After reviewing 37,000 comments in the past seven years, the Consumer Financial Protection Bureau is nearing the finish line on refinements to the Fair Debt Collection Practices Act (FDCPA).
On Oct. 30, the CFPB issued a 653-page final rule that amended Regulation F, which implements the FDCPA to give consumers control over debt-collection communications, including text and email messages. Several elements of the rule are slated to be hammered out in December — specifically, validation notices, disclosures for time-barred debts, and credit reporting by debt collectors. The rule will go into effect one year after its publication in the Federal Register.
On the surface, the rule applies only to third-party debt collectors, like independent collection agencies. But many of the rule’s standards will likely establish compliance benchmarks for first-party creditors —lenders. Deviation from those benchmarks could constitute violations of the Dodd-Frank Act’s mandate that lenders refrain from engaging in unfair, deceptive or abusive acts or practices (UDAAP). Further, lenders are required under Dodd-Frank to supervise their service providers to ensure compliance with federal consumer financial laws like the FDCPA.
The CFPB’s debt-collection rule spells out the frequency with which collectors can call consumers about delinquent accounts, and clarifies email and text message communication procedures. The rule aims to prevent harassment or abuse, false or misleading representations, and unfair practices in debt collection.
Regarding call frequency, collectors must limit collection attempts via telephone to seven times in seven consecutive days. So, collection firms must keep a tally of calls for every rolling seven-day period. Also, agencies may not call within seven days of having had a conversation with the consumer in connection with collection of the debt. If, for example, a customer sends the collection agency a text message, and the agency resolves the issue or the text turns into a chat on the company’s website, the agency must have a mechanism in place to prevent calls to that person for the next seven days.
While the frequency standard applies to telephone calls, it does not apply to digital messages.
For text and email, each message must include an opt-out that is easy for consumers to see and exercise. Verbal opt-outs count, too. If a consumer tells a debt collector to stop emailing, for instance, the agent must abide by that request — and recognize that the customer’s preference can change frequently. As such, collection firms must have technology in place to continuously update communication preferences.
As such, agents should be trained to clarify consumer opt-outs. If the customer says, “Don’t email me,” the agent should attempt to determine whether that request is being made for that day, the week, or indefinitely. Similarly, if the customer says, “Don’t call me on Tuesdays at 3 p.m.,” but then the customer calls next Tuesday at 3 p.m., the collector can’t take that to mean that the timing is OK for future calls. Rather, the agent will need to reconfirm with the customer, perhaps asking when would be a good time to be contacted.
Meanwhile, opt-out requests can lead to lags in collection attempts. In the case of a debt that is being transferred to a collection agency, the creditor must send an opt-out notice that informs the consumer that the collector might communicate using the consumer’s email address. The collector must hold off on email collection efforts for 35 days to give the consumer a chance to respond.
For texts, the phone number has to come directly from the consumer, not from the creditor or a previous collection agency. The consumer either has to use the number to contact the agency about the debt and not opt out within 60 days, or the consumer has to have consented for the agency to use the number. As such, collection agents should constantly seek to refresh consent, otherwise, collectors will have to grapple with determining how close they are to the end of the 60-day window for consent.
With all these protections in place, consumers still have the upper hand when it comes to claims of harassment. Even if a collector makes only six call attempts in a seven-day period, a consumer may challenge whether that frequency is reasonable. Consumers may also allege harassment for what they deem to be an excessive number of emails or text messages.
As the ink dries on this new FDCPA rule, lenders would be wise to start defining best practices for debt collection. They should consider enhancing their compliance-management systems by developing written policies and procedures — particularly around email and text communication — that incorporate the new requirements into existing monitoring programs. They should update collector-training procedures to ensure that agents are securing appropriate consents and staying abreast of communication preferences. Lenders should also revisit their vendor-management protocols and due-diligence procedures to ensure that service providers are prepared when the implementation period begins.