We have been waiting for the CFPB’s final adoption and implementation of its new debt collection Rule. Well, the wait is over. See 12 CFR Part 1006 - Fair Debt Collection Practices Act (Regulation F) | Consumer Financial Protection Bureau (consumerfinance.gov).
The adopted Rule, to be known as Regulation F, is really in two parts: First, the Rule focuses on debt collection communications and clarifies the Fair Debt Collection Practices Act’s (FDCPA) prohibitions on harassment and abuse, false or misleading representations, and unfair practices by debt collectors. This part of the Rule closely follows the FDCPA language itself.
The second part of the Rule clarifies certain disclosures that third-party debt collectors must provide to consumers at the beginning of collection communications.
So, what does all of this mean for original creditors, not third-party debt collectors? Several things.
- Recall that original creditors collecting their debt are indeed treated as third-party debt collectors if they use a fictitious name in collecting. This factor has long been a part of the FDCPA. But, Regulation F now adds another such instance: that is, if original debt collectors attempt to enforce a security interest by means of interstate commerce (mail, telephone, etc.), they are subject to the Act and the Regulation if the creditor (i) has no present right to possession of the subject collateral, (ii) has no present intention to take possession of the collateral, or (iii) the collateral is exempt by law from dispossession.
- In addition to my long standing advice to original creditors to follow the prohibitions of FDCPA Section 806 (harassment or abuse), 807 (false or misleading representations) and 808 (unfair practices), original creditors may also now want to (i) limit collection calls to the timing permitted at Regulation F Section 1006.14(b)(2), (ii) respect the requirement that debt collectors give debtors “opt-out” rights with respect to email and text messaging at Section 1006.6(e), and (iii) respect the prohibition against collecting time-barred debts at Section 1006.26.
- Certainly, there are several provisions in the Rule that may be seriously disruptive of an original creditor’s collection processes; and, for this reason, the original creditor may choose not to follow the Rule in every instance. For example, the notice for validation of debts and the providing of required disclosures may be a bridge-too-far for original creditors.
In my judgment, the key to success continues to be to conduct the business of collection in such a manner that original creditors never have to argue with a consumer’s attorney about why the creditor is not a “debt collector” under the FDCPA and this new Regulation F.