This post follows up on our earlier “primer” and flash alert on the Consumer Financial Protection Bureau’s proposed rule (the proposal) to implement the Fair Debt Collection Practices Act, which the CFPB released with a Fact Sheet and a Table of Contents to the proposal. Below, we describe key details of the proposal, and provide further information from stakeholders and the CFPB that has become available since the proposal’s publication.

McGuireWoods also will host a free webinar on the proposal in the coming weeks; a date will be announced soon.

Comments on all aspects of the proposal are due 90 days after it appears in the Federal Register, which should be any day now.

I. Summary of Key Points

  • The proposal would apply only to “debt collectors” as defined by the FDCPA. Importantly, owners of debt — even debt in default when purchased — would continue to fall outside the branch of the “debt collector” definition that covers those who regularly collect debts “owed or due, to another.” As a practical matter, this means that the only “first-party” collectors (i.e., collectors who own the debt) who would generally be regulated as “debt collectors” would continue to be those who operate a “business the principal purpose of which is the collection of debts.”
  • Nonetheless, many of the proposal’s requirements regarding what is unfair, deceptive or abusive under the FDCPA likely would be viewed as informing the UDAAP/UDAP analysis that applies to every person collecting consumer debts.
  • The proposal would regulate communications by debt collectors in several key ways. In particular, it would:
    • cap at seven the number of telephone calls that debt collectors may place to consumers within a seven-day window about a particular debt;
    • impose a waiting period of seven days after a debt collector has a telephone conversation with a person about a particular debt;
    • permit unlimited electronic communications about a debt, but require a debt collector to include in any e-mail, text message or other electronic communication a clear and conspicuous statement describing a way for the consumer to “opt out” from receiving any further messages through that particular medium;
    • prohibit communications about a debt via a workplace email addresses (with exceptions) and through public-facing social media platforms; and
    • create an exception to communications limits and requirements for messages satisfying the definition of a new term, “limited content message.”
  • The proposal would standardize the “debt-validation” disclosures to consumers long required by § 809 of the FDCPA.

II. Structural Observations

Several parts of the proposal merely re-state the FDCPA’s requirements. In that regard, the CFPB intends that this rule become the sole, or at least the primary, source for determining FDCPA requirements, in much the same way that many other consumer financial regulations now do, such as Reg. Z serving as the primary source for reviewing requirements initially appearing in the Truth-in-Lending Act.[1]

The proposal would mirror many other consumer financial rules by including Official Commentary to the rule’s text, which courts have held is as authoritative as the rule text itself. The proposal also would permit stakeholders to make requests for an “official interpretation,” which if granted would then be included in the Official Commentary.[2]

III. Definitional and Coverage Issues

The proposal raises a few threshold definitional and coverage issues that affect what its requirements would mean in practice.

A. “Debt Collector” and UDAAP / UDAP Issues

The proposal, like the FDCPA, regulates the activities of “debt collectors,” and incorporates the statute’s definition of that term (and the term “debt”) with only minor wording changes. Thus, owners of debt, even if purchased after a default, would continue under the Supreme Court’s decision in Henson v. Santander Consumer USA, 137 S. Ct. 1718 (2017), to fall outside the branch of the “debt collector” definition that covers those who regularly collect debts “owed or due, to another.” As a practical matter, this means that the only “first-party” collectors (i.e., collectors who own the debt) who would generally be regulated as “debt collectors” would continue to be those who operate a “business the principal purpose of which is the collection of debts.”[3]

Nonetheless, as we explained in our “primer”, many of the proposal’s requirements regarding what, under the FDCPA, is considered to be “unfair” (see § 1006.22), “deceptive” (§ 1006.18) or “abusive” (§ 1006.14) likely would be viewed as informing the UDAAP/UDAP analysis that applies to every person collecting consumer debts. Indeed, the CFPB makes this connection between the FDCPA and UDAAP explicit in the proposal by relying on its separate authority to under Section 1031(b) of the Dodd-Frank Act to prescribe rules under UDAAP in several instances, albeit only UDAAP rules that would apply to FDCPA “debt collectors.”[4] In sum, banks and others who fall outside the FDCPA’s and the proposal’s definition of “debt collector” would be wise to follow this rulemaking closely.

