Debt Collection Practices (Regulation F), 23274-23418 [2019-09665]

Download as PDF 23274 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Part 1006 [Docket No. CFPB–2019–0022] RIN 3170–AA41 Debt Collection Practices (Regulation F) Bureau of Consumer Financial Protection. ACTION: Proposed rule with request for public comment. AGENCY: The Bureau of Consumer Financial Protection (Bureau) proposes to amend Regulation F, 12 CFR part 1006, which implements the Fair Debt Collection Practices Act (FDCPA) and currently contains the procedures for State application for exemption from the provisions of the FDCPA. The Bureau’s proposal would amend Regulation F to prescribe Federal rules governing the activities of debt collectors, as that term is defined in the FDCPA. The Bureau’s proposal would, among other things, address communications in connection with debt collection; interpret and apply prohibitions on harassment or abuse, false or misleading representations, and unfair practices in debt collection; and clarify requirements for certain consumer-facing debt collection disclosures. SUMMARY: Comments must be received on or before August 19, 2019. ADDRESSES: You may submit comments, identified by Docket No. CFPB–2019– 0022 or RIN 3170–AA41, by any of the following methods: • Federal eRulemaking Portal: https:// www.regulations.gov. Follow the instructions for submitting comments. • Email: 2019-NPRM-DebtCollection@ cfpb.gov. Include Docket No. CFPB– 2019–0022 or RIN 3170–AA41 in the subject line of the email. • Mail: Comment Intake—Debt Collection, Bureau of Consumer Financial Protection, 1700 G Street NW, Washington, DC 20552. • Hand Delivery/Courier: Comment Intake—Debt Collection, Bureau of Consumer Financial Protection, 1700 G Street NW, Washington, DC 20552. Instructions: The Bureau encourages the early submission of comments. All submissions should include the agency name and docket number or Regulatory Information Number (RIN) for this rulemaking. Because paper mail in the Washington, DC area and at the Bureau is subject to delay, commenters are encouraged to submit comments electronically. In general, all comments received will be posted without change jbell on DSK3GLQ082PROD with PROPOSALS2 DATES: VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 to https://www.regulations.gov. In addition, comments will be available for public inspection and copying at 1700 G Street NW, Washington, DC 20552, on official business days between the hours of 10:00 a.m. and 5:00 p.m. Eastern Time. You can make an appointment to inspect the documents by telephoning 202–435–7275. All comments, including attachments and other supporting materials, will become part of the public record and subject to public disclosure. Proprietary or sensitive personal information, such as account numbers, Social Security numbers, or names of other individuals, should not be included. Comments will not be edited to remove any identifying or contact information. FOR FURTHER INFORMATION CONTACT: Adam Mayle, Counsel; or Dania Ayoubi, Owen Bonheimer, Seth Caffrey, David Hixson, David Jacobs, Courtney Jean, or Kristin McPartland, Senior Counsels, Office of Regulations, at 202–435–7700. If you require this document in an alternative electronic format, please contact CFPB_accessibility@cfpb.gov. SUPPLEMENTARY INFORMATION: I. Summary of the Proposed Rule The Bureau proposes to amend Regulation F, which implements the Fair Debt Collection Practices Act (FDCPA),1 to prescribe Federal rules governing the activities of debt collectors, as that term is defined in the FDCPA (FDCPA-covered debt collectors). The proposal focuses on debt collection communications and disclosures and also addresses related practices by debt collectors. The Bureau also proposes that FDCPA-covered debt collectors comply with certain additional disclosure-related and record retention requirements pursuant to the Bureau’s rulemaking authority under title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).2 In 1977, Congress passed the FDCPA to eliminate abusive debt collection practices by debt collectors, to ensure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.3 The statute was a response to ‘‘abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors.’’ 4 According to Congress, 1 15 U.S.C. 1692–1692p. Law 111–203, 124 Stat. 1376 (2010). 3 15 U.S.C. 1692(e). 4 15 U.S.C. 1692(a). 2 Public PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 these practices ‘‘contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.’’ 5 The FDCPA established certain consumer protections, but interpretative questions have arisen since its passage. Some questions, including those related to communication technologies that did not exist at the time the FDCPA was passed (such as mobile telephones, email, and text messaging), have been the subject of inconsistent court decisions, resulting in legal uncertainty and additional cost for industry and risk for consumers. As the first Federal agency with authority under the FDCPA to prescribe substantive rules with respect to the collection of debts by debt collectors, the Bureau proposes to clarify how debt collectors may employ such newer communication technologies in compliance with the FDCPA and to address other communications-related practices that may pose a risk of harm to consumers and create legal uncertainty for industry. The Bureau also proposes to interpret the FDCPA’s consumer disclosure requirements to clarify how industry participants can comply with the law and to assist consumers in making better-informed decisions about debts they owe or allegedly owe.6 A. Coverage and Organization of the Proposed Rule The Bureau’s proposed rule is based primarily on its authority to issue rules to implement the FDCPA. Consequently, the proposal generally would impose requirements on debt collectors, as that term is defined in the FDCPA. However, the Bureau proposes certain provisions of the regulation based on the Bureau’s Dodd-Frank Act rulemaking authority. With respect to debt collection, the Bureau’s authority under the DoddFrank Act generally may address the conduct of those who collect debt related to a consumer financial product or service, as that term is defined in the Dodd-Frank Act.7 Proposed rule 5 Id. 6 Because this is a proposed rule, the Bureau’s statements herein regarding proposed interpretations of the FDCPA or the Dodd-Frank Act do not represent final Bureau interpretations. The Bureau is not, through its proposed interpretations, finding that conduct either violates or is permissible under the FDCPA or the Dodd-Frank Act. 7 Covered persons under the Dodd-Frank Act include persons who are ‘‘engage[d] in offering or providing a consumer financial product or service’’; this generally includes persons who are ‘‘collecting debt related to any consumer financial product or service’’ (e.g., debt related to the extension of consumer credit). See 12 U.S.C. 5481(5), (6), (15)(A)(i), (x). E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules provisions that rely on the Bureau’s Dodd-Frank Act rulemaking authority generally would not, therefore, require FDCPA-covered debt collectors to comply if they are not collecting debt related to a consumer financial product or service.8 Such FDCPA-covered debt collectors, however, would not violate the FDCPA by complying with any such provisions adopted in a final rule. The proposed rule restates the FDCPA’s substantive provisions largely in the order that they appear in the statute, sometimes without further interpretation. Restating the statutory text of all of the substantive provisions may facilitate understanding and compliance by ensuring that stakeholders need to consult only the regulation to view all relevant definitions and substantive provisions. Where the Bureau proposes to restate statutory text without further interpretation, the relevant section-bysection analysis explains that the proposed rule restates the statutory language with only minor wording or organizational changes for clarity. Except where specifically stated, the Bureau does not intend to codify existing case law or judicial interpretations of the statute by restating the statutory text. The Bureau requests comment on the proposed approach of restating the substantive provisions of the FDCPA. The proposed rule has four subparts. Subpart A contains generally applicable provisions, such as definitions that would apply throughout the regulation. Subpart B contains proposed rules for FDCPA-covered debt collectors. Subpart C is reserved for any future debt collection rulemakings. Subpart D contains certain miscellaneous provisions. B. Scope of the Proposed Rule jbell on DSK3GLQ082PROD with PROPOSALS2 Communications Proposals Debt collection efforts often begin with attempts by a debt collector to reach a consumer. Communicating with a debt collector may benefit a consumer by helping the consumer to either 8 These provisions appear in proposed §§ 1006.14(b)(1)(ii) (repeated or continuous telephone calls or telephone conversations), 1006.30(b)(1)(ii) (prohibition on the sale, transfer, or placement of certain debts), and 1006.34(c)(2)(iv) (certain information about the debt) and (3)(iv) (certain information about consumer protections). Note that proposed §§ 1006.14(b)(1)(i) and 1006.30(b)(1)(i) would prohibit the same conduct by all FDCPA-covered debt collectors that proposed §§ 1006.14(b)(1)(ii) and 1006.30(b)(1)(ii) would prohibit only for FDCPA-covered debt collectors collecting consumer financial product or service debt. Additionally, the record retention requirement in § 1006.100 is proposed only pursuant to DoddFrank Act rulemaking authority but would apply to all FDCPA-covered debt collectors. