Over the past two years, the CFPB has been updating Regulation F (“Rule”)[1] which implements the Fair Debt Collection Practices Act of 1977 (“FDCPA”).[2]  Previously, the rules for debt collectors addressed traditional forms of communication like landline telephone calls and snail mail.  The new Rule captures 21st-century communication methods like text messages, email, and social media messaging, and also adds consumer protections.  While Regulation F does not apply to banks that collect their own debts, banks should be knowledgeable about the Rule’s detailed requirements in order to have proper oversight in place for any third-party debt collectors hired to collect bank debts.  Additionally, banks should consider following Regulation F’s debt collection practices as added protection against allegations of unfair or deceptive collection tactics, which could implicate other laws and regulations.  Some of the changes to Regulation F include limitations on communications, required disclosures, prohibited conduct, and record retention. 

Communications

The new Rule covers debt collectors and debts as defined in the FDCPA with no expansion of the definition.  First-party creditors, like banks who collect their own debts, are not “debt collectors”, but mortgage servicers are not excluded from the definition, so it is unclear whether the Rule’s requirements and prohibitions apply to mortgage servicing operations.  The definition of “debt” is also the same as in the FDCPA and only includes an obligation or alleged obligation of a consumer who is a natural person.[3]  The Rule clarifies what constitutes a “communication” from a debt collector through traditional and new technologies.  Communication is the conveying of information regarding a debt directly or indirectly to any person through any medium, including any oral, written, or electronic.  Examples of communication include contact in person or by telephone, audio recording, paper document, mail, email message, text message, social media message, or other electronic media.[4]  Regulation F requires a debt collector to include a clear and conspicuous opt-out notice in electronic communications and electronic attempts to communicate with a consumer.[5]  The opt-out notice must have a reasonable and simple method by which the consumer can opt out of further electronic communications to a specific email address, telephone number for text messages, or other electronic-medium address to which the electronic communication or electronic attempt to communicate is sent.

The Rule also defines an “attempted communication” as any act to initiate a communication or other contact about a debt with any person through any medium, including by soliciting a response from such person.  An act to initiate a communication or other contact about a debt is an attempt to communicate regardless of whether the attempt, if successful, would be a communication that conveys information regarding a debt directly or indirectly to any person.[6]  Debt collectors are not permitted, with limited exceptions, to communicate with a third party about a consumer’s debt,[7] nor are they allowed to contact consumers through a social media platform if the communication or attempt to communicate is viewable by the general public or the consumer’s social media contacts.[8]

There is a voicemail safe harbor under the Rule.  A “limited-content message” (“LCM”) is not a communication by a debt collector, but instead is an attempt to communicate because it does not give information about a debt directly or indirectly to a person.  An LCM is a voicemail for a consumer that contains (i) a business name for the debt collector that does not indicate that the caller is in the business of collecting debts; (ii) a request that the consumer reply to the message; (iii) the name(s) of one or more natural persons whom the consumer can contact to reply to the debt collector; and (iv) the telephone number(s) that the consumer can use to reply to the debt collector.[9]  An LCM may contain a salutation; the date and time of the message; suggested dates and times for the consumer to reply to the message; and a statement that the consumer may reply to any of the company’s representatives or associates.  An LCM must include all required content, and may include optional content, but cannot include additional content or it could lose its status as an LCM.  LCMs are not allowed in live calls or text messages. 

Required Disclosures & Validation

The revised Regulation F requires that a debt collector provide a consumer with five categories of validation information in regard to the consumer’s debt at the outset of debt collection communications.[10]  Conveniently, the Rule provides a model notice for such disclosures that, if used, grants the debt collector a safe harbor for compliance with the validation information content and format requirements.[11]  The validation notice must be sent within five days of initial communication with a consumer and can be written or electronic.[12]  Regardless of the method utilized, both written and electronic disclosures must be given in a manner that is reasonably expected to provide notice and in a form a consumer may keep and access later.  In the case of any disclosures that are provided verbally, the disclosures must be given at a volume and speed sufficient for the consumer to hear and comprehend them.  Something to be aware of, the model notice must remain substantially similar to the published form in order to obtain the safe harbor protections; thus, any additional non-required information a debt collector desires to provide (e.g., state law information) should be placed on the back of the model notice form. 

