Adjusting Procedures for Deceased Consumers

Adjusting Procedures for Deceased Consumers

By: Caren D. Enloe

Section 1692a(3) defines a consumer as any natural person obligated or allegedly obligated to pay a consumer debt. The final debt collection rule reads the definition of a consumer to include deceased natural consumers as well. With a November 30th effective date ahead, here are some key items that may call for changes to your policies and procedures.

Initial Skip Traces

Because the Rule now addresses communications about deceased consumers, review your skip trace policies. Make sure they give the debt collector enough information about the deceased consumer's estate. Collection agencies should examine their skip trace policies and procedures to confirm they adequately identify estates and the representatives of those estates wherever possible. According to the CFPB, acceptable ways to identify estates include a search of public records and the use of location information communications.

Location Information

The Rule lets debt collectors seek location information about persons authorized to act on behalf of the deceased consumer's estate. Neither the FDCPA nor the Rule allows the debt collector to disclose the debt. Even so, the Rule's Official Commentary gives directed guidance on what content is acceptable in location information communications.

For deceased consumers, the Comments indicate a debt collector may state: "that the debt collector is seeking to identify and locate the person who is authorized to act on behalf of the deceased consumer's estate" or "that the debt collector is seeking to identify and locate the person handling the financial affairs of the deceased consumer." See Comment 10(b)(2)-1. Collection agencies should consider adding this language to their skip tracing and location inquiries.

It is not a per se safe harbor, but following the language of the comments provides some persuasive authority for compliance.

Debt Validation Notice

For debt validation, the Rule makes clear that if the debt collector knows or should know that the consumer is deceased, and has not previously provided the validation notice to the deceased consumer, the collector must provide the notice to a person authorized to act on behalf of the deceased consumer's estate. Under the CFPB's interpretation, this includes executors, administrators, and personal representatives.

The "should know" standard should give debt collectors pause. They should consider what tools they have that would or should let them know a consumer is deceased. Debt collectors should set policies and procedures that address when and to whom a debt validation notice should be sent when the consumer is deceased. They should also set processes for identifying estates and the appropriate representative of the estate.

Debt collectors should be mindful of the specificity required when sending validation notices to the representative of a deceased consumer. Comment 34(a)(1)-1 requires the debt collector to identify by name the person authorized to act on behalf of the deceased person. It is not enough to address the debt validation to the "Estate of John Smith." Instead, the debt collector must identify the specific person authorized to act on behalf of the estate and, where the notice has not previously been provided, send it addressed to the appropriate representative.

Permissive Parties for Communication

For all other communications, and consistent with this broad reading of who is a consumer, the Rule also includes as permissive third parties the deceased consumer's spouse, parent (if the consumer is a minor), legal guardian, executor or administrator, and confirmed successor in interest (as defined in Regulation X). The Comments further clarify that the terms "executor" and "administrator" include less formal personal representatives.

See Comment 6(a)(4)-1. "Persons with such authority may include personal representatives under the informal probate and summary administration procedures..., persons who sign declarations or affidavits to effectuate the transfer of estate assets, and persons who dispose of the deceased consumer's financial assets or other assets of monetary value extrajudicially." Collection agencies should note this clarification.

They should begin reviewing their policies, procedures, and scripts to see whether these are thorough enough to identify such parties.

Summary of Actions for Preparedness

Because the Rule takes a broader view of who is a consumer, collection agencies should begin reviewing their policies, procedures, scripts, and letter contents. The goal is to communicate properly with the appropriate representatives of estates. Skip tracing and location contacts should be updated to identify deceased consumers and those authorized to act on behalf of the estate.

Debt validation notices should be updated to reach the appropriate named representative of the estate. Finally, policies and procedures should be updated to identify the appropriate third parties for further communications about the debt when the consumer is deceased.