Key Provisions of the Debt Collection Rule
Scope and Coverage
Section 1006.1 is the enabling provision of the Rule and sets forth its purpose, scope, and coverage. The Rule’s stated purposes include carrying out the purposes of the FDCPA, ensuring that debt collectors fully and accurately disclose certain features of debt collection so that consumers “understand the costs, benefits, and risks associated with debt collection,” and requiring record retention by debt collectors to facilitate “supervision of debt collectors and the assessment and detection of risks to consumers.”
While the proposed rule raised concerns as to whether it was intended to cover first-party creditors, the final version expressly states it applies only to “debt collectors” as that term is defined in the FDCPA. First-party creditors, however, should note that, while the CFPB declined to expand the Rule’s coverage, it left open the possibility that activities performed by entities not subject to the FDCPA may violate other statutes, including the unfair, deceptive or abusive act provisions (“UDAAP”) found in the Consumer Financial Protection Act. It is therefore likely that the standards set by the Rule will be used to support future enforcement activities by the CFPB under its UDAAP authority as to first-party creditors engaged in consumer debt collection.
Definitions
Section 1006.2 includes several new definitions that expand upon those found in section 1692a of the FDCPA. Of note, the Rule expands the definition of “consumer” to include deceased natural persons.
The definitional sections of the Rule also focus on what is and is not a “communication,” introducing a new concept, a “limited-content message.” Section 1006.2(d) of the Rule defines “communications” that are subject to the provisions of the FDCPA, repeating the statute’s definition, and emphasizing that the communication can be made through any medium. Section 1006.2( j) of the Rule sets forth the requirements for limited-content messages. To fit the definition of a limited-content message, the communication must include a business name for the debt collector that does not indicate the debt collector is in the debt collection business, a request that the consumer reply to the message, the name or names of one or more natural persons whom the consumer can contact, and a telephone number that the consumer can use to reply to the debt collector. The definition also permits the debt collector to include certain optional information, such as recommended callback times and days. A debt collector who leaves a limited-content message within the meaning of section 1006.2( j) is not engaging in a communication about the debt within the meaning of section 1006.2(d). However, a message left for a third party, such as a friend of the consumer, is not a limited-content message because it is not a message for the consumer, even if the content of the message complies with section 1006.2( j). The benefit of the creation of the limited-content messages is to facilitate communication between consumers and debt collectors, which should reduce call frequency, reduce the number of lawsuits filed against consumers, and give consumers greater control over when they listen to and respond to messages from debt collectors.
Section 1006.2(b) of the Rule defines “attempt to communicate” broadly as including “any act to initiate a communication or other contact about a debt with any person through any medium, including by soliciting a response from such person” and includes leaving a limited-content message. This definition clarifies that a debt collector’s attempts to communicate with a consumer are covered by the FDCPA even if the consumer is never reached.
Communications in Connection with Debt Collection
Section 1006.6 of the Rule implements and interprets section 1692c of the FDCPA, which deals with communications with consumers and third parties in connection with a debt. Section 1006.6(a) restates that statute’s definition of “consumer,” but then expands it to include a “confirmed successor in interest,” as defined in Regulation X and Regulation Z. Section 1006.6(b) includes only minor revisions to the prohibitions of section 1962c(a) from communicating with the consumer at an unusual or inconvenient time or place, when he or she is represented by an attorney, or at his or her place of employment. In each of these instances, section 1006.6(b) addresses both communications and attempts to communicate, indicating that even limited-content messages are subject to these prohibitions. In determining a time that is not inconvenient to the consumer, the onus is on the debt collector to choose the most conservative option when a consumer’s information includes multiple locations, such as a mailing address in one time zone with a telephone number in another. Lastly, section 1006.6(b) includes an exception for communications with the consumer’s prior consent or pursuant to court order.
Section 1006.6(c) of the Rule only slightly revises the language of section 1692c(c) of the statute regarding the prohibition of further communications with a consumer when he or she informs the collector in writing of a refusal to pay or a desire for the debt collector to cease further communications. However, the Rule adds an electronic notification mechanism for consumers, such as that provided in section 101(a) of the E-SIGN Act.
Section 1006.6(d) of the Rule only slightly revises section 1692c(b) of the statute regarding communications with third parties, but it creates a meaningful exception for obtaining location information and it provides a safe harbor for email and text communications. A bona fide error defense may be available to a debt collector who maintains procedures to reasonably confirm and document that the debt collector communicated with the consumer through one of three methods of communication. First, the defense is available for the use of an email address or by texting to a telephone number recently used by a consumer to contact the debt collector for purposes other than opting out of electronic communications. Second, a debt collector may communicate through a non-work email provided to the original creditor or a prior debt collector if the original creditor or prior debt collector disclosed (1) the transfer of the debt to the debt collector, (2) that the new debt collector may use this email, (3) that, if other persons have access to the email, then they may see these communications, and (4) instructions for a reasonable and simple opt out with a thirty-five-days opt-out period, and the consumer did not timely opt out. A non-work email address is one that has a domain name that is available for use by the general public, unless the debt collector knows the address is provided by the consumer’s employer. Third, a debt collector may communicate by texting to a non-work telephone number if the consumer provides consent to the debt collector to receive such texts or the consumer used the telephone number to text with the debt collector about the debt within the past sixty days (or the debt collector has confirmed that the telephone number has not been reassigned) and the consumer has not opted out of receiving texts.
