CFPB Final Rule: Modernizing Debt Collection for the Digital Age

Communication has changed a lot since 1977:

• 1992 – The first text message is sent.
• 1996 – Free, Internet email is introduced.
• 2003 – MySpace kicks off the social media revolution.
• 2007 – The iPhone puts the Internet at our fingertips.

Today, people send over 105 billion emails and 23 billion text messages each day. And yet, debt collection laws have remained silent on the issue of electronic communications – until now.

CFPB Final Rule Aligns Communications With Consumer Preferences

For the first time since the law’s inception over 40 years ago, the Consumer Financial Protection Bureau (CFPB) has released updates to the federal Fair Debt Collection Practices Act (FDCPA).

The 653-page final rule, released on October 30, 2020, focuses on debt collection communications, providing much-needed clarification on how often and through what means debt collectors can communicate with consumers regarding their debts, including newer communication technologies like email and text messages.

“With the vast changes in communications since the FDCPA was passed more than four decades ago, it is important to provide clear rules of the road,” said CFPB Director Kathleen L. Kraninger.  “With this modernized debt collection rule, consumers will have greater control when communicating with debt collectors.”

So far, the response from the debt collection industry has been positive, with collectors and accounts receivable management (ARM) industry leaders appreciating the added clarity the rule provides. But the rule may also complicate compliance for those without adequate consumer preference management technologies in place.

Here are three key takeaways to note:

1) Debt Collection Emails, Texts, Social Media Messages Allowed

Research shows that a growing number of today’s consumers prefer to manage their accounts online, using email, text and social media messaging over phone calls and letters. Yet most debt collectors still primarily reply on outdated, traditional channels for communication due to lack of clarity in debt collection laws.

The new rule confirms that debt collection agencies may use email, text messaging (SMS) and private social media messaging to contact consumers regarding their debts.

While many forward-thinking debt collectors already use email and SMS messaging as part of their collections strategy, the new rule makes it official. It also provides important guidelines that enable agencies to reduce the risk of litigation, while providing better service to consumers.

“Consumers in the collections process deserve to be on a level playing field with others in the financial services marketplace with recognition of their preference to use email and text messaging over other outdated methods, such as faxes, as outlined in the current law,” says ACA International CEO Mark Neeb in a recent press release.

2) Call Frequency Capped, but Voicemail Messages Allowed

In addition to modernizing debt collection communications, the CFPB provided clearer guidance on call frequency and the issue of third-party disclosure in voicemails, enabling collectors to reduce call liability.

Calls Capped to 7 Calls in a 7-Day Period

The CFPB made waves by including a call cap in the final rule.

With some exceptions, collectors will be prohibited from making more than seven calls in a seven-day period and may not call for seven days after having a telephone conversation with a person.

Some important things to note:

• Because the cap applies to EACH DEBT, consumers with multiple debts may be called more often.
• Collectors will be presumed to be complying with the FDCPA if calls do not exceed the cap – but may be rebutted with evidence of harassment.
• There is no official cap on electronic communications, but prohibitions on harassment will still limit frequency and time.

Limited Content Messages Defined

The collection industry welcomed a new safe harbor for voicemail messages, which have long remained a top compliance concern.

Under the FDCPA, collectors must avoid disclosing debts to third parties; but they are also required to disclose their identity as a debt collector. This makes leaving a voicemail risky. Until now, collectors have either avoided voicemail entirely or left carefully worded “Zortman” messages that leave out the consumer’s name.

In the final rule, the CFPB introduced the “limited content message,” which allows collectors to safely leave voicemails without violating third-party disclosure.

The messages cannot mention the consumer’s name and must include:

• Business name that does not indicate that it is a debt collector
• A request to reply to the message
• Name(s) of the person(s) the consumer can contact
• Phone number for the reply

These limited content messages will help decrease litigation and repeated consumer calls as agents try to establish contact with debtors.

3) Must Comply to Time & Place Limits, Preferences

While the rule opens more channels for communications, it also gives consumers more control over how, when and where they can be contacted.

Inconvenient Time and Place Limits Apply – With Mobile Exception

Just like calls, the rule prohibits collectors from messaging people at inconvenient times and places.

While there is no cap on the number of emails and texts collectors can send, collectors still need to follow the FDCPA’s prohibition on harassing, oppressive or abusive conduct. That means collectors can’t just send unlimited emails and texts all day and night.

E-communications should not be sent outside 8-9pm in the consumer’s location. Debt collectors should also avoid contacting debtors at a time or place they know or should know is inconvenient.

For circumstances where the consumer location is not known, such as with mobile phones, collectors should make sure communications are convenient for multiple locations and update the location when that information becomes available.

Opt-Out Instructions Required

Debt collectors also need to verify continued consent to use electronic communications.

Each electronic communication must include clear opt-out instructions. If a consumer chooses to opt out of a particular communication channel or change their communication preferences, that request must be honored.

For text messaging, there is also a required 60-day reverification cycle to confirm that consent was obtained and that the number has not since been reassigned.

*The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.