The Consumer Financial Protection Bureau released a definitive collection rule on Friday that limits the frequency with which collectors can call borrowers to seven calls per week, but allows communication via voicemail, email and text messages for the first time.
The CFPB set rules to enable the use of technologies developed under the Fair Collection Practices Act, passed in 1977. Consumers can opt out of such modern communication.
"Given the tremendous changes in communications since the FDCPA was passed more than four decades ago, it is important to establish clear traffic rules," said CFPB Director Kathy Kraninger in a press release. “Our collection rules limit the collection agencies and offer consumers clear rights. With this modernized collection rule, consumers have better control when communicating with collection agencies. "
Collection agencies must offer consumers "a sensible and simple method" to disable communications sent to a specific email address or phone number, according to the CFPB. If a collection agency uses electronic communications to reach out to a consumer, the consumer can use the same technology to submit a request to stop communications or notify the collection agency that they refuse to pay the debt, according to the CFPB.
Consumer advocates have criticized the rule of opening the floodgates for collectors to bombard consumers with texts and emails.
The final 653-page rule included significant changes from the CFPB's May proposal, which received 14,000 public comments.
The rule provides a safe haven for debt collectors who call consumers seven times a week or less by phone. However, violating this limit may not automatically result in a penalty. The CFPB said other factors need to be considered when a debt collector exceeds the seven call limit, such as: For example, whether the calls were "intended to annoy, abuse or harass the person at the number called". However, if a collector exceeds the seven-call limit, it is a reason for a consumer to file a lawsuit.
It is also noteworthy that the CFPB has not given the industry any clarity about validation notices that collection agencies must send to consumers to inform them of an outstanding claim. The notices are a critical part of the collections process that can affect a consumer's right to dispute the debt. The office said it was still doing qualitative testing on validation cues.
"Much of the litigation in debt collection revolves around validation notices. This is a major disadvantage for the industry as it harms everyone involved," said Joann Needleman, attorney at law firm Clark Hill.
In the event of another win for collectors, the office dropped its so-called "meaningful participation", according to which a lawyer who sends a letter with letterhead actually has to be involved in the collection process.
The National Creditors Bar Association issued a statement thanking the CFPB for its "careful attention to our members' concerns about the regulation of attorney behavior and the importance of the independence of legal practice."
The rule makes it clear that the FDCPA's general ban on harassing, suppressive, or abusive acts not only applies to phone calls, but also to emails and text messages. The final rule reaffirms the FDCPA's prohibitions on false, misleading, unfair, and misleading practices.
The rule created a new term – restricted message – to describe a voicemail message left for a consumer that does not contain information subject to the communication restrictions of FDCPA.
"This definition enables a debt collection agency to leave a voicemail message for a consumer that is not a communication under the FDCPA or the definitive rule, and therefore not subject to certain requirements or restrictions," the rule reads.
The rule also clarifies the obligation for debt collection agencies to keep records of compliance or non-compliance with the FDCPA and Regulation F and prohibits the sale or transfer of certain debts.
It also clarifies the obligations of debt collection agencies when dealing with duplicate disputes. The rule also generally allows collectors to discuss a debt with a personal representative of the estate of a deceased consumer.
The CFPB announced it would release a second ruling in December that will focus on the disclosure of statute-barred debt, essentially prohibiting collectors from suing or suing debt that they know or should know has passed the statute of limitations.