Acquisition of Location Information
Section 1006.10 of the Rule implements and interprets, but does not materially change, section 1692b of the FDCPA. Section 1006.10 includes a definition of “location information” to mean a consumer’s place of abode and the telephone number at such place or place of employment. This section also permits a debt collector to obtain location information for a person who is authorized to act on behalf of a deceased consumer’s estate.
Harassing, Oppressive, and Abusive Conduct
Section 1006.14 of the Rule implements and interprets section 1692d of the FDCPA. While section 1006.14 generally restates the language of the statute with some minor rewording, it adds two new provisions in subsections 14(b) and 14(h).
Section 1006.14(b) of the Rule implements and interprets section 1692d(5) of the FDCPA, which prohibits a debt collector from causing a telephone to ring or from engaging any person in telephone conversations repeatedly or continuously with the intent to annoy, abuse, or harass any person at the called number. Section 1006.14(b) establishes a bright-line test by placing numeric and frequency limitations on the placing of telephone calls to a person, thus creating presumptions of compliance and violation. Generally, and subject to certain very limited exceptions, a debt collector is presumed to have violated the provision if: (a) it places telephone calls to a particular person in connection with a particular debt more than seven times within seven consecutive days; or (b) after having had a telephone conversation with a particular person regarding a particular debt, makes a call within seven days of that conversation. The converse is also true. The debt collector is presumed to have complied if it stays within the call frequency limitations. For purposes of section 1006.14(b), “particular debt” means each of a consumer’s debts in collection, except that student loans serviced under a single account number are aggregated together to be a “particular debt.” It should be noted that the call frequency exceptions presented in the final version of the Rule are more limited than those that were originally proposed. In particular, the Rule clarifies that any prior consent provided by a consumer for follow up communications expires within seven days of being provided.
Section 1006.14(h) of the Rule addresses prohibited communication media. It prohibits a debt collector from communicating or attempting to communicate with any person through any medium of communication if the consumer has requested that the debt collector not use that medium. Notably, this subsection of the Rule is more expansive than the proposed Rule. As proposed, the prohibition was limited to communications with consumers. In its final form, the prohibition includes communications to persons. Notwithstanding the prohibitions in section 1006.14(h)(1) and specifically addressing electronic communications, if a person opts out of electronic communications, the debt collector may send an electronic confirmation of the opt out as long as the reply contains no information other than a statement confirming the person’s request. Section 1006.14(h) also allows the debt collector to respond once using the same medium if a person initiates communication from an address or telephone number that a person previously requested that the debt collector not use.
False, Deceptive, or Misleading Representations or Means
Section 1006.18 of the Rule implements and interprets section 1692e of the FDCPA, which contains a non-exhaustive list of sixteen examples of false communications prohibited by the FDCPA. Section 1006.18 does not materially change the substance of this list, but reorganizes it into categories of false, deceptive, or misleading representations; false, deceptive, or misleading collection means; false representations or deceptive means, seemingly a catch-all provision; and required disclosures. Notably, limited-content messages are not subject to the required-disclosures provision of this section. However, the first communication with a consumer, regardless of whether it is written or oral and whether it is initiated by the debt collector or by the consumer, must include the statutory “mini-Miranda” disclosure. This section also allows a debt collector’s employee to use an assumed name so long as it is used consistently and the employer can readily identify the employee by the assumed name.
Unfair or Unconscionable Means
Section 1006.22 of the Rule implements and interprets section 1692f of the FDCPA, which contains a non-exhaustive list of eight examples of unfair or unconscionable means for collecting a debt, without materially changing its substance. However, section 1006.22(f ) adds new prohibitions on communications using certain media. Section 1006.22(f )(3) prohibits communicating or attempting to communicate with a consumer using an email address that the debt collector knows or should know is provided by the consumer’s employer, unless the debt collector received the consumer’s prior consent to use the email or if the collector received an email from that address. However, note that the consumer could, at any time, opt out of receiving emails at that address using debt collector–provided instructions pursuant to section 1006.6(e), or could otherwise request not to receive emails at that address pursuant to section 1006.14(h). Section 1006.22 also prohibits communications, even limited-content messages, with a consumer through social media platforms if the message is viewable by third parties.
