CFPB Loosens Restrictions On Debtor Contact

Debt collection is ready to enter the digital age.

To that end, the Consumer Financial Protection Bureau (CFPB) issued a final rule on Friday (Oct. 30) that allows debt collectors to engage with borrowers over a broader range of communications channels than before. The communications can now include email and text messages (in unlimited quantity and even across social media direct messages), according to the CFPB.

But the final rule, modifying the Fair Debt Collection Practices Act (FDCPA), also limits the number of times a collector can contact a borrower within a seven-day period – to seven calls over seven consecutive days.

Spanning more than 650 pages, the final rule also mandates that debt collectors give consumers “simple” methods to opt-out of being contacted at their phone numbers or email addresses.  The consumer can, in turn, use the method of communication utilized by the debt collector – the email, for example – to request that the collector stop contacting them.

The final rule comes after the changes were initially proposed in May 2019, and the CFPB received more than 14,000 comments over the ensuing comment period that lasted into September of last year.

The CFPB said the changes “clarify the application of the FDCPA to newer communication technologies” that did not exist when the Act was passed in 1977.

Urban.org has estimated that roughly one-third of people with credit profiles in the U.S. have debt in some stage of collections.

In more granular detail on communications, the final rule also states that a debt collector may obtain “a safe harbor from civil liability” for an unintentional third-party disclosure if the collector follows the procedures identified in the rule when communicating with a consumer by email or text message.

Validation Up Next?

There are no changes discussed to debt validation – where initial points of contact from debt collectors mandate that they send documentation informing the consumer of (and detailing) the outstanding debt. “The Bureau is completing its review and evaluation of comments regarding … the form and content of validation information,” according to the final rule.

As reported by Banking Dive, the CFPB will address a second rule in December centered on the disclosures tied to debt where the statute of limitations has expired – and where collectors cannot sue to collect that debt.

Consumer groups contend that the door is now opened for individuals to be harassed by collectors, who are allowed by the final rule to make one call per day – and several calls for consumers who may owe debt tied to multiple accounts.

“We appreciate that the CFPB has modified many aspects of the rule in response to our concerns, but with millions of Americans scraping by amid the economic fallout from a global pandemic, the rule still allows debt collectors to make excessive, harassing calls,” National Consumer Law Center attorney April Kuehnhoff said in a statement.

The new rules come against a backdrop where, as noted in this space, Americans cut their credit card balances as recently as August for the sixth consecutive month, the Federal Reserve System reported. Revolving debt — mainly credit card debt — as reported by the central bank declined by $9.4 billion in August compared with July. And in another sign that finances are being stretched amid the pandemic, PYMNTS’ own data show that roughly 60 percent of individuals live paycheck to paycheck.