On July 28, 2016, the Consumer Financial Protection Bureau (the “CFPB”), under the authority granted to it by the Dodd-Frank Act, published its outline of proposals for revisions to the Fair Debt Collections Practices Act (“FDCPA”). The proposals, if enacted, would apply to collection agencies, debt buyers, collection law firms, and loan servicers, though many proposals are designed in such a way that it is clear creditors and debt owners will also be affected by these proposals.
Substantiation of Debt
Of paramount concern to the CFPB is “information integrity.” The CFPB believes poor information transfer from creditors to debt collectors is a large contributor to lack of information integrity, resulting in debt collection efforts being directed to the wrong consumers, being made for the wrong amount, or being made when the debt collector is not otherwise entitled to collect the debt. This concern represents the largest number of complaints filed with the CFPB.
To address this, the CFPB has proposed that prior to making collection efforts, debt collectors “substantiate” the debt in three ways:
1) First, the CFPB proposes a requirement that debt collectors possess a reasonable basis that a particular consumer owes the debt. Recognizing that rigid rules cannot be made in a wide-ranging world of credit transactions, but still wishing to provide clarity to covered persons, the CFPB is considering certain fundamental information that collectors can rely upon to establish a reasonable claim for indebtedness. This includes:
- The full name, last known address, and last known telephone number of the consumer;
- The account number of the consumer with the debt owner at the time the account went into default;
- The date of default, the amount owed at default, and the date and amount of any payment or credit applied after default;
- Each charge for interest or fees imposed after default, and the contractual or statutory source for such interest or fees; and
- The complete chain of title from debt owner at the time of default to the creditor.
2) Secondly, substantiation would include obtaining written representation from the debt owner that it has implemented written policies and procedures to ensure the accuracy of transferred information.
3) Finally, substantiation would require collectors review for “warning signs” that raise questions as to the accuracy of information, such as the consumer information not being in an understandable form or the consumer filing a dispute. The CFPB has not limited this review to only pre-collection efforts and proposes a list of actions to be taken when warning signs are received at specified times over the course of collections. These proposed actions may additionally be required of subsequent collectors, if the dispute was not resolved. Therefore, the CFPB is also proposing requirements which require subsequent collectors to obtain and review certain information from past collection efforts, as well as requiring collectors to provide certain information if the account is transferred back to the debt owner or to a subsequent debt collector.
Required Disclosures
The CFPB currently finds the validation notices lack sufficient information to allow the consumers to recognize past obligations. Therefore, it is proposing the inclusion of additional information such as the amount owed at the time of default and interest fees and credits applied since the date of default. In addition to this enhanced notice, the CFPB is proposing debt collectors provide consumers a Statement of Rights, which sets forth various rights afforded to the consumers under the FDCPA. A collector may be required to send the Statement of Rights a second time to the consumer 180 days after the consumer received the first Statement of Rights, if communications are still ongoing. The CFPB has provided a model notice for both the validation notice and the Statement of Rights.
In a similar vein, the CFPB is also considering a requirement for the debt collector to provide “litigation disclosures,” advising that the collector intends to sue, that a court could rule against the consumer if no action is taken, and that additional information, including contact information for legal service programs, is available on the CFPB website.
Lastly, the CFPB is considering a proposal that would require a collector provide a “time-barred debt disclosure,” if an attempt is made to collect a time-barred debt. There are additional proposals to prohibit suit or threat of suit on time-barred debts.
Communications with Consumers
Communication practices comprise the second largest source of complaints and therefore, a number of proposals are being considered. The CFPB recognizes a resolution is needed for the long-standing FDCPA dilemma posed when collectors are faced with leaving a voicemail message, which may or may not result in an FDCPA violation. Acknowledging that many consumers may benefit from discussing an obligation with a debt collector, it is proposing to allow collectors to leave messages which convey only 1) the individual debt collector name, 2) the consumer’s name, and 3) a toll-free number the consumer can use to reply to the collector. The following would be an acceptable message. “This is John Smith calling for David Jones. David, please contact me at 1-800-555-1212.”
Once a collector has confirmed good contact information for the consumer, the CFPB is considering a “contact cap” which would limit the amount of times a collector may contact the consumer in a given week. This would include both successful and attempted contacts. The CFPB is considering these limits for all combined avenues of communication (letters, calls, emails, etc.). In other words, the collector may only contact or attempt to contact a consumer by any combination of methods a specified number of times in a week.
The CFPB has made attempts to address contacts with consumers at inconvenient times or places. Though the CFPB is considering certain areas as presumptively inconvenient – medical facilities, places of worship, places of burial or grieving and child care centers – it has not gone as far as to say workplace calls are presumptively inconvenient. Conversely, they are considering prohibitions to sending an email to a consumer at their workplace, unless the consumer consents.
This summary is not an exhaustive list of all proposals, and the CFPB intends to conduct further proceedings within the next several months to determine the impact of the regulations.
To see the full outline of proposals, please visit: http://files.consumerfinance.gov/f/documents/20160727_cfpb_Outline_of_proposals.pdf.
By Molly Rose
Molly’s practice focuses on bankruptcy, retail foreclosure and loan enforcement. She understands that being a good attorney is about more than thinking of the firm’s bottom line; it’s about building trust with clients by keeping them informed and working together to determine the best legal and most financially sound course of action.
