The Consumer Financial Protection Bureau (CFPB) announced two final debt collection rules which are scheduled to take effect on November 30, 2021. These two rules clarify and add further detail to provisions of the Fair Debt Collection Practices Act (FDCPA), the law that offers protections to consumers from abusive or unfair collection practices from third-party debt collectors.
These rules were originally going to be made effective in the spring, but the CFPB delayed the effective date by 60 days to allow all affected parties time to comply due to the COVID-19 pandemic. However, after making the announcement regarding a 60-day delay, the CFPB determined that the extension was not needed and published the official notice in the Federal Register officially withdrawing the extension.
The first of these rules was issued in October 2020, and it addresses communications on behalf of debt collectors, specifically prohibiting harassment, abuse, or the making of false or misleading representations.
The second rule, which was issued in December 2020 requires certain information that all debt collectors must first provide to consumers at the start of all collection communications. This specific information is referred to as a validation notice, which includes a statement that says the communication is from a debt collector, along with other information, including the current amount of the debt.
The validation notice provided by the debt collector must include: 1) the debt collector’s name and mailing address, 2) the name of the original creditor, 3) the itemization date and the amount owed on that date, 4) itemization of what is currently owed, including interest, fees, payments and credits since the itemization date, 5) information about whether the debt is a credit card debt and the merchant associated with the debt, if there is one, 5) information about applicable consumer protections available, and 6) information regarding how the consumer can dispute the debt.
If a debt collector provides the validation notice in writing using the CFPB’s model form, this is considered compliance under the validation notice requirements. Debt collectors are also able to send electronic disclosures to the consumer who can provide consent or acknowledgement via that medium.
The proposed rule does make a few other modifications to the current provisions of the FDCPA, including defining “debt collector” and “consumer.” The proposed rule only covers third-party debt collectors and not the original creditors or servicers of the debt. Additionally, the rule specifically excludes in-house collectors paid by the original creditor. The rule also specifically defines “consumer” to include a deceased natural person who owes the debt, including a confirmed successor in interest of the debt, meaning the personal representative of the deceased consumer’s estate.
This second rule not only requires certain information be provided to consumers, but it also prohibits debt collectors from bringing or threatening to bring a lawsuit against a consumer to collect debts that are past their statute of limitations.
The new rule also requires debt collectors to either speak to a consumer in person, send a letter or email, or speak with them over the phone before providing information to the credit reporting bureaus.
The final rule prohibits a debt collector from calling a consumer about a debt more than seven times within seven consecutive days. The rule also clarifies that collection calls to mobile devices or electronic communications, including texts and emails, are included in the FDCPA’s prohibition on communicating at certain times or places that the debt collector knows or should know are inconvenient to the consumer.
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