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 resolve a debt the consumer owes, or identify and inform the debt collector if the debt is one that the consumer does not owe. However, debt collection communications also may constitute unfair practices, may contain false or misleading representations, or may be harassing or abusive either because of their content (for example, when debt collectors employ profanity) or because of the manner in which they are made (for example, when debt collectors place excessive telephone calls with the intent to harass or abuse). Communication technology has evolved significantly since the FDCPA was enacted in 1977. Today, consumers may prefer communicating with debt collectors using newer technologies, such as emails, text messages, or web portals, because these technologies may offer greater efficiency, convenience, and privacy. These technologies also may allow consumers to exert greater control over the timing, frequency, and duration of communications with debt collectors—for example, by choosing when, where, and how much time to spend responding to a debt collector’s email. Debt collectors also may find that these technologies are a more effective and efficient means of communicating with consumers. To address concerns about debt collection communications and to clarify the application of the FDCPA to newer communication technologies, the Bureau proposes to: • Define a new term related to debt collection communications: Limitedcontent message. This definition would identify what information a debt collector must and may include in a message left for consumers (with the inclusion of no other information permitted) for the message to be deemed not to be a communication under the FDCPA. This definition would permit a debt collector to leave a message for a consumer without communicating, as defined by the FDCPA, with a person other than the consumer. • Clarify the times and places at which a debt collector may communicate with a consumer, including by clarifying that a consumer need not use specific words to assert that a time or place is inconvenient for debt collection communications. • Clarify that a consumer may restrict the media through which a debt collector communicates by designating a particular medium, such as email, as one that cannot be used for debt collection communications. • Clarify that, subject to certain exceptions, a debt collector is prohibited from placing a telephone call to a person more than seven times PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 23275 within a seven-day period or within seven days after engaging in a telephone conversation with the person. • Clarify that newer communication technologies, such as emails and text messages, may be used in debt collection, with certain limitations to protect consumer privacy and to prevent harassment or abuse, false or misleading representations, or unfair practices. For example, the Bureau proposes to require that a debt collector’s emails and text messages include instructions for a consumer to opt out of receiving further emails or text messages. The Bureau also proposes procedures that, when followed, would protect a debt collector from liability for unintentional violations of the prohibition against third-party disclosures when communicating with a consumer by email or text message. Consumer Disclosure Proposals The FDCPA requires that a debt collector send a written notice to a consumer, within five days of the initial communication, containing certain information about the debt and actions the consumer may take in response, unless such information was provided in the initial communication or the consumer has paid the debt. To clarify the information that a debt collector must provide to a consumer at the outset of debt collection, including (if applicable) in a validation notice, the Bureau proposes: • To specify that debt collectors must provide certain information about the debt and the consumer’s rights with respect to the debt. The Bureau also proposes to require a debt collector to provide prompts that a consumer could use to dispute the debt, request information about the original creditor, or take certain other actions. The Bureau also proposes to permit a debt collector to include certain optional information. • A model validation notice that a debt collector could use to comply with the FDCPA and the proposed rule’s disclosure requirements. • To clarify the steps a debt collector must take to provide the validation notice and other required disclosures electronically. • A safe harbor if a debt collector complies with certain steps when delivering the validation notice within the body of an email that is the debt collector’s initial communication with the consumer. The Bureau also proposes to prohibit a debt collector from suing or threatening to sue a consumer to collect a time-barred debt. The Bureau plans to test consumer disclosures related to time-barred debt and, after testing, will E:\FR\FM\21MYP2.SGM 21MYP2 23276 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules assess whether a debt collector who collects a time-barred debt must disclose that the debt collector cannot sue to collect the debt because of its age. At a later date, the Bureau may release a report on such testing and issue a disclosure proposal related to the collection of time-barred debt. Stakeholders will have an opportunity to comment on such testing if the Bureau intends to use it to support disclosure requirements in a final rule. jbell on DSK3GLQ082PROD with PROPOSALS2 Additional Proposals The Bureau proposes to address certain other consumer protection concerns in the debt collection market. For example, the Bureau proposes: • To clarify that the personal representative of a deceased consumer’s estate is a consumer for purposes of proposed § 1006.6, which addresses communications in connection with debt collection. This clarification generally would allow a debt collector to discuss a debt with the personal representative of a deceased consumer’s estate. The Bureau also proposes to clarify how a debt collector may locate the personal representative of a deceased consumer’s estate. In addition, the proposed rule would interpret the requirement that a debt collector provide the validation notice to a ‘‘consumer’’ to require the notice be provided to the person acting on behalf of a deceased consumer’s estate, i.e., the executor, administrator, or personal representative of a deceased consumer’s estate, who would have the right to dispute the debt. • To prohibit a debt collector from furnishing information about a debt to a consumer reporting agency before communicating with the consumer about the debt. • To prohibit, with certain exceptions, the sale, transfer, or placement for collection of a debt if a debt collector knows or should know that the debt has been paid or settled or has been discharged in bankruptcy, or that an identity theft report has been filed with respect to the debt. The Bureau requests comment on all aspects of the proposed rule. C. Effective Date The Bureau proposes that the effective date of the final rule would be one year after the final rule is published in the Federal Register. The Bureau requests comment on this proposed effective date. II. Background A. Debt Collection Market Background A consumer debt is commonly understood to be a consumer’s VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 obligation to pay money to another person or entity. Sometimes a debt arises out of a closed-end loan. At other times, a debt arises from a consumer’s use of an open-end line of credit, most commonly a credit card. And in other cases, a debt arises from a consumer’s purchase of goods or services with payment due thereafter. Often there is an agreed-upon payment schedule or date by which the consumer must repay the debt. For a variety of reasons, consumers sometimes are unable (or in some instances unwilling) to make payments when they are due. Collection efforts may directly recover some or all of the overdue amounts owed to debt owners and thereby may indirectly help to keep consumer credit available and more affordable to consumers.9 Collection activities also can lead to repayment plans or debt restructuring that may provide consumers with additional time to make payments or resolve their debts on more manageable terms.10 The debt collection industry includes creditors, third-party debt collectors (including debt collection law firms), debt buyers, and a wide variety of related service providers. Debt collection is estimated to be an $11.5 billion-dollar industry employing nearly 118,500 people across approximately 7,700 collection agencies in the United States.11 Creditors When an account becomes delinquent, initial collection efforts often are undertaken by the original creditor or its servicer. The FDCPA typically does not cover these first-party recovery efforts. If these first-party recovery efforts result in resolution of the debt, whether through payment in full or another arrangement, the consumer typically will not interact with a third-party debt collector. Third-Party Debt Collectors If a consumer’s payment obligations remain unmet, a creditor may send the account to a third-party debt collector to recover on the debt in the third-party debt collector’s name. A creditor may choose to send an account to a third9 See Bureau of Consumer Fin. Prot., Fair Debt Collection Practices Act: CFPB Annual Report 2013, at 9 (Mar. 2013), https://www.consumerfinance.gov/ data-research/research-reports/annual-report-onthe-fair-debt-collection-practices-act/ (hereinafter 2013 FDCPA Annual Report). 