Section 1006.22(g) also creates a safe harbor to permit a debt collector to reveal its name and that the communication relates to collection of a debt. If a debt collector communicates with a consumer using an email address or telephone number and follows the procedures described in section 1006.6(d)(3), then it will not violate section 1006.22(a) by revealing in the email or text message the debt collector’s name or other information indicating that the communication relates to the collection of a debt.
Collection of Time-Barred Debt
Section 1006.26(b) of the Rule is a new provision that prohibits suits or threats of suit on time-barred debt. Because the limitations period to collect a debt varies from state to state, section 1006.26(a) defines “statute of limitations” as “the period prescribed by applicable law for bringing a legal action against the consumer to collect a debt” and “time-barred debt” as “a debt for which the applicable statute of limitations has expired.” The prohibition in section 1006.26 aligns with the holdings of several federal appellate courts. The rationale for this portion of the Rule is that a debt collector who sues or threatens to sue a consumer on a time-barred debt may explicitly or implicitly misrepresent to the consumer that the debt is legally enforceable, and that misrepresentation likely is material to consumers because it may affect their conduct with regard to the collection of that debt, including, for example, whether to pay it.
Other Prohibited Practices
Section 1006.30 of the Rule contains several prohibitions. A debt collector may not furnish information to a credit reporting agency before communicating with the consumer about the debt. Section 1006.30(b) prohibits the sale, transfer, or placement of debts if the debt collector knows or should know that the debt has been paid or settled or that the debt has been discharged in bankruptcy. The provision carves out exceptions for transferring debts to their owner or the original creditor, securitizing or pledging them as collateral, or debt transfers made in the course of a merger or acquisition. Lastly, section 1006.30(d) slightly revises the venue provision in section 1692i of the FDCPA, without further defining “judicial district or similar legal entity.”
Debt Validation Notices
Section 1006.34 of the Rule implements and interprets section 1692g(a) of the FDCPA, provides new delivery requirements and new definitions, and expands the information required in the debt collector’s validation notice. Within five days of its initial communication, the FDCPA requires the debt collector to provide the consumer with certain information regarding the debt and certain disclosures regarding the consumer’s rights to dispute the debt and request validation of the debt. The Rule expands these requirements and allows for these communications to be provided electronically consistent with section 101(c) of the E-SIGN Act, as well as orally.
Section 1006.34 additionally recognizes the term “consumer” to include deceased consumers for purposes of providing the validation notice. Comment 1006.34(a)(1)-1 makes clear that, if the debt collector knows or should know that the consumer is deceased, and if the debt collector has not previously provided the validation notice to the deceased consumer, the debt collector must provide the debt validation notice to a person authorized to act on behalf of the deceased consumer’s estate.
Validation Information
In addition to the information required to be disclosed pursuant to the FDCPA, section 1006.34(c) of the Rule requires the debt collector to provide additional information about the debt, and it allows for and identifies certain optional disclosures that debt collectors may provide. Section 1006.34(c)(2) requires the debt collector to provide information about the debt, including the debt collector’s name and the address at which it accepts disputes and requests for the original creditor information, as well as the consumer’s name and mailing address. If the debt is related to a consumer financial product or service, then the debt collector must disclose the name of the creditor to whom the debt was owed on the itemization date. The comments allow the debt collector to use its vendor’s mailing address, if that is an address at which the debt collector accepts disputes and requests for original-creditor information. Comment 1006.34(c)(2)(ii)-1 sets forth the CFPB’s expectation that the debt collector will use “the most complete and accurate version” of the consumer’s name known to the debt collector.
Section 1006.34(c)(2) also requires the debt collector to include in the validation notice the account number or a truncated version of the same, the name of the current creditor, and a tabular itemization of the debt from the “itemization date.” Residential mortgage debt subject to the mortgage servicing rules and their periodic statement requirements may be excepted from certain itemization requirements if the debt collector furnishes a copy of the most recent periodic statement provided to the consumer with the validation notice. The Rule allows for, but does not require, debt collectors to provide their telephone contact information; a reference code the debt collector uses to identify the debt or the consumer; and the merchant brand, affinity brand, or facility name for the debt.
Of particular note, the Rule introduces a new concept that is not present in the FDCPA—the itemization date. Debt collectors can choose one of five specified reference dates from which to itemize the debt: (1) the last statement date, which is the date of the last periodic statement or written account statement or invoice provided to the consumer by the creditor; (2) the charge-off date, which is the date the creditor charged off the account; (3) the last payment date, which is the date the last payment was applied to the debt; (4) the transaction date, which is the date of the transaction that gave rise to the debt; or (5) the judgment date, which is the date of a final court judgment that determines the amount of the debt owed by the consumer.
