Update to Creditors regarding changes to the FDCPA – 12 CFR Part 1006 “Regulation F”

Simon PLC Attorneys & Counselors – January 2022 Memorandum

Update to Creditors regarding changes to the FDCPA – 12 CFR Part 1006 “Regulation F”

Troy, Michigan – The Consumer Financial Protection Bureau (“CFPB”) has recently promulgated amendments to the Fair Debt Collection Practices Act (“FDCPA”) which went into effect as of November 30, 2021.  The changes are, without a doubt, the most sweeping revisions to the FDCPA, which governs the conduct of third-party debt collection agencies (including lawfirms) since its enactment nearly 45 years ago.  12 CFR Part 1006, otherwise known as “Regulation F” affects many aspects of debt collection, most significantly the means and manner in which a debt collector may contact a debtor and the information and notices that must be provided in the debt collector’s initial communication to the debtor.

Regulation F, among other things, clarifies and provides bright-line rules for many areas of the FDCPA that previously did not give any guidance such as the frequency with which a debt collector may contact a debtor regarding an outstanding debt.  Regulation F also seeks to modernize the FDCPA and bring it into mesh with means of electronic communication that were not even the stuff of science fiction fantasy when the FDCPA was signed into law in 1977.  For instance, debt collectors are now explicitly authorized to contact debtors via social media, instant and text messaging, albeit subject to restrictions and notice requirements.  Previously, however, these were grey areas at best and often the source of ammunition for litigation-hungry consumer protection attorneys.

Rather than attempt to detail all of the various provisions of Regulation F’s nearly 700 pages, This memorandum will focus on what is perhaps of most concern to debt collectors: the requirement that the initial communication with a debtor be accompanied by a “Validation Notice” which provides highly particularized information regarding the debt as well as a clear recitation of the debtor’s rights to dispute it, request additional documentation confirming its validity, specify when and by what means further contact can be made, as well as information about the CFPB and how to seek assistance.

The CFPB’s model Validation Notice provides a template for compliance; Regulation F also provides a “safe harbor” to collectors whose demand letters substantially follow the model form. Most significantly, the model form requires collectors to specify an “Itemization Date” which can be any one of five different dates:

  • The Last Statement Date – The date of the last periodic statement, written account statement, or invoice provided to the debtor by the creditor its servicer (a statement from a previous debt collector will not suffice).
  • Charge Off Date.
  • Last Payment Date – The date the most recent payment was applied to the debt. (can be a payment made by a 3rd party such as an insurance company, liquidation agent, or debt collector).
  • Transaction Date – The date the loan originated the purchased item or service giving rise to the debt was provided to the debtor.
  • Judgment Date – The date which a court judgment determining the amount of the debt became final.

In addition to the amount of the debt as of one the above dates, collectors must also provide the name of the creditor to whom the debt was owed as of the Itemization Date; any fees, interest, credits, payments, or other adjustments applied or accrued after the Itemization Date.  Such amounts must be clearly broken out into separate categories.  Note this information must come from the creditor and should ideally be included upon the initial referral of the debt to the collector.

For residential mortgage debt, at the time a debt collector provides the Validation Notice, the debt collector need not provide the validation information required by Regulation F, specifically, the Itemization Date, the amount of debt on the Itemization Date and an itemization of the current amount of the debt provided that the servicer, creditor or assignee of the mortgage was already required under Regulation Z, 12 CFR 1026.41 to provide a periodic statement to the debtor.  Contained in the periodic statement includes the amount due, account information, an explanation of the amount due, transaction activity, and past payment breakdown.  If such periodic statement was provided, the debt collector would need to just provide the consumer a copy of the most recent periodic statement and refer to the periodic statement in the same communication with the Validation Notice.  A debt collector may comply with the requirement to refer to the periodic statement in the Validation Notice by, for example, including on the Validation Notice the statement, “See the enclosed periodic statement of the itemization of the debt.”

While the CFPB’s intent in forcing collectors to provide detailed information about the debt and informing the debtor of his or her right to dispute and request validation as well as other primary rights under the FDCPA may be noble, the sweeping scope of the changes wrought by Regulation F will no doubt create a goldmine of opportunity for consumers’ rights attorneys.  Not only debt collectors, but creditors themselves under principles of agency and FDCPA itself can be held liable for seemingly minor technical violations.  At Simon PLC Attorneys & Counselors, your consumer debt collection matter will be given the highest level of care and attention from attorneys experienced and trained in aggressively seeking recovery within the bounds of ever-expanding federal legislation.

N.B. Not Legal Advice: Please contact us if you would like to discuss the facts and circumstances of your specific matter. Simon PLC Attorneys & Counselors expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this memorandum. The information contained herein may not reflect current legal developments and is provided without any knowledge as to the recipient’s location, industry, identity or specific circumstances. No recipients of this content, clients or otherwise, should act, or refrain from acting, on the basis of any content included in this memorandum without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the jurisdiction for which the recipient’s legal issue(s) involve. The application and impact of relevant laws varies from jurisdiction to jurisdiction, and our attorneys do not seek to practice law in states, territories and foreign countries where they are not properly authorized to do so.