What Debt Collectors Need to Know and Do to Comply with Reg F
In recent years, the Consumer Financial Protection Bureau (CFPB) finalized two rules, known together as Debt Collection Practices (Regulation F), which impacts the Fair Debt Collection Practices Act (FDCPA). Reg F is the biggest change for the debt collection industry since the inception of the FDCPA and went into effect on November 30, 2021. The final rule will forever change the collector-consumer relationship with provisions such as:
- Regulating the number of calls to consumers per week
- Giving consumers the right to stop specific types of communication
- Allowing electronic communication for debt collection, or to provide disclosures required under the FDCPA
- Giving consumers the right to opt-out of electronic communications
- Requiring agencies to provide an expanded list of disclosures to a consumer at the outset of collection communications
- Requiring third-party disclosures for communicating with a consumer by email or text message
- Barring debt collectors from threatening legal action against a consumer to collect a time-barred debt
Debt collectors who do not comply with Regulation F may come under increased scrutiny from clients and consumers now that the November 30th deadline has passed. However, if collection agencies develop a more cohesive partnership with creditors, compliance with the new rule is doable. For an exhaustive background on everything Reg F, this guide from TCN is a nice summary of the history and rules surrounding the new regulation.
There are a few priority items and best practices you can follow, even if you can only roll them out one-by-one. We recommend focusing on these eight actions:
- Ask creditors to provide more information to enable you to collect debts in compliance with the regulations. Review all material, templates, and material guidance on the new regulations thoroughly with the creditor.
- Provide debt validation notice (the initial communication) when contacting a consumer about debt in either electronic or written form, depending on the preferred method agreed to by the consumer. The new regulation also includes a demand template (also known as Model Validation Notice) for use.
- Send all communication debt validation notices in the language preferred by the consumer. As per the new rule, it’s stipulated that the notice must be in English as well as the other languages understood by the consumer.
- Include a disclosure in the debt validation notice that the communication is an attempt to collect a debt. Your agency’s legal name and mailing address need to be clearly mentioned in the notice. The name of the consumer and the amount of the debt also need to be specifically stated along with the name of the original creditor in the notice.
- Verify the methods of contact that are preferred by the consumer, including telephone calls, email, written communication via letters, or text message. Use text messaging and email, if the consumer consents to those types of contact. The new rule also allows for a “limited content” voicemail.
- Attempt no contact with the consumer before 8 am or after 9 pm unless the consumer specifies otherwise. Make sure contact attempts are made up to seven times in seven days. Wait seven days to contact a consumer after you have successfully communicated with that consumer.
- Verify an email address or telephone number for text messages as per the verification methods outlined in Regulation F.
- Keep up-to-date records and evidence for regulators to counter any violation of the FDCPA.
While Reg F looks fairly clear, it contains broad prohibitions on certain collection conduct. These statutory features may provide flexibility but also leave you to use discretion and make judgment calls regarding compliance with the FDCPA and Regulation F. The result? Certain situations may arise that put you at the risk of operating outside of a safe harbor. To help debt collectors prepare for the upcoming rules, we have developed an extensive CFPB Reg F Preparedness Assessment that takes a comprehensive look at a debt collector’s operations to help ensure full compliance with the new Debt Collection Rules. For the assessment, recommendations, and consultation on the proper controls under Reg F, visit this page. You can also download a go-to guide to new debt collection practices here.