Simon PLC Attorneys & Counselors – September 2020 Memorandum
PUBLICATION OF NEW AND EXPECTED CFPB FINAL DEBT COLLECTION RULES IN OCTOBER 2020
Bloomfield Hills, Michigan – In July 2020, the Consumer Financial Protection Bureau (CFPB) announced that it plans to publish final debt collection rules in October 2020. The announcement was released after the U.S. Supreme Court issued its long awaited decision in Seila Law v. Consumer Financial Protection Bureau, 591 US _____, 140 S. Ct. 2183 (2020). For financial services companies regulated by the CFPB the case has more practical significance. The CFPB’s Director is now directly accountable to the President and can be removed for any reason. This potentially may impact the agency’s regulatory and enforcement agenda with the upcoming 2020 Presidential election.
Prior to the ruling in Seila, the sole director of the CFPB could only be terminated for cause. Writing for a 5-4 majority, Chief Justice John Roberts joined by Chief Justices Clarence Thomas, Samuel Alito, Neil Gorsuch, and Brett Kavanaugh held that the CFPB structure—an independent agency ran by a single individual who is removable by the President only for “inefficiency, neglect of duty, or malfeasance in office” “lacks a foundation in historical practice”—was incompatible with the structure of the Constitution and violates the Constitution’s separation of powers. The Court recognized that the statute pertaining to the Director of the CFPB was severable from the rest of the statute establishing the agency, thereby declining to declare the statute in its entirety and CFPB’s authority as unconstitutional. Moreover, the Court declined to address the effect its ruling had on prior CFPB rules and enforcement actions.
For now though the CFPB is on track to release the final rules in October 2020, according to its current agenda. In May 2019, the CFPB announced its proposed updates to the FDCPA which focused on communications with debtors, disclosures pertaining to time-barred debts and guidance on determining what constitutes as harassment and abuse as well as false and misleading representations.
For financial services companies regulated by the CFPB some of the proposed new rules have been long awaited:
- Clarify the times and places at which a debt collector may communicate with a consumer, including by clarifying that a consumer need not use specific words to assert that a time or place is inconvenient for debt collection communications.
- The term “limited content message” is used to describe how much information can be left on a voicemail message without it being considered “a communication.” In other words, it will be possible to leave a message with an assistant or family member as long as it doesn’t provide too much detail.
- Clarify that a consumer may restrict the media through which a debt collector communicates by designating a particular medium, such as email, as one that cannot be used for debt collection communications.
- Clarify that, subject to certain exceptions, a debt collector is prohibited from placing a telephone call to a person more than seven times within a seven-day period or within seven days after engaging in a telephone conversation with the person.
- Clarify that newer communication technologies, such as emails and text messages, may be used in debt collection, with certain limitations to protect consumer privacy and to prevent harassment or abuse, false or misleading representations, or unfair practices. For example, the CFPB proposes to require that a debt collector’s emails and text messages include instructions for a consumer to opt out of receiving further emails or text messages.
- To specify that debt collectors must provide certain information about the debt and the consumer’s rights with respect to the debt. The CFPB also proposes to require a debt collector to provide prompts that a consumer could use to dispute the debt, request information about the original creditor, or take certain other actions. The CFPB also proposes to permit a debt collector to include certain optional information.
- A model validation notice that a debt collector could use to comply with the FDCPA and the proposed rule’s disclosure requirements.
- To clarify the steps a debt collector must take to provide the validation notice and other required disclosures electronically.
- A safe harbor if a debt collector complies with certain steps when delivering the validation notice within the body of an email that is the debt collector’s initial communication with the consumer.
- The CFPB also proposes to prohibit a debt collector from suing or threatening to sue a consumer to collect a time-barred debt, along with providing disclosures regarding how such time-barred debts can be revived.
- To clarify that the personal representative of a deceased consumer’s estate is a consumer. This clarification generally would allow a debt collector to discuss a debt with the personal representative of a deceased consumer’s estate.
- To prohibit a debt collector from furnishing information about a debt to a consumer reporting agency before communicating with the consumer about the debt.
- To prohibit, with certain exceptions, the sale, transfer, or placement for collection of a debt if a debt collector knows or should know that the debt has been paid or settled or has been discharged in bankruptcy, or that an identity theft report has been filed with respect to the debt.
In the proposed rule that was published in May 2019, the CFPB proposed a one-year implementation before the debt collection rules would become effective. If this one-year implementation is also incorporated in the final rule, then notwithstanding the November 2020 elections, it is more likely that the final rules will take effect in October or November of 2021.
Please contact Simon PLC Attorneys and Counselors if you are a financial institution or debt collector with questions about the FDCPA and would like advice on how these proposed rules may apply to your circumstances.
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