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On October 29, the CFPB released information on validation notices to help facilitate compliance with requirements in the Regulation F debt collection final rule. As previously covered by InfoBytes, in October 2020 the CFPB issued its final rule (effective November 30) amending Regulation F, which implements the Fair Debt Collection Practices Act, addressing debt collection communications and prohibitions on harassment or abuse, false or misleading representations, and unfair practices. The CFPB released guidance for debt collectors offering instructions on how to provide certain validation information, including using the “Itemization Table” in the model validation notice as well as examples of how the table might be completed for different types of debts. The guidance also provides, among other things, examples of itemization tables for the collection of multiple debt owned by the same consumer.
The Bureau also issued new FAQs related to Regulation F that address validation information generally and validation information related to residential mortgage debt. Among other things, the FAQs: (i) specify the validation information debt collectors must provide consumers who owe or allegedly owe a debt; (ii) clarify that while the use of the model validation notice provided in Appendix B of the final rule is not required, debt collectors must comply with the validation information content and format requirements in Regulation F; (iii) specify that a debt collector can make changes to the model validation notice and still obtain the validation information content and format safe harbor with certain limitations; (iv) state that a debt collector does not need to provide the itemization-related information in a validation notice provided the debt collector follows a special rule for certain residential mortgage debt; (v) outline validation information that may be omitted if using the Mortgage Special Rule, and clarify that generally if a debt collector uses the Mortgage Special Rule with the model validation notice, the debt collector may still receive a safe harbor as long as certain criteria is met; (vi) define “most recent periodic statement” for purposes of the Mortgage Special Rule; and (vii) clarify that under the Mortgage Special Rule, a debt collector “uses the date of the periodic statement provided under that Special Rule as the itemization date.” As previously covered by InfoBytes, the Bureau issued FAQs last month discussing limited-content messages and the call frequency provisions under the Debt Collection Rule in Regulation F.
Recently, the CFPB issued a Spanish-language translation of its Model Validation Notice. Debt collectors are permitted to send a consumer a completely and accurately translated validation notice if the consumer was either provided an English-language version in the same communication or in a prior communication. Debt collectors that meet these requirements and use the translated notice qualify for the Debt Collection Rule’s safe harbor that any translation be complete and accurate. The Bureau noted that the translated validation notice omits the disclosure informing consumers of their right to request the validation notice in Spanish, “because no translation of those disclosures is necessary,” but debt collectors who choose to include the optional Spanish-language disclosures in a Spanish-language validation notice are still eligible for the safe harbor.
On October 1, the CFPB released a set of FAQs discussing limited-content messages and the call frequency provisions under the Debt Collection Rule in Regulation F. As previously covered by InfoBytes, in October 2020 the CFPB issued its final rule amending Regulation F, which implements the Fair Debt Collection Practices Act, addressing debt collection communications and prohibitions on harassment or abuse, false or misleading representations, and unfair practices. Among other things, the FAQs clarify: (i) the qualifications of a “limited-content message”; (ii) that debt collectors can utilize a pre-recorded voice message for limited-content messages; (iii) that the final rule “establishes a presumption of a violation of, and a presumption of compliance with, the prohibition against harassing, oppressive, or abusive conduct, based on the frequency of a debt collector’s telephone calls and conversations”; (iii) that the final rule “does not preempt a state law that affords greater protection to consumers, including, for example, by imposing limits or more restrictive presumptions related to telephone call frequency”; (iv) that seven days is the maximum time a consumer’s direct prior consent applies to additional telephone calls; and (v) the factors that may rebut the presumption of a violation.
