CFPB Issues Final Rule on Debt Collection Disclosures

The CFPB recently issued a final rule amending Regulation F, to provide additional requirements regarding: (i) the validation notice and disclosures provided at the outset of debt collection, (ii) identifying actions to be taken before a debt collector may report information to a consumer reporting agency (CRA), and (iii) prohibiting time-barred debt collection.  The final rule becomes effective on November 30, 2021.

Validation Notice

Under the final rule, debt collectors must provide the consumer with certain information relating to the debt and the consumer’s rights (Validation Notice).  The Validation Notice must be provided either in the debt collector’s initial communication to the consumer, or within 5 days of the initial communication, and must include the following information:

• a statement that indicates the communication is from a debt collector;
• the account number;
• for a consumer financial product or service, the debt collector’s name and mailing address, the name and mailing address of the consumer who owes the debt, the name of the creditor to whom the debt is currently owed, and the name of the creditor as of the itemization date (see below);
• an itemization of the current amount of the debt reflecting interest, fees, payments, and credits since the itemization date.  The debt collector may select one of five reference dates as the itemization date: 1) the last statement date; 2) the charge-off date; 3) the last payment date; 4) the transaction date; or 5) the judgment date; and
• consumer response information, such as prepared statements and prompts that the consumer may use to take certain actions, including disputing the debt.   

The final rule provides a safe harbor for debt collectors using the model form Validation Notice, which may include specific optional content.  The final rule incorporates certain requirements relating to translation of the notice into other languages, including a requirement the debt collector must provide a Spanish-language version if it included optional content notifying the consumer of the ability to request Spanish translation.

The debt collector must allow the consumer 30 calendar days from the date the consumer receives, or is assumed to have received, the Validation Notice, to dispute the debt or request original-creditor information about the debt.  During this period, the debt collector must not engage in collection activities or otherwise interfere with the consumer’s rights.

Importantly, the final rule revises the definition of “consumer” to include both living and deceased consumers.  Thus, if the debt collector knows or should know the consumer is deceased prior to providing the Validation Notice, the notice must be provided to the person authorized to act on behalf of the deceased consumer’s estate.

Required Actions Before Credit Reporting 

CFPB observed that some debt collectors have engaged in “passive collection” or the practice of furnishing collection information about a debt to a CRA without first taking an action to notify the consumer about the debt.  Under the final rule, such “passive collection” is unlawful and before a debt collector furnishes information to a CRA, it must: (i) speak to the consumer about the debt in person or by telephone; or (ii) place a letter in the mail or send an electronic message to the consumer about the debt and wait a reasonable period of time to receive notice of undeliverability.  The final rule provides that a period of 14 calendar days after the letter or electronic message was sent is deemed a “reasonable period of time.”  During the “reasonable period of time,” the debt collector must permit receipt of, and monitor for, notifications of undeliverability from communications providers.  If the debt collector receives a notice of undeliverability during the “reasonable period of time,” the debt collector must not furnish information about the debt to a CRA until it resubmits the information about the debt to the consumer using one of the methods identified above.

Time-Barred Debt

Finally, debt collectors are prohibited from bringing or threatening to bring legal action against a consumer to collect a time-barred debt.  The final rule defines “time-barred debt” as a debt for which the applicable statute of limitations has expired.  Proofs of claim filed in connection with a bankruptcy proceeding are not included in this prohibition.

The final rule follows a related final rule on debt collection practices issued by the CFPB in November 2020.  See WBK’s coverage of the November final rule here.