In 1977, gas cost 62 cents per gallon; the first Apple II computers became available for sale; even the most primitive mobile phones were half a decade away from being released to the public; and debt collectors relied on landline phones, the US mail or in-person conversations to collect the debts assigned to them. When Congress passed the Fair Debt Collection Practices Act ("FDCPA") that year, it could not have envisioned a world where consumers communicate instantly using cellphones, text messages, emails and social media.
No federal agencies promulgated any significant regulations under the FDCPA in the 40 subsequent years. Until the Dodd-Frank Act became effective, no federal agency even had the authority to do so. In the absence of any controlling regulations, courts were free to fashion their own standards and interpretations of the FDCPA. Given the voluminous amount of FDCPA litigation, courts across the country quickly created inconsistent standards and a maze of differing interpretations. Fortunately for entities seeking simple, practical and uniform standards for FDCPA compliance in the modern age, the Consumer Financial Protection Bureau (the "CFPB" or "the Bureau") issued its proposed Regulation F under the FDCPA (the "Proposed Rule") on May 7, 2019.
In this Legal Update, we summarize the CFPB's proposed debt collection rulemaking and describe the consequences for entities engaged in collecting consumer-purpose debts. We do not rehash all 538 pages of the Bureau's proposal but instead summarize some of the most significant developments that FDCPA-regulated entities should review when considering whether to provide comments to the Bureau regarding the Proposed Rule
Overview of the FDCPA
Before we discuss the content of the Proposed Rule, we briefly remind our readers of the basic structure of the FDCPA.
Congress passed the FDCPA in 1977 in order to combat "[d]isruptive dinnertime calls, downright deceit, and more."1 The FDCPA applies to "debt collectors," who are generally third-party entities (i.e., not original creditors) who either (i) regularly collect debts on behalf of others or (ii) obtained defaulted debts, but only if the entity's "principal purpose" is the collection of debts.2 In general, the FDCPA prohibits a debt collector from using unlawful, abusive, deceptive, or unfair collection tactics in connection with the collection of debts. The FDCPA contains an extensive (but not exclusive) list of practices that are prohibited under this standard. They include tactics such as calling a debtor at unreasonable hours, calling a debtor at work when the debt collector knows that the debtor's employer does not allow the debtor to receive calls, letting the phone ring incessantly in order to harass the debtor, threatening to take actions that the collector does not intend to or cannot legally take, communicating with unauthorized third parties about the debt, and making any collection-related communication that would tend to confuse the "least sophisticated consumer." The FDCPA also imposes several affirmative disclosure requirements on debt collectors, including with respect to debt validation notices, "mini-Miranda" notices, and self-identification.
The Proposed Rule generally restates the FDCPA definition of a "debt collector" with only minor changes.3 Even if a collector is not covered by the FDCPA, the Bureau views the practices prohibited by the FDCPA as potentially unfair, deceptive, and/or abusive practices ("UDAAPs") that could violate the Dodd-Frank Act when undertaken by any person engaged in collection activities.4 As a result, even entities such as first-party collectors, or servicers of performing mortgage loans that later become delinquent, should review the Proposed Rule and consider revising their practices as a matter of best practices and UDAAP risk control.
The proposed rule clarifies a number of terms used in the FDCPA that have been the root of significant litigation and enforcement actions since the passage of the FDCPA. We explain the proposed rule's clarifications below.
Communication and Limited-Content Messages: the FDCPA prohibits a debt collector from communicating with third parties about the consumer's debt, unless the third party is the consumer's lawyer, a consumer reporting agency, the creditor or the creditor's lawyer, or the debt collector's lawyer.5 In addition, a debt collector communicating with a consumer must provide the so-called "mini-Miranda" notice to inform the consumer that the communication is from a debt collector.6 As a result, debt collectors frequently were tripped up by inadvertently having a communication overheard by a third party, especially if the debt collector chose to leave voicemails for debtors after an unsuccessful attempt to establish contact with the consumer. If a debt collector left a voicemail identifying itself as a debt collector and implied or revealed the existence of the consumer's debt, it could unknowingly violate the FDCPA if the debtor lived with a roommate or other third parties who might have access to the voicemail box. On the other hand, if the voicemail was considered to be a communication in connection with the collection of the debt, the collector would violate the FDCPA if it did not identify itself and disclose that it is a debt collector.
