2. Regulation F will likely change collection communication practices.
Regulation F could cause first-party and third-party debt collectors to change their collection communication practices. Through Regulation F, the CFPB intended to provide guidance and more legal certainty on debt collector’s use of newer communication channels such as voicemail, email and text messaging. Many debt collectors and creditors have shied away from using these communication channels because of legal uncertainty created by court decisions and statutory silence. At the same time, Regulation F limits the number of telephone calls a debt collector may place. Because Regulation F limits a traditional communication channel and provides guardrails for the use of new communication practices, the new rule could encourage debt collectors to explore the use of new communication practices and technologies.
In addition, Regulation F contains new provisions that give consumers choices when it comes to receiving collection communications. For example, if a consumer prefers to communicate with a debt collector through email but not text messages, then Regulation F requires a debt collector to respect that communication preference subject to certain exceptions. The degree to which Regulation F gives consumers control of how a debt collector communicates with them may cause debt collector’s communication practices to evolve.
Changes to collection communication practices by first-party or third-party debt collectors could require adjustments by creditors. For example, creditors may have to change their vendor management tools to monitor a debt collector’s new communication practice and perform enhanced oversight of a debt collector’s activities for a period of time after the collector starts using the new communication practice.
3. Regulation F could require creditors to be more involved in third-party collections.
Regulation F could require a creditor to play a more significant role in third-party collections. Regulation F provides a safe harbor from the FDCPA’s prohibition on unauthorized third party disclosures if a debt collector follows certain reasonable procedures when sending emails and text messages to consumers. The safe harbor procedures require a debt collector to verify an email address or telephone number for text messages using one of the verification methods set forth in Regulation F. For email communications, one verification method involves the creditor sending advance notice to consumers regarding the debt collector’s future email communications. While other email verification methods are available under the safe harbor, a debt collector’s policy choices or the particular collection context may necessitate the creditor sending the specific notice required by Regulation F to enable the debt collector to qualify for the safe harbor when corresponding with a consumer via email.
Regulation F could also require a creditor to transfer more debt information to debt collectors. Part two of the final rule requires debt collectors to disclose more debt validation information to consumers to help consumers identify the debt. In commentary accompanying part two of the rule, the CFPB acknowledged that debt collectors depend on creditors to provide the account information that debt collectors must disclose to consumers. The CFPB reasoned that creditors will be incentivized to provide the account information to debt collectors to enable debt collectors to legally collect debts.
The expanded role that creditors may play in third-party collections could require creditors and debt collectors to amend their collection agreements and to revise practices to increase coordination among the parties.
4. Regulation F may require creditors and debt collectors to make judgment calls.
In lieu of adopting prescriptive practices or express limits, the CFPB chose to incorporate safe harbors and rebuttable presumptions into Regulation F. Like the FDCPA, Regulation F contains broad prohibitions on certain collection conduct. These statutory features provide flexibility to debt collectors (and creditors) but also leave debt collectors and creditor to use discretion and make judgment calls regarding compliance with the FDCPA and Regulation F. Certain situations may arise in collections that justify the risk of a debt collector operating outside of a safe harbor or placing a call that exceeds the call frequency presumption.
5. Regulation F is more complex than it may appear.
The new provisions of Regulation F may seem straightforward, but when the provisions are applied to situations that could arise during collections, the complexities of Regulation F become apparent. Regulation F weaves together existing provisions in the FDCPA and new provisions. The provisions interplay with each other. Just because one practice is permitted by one Regulation F provision does not mean the practice is permitted under other Regulation F provisions. In addition, Regulation F’s Official Interpretations and the CFPB’s commentary accompanying the final rule have material guidance that should be reviewed by creditors and debt collectors. Experienced regulatory attorneys could add significant value by helping debt collectors and creditors navigate Regulation F.
6. Reviewing state law should be a step in the Regulation F implementation process.
Nearly all U.S. states and some cities regulate debt collection through a variety of laws including, but not limited to, debt collection statutes and trade practices statutes. State and local collection laws can vary in scope from the FDCPA and Regulation F in terms of who is subject to the law and what practices the law covers. For over 40 years, state and local laws have developed around a fairly static federal debt collection statute. The new provisions in Regulation F could create new state law compliance questions for creditors and debt collectors to address. For example, how do state law requirements interact with the safe harbors and rebuttable presumptions under Regulation F? To what extent do applicable state laws require a creditor or first-party collector to comply with Regulation F? Creditors and debt collectors should not end their regulatory analysis with Regulation F. Applicable state and local collection laws should also be considered.
Conclusion
Although it does not apply on its terms to many creditors, Regulation F could have a number of implications on a creditor’s vendor relationships, multi-state compliance, collection strategies, role in third-party collections, and other aspects of a creditor’s collection efforts. The degree to which creditors must understand Regulation F and manage compliance changes from Regulation F depends on the creditor’s practices and strategies.