The rule becomes effective one year after it is published in the Federal Register.

On October 30, 2020, the Consumer Financial Protection Bureau (CFPB) issued a final rule revising Regulation F, 12 CFR part 1006, which implements the federal Fair Debt Collection Practices Act, 15 U.S.C. 1692, et seq. (FDCPA). (The second part of the final rule is discussed in a subsequent Alert.)

The final rule expressly applies to “debt collectors,” but the changes may also be of interest to financial institutions and creditors if, for example, a state’s definition of “debt collector” extends to creditors engaged in collection activities, the creditor voluntarily elects to adhere to the new standards and/or the creditor wants to know the rules that apply to their debt collection vendors.

As further detailed below, the final rule:

• Restates and clarifies prohibitions on harassment and abuse, false or misleading representations, and unfair practices by debt collectors when collecting consumer debt;
• Focuses on debt collection communications and gives consumers more control over how often and through what means debt collectors can communicate with them regarding their debt; and
• Clarifies how the protections of the FDCPA apply to newer communication technologies, such as email and text messages.

Below is a summary of some of the most significant provisions in the final rule.

Compliance Time Frame

The rule becomes effective one year after it is published in the Federal Register.

Electronic Communications with Consumers

Perhaps the most significant change under the final rule concerns how debt collectors may communicate with consumers electronically, namely, by email, text message or other electronic means. Under the final rule, email and text messages to consumers are permitted, but the rule sets out a certain limitations aimed at protecting consumer privacy and protecting consumers from harassment or abuse.

Notably, the rule requires debt collectors who communicate electronically with consumers to include in such communications a clear and conspicuous statement describing a reasonable and simple method to opt out of receiving further emails or text messages. Further, if a debt collector chooses to communicate with consumers through electronic communications, then this opens the door for the consumer to use electronic communications to place either a cease communication request or to notify the debt collector that the consumer refuses to pay the debt.

Telephone Call Contact Caps with Rebuttable Presumptions

The final rule also implements somewhat controversial “contact caps” on debt collectors who contact consumers by telephone. Under the new rule, a debt collector is presumed to violate the FDCPA’s prohibition on repeated or continuous telephone calls if the debt collector places a telephone call to a person more than seven times within a seven-day period, or within seven consecutive days of having had a telephone conversation with the person. On the other hand, a debt collector is presumed to comply with the FDCPA if the debt collector places telephone calls not in excess of either of these caps.

The final rule also provides nonexhaustive lists of factors that may be used to rebut the presumption of compliance or of a violation. In comparison, electronic communications do not have a specific numerical limit—but, these communications are still subject to standard prohibitions on harassment and abuse.

Other Communications Provisions

The final rule also clarifies restrictions on the times and places at which a debt collector may communicate with a consumer, including by clarifying that a consumer need not use specific words to assert that a time or place is inconvenient for debt collection communications.

The final rule also defines a new term concerning debt collection communications: “limited-content message.” Limited-content messages are voicemails left with a consumer, and the final rule identifies what information a debt collector must and may include in such message. If a voicemail includes only the permitted content, then it is not a “communication” under the FDCPA.

Social Media Contacts

Under the final rule, a debt collector may not communicate or attempt to communicate with a person concerning the collection of a debt through a social media platform if the communication is viewable by the general public or the person’s social media contacts.

Record Retention Requirements

The final rule also includes provisions clarifying debt collectors’ obligations to retain records evidencing compliance or noncompliance with the FDCPA and Regulation F. A debt collector must retain records starting on the date it begins collection activity until three years after the debt collector’s last collection activity on the debt. If a debt collector records telephone calls, then it must retain the recording of each call for three years after the date of the call.

Restrictions on Sale of Certain Debts

The final rule prohibits the sale, transfer for consideration or placement for collection of certain debts, namely, debts the debt collector knows or should know have been paid or settled or discharged in bankruptcy.

Lingering Uncertainty on Model Validation Notices

In the Notice of Proposed Rulemaking process, the CFPB provided a model validation notice which would act as a safe harbor for debt collectors from a barrage of FDCPA lawsuits. The CFPB states that it intends to publish a disclosure-focused final rule in December 2020 to clarify the information that a debt collector must provide to a consumer at the outset of debt collection and to provide a model notice containing the information required by FDCPA section 809(a).

Time-Barred Debt Disclosures

The final rule did not address the issue of the collection of time-barred debt. But, the CFPB has indicated that its upcoming disclosure-focused final rule will address this issue as well.

About Duane Morris

Duane Morris’ Banking and Finance Group will continue to monitor developments and issue additional Alerts as more information on the implementation of the final rule becomes available.

For More Information

If you have any questions about this Alert, please contact Jonathan M. Petrakis, Lynne E. Evans, any of the attorneys in our Banking and Finance Industry Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.