Important changes to debt collection practices: What you need to know

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The Consumer Financial Protection Bureau (CFPB) has issued major updates to the rules that affect creditors and those that collect their debt by amending Regulation F, which implements the Fair Debt Collection Practices Act (FDCPA).  Businesses covered by the new rules should consider preparing for the changes as soon as possible before the amendments go into effect on November 30, 2021.
 

 As a threshold issue, it is noteworthy that the Bureau expanded the definition of a covered “consumer” by now including both living and deceased people within the regulation’s coverage.  A deceased consumer’s estate is now entitled to protections of the FDCPA, a change that may result in important consequences for debt collectors, who will now be required to provide validation information to an estate representative when it seeks collection against a decedent’s estate.

In addition to modernizing the guidelines to address collection-related communications through email, text messaging, and social media, the CFPB has also imposed new rules for consumer-oriented disclosures, the reporting of credit information to consumer reporting agencies (CRAs) and bringing suit on time-barred debt, as discussed below. 
 

Specifically, the regulation expands on existing requirements to provide consumers with debt validation information when first communicating with the consumer about a debt. The regulation now says that a debt collector may provide a validation notice in written or electronic form either in the initial communication with the consumer, or within 5 days thereafter.  The validation notice must be “clear and conspicuous,” and adhere to specific content requirements, including a statement disclosing that the communication is from a debt collector; the name and mailing information of the debt collector, consumer, and actual creditor; the itemized amount of the debt; and consumer-response information that a consumer may use to take certain action, such as disputing the debt. The CFPB has allowed for optional content to be included with the validation notice, provided the additional information is not more prominent than the required content. 
 

The amended regulation includes a model validation notice, which provides a safe harbor for compliance with the new content guidelines. A debt collector may be protected if it uses the model form, specified variations of the form, or a substantially similar form. The safe harbor does not apply to the regulation’s delivery method and timing requirements. 
 

The regulation also now provides debt collectors the option to send the consumer a validation notice translated into any language, so long as the debt collector also provides an English-language notice in the same communication as the translated notice. 

 

Prior to furnishing collection information to a CRA, debt collectors will now be required to:

 

1. Speak with the consumer about the debt in person or by telephone; or,

 

2. Mail the consumer a letter about the debt or send the consumer a message about the debt by email.

 

In addition, debt collectors must also wait a “reasonable period of time” to ensure that letters or emails sent to the consumer are not undeliverable. The regulation provides a safe harbor of 14 days from the date of sending the letter or email to the consumer before furnishing information to the CRA. Thereafter, the debt collector may furnish the debt information to a CRA if it does not receive a notice of undeliverability.   

 

Finally, the amended regulation prohibits debt collectors from bringing or threatening to bring legal action against a consumer to collect a time-barred debt. Once the statute of limitations has expired on a particular debt, no further legal action may be filed, although exceptions apply for the filing of proofs of claim in connection with bankruptcy proceedings.