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The CFPB steps into the FDCPA: More Alphabet Soup or Meaningful Structure and Guidance?

Posted By USFN, Monday, November 25, 2013
Updated: Wednesday, October 14, 2015

November 25, 2013


by Wendy Walter
RCO Legal, P.S. – USFN Member (Arkansas, Oregon, Washington)

On November 6, the Consumer Financial Protection Bureau (CFPB or Bureau) published its advanced notice of proposed rulemaking covering the Bureau’s intention to begin rulemaking in the area of the Fair Debt Collection Practices Act (FDCPA). For firms and clients with compliance systems and policies tailored to the current state of the law in debt collection, this announcement signals the beginning of a change to the law as we currently know it.

The CFPB issued 162 questions covering six major topics, including transfer of information from original creditor to the debt collector; validation notices, disputes and verifications; communication with third parties; unfair, deceptive, and abusive acts or practices and questions about how the Bureau should define “unfair;” collection of time-barred debts; and debt collection in the litigation process and procedures in suits collecting debts. The Bureau’s goal is to clean up some areas in the law that might not be clear to consumers, areas that create impossible situations for the industry, and to overall help create a standard of conduct in the collection of debts.

For transfers of information, the Bureau wants to know if debt buyers are aware of pending or prior disputes, cease-communication requests, or whether the consumer was represented by counsel. In the advance notice of proposed rulemaking (ANPR), the Bureau also discusses the extent to which consumers should have the right to obtain more information about the debt, whether there should be a requirement for the debt collector to provide a regular statement, and the extent to which a consumer should get notice when the debt is sold.

On the subject of the validation process, the Bureau is asking questions that seem to indicate a new standard validation form may be on its way. The form might rephrase the way borrower rights are described to make them easier for the consumer to understand; it might explain all consumer rights under the FDCPA including the right to request that communication cease, the right to have collection efforts stopped during the investigation and validation of the debt, the right to have communication go through an attorney if the consumer is represented; and the new form might clarify the total amount owed provision and possibly require that debt collectors break out the fees from the “principal,” explain the principal concept, and possibly disclose the charge-off date and charges and fees incurred since that date. The Bureau thinks the statements might need more information in order to properly identify the loan or account that is being collected including, but not limited to: identification of joint borrowers, partial disclosure of the social security number, account number of the original creditor, name of the original creditor, name of brand associated with the debt, and the type of debt being collected. Another topic the Bureau explores is the fact that the majority of non-English speaking consumers in the U.S. are Spanish-speaking, and it asks whether the notices should be in English and Spanish to be clearer and understandable.

The Bureau has more questions about the dispute process. If a debt is disputed, should a debt collector have a deadline by which to respond and validate a debt? Should there be a form for responding and validating a debt? Another question, one that is well-taken in our industry given the volume of frivolous disputes seen in mortgage servicing: should there be a standard for a consumer when disputing a debt? In other words, the Bureau wants to know if it makes sense to require a consumer to submit basic information or documentation to support a dispute under the FDCPA.

The Bureau is also focused on technology, social media, cell phones, and text messages as methods of communicating with consumers and the extent to which debt collection communication is occurring in these contexts.

As an industry, we could add to the discussion, highlight the overlap between the new national servicing rules in RESPA and TILA, and work towards a carve-out of the foreclosure process and keeping it distinct from debt collection. Now that the questions the Bureau is asking are known, it might be time to start the discussion. The comment period ends February 10, 2014 — and what else do we have to do between now and then? Wait a minute, aren’t there some new servicing rules to worry about?

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