Ryan Wood: CFPB Seeks to Provide ‘Clear Rules of the Road’ with Revisions to FDCPA

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PERSON OF THE WEEK: The CPFB recently published new rules concerning the Fair Debt Collection Practices Act (FDCPA) – the first in more than 40 years – designed to clarify what practices are, or are not, allowed under Act.

To learn more about how these new rules will impact mortgage servicers, MortgageOrb recently interviewed Ryan Wood, a regulatory attorney in the compliance solutions unit at Covius.

Q: How do these new rules bring the FDCPA into the 21st century?

Wood: On October 30, 2020, the CFPB issued the final version of Regulation F, a rule that implements parts of the Fair Debt Collection Practices Act (FDCPA). The FDCPA was enacted in 1977, but prior to the creation of the CFPB, no federal agency had the authority to create regulations interpreting or clarifying the Act. Technology and debt collection practices have changed considerably in the past 43 years; this has led to uncertainty and litigation over how to apply the mandates of the FDCPA to modern processes.

According to CFPB Director Kathleen Kraninger, the purpose of the rulemaking is to “provide better protection for consumers, clearer operating procedures for debt collectors intent on following the law, and easier identification of the bad actors” and to develop “a debt collection system that works for consumers and the industry in the modern world.” The process of developing the new rule has taken more than seven years due to the complexity of the issues that the Bureau needed to address.

The rulemaking document spans more than 650 pages, of which approximately 33 pages make up the text of the actual regulation. The remainder consists of background information, explanations of the rulemaking process, an outline of the CFPB’s legal authority to make the rule, and detailed analyses and official commentary for each section of the regulation.

Q: What are the “new rules of the road” for servicers?

Wood: Director Kraninger has often emphasized her goal of providing “clear rules of the road” for the financial services industry to follow and, in keeping with that philosophy, this regulation seeks to clarify several of the ambiguous and contentious requirements of the FDCPA. 

The FDCPA prohibits debt collectors from communicating with a consumer “at any unusual time or place or at a time or place known, or which should be known, to be inconvenient to the consumer.” The new rules now provide a better sense of the meaning of an “unusual” or “inconvenient” time or place. The CFPB deliberately declined to require consumers to “use specific words to assert that a time or place is inconvenient for debt collection communications,” thereby placing the onus on collectors to be more careful about communication that the consumer may have indicated is inconvenient.

The rule also provides that a consumer “may restrict the medium through which a debt collector communicates by designating a particular medium, such as email, as one that cannot be used for debt collection communications.” This means, for example, that a collector may not contact a consumer using a particular email address or phone number that the consumer has declared off-limits.

Repeated or continuous phone calls are another area that the CFPB provided guidance on. The rule creates a presumption of violation of the FDCPA’s prohibition on repeated or continuous phone calls if a collector calls “more than seven times within seven consecutive days” or within a period of seven days after having a conversation with the consumer about the debt.

In terms of newer technologies, such as emails and text messages in debt collection, the CFPB has clarified that these can be used by servicers, subject to certain limitations and procedures.

In the past, leaving voicemails without triggering potential FDCPA violations has been the subject of much consternation for collectors. Collectors want to leave sufficient information in order to receive a call back, but courts have held that including information such as “this is a call from a debt collector” in a voicemail constitutes a “communication” under the FDCPA. This then obligates the collector to make additional FDCPA disclosures, even though the collector has not yet spoken with the consumer.

To help solve this issue, the rule defines “limited-content messages,” as a type of voicemail that a collector may leave for a consumer that will not be deemed a “communication” under the FDCPA. This addition should help clear up exactly what content collectors should include in a voicemail in order to avoid triggering additional FDCPA requirements.

Q: When do the new regulations take effect and are there more to come?

Wood: The final version of Regulation F will go into effect one year after its publication in the federal register, or November 30, 2021, which should give the financial services industry sufficient time to make any necessary adjustments to collection procedures.

The rule issued this October did not address the specific disclosures that a debt collector must provide in debt collection communication; that portion of the rule and a model form is expected to be published some time this month.

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