One of the most challenging sections of Regulation F (also referred to as the CFPB new rules for debt collection) is Section 1006.42 regarding required disclosures. This section details how disclosures required under the Fair Debt Collection Practices Act (FDCPA) and Regulation F must be provided to consumers as part of the debt collection process.
Essentially, this section requires third-party debt collectors to provide consumers with actual notice of certain written disclosures in a form consumers can keep and access later. This requirement applies to both paper-based and electronic delivery of disclosures.
Making the Leap to Electronic Delivery of Required Disclosures
Reg F will have little impact on debt collectors who plan to mail the required disclosures to consumers by First Class mail using the United States Postal Service. Without exception, sending a paper letter in this way constitutes notice in a form the consumer can keep and access later. The CFPB explains in the Supplement to the Rule,
“42(a)(1)–2, a debt collector satisfies § 1006.42(a)(1) [i.e., the duty to provide actual notice in a form the consumer can keep and access later] if the debt collector mails a printed copy of a disclosure to the consumer’s last known address, unless the debt collector, at the time of mailing, knows or should know that the consumer does not currently reside at, or receive mail at, that location.” [Explanation added.]
When sending required disclosures electronically, however, meeting the “keep and access later” requirement will require a few additional steps. Debt collectors who intend to substitute the digital delivery of required disclosures for mail delivery will need to modify their workflow to meet the requirements of the Electronic Signatures in Global and National Commerce Act (E-Sign). For your reference, I’ve included the relevant E-Sign requirements at the end of this post.
Step 1: Know the E-Sign Provisions That Apply
The CFPB’s first attempt to regulate E-Sign consent and the delivery requirements for required disclosures under Regulation F were convoluted, intimidating and, quite frankly, unworkable. Fortunately, between the time the CFPB issued the Notice of Proposed Rulemaking in May of 2019 and the Final Rule in December of 2020, the CFPB had a change of heart about E-Sign compliance under Regulation F.
Simply put, the CFPB settled on a single requirement for the electronic delivery of the Required Disclosures,
“Do so in accordance with section 101(c) of the Electronic Signatures in Global and National Commerce Act (E-SIGN Act) (15 U.S.C. 7001(c)).”
Here is Section 1006.42 in full:
Regulation F’s E-Sign Provisions
(a) Sending required disclosures.
(1) In general. A debt collector who sends disclosures required by the Act and this part in writing or electronically must do so in a manner that is reasonably expected to provide actual notice, and in a form that the consumer may keep and access later.
(2) Exceptions. A debt collector need not comply with paragraph (a)(1) of this section when sending the disclosure required by § 1006.6(e) or § 1006.18(e) in writing or electronically, 585 unless the disclosure is included on a notice required by FDCPA section 809(a) (15 U.S.C. 1692g(a)), as implemented by Bureau regulation, or § 1006.38(c) or (d)(2).
(b) Requirements for certain disclosures sent electronically.
To comply with paragraph (a) of this section, a debt collector who sends the notice required by FDCPA section 809(a), as implemented by Bureau regulation, or the disclosures described in § 1006.38(c) or (d)(2)(i), electronically must do so in accordance with section 101(c) of the Electronic Signatures in Global and National Commerce Act (E-SIGN Act) (15 U.S.C. 7001(c)).
Step 2: Identify the Required Disclosures
Regulation F identifies three disclosures that must be provided in writing. As such, these three disclosures can only be provided electronically (i.e., by email or text) if the debt collector first obtains the consumer’s affirmative consent to receive the required disclosures electronically as required by E-Sign.
The three disclosures identified as required disclosures in 1006.42 include the validation notice, verification information about the debt, and the name of the original creditor. Debt collectors should take note that although not referenced in the CFPB new rules, the Fair Debt Collection Practices Act’s postdated payment and postdated check notice must also be provided to the consumer in writing and can be sent digitally only if the debt collector has obtained the consumer’s E-Sign consent to do so.
Specifically, Section 15 USC 1692f provides,
“A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
(2) The acceptance by a debt collector from any person of a check or other payment instrument postdated by more than five days unless such person is notified in writing of the debt collector’s intent to deposit such check or instrument not more than ten nor less than three business days prior to such deposit.” [Emphasis added.]
This means that in addition to the three disclosures identified in Section 1006.42, in order to substitute the electronic delivery of the postdated check/payment written disclosure, the debt collector must first obtain the consumer’s E-Sign consent.
