Michael S. Zullo, Lynne E. Evans, attorneys in the Banking and Finance Industry Group at law firm Duane Morris LLP.

On December 18, 2020, the Consumer Financial Protection Bureau (CFPB) issued the second of two parts of a final rule revising Regulation F, 12 CFR part 1006, which implements the federal Fair Debt Collection Practices Act, 15 U.S.C. 1692, et seq. (FDCPA). The CFPB issued the first part of the final rule revising Regulation F on October 30, 2020. Our previous Alert provides a summary of key changes from the prior issuance.

There are several key changes that debt collectors, creditors and financial institutions should note. As further detailed below, the rule:

• Clarifies the information that a debt collector must provide to a consumer at the outset of debt collection communications, i.e., in a validation notice;
• Mandates that debt collectors take certain actions before furnishing information about a consumer’s debt to a consumer reporting agency; and
• Prohibits debt collectors from bringing or threatening to bring legal action against a consumer to collect a time-barred debt.

Although the rule expressly applies only to “debt collectors,“[1] states may extend the rules to apply to creditors. Furthermore, creditors themselves may elect to adhere to the new standards in an abundance of caution, or stay informed of the rules that apply to their debt collection vendors.

Compliance Time Frame

The rule becomes effective on November 30, 2021.

Information Debt Collectors Must Provide to Consumers at Outset of Debt Collection Communications – Validation Notices

Section 809(a) of the FDCPA requires a debt collector to send a written notice to the consumer with certain information about the debt and the actions the consumer may take in response (known as the “validation notice”) within five days of the initial communication, unless such validation information was provided in the initial communication or the consumer has already paid the debt.

The final rule clarifies the information that must be provided to the consumer at the outset of debt collection communications regarding the debt and the consumer’s rights―including, if applicable, on a validation notice.

Clarified Validation Notice Requirements

The new rule clarifies that the validation notice must clearly and conspicuously include:

1. “Mini-Miranda” warning: The statement that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose;
2. Debt information: Specific information about the debt (e.g., debt collector’s name and mailing address at which the debt collector accepts disputes and request for original creditor information, name of the creditor to whom the debt is currently owed, itemization date and amount of the debt on the itemization date and the current amount of the debt);
3. Information about consumer protections: Specific information about the consumer’s rights and protections (e.g., the date that the debt collector will consider the end date of the validation period and a statement of the consumer’s rights to dispute the debt or request the name and address of the original creditor during that time); and
4. Prompts for consumer response information: Specific prompts for the consumer to dispute the debt, request information about the original creditor or take certain other actions. Further, the prompts must be segregated from the validation information and option information, and must be located at the bottom of the notice under the headings “How do you want to respond?” and “Check all that apply.”

Model Notice and Safe Harbor

The final rule includes a first-of-its-kind model validation notice and provides a safe harbor for debt collectors who use the model validation notice or certain variations of the notice.

Disputes and Requests for Original Creditor Information

As before, the final rule states procedures for responding to a dispute or request for original creditor information within the 30-day period following a consumer’s receipt of the required validation notice. During that 30-day period, a debt collector may not engage in any collection activities or communications that “overshadow or are inconsistent with the disclosure of the consumer’s rights to dispute the debt and to request the name and address of the original creditor.”

Also as before, on receipt of a request for original creditor information, a debt collector must cease collection efforts until it sends the name and address of the original creditor to the consumer, in writing or electronically. Similarly, on receipt of a dispute of the debt, a debt collector must cease collection efforts until the debt collector sends the consumer a copy of the verification of the debt or copy of a judgment, or, if the debt collector reasonably determines that the dispute is duplicative, notifies the consumer in writing that the dispute is duplicative.

Definition of Consumer Extended to Include Deceased Consumers

The final rule expands the definition of “consumer” under the FDCPA to include deceased natural persons. The rule further provides that if a debt collector knows, or should know, that the consumer is deceased, and the validation information has not previously been provided to the deceased, then the debt collector must provide such information to the person authorized to act on behalf of the deceased’s estate.

Mandatory Communications Prior to Furnishing Information About Debt to Consumer Reporting Agency

The final rule prohibits a debt collector from furnishing information about a debt to a consumer reporting agency before engaging in specific outreach to the consumer about the debt. The specific outreach required includes either speaking to the consumer about the debt in person or by telephone, or mailing a letter or sending an electronic message to the consumer about the debt.

Prohibition on Collection of Time-Barred Debt

The final rule prohibits a debt collector from suing or otherwise threatening to sue a consumer in order to collect a time-barred debt (i.e., one for which the applicable statute of limitations has expired). This rule does not apply to proofs of claim filed in a bankruptcy proceeding.