The Final Debt Collection Rule is Here and Focuses on Communication Methods

The Final Debt Collection Rule is Here and Focuses on Communication Methods: Here's What You Need to Know

By: Caren D. Enloe

On October 30, 2020, the CFPB published its long awaited Final Debt Collection Rule (the "Rule"). The Rule interprets the federal Fair Debt Collection Practices Act (the "FDCPA"). It clarifies how new communication technologies can be used in compliance with the FDCPA. In an unexpected twist, the CFPB delayed its final rules on validation notices and time barred debt disclosures. It has said those provisions will be published in December.

What's Not Included in the Rule?

The Rule leaves several items for another day. These include the final versions of Section 1006.26 (Collection of Time Barred Debt), Section 1006.34 (Notice of Validation of Debts), and the Safe Harbor Model Forms.

The proposed rule and supplemental proposed rule included new provisions on time barred debt and validation notices. These are still under consideration by the CFPB and are expected in December. The final provisions are widely expected to add mandatory disclosures beyond those already required by 15 U.S.C. 1692g(a). Those additional disclosures are likely to include:

• Disclosures about time barred debt, or debt that can be revived by payment.
• Additional validation information. This includes a tabular itemization of the amount of the debt from its itemization date, and a response section that lets the consumer dispute the debt by checking a set number of boxes about the basis of the dispute.

When Does the Rule Go Into Effect?

The Rule takes effect one year from its publication in the Federal Register. As of the date this article was written, it had not yet been published. It is therefore unlikely to take effect until December 2021 or early 2022.

Who's Covered?

The proposed rule raised some concern about whether it would cover first party creditors. The final version states it applies only to "debt collectors" as defined in the FDCPA. First party creditors should still be mindful of the CFPB's warning. The Rule is not intended to address whether activities by entities not subject to the FDCPA would violate other statutes. That includes the unfair, deceptive, or abusive act provisions in the Dodd-Frank Act.

What's Included in the Rule?

Most of the Rule addresses communications between the consumer and the debt collector. It expands on the FDCPA and clarifies how debt collectors can use new communication technologies that did not exist when the FDCPA was enacted. These include email, voice mail, and text messages.

The Rule sets out how to communicate with consumers. It also identifies certain policies and procedures that create safe harbors from FDCPA violations. Of note, the Rule contains a detailed Official Commentary. That commentary includes sample language for items such as opt out notices.

The Rule will not take effect until late 2021 or early 2022. Even so, compliance departments should begin aligning their policies, procedures, letters, and scripts with the Rule now, in anticipation of the effective date.

Attempts to Communicate vs. Communications

The Rule distinguishes between attempts to communicate and actual communication. "Attempts to communicate" are any acts to initiate a communication about a debt. They include leaving "limited contact messages."

"Limited Content Messages" are a new concept introduced in the definitional section (1006.1). They give debt collectors a safe way to leave non-substantive messages that ask for a return call. They do this without disclosing the debt to third parties. The Rule and its Comments make clear that Limited Content Messages are not communications about a debt.

To qualify as a Limited Content Message, the message must be left by voice mail. It can only contain the limited content set out in Section 1006.1(j). Note a change from the proposed rule: the proposed rule allowed limited content messages by text message and orally, but the final version does not. The proposed rule also allowed the consumer's identification as a component, but the final version does not.

A Limited Content Message can only include: (a) a business name for the debt collector that does not indicate it is in the debt collection business; (b) a request that the consumer reply to the message; (c) the name or names of one or more natural persons the consumer can contact; (d) a telephone number or numbers the consumer can use to reply; and (e) certain very limited and specified optional content. Communications are different because they convey information about a debt.

Time and Place

New technologies make it harder to avoid communicating at an inconvenient time or place. The Rule addresses this in Section 1006.6 and its Official Comments.

Section 1006.6 provides that an inconvenient time is before 8:00 AM and after 9:00 PM local time at the consumer's location. The Official Comments add guidance for ambiguous location information. In that case, and absent information to the contrary, the debt collector may assume a time that is convenient in all time zones where the consumer may be located.

The Official Comments also let the debt collector ask follow-up questions when it needs more clarity about a convenient time and place. The Rule makes clear that no particular words are required for a consumer to indicate that a time or place is inconvenient.

Use of Electronic Communications and a Safe Harbor

The Rule allows email and text message communications. It sets out procedures that give the debt collector a safe harbor if followed.

Section 1006(d)(4) allows email communications to the consumer in two ways. First, through an email address the consumer used to communicate with the debt collector and has not since opted out of, or that the consumer gave prior express consent to use. Second, through an email address used previously by the creditor or a prior debt collector, subject to certain limitations and conditions. Section 1006(d)(5) allows text messaging under similar conditions.

Section 1006.6 also requires debt collectors to let consumers opt out of electronic communications. It requires a clear and conspicuous statement describing a "reasonable and simple method" for opting out. The CFPB has said it is finalizing provisions that will require debt collectors to give consumers a reasonable and simple method to opt out of electronic communications and to control the time, place, and medium for communications. These provisions will likely be part of the December supplement to the Rule.

Frequency and a Safe Harbor

Section 1692d(5) of the FDCPA prohibits a debt collector from causing a telephone to ring, or engaging a person in telephone conversations, repeatedly or continuously with intent to annoy, abuse, or harass. The final rule is more restrictive than the proposed rule.

Section 1006.14 sets a bright line with numeric limits on placing telephone calls. The final version creates presumptions of both compliance and violation. Subject to certain very limited exceptions, a debt collector is presumed to have violated the provision if it: (a) places telephone calls to a particular person about a particular debt more than seven times within seven consecutive days; or (b) makes a call within seven days of a telephone conversation with that person about that debt. The reverse is also true. The debt collector is presumed to have complied if it stays within the call frequency limits.

The exceptions in the final version are more limited than those originally proposed. In particular, the Rule clarifies that any prior consent from a consumer for follow up communications expires within seven days.

Unfair or Unconscionable Means

Section 1006.22 interprets and implements Section 1692f of the FDCPA, which contains a non-exhaustive list of unfair or unconscionable means to collect a debt. Section 1006.22 adds new prohibitions on communications using certain media. Section 1006.22(f)(3) prohibits communicating, or attempting to communicate, with a consumer using an email address the debt collector knows was provided by the consumer's employer. The exception is when the consumer provided the email address to the debt collector or a prior debt collector and has not since opted out.

What's Next?

As with any rulemaking, it is not over until the fat lady sings. Depending on the outcome of the 2020 election, Congress may consider proposals to walk back parts of the Rule. It could potentially overturn the Rule using the Congressional Review Act if the Democrats take control of both the House and the Senate. It remains to be seen how the continued effects of the pandemic will affect any legislative effort against the Rule.

There is also more to come from the CFPB. In December, the CFPB plans to release the remainder of the Rule, this time focusing on disclosures. The CFPB is also looking at additional steps, including a debt collector's obligations to substantiate debts. In any event, compliance departments should begin carefully reviewing the Rule and its Official Comments. They should align their policies, procedures, media content, and scripts to conform with the Rule and take advantage of its safe harbors.