The Rule’s Official Interpretations provide key clarifications and points of emphasis. First, for debt collectors choosing to use the last payment date, they clarify that the last payment date includes a third-party payment applied to the debt and contemplates the inclusion of sales proceeds and insurance reimbursements. Second, for debt collectors choosing to use the last statement date, it is the date of the last statement provided by the creditor or a third party acting on the creditor’s behalf, including a servicer. However, a statement sent by a debt collector is not considered a last statement for purposes of the itemization date. Finally, for those debt collectors relying upon a transaction date, if a debt has more than one transaction date, debt collectors may use any of the transaction dates so long as they use it consistently. While the Rule requires the debt collector to choose an itemization date and disclose it, the Rule does not require the debt collector to disclose the itemization date category upon which it relies.
Section 1006.34(c)(3) requires that the debt collector provide additional information about consumer protections. In addition to advising the consumer of his or her rights pursuant to section 1692g(a) of the FDCPA, the debt collector must provide the end date for the validation period. While sections 1692g(a)(3)–(5) of the FDCPA provide that the consumer has thirty days to dispute the debt or request validation, section 1006.34(b)(5) of the Rule explains that the debt collector may assume that a consumer receives the validation information on any date that is at least five business days (excluding federal legal holidays) after the debt collector provides the notice. The calculation of the end of the validation period should therefore add a minimum of five business days (excluding federal legal holidays) to the thirty-day validation period. If the debt collector is collecting a consumer financial product or service debt, it is required to provide a disclosure directing the consumer to the CFPB’s website for additional information. Finally, if the debt collector sends the validation notice electronically, it must include a statement explaining how the consumer can dispute the debt or request original-creditor information electronically.
Section 1006.34(c)(4) requires that the debt collector provide a consumer-response section that includes dispute prompts under the headings “How do you want to respond?” and “Check all that apply,” and must include certain prescribed dispute statements that are listed in a prescribed order. The Rule specifically requires the following prompt: “I want you to send me the name and address of the original creditor.”
The Rule includes a model form and a safe harbor for those that use the model form. Deviations are allowed, provided that the content, format, and placement of information are substantially similar to the model form.
The validation notice may also include certain optional disclosures, including the debt collector’s telephone contact information, availability, and reference code. Certain prescribed payment disclosures are allowable so long as they do not overshadow the validation notice. The Rule does not require but does allow for validation notices to be sent electronically consistent with section 1006.42 of the Rule and allows for, but does not require, Spanish-language disclosures.
Section 1006.34(d)(3)(iv) of the Rule allows for the inclusion of certain disclosures that are specifically required by applicable law or provide a safe harbor under applicable law. Careful attention should be paid to their placement. Unless the disclosure concerns time-barred debt, it must be placed on the back of the validation notice with a statement on the front referring to the disclosure. Additionally, reverse side disclosures cannot be directly reverse of the consumer-response information on the front of the page.
Disputes and Requests for Original Creditor Information
Section 1006.38 of the Rule implements, interprets, and largely mirrors sections 1692g(b) and 1692g(c) of the FDCPA with regard to duplicative disputes. A “duplicative dispute” is defined as a dispute that was submitted within the validation period, and that is “substantially the same as a dispute previously submitted by the consumer in writing within the validation period for which the debt collector already has satisfied” the debt validation requirements, but that “does not include new and material information to support the dispute.” In the case of a duplicative dispute, the debt collector must either: (1) notify the consumer in writing or electronically in a manner permitted by section 1006.42 of the Rule that the dispute is duplicative, provide a brief statement as to the basis for the determination, and refer the consumer to the prior response; or (2) provide a second copy of the verification of the debt or of the judgment.
Providing Required Disclosures
Section 1006.42 of the Rule implements and interprets portions of section 1692g of the FDCPA with regard to the ways in which a debt collector can make disclosures. The objective is to provide disclosures in a manner reasonably expected to give the consumer actual notice in a form that the consumer may keep and access at a later time. If a debt collector provides the notices electronically, then it must comply with the procedures of the E-SIGN Act.
Other Provisions
The Rule contains document retention requirements. Section 1006.100 requires debt collectors to retain records evidencing their compliance or noncompliance with the FDCPA and the Rule starting on the date that the debt collector begins collection activity and ending three years after the debt collector’s last collection activity. The Rule contains a special provision for telephone recordings that makes it clear that, if a debt collector records telephone calls made in connection with the collection of debt, recordings must be kept for three years from the date of the call. The Official Interpretations address examples of what records should be retained and suggest that records can be retained by any method that reproduces the records accurately and allows for ready access.
Section 1006.104 of the Rule implements section 1692n of the FDCPA in relation to state laws and, while adding its application to the Rule, closely mirrors the statutory language, which provides that the FDCPA does not annul, alter, affect, or exempt any person from complying with state law except to the extent those laws are inconsistent with the FDCPA.
Section 1006.108 of the Rule provides the procedure for states to apply for an exemption for state regulation of debt collection.
