A summary of the Debt Collection Rules of the Consumer Financial Protection Bureau can be found below. Debt collectors are required to be extremely cautious when contacting you under the new rule. It is not permissible for them to say certain things or make repeated calls. When you know your rights, you can fight off debt collectors both in and out of court and win!
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You have likely heard about the new Debt Collection Rule issued by the Consumer Financial Protection Bureau (CFPB). Consumers who owe debts are provided with specific protections by the Debt Collection Rule, which took effect on November 30, 2021.
Debt collectors must comply with the new rules and fulfill their obligations under the Fair Debt Collection Practices Act (FDCPA).
Several officials have criticized the FDCPA for not explicitly defining what practices constitute abuse of consumer rights. Since the FDCPA was passed in 1977 and it was amended in 2010, some rules regarding debt collection practices were not clear to people living in the digital age.
The purpose of this article is to explore the details of the Debt Collection Rule, including the changes made to communication practices and disclosures.
Who Is Subject To The Debt Collection Rule?
Debt collectors are explicitly covered by the Debt Collection Rule. It is important to note that “debt collectors” include debt collection agencies as well as law firms that attempt to collect outstanding obligations on behalf of first-party creditors. The Debt Collection Rule applies to debt collection agencies that purchase debt from financial institutions.
The Debt Collection Rule does not apply to financial institutions or other similar lenders; however, the CFPB may potentially use it against abusive first-party creditors.
The New Debt Collection Rule Must Be Followed By Debt Collectors
Creditors may attempt to contact you by telephone under the new Debt Collection Rule. There are, however, some new restrictions.
A debt collector used to leave a voicemail message explaining the reason for his or her call in the past. Those who heard the voicemail, including employers, family members, colleagues, and friends, would know that a debt collector was pursuing you.
It is required by the Debt Collection Rule that debt collection agencies leave only limited information on your voicemail. They may not use language that indicates that they are collecting a debt or identify themselves as debt collectors.
It is, instead, necessary that they provide a business name that does not include the words “debt collection agency” or “debt collector.” A telephone number can also be included in the message.
Additionally, the Debt Collection Rule limits the frequency with which a debt collector may contact you. According to the law, debt collectors are considered abusive if they get you more than seven times within a week or seven days after their last telephone contact.
Finally, debt collectors may only contact you during authorized times. It is inappropriate to call before 8 a.m. or 9 p.m., according to your time zone. Based on the information available to the debt collector, they may assume your current time zone if they do not have specific information concerning your location.
Emails And Texts Can Be Used By Debt Collectors To Contact You
There is a possibility that debt collectors will attempt to contact you via email or text message. It should be noted, however, that certain limitations apply.
If a debt collector contacts you via email, they must have your specific approval. The approval process begins when you contact a debt collector via email or when the original first-party creditor provides your email address as an authorized contact method.
Debt collectors must, however, allow you to opt out of future communications if they contact you via email. You must be provided with simple instructions on how to opt out of the collection agency’s electronic communications within the email.
Similarly, a debt collector may contact you via text message using your phone number. You must permit them to text you. If you decide not to communicate with them via text, they must cease to send you text messages.
They Can Also Contact You Through Social Media
There is a possibility that a debt collector will attempt to contact you through your social media accounts. Nevertheless, if they do so, they must adhere to specific guidelines.
All messages sent by the debt collector must remain private. Your friends, family members, and other contacts cannot leave messages on your social media posts.
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If a debt collector contacts you via your social media account, they must identify themselves. It is not permissible for a debt collector to pretend to be a relative or an old friend.
You must have the option to opt out of debt collectors’ social media messages. If you ask them to stop messaging you through these platforms, they won’t be able to do so.
Are Debt Collectors Required To Provide Disclosures Under The New Debt Collection Rule?
Several new disclosure rules apply to debt collection agencies.
