Every day, people send over 105 billion emails and 23 billion texts. Despite this, debt collection laws have remained silent on the issue of electronic communications.
CFPB released updates to the Fair Debt Collection Practices Act (FDCPA) for the first time since the law was passed over 40 years ago. As part of the 653-page final rule released on October 30, 2020, debt collection communications are clarified, including the use of newer communication technologies, such as email and text messages, by debt collectors regarding consumers’ debts.
Consumers of today favour using social media, email, and text messaging over phone calls and letters to maintain their accounts. However, due to a lack of clarity in debt collection laws, most debt collectors continue to rely primarily on outdated, traditional channels of communication.
Consumer Financial Protection Bureau (CFPB) is a 21st century agency that assists consumers in taking control of their economic lives by improving the effectiveness of rules, enforcing those rules consistently, and empowering consumers. For more information
The CFPB helps debt collectors implement the rules by informing consumers about their rights and protections. Through consumerfinance.gov, you can find resources to help debt collectors understand, implement, and comply with the rules.
In November, two FDCPA final rules will go into effect.
- The first rule, issued in October 2020, clarifies the FDCPA’s prohibitions. Debt collectors are prohibited from harassing or abusing consumers, making false or misleading representations, or abusing their power when collecting debt.
This modernized debt collection rule will give consumers greater control when interacting with debt collectors with the vast changes in communications since the FDCPA was passed more than four years ago.
As of now, the debt collection industry has reacted positively to the rule, with collectors and accounts receivable management (ARM) leaders appreciating the added clarity it provides. However, those without adequate consumer preference management technologies may also find compliance challenging.
- A second rule, released in December 2020, clarifies the disclosures debt collectors must make to consumers at the beginning of the collection process. Time-barred debts are also prohibited by the second rule from being sued or threatened with being sued by debt collectors. Furthermore, the second rule requires debt collectors to disclose the existence of a debt to consumers before reporting information about it to consumer reporting agencies.
Additional guidance will be considered by the CFPB for debt collectors, including those that service mortgage loans. As large numbers of borrowers exit forbearance in the fall, mortgage servicers are expected to receive a potentially historically high number of loss mitigation inquiries and, as a result, mortgage servicers may run out of capacity. To ensure a smooth and successful implementation, the CFPB will continue to work with all market participants.
The Consumer Financial Protection Bureau’s (CFPB) Rule for Modernizing Debt Collection, which became effective on November 30, 2021, includes several key provisions, such as:
- Limiting the number of calls debt collectors can make per week to a consumer. A collector may not make more than seven calls in a seven-day period and may not call for seven days after a telephone conversation.
- With “limited content messages,” collectors can leave voicemails without violating third-party disclosure rules. By establishing contact with debtors using these limited content messages, agents can reduce litigation and consumer calls. However, the rule also gives consumers more power over how, when, and where they are contacted.
- Providing consumers with a validation notice containing specific information about their debt and their rights.
- Prohibiting debt collectors from threatening or harassing consumers.
- Allowing consumers to opt-out of certain communication methods, such as text messages or emails. While there is no cap on how many emails and texts collectors may send, they are prohibited from messaging people at inconvenient times. The FDCPA still prohibits collectors from harassing, oppressing, or abusing consumers. Therefore, collectors cannot send unlimited emails and texts. A 60-day reverification cycle is also required for text messaging to ensure consent was obtained and that the number has not been reassigned since.
- Each electronic communication must contain clear instructions on how to opt out. Debt collectors must also verify continuing consent to use electronic communications. Consumers can opt out of certain communication channels or change their communication preferences at any time.
- Requiring debt collectors to have reasonable procedures in place to ensure that they are collecting the correct debt from the correct consumer.
- Providing clear instructions for consumers to dispute debts and receive additional information about their debts.
Overall, the rules aims to provide greater consumer protections and transparency in the debt collection process.
