Note to Lenders: CFPB Amends the Fair Debt Collection Practices ActJanuary 9, 2023
In 2020, the Consumer Financial Protection Bureau (“CFPB”) issued a final rule (“Rule”) that amends Regulation F, 12 C.F.R. part 1006, the Fair Debt Collection Practices Act (the “FDCPA”). The Rule became effective on November 30, 2021. Because the FDCPA was implemented over four decades ago, the Rule is designed to interpret and further the goals of the FDCPA in present day. The Rule places additional restrictions on debt collection practices and addresses communications regarding debt collection.
Scope of the Rule
The FDCPA and the Rule only apply to “debt collectors.” Debt collectors generally include anyone who is collecting or attempting to collect a debt owed to another. This typically includes law firms and debt collection agencies. Notably, this excludes the party to whom a debt is owed, i.e., the creditor itself. Although not directly covered under the Rule, creditors should be mindful of the Rule’s provisions because the regulations do affect creditors if they hire or sell debt in default to FDCPA-covered entities.
Key Amendments Made by the Rule
- Electronic Communication. The Rule allows debt collectors to use email, text message, and social media to communicate with consumers about debts, but the debt collector must follow certain guidelines explicitly stated in the Rule. Several of the applicable guidelines focus on ensuring no third-party disclosures occur.
- Telephone Call Frequency. A debt collector is prohibited from calling a consumer regarding the consumer’s debt more than seven times within a seven-day period or within seven days after engaging in a telephone conversation with the consumer. If the debt collector exceeds this limitation, a presumptive violation of the Act arises, subject to certain exceptions such as consumer consent.
- Limited Content Messages. A debt collector is allowed to leave a “limited content message” on the voicemail of a consumer regarding a debt. By leaving such message, the communication falls outside the scope of a “communication” for purposes of the FDCPA. The voicemail can only contain the information explicitly laid out in the Rule to qualify as a “limited content message.”
- Consumer Rights. Consumers can restrict debt collector communications. A consumer can restrict the method by which the debt collector contacts the consumer and the time and place at which the debt collector makes such contact. Importantly, if the debt collector uses electronic communication methods, the debt collector must also provide the consumer an opt-out method for those communications.
- Time-Barred Debt. The Rule imposes a prohibition on legal action or threatening legal action against a consumer to collect a debt when the statute of limitation for asserting a claim to collect on such debt has expired. This does not prevent the debt collector from still attempting to collect on such debt through other methods, which may include filing a proof of claim in a bankruptcy proceeding.
- Credit Reporting Limitations. Debt collectors are prohibited from reporting information to a consumer reporting agency about a consumer debt before the debt collector either (i) speaks with the consumer or (ii) sends a validation notice and waits fourteen days to receive a notice of un-deliverability.
The Rule provides guidance and restrictions on several other debt collection practices such as record retention, deceased consumers, and disclosure requirements. Debt collectors, as well as creditors who use FDCPA-covered entities, should speak with an attorney to confirm that their policies and practices are compliant with these new regulations.
If you have any questions about the implications of Rule, please reach out to any of our Bankruptcy, Restructuring & Workouts attorneys.