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Financial Services Law Insights and Observations

24 state attorneys general reject CFPB’s time-barred debt proposal

State Issues Agency Rule-Making & Guidance CFPB Debt Collection FDCPA Regulation F State Attorney General Disclosures

State Issues

On August 4, twenty-four state attorneys general responded to the CFPB’s request for comments on its proposed supplemental debt collection rule (the “Supplemental Proposed Rule”) arguing it does not “adequately protect[] consumers’ rights.” As previously covered by a Buckley Special Alert, the Supplemental Proposed Rule— which adds to the CFPB’s May 2019 proposed rule (InfoBytes coverage here) — proposes (i) certain disclosures required to be included in communications where a third-party debt collector knows or should know that a debt is time-barred; and (ii) model language and forms that debt collectors may use to comply with such disclosure requirements.

Among other things, the attorneys general disagree with the “know or should know” standard, arguing that the Bureau should “adopt a strict-liability standard, which would be in line with what the FDCPA intends to accomplish.” Moreover, the attorneys general assert that the model disclosures (i) were not adequately tested; (ii) do not account for the variations in state laws as to the potential revival of time-barred debt; and (iii) provide a safe harbor that is inconsistent with the FDCPA and the Dodd-Frank Act. Lastly, the attorneys general express concerns that the Supplemental Proposed Rule conflicts with state laws that require state disclosures to be on the front side of debt collection notices and fails to address “obsolete debt.”