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If you missed Part 1 of “What the CFPB Rules Mean to You,” and you’re concerned about how the proposed rules might affect your operations, I recommend giving it a read. Based on a panel discussion I recently participated in (you can access the webinar here), Part 1 offers a detailed summary of the CFPB’s proposals as well as areas of concern related to call caps, electronic communications, and limited content messages.

This post covers the remainder of our discussion. Following a brief summary of validation notices/required disclosures, I’ll explain the changes and strategies you should consider pursuing long term and what you should be focused on right now.


Validation Notices/Required Disclosures

The CFPB’s proposed rules for validation notices and disclosures put some new twists on a number of well-established ARM industry standard operating procedures—and in some cases, with big implications for collection agencies and consumers.


Proposed Requirements

For validation notices, collectors will be required to specify the date the debt collector will consider the end date of the validation period. The proposed rule makes clear the validation period begins on the date the debt collector provides the validation information and ends 30 days after the consumer receives, or is assumed to receive, the validation information.

For purposes of determining the end of the validation period, the debt collector may assume that a consumer receives the validation information on any date that is at least five days (excluding legal public holidays, Saturdays, and Sundays) after the debt collector provides it.

Debt itemization must include the Itemization Date. The Itemization Date may be one of four dates for which a debt collector can ascertain the amount of the debt: the last statement date, the charge off date, the last payment date, or the transaction date.

The debt itemization must also include specific information amount the debt including but not limited to the collector’s name and mailing address; the consumer’s name and mailing address; the merchant brand, if the debt is a credit card debt; or if it is a consumer financial product or service debt, the name of the creditor to whom the debt was owed on the itemization date; the account number; name of the current creditor; and an itemization of the current amount of the debt in a tabular format reflecting interest, fees, payments, and credits.

Tear-offs at the bottom of validation notices should allow consumers to respond in a variety of ways such as disputing account ownership, requesting validation of the debt or the name of the original creditor, and submitting payments.


Lingering Concerns

With some validation notices sent electronically and others mailed to locations with less frequent mail delivery, counting 35 days past the date that notices are sent could lead agencies to inadvertently reach out to consumers before the validation period has ended and deny them a full 30 days to respond.

Debt itemization, particularly the inclusion of exact dates, could pose problems for medical debt collectors due to the insurance payer billing process that precedes provider collections. Inclusion of interests, fees, and costs creates additional difficulties for collectors as well; they would prefer not to mention these additional charges if they don’t apply—or, in a disclaimer, explicitly state that they don’t apply—and be granted safe harbor from frivolous lawsuits.

The CFPB’s proposed tear-off has both consumer groups and collection agencies particularly concerned.

  • Both camps agree that checking a box at the bottom of the form is inadequate, and consumer groups fear tear-offs could confuse consumers who might misunderstand their rights or the time they have to dispute a debt (or worse, get reported to a credit reporting agency before they even realize a debt is in arrears).
  • Designing a compliant tear-off form could be a struggle. With all the consumer response options the CFPB proposes including, there’s little room on the page for required state law disclosures. In some states, agencies are prohibited from placing these disclosures on the reverse side of the form.
  • Most agencies fear their document readers will miss statements handwritten by the consumer and potentially miss important instructions provided by the consumer.


“One thing I find interesting about [the CFPB’s] request for validation is they’ve tried to take some liberties with rewriting the validation notice and the mini-Miranda and as I read the FDCPA, there is no required language or specific words that must be used; rather, they are concepts which must be conveyed. [ . . . ] 

I think there are different ways of expressing the same thought that don’t sound like you’re being handcuffed and thrown into a squad car and brought down to the station.”

Michael Kraft, General Counsel, CCS Companies



Agency Imperatives That Could Complicate Operations

The proposed CFPB rules could have a tremendous impact on ARM businesses, regardless of how they communicate with consumers. Fundamental change may be needed, at least in some respects, to manage compliance day to day.


Record retention in the digital era

Under the CFPB’s proposed rules, ARM agencies will need to retain evidence of compliance with the new rules starting on the date the collector begins collection activity on a debt until: 1) three years after the date of the collector’s last communication or attempted communication; or 2) three years after the date the debt is settled, discharged or transferred to the debt owner or to another debt collector.

Retaining three years’ worth of call recordings, letters, text messages, chats, and social media communications—often stored by date and time—could impose a significant burden.


Creditor/agency data sharing

Data standards are going to become increasingly important going forward. To be able to effectively manage communication preferences and consents, validation requirements, and consumer and account data, agencies will need to align more closely with creditors than they have in the past. 



Big Takeaway for ARM Agencies: For Now, ‘Consent Is King’

The CFPB has attempted to interpret compliance with the FDCPA in ways that protect the most vulnerable consumers without unduly burdening or impeding collection agencies. While there are opportunities for greater clarity and refinement within the proposed rules, the experts on the panel are generally pleased with the CFPB’s efforts to balance stakeholder concerns.

The CFPB is also open to safe harbors in certain areas to protect agencies from consumers’ unfair legal claims. The CFPB has reinstated commission letters, for example, thus giving collection agencies the ability to seek the CFPB’s interpretation of FDCPA regulations (which has the force and effect of law unless a court overturns it).

With this new roadmap from the CFPB, agencies may be more open to communicating in ways they’ve avoided in the past. And that’s a good thing for both businesses and consumers.

As we await (and help shape) the final CFPB rules, agencies must look to the letter of the FDCPA, E-Sign, and TCPA. They must prioritize consent and revocation management above all, and make their voices heard before the CFPB and Congress. No need to wait for final rules before adopting electronic communications; with the right systems and tools in place, you can boldly take your business in new directions.



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.

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Rozanne Andersen, J.D., serves as Ontario Systems’ Vice President and Chief Compliance Officer. She is responsible for leading Ontario Systems’ corporate efforts and response to the CFPB’s launch of compliance examinations in the ARM industry. Rozanne is a recognized thought leader in the area of compliance. Her advocacy work on behalf of the credit and collection industry has resulted in landmark legislation and regulation at both the state level and at the federal level with regard to the FDCPA, FCRA and HIPAA.
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