What's Missing? The CFPB's Notice of Proposed Rulemaking on Debt Collection Fails to Resolve a Number of Compliance Issues

Hudson Cook, LLP
Contact

Introduction

This article is part of a series of articles and webinars Hudson Cook will present over the coming weeks addressing the CFPB's Notice of Proposed Rulemaking on Debt Collection (the "Proposals"). While the Proposals, if adopted, would bring a welcome update to the Fair Debt Collection Practices Act's 1970s-era regulatory framework and patchwork of case law, there are a number of issues left unresolved by the Proposals. While the article briefly addresses how the Proposals could minimize risk for debt collectors, we devote most of the article to describing the issues that the Proposals fail to address with any certainty. Creditors and debt collectors considering whether to comment on the Proposals would be wise to review not only the substance of the Proposals, but also the issues they do not address.

Background

The CFPB issued the Proposals under its authority to make rules interpreting the federal Fair Debt Collection Practices Act ("FDCPA") and the Dodd-Frank Act's prohibition on unfair, deceptive, or abusive acts or practices ("UDAAPs"). The Proposals are the latest step in public-facing rulemaking activity that began in November of 2013 with the CFPB's advance notice of proposed rulemaking.

The CFPB will accept comments on the Proposals until Monday, August 19, 2019. The CFPB will then publish a final rule (there are no timing requirements for publishing the final rule), which is proposed to become effective one year after publication of the final rule in the Federal Register.

If adopted as proposed, the Proposals would apply only to persons who are "debt collectors" as defined in the federal FDCPA, and not to creditors.

Issues Addressed by the Proposals

The Proposals attempt to clarify a number of issues that have been the topic of FDCPA litigation over the years. The Proposals also attempt to clarify how debt collectors can use technology (including text messages and emails) to collect debt. We summarize the new issues addressed by the Proposals here and here.

Many of the Proposals could ease litigation risk for debt collectors who comply, including, for example, the model debt validation notice, and the safe harbor status it provides, the bright line rule for telephone contact frequency, the express authorization to communicate via text message and email, the limited content message meant to resolve the "Foti dilemma," and the guidance on "meaningful attorney involvement." Most of these issues arise frequently in litigation or else have caused compliance headaches for debt collectors attempting to communicate with consumers in a convenient and modern way under a regulatory regime developed in the 1970s. Some of the Proposals are highly technical and will create added compliance burdens for debt collectors, including, for example, the detailed requirements for obtaining the debtor's consent to receive text messages and emails and allowing debtors to opt out of such communications. We will continue analyze the new requirements and restrictions in the Proposals in more detail in subsequent articles and webinars.

Issues Not Clearly Addressed by the Proposals

The Proposals have not provided total clarity on all issues of concern and risk for debt collectors (and creditors). Below, we discuss some potential uncertainty in the Proposals and some areas where debt collectors and creditors might want clarity, but did not receive any from the Proposals:

