CFPB Proposed Rule: Modernization of the Debt Collection Rule under the FDCPA (May 7, 2019)

To amend Regulation F, of the Fair Debt Collections Practices Act

No one likes having debt, yet most of us have it. We accumulate debt through education loans in hopes of creating more opportunities and a better future for ourselves. From the purchase of consumer household goods and because we get sick and don’t have insurance or insurance doesn’t cover the bills, we take on debt. We acquire debt because few have cash on hand to purchase a car or house outright.  No matter the reason, we accumulate debt - then the debt has to be repaid.

For the vast majority of Americans, we carry some level of consumer debt, and for a small percentage of consumers, the debt is easy to pay off and never causes a day of worry. For 25%[1] of Americans, debt weighs heavily on them, and they worry about how to repay the debt. Regardless of the reason for debt, the majority of Americans from all income levels work hard at repaying their debts in full as they strive to maintain their daily lives of working and taking care of their families.

In 1977, the Fair Debt Collections Practices Act (FDCPA) was approved by Congress, providing guidelines for how the debt collection industry can conduct business and provide protection for consumers. Some of the current guidelines in the FDCPA include only calling consumers between 8 am – 9 pm (based on consumer time zone), barring the discussion debt with people other than the consumer and notifying the consumer of debt to confirm the validity of the debt; and providing consumers an opportunity to dispute the debt.

These guidelines help consumers have the ability to track their debt, who owns it and know who should be contacting them, as well as manage how they were being contacted by debt collectors.

On May 7, 2019, in Philadelphia, the CFPB (Consumer Finance Protection Bureau), under the Trump Administration, released a proposal to update Regulation F of the FDCPA[2], which governs the guidelines that debt collectors follow to collect consumer debt.

The changes proposed were made under the guise of modernizing the debt collection industry. However, the proposed changes would actually remove protections that consumers have enjoyed for more than ten (10) years and open consumers up for harassment and abuse from the debt collection industry.

A quick summary of debt collection guidelines allowed under the current Regulation F, of the FDCPA:

1.    Limits the hours of contact

2.    Limits on what debt collectors can say in voice mail or to others who answer the phone

3.    Prohibits contact via email, text and social media

Proposed Rules Allow:

1.    Seven (7) calls per each debt per week.

2.    Unlimited emails and text messages without confirming the consumer has access to the email account or text number

3.    Access to contact consumers via social media (Direct Messages, Private Messages), with no guarantee they won’t ‘accidentally’ message on the public side of social media

4.    Zombie debt

Proposed changes to Regulation F allow debt collectors to contact consumers through the telephone up to seven (7) times per week, per debt. This may not seem like a lot; however, if you have multiple student loans, like 60% of Americans[3], you could receive seven (7) calls on each loan. Consumers with student loan debt, hold an average of 3.7 loans[4], which could result in 28 calls per week. That’s a large number of calls and could be considered harassment.

New to the debt collector toolbox would be the ability to contact consumers through email and text messages, an unlimited number of times. For a growing number of Americans who use pre-paid cellular services and pay to send and receive text messages, adding an additional burden causing consumers to pay for text messages received from debt collectors or requiring them to pay for the data services when receiving email messages, when not connected to Wi-Fi.

There are many red flags for consumer protections with these changes.

1.    The biggest red flag is debt collectors would not have to confirm that the email address or cellular number they are contacting is accessible by the consumer.

2.    The next red flag is debt collectors would no longer have to send proof of verification of the debt through the US Postal Service. They would have the ability to send debt notifications electronically through email or text, without confirming the consumer can receive and access the messages.

3.    Another red flag with this proposed tool is consumers would be required to click on a link contained in the electronic message to confirm receipt of the notification – current good practices as given by the government and communication companies says not to click on links that you don’t recognize.

4.    A bad game-changer allows debt collectors the right to contact consumers via their social media accounts. The proposed rule would limit them to sending messages through DM’s (direct messages) and FB messages; provided they didn’t intentionally post on the consumers' page or tweet them where others could see. However, there would be no consequences or penalties if a debt collector “accidentally” posts the amount a consumer owes into their twitter feed, Facebook page, or Instagram feed.

Also included are proposed changes that would violate consumer privacy by disclosing details of a consumer’s debt to people other than the consumer, including at the consumer’s place of employment. Currently, debt collectors are prohibited from disclosing information that would identify the purpose of their call as debt collection when leaving a message with a person or on a voicemail message. Under the proposed changes, debt collectors would be able to disclose the reason for their call to whomever they speak with or wherever they leave a voice mail message.

What may be the most harmful proposed change is for the collection of a time-barred debt or zombie debt, which is debt that legally doesn’t exist due to expired statute of limitations.  This is debt that is revived if a consumer to acknowledge the debt, promises to make a payment or actually makes a payment on the expired debt.

Most consumers are not aware of the statutes of limitation of debt. Additionally, most consumers are not aware that there are two different statutes to be aware of; one set by their state and the other set by consumer credit reporting companies. The proposal allows consumer debt to live on even when it should not be collected, and the consumer can no longer be sued legally.

The proposed changes to Regulation F of the FDCPA amount to harassment and abuse for consumers.

What we’re asking for in the proposed changes:

1.       Debt collectors should be limited to one (1) conversation with the consumer each week and three contact attempts, regardless of the number of debt collectable items that the consumer has with that debt collector.

2.       Debt collectors should be required to obtain consent from the consumer to send electronic communications, and collectors have to comply with the E-Sign Act prior to sending any electronic notices.

3.       No form of communication should be exempt from the FDCPA (meaning all methods of communication should include consumer protections by the FDCPA), and debt collectors should have to respect the privacy of consumers in all communications as they currently do.

4.       All time-barred debt (zombie debt) should be banned.  

What can you do to get involved? The CPFB has a 75 day public comment period for people to voice their support or opposition to the proposed rule changes. You can make your voice heard in stand in opposition of harmful policies until August 19, 2019.

Comments can be sent to the CFPB by identifying Docket No. CFPB-2019-0022 or RIN 3170-AA41, by any of the following methods:

Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.

Email: 2019-NPRM-DebtCollection@cfpb.gov. Include Docket No. CFPB-2019-0022 or RIN 3170-AA41 in the subject line of the email.

Mail: Comment Intake—Debt Collection, Bureau of Consumer Financial Protection, 1700 G Street NW, Washington, DC 20552.

Hand Delivery/Courier: Comment Intake—Debt Collection, Bureau of Consumer Financial Protection, 1700 G Street NW, Washington, DC 20552.

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[1] 25% of Americans Are Worried About Their Finances for 2019 — Here’s Why, Go Banking Rates

[2] Debt Collection Practices (Regulation F), Released on 5/7/19 by the CFPB

[3] Americans are drowning in debt. Here’s where it’s the worst, Washington Post

[4] What Is The Average Student Loan Debt, Experian