Permitted & Prohibited Conduct

The new Regulation F places limits on the time, place, and number of communications that can be made to consumers regarding a debt.  It is important to be aware that for purposes of these prohibitions, “consumer” not only includes the debtor but also that person’s spouse, parent (if the debtor is a minor), legal guardian, executor or administrator of the estate of a deceased consumer, and confirmed successor in interest.[13] 

Debt collectors cannot make telephone calls repeatedly or continuously with the intent to annoy, abuse, or harass.[14]  They can gain a presumption of compliance with this prohibition by following the “seven in seven” guideline, which is: (i) placing a telephone call to a particular person no more than seven times within seven consecutive calendar days, and (ii) after having a live telephone conversation with a person, not calling them again for seven consecutive calendar days.[15]  There are exceptions to the limitations on call frequency.  The call by the debt collector does not count toward the call limit when the consumer gives prior consent directly to the debt collector; when the telephone call does not connect to the dialed number (busy signal or number not in service); or when the debt collector is calling the consumer’s attorney, the creditor, the creditor’s attorney, the debt collector’s attorney, or a credit reporting agency.[16]

The Rule also generally prohibits communications at inconvenient times or places, after a consumer has refused to pay, or after a consumer has requested a debt collector halt communications. A debt collector may not communicate or attempt to communicate with a consumer at an unusual time or at a time that the debt collector knows or should know is inconvenient to the consumer, or at any unusual place or at a place that the debt collector knows or should know is inconvenient to the consumer.[17]  The Rule provides that inconvenient times are before 8:00 a.m. and after 9:00 p.m. local time at the consumer’s location.  The time of an electronic communication or electronic attempt to communicate occurs at the time that the debt collector sends it, not at the time that the consumer receives or views it.[18]  Additionally, if a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wants the debt collector to cease further communication, with limited exception, the debt collector must not communicate or attempt to communicate further with the consumer with respect to such debt.[19]  The writing from the consumer can be in the form of a text message or social media message, as long as the debt collector accepts those types of electronic communications from consumers.

The revised Regulation F allows any person to request that a debt collector not use or stop using a particular medium of communication (e.g., email, email messages to a specific address, telephone calls, or telephone calls to a specific number) to collect a debt.  Subject to certain exceptions, once a person has made such a request, the debt collector cannot communicate or attempt to communicate with a person through that requested medium.[20]  If the consumer opts out of receiving electronic communications, the debt collector may send an electronic communication to confirm the opt-out but cannot add any other information to that communication. If the consumer uses the prohibited medium to contact the debt collector, the debt collector may respond once using that same medium. 

The Rule also generally prohibits communicating or attempting to communicate with a consumer at the consumer’s workplace if the debt collector knows or has reason to know that the employer prohibits the consumer from receiving such communications.[21]  This prohibition extends to emails.  Debt collectors may not communicate with a consumer using an email address that the debt collector knows is provided by the consumer’s employer, unless the consumer has given prior consent and not withdrawn that consent, or the consumer used the email address to contact the debt collector and has not since opted out of communications to that email address.  Additional prohibitions for debt collectors include communicating with a consumer who is known to be represented by an attorney; taking action or threatening to take action that cannot be taken; and threatening to take an action that the debt collector does not actually intend to take.[22]     

Takeaway

The biggest risk for banks in regard to the revised Regulation F is to fail to be knowledgeable of the Rule’s requirements and prohibited conduct.  Banks will benefit from instituting policies and procedures that ensure proper oversight of third-party debt collectors to monitor compliance with Regulation F and should consider eliminating debt collection practices that are prohibited under the Rule. 

For more information about this article or other legal banking issues, contact DeMarion Johnston, VBA General Counsel, at djohnston@vabankers.org. This article has been prepared for informational purposes only and is not legal advice.