The CFPB Issues Regulation F, but the Debt Collection Rules Are Far From Final

The long-awaited Final Rule (Regulation F) for the Fair Debt Collection Practices Act (FDCPA) was issued Friday afternoon, concluding a seven-year rulemaking process. In its official press release, the Consumer Financial Protection Bureau’s (CFPB or Bureau) Director, Kathleen Kraninger, stated that “Our debt collection rulemaking provides limits on debt collectors and provides clear rights for consumers. With this modernized debt collection rule, consumers will have greater control when communicating with debt collectors.” 

The Final Rule will be effective within a year from its publication in the Federal Register, which is expected within the next few weeks. Those who must comply with the Final Rule have been preparing for its implementation since the Notice of Proposed Rule was issued in May of 2019. In its current form, the Final Rule is not perfect and certainly presents challenges for the industry. The Rule as it stands presents challenges to small participants who will need a more robust infrastructure to ensure compliance. The Final Rule is certainly the first step in bringing some much-needed consistency to a statute that lacked a primary regulator until the CFPB was granted authority over the statute under Dodd-Frank. Whether Regulation F achieves the goal of clear rules of the road for industry while at the same time providing consumers with a clear understanding of what constituted appropriate debt collection activity remains to be seen.

Ultimately, the Final Rule did not add substantive changes from last year’s proposed rule. A summary of the most significant regulations that were finalized are as follows:   

• Limited content voice mail Messages will be exempt from the FDCPA
  • Debt collectors will now be allowed to leave a specific voicemail message for consumers to get a call back or response without running afoul of the FDCPA. This specific message cannot be used in a text.
• Opportunities to communicate with consumers by email and/or text
  • Debt collectors will now be able to communicate with consumers by email and text provided that the debt collector has reasonable procedures in place to ensure that emails and texts are sent to the proper consumer, that the consumer can establish a preference regarding how he or she wants to communicate and that consumer has not otherwise opted-out of receiving the electronic communication or withdrawn that consent. Confirmation of a consumer’s telephone number or email address can come directly from the consumer, the creditor, or a prior debt collection.
• Debt collectors are provided with a rebuttable presumption of non-compliance if they exceed frequency limits on telephone calls
  • If a debt collector places more than seven calls within seven consecutive days or calls a consumer more than once within a seven day period after communicating with a consumer, a debt collector is presumed to have violated the FDPCA. The burden would then be on the debt collector to rebut that presumption.

The Bureau announced that a “disclosure-focused final rule” would be issued in December 2020. This is significant because in most instances, disclosures to consumers commence the debt collection process. By not issuing a final disclosure at this time, many stakeholders may be hampered in their run-up to implementation.  

With a pending election which could result in a possible new Director at the CFPB, it is unclear whether the implementation date of the Final Rule may be subject to delays or further review. Recall that the implementation of the Payday Rule was delayed due to legal challenges and re-consideration of the Ability-to-Repay (ATR) Provision by Director Kraninger. Ultimately the ATR provision was pulled from the Payday Rule. It is quite possible that provisions of the Final Rule could see a similar fate. Nonetheless, Industry should consider the Final Rule a “policy document for best practices” and begin the process of implementing these requirements within your daily operations.

The Clark Hill team will also be reviewing and analyzing the Final Rule in the coming days and weeks to provide greater insight and recommendations. Look for future in-depth analysis of specific provisions of the Final Rule shortly.

For more information, please contact Joann Needleman, jneedleman@clarkhill.com,  Leslie Bender, lbender@clarkhill.com, and Ann Lemmo, Alemmo@clarkhill.com