B. “Communications” and “Limited-Content Messages”

1. A Limited-Content Message Is Not a “Communication”

Much of the proposal (and the FDCPA) describes when debt collectors may not communicate, or attempt to communicate, with a consumer or others. The proposal, however, defines the words “communicate” and “communication” not to include what it calls a “limited-content message.”[5] This means that when the proposal prohibits debt collectors from “communicating,” the debt collector does not violate the prohibition if it merely conveys a “limited-content message.”[6]

A “limited-content message” is “a message for a consumer” that must contain these five items:

  1. the consumer’s name;
  2. a request that the consumer reply to the message;
  3. the name or names of one or more individuals (“natural persons”) whom the consumer can contact to reply to the debt collector;
  4. a telephone number that the consumer can use to reply to the debt collector; and
  5. if the message is a text or other electronic message, the required opt-out discussed below for messages through such mediums.

Nothing may be added to these five essential items in the message, other than these specified optional items:   (a) a salutation; (b) the message’s date and time; (c) a “generic statement that the message relates to an account”; and (d) suggested dates and times for the consumer to reply to the message.[7] Note that the requirement that the message be “for a consumer” would be satisfied if, for example, the collector leaves a limited-content message with a third party who answers the consumer’s home or mobile telephone.[8]

Any deviation from these essential and optional items will turn the message into a regulated “communication.” For example, “a message that includes the consumer’s account number is not a limited-content message because it” goes beyond the optional item described above for a “generic statement that the message relates to an account.”[9]

The proposal offers this example (and others) of a limited-content message that includes the essential as well as some optional items:

“Hi, this message is for Sam Jones. Sam, this is Robin Smith. I’m calling to discuss an account. It is 4:15 p.m. on Wednesday, September 1. You can reach me or, Jordan Johnson, at 1-800-555-1212 today until 6:00 p.m. eastern, or weekdays from 8:00 a.m. to 6:00 p.m. eastern.”[10]

2. However, a Limited-Content Message Is an “Attempt to Communicate”

Although not a communication itself, conveying a limited-content message is what the proposal defines as an “attempt to communicate.”[11] Thus, the prohibition on attempting to communicate with a consumer who has told the collector to cease further communications, for example, would bar a collector from conveying even a limited-content message.[12]

C. Deceased “Consumers”

The proposal also would go beyond the text of the statute by interpreting the term “consumer” to include deceased natural persons who are obligated or allegedly obligated to pay a debt.[13] Moreover, if a debt collector knows or should know before providing validation information that a debtor is deceased, then for purposes of validation notices and related disclosures described below, a person authorized to act on behalf of the deceased debtor’s estate “operates as the consumer.”[14]

Additionally, for several of the proposals prohibitions on communications with consumers, the term also would include a consumer’s spouse; a consumer’s parent (if the debtor is a minor); a consumer’s legal guardian, the executor, administrator or other personal representative of estates of deceased consumers; and a “confirmed successor-in-interest” to the consumer, as that term is now familiarly defined in Reg. X’s mortgage servicing rules.[15]

IV. Communication Provisions

A. Telephone Calls

1. Cap on the Number of Telephone Calls

The piece of the proposal that has generated the most reaction since its release is the cap on the number of telephone calls that a debt collector may “place” to a “particular person” — which could be the consumer or a particular third-party — about the collection of a “particular debt” within a seven-day period. The proposal would impose a cap of seven such telephone calls within any seven-day period.[16] Note that “placing a telephone call” would include “conveying a ringless voicemail,” even when only a “limited-content message” is conveyed. Thus, the proposal would count mere attempts to communicate by placing a phone call toward the seven-call limit.

The cap on placing telephone calls would not, however, count the sending of an electronic message to a mobile telephone, such as a text message (or an email).[17] The cap would also make exceptions for and thus not count certain types of calls, such as those responding to a person’s request for information, or calls placed with a person’s prior consent given directly to the debt collector.[18]  The proposed commentary contains several examples applying this cap to specific facts.[19]

2. Waiting Period After Telephone Conversations

Relatedly, the proposal would impose a waiting period of seven days after a debt collector has a telephone conversation with a person about a particular debt, during which time the debt collector would not be permitted to place a telephone call to that person about that debt.[20] Again, proposed commentary contains examples of how this rule would apply to specific facts.[21]

B. Texts and E-mails: Opt-Outs and Workplace Restrictions on Communications

The proposal contains no frequency limit, or waiting period, for electronic messages such as e-mails and texts. However, the proposal does impose other restrictions on electronic messages:

  • Opt-Outs. The proposal would require a debt collector to include in any e-mail, text message or other electronic communication a clear and conspicuous statement describing a way for the consumer to “opt out” from receiving any further messages from the collector through that particular medium, such as through a particular phone number, e-mail address or other electronic-medium address. “Clear and conspicuous statement” here would generally require the use of a type size no smaller than the other text in the message.[22]
  • Workplace E-mails. The proposal would prohibit a debt collector from communicating or attempting to communicate with a consumer either:
    • through an email address that the debt collector should know is provided by the consumer’s employer, unless the consumer consents in advance directly to the debt collector or sends the debt collector an email from that email address;[23] or
    • at the consumer’s place of employment by any means of communication, if the debt collector should know that the consumer’s employer prohibits the consumer from receiving such communication, unless the consumer consents in advance directly to the debt collector (or with court permission).[24]
  • Public-Facing Social Media Platforms. Under the proposal, collectors would specifically be prohibited from communicating or attempting to communicate about a debt through a public-facing social media platform, except via the platform’s private message function.[25]

C. Stakeholder Reaction and Further CFPB Guidance on Communications

Since the proposal on May 7, stakeholders across the spectrum have voiced strong reaction to these communication provisions, and the CFPB has already provided some informal response.

Industry stake-holders, consistent with their position before the proposal, have decried what they call a “one-size fits all” approach on the seven-telephone call cap and related waiting period on the basis that this fixed limit and waiting period would apply regardless of the type of debt, the amount of the debt, and the age of the debt. Consumer advocates, on the other hand, intend to push for the CFPB to modify the proposal and adopt a “per consumer,” rather than a “per debt” approach. As advocates have pointed out, the proposal would allow a collector to call a consumer seven times in a week about a medical debt, and an additional seven times during the same week about a credit card debt.[26] The proposal treats student loans differently from other debts, however; all loans serviced under a single account number would count as a single, “particular debt.”[27]

Consumer advocates, as expected, also are unhappy that the cap and waiting period apply only to telephone calls and not electronic messages, complaining that the proposal authorizes unlimited electronic communication. In that regard, the CFPB provided a further observation to the press about how those messages will be regulated: “Both the proposed rule (and the FDCPA) make clear that a collector who texts or e-mails too frequently faces liability if the consequence of the communications is harassment, oppression or abuse of any person.” The CFPB also pointed out that consumers would have the option to opt out of receiving further texts and other electronic messages.[28]

V. Validation Notices and Related Disclosures

The proposal would standardize disclosures to consumers in the form of the “debt validation notice” long required by § 809 of the FDCPA. The proposal would do this by requiring that validation notices be “substantially similar” in both content and format to an important, new model: Model Form B-3 in the proposal’s Appendix B. Further, while use of Model Form B-3 is not mandatory (again, use of a form that is substantially similar is acceptable), a debt collector who uses the form itself would enjoy a safe-harbor from liability for violating the rule’s validation-notice requirements.[29] Because Model Form B-3 is worthy of close study, we have included an image of it in the Appendix. It may also be found at this link, and page 491 of the proposal.

Debt collectors, while adhering to the “substantially similar” standard, would be allowed to add certain option items to the model form, including hyperlinks, certain payment disclosures (such as “Contact us about your payment options”) and disclosures required by state law. In the last case, the form would have to state on its front that other required disclosures appear on the reverse side of the notice. The sending of notices translated into other languages would be permitted, so long as the collector also sends an English-language version in the same (or an earlier) communication.[30]

     Duplicative Disputes. The proposal also refines the rules a debt collector can follow in cases where, in response to a validation notice, it receives what the proposal defines as a “duplicative dispute.” Under the FDPCA, if a consumer disputes a debt, the debt collector must cease collection activities until it provides the consumer with verification of the debt.   Under the proposal, where a collector receives a dispute that it “reasonably determines” is “duplicative” of an earlier dispute (as “duplicative” is defined in the proposal), the debt collector may resume collection activities (assuming it is otherwise permitted to do so) as soon as it notifies the consumer in writing or electronically that the dispute is duplicative, provides a brief statement of the reasons for the determination, and refers the consumer to the collector’s response to the earlier dispute.[31]

     Electronic Disclosures. If a debt collector wishes to provide the required validation notice and related disclosures electronically, the collector must to obtain the consumer’s affirmative consent directly to comply with § 101(c) of the Electronic Signatures in Global and National Commerce Act (E-SIGN Act). In the alternative, the collector could send the electronic disclosures to a particular email address or phone number (in the case of text messages), that the creditor or a prior debt collector already obtained with regard to that debt, in accordance with the E-SIGN Act.[32] For clarity, the CFPB released a flow chart to explain further how a collector would provide certain required disclosures electronically.

