The CFPB’s Long Awaited Debt Collection Rule is Certain to Shake Up the Industry
On May 7, 2019, the Consumer Financial Protection Bureau (CFPB) issued a Notice of Proposed Rulemaking (the Proposed Rulemaking) to implement portions of the Fair Debt Collection Practices Act (FDCPA). The CFPB’s proposals will certainly modernize debt collection practices, but they are likely to bring added challenges for businesses and consumers. Among other things, the CFPB’s Proposed Rulemaking would limit the number of calls debt collectors may place per week, define how debt collectors can use voicemail, email, and text messages, and potentially limit liability for debt collectors who attempt to collect so-called “stale” debts. While the proposed rules are not yet binding law, industry players who may be subject to regulation under the FDCPA should be aware of the big changes in debt collection law.
The FDCPA applies to debt collectors, who are defined broadly 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.” Congress passed the FDCPA in 1977, but it was not until passage of the Dodd Frank Act in 2010 that Congress delegated rulemaking authority to a federal agency, the CFPB. It has taken almost another nine years for the CFPB to propose rules implementing the FDCPA.
According to the CFPB, the highly anticipated Proposed Rulemaking accomplishes four big goals:
- It provides a numeric limit on the number of times a debt collector may attempt to contact a consumer by telephone about a specific debt. Under the proposal, debt collectors could try to contact consumers no more than seven times per week, and once contact is made, a debt collector would have to wait at least one week before calling the consumer again.
- It requires debt collectors to send consumers a disclosure about the debt being collected and related consumer protections. The disclosure would include an itemization of the debt and plain-language information about how a consumer may respond to a collection attempt. The disclosure would include a “tear-off” that consumers could send back to the debt collector to respond to, or dispute, the debt.
- It regulates how debt collectors may use voicemails, emails and text messages to communicate with consumers. Notably, the Proposed Rulemaking would permit consumers to “unsubscribe” from future communications through these methods. Under the Proposed Rulemaking, consumers could limit the ways debt collectors contact them, e.g., while at work.
- Prohibits debt collectors from filing lawsuits and threatening to file lawsuits on time-barred debts if the debt collector knows or should know that the statute of limitations has expired. The proposal also prohibits debt collectors from reporting information about a debt to a consumer reporting agency unless the debt collector communicated about the debt with the consumer.
Industry groups have cheered some parts of the Proposed Rulemaking as advancing the FDCPA, a 1970s-era statute, into the digital age of the 21stcentury. Indeed, allowing electronic communications like text messages, social media, and instant messaging may benefit consumers by reducing the number of calls that debt collectors make and providing more clear guidance. Consumer groups, on the other hand, have raised concerns about this portion of the Proposed Rulemaking. In particular, consumer groups have raised privacy concerns related to use of social media sites like Facebook and LinkedIn to help collect debts. The industry has also been critical of the limit on the number of calls and the disclosure requirements. Further, some consumer advocates have decried what they see as loopholes in the Proposed Rulemaking that would allow debt collectors to potentially escape liability for suing a consumer on a stale debt.
Given the tumult in present-day Washington, D.C., nothing about the Proposed Rulemaking is settled. And, given the loud voices from industry and consumer groups, it is likely that courts will decide whether more controversial proposals in the Proposed Rulemaking make it into law. Until then, however, businesses that collect consumer debts should consider whether to submit comments on the Proposed Rulemaking and closely monitor the administrative status to ensure they are ready to adapt to the changes.