On August 26, the U.S. Supreme Court issued a 6-3 decision in Alabama Association of Realtors et al. v. U.S. Department of Health and Human Services et al. to lift the federal government’s eviction moratorium, stating the CDC lacked authority to impose the ban. This decision follows the Court’s June decision, which previously denied the group’s request to lift the eviction moratorium in order to let the ban expire at the end of July as intended to allow for a “more orderly distribution of the congressionally appropriated rental assistance funds.” (Covered by InfoBytes here.) In agreeing with the group’s argument that the law on which the CDC relied upon did not allow it to implement the current ban, the majority held that “[i]t strains credulity to believe that this statute grants the CDC the sweeping authority that it asserts,” pointing out that, as the Court noted in its June decision, “[i]f a federally imposed eviction moratorium is to continue, Congress must specifically authorize it.” This decision vacates a stay on the U.S. District Court for the District of Columbia’s judgment placed by the same court and renders the district court’s judgment enforceable. As previously covered by InfoBytes, the district court ruled that the CDC exceeded its authority when it imposed the temporary ban and stated that because the Public Health Service Act (PHSA) does not “grant the CDC the legal authority to impose a nationwide eviction moratorium” the moratorium must be set aside.
The dissenting judges faulted the Court for deciding the issue without full briefing and argument, arguing that a stay entered by a lower court cannot be vacated “unless that court clearly and ‘demonstrably’ erred in its application of ‘accepted standards.’” Among other things, they pointed out that “it is far from ‘demonstrably’ clear that the CDC lacks the power to issue its modified moratorium order” as the CDC’s current, modified order targets only regions experiencing a spike in transmission rates. They further argued that the PHSA’s language authorizes the CDC “to design measures that, in the agency’s judgment, are essential to contain disease outbreaks,” and that “the balance of equities strongly favors leaving the stay in place.” According to the minority, “public interest strongly favors respecting the CDC’s judgment at this moment, when over 90% of counties are experiencing high transmission rates.”
Notably, the decision impact’s the CFPB’s interim final rule (Rule) amending Regulation F to require all landlords to disclose to tenants certain federal protections put in place as a result of the ongoing Covid-19 pandemic (covered by InfoBytes here). As previously covered by InfoBytes, the U.S. District Court for the Middle District of Tennessee denied a request in May for a temporary restraining order to block the Rule, but noted however, that “by its own terms the Rule applies only during the effective period of the CDC Order, only to tenants to whom the CDC Order reasonably might apply, and only in jurisdictions in which the CDC Order applies. Defendant CFPB has opined, in its response to the Motion, that ‘the Rule’s provisions—by the Rule’s own operation—have no application where the CDC Order, on account of a court order or otherwise, does not apply.’ . . . The Court concurs with this view, and it intends to hold CFPB to this view (and believes that other courts perhaps should do likewise).”
On January 15, the CFPB issued a small entity compliance guide summarizing the Bureau’s debt collection rule. As previously covered by InfoBytes, the Bureau issued a final rule last October amending Regulation F, which implements the Fair Debt Collection Practices Act (FDCPA), to address debt collection communications and prohibitions on harassment or abuse, false or misleading representations, and unfair practices. The guide provides a detailed summary of the October final rule’s substantive prohibitions and requirements, as well as a summary of key interpretations and clarifications of the FDCPA. The Bureau noted, however, that the current small entity compliance guide does not discuss (unless specifically noted otherwise) the CFPB’s final rule issued in December (covered by InfoBytes here), which clarified consumer disclosure requirements, provided a model validation notice, and addressed required actions prior to furnishing and prohibitions concerning the collection of time-barred debt. Updates will be made to the small entity compliance guide at a later date to include provisions related to the December final rule.
On December 18, the CFPB issued a final rule amending Regulation F, which implements the Fair Debt Collection Practices Act, clarifying the information debt collectors must provide to consumers at the outset of collection communications and providing a model validation notice containing such information. (See also the Bureau’s Executive Summary.) The final rule also prohibits debt collectors from bringing or threatening to bring legal action against a consumer to collect time-barred debt, and requires debt collectors to take certain actions before furnishing information about a consumer’s debt to a consumer reporting agencies (CRA). Among other things, the final rule addresses the following:
- Validation notice. The final rule clarifies that debt collectors may provide “clear and conspicuous” debt validation notices in writing or electronically when commencing debt collection communications. Validation notices must include a statement indicating that the communication is from a debt collector, along with additional information such as itemization-related information, the current amount of debt, consumer protection information, and information for consumers who may choose to dispute the debt or take other actions. The final rule also outlines optional content that debt collectors may choose to include while retaining the safe harbor for using the model notice, provided that “the optional content is no more prominent than the required content.” The final rule also revises the definition of “consumer” used in a separate final rule issued by the Bureau at the end of October (covered by InfoBytes here). The December final rule’s definition now includes both living and deceased consumers.
