extent the creditor is an FDCPA debt collector.

The CFPB concluded that the transfer of time-barred debt, disputed debt, debt lacking ownership documentation, debt subject to litigation, debt in which the consumer has an uncompleted settlement agreement, or other types of debt suggested by commenters do not present the same unfairness and unconscionability concerns of the same prevalence and magnitude as the debt types to which the prohibition applies.

The exceptions state that a debt collector may sell, transfer for consideration, or place for collection a debt that has been discharged in bankruptcy if the debt is transferred to the debt’s owner or to a previous owner of the debt; if the transfer is authorized under the terms of the original contract between the debt collector and the previous owner, or as a result of a merger, acquisition, purchase and assumption transaction or a transfer of substantially all of the debt collector’s assets; or if the debt is secured by an enforceable lien and the debt collector provides notice to the transferee that the consumer’s personal liability for the debt was discharged in bankruptcy.

Duplicate Dispute Notice (Section 1006.38(d)(2)(ii)) – The Final Rule provides that a dispute is duplicative if, among other things, the dispute is substantially the same as a dispute previously submitted by the consumer in writing within the validation period for which the debt collector has already satisfied the requirements of section 1006.38(d)(2)(i) regarding disputes and verification. The Final Rule provides that, in the case of a dispute that a debt collector reasonably determines is a duplicative dispute, the debt collector must cease collection of the debt, or any disputed portion of the debt, until the debt collector either (a) notifies the consumer that the dispute is duplicative (with a statement of reasons for its determination and by stating the debt collector responded to the earlier dispute and providing the date of the response) or (b) provides a copy either of verification of the debt or of a judgment to the consumer.

Validation Notice Language Access (Section 1006.18(e)(4)) – The Final Rule adopts a requirement that debt collectors make validation and “mini-Miranda” disclosures, as required by Final Rule, in the same language or languages used for the rest of the communication in which the disclosures are conveyed. The CFPB determined that requiring debt collectors to identify consumers who are unable to communicate in English and provide accurate translations in the myriad languages that consumers speak may impose a significant burden on debt collectors.

Decedent Debt (Sections 1006.2(e), 1006.6(a)(4), 1006.10, 1006.18, 1006.34(a)(1), 1006.38, 1006.42)) – The Final Rule clarifies that the term “consumer” means “any natural person obligated or allegedly obligated to pay any debt.” Under the Final Rule, the personal representative of a deceased consumer’s estate is a consumer for the purposes of communications in connection with debt collection. This clarification generally allows a debt collector to discuss a debt with the personal representative of a deceased consumer’s estate, subject to the rules on communications and attempts to communicate. The Final Rule also clarifies how a debt collector may locate the personal representative of a deceased consumer’s estate and how the validation notice and dispute requirements apply after the consumer dies. The Final Rule also states that a debt collector is not in violation of the prohibition on communicating with any person other than the consumer for the purpose of acquiring location information about the consumer by stating that the consumer owes any debt if the debt collector states that they are attempting to identify and locate the person who is authorized to act on behalf of the deceased consumer’s estate or handling the deceased consumer’s estate.

Topics Not Included in the Final Rule

Provisions Covered in Forthcoming Disclosure-Focused Rule (December 2020)

The CFPB intends to publish a disclosure-focused final rule in December 2020 that will address the following topics, among others:

• Validation Notice Clarification (Reserved Section 1006.34) – The CFPB intends to clarify the information that a debt collector must provide to a consumer at the outset of debt collection.
• Model Validation Notice (Reserved Section 1006.34, Appendix B) – The CFPB will provide a model validation notice containing the information required by FDCPA section 809(a)).
• Furnishing Consumer Reporting Information (Reserved Section 1006.30(a)) – The Proposed Rule would have prohibited a debt collector from reporting collection items to consumer reporting agencies unless the debt collector has already communicated with the consumer by, for example, sending a letter to the consumer.
• Time-Barred Debt (Reserved Section 1006.26): The Proposed Rule would have prohibited a debt collector from suing or threatening to sue on a debt if the debt collector knows or should know that the applicable statute of limitations has expired. Also, the February 2020 supplemental proposal would have required a debt collector collecting a debt that the debt collector knows or should know is time barred to disclose that (1) the law limits how long the consumer can be sued for a debt and, because of the age of the debt, the debt collector will not sue the consumer to collect it and (2) if the debt collector’s right to bring a legal action against the consumer to collect the debt can be revived under applicable law, the revival can occur and the circumstances in which it can occur. The supplemental proposal also included model language and forms that debt collectors could use to comply with the proposed time-barred debt and revival disclosures.

