New government proposals could affect collections and recovery

Recently, the Consumer Financial Protection Bureau (CFPB) put forth a Notice of Proposed Rulemaking that could potentially impact how businesses approach conducting collections and recovery. The newly proposed rules were initiated on May 7, 2020.

Passing these rules would mean the Fair Debt Collection Practices Act (FDCPA), enacted in 1977, would be modified. If it goes forward, debt collectors might see some changes or limitations on how they can pursue collection and recovery.

Restricts the number of phone calls made to debtors

If the initiative passes, debt collectors would be limited to no more than seven telephone contact attempts per week. Once the collector successfully reaches the customer, they must wait a period of one week before attempting to call them again.

Limits on how collectors use technology to collect

Under new regulations, debt collectors would have new restrictions to adhere to when using modern technology, such as voicemail, email, and text messages to contact customers to collect debts owed. The proposal outlines debtors would have the right to unsubscribe to communications from any of these methods. If passed, debtors would also be given control to limit contact with specific phone numbers or hours of the day when they can’t be contacted.

Rules on collection of time-barred debt

Under the law, collectors cannot sue to recoup the time-barred debt. The newly proposed rules would prevent collectors from “using non-litigation means” (i.e. phone calls) to tell the customer they plan to file a lawsuit on debt where the statute of limitations has passed. The rule applies where the collector tries to threaten to sue to collect on a debt they know or “should know” has reached a statute of limitations.

If the new rules are passed, collectors would be required to disclose to the debtor on their initial contact they aren’t allowed to sue for the time-barred debt. Additionally, collectors would also be prohibited from reporting a time-barred debt to any consumer reporting agency until they’ve first communicated with the consumer about the debt.

Requirements for collection disclosures

The CFPB is proposing debt collectors must send consumers a disclosure with “certain information” pertaining to the debt and any “related consumer protections.” Collectors would have to provide the debtor with an itemized account of the debt, and easy to understand language about ways people could respond to the collection notice, including the option to dispute it. These disclosures would require collectors to provide a “tear-off” form for debtors to send back to the collector in response to the collection notice.

Currently, these rules are still in flux as the proposed rules are still in the public comment stage. Originally, comments were to end June 5, 2020, but due to the COVID-19 pandemic, this was extended and public comments will now close on August 4, 2020. The federal government has made the entire proposal viewable online at this link.

MicroBilt has the tools to aid businesses in their collection and recovery efforts. If you’d like to learn more about our suite of recovery and skip tracing tools, contact us today. We’re happy to demonstrate how our tools seamlessly help in the collection process.