- Safe harbor for model validation notices. Debt collectors who choose to use the model validation notice are in compliance with the final rule’s content requirements. Additionally, the use of a model validation notice would not be considered a violation of the prohibition on conduct that “overshadows” a consumer’s rights during the validation period. The final rule outlines additional safe harbors, and provides examples where a safe harbor generally will not apply. Notably, the safe harbor does not cover validation notice delivery methods and timing requirements.
- Translations. Debt collectors who choose to provide validation notices in other languages must also include an English-language notice in the same communication.
- Credit reporting. The final rule requires debt collectors to either speak to a consumer in person, send an email or letter, or try to speak with a consumer by telephone before furnishing any information to a CRA. Communications sent via email or letter will require a 14 day waiting period to allow for a “reasonable period of time” to receive a notice of undeliverability.
- Time-barred debt. The final rule prohibits debt collectors from suing or threatening to sue consumers when attempting to collect time-barred debt. Proofs of claim filed in connection with a bankruptcy proceeding are not included in this prohibition.
The final rule takes effect November 30, 2021.
More information from Buckley on the details of the newest debt collection final rule will be available soon.
On October 30, the CFPB issued (along with blog post from Director Kraninger) its final rule amending Regulation F, which implements the Fair Debt Collection Practices Act (FDCPA), addressing debt collection communications and prohibitions on harassment or abuse, false or misleading representations, and unfair practices. The final rule does not include several significant provisions from the proposed rule, including those related to consumer disclosures. The Bureau states a second “disclosure-focused” final rule will be released in December 2020. This final rule is expected to address the model debt validation notice and time-barred debt disclosures previously proposed by the Bureau. As previously covered by InfoBytes (here and here) the Bureau issued the proposed rule in May 2019 and a supplemental proposed rule in February 2020, addressing time-barred debt disclosures. The final rule is effective November 30, 2021.
Among other things, the final rule: (i) prohibits a debt collector from calling a consumer about a particular debt more than seven times within seven consecutive days or within seven consecutive days of having had a telephone conversation; (ii) allows consumers to set preferences with debt collectors on certain communications, including communications with third parties and allowing consumers a reasonable way to opt-out of electronic communications; and (iii) clarifies that the FDCPA’s prohibition on harassing, oppressive, or abusive conduct applies to email and text messages. Additionally, the final rule also contains the procedures for state application for exemption from the provisions of the FDCPA.
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.”
On May 7, the CFPB issued its Notice of Proposed Rulemaking (NPRM) amending Regulation F, to implement the Fair Debt Collection Practices Act (FDCPA) (the “Proposed Rule”). The Bureau also released a Fact Sheet on the Proposed Rule. The proposed effective date is one year after the final rule is published in the Federal Register, with comments on the Proposed Rule due 90 days after publication. Generally, the Proposed Rule covers debt collection communications and disclosures and addresses related practices by debt collectors. Highlights of the Proposed Rule include:
- Coverage. The Proposed Rule incorporates many existing provisions of the FDCPA into Regulation F including existing definitions of “debt collector” and “debt,” with only minor wording and organizational changes. The Proposed Rule would generally only cover third-party debt collectors, not the first-party efforts of the original creditor or its servicer, and specifically excludes in-house collectors of creditors (“[a]ny officer or employee of a creditor while the officer or employee is collecting debts for the creditor in the creditor’s name.”). The Proposed Rule restates the FDCPA’s definition of “consumer” but interprets the term to include “a deceased natural person who is obligated or allegedly obligated to pay a debt.” Additionally, with respect to the special definition of “consumer” for the section on communications in connection with debt collection, the Proposed Rule interprets that to include a confirmed successor in interest as well as the personal representative of a deceased consumer’s estate.
