It is hard for anyone to get their head around the Consumer Financial Protection Bureau’s proposed new rules for debt collection. The document is an exhausting 537 pages long, filled with cross references, mired in statutory definitions, and extremely challenging to navigate. Honestly, after I finished my first reading of the new rules, I was convinced I would never master their complexity. I am happy to say, after two weeks of study, I was able to distill the proposed rules into 10 elevator conversations. These five conversations are the first of my two-part blog series.
Elevator Conversation #1: “The Bureau’s proposed rules have been a long time coming.”
It’s a very long process. It all started in 2010, when Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. This law made the Bureau the first agency with the power to issue substantive rules under the 1977 Fair Debt Collection Practices Act (FDCPA). The Bureau announced its notice of proposed rulemaking for the FDCPA on November 6, 2013. On Tuesday May 7, 2019, almost six years later, the Bureau released the proposed rules for the FDCPA.
The next step in the rulemaking process requires the Bureau to publish these proposed rules in an official Federal government publication called the Federal Register. After they are published in the Federal Register, industry and consumers alike will have a 90-day period to file comments. At that point the Bureau will take the comments under advisement toward eventually promulgating the final rules. As of the date of this writing, we anticipate the proposed rules will be published this week.
Elevator Conversation #2: “I wonder if debt collectors can be sued for noncompliance with the new rules.”
My lawyer told me once the new rules take effect – most likely a year after the final rules are published in the Federal register – they will have the force and effect of law. Rules are the same thing as regulations. When a governmental body such as the Bureau goes through this elongated rulemaking process, its final rules will apply to all third-party debt collectors. This means consumer attorneys and their clients will be able to sue third-party debt collectors for failing to follow the new rules. Similarly, the Bureau and state attorneys general will be able to issue civil investigative demands and launch enforcement actions against third-party debt collectors for noncompliance.
Elevator Conversation #3: “I can live with the call caps because they don’t apply to text messaging.”
Under the new rules, third-party debt collectors will be able to place up to seven calls in seven days to a particular person regarding a particular debt. However, any number of calls placed in excess of that limitation will be considered harassing, oppressive or abusive behavior under the FDCPA and an abusive practice under section 1031 of the Dodd-Frank Act. Such limits do not impact text message communications even though text messages are defined as calls under the Telephone Consumer Protection Act.
Nor may debt collectors place a call to a person within a period of seven consecutive days after having a telephone conversation with the person in connection with the collection of such debt. The date of the telephone conversation is the first day of the seven-consecutive-day period. Third-party debt collectors can exceed these limits if responding to a request for information from the person, or if such person’s prior consent is given directly to the debt collector.
See 1006.14(b)(2) – Frequency Limits at page 459.
Elevator Conversation #4: “It is nice to see some clarity around email and text message communications.”
I know we did not need the Bureau to tell us we could communicate electronically with consumers, but it is nice to see the clarification around compliance with the Electronic Signatures in Global Commerce Act (ESIGN). Personally, I am not wasting any more time fighting ESIGN. At our agency, we already provide the disclosures to our consumers, ask for their consent to deliver legally-required written notices and disclosures to them as required by ESIGN [see sidebar], ask them to show us their nonwork email address or nonwork mobile number is an active address or number they can access, and then just move on.
The new rules just give us more options and make this ESIGN process easier. Under the new rules, as proposed, we will have a bona fide error defense against unauthorized third-party disclosure of the debt if we have procedures that confirm we communicate with the consumer using:
- An email address or mobile number the consumer recently used to contact us other than to opt out;
- A nonwork email address or nonwork mobile phone number either our agency or the creditor for the particular debt told them we would use to communicate with them about the debt. Note: such notice must be provided clearly and conspicuously either verbally or in writing and must be provided at least 30 or fewer days before using. The opt out specified in the notice has not expired [other restrictions apply]; or
- A nonwork email address or nonwork mobile phone number either the creditor or a prior debt collector obtained from the consumer to communicate about the debt and used before the debt was placed with our agency.
See 1006.6(d)(3) at pages 455-456 – Reasonable procedures for email and text message communications.
Elevator Conversation #5: “We have already cut our postage and letter expense in half by adopting a voluntary email or text message program for our consumers.”
No need to wait for these new rules to take effect. We have two categories of letter communications. The first is called Ordinary Collection Actions and the second is Legally Required Collection Actions. The former is composed of requests for payment, payment reminders, receipts, settlement documents, and standard collection notices requesting payment. The latter is composed of the G notice or validation notice which we must provide in the first communication with the consumer or within five days of our first communication with the consumer, the intent to deposit notice, the name of the original creditor notice and the verification information we send if the consumer disputes the debt within 30 days of receiving the notice.
We simply follow the reasonable procedures steps for electronic communications when sending information relating to Ordinary Collection Actions [see above] and follow ESIGN when we engage in Legally Required Collection Actions by sending information which the law requires us to provide in writing.
Next week … more about ESIGN and how you can use it for the validation notice, collecting decedent debt, new notice requirements for credit reporting, document retention requirements, the limited content message, the model form and more. Send your questions about the new proposed rules to me at firstname.lastname@example.org, Angela Erwin at email@example.com, or Sara Woggerman at firstname.lastname@example.org.
Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.
© 2019 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.
ESIGN in Action
The ESIGN SEC. 101. (c) CONSUMER DISCLOSURES provision explains the information you must provide the consumer to secure ESIGN consent. I’ve included the requirements for your reference at the end of this blog. To give you an idea of a script you and your attorney can edit to solicit the consumer’s ESIGN consent, I provide the following:
Collector: Hi Amy, I’m glad we could set up the preauthorized electronic funds transfer payments. But before we can send you your [FDCPA required] post-dated payment intent to deposit reminders pursuant to 15 USC 1692f (2) by email/text, I have to make sure you will be able to receive the information we send and understand your right. Do you mind listening for a few seconds?
Amy: No, I don’t mind listening.
Collector: Great. Sometimes the kinds of documents that we must send you require us to obtain your consent to send them electronically.
Granting consent to receive this information electronically applies to the following debt or debts (list debt(s)).
You can withdraw this consent at any time by calling us at xxx-xxx-xxxx and we will mail you the required information in the future. (Include a statement here that describes if the agency will charge or not charge a fee for obtaining this information in a paper form.)
To ensure we always have your proper email address, you can update your contact information by calling us*, visiting our website* or sending us an email*. (An agency could do this via text if the agency has this capability; texting laws will apply.)
The hardware and software requirements to access and obtain records are (… – example: you are required to have Adobe Acrobat).
To confirm that you can receive the information electronically I am going to send you an email.
Please reply to me so I know this is a good address for you.
(Note: if you disclose the information via web, the consumer must confirm their ability to use the web; if you disclose the information via email, they must confirm their ability to use that email address; if you disclose the information using text, they must confirm their ability to use that mobile number for texts.)
Amy: OK, I received your email and sent a reply to you.
Collector: Great. Got it. We are good to go. Remember, if you have any questions for me at any time about anything we have discussed, you may call our office Monday through Saturday between the hours of 8 a.m. Central and 6 p.m. Central.