Attorney Involvement

The CFPB declined to adopt the safe harbor in the Proposed Rule that would have covered claims that an attorney falsely represented the attorney’s involvement in the preparation of a litigation submission. The CFPB notes that under the existing case law, a debt collection communication sent under an attorney’s name may violate the FDCPA if the attorney was not meaningfully involved in the preparation of the communication. The CFPB said it anticipates that debt collection attorneys will continue to face lawsuits under this legal theory and that the theory has validity based in the text of the FDCPA.

What’s Next for Debt Collection Regulation?

Depending on the outcome of the 2020 election—especially if both houses of Congress and the White House are controlled by Democrats—Congress may consider legislative proposals on debt collection. Under the Congressional Review Act (CRA), Congress with approval of the president may overturn regulatory rulemakings. As a practical matter, the CRA is only effective after a change in administration since a president typically agrees with (and would not approve the reversal of) the rules issued under the president’s own appointed agency heads.

The CRA contains a lookback provision that applies after Congress adjourns at the end of a session. With a majority vote of both houses, the incoming Congress can pass a resolution of disapproval to overturn any major rule promulgated within 60 legislative days of the end of the previous session. Because of how the House of Representatives and Senate calculate their legislative days, the lookback for the incoming Congress in 2021 will extend back to approximately mid-June of 2020. Although the exact date cannot be determined until the current session ends, it is clear that the Final Rule will be within the window of rules that a new Congress can consider for review under the CRA.

The CRA is, however, a very blunt tool for overturning agency rules. If Congress were successful in disapproving of the Final Rule, the resolution would roll back the entire rule and prevent the CFPB from issuing any substantially similar rule. Instead, if there is a change in administration, Congress may instead amend the FDCPA to address only those portions of the Final Rule that it finds objectionable, or there could be efforts undertaken to further restrict certain collection activity.

In addition to the expected December 2020 rule on disclosures, the CFPB may initiate a rulemaking to address other types of debt interventions. In a footnote to the Final Rule, the CFPB noted that it had received feedback asking it to address such interventions, including a debt collectors’ obligation to substantiate debts. The CFPB said it would not be advisable to finalize such interventions without the benefit of public notice and comment. Furthermore, the CFPB has yet to follow up on pre-rule consideration of whether to propose rules for information flows between creditors and FDCPA collectors and about potential rules to govern creditors that collect their own debts.

Related Articles and Presentations

CFPB and FTC Debt Collection Update (2020)

CFPB Issues Proposed Debt Collection Rules (2019)

CFPB Debt Collection Regulatory Update (2019)

New CFPB Management Unveils a Reduced Regulatory Agenda (2018)

What to Expect in a Narrowed CFPB Debt Collection Rulemaking (2017)

Debt Collection Rulemaking: Proposal Highlights and Key Dates (2016)

CFPB Debt Collection (Regulation F) Rulemaking FAQs (2014)

Navigating CFPB Debt Collection Investigations and Enforcement Actions

Navigating Debt Buying in A "Regulatory by Enforcement" Environment During a Rulemaking

Federal Crackdown on Debt Buyer Emphasizes Need for Consumer Disclosures

Minimizing Legal and Compliance Risk for Credit Furnishers

For more information about this and related industry topics, see www.venable.com/cfs/publications.

This article is not intended to provide legal advice or opinion and should not be relied on as such. Legal advice can be provided only in response to a specific fact situation.