Step 3: Monitor and Document Delivery of Required Disclosures
When it comes to the delivery of required disclosures, debt collectors must ensure the consumer receives actual notice of the required disclosure. The law allows debt collectors to rely on the mailbox rule when sending required disclosures by First Class mail using the United States Postal Service. The mailbox rule is a legal presumption that a properly addressed First Class letter sent using the United States Postal Service will be received by the addressee within five days of the date of mailing thereby constituting actual notice.
There is no such mailbox rule counterpart for the digital delivery of a required disclosure. To address this issue, the CFPB explains in Section 1006.42 (a) that when sending a required disclosure to a consumer, certain factors will be considered when determining if the debt collector’s method of delivery was reasonable and if it is reasonable for the debt collector to assume the electronic delivery of the required disclosure occurred.
This means that debt collectors, when sending required disclosures electronically, must permit their communications providers to monitor delivery and open rates of any required disclosures as well as any attachments or links sent by email or text. If the communications provider notifies the debt collector the email or text bounced back or was never opened, or the embedded URL link was never accessed, the debt collector cannot presume delivery of the required notice occurred.
Step 4: Identify Your Business as the Sender
The CFPB explains in Section 1006.42 of the Supplement to the new Rule that a debt collector must properly identify itself as the sender of the communication by including a business name that the consumer would be likely to recognize, such as the name included in the notice described in § 1006.6(d)(4)(ii)(C), or the name that the debt collector has used in a prior limited-content
message left for the consumer or in an email message sent to the consumer.
Step 5: Respond to Every Opt-Out
If a consumer has opted out of debt collection communications to a particular email address or telephone number, then a debt collector cannot use that email address or telephone number to send required disclosures—even if the debt collector had previously obtained the consumer’s E-Sign consent.
In other words, upon receipt of an opt-out for email communication or text communication from a consumer, the opt-out effectively revokes any type of consent previously provided by the consumer for that method of communication.
Step 6: Honor Any and All Restrictions Consumers Have Set
Regulation F allows consumers to dictate the time, place, and medium of communication. Debt collectors would be well advised to honor any restrictions consumers place on the time or day the debt collector may communicate with them regarding required disclosures sent electronically by email or text in compliance with E-Sign.
For Your Reference: E-Sign Requirements Governing Consent
[i] E-sign SEC. 101. (c) 1) CONSENT TO ELECTRONIC RECORDS. —Notwithstanding subsection (a), if a statute, regulation, or other rule of law requires that information relating to a transaction or transactions in or affecting interstate or foreign commerce be provided or made available to a consumer in writing, the use of an electronic record to provide or make available (whichever PUBLIC LAW 106-229-JUNE 30, 2000, 114 STAT. 465 is required) such information satisfies the requirement that such information be in writing if—
(A) the consumer has affirmatively consented to such use and has not withdrawn such consent;
(B) the consumer, prior to consenting, is provided with a clear and conspicuous statement—
(i) informing the consumer of:
(I) any right or option of the consumer to have the record provided or made available on paper or in nonelectronic form, and
(II) the right of the consumer to withdraw the consent to have the record provided or made available in an electronic form and of any conditions, consequences (which may include termination of the parties’ relationship), or fees in the event of such withdrawal;
(ii) informing the consumer of whether the consent applies
(I) only to the particular transaction which gave rise to the obligation to provide the record, or
(II) to identified categories of records that may be provided or made available during the course of the parties’ relationship;
(iii) describing the procedures the consumer must use to withdraw consent as provided in clause (i) and to update information needed to contact the consumer electronically; and
(iv) informing the consumer
(I) how, after the consent, the consumer may, upon request, obtain a paper copy of an electronic record, and
(II) (II) whether any fee will be charged for such copy;
(C) the consumer—
(i) prior to consenting, is provided with a statement of the hardware and software requirements for access to and retention of the electronic records; and
(ii) consents electronically, or confirms his or her consent electronically, in a manner that reasonably demonstrates that the consumer can access information in the electronic form that will be used to provide the information that is the subject of the consent; and
(D) after the consent of a consumer in accordance with subparagraph (A), if a change in the hardware or software requirements needed to access or retain electronic records creates a material risk that the consumer will not be able to access or retain a subsequent electronic record that was the subject of the consent, the person providing the electronic record—
(i) provides the consumer with a statement of
(I) the revised hardware and software requirements for access to and retention of the electronic records, and
(II) the right to withdraw consent without the imposition of any fees for such withdrawal and without the imposition of any condition or consequence that was not disclosed under subparagraph (B)(i); and (ii) again complies with subparagraph (C).
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