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Legal, Regulatory, and Privacy Issues

CFPB finalizes fair debt collection update proposal that elicited negative feedback

There is considerable concern about consumer privacy rights and online security


While some of the provisions are not seen as consumer-friendly, the ABA says consumers have more control over communication channels today.

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The Consumer Financial Protection Bureau has finalized a proposal to update a decades-old debt collection law to better reflect the role of newer communication techniques, with the final rule being effective in 2021. The proposal had drawn a flurry of comments in 2019 when the CFPB came out with it.

Consumer advocates see the finalized proposal as a ‘mixed bag’ for consumers. According to a media release put out by the National Consumer Law Center and other consumer advocates, “In a victory for consumers, the final rule drops some of the more outrageous elements of the proposed rule that advocates had criticized, including a free pass for collection attorneys who make false, deceptive, or misleading representations.”

Finalized rule clarifies debt collection rules for consumer interaction

According to the CFPB,  the finalized rule “clarifies ways in which debt collectors can communicate with consumers and what types of collection practices are a violation” of the debt collection law. The finalized rule lays out:

  • What are the restrictions on the times and places that a debt collector can interact with a consumer
  • That a consumer can restrict a debt collector from communicating through a particular medium such as email
  • Debt collectors can communicate through newer technologies such as email, text messages (and social media) but such communications should provide a way for consumers to opt out
  • A debt collector can call a consumer up to seven times within a seven-day period, or after a seven-day break after last talking to a consumer
  • A “limited content message” would not be a communication under the debt collection rules, allowing debt collectors to leave such voicemail messages that are not bound by some restrictions

Multiple public criticisms for initial proposal

A lot of the initial input pointed to the lack of consumer friendliness of some of the proposed changes.

The level of feedback reflects consumer concern about abusive debt collection practices, an area in which the CFPB has said it received the most number of complaints between 2011 and 2018.

Consumers, consumer advocates and industry representatives weighed in on various shortcomings they see in the CFPB proposal. Witnesses at a Congressional hearing on legislation that protects consumers from abusive debt collection practices touched on the shortfalls of the CFPB’s proposed update to the Fair Debt Collection Practices Act of 1977 as well.

Some themes of the negative feedback on CFPB’s proposed rule are:

  • Procedures for collecting on time-barred debts should be clearer
  • The update allows debt collectors too many phone calls to contact debtors
  • Sending debtors text messages with hyperlinks to click on is an unsafe practice that could threaten their online security and privacy
  • Contact via social media lacks privacy safeguards
  • There’s nothing to prevent attorneys from making misleading representations in legal documents
  • No compulsory requirement for E-SIGN Act compliance for electronic messages to ensure that the consumer consents to receiving them, and is able to access them
  • Allowing collectors to leave “limited content” messages with third parties could violate consumers’ privacy
  • A model notice that would inform consumers about their alleged debts and their rights could be delivered orally, and doesn’t provide adequate consumer protection

In a separate FDCPA decision involving a debt collector, the U.S. Court of Appeals for the Seventh Circuit ruled against allowing debt collectors to send consumers notices with hyperlinks to click on to get legal disclosures, one of the changes the CFPB update would initiate.

See related:  Know your rights: Fair Debt Collection Practices Act

Consumers wary about harassment, security issues

The proposed changes had drawn a barrage of comments (more than 2,000) from the general public.

According to George Wagner, “A strong rule should not allow collectors to call consumers too often; to harass debtors by email, text and direct message without consent; to collect on time-barred zombie debt; or to file a lawsuit without proving that it’s against the right person, for the right amount. Stopping predatory debt collection matters to me because it’s unfair to poor people. We need strong protections from predatory debt collection – not rules that empower debt collectors.”

And from Sylvia Edgar, “This proposed rule should NOT be incorporated. These types of disclosure should never be done over the internet. It is too risky for the consumer. We have been educated about the dangers of clicking on unfamiliar links. Just like answering the phone only when you are sure who is calling people want to take as few risks as possible.”

Comments also included what looked like multiple form cut-and-paste letters making the same points, from both debt collectors and consumers.

Noting this, a poster using the moniker “Resident47” said, “I am quite disappointed to see the blatant mass dumping of look-alike, astroturfing submissions from both the pro-consumers and the reluctantly regulated. I take heart in the sincere remarks from the collection industry which eschew abuse and neglect as a business model. With considerable digging, I’ve found many insightful and provoking comments which at least establish some solidarity.”

This poster disavowed any agenda, as a citizen with “no significant affiliation,” other than “to help defend everyone like me who ever got snared by the worst tendencies of debt collectors, and found that we must rescue ourselves if we want help at all.”

According to this commenter, “This is a largely pro-consumer set of reform ideas, though I sense the hand of the target industry steering some of them in their own direction.”