10 See id. 11 See Bureau of Consumer Fin. Prot., Fair Debt Collection Practices Act: CFPB Annual Report 2019, at 8 (Mar. 2019), https://files.consumerfinance.gov/ f/documents/cfpb_fdcpa_annual-report-congress_ 03-2019.pdf (hereinafter 2019 FDCPA Annual Report). PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 party debt collector for several reasons, including because the third-party debt collector possesses capabilities and expertise that the creditor lacks. Thirdparty debt collectors usually are paid on a contingency basis, typically a percentage of recoveries; debt collectors contracting with creditors on a contingency basis generated a large majority of the industry’s 2018 revenue.12 Contingency debt collectors compete with one another to secure business from creditors based on, among other factors, the debt collectors’ effectiveness in obtaining recoveries.13 Debt Buyers If contingency collections prove unsuccessful—or if a particular creditor prefers not to use such third-party debt collectors—a creditor may sell unpaid accounts to a debt buyer. In 2009, the Federal Trade Commission (FTC) called the advent and growth of debt buying ‘‘the most significant change in the debt collection business’’ in recent years.14 Debt buyers purchase defaulted debt from creditors or other debt owners and thereby take title to the debt. Credit card debt comprises a large majority of the debt that debt buyers purchase.15 Debt buyers generated about one-third of debt collection revenue, or about $3.5 billion, in 2017.16 Creditors who sell their uncollected debt to debt buyers receive a certain up-front return, but these debts typically are sold at prices that are a fraction of their face value. Debt buyers typically price their offers for portfolios based upon their projections of the amount they will be able to collect. The debt buyer incurs the risk of recovering 12 Id. at 10. third-party collection agencies have been increasing in size in recent years, third-party debt collection continues to include a significant number of smaller entities. See Robert M. Hunt, Understanding the Model: The Life Cycle of a Debt, at 15, Fed. Reserve Bank of Phila. (June 6, 2013), https://www.ftc.gov/sites/default/files/documents/ public_events/life-debt-data-integrity-debtcollection/understandingthemodel.pdf. 14 Fed. Trade Comm’n, The Structure and Practices of the Debt Buying Industry, at i (2013), https://www.ftc.gov/sites/default/files/documents/ reports/structure-and-practices-debt-buyingindustry/debtbuyingreport.pdf (hereinafter FTC Debt Buying Report). 15 Id. at 7 (citing Credit Card Debt Sales in 2008, 921 Nilson Rep. 10 (Mar. 2009)). 16 Bureau of Consumer Fin. Prot., Fair Debt Collection Practices Act: CFPB Annual Report 2018, at 10 (Mar. 2018), https:// files.consumerfinance.gov/f/documents/cfpb_ fdcpa_annual-report-congress_03-2018.pdf (hereinafter 2018 FDCPA Annual Report) (citing Edward Rivera, Debt Collection Agencies in the US, IBIS World (Dec. 2017)). Although debt buyers represent about one-third of industry revenue, this overstates debt buyers’ share of dollars collected, since debt buyer revenue includes all amounts recovered, whereas the revenue of contingency debt collectors includes only the share of recoveries retained by the debt collector. Id. 13 While E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules to information that transferred with the account file, public records, data sellers, or proprietary databases of contact information. A debt collector may also attempt to obtain location information for a consumer from third parties, such as family members who share a residence with the consumer or colleagues at the consumer’s workplace. Once a debt collector has obtained contact information for a consumer, the debt collector typically will seek to communicate with the consumer to obtain payment on some or all of the debt. The debt collector may tailor the collection strategy depending on a variety of factors, including the size and age of the debt and the debt collector’s assessment of the likelihood of Debt Collection Law Firms obtaining money from the consumer. If debt collection attempts are For example, rather than affirmatively locating and contacting consumers, unsuccessful, a debt owner may try to some debt collectors collecting recover on a debt through litigation. Most debt collection litigation is filed in relatively small debts—such as many medical, utility, and State courts. Debt owners often retain telecommunications debts—will report law firms and attorneys that specialize the debts to consumer reporting in debt collection and that are familiar agencies (CRAs) and then wait for with State and local rules. If a debt consumers to contact them after owner obtains a judgment in its favor, discovering the debts on their consumer post-litigation efforts may include reports.20 Other types of debt are subject garnishment of wages or seizure of to statutory or regulatory requirements assets. that may affect how a debt collector tries B. Debt Collection Methods to recover on them. For example, The debt collection experience is a privacy protections may affect how a common one—approximately one in debt collector seeks to recover on a three consumers with a credit record medical debt, and the availability of reported having been contacted about a administrative wage garnishment and debt in collection in 2014.18 Of those, 27 tax refund intercepts may affect how a percent reported having been contacted debt collector seeks to recover on a about a single debt over the prior year, Federal student loan. Changes in a consumer’s situation 57 percent reported having been may warrant a change in a debt contacted about two to four debts, and collector’s recovery strategy, such as 16 percent reported having been contacted about more than four debts.19 when information purchased from CRAs or other third parties indicates that the A creditor typically stops consumer has started a new job. A debt communicating with a consumer once responsibility for an account has moved owner also may ‘‘warehouse’’ a debt and cease collection efforts for a significant to a third-party debt collector. Active period. A new debt collector may later debt collection efforts typically begin be tasked with resuming collection with the debt collector attempting to efforts because, for example, the debt locate the consumer, usually by identifying a valid telephone number or owner has sold the account, detected a possible change in the consumer’s mailing address, so that the debt financial situation, or wishes to make collector can establish contact with the periodic attempts at some recovery. consumer. To obtain current contact Each time a new debt collector obtains information, a debt collector may look responsibility for collecting the debt, the 17 FTC Debt Buying Report, supra note 14, at 23– consumer likely will be subject to 24. communications or communication 18 Bureau of Consumer Fin. Prot., Consumer attempts from the new debt collector. Experience with Debt Collection: Findings from For the consumer, this may mean CFPB’s Survey of Consumer Views on Debt, at 5 jbell on DSK3GLQ082PROD with PROPOSALS2 less than the sum of the amount it paid to acquire the debt and its expenses to collect the debt. Typically a debt buyer engages in debt collection, attempting to collect debts itself. However, a debt buyer also may use a third-party debt collector or a series of such debt collectors. If the debt buyer is unable to collect some of the debts it purchased, the debt buyer may sell the debt again to another debt buyer. Any single debt thus may be owned by multiple entities over its lifetime. The price paid for a debt generally will decline as the debt ages and passes from debt buyer to debt buyer, because the probability of payment decreases.17 (2017), https://files.consumerfinance.gov/f/ documents/201701_cfpb_Debt-Collection-SurveyReport.pdf (hereinafter CFPB Debt Collection Consumer Survey). This figure includes consumers contacted only by creditors as well as those contacted by one or more debt collection firms. Id. at 13. 19 Id. at 13. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 20 Bureau of Consumer Fin. Prot., Consumer Credit Reports: A Study of Medical and NonMedical Collections, at 35–36 (2014), https:// files.consumerfinance.gov/f/201412_cfpb_reports_ consumer-credit-medical-and-non-medicalcollections.pdf (hereinafter CFPB Medical Debt Report). PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 23277 contact from a series of different debt collectors over a number of years. During this time, the consumer may make payments to multiple debt collectors or may receive communication attempts from multiple debt collectors that may stop and restart at irregular intervals, until the debt is paid or settled in full or collection activity ceases for other reasons. C. Consumer Protection Concerns Each year, consumers submit tens of thousands of complaints about debt collection to Federal regulators; 21 many of those complaints relate to practices addressed in the proposed rule. Consumers also file thousands of private actions each year against debt collectors who allegedly have violated the FDCPA. Since the Bureau began operations in 2011, it has brought numerous debt collection cases against third-party debt collectors, alleging both FDCPA violations and unfair, deceptive, or abusive debt collection acts or practices in violation of the Dodd-Frank Act.22 In these cases, the Bureau has ordered civil penalties, monetary compensation for consumers, and other relief. In its supervisory work, the Bureau similarly has identified many FDCPA violations during examinations of debt collectors. Over the past decade, the FTC and State regulators also have brought numerous additional actions against debt collectors for violating Federal and State 21 See, e.g., 2019 FDCPA Annual Report, supra note 11, at 15–16; Fed. Trade Comm’n, 2018 Consumer Sentinel Network Databook, at 4, 7 (Feb. 2019), https://www.ftc.gov/system/files/documents/ reports/consumer-sentinel-network-data-book-2018/ consumer_sentinel_network_data_book_2018_ 0.pdf; 2018 FDCPA Annual Report, supra note 16, at 14–15; Fed. Trade Comm’n, 2017 Consumer Sentinel Network Databook, at 3, 6 (Mar. 2018), https://www.ftc.gov/system/files/documents/ reports/consumer-sentinel-network-data-book-2017/ consumer_sentinel_data_book_2017.pdf; Bureau of Consumer Fin. Prot., 2017 Fair Debt Collection Practices Act: CFPB Annual Report 2017, at 15–16 (Mar. 2017), https://files.consumerfinance.gov/f/ documents/201703_cfpb_Fair-Debt-CollectionPractices-Act-Annual-Report.pdf (hereinafter 2017 FDCPA Annual Report); Fed. Trade Comm’n, Consumer Sentinel Network Data Book for January– December 2016, at 3, 6 (Mar. 2017), https:// www.ftc.gov/system/files/documents/reports/ consumer-sentinel-network-data-book-januarydecember-2016/csn_cy-2016_data_book.pdf. 22 See, e.g., Consent Order, In re Encore Capital Grp., 2015–CFPB–0022 (Sept. 9, 2015), https:// files.consumerfinance.gov/f/201509_cfpb_consentorder-encore-capital-group.pdf; Consent Order, In re Portfolio Recovery Assocs., LLC, 2015–CFPB– 0023 (Sept. 9, 2015), https:// files.consumerfinance.gov/f/201509_cfpb_consentorder-portfolio-recovery-associates-llc.pdf; Complaint, Consumer Fin. Prot. Bureau v. Nat’l Corrective Grp., Inc., 1:15–cv–00899–RDB (D. Md. Mar. 30, 2015), https://files.consumerfinance.gov/f/ 201503_cfpb_complaint-national-correctivegroup.pdf. E:\FR\FM\21MYP2.SGM 21MYP2 23278 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 debt collection and consumer protection laws. D. FDCPA and Dodd-Frank Act Protections for Consumers Federal and State governments historically have sought to protect consumers from harmful debt collection practices. From 1938 to 1977, the Federal government primarily protected consumers through FTC enforcement actions against debt collectors who engaged in unfair or deceptive acts or practices in violation of section 5 of the FTC Act.23 When Congress enacted the FDCPA in 1977, it found that ‘‘[e]xisting laws and procedures for redressing . . . injuries [were] inadequate to protect consumers.’’ 