CFPB debt collection proposal

Highlights from the CFPB’s long-anticipated proposed rules on debt collection.

Key points

  • The CFPB proposed rules that would address the frequency and methods by which debt collectors may communicate with consumers, including by telephone, cell phone, text messaging, and email. 
  • Debt collectors would be subject to limits on the number of times they may attempt to communicate with a consumer by telephone.
  • Communications via text and email would be permitted; the frequency of such communications would not be strictly limited by the rule but would be required to provide consumers with opt-out language and subject to prohibitions on harassment, oppression, or abuse.
  • The proposed rules would apply to debt collectors as defined under the FDCPA; they would not cover first-party debt collectors or creditors.

The Bureau of Consumer Financial Protection (CFPB or Bureau) has issued proposed rules that would amend its Regulation F, which implements the Fair Debt Collection Practices Act (FDCPA), to impose requirements on debt collectors, as defined in the FDCPA. The CFPB was delegated authority to prescribe rules under the FDCPA by the Dodd-Frank Act.

The current proposed rules focus on debt collection communications and disclosures, including clarifying how, and how often, debt collectors may communicate with consumers, and providing consumers with information about how to respond to a collection attempt, including designating the communication method. The proposed rules would also address the conduct of debt collectors by applying prohibitions on harassment, abuse, false or misleading representations, and unfair practices in debt collection.

The CFPB broadly summarizes the proposed provisions into three general categories: communications proposals, consumer disclosure proposals, and additional proposals.

Communication proposals would:

  • Define a new term—limited-content message—to identify information a debt collector must and may include in a message left for consumers in order for the message to not be deemed a communication under the FDCPA. A limited-content message could be conveyed as a voicemail, text, or orally; email messages may require more information than is permitted under the definition.
  • Clarify the times and places at which a debt collector may communicate with a consumer. The debt collector would be prohibited from communications during unusual times (generally before 8:00 a.m. or after 9:00 p.m.) or at the consumer’s place of business (subject to exceptions).
  • Clarify that a consumer may restrict the media through which a debt collector communicates, such as by telephone, email, or text.
  • Clarify that, subject to certain exceptions, a debt collector may not place a telephone call to a person in connection with the collection of a debt more than seven times within a seven-day period or within seven days of engaging in a telephone conversation with a person.
  • Clarify that communication technologies, including email and text messages, may be used in debt collection. Such communications must include a statement on ways the consumer can opt out of further electronic communications. Although no frequency limits are specified for electronic communications, debt collectors are prohibited from engaging in conduct that would be considered harassing, oppressive, or abusive.

Consumer disclosure proposals address information that a debt collector provides to a consumer at the outset of debt collection, including in a validation notice, and would:

  • Specify required and optional information to be provided by the debt collector and the consumer’s rights with respect to the debt as well as prompts for the consumer to dispute the debt, request information, or take certain actions.
  • Include a model validation notice.
  • Clarify steps a debt collector must take to provide the validation notice and other required disclosures electronically.
  • Establish a safe harbor if a debt collector complies with certain steps when delivering the validation notice within the body of an email that is the debt collector’s initial communication with the consumer.

Additional proposals would:

  • Prohibit a debt collector from furnishing information about a debt to a consumer reporting agency before communicating with the consumer about the debt.
  • Prohibit, with certain exceptions, the sale, transfer, or placement for collection of a debt if the debt collector knows or should have been known that the debt has been discharged.
  • Prohibit suits and threats of suits on time-barred debt. (The CFPB notes that it intends to test consumer disclosures related to time-barred debt and may release a disclosure proposal at a later date.)
  • Require records to be retained beginning from the date the debt collector begins collection activity until three years after the last communication, or the debt is settled, discharged, or transferred.

Comments will be accepted for a period of 90 days following publication in the Federal Register.

KPMG perspectives

This CFPB debt collection proposal was highly anticipated and, if finalized, will necessitate technology changes by creditors and debt collectors as well as procedural and control enhancements, including third-party risk management. The CFPB references its earlier debt collection-related releases including an Advance Notice of Proposed Rulemaking released in 2013, a 2016 paper outlining rulemaking proposals and alternatives under consideration for debt collectors and debt buyers by the Small Business Review Panel, and a study on Debt Collection Operations released in 2016 as the basis for the proposed changes. Industry participants welcome the text, email, and other electronic communication means to update the regulation to more current consumer communication. However, the proposal also puts forth communication frequency restrictions, repeat dispute provisions, and special proposed rules for mortgage servicing to which debt collectors would need to adhere.

Notably, the CFPB’s 2018 annual report to Congress regarding the administration of its FDCPA and consumer protection-related debt collection activities includes the activities of the Federal Trade Commission, which shares enforcement authority for the FDCPA. Therefore, entities throughout the collection process should anticipate and prepare for impacts from the proposed rules.