New Debt Collection Laws You Need to Know Even If You’re Not a Collection Agency

Debt collection agencies must be prepared for new laws that took effect last autumn. Regulation F is the latest amendment to the Fair Debt Collection Practices Act (FDCPA), which defines when creditors can contact consumers.

Creditors should carefully assess how Regulation F will influence vendor relationships, multi-state compliance, collection strategies, and role in third-party collections. The extent to which Regulation F impacts these areas will depend on the specific creditor’s practices and systems.

1. Time and Place Restrictions

In its most recent update to Regulation F, the Consumer Financial Protection Bureau (CFPB) has clarified several important debt collection laws. These rules exist to safeguard consumers from abusive or harassing debt collectors.

For instance, debt collectors cannot call you during times considered inconvenient for you unless they have specific knowledge of your unique circumstances or you have given them prior consent. Furthermore, they cannot leave a voicemail that is overly long or contains profane or obscene language.

Though these may seem insignificant, they can majorly affect how debt collectors treat you. If a collector violates one of your time or place restrictions, you can file a complaint with the Consumer Financial Protection Bureau or take them to court.

The most significant change regarding time and place is that collectors no longer have the right to call you while you are at work or at an unscheduled event outside your home. This is a significant development, as many debtors have jobs that require them to be on the go during the day.

Additionally, collectors no longer have access to your landline at work or employer-provided cell phone for making work calls. Most employers have policies prohibiting employees from receiving debt collection communications on their work phones.

Additionally, collectors cannot now threaten you with litigation for a time-barred debt unless they intend to pursue that action. This critical change affects how you should handle debtors who attempt to sue for no longer owed amounts.

If you have any queries regarding these new debt collection laws or have been approached by a collector who appears to be breaking the rules, seeking legal counsel from an experienced debt collection lawyer in New York is advised. Attorney Alden B. Smith has nearly four decades of expertise and can assist in deciphering your options; dealing with violating debt collectors who may not abide by the law is your best course of action.

2. Consent Requirements

Regulation F is an essential update to current debt collection regulations, and you should know how they will affect your agency. Ensure your team has all the information they need to remain compliant and avoid fines or lawsuits that could jeopardize your business.

The new rule addresses certain aspects of debt collection, such as consent requirements for communicating with consumers about their debts. It provides guidelines regarding phone call content and frequency and how many times a collector may call in seven days (the “7-in-7 rule”).

Email communication must comply with the law and include an easy-to-understand opt-out form that gives consumers an accessible and straightforward way to stop receiving messages from debt collectors. Once opting out, that person should never again be contacted through this contact method.

Text message communications also need clear and prominent opt-out instructions. If a consumer wishes to discontinue receiving these communications, the collector must cease communication through that channel and explain their best alternative.

Furthermore, the rules require creditors to disclose their legal name and mailing address to consumers before sendingalidation notices. This is because, under the law, debtors have a right to know who they have been in contact with.

Debt collectors must share an immense amount of information with consumers. This includes the original creditor’s name and address, the amount owed, and when and how it was initially collected.

Though it may initially seem daunting, your team can stay ahead of these new laws with a top-down approach. Please ensure all your agency members understand precisely what’s required so they can work together on revising company policy and altering workflows accordingly. This way, everyone stays compliant with all regulations.

Are you uncertain how to interpret these new regulations and rules? Contact TCN for further details or an assessment of how this regulation may impact your agency. We can assist in ensuring complete adherence to the new requirements while getting your team ready for any CFPB updates that come down the pike.

3. Third-Party Disclosures

The debt collection industry is facing a significant transition. In November, the Consumer Financial Protection Bureau (CFPB) released a final rule to clarify and implement the Fair Debt Collection Practices Act (FDCPA), known as Regulation F. This regulation will become effective on November 11, 2021.

Regulations outlining collector responsibilities include several requirements to follow when engaging with consumers. For instance, collectors must issue a debt validation notice outlining their rights and how to exercise them. Furthermore, collectors are obliged to provide substantiation of any debt when requested by the consumer and keep records for three years.

One essential requirement of the new rules is that debt collectors must not disclose any information about a consumer’s debt to third parties without their consent. This requirement applies to both phone calls and emails or text messages sent out by creditors and debt collectors alike, so they need to review their policies regarding third-party information disclosure to guarantee they adhere to these guidelines.

Regulation F requires debt collectors to use reasonable procedures to verify email addresses and telephone numbers when sending emails or text messages. This helps reduce the risk of violations by disallowing consumers from receiving communications from debt collectors without permission.

Additionally, the new regulations limit how often debt collectors can contact consumers about their debts. For instance, they cannot get a consumer more than seven times within seven days or seven days after having had an engaged telephone conversation with the consumer.

Violators of the rules may face substantial fines. These amounts depend on both the degree and type of infraction.

The new rules represent a significant shift for creditors and debt collectors, yet they don’t need to be challenging to implement. Agencies can begin training employees to ensure they understand the regulations and have established proper protocols before communicating with debtors. They may also look into compliance software that provides intuitive rules, list management services, natural language compliance services, and analytics to reduce their exposure to non-compliance risks.

4. Electronic Communications

Debt collection agencies must be ready for the new communications with Regulation F when conducting debt collection activities. They must abide by these new guidelines to avoid legal problems and fines.

The new regulation permits debt collectors to communicate electronically with consumers through email and text messages. However, they must obtain consumers’ express prior consent for these communications and provide them with a straightforward opt-out method for each medium used.

Electronic communication with consumers is becoming more common for creditors and debt collectors to communicate about a debt. It gives the direct consumer access to the collection agency, decreasing the potential risk of third-party disclosures.

To facilitate this process, the regulation requires debt collectors to use a model validation notice for each consumer and supply them with information to verify their identity. To comply with these demands, your staff must receive training on the model validation notice and comprehend what information must be included in each communication they send.

Debt collectors must ensure they maintain all records related to their communications regarding a consumer’s debt by Regulation F. These records must be stored for three years after the last collection activity related to that consumer’s debt.

Another requirement is that debt collectors may only contact a consumer by telephone after having first communicated with them in person or other ways and are allowed to verify their identity. After this has occurred, the consumer must be allowed to reply to the telephone call.

Finally, the law restricts how often debt collectors can contact a consumer in a week and at what time they may attempt to reach them. This represents a significant change from previous rules that allowed debt collectors up to seven weekly attempts.

Though Regulation F may seem complex, there are numerous safe harbors, and rebuttable presumptions debt collectors and creditors can use to reduce their risk of violation. It is recommended that creditors consult experienced regulatory attorneys for help navigating Regulation F and complying with the law.