24 Congress found that ‘‘[t]here [was] abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors,’’ and that these practices ‘‘contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.’’ 25 The FDCPA was enacted, in part, ‘‘to eliminate abusive debt collection practices by debt collectors, [and] to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged.’’ 26 Among other things, the FDCPA: (1) Prohibits debt collectors from engaging in harassment or abuse, making false or misleading representations, and engaging in unfair practices in debt collection; (2) restricts debt collectors’ communications with consumers and others; and (3) requires debt collectors to provide consumers with disclosures concerning the debts they owe or allegedly owe. Until the creation of the Bureau, no Federal agency was authorized to issue regulations to implement the substantive provisions of the FDCPA. Courts have issued opinions providing differing interpretations of various FDCPA provisions, and there is considerable uncertainty with respect to how the FDCPA applies to communication technologies that did not exist in 1977. Further, to reduce legal risk, debt collectors typically use the language of the statute in making required disclosures, even though that language can be difficult for consumers to understand. The Dodd-Frank Act amended the FDCPA to provide the Bureau with authority to ‘‘prescribe rules with 23 15 U.S.C. 45. U.S.C. 1692(b). 25 15 U.S.C. 1692(a). 26 15 U.S.C. 1692(e). 24 15 VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 respect to the collection of debts by debt collectors.’’ 27 Section 1031 of the DoddFrank Act also authorizes the Bureau, among other things, to prescribe rules applicable to a covered person or service provider identifying as unlawful unfair, deceptive, or abusive acts or practices in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service.28 Section 1031(b) provides that rules under section 1031 may include requirements for the purpose of preventing such unfair, deceptive, or abusive acts or practices.29 Covered persons under the Dodd-Frank Act include persons who are ‘‘engage[d] in offering or providing a consumer financial product or service’’; 30 this generally includes persons who are ‘‘collecting debt related to any consumer financial product or service’’ (e.g., debt related to the extension of consumer credit).31 Covered persons under the Dodd-Frank Act thus include many FDCPA-covered debt collectors, as well as many creditors and their servicers, who are collecting debt related to a consumer financial product or service. III. The Rulemaking Process The Bureau has conducted a wide range of outreach on the scope and substance of this proposed rule, including by holding field hearings,32 hosting two joint roundtables with the FTC,33 and issuing an Advance Notice of Proposed Rulemaking (ANPRM) in November 2013.34 The Bureau has conducted several rounds of qualitative testing of prototype debt collection 27 15 U.S.C. 1692l(d). Act section 1031(b), 12 U.S.C. 5531(b). 29 Id. 30 12 U.S.C. 5481(6). 31 12 U.S.C. 5481(5), (15)(A)(i), (x). 32 See Bureau of Consumer Fin. Prot., Field Hearing on Debt Collection in Seattle, WA (Oct. 24, 2012), https://www.consumerfinance.gov/about-us/ events/archive-past-events/field-hearing-on-deftcollection-from-seattle-washington/; Bureau of Consumer Fin. Prot., Field Hearing on Debt Collection in Portland, ME (July 10, 2013), https:// www.consumerfinance.gov/about-us/events/ archive-past-events/field-hearing-debt-collectionportland-me/; Bureau of Consumer Fin. Prot., Field Hearing on Debt Collection in Sacramento, CA (July 28, 2016), https://www.consumerfinance.gov/aboutus/events/archive-past-events/field-hearing-debtcollection-sacramento-calif/. 33 Fed. Trade Comm’n & Bureau of Consumer Fin. Prot., Debt Collection and the Latino Community: An FTC–CFPB Roundtable (Oct. 23, 2014), https:// www.ftc.gov/news-events/events-calendar/2014/10/ debt-collection-latino-community-roundtable; Fed. Trade Comm’n & Bureau of Consumer Fin. Prot., Roundtable on Data Integrity in Debt Collection: Life of a Debt (July 6, 2013), https://www.ftc.gov/ system/files/documents/public_events/71120/lifedebt-roundtable-transcript.pdf. 34 78 FR 67848 (Nov. 12, 2013). 28 Dodd-Frank PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 disclosure forms and has conducted formal and informal surveys over the past several years to obtain a more comprehensive and systematic understanding of debt collection practices. The Bureau also convened a Small Business Review Panel in August 2016 to obtain feedback from small debt collectors. Since the Bureau began studying this market, the Bureau has met on many occasions with various stakeholders, including consumer advocacy groups, debt collection trade associations, industry participants, academics with expertise in debt collection, Federal prudential regulators, and other Federal and State consumer protection regulators. The Bureau also received a number of comments specific to the debt collection rulemaking in response to its Request for Information Regarding the Bureau’s Adopted Regulations and New Rulemaking Authorities 35 and its Request for Information Regarding the Bureau’s Inherited Regulations and Inherited Rulemaking Authorities,36 and the Bureau has considered these comments in developing the proposed rule. In addition, the Bureau has engaged in general outreach, speaking at consumer advocacy group and industry events and visiting consumer organizations and industry stakeholders. The Bureau has provided other regulators with information about the proposed rule, has sought their input, and has received feedback that has helped the Bureau to prepare this proposed rule. A. 2013 Advance Notice of Proposed Rulemaking The Bureau issued an ANPRM regarding debt collection in November of 2013. The ANPRM sought information about both first- and thirdparty debt collection practices, including: Debt collectors’ communication and calling practices; the use of disclosures, such as timebarred debt disclosures, in debt collection; the quantity and quality of information in the debt collection system; credit reporting by debt collectors; the prevalence and use of litigation by debt collectors, including by debt collection attorneys; and record retention, monitoring, and compliance issues. The Bureau received more than 23,000 comments in response to the ANPRM, with approximately 379 nonform comments submitted. These nonform comments were provided by consumers, consumer advocacy groups, 35 83 36 83 E:\FR\FM\21MYP2.SGM FR 12286 (Mar. 21, 2018). FR 12881 (Mar. 26, 2018). 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules industry participants and trade associations, legal groups including law school clinics, State Attorneys General, and other stakeholders. The Bureau also worked with Cornell University’s Regulation Room, which interacted with consumers to obtain their input and submitted a consolidated comment representing views from a multitude of consumers. Comments on the ANPRM related to both first- and third-party collection efforts. Commenters provided significant feedback regarding debt collector communication practices and interactions with consumers, consumer disclosures, and the use of newer communication technologies. Specific comments are discussed in more detail in part V where relevant. B. Consumer Testing The Bureau contracted with a thirdparty vendor, Fors Marsh Group (FMG), to assist with developing, and to conduct qualitative consumer testing of, two potential consumer-facing debt collection model disclosure forms: The validation notice and the statement of consumer rights. The Bureau sought insight into consumers’ existing understanding of debt collection protections and how consumers would interact with the forms if they were adopted in a final rule. Specific findings from the consumer testing are discussed in more detail in part V where relevant.37 jbell on DSK3GLQ082PROD with PROPOSALS2 Validation Notice Testing Focus groups. FMG facilitated five focus groups in July 2014 to assess consumers’ thoughts about debt collectors and debt collection, to evaluate their perceptions of disclosures provided by debt collectors, and to measure their understanding of consumers’ rights in debt collection. Two focus groups, one consisting of participants who had been contacted by a debt collector within the previous two years and one consisting of participants without such experience, were held in Arlington, Virginia, on July 16, 2014. Three focus groups, two consisting of participants with debt collection experience and one consisting of participants without debt collection 37 While the Bureau tested a statement of consumer rights disclosure, this proposal would not require debt collectors to provide such a disclosure to consumers. Instead, the Bureau proposes to require certain debt collectors to provide on the validation notice a statement referring consumers to a Bureau-provided website that would describe certain consumer protections in debt collection. See the section-by-section analysis of proposed § 1006.34(c)(3)(iv). Because the Bureau does not propose to require debt collectors to provide consumers with a statement of consumer rights disclosure, the Bureau does not summarize testing related to that disclosure in this proposal. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 experience, were held in New Orleans, Louisiana, on July 29, 2014. In conjunction with the release of this proposal, the Bureau is making available a report prepared by FMG regarding the focus group testing (FMG Focus Group Report).38 Cognitive Testing. FMG also conducted 30 one-on-one interviews of consumers to assess their perceptions, preferences, and understanding of different validation notices and to evaluate how each of the notices might affect consumer behavior. The interviews took place at three locations: Arlington, Virginia, on September 23 and 24, 2014; Minneapolis, Minnesota, on October 9 through 11, 2014; and Las Vegas, Nevada, on October 23 and 24, 2014. At each location, FMG interviewed 10 participants, seven of whom had debt collection experience and three of whom did not. FMG tested three validation notices at each location. The first form was modeled closely on validation notices commonly used by debt collectors. The form included the disclosures specifically required by FDCPA section 809(a), and the language on the form generally mirrored the statutory language. The second form provided the same information as the first form, but in plainer language. The third form used the same language as the second form, along with additional information, including consumer protection information, chain-of-title information describing the history of the debt, and, for two of the testing locations, information about time-barred debts. FMG asked the participants to define, locate, and explain the meaning of specific elements on each form. Participants responded to three surveys, each with three Likert-scale questions.39 Participants were asked to compare the first and second forms side-by-side and were asked targeted questions about what they would do after reading individual elements of each notice. In conjunction with the release of this proposal, the Bureau is making available a report prepared by FMG regarding the 38 See generally Fors Marsh Grp., Debt Collection Focus Groups (Aug. 2014), https:// files.consumerfinance.gov/f/documents/cfpb_debtcollection_fmg-focus-group-report.pdf (hereinafter FMG Focus Group Report). The focus group testing was conducted in accordance with OMB control number 3170–0022, Generic Information Collection Plan for the Development and/or Testing of Model Forms, Disclosures, Tools, and Other Similar Related Materials. 39 A Likert-scale is a commonly used research scale that asks respondents to specify their level of agreement or disagreement with a series of statements. PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 23279 cognitive testing (FMG Cognitive Report).40 Usability Testing. FMG also conducted 30 additional one-on-one interviews of consumers to assess their perceptions, preferences, and understanding of different model validation notices and to evaluate what influence, if any, these forms could have on their behavior. FMG interviewed 23 consumers who had been contacted by a debt collector within the previous two years and seven without such experience. The interviews took place at three locations: Arlington, Virginia, on March 31 and April 1, 2015; Minneapolis, Minnesota, on April 14 and 15, 2015; and Las Vegas, Nevada, on April 28 and 29, 2015. During the interviews, researchers asked participants comprehension questions to determine their understanding of the forms and debriefing questions to establish their reactions to and perceptions of the forms. Researchers also engaged consumers in testing activities to assess their interactions with the forms. In conjunction with the release of this proposal, the Bureau is making available a report prepared by FMG regarding the usability testing (FMG Usability Report).41 The Bureau also is making available a report prepared by FMG summarizing the focus group testing, cognitive testing, and usability testing (FMG Summary Report).42 Quantitative Testing The Bureau plans to conduct a web survey of 8,000 individuals possessing a broad range of demographic characteristics. The survey will explore consumer comprehension and decisionmaking in response to sample debt collection disclosures relating to time40 See generally Fors Marsh Grp., Debt Collection Cognitive Interviews (n.d.), https:// files.consumerfinance.gov/f/documents/cfpb_debtcollection_fmg-cognitive-report.pdf (hereinafter FMG Cognitive Report). The cognitive testing was conducted in accordance with OMB control number 3170–0022, Generic Information Collection Plan for the Development and/or Testing of Model Forms, Disclosures, Tools, and Other Similar Related Materials. 41 See generally Fors Marsh Grp., Debt Collection User Experience Study (Feb. 2016), https:// files.consumerfinance.gov/f/documents/cfpb_debtcollection_fmg-usability-report.pdf (hereinafter FMG Usability Report). Like the other testing, the usability testing was conducted in accordance with OMB control number 3170–0022, Generic Information Collection Plan for the Development and/or Testing of Model Forms, Disclosures, Tools, and Other Similar Related Materials. 42 See generally Fors Marsh Grp., Debt Collection Validation Notice Research: Summary of Focus Groups, Cognitive Interviews, and User Experience Testing (Feb. 2016), https:// files.consumerfinance.gov/f/documents/cfpb_debtcollection_fmg-summary-report.pdf (hereinafter FMG Summary Report). E:\FR\FM\21MYP2.SGM 21MYP2 23280 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules barred debts. The Bureau will use the information it gathers to help assess how the Bureau may improve the clarity and effectiveness of debt collection disclosures, among other things. On February 4, 2019, in accordance with the Paperwork Reduction Act of 1995,43 the Bureau proposed an information collection that described the web survey and was open for public comment for 30 days.44 The comment period closed on March 6, 2019. This request is pending under OMB review and can be viewed on OMB’s electronic docket at https:// www.reginfo.gov/public/do/ PRAViewICR?ref_nbr=201902-3170-001 (see ICR Reference Number 201902– 3170–001). Stakeholders will have an opportunity to comment on a report describing the web survey results if the Bureau proposes to use those results to support disclosure requirements in a final rule. C. Study of Debt Collection Market Operations To better understand the operational costs of debt collection firms, including law firms, the Bureau surveyed debt collection firms and vendors and published a report based on that study in July 2016 (CFPB Debt Collection Operations Study or Operations Study).45 The answers to the survey questions aided the Bureau’s understanding of the compliance costs to debt collectors if the proposal were finalized. As a qualitative study, the survey’s results are not necessarily representative of the debt collection industry as a whole, but they provide a broad understanding of how a range of different types of debt collectors operate. The Operations Study focused on understanding how debt collection firms obtain information about delinquent consumer accounts and attempt to collect on those accounts.46 Between July and September 2015, the Bureau sent a written survey to debt collection firms. The survey focused on current practices and included 43 44 U.S.C. 3501 et seq. Agency Information Collection Activities: Submission for OMB Review; Comment Request, 84 FR 1430 (Feb. 4, 2019). 45 See generally Bureau of Consumer Fin. Prot., Study of Third-Party Debt Collection Operations (July 2016), https://www.consumerfinance.gov/ documents/755/20160727_cfpb_Third_Party_Debt_ Collection_Operations_Study.pdf (hereinafter CFPB Debt Collection Operations Study). 46 Most respondents collected debt on behalf of clients, rather than buying debt and collecting on their own behalf. Respondents that bought some debt reported that the majority of accounts they collected were for clients. As a result, the Operations Study did not provide distinct information on debt buyers and their operations as compared to third-party debt collectors. jbell on DSK3GLQ082PROD with PROPOSALS2 44 See VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 questions about employees, types of debt collected, clients, vendors, software, policies and procedures for consumer interaction, disputes, furnishing data to CRAs, litigation, and compliance. Between August and October 2015, the Bureau conducted telephone interviews with a subset of survey respondents. The interviews included several specific questions about the types of voicemails debt collectors leave and what share of lawsuits filed against consumers end with entry of default judgment, as well as some open-ended questions about the costs associated with making changes to collection management systems to address changes in State regulations. From July to October 2015, the Bureau conducted telephone interviews with debt collection vendors. A particular focus of these interviews was collection management systems, including programming and consulting services provided to system users. The Bureau also asked vendors about print mail services, predictive dialers, voice analytics, payment processing, and data services. Although the Bureau constructed the survey sample to ensure representation of debt collection firms of various sizes, the survey was not intended to be nationally representative. Nonetheless, the survey findings generally have informed the Bureau’s understanding of the operations and operating costs of various types of debt collection firms. Part VI discusses the Bureau’s findings from the study in greater detail. D. Survey of Consumer Experiences With Debt Collection The Bureau conducted a survey of consumers’ experiences with debt collection, approved under OMB control number 3170–0047, Debt Collection Survey from the Consumer Credit Panel, and published a report of the findings in January 2017 (CFPB Debt Collection Consumer Survey or Consumer Survey).47 Distributed to consumers in December 2014, the survey asked consumers about their experiences with creditors and debt collectors over the prior year, including disputes and lawsuits, and how they prefer to communicate with a creditor or debt collector. The survey also asked for information on each consumer’s demographic characteristics, general financial situation, and credit-market experiences. The survey sample was selected from the Bureau’s Consumer Credit Panel, which consists of a nationally representative, de-identified set of credit records maintained by one of the three nationwide CRAs, and responses were weighted to provide nationally representative results. The Consumer Survey, which included survey participants’ self-reported responses, provided a more comprehensive picture of consumers’ experiences and preferences related to debt collection than was previously available.48 The Bureau considered survey responses when developing the proposal. The Consumer Survey describes in detail several key findings relating to the prevalence of debt collection, the extent to which consumers dispute debts, and the extent to which creditors or debt collectors pursue the collection of debts through lawsuits. About onethird of consumers with a credit file at one of the three nationwide CRAs reported being contacted by a creditor or debt collector about a debt in the prior year, and most of those consumers reported being contacted about two or more debts.49 More than one-half of the consumers who had been contacted about a debt in collection indicated that at least one of the debts about which they had been contacted was not theirs or was for the wrong amount. Roughly one-quarter of the consumers who had been contacted about a debt in collection reported having disputed a debt with their creditor or debt collector in the past year.50 About one-in-seven consumers (about 15 percent) who had been contacted about a debt in collection reported having been sued by a creditor or debt collector in the preceding year.51 The Consumer Survey also describes in detail several key findings related to the frequency with which consumers are contacted about debts in collection, how often consumers ask debt collectors to stop contacting them, how consumers prefer to be contacted by debt collectors, and the frequency with which consumers report negative experiences with debt collectors. More than onethird of consumers (37 percent) contacted about a debt in collection indicated that the creditor or debt collector that most recently had contacted them tried to reach them at least four times per week. Seventeen percent reported that the creditor or debt collector tried to reach them at least eight times per week. Close to twothirds of consumers (63 percent) said 48 Id. at 4. at 13. 50 Id. at 24–25. 51 Id. at 27. 49 Id. 47 See generally CFPB Debt Collection Consumer Survey, supra note 18. PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules they were contacted too often by the most recent creditor or debt collector.52 Consumers contacted at the same frequency by creditors and debt collectors were more likely to characterize contact by a debt collector as occurring ‘‘too often’’ than when a creditor engaged in the same frequency of contact. In addition, 42 percent of consumers who reported they had been contacted about a debt in collection said they had asked at least one creditor or debt collector to stop contacting them in the prior year, but only one in four consumers who made this request reported that the contact stopped. Consumers contacted by debt collectors were more likely than those contacted by creditors to report negative experiences, such as being treated impolitely or being threatened.53 Almost one-half of the consumers (including those who did not report having been contacted by a creditor or debt collector about a debt in collection in the prior year) said they would most prefer debt collectors to contact them by letter. When asked the way they would least like debt collectors to contact them, consumers most commonly indicated in-person contacts (20 percent of consumers). Nearly two-thirds of consumers said it was ‘‘very important’’ that others not see or hear a message from a creditor or debt collector. At the same time, most consumers also preferred that a creditor or debt collector include their name and the purpose of the call (i.e., debt collection) in a voicemail or answering-machine message.54 jbell on DSK3GLQ082PROD with PROPOSALS2 E. Small Business Review Panel In August 2016, the Bureau convened a Small Business Review Panel (Small Business Review Panel or Panel) with the Chief Counsel for Advocacy of the Small Business Administration (SBA) and the Administrator of the Office of Information and Regulatory Affairs with the Office of Management and Budget (OMB).55 As part of this process, the Bureau prepared an outline of proposals under consideration and the alternatives 52 Id. at 30–31. As discussed further in the Consumer Survey, consumers’ estimates of the frequency of contacts may be subject to uncertainty because the survey does not purport to distinguish in its questions or analysis between various factual scenarios. 53 Id. at 34–35, 45–46. 54 Id. at 36–38. 55 The Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), as amended by section 1100G(a) of the Dodd-Frank Act, requires the Bureau to convene a Small Business Review Panel before proposing a rule that may have a substantial economic impact on a significant number of small entities. See Public Law 104–121, tit. II, 110 Stat. 847, 857 (1996) (as amended by Pub. L. 110–28, section 8302 (2007)). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 23281 considered (Small Business Review Panel Outline or Outline),56 which the Bureau posted on its website for review by the small entity representatives participating in the Panel process and by the general public. The Panel participated in initial teleconferences with small groups of the small entity representatives to introduce the Outline and supporting materials and to obtain feedback. The Panel then conducted a full-day outreach meeting with the small entity representatives in August 2016 in Washington, DC. The Panel gathered information from the small entity representatives and made findings and recommendations regarding the potential compliance costs and other impacts of the proposals under consideration on those entities. Those findings and recommendations are set forth in the Small Business Review Panel Report, which is part of the administrative record in this rulemaking and is available to the public.57 The Bureau has considered these findings and recommendations in preparing this proposal and addresses many of them in greater detail in part V.58 Section 1022(a) of the Dodd-Frank Act provides that ‘‘[t]he Bureau is authorized to exercise its authorities under Federal consumer financial law to administer, enforce, and otherwise implement the provisions of Federal consumer financial law.’’ 60 Section 1022(b)(1) of the Dodd-Frank Act provides that the Director may prescribe rules and issue orders and guidance, as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of the Federal consumer financial laws, and to prevent evasions thereof.61 ‘‘Federal consumer financial law’’ includes title X of the Dodd-Frank Act and the FDCPA.62 These and other authorities are discussed in greater detail in parts IV.A through E below. Part IV.A discusses how the Bureau proposes to interpret its authority under sections 806 through 808 of the FDCPA. Parts IV.B through E discuss the Bureau’s relevant authorities under the Dodd-Frank Act and the Electronic Signatures in Global and National Commerce Act (E–SIGN Act). IV. Legal Authority The Bureau issues this proposal pursuant to its authority under the FDCPA and the Dodd-Frank Act. As amended by the Dodd-Frank Act, FDCPA section 814(d) provides that the Bureau ‘‘may prescribe rules with respect to the collection of debts by debt collectors,’’ as defined in the FDCPA.59 As discussed in part V, the Bureau proposes several provisions, in whole or in part, pursuant to its authority to interpret FDCPA sections 806, 807, and 808, which set forth general prohibitions on, and requirements relating to, debt collectors’ conduct and are accompanied by non-exhaustive lists of examples of unlawful conduct. This section provides an overview of how the Bureau proposes to interpret FDCPA sections 806 through 808. FDCPA section 806 generally prohibits a debt collector from ‘‘engag[ing] in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt.’’ 63 Then, ‘‘[w]ithout limiting the general application of the foregoing,’’ it lists six examples of conduct that violate that section.64 Similarly, FDCPA section 807 generally prohibits a debt collector from ‘‘us[ing] any false, deceptive, or misleading representation or means in connection with the collection of any debt.’’ 65 Then, 56 Bureau of Consumer Fin. Prot., Small Business Review Panel for Debt Collector and Debt Buyer Rulemaking: Outline of Proposals Under Consideration and Alternatives Considered (July 2016), https://files.consumerfinance.gov/f/ documents/20160727_cfpb_Outline_of_ proposals.pdf (hereinafter Small Business Review Panel Outline). The Bureau also gathered feedback on the Small Business Review Panel Outline from other stakeholders, members of the public, and the Bureau’s Consumer Advisory Board and Community Bank Advisory Council. 57 Bureau of Consumer Fin. Prot., U.S. Small Bus. Admin., & Office of Mgmt. & Budget, Final Report of the Small Business Review Panel on the CFPB’s Proposals Under Consideration for the Debt Collector and Debt Buying Rulemaking (Oct. 2016), https://files.consumerfinance.gov/f/documents/ cfpb_debt-collector-debt-buyer_SBREFA-report.pdf (hereinafter Small Business Review Panel Report). 58 Certain proposals under consideration in the Small Business Review Panel Outline and discussed in the Small Business Review Panel Report are not included in this proposed rule and therefore are not discussed in part V. For example, because this proposed rule would apply only to FDCPA-covered debt collectors, the Bureau does not include a discussion of proposals under consideration that would have imposed information transfer requirements on first-party creditors who generally are not FDCPA-covered debt collectors. 59 15 U.S.C. 1692l(d). As noted, the Bureau is the first Federal agency with authority to prescribe substantive debt collection rules under the FDCPA. PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 A. FDCPA Sections 806 Through 808 Prior to the Dodd-Frank Act’s grant of authority to the Bureau, the FTC published various materials providing guidance on the FDCPA. The FTC’s materials have informed the Bureau’s rulemaking and, if relevant to particular proposed provisions, are discussed in part V. 60 12 U.S.C. 5512(a). 61 12 U.S.C. 5512(b)(1). 62 12 U.S.C. 5481(12)(H), (14). 63 15 U.S.C. 1692d. 64 Id. at 1692d(1)–(6). 