- Validation Notice. The Proposed Rule requires a debt collector to provide a consumer with a validation notice that includes certain information about the debt and the consumer’s rights with respect to the debt including: (i) the debt collector’s name and mailing address; (ii) the name of the creditor to whom the debt is currently owed and, for consumer financial product or service debt as defined in the Proposed Rule, the name of the creditor to whom the debt was owed on the itemization date; (iii) the itemization date and the amount of debt owed on that date; (iv) itemization of the current amount of the debt in a tabular format reflecting interest, fees, payments, and credits since the itemization date; (v) the current amount of the debt; (vi) if the debt is a credit card debt, the merchant brand, if any, associated with the debt, to the extent available to the debt collector; (vii) information about consumer protections; and (viii) consumer response information, including dispute prompts. The validation notice must also include the “debt collector communication disclosure” indicating the communication is for the purposes of collecting a debt.
- Disclosure Safe Harbor. Under the Proposed Rule, if a debt collector delivers in writing the Bureau’s Model Form B-3 validation notice, provided in appendix B to the Proposed Rule (available on pg. 491), it is considered to be in compliance with the validation notice requirements, though use of the model form is not required.
- Electronic Disclosures. The Proposed Rule would require debt collectors who provide required disclosures electronically to obtain the consumer’s affirmative consent directly to comply with Section 101(c) of the Electronic Signatures in Global and National Commerce Act (E-SIGN Act). In the alternative, debt collectors can send the electronic disclosures to a particular email address or phone number (in the case of text messages), that the creditor or prior debt collector could have with regard to that debt in accordance with the E-SIGN Act. Additionally, the Bureau released a flow chart to clarify how a debt collector would provide certain required disclosures electronically.
- Conduct Provisions.
- Time and Place Restrictions. The Proposed Rule clarifies that calls to mobile telephones and electronic communications, such as emails and text messages, are subject to the FDCPA’s prohibition on communicating at times or places that the debt collector knows or should know are inconvenient to the consumer, subject to certain exceptions.
- Restriction on Number of Telephone Calls. With exceptions for certain types of calls (such as those responding to a consumer request for information or made with prior consent by the consumer given directly to the debt collector), the Proposed Rule prohibits a debt collector from calling a consumer about a particular debt more than seven times within a seven-day-period. The Proposed Rule also prohibits a debt collector from calling a consumer for seven consecutive days after having had a telephone conversation with the consumer regarding the debt, beginning with the date of the conversation. A debt collector who does not exceed the frequency limits is deemed in compliance with the FDCPA’s prohibition on harassment and the Dodd-Frank Act’s prohibition on unfair acts or practices as it relates to telephone calls.
- Text and Email Communications. The Proposed Rule does not contain a restriction on the frequency or number of communications a debt collector can make via email or text message. However, the Proposed Rule requires a debt collector to include—in emails, text messages and other electronic communications—an option for the consumer to unsubscribe from future such communications and would prohibit a debt collector from attempting to communication through a medium the consumer has requested the collector not use, including a particular phone number or email address. The Proposed Rule would prohibit a debt collector from contacting a consumer through a workplace email address (absent prior consent by the consumer or receipt by the debt collector of an email sent from the consumer’s work email account) or through a public-facing social media platform, except through the platform’s private message function.
- Limited-Content Messages. The Proposed Rule specifies certain content parameters for a “Limited-Content Message” that a debt collector could send by voicemail or text that would not be considered a “communication” and therefore, would not need to include the required disclosures. Additionally, if the limited-content message was heard or observed by a third party, it would not constitute a prohibited third-party disclosure.
- Other prohibitions. The Proposed Rule prohibits a debt collector from, among other things, (i) suing or threatening to sue on a time-barred debt; (ii) reporting debts to credit reporting agencies prior to initiating communications with the consumer; and (iii) selling, transferring or placing for collection a debt to another debt collector that the collector knows or should know has been paid or settled, discharged in bankruptcy, or relates to a filed identity theft report.