While “Resident47” doesn’t like the idea of unlimited electronic media communication, this poster sees a limit of seven calls a week as a “drastic improvement” compared to past debt collector practices that they have been on the receiving end of.

They also have some suggestions for improving the current debt collection system, including making “damage awards damaging again,” based on each violation, and reflecting the march of inflation.

See related:  Robo-comments on payday loans clog regulation-making machinery

Update doesn’t uphold consumer privacy rights

A coalition of 36 public rights groups – including consumer advocates such as the National Consumer Law Center, U.S. PIRG and the Consumer Federation of America –  noted that a major impetus for the original FDCPA was consumers’ privacy rights, and the proposed changes don’t do enough to uphold these protections.

This coalition said in its public comment letter to the CFPB on the proposal, “In attempting to interpret the statute and take into account new means of communications, we are concerned that the Bureau is opening the door to more potential privacy abuses and security problems. This comes at a time when there are already serious concerns about rampant robocalling, online privacy, data breaches and identity theft.”

Another group of 232 consumer, community and legal organizations, representing all 50 states and the District of Columbia, said in its comments to the CFPB, “The rule as proposed does far more to protect abusive debt collectors than consumers. The proposal opens consumers up to harassment, abuse and violations of their privacy by telephone, email, text and other means; obscures information about consumers’ rights; and protects debt collectors and collection attorneys who pursue debts after the legal deadline or with false, deceptive or misleading representations.”

This group noted that not allowing debt collectors to report debts to credit bureaus without first informing consumers is a move in the right direction. However, they should be required to notify consumers by snail mail, unless the consumer has opted into electronic communications.

The group also urged the CFPB to outlaw the sale of time-barred debts and those that are disputed, considering that attempts to collect on such debts could be conducive to abusive practices from debt collectors.

See related:  State statutes of limitation for credit card debt

Congressional hearing

At the Congressional hearing, Dr. Cassandra Gould, a pastor from Jefferson City, Missouri, said, “There is no hope or future found in unlimited contact via text, email and all forms of private social media messages, which practically would interrupt parents’ engagement with kids.”

April Kuehnhoff, staff attorney at the National Consumer Law Center, noted in her testimony that allowing debt collectors to leave “limited content messages” with any third-party that answers the phone is not a good idea, since the respondents are likely to know from the message passed on that the call is from a debt collector.

She also stated, “The proposal contains an especially alarming proposal to allow debt collectors to send validation notices through hyperlinks. Many consumers will not recognize the debt collector and will be reluctant to click on a hyperlink that could expose the consumer to a virus, malware or spyware.”

On the whole, “This proposal does far more to protect abusive collectors and to encourage harassing and abusive collection practices than it does to protect consumers. We urge the Bureau to go back to the drawing board, reject the proposal rule, and start over again,” Kuehnhoff said.

And a letter from some Democratic members of Congress noted, “The Bureau has proposed changes to the law that will fail to constrain collectors’ harmful behaviors in any meaningful way – and may make them worse.”

Industry sees no need to clamp down on collector communications

Speaking for the debt collection industry at the Congressional hearing, Sarah J. Auchterlonie, a regulatory relations adviser to the Association of Credit and Collection Professionals, advocated against call limits, noting that “limiting contact between consumers and collectors turns ‘early out’ debt into ‘bad debt’ and increases the potential for litigation.”

She also doesn’t see unlimited email and text message use as compensating for limits on telephone calls, considering that it can be expensive for debt collection businesses to implement digital collection software that synchronizes with legacy systems and meets security requirements.

In defense of unlimited text message contact, she noted that most consumers today have plans that allow for unlimited texting.

For its part, the American Bankers Association, a trade group representing bankers, is against the CFPB’s intention to use its authority under the Dodd-Frank Act to rule on call frequency, and ban the “sale, transfer or placement of certain debts” as unfair, deceptive or abusive acts or practices (UDAAP).

In emailed feedback comments, Diana Banks, senior counsel with ABA, noted that the ABA would prefer that the CFPB rely on its FDCPA authority to rule on these so-called UDAAP issues. If the CFPB takes the Dodd-Frank route, “the proposal will introduce substantial uncertainty and legal risk for first-party creditors, including the risk that state attorneys general may bring class action lawsuits against national banks for alleged technical violations of the FDCPA,” the ABA said.

The trade group also noted that consumers now have more control over their means of communication than they did back in the seventies when the FDCPA was passed.

“Thus, the prohibition against communicating during inconvenient times and places should shift from a one-size-fits-all paradigm suited for the time in which the FDCPA was enacted, to a presumption that consumers can control when they would like to be contacted,” according to the ABA.

For instance, considering that consumers can view emails at their convenience, these communications should not be subject to the FDCPA provisions for communicating at inconvenient times or places.

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