65 15 U.S.C. 1692e. E:\FR\FM\21MYP2.SGM 21MYP2 23282 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules ‘‘[w]ithout limiting the general application of the foregoing,’’ section 807 lists 16 examples of conduct that violate that section.66 Finally, FDCPA section 808 prohibits a debt collector from ‘‘us[ing] unfair or unconscionable means to collect or attempt to collect any debt.’’ 67 Then, ‘‘[w]ithout limiting the general application of the foregoing,’’ FDCPA section 808 lists eight examples of conduct that violate that section.68 The Bureau interprets FDCPA sections 806 through 808 in light of: (1) The FDCPA’s language and purpose; (2) the general types of conduct prohibited by those sections and, where relevant, the specific examples enumerated in those sections; and (3) judicial precedent.69 Interpreting General Provisions in Light of Specific Prohibitions or Requirements By their plain terms, FDCPA sections 806 through 808 make clear that their examples of prohibited conduct do not ‘‘limit[ ] the general application’’ of those sections’ general prohibitions. The FDCPA’s legislative history is consistent with this understanding,70 as are opinions by courts that have addressed this issue.71 Accordingly, the Bureau may prohibit conduct that the specific examples in FDCPA sections 806 through 808 do not address if the conduct violates the general prohibitions. The Bureau proposes to use the specific examples in FDCPA sections 806 through 808 to inform its interpretation of those sections’ general 66 Id. at 1692e(1)–(16). U.S.C. 1692f. 68 Id. at 1692f(1)–(8). 69 Where the Bureau proposes requirements pursuant only to its authority to implement and interpret sections 806 through 808 of the FDCPA, the Bureau does not take a position on whether such practices also would constitute an unfair, deceptive, or abusive act or practice under section 1031 of the Dodd-Frank Act. Where the Bureau proposes an intervention both pursuant to its authority to implement and interpret FDCPA sections 806 through 808 and pursuant to its authority to identify and prevent unfair acts or practices under Dodd-Frank Act section 1031, the section-by-section analysis explains why the Bureau proposes to identify the act or practice as unfair under the Dodd-Frank Act. 70 See, e.g., S. Rept. No. 95–382, 95th Cong., 1st Sess. 2, at 4 (1977), reprinted in 1977 U.S.C.C.A.N. 1695, 1698 (hereinafter S. Rept. No. 382) (‘‘[T]his bill prohibits in general terms any harassing, unfair, or deceptive collection practice. This will enable the courts, where appropriate, to proscribe other improper conduct which is not specifically addressed.’’). Courts have also cited legislative history in noting that, ‘‘in passing the FDCPA, Congress identified abusive collection attempts as primary motivations for the Act’s passage.’’ Hart v. FCI Lender Servs, Inc., 797 F.3d 219, 226 (2d Cir. 2015). 71 See, e.g., Stratton v. Portfolio Recovery Assocs., LLC, 770 F.3d 443, 450 (6th Cir. 2014) (‘‘[T]he listed examples of illegal acts are just that—examples.’’). jbell on DSK3GLQ082PROD with PROPOSALS2 67 15 VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 prohibitions. Accordingly, the proposal would interpret the general provisions of FDCPA sections 806 through 808 to prohibit or require certain conduct that is similar to the types of conduct prohibited or required by the specific examples. For example, the proposal would interpret the general provisions in FDCPA sections 806 through 808 as protecting consumer privacy in debt collection in ways similar to the specific restrictions in: (1) FDCPA section 806(3), which prohibits, with certain exceptions, the publication of a list of consumers who allegedly refuse to pay debts; 72 (2) FDCPA section 808(7), which prohibits communicating with a consumer regarding a debt by postcard; and FDCPA section 808(8), which prohibits the use of certain language and symbols on envelopes.73 The interpretative approach of looking to specific provisions to inform general provisions is consistent with judicial precedent indicating that the general prohibitions in the FDCPA should be interpreted ‘‘in light of [their] associates.’’ 74 For example, courts have held that violating a consumer’s privacy interest through public exposure of a debt violates the FDCPA, noting that violating a consumer’s privacy is a type of conduct prohibited by several specific examples.75 In this way, the Bureau uses the specific examples in FDCPA sections 806 through 808 to inform its understanding of the general provisions, consistent with the statute’s use of the phrase ‘‘without limiting the general application of the foregoing’’ to introduce the specific examples.76 Judicial Precedent The Bureau interprets the general prohibitions in FDCPA sections 806 through 808 in light of the significant body of existing court decisions interpreting those provisions, which provides instructive examples of collection practices that are not addressed by the specific prohibitions in those sections but that nonetheless run afoul of the FDCPA’s general prohibitions in sections 806 through 808.77 For example, courts have held 72 15 U.S.C. 1692d(3). U.S.C. 1692f(7)–(8). 74 Currier v. First Resolution Inv. Corp., 762 F.3d 529, 534 (6th Cir. 2014) (citing Limited, Inc. v. C.I.R., 286 F.3d 324, 332 (6th Cir. 2002)). 75 See id. at 535. 76 15 U.S.C. 1692d–1692f. 77 This interpretive approach is consistent with courts’ reasoning that these general prohibitions should be interpreted in light of conduct that courts have already found violate them. See, e.g., Todd v. Collecto, Inc., 731 F.3d 734, 739 (7th Cir. 2013). While judicial precedent informs the Bureau’s interpretation of the general prohibitions in FDCPA sections 806 through 808, the Bureau does not 73 15 PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 that a debt collector could violate FDCPA section 808 by using coercive tactics such as citing speculative legal consequences to pressure the consumer to engage with the debt collector.78 Additionally, courts have held that a debt collector could violate FDCPA sections 806 through 808 by taking certain actions to collect a debt that a consumer does not actually owe or that is not actually delinquent.79 Similarly, a debt collector could violate FDCPA section 807 by, for example, giving ‘‘a false impression of the character of the debt,’’ 80 such as by failing to disclose that an amount collected includes fees,81 or by failing to disclose that the applicable statute of limitations has expired.82 Several courts have applied an objective standard of an ‘‘unsophisticated’’ or ‘‘least sophisticated’’ consumer to FDCPA sections 807 83 and 808 84 and an propose to adopt specific judicial interpretations through its restatement of the general prohibitions except where noted in the proposal. 78 See, e.g., Hosseinzadeh v. M.R.S. Assocs., Inc., 387 F. Supp. 2d 1104, 1117 (C.D. Cal. 2005) (denying debt collector’s motion for summary judgment on section 808 claim where debt collector used false name and implied that consumer ‘‘would have legal problems’’ if consumer did not return debt collector’s telephone call). 79 See, e.g., Fox v. Citicorp Credit Servs., Inc., 15 F.3d 1507, 1517 (9th Cir. 1994) (reversing grant of summary judgment to debt collector in part because ‘‘a jury could rationally find’’ that filing writ of garnishment was unfair or unconscionable under section 808 when debt was not delinquent); Ferrell v. Midland Funding, LLC, No. 2:15–cv–00126–JHE, 2015 WL 2450615, at *3–4 (N.D. Ala. May 22, 2015) (denying debt collector’s motion to dismiss section 806 claim where debt collector allegedly initiated collection lawsuit even though it knew plaintiff did not owe debt); Pittman v. J.J. Mac Intyre Co. of Nev., Inc., 969 F. Supp. 609, 612–13 (D. Nev. 1997) (denying debt collector’s motion to dismiss claims under sections 807 and 808 where debt collector allegedly attempted to collect fully satisfied debt). 80 Fields v. Wilber Law Firm, P.C., 383 F.3d 562, 565–66 (7th Cir. 2004) (reversing dismissal of plaintiff’s claims brought under sections 807 and 808 because dunning letter that failed to communicate that total amount due included attorneys’ fees ‘‘could conceivably mislead an unsophisticated consumer’’). 81 Id. 82 See, e.g., Pantoja v. Portfolio Recovery Assocs., 852 F.3d 679, 686–87 (7th Cir. 2017). 83 See, e.g., Hartman v. Great Seneca Fin. Corp., 569 F.3d 606, 613 (6th Cir. 2009) (applying least sophisticated consumer standard to section 807 claim); Bentley v. Great Lakes Collection Bureau, 6 F.3d 60, 62 (2d. Cir. 1993) (same); Swanson v. S. Or. Credit Serv., Inc., 869 F.2d 1222, 1227 (9th Cir. 1988) (same). 84 See, e.g., Crawford v. LVNV Funding, LLC, 758 F.3d 1254, 1258 (11th Cir. 2014) (‘‘[W]e have adopted a ‘least-sophisticated consumer standard to evaluate whether a debt collector’s conduct is ‘deceptive,’ ‘misleading,’ ‘unconscionable,’ or ‘unfair’ under the statute.’’); LeBlanc v. Unifund CCR Partners, 601 F.3d 1185, 1200–01 (11th Cir. 2010) (applying least sophisticated consumer standard to section 808 claim); Turner v. J.V.D.B. & Assocs., Inc., 330 F.3d 991, 997 (7th Cir. 2003) E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 objective, vulnerable consumer standard to FDCPA section 806.85 In determining whether particular acts violate FDCPA sections 806 through 808, the Bureau interprets those sections to incorporate ‘‘an objective standard’’ that is designed to protect consumers who are ‘‘of belowaverage sophistication or intelligence’’ or who are ‘‘especially vulnerable to fraudulent schemes.’’ 86 Courts have reasoned, and the Bureau agrees, that ‘‘[w]hether a consumer is more or less likely to be harassed, oppressed, or abused by certain debt collection practices does not relate solely to the consumer’s relative sophistication’’ and may be affected by other circumstances, such as the consumer’s financial and legal resources.87 Courts have further reasoned that section 807’s prohibition on false, deceptive, or misleading representations incorporates an objective, ‘‘unsophisticated’’ consumer standard.88 This standard ‘‘protects the consumer who is uninformed, naive, or trusting, yet it admits an objective element of reasonableness.’’ 