insideARM Perspective on CFPB Outline of Proposed Debt Collection Rules

Last week the CFPB released its 117-page Outline of Proposed Rules for debt collection in anticipation of the next step in rulemaking, the SBREFA panel, to be held on August 25th. insideARM is breaking down those proposals for our readers in a series of posts covering the range of topics addressed.

Our first post – insideARM Perspective on CFPB Outline of Proposed Debt Collection Rules – Communication Part 1 — detailed the specifics of the Outline covered the first two topics related to communications; voicemail and contact frequency. This post covers the remaining topics in that section: general time, place, and manner restrictions; decedent debt, and consent.

General time, place, and manner

FDCPA section 805(a) limits the times and places at which collectors may communicate with consumers in connection with the collection of debts. Unless the collector has received consent from the consumer, they are prohibited from communicating with that consumer about a debt at “any unusual time or place, or at a time or place that the collector knows or should know is inconvenient for the consumer,” such as a hospital, church, or day care center. The statute also specifies that debt collectors shall assume that the convenient time for contacting consumers is after 8:00 a.m. and before 9:00 p.m. in the consumer’s location – unless they’ve been told otherwise by the consumer.

The CFPB says that, in spite of these protections, consumers continue to complain about this issue, so they are contemplating further rules. The Bureau also acknowledges that debt collectors face uncertainty about whether and how section 805(a) applies to communications via newer technologies such as email.

The proposal under consideration dictates that collectors would not be able to rely on the consumer consent provided to the original creditor or a prior collector. [Emphasis here, and in subsequent paragraphs, added by insideARM]

The Bureau is also considering a proposal that would specify how a debt collector determines a consumer’s location when the debt collector has conflicting location information for the consumer. For example, when a consumer has a mobile phone number in one time zone and a street address in another, a debt collector may be unsure which time zone reflects the consumer’s actual location. The proposal would provide that, in the absence of knowledge of circumstances to the contrary, the debt collector would have to choose a time that would be convenient in all of the locations in which the collector’s information indicates the consumer might be.

The proposals also address newer technologies, saying that whether a communication is sent at an unusual or inconvenient time is determined by the time at which the message generally is available for the consumer to receive it. Because an email or text message is generally immediately available for consumer’s receipt, the time of sending will be the determining factor.

It is very encouraging that the CFPB is directly addressing communication via newer technologies. Collectors have been saying for quite a while that consumers want to be able to communicate with them using the methods with which they are most comfortable, but there has been too much gray area surrounding the use of these methods.

Decedent debt

There are several proposals under consideration related to communication with consumers about the debt of an individual who has died. The proposals would:

Clarify that it is permissible to contact surviving spouses, parents of deceased minors, or individuals who are designated as personal representatives of an estate under state law.
Establish a 30-day pause after the consumer’s death before such contact could begin. This waiting period would apply regardless of the method of communication (e.g., phone, email, mail, text message, etc.). The Bureau is also seeking feedback about the idea of a 60-day waiting period as an alternative.
Clarify that a “personal representative” is acceptable “as part of, in addition to, or instead of the labels ‘executor or administrator.’”
Define “personal representatives” as those individuals who have been recognized under state probate or estate laws as having responsibilities to perform many of the same functions as executors and administrators. However, the Bureau is also seeking feedback on the idea of defining “personal representative” more broadly, to include, for example, any person with the authority to pay the decedent’s debts out of the assets of the decedent’s estate.
Specify that a collector who contacts a consumer during the 30-day waiting period without knowing or having reason to know that the consumer has died would not violate the regulation. However upon learning of the consumer’s death, the collector would be required to either terminate the communication or solely to seek location information for the decedent’s official representative (as defined above).

Consumer consent

Perhaps one of the more significant proposals under consideration by the Bureau is that a collector could no longer rely on consent passed to it from their creditor client. The requirement would be that each collector, to obtain consent, must obtain it directly from the consumer (whether orally or in writing).

Additionally, the Bureau is considering requiring collectors to clearly and prominently disclose to the consumer – either orally or in writing – what the consumer is consenting to (e.g., that the consumer consents to communications at a specific date and time, or to the debt collector revealing information about a debt to a third party). The CFPB is not yet clear on how to implement this requirement, and how specific the disclosure must be.

insideARM knows that many collection agencies have been evaluating their policies and procedures to both collect and document consent. According to the Outline, the Bureau is interested in receiving feedback about the most effective and least burdensome methods for memorializing consent, as well as the revocation of consent.

This is a critical time for the industry to voice its opinion. As you can see, the Bureau is requesting input in a variety of specific areas. Contact your appropriate association(s) to offer data, input, and assistance in this effort.

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Read insideARM’s detailed coverage of the CFPB’s Outline of Proposed Rules

CFPB Outlines Debt Collection Rulemaking Proposals

insideARM Perspective on CFPB Outline of Proposed Debt Collection Rules – Communication Part 1 (Contact frequency and voicemail messages)

insideARM Perspective on CFPB Outline of Proposed Debt Collection Rules – Communication Part 2 (General time, place, and manner restrictions; decedent debt; and consumer consent)

insideARM Perspective on CFPB Outline of Proposed Debt Collection Rules – Information Integrity (Data integrity, data transfer, substantiation, validation notice)

insideARM Perspective on CFPB Outline of Proposed Debt Collection Rules – Litigation and Time-Barred Disclosures

What Collectors Really Need to Know About the CFPB’s Proposed Rules - a podcast by Attorney John Rossman

15 Industry Experts React to CFPB Outline of Proposed Debt Collection Rules

Webinar: CFPB Rulemaking and Overview (August 16, repeated on August 18) – free for Compliance Professionals Forum members; $59 for others

President of FMA Alliance Shares Experience at Debt Collection SBREFA Hearing

Creditor Rights Law Firms Well-Represented on CFPB’s Small Business Review Panel