Several federal appeals courts have reached the conclusion that contacts from a debt collector that do not refer to or imply the existence of a debt, and do not reveal information about the debtor's debts, are not "communications" for purposes of the FDCPA.7 However, the law remained unsettled and, as recently as 2017, the FTC entered into a stipulated judgment with a debt collector to settle allegations that the collector left voice messages in a manner that could reveal the existence and status of the consumer's debt to an unauthorized third party.8 The Bureau ultimately believed this conflict led collectors to err on the side of not leaving voicemails, which in turn led to more frequent call attempts so that collectors could ensure they established live, right-party contact.9
The Proposed Rule resolves this conflict by clarifying that a debt collector does not convey information regarding a debt "directly or indirectly to any person" if the debt collector provides only a "limited-content message."10 A "limited-content message" must include only the expressly required content set forth in the Proposed Rule, and nothing more (except the optional content described below). The Proposed Rule requires that a "limited-content message" include all of the following:
- The consumer's name;
- A request that the consumer reply to the message;
- The name or names of one or more natural persons whom the consumer can contact to reply to the debt collector;
- A telephone number that the consumer can use to reply to the debt collector, and
- If applicable, a clear and conspicuous statement describing one or more ways the consumer can opt out of further attempts to communicate by the debt collector to that telephone number (discussed in further detail below in the "Opt Out" section).11
In addition to the required content, a debt collector leaving a limited-content message may also opt to include a salutation, the date and time of the message, a generic statement that the message relates to an account, or suggested dates and times for the consumer to reply to the message.12 If a collector includes information in a message that exceeds the permitted information and conveys information about the debt, such as information revealing that the message relates to the collection of a debt (such as the consumer's account number), the collector loses the protection of the limited-content message exception.13 As the name of the debt collector is not among the required or optional content, a collector may lose the protection of the "limited-content message" exception if a message included the collector's name. Consistent with this view, the Bureau noted that email cannot be used to transmit a "limited-content message" because email messages "typically require additional information (e.g., a sender's email address) that may in some circumstances convey information about a debt."14
Although a limited-content message is not a "communication" under the Proposed Rule, it is nonetheless considered an attempt to communicate, and is subject to the restrictions in the Proposed Rule regarding attempts to communicate with a consumer regarding a debt (such as the seven-call limit discussed below).15
Consumer: As noted above, the FDCPA strictly prohibits communication of a consumer's debt to third parties besides a limited list of persons.16 The limited scope of the exceptions to this prohibition presented several difficulties for debt collectors. First, debt collectors were hampered in resolving the debts of a deceased person with an estate or executor, since discussing the deceased person's debts would be prohibited by the FDCPA.17 Second, the Bureau's Regulation X mortgage servicing rules require a mortgage servicer to promptly communicate with successors-in-interest regarding a mortgage loan upon death of the borrower.18 If the mortgage loan was in default when the servicer obtained servicing, the servicer would be mandated by Regulation X to communicate with a successor-in-interest, but would be prohibited by the FDCPA, since successors-in-interest are not among the limited list of persons with whom a collector may convey information about a debt.
Acknowledging this conflict, the Bureau previously issued an interpretive rule providing a safe harbor from FDCPA liability when servicers communicate with a successor-ininterest in compliance with Regulation X.19 The Proposed Rule formally resolves this conflict by adopting a definition of "consumer" that includes the executor, administrator, or personal representative of the debtor's estate, if the debtor is deceased, as well as a confirmed successor-in-interest as defined in Regulation X and Regulation Z. 20 As a result, mortgage servicers who are subject to the FDCPA would be free to comply with Regulation X without worrying whether they are inadvertently violating the FDCPA.
1 Henson v. Santander Consumer USA Inc., 137 S. Ct. 1718, 1720 (2017).
2 15 U.S.C. § 1692a(6). See also Barbato v. Greystone Alliance LLC, 916 F.3d 260 (3d Cir. 2019).
3 Proposed 12 C.F.R. § 1006.2(i)(1).
4 See CFPB Bulletin 2013-07 (Jul. 10, 2013).
5 15 U.S.C. § 1692c(b).
6 Id. § 1692e(11).
7 See Scribner v. Works & Lentz, Inc., 655 F. App'x 702, 703-04 (10th Cir. 2016) (call to manager of debtor's apartment complex; caller did not identify herself or her employer as debt collector or refer to any debt owed by debtor); Brown v. Van Ru Credit Corp., 804 F.3d 740, 743 (6th Cir. 2015) (voicemail left with debtor's business; voicemail did not mention debtor, his alleged debt, or that caller was debt collector); Marx v. Gen. Revenue Corp., 668 F.3d 1174, 1177 (10th Cir. 2011) (fax to debtor's work location; fax indicated its purpose was to verify employment and did not reference any debt).
8 See Stipulated Order for Permanent Injunction and Civil Penalty Judgment, United States v. GC Servs. Limited Partnership, Civ. No. 17-1461 (S.D. Tex. Mar. 2, 2017).
9 Proposed rule with request for public comment: Debt Collection Practices (Regulation F), Docket No. CFPB-2019-0022 ("Notice of Proposed Rule"), at 60.
10 Proposed 12 C.F.R. § 1006.2(b).
11 Id. § 1006.2(j).
13 Comment 2(j) to Proposed 12 C.F.R. § 1006.2.
14 Notice of Proposed Rule at 63.
15 Proposed 12 C.F.R. § 1006.2(b).
16 15 U.S.C. § 1692c(b).
17 Notice of Proposed Rule at 73.
18 12 C.F.R. § 1024.38(b)(1)(vi).
19 81 Fed. Reg. 71977 (Oct. 19, 2016).
20 Proposed 12 C.F.R. § 1006.2(e); Comment 6(a)(4) to
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