CFPB Issues New Debt Collection Rule FAQs
For the first time this year, the CFPB released new Debt Collection Rule FAQs yesterday. The added sections address Reg. F questions related to prohibitions on third-party communications, electronic communications, and unusual or inconvenient time and place provisions.
Since the release of the final debt collection rule, industry has been waiting for CFPB clarification regarding the covered issues. We have given regular feedback to the CFPB, established an Advisory Opinion Program Task Force to review and submit members’ relevant questions and submitted a yet to be answered AOP Request as well. We hope the CFPB will address open Model Validation Notice questions, covering charge off date, judgement date, medical debt, nontraditional card debt issues, among other items soon.
While the FAQs give guidance and context, regulators do not specifically answer each possible scenario related question. The CFPB places the responsibility of compliance squarely on the debt collection industry.
There is a lot to unpack but initial observations under each of the FAQ categories include:
Prohibitions on Third-Party Communications
With the Hunstein Case still looming, many were hoping that the CFPB would weigh in on the use of third-party vendors. The CFPB did not address the issue and instead reiterated the rule and its exceptions. The exceptions to third party communications, are prior consent to the current debt collector, express permission of the court, communication reasonably necessary to effectuate post-judgment judicial remedies, and location information.
Certainly, there will be differing opinions on the interpretation of a court’s “express permission” and what the “reasonably necessary” standard means.
Electronic Communication and Opt-out Notice
Helpful FAQ clarification noted that just because a consumer initiates an e-mail or text message, the debt collector is not required to respond using the same electronic medium method. The FAQ however lists many items that are certain to give debt collectors pause before they consider the use of electronic communications with consumers.
The FAQs extensively cover opt-out modes and requirements. The CFPB makes it very clear that debt collectors are responsible to cease electronic communication no matter how the consumer conveys the opt-out information. The FAQs do not make it a secret that violations of the opt-out rule are a “prohibition on harassing, oppressive, or abusive conduct”. The CFPB is putting industry on notice that not only the opt-out needs to be “clear and conspicuous” but that the sanction for non-compliance will be as well.
Unusual or Inconvenient Times or Places
The seven (7) FAQs under this category are very useful to understand how the CFPB views industry’s responsibility. The standard of “know or should know” is mentioned throughout and indicates that debt collectors are required to understand nuances between communications made to the wrong locations versus made at the wrong time. There is clarification that e-mails are evaluated by when they are sent to the consumer, not when received or read. The FAQs also address automated responses that certain systems generate when a payment is made by the consumer, exceptions to the rule and a lot more.
The FAQs give very helpful information, but some will argue leaves too many situations open for interpretation. Overall, the CFPB Debt Collection Rule Frequently Asked Questions (FAQs) offer examples, guidance and compliance themes that regulatory experts will undoubtedly spend many hours on.