The itemization date is one of the most important disclosures. A debt collection agency must provide an itemized debt statement if a consumer requests it. Nonetheless, the debt collection agency must choose a date that coincides with one of the following:
- The last statement provided by the original creditor to the consumer
- Debt resulting from a transaction
- Original creditor’s charge-off date
- Consumer’s final payment
- The date on which a judgment was entered against the debtor
A complete list of all charges incurred since the itemization date must be provided by the debt collection agency.
In addition, the debt collector must provide specific information that will assist the consumer in identifying the original creditor. Among other things, the debt collector should provide pertinent information such as the initial account number and the name of the first-party creditor.
How Does The Debt Collection Rule Affect Time-Barred Debt?
It is important to note that time-barred debts are debts that cannot be collected by way of a lawsuit. There is a statute of limitations law in every state that prevents creditors and debt collection agencies from pursuing cases after a certain period has passed.
Depending on the state and type of debt, the statute of limitations may vary. Revolving debt and oral debt promises typically have shorter limitations. There are longer limitations on debts involving promissory notes, such as home mortgages and auto loans. The limitations may range from two to fifteen years.
As a result of the Debt Collection Rule, debt collectors cannot threaten legal action against you unless they have the right to do so.
In the case of a credit card debt that has passed the five-year limitation period, a debt collector cannot send you aggressive letters threatening to sue you. They can continue to contact the debtor via telephone and letter, but suing is out of the question.
Here’s an example.
Ted, who lives in California, receives telephone calls and emails from a debt collection agency called Midland Credit Management. Even though he does not recall the credit card debt they claim he owes, they keep threatening to sue him if he does not repay it. According to research he conducted online, California’s statute of limitations on credit card debt is four years. Based on Ted’s analysis of the debt documentation provided by Midland Credit Management, it is clear that he has not been active on the account for more than five years. Midland Credit has violated the FDCPA by threatening to take legal action when they have no right to.
Do Debt Collectors Have The Right To Report My Account To A Credit Bureau?
Until you pay off your debt or settle with the collection agency, debt collectors are required to report your account information to credit bureaus.
The new Debt Collection Rule, however, prohibits creditors from immediately reporting your account to the credit bureaus. In place of this, debt collection agencies must either contact you or send a validation notice and wait for a certain period to pass before contacting you.
If these agencies receive a non-delivery notice, they cannot report the account. As a result, the agency will need to make another attempt to locate you. After 14 days, the debt collection agency may report the account if it does not receive a response.
Do Debt Collectors Have The Right To Collect Debts From Deceased Individuals?
Debt collectors may attempt to collect debts from deceased individuals. If the debt collector knows that the debtor has died or has reason to believe that the debtor is no longer alive, communication must be directed to the individual who represents the debtor’s estate.
A debt collection agency must verify any new debts acquired with deceased borrowers directly with the estate representative. In their letter, the debt collection agency must identify the estate representative by name.
For How Long Must Debt Collectors Retain Records Of Their Debt Collection Efforts?
Records must be retained by debt collectors following government regulations. The new Debt Collection Rule and the Fair Debt Collection Practices Act must be followed by all records. When a debt collector begins collection activities, records are retained for some time. Following the last communication with the borrower, debt collection agencies must retain all documents for three years.
All communications, including letters, emails, social media messages, texts, and recorded telephone calls, are subject to the Debt Collection Rule.
Can I Report Or Sue A Debt Collector If They Violate The Debt Collection Rule?
If a debt collection agency does not comply with the new Debt Collection Rule, you have rights. Debt collectors should never be allowed to abuse or harass you. The Federal Trade Commission and the Consumer Financial Protection Bureau should be notified of illegal actions. You can register complaints online with both agencies.
If the violation violates your state’s debt collection laws, you can report it to your Attorney General. You can ask the Attorney General’s office to take action on your behalf against the debt collection agency.
It is possible to sue the debt collection agency in court. Debt collection agencies may owe you a penalty and expenses related to the case if you win.
Moreover, you may be able to use any violation against a debt collection agency to obtain a better settlement for your debt. The amount of the settlement may be reduced if you can prove that their actions violated your rights.
