At the end of November, the CFPB’s new rules concerning debt collection, specifically Regulation F, 12 C.F.R. part 1006, go into effect. While this rule is focused on debt collection, it also impacts any creditor that falls subject to the Fair Debt Collection Practices Act (FDCPA). These new rules mean changes to consumer communication efforts, especially when it comes to engaging in modern electronic channels. Today we are sharing what we feel are the top 5 takeaways from Regulation F, and the subtle changes you can make to ensure compliance.
1) Permission and the Final Notice
The new rule provides a framework for how to communicate with consumers in a compliant manner while using email or text messages. With respect to email, the CFPB laid out a process where the creditor must inform the consumer that it intends to send the account to the specific collection agency and that the agency will use the consumer’s email address to communicate regarding a debt. Due to the fact that the consumer’s communication preference is king, the communication from the creditor must also include instructions for how the consumer can opt-out of receiving communication from the debt collector at the consumer’s email address. Additionally, required disclosures that are sent electronically are subject to the same “keep and access later” requirement that applies to paper disclosures. This means acknowledgment and accordance with the E-SIGN Act. For text communications, the validity of the number must be established every 60 days to ensure that the number has not been re-assigned. This will help to ensure that only the correct party is contacted regarding the debt. Notably, the best practices for both email and text will still include an effort to obtain the consumer’s prior express consent to communicate through either email or text messages.
2) Time
Mimicking the requirements for voice calls, the new rules state that reasonable effort must be made to avoid communicating at times that may be inconvenient for the consumer. This means that communications must not occur outside of the hours of 8 a.m. and 9 p.m. unless the consumer has instructed otherwise. As not all consumers’ email or mobile contact information corresponds to their physical time zone, the contacting party must ensure that its processes limit communication attempts to those hours where it would fall within the permissible timeframe. Again, the consumer’s preference as to not only how to be contacted, but when to be contacted will be important information for creditors and their collection partners to obtain and utilize for consumers.
3) Opt-out
Under the new rule, consumers must be provided an obvious and simple means for opting out in EVERY electronic communication. This illustrates the emphasis on consumer preference that is prevalent throughout the new rules. Read sample opt-out language here.
*Important: If you would like for your collection partner to be able to utilize email in a compliant manner, the new rules require that your final notification to consumers includes an opt-out mechanism to prevent the consumer from receiving further electronic communications from a collection partner. If a third-party has been sending the final notifications to consumers on your behalf, they may continue to do so, but the requirement to include the opt-out mechanism will still apply. Additionally, to ensure compliance, you may need to supply your collection partner with more consumer data when transferring accounts— the initial notice from your collection partner to the consumer will likely need to include one of the following dates: (1) the last statement date; (2) the charge-off date; (3) the transaction date; or (4) the last payment date. Ensuring that you are capturing this information and passing it along to your collection partners will be an important part of planning consumer communications moving forward.
4) Credit Reporting
As many healthcare providers are aware, laws and regulations have been put into effect in recent years to ensure that consumers have an opportunity to learn of their debt and make arrangements to resolve it before it is reported to the credit bureaus. However, the new rules will take that concept a step further and apply it to all types of debt covered by the FDCPA. Starting at the end of November, debt collectors will not be able to report an account to the credit bureaus unless they have either (1) had a telephone conversation with the consumer, or (2) sent a notice that was not returned as undeliverable.
5) Changes to Validation Notices from Collection Agencies
Your collection partner will be required to make some changes to the validation notices sent to consumers in order to comply with the nuances of Regulation F. Many of these changes reflect the need for the additional data referenced above in #3. See Professional Credit’s new validation notice* here.
In the long run, Regulation F is paving the way for more efficient and cost-effective consumer outreach by providing clear guidelines for utilizing modern digital channels.
*Please note the sample validation notice will differ in certain states due to varying state regulations.
ATTENTION CLIENTS: You are invited to an exclusive webinar event, “FDCPA Regulation F: How It Affects Your Relationship With Your Collection Agency.” Please keep a lookout for an invitation via email or reach out to your Client Success representative to register.
LEGAL DISCLAIMER
The materials available on this website are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular question or issue.