The CFPB recently published a final rule amending Regulation F, in order to provide additional requirements regarding: (i) the validation notice and the information provided at the start of debt collection, (ii) the identification of the measures to be taken before a debt collector can release information to a consumer information agency (CRA), and (iii) prohibit prescribed debt collection. The final rule will take effect on November 30, 2021.
According to the final rule, debt collectors must provide the consumer with certain information relating to the consumer’s debt and rights (validation notice). The Validation Notice must be provided either in the initial communication from the debt collector to the consumer or within 5 days of the initial communication, and must include the following information:
- a statement that the communication is from a debt collector;
- the account number;
- for a consumer financial product or service, the name and mailing address of the collection agent, the name and mailing address of the consumer who owes the debt, the name of the creditor to whom the debt is currently owed, and the name of the creditor as of the detail date (see below);
- a breakdown of the current amount of debt reflecting interest, charges, payments and credits since the date of the breakdown. The collection agent can select one of the five reference dates as the detail date: 1) the date of the last statement; 2) the date of charge; 3) the last payment date; 4) the date of the transaction; or 5) the date of the judgment; and
- consumer response information, such as prepared statements and prompts that the consumer can use to take certain actions, including debt dispute.
The final rule provides a safe harbor for debt collectors using the validation notice template, which can include specific optional content. The final rule incorporates some requirements for the translation of the notice into other languages, including a requirement that the debt collector must provide a Spanish version if it included optional content advising the consumer of the possibility of requesting a translation into Spanish.
The debt collector must allow the consumer 30 calendar days from the date the consumer receives, or is believed to have received, the validation notice, to dispute the debt or request information about the original creditor regarding the debt. During this period, the debt collector must not engage in collection activities or otherwise interfere with the rights of the consumer.
It is important to note that the final rule revises the definition of “consumer” to include both living and deceased consumers. Thus, if the debt collector knows or should know that the consumer is deceased before providing the validation notice, the notice should be provided to the person authorized to act on behalf of the deceased consumer’s estate.
Actions Required Before Credit Report
The CFPB has observed that some debt collectors have engaged in “passive collection” or the practice of providing information about debt collection to a rating agency without first taking action to inform the consumer of the debt. debt. The final rule is that such “passive collection” is illegal and before a debt collector provides information to a CRA, they must: (i) speak to the consumer about the debt in person or by telephone; or (ii) mail or e-mail the consumer regarding the debt and wait a reasonable period of time to receive a notice of non-deliverability. The final rule provides that a period of 14 calendar days after the letter or e-mail is sent is considered a “reasonable period of time”. During the “reasonable period of time,” the debt collector must authorize receipt and monitor non-delivery notifications from communications providers. If the debt collector receives a non-deliverability notice within the “reasonable period of time,” they should not provide debt information to a CRA until they resubmit the debt information to the consumer. using one of the methods identified above.
Finally, debt collectors are prohibited from bringing or threatening to take legal action against a consumer to collect a prescribed debt. The final rule defines “statute of limitations” as debt for which the applicable limitation period has expired. Proofs of claim filed in bankruptcy proceedings are not subject to this prohibition.
The final rule follows a related final rule on debt collection practices released by the CFPB in November 2020. See WBK’s coverage of the November final rule here.