  • Skip Tracing: The Proposals effectively re-state the FDCPA's limits on skip tracing (in the FDCPA, "skip tracing" refers to the practice of contacting a third party to obtain location information about a debtor). Since its inception, the CFPB has targeted the skip tracing practices of creditors and debt collectors alike, taking issue with repeated contacts to third parties for skip tracing purposes, contacting third parties when the debt collector still has good location information for the debtor, and inappropriate conversations with third parties that not only seek location information but also reveal the existence of the debt to the third party. For the most part, the CFPB has been consistently applying the FDCPA's limits on skip tracing to creditors and debt collectors. Given that the CFPB provided almost no additional guidance on skip tracing, it appears that the CFPB may believe the statutory limits are sufficiently consumer-protective and clear for debt collectors to understand. But, the CFPB could have clarified the circumstances under which a debt collector may engage in skip tracing (e.g., returned mail from the debtor's last known address, all voicemail boxes full, last known phone numbers disconnected, etc.). Or, it could have interpreted the exceptions in the FDCPA to "one contact" rule for skip tracing by explaining how a debt collector might demonstrate that an exception applies.
  • Time-Barred Debt: The CFPB effectively proposes to codify the least controversial time-barred debt cases under the FDCPA. Specifically, the Proposals would re-state the long-accepted rules that a debt collector may not sue or threaten to sue on time-barred debt (almost every court to consider these issues has found that lawsuits and threats to sue on time-barred debt violate the FDCPA). However, in recent years, the case law has become murky around what it means to "threaten to sue" on a time-barred debt. Are implied threats to sue sufficient? What type of language would imply that the debt collector is going to sue? Different courts around the U.S. have held that language like "settle" and "resolve" could imply that the debt collector has a right to sue, but there is no consensus on what it means to "threaten to sue" on a time-barred debt. The CFPB did not, in its Proposals, attempt to define "threaten to sue" or clarify what types of language could violate the FDCPA beyond simply an express threat to sue. This leaves the door wide open for continued litigation over what it means to threaten to sue on a time-barred debt.
  • Right-Party Contact: The CFPB did not provide any guidance on what sort of information a debt collector must obtain to establish right-party contact. "Right-party contact" is not a legal term; instead, it is short-hand for how a debt collector or creditor ensures that it is speaking with its customer before discussing the debt with the customer (including by providing a mini-Miranda warning that would necessarily reveal the existence of the debt to a third party). While the federal FDCPA does not expressly prohibit a debt collector from speaking to a person before confirming right-party contact, it does prohibit a debt collector from revealing the existence of the debt to a third party. To avoid revealing the existence of the debt to a third party, a debt collector should generally take steps to ensure right-party contact at the beginning of a communication, unless there are clear indicators that the debt collector is communicating with the debtor (e.g., she sends an email from an email address for which the debt collector has already established right party contact). While the safe harbor procedures in the Proposals for electronic communications appear to address right-party contact in that specific context (sending emails and text messages to debtors), the CFPB has left open how a debt collector would obtain right-party contact during an ordinary phone call.
  • Overshadowing: The CFPB has proposed a safe harbor debt validation notice that the debt collector may use to provide the information required by section 1692g of the FDCPA. According to the supplementary material, the additional language in the safe harbor beyond the required information would not, as a matter of law, overshadow the discussion of the consumer's debt validation rights. In other words, the safe harbor would be both a safe harbor for the required language, and a safe harbor against an overshadowing claim. However, any communications sent during the validation period, not just information in the validation notice, can overshadow the debtor's validation rights. The CFPB did not provide any further guidance, though, on what types of statements or other communications (such as billing statements, returned payment notices, payment reminders, and collection letters) sent during the validation period could overshadow the information in the validation notice. The case law under the FDCPA has not been consistent with respect to what language or practices may overshadow the debtor's debt validation rights. As a result, guidance from the CFPB on overshadowing would have been helpful.
  • Creditors: Perhaps the greatest open question following the Proposals is how the CFPB will apply any rule it promulgates under the FDCPA to creditors collecting their own debts. The Proposals define "debt collector" in the same way as the FDCPA, which expressly does not apply to creditors. However, as explained above, some provisions of the Proposals are promulgated not only under the CFPB's authority to make rules interpreting the FDCPA, but also under its authority to make rules prohibiting UDAAPs. Any act or practice that the CFPB has deemed unfair, deceptive, or abusive with respect to debt collectors could conceivably be applied to a creditor collecting its own debts. Further, the CFPB has made clear that it will enforce many provisions of the FDCPA against creditors collecting their own debts under a UDAAP theory. Therefore, even those provisions promulgated under the FDCPA could conceivably be applied to creditors collecting their own debts under a UDAAP theory. The CFPB has provided very little in the way of guidance to creditors on how it will view the Proposals in the UDAAP enforcement context. To its credit, the CFPB may want to afford itself some flexibility in how it wields its UDAAP authority and interprets the extent to which the FDCPA and any rules it promulgates under the FDCPA apply to creditors - the interests and business practices of creditors vary widely, and require some regulatory nimbleness. Nonetheless, certain vague statements about creditors in the supplementary material to the Proposals have sparked concern within trade groups representing creditors about the extent to which the CFPB might apply any rules it makes under the FDCPA or under its UDAAP authority to creditors collecting their own debts. And, the CFPB could certainly use the supplementary material in its final rule to elaborate more on its enforcement priorities with respect to creditors without tying its hands. This issue is ripe for comment by creditor groups.

Conclusion

The issues that the CFPB did not address are nearly as important as those that it did, given the risks posed by, and costs of, continued uncertainty. These issues are certainly worth commenting on. Even if the CFPB does not address them when it issues its final rule, it will at least be aware of areas where the rule can be improved in the future.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Hudson Cook, LLP | Attorney Advertising

Written by:

Hudson Cook, LLP
Contact
more
less

Hudson Cook, LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at www.jdsupra.com) (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at privacy@jdsupra.com.

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.