89 The Bureau agrees with the reasoning of courts that have applied this standard or a ‘‘least sophisticated consumer’’ standard.90 The Bureau proposes to use (applying unsophisticated consumer standard to section 808 claim). Circuit courts have also held, for example, that the least sophisticated consumer standard applies to a consumer’s understanding of a validation notice required under FDCPA section 809 and threats to take legal action under FDCPA section 807(5). See Swanson, 869 F.2d at 1225–27; Wilson, 225 F.3d 350, 353 (3d Cir. 2000). 85 For example, in Jeter v. Credit Bureau, Inc., 760 F.2d 1168, 1179 (11th Cir. 1985), the court applied a standard analogous to the ‘‘least sophisticated consumer’’ to an FDCPA section 806 claim, holding that claims under section 806 ‘‘should be viewed from the perspective of a consumer whose circumstances makes him relatively more susceptible to harassment, oppression, or abuse.’’ 86 See Brief for the United States as Amicus Curiae Supporting Respondents, Sheriff v. Gillie, 136 S. Ct. 1594 (2016) (No. 15–338), 2016 WL 836755, at * 29 (quoting Gammon v. GC Servs. Ltd. P’ship, 27 F.3d 1254, 1257 (7th Cir. 1994) and Clomon v. Jackson, 988 F.2d 1314, 1319 (2d Cir. 1993)). 87 Jeter, 760 F.2d at 1179 (‘‘[R]ather, such susceptibility might be affected by other circumstances of the consumer or by the relationship between the consumer and the debt collection agency. For example, a very intelligent and sophisticated consumer might well be susceptible to harassment, oppression, or abuse because he is poor (i.e., has limited access to the legal system), is on probation, or is otherwise at the mercy of a power relationship.’’). 88 See Brief for the United States as Amicus Curiae Supporting Respondents, supra note 86, at *10, 27–30. 89 Gammon, 27 F.3d at 1257. 90 See, e.g., Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir. 2008) (‘‘We use the ‘least sophisticated debtor’ standard in order to effectuate the basic purpose of the FDCPA: To protect all consumers, the gullible as well as the shrewd’’) (internal quotation marks and citation omitted); Clomon, 988 F.2d at 1319 (‘‘To serve the purposes VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 the term ‘‘unsophisticated’’ consumer to describe the standard it will apply in this proposal when assessing the effect of conduct on consumers. FDCPA’s Purposes FDCPA section 802 establishes that the purpose of the statute is to eliminate abusive debt collection practices by debt collectors, to ensure that debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.91 In particular, FDCPA section 802 delineates certain specific harms that the general and specific prohibitions in sections 806 through 808 were designed to alleviate. Section 802 states: ‘‘[T]he use of abusive, deceptive, and unfair debt collection practices by many debt collectors . . . contribute[s] to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.’’ 92 B. Dodd-Frank Act Section 1031 Section 1031(b) Section 1031(b) of the Dodd-Frank Act provides the Bureau with authority to prescribe rules to identify and prevent unfair, deceptive, or abusive acts or practices. Specifically, DoddFrank Act section 1031(b) authorizes the Bureau to prescribe rules applicable to a covered person or service provider identifying as unlawful unfair, deceptive, or abusive acts or practices in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service.93 Section 1031(b) of the Dodd-Frank Act further provides that ‘‘[r]ules under this section may include requirements for the purpose of preventing such acts or practices’’ 94 (sometimes referred to as prevention authority). The Bureau proposes certain provisions based on its authority under Dodd-Frank Act section 1031(b). Section 1031(b) of the Dodd-Frank Act is similar to the FTC Act provisions of the consumer-protection laws, courts have attempted to articulate a standard for evaluating deceptiveness that does not rely on assumptions about the ‘average’ or ‘normal’ consumer. This effort is grounded, quite sensibly, in the assumption that consumers of below-average sophistication or intelligence are especially vulnerable to fraudulent schemes. The least-sophisticated-consumer standard protects these consumers in a variety of ways.’’). 91 15 U.S.C. 1692(e). 92 15 U.S.C. 1692(a). 93 12 U.S.C. 5531(b). 94 Id. PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 23283 relating to unfair and deceptive acts or practices.95 Given these similarities, where the Bureau relies on Dodd-Frank Act section 1031(b) authority to support particular provisions, the Bureau is guided, in part, by case law and Federal agency rulemakings addressing unfair and deceptive acts or practices under the FTC Act. For example, case law establishes that, under the FTC Act, the FTC may impose requirements to prevent acts or practices that the FTC identifies as unfair or deceptive so long as the preventive requirements have a reasonable relation to the identified acts or practices.96 Where the Bureau relies on Dodd Frank Act section 1031(b) prevention authority to support particular proposals, the Bureau explains how the preventive requirements have a reasonable relation to the identified unfair, deceptive, or abusive acts or practices. Section 1031(c) Section 1031(c)(1) of the Dodd-Frank Act provides that the Bureau shall have no authority under section 1031 to declare an act or practice in connection with a transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service, to be unlawful on the grounds that such act or practice is unfair, unless the Bureau ‘‘has a reasonable basis’’ to conclude that: (A) The act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers; and (B) such substantial injury is not outweighed by countervailing benefits to consumers or to competition.97 Section 1031(c)(2) of the Dodd-Frank Act provides that, in determining whether an act or practice is unfair, the Bureau may consider established public policies as evidence to be considered with all other evidence. Public policy considerations may not serve as a primary basis for such a determination.98 The Bureau proposes certain interventions based in part on its authority under Dodd-Frank Act section 1031(c). The unfairness standard under DoddFrank Act section 1031(c)—requiring primary consideration of the three elements (substantial injury, not reasonably avoidable by consumers, and 95 15 U.S.C. 45. Jacob Siegel Co. v. Fed. Trade Comm’n, 327 U.S. 608, 612–13 (1946) (‘‘The Commission is the expert body to determine what remedy is necessary to eliminate the unfair or deceptive trade practices which have been disclosed. It has wide latitude for judgment and the courts will not interfere except where the remedy selected has no reasonable relation to the unlawful practices found to exist.’’). 97 12 U.S.C. 5531(c)(1). 98 12 U.S.C. 5531(c)(2). 96 See E:\FR\FM\21MYP2.SGM 21MYP2 23284 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 countervailing benefits to consumers or to competition) and permitting secondary consideration of public policy—is similar to the unfairness standard under the FTC Act.99 Section 5(n) of the FTC Act was amended in 1994 to incorporate the principles set forth in the FTC’s ‘‘Commission Statement of Policy on the Scope of Unfairness Jurisdiction,’’ 100 issued on December 17, 1980. The FTC Act unfairness standard, the FTC Policy Statement on Unfairness, rulemakings by the FTC and other Federal agencies,101 and related cases 102 inform the scope and meaning of the Bureau’s authority under Dodd-Frank Act section 1031(b) to issue rules that identify and prevent acts or practices that the Bureau determines are unfair pursuant to DoddFrank Act section 1031(c). Substantial injury. The first element for a determination of unfairness under Dodd-Frank Act section 1031(c)(1) is that the act or practice causes or is likely to cause substantial injury to 99 Section 5(n) of the FTC Act, as amended in 1994, provides that, ‘‘The [FTC] shall have no authority . . . to declare unlawful an act or practice on the grounds that such act or practice is unfair unless the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition. In determining whether an act or practice is unfair, the [FTC] may consider established public policies as evidence to be considered with all other evidence. Such public policy considerations may not serve as a primary basis for such determination.’’ 15 U.S.C. 45(n). 100 Letter from the FTC to Hon. Wendell Ford and Hon. John Danforth, Committee on Commerce, Science & Transportation, United States Senate, Commission Statement of Policy on the Scope of Consumer Unfairness Jurisdiction (Dec. 17, 1980), reprinted in Int’l Harvester Co., 104 F.T.C. 949, 1070–76 (1984), https://www.ftc.gov/sites/default/ files/documents/commission_decision_volumes/ volume-104/ftc_volume_decision_104__july_-_ december_1984pages949_-_1088.pdf (hereinafter FTC Policy Statement on Unfairness); see also S. Rept. 103–130, at 12–13 (1993), reprinted in 1994 U.S.C.C.A.N. 1776 (legislative history to FTC Act amendments indicating congressional intent to codify the principles of the FTC Policy Statement on Unfairness). 101 In addition to the FTC’s rulemakings under unfairness authority, certain Federal prudential regulators have prescribed rules prohibiting unfair practices under section 18(f)(1) of the FTC Act and, in doing so, they applied the statutory elements consistent with the standards articulated by the FTC. See 74 FR 5498, 5502 (Jan. 29, 2009) (background discussion of legal authority for interagency Subprime Credit Card Practices rule). The Board, FDIC, and the OCC also previously issued guidance generally adopting these standards for purposes of enforcing the FTC Act’s prohibition on unfair and deceptive acts or practices. See id. 102 See, e.g., Consumer Fin. Prot. Bureau v. NDG Fin. Corp., No. 15–cv–52110 CM, 2016 WL 7188792 (S.D.N.Y. Dec. 2, 2016); Consumer Fin. Prot. Bureau v. Universal Debt & Payment Sols., LLC, No. 1:15– CV–00–859 RWS, 2015 WL 11439178 (N.D. Ga. Sept. 1, 2015); Consumer Fin. Prot. Bureau v. ITT Educ. Servs., Inc., 219 F. Supp. 3d 878 (S.D. Ind. 2015). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 consumers. As discussed above, the FTC Act unfairness standard, the FTC Policy Statement on Unfairness, rulemakings by the FTC and other Federal agencies, and related cases inform the meaning of the elements of the unfairness standard under Dodd-Frank Act section 1031(c)(