The proposal also would ban collection practices that the CFPB has identified as harmful, most notably:

  • Time-Barred Debt. As expected, the proposal would bar debt collectors from bringing, or threatening to bring, a lawsuit to collect a debt if the debt collector knows or should know that the applicable statute of limitations on the debt has expired.[33]
  • Credit Reporting. The proposal would prohibit debt collectors from furnishing information about a debt to any consumer reporting agency before “communicating” with the consumer about that debt — as opposed to merely attempting to communicate with the consumer.[34]

VI. Advisory Opinions

The proposal would establish, in an Appendix C to the rule, a procedure for requesting an “advisory opinion” from the CFPB about the application of the FDCPA and the final rule. The proposal also would confirm the protection against liability that the FDCPA provides for any act or omission in good faith reliance on an advisory opinion.[35] Note that this mechanism differs from the one described above whereby parties may request “official interpretations” of the rule. If granted, an official interpretation would appear in the rule’s Official Commentary.[36]

[1]           Preamble to the Proposal, at 5 (May 7, 2019) (“Preamble”).

[2]           12 C.F.R. Part 1006, Cmt. I-2.

[3]           12 C.F.R. § 1006.2(i) (emphasis added); see FDCPA § 803(6).

[4]           See, e.g., § 1006.14(b)(ii) (imposing, as an “unfair” practice under UDAAP the seven-call cap described below).

Regarding who is covered by the UDAAP-based rules, the CFPB explains — in the context of this cap on telephone calls — that it “has not determined in connection with this proposal whether telephone calls in excess of the [proposed limit] by creditors and others generally not covered by the FDCPA would constitute an unfair act or practice under section 1031(c) of the Dodd-Frank Act if engaged in by those persons, rather than by an FDCPA-covered debt collector.” Preamble at 148 n.313; see also Preamble, at 4-5, 35-40.

[5]           § 1006.2(d), .2(j).

[6]           Cmt. 6(d)(1)-1 (“Because a limited-content message is not a communication, a debt collector does not violate [the prohibition on communicating with certain third-parties] if the debt collector leaves a limited-content message for a consumer with a third party who answers the consumer’s’s home or mobile telephone.”).

[7]           § 1006.2(j).

[8]           Cmt. 2(j)-3.

[9]           Cmt. 2(j)-1 (emphasis added).

[10]         Cmt. 2(j)-2.ii.

[11]         § 1006.2(b).

[12]         § 1006.6(c).

[13]         § 1006.2(e).

[14]         Cmts. 34-1, 42-1.

[15]         §§ 6(a), 14(h).

[16]         § 1006.14(b)(2)(i).

[17]         Cmt. 14(b)(1)-1; Cmt. 14(b)(i)-1.

[18]         § 1006.14(b)(3).

[19]         Cmt. 14(b)(2)(i)-1, -2; Cmt. 14(b)(5)-1.

[20]         § 1006.14(b)(2)(ii).

[21]         Cmt. 14(b)(2)(ii)-1.

[22]         § 1006.6(e); Cmt. 6(e)-1.

[23]         § 1006.22(f)(3).

[24]         § 1006.6(b)(3), (b)(4).

[25]         § 1006.22(f)(4); Cmt. 22(f)(4)-1.

[26]         Cmt. 14(b)(5)-1.

[27]         § 1006.14(b)(5) & Cmt. 14(b)(5)-1.iii.

[28]         Jon Hill, CFPB Pitches New Rules for Debt Collection Industry, Law 360 (May 7, 2019)

[29]         § 1006.34(d) & associated commentary.

[30]         § 1006.34(d)(3), .34(d)(4), § 1006.34€.

[31]         § 1006.38.

[32]         § 1006.42.

[33]         § 1006.26.

[34]         § 1006.30(a); Cmt. 30(a)-1.

[35]         Appx. C; see FDCPA § 813(e).

[36]         Cmt. I-2.

Appendix: Model Form B-3 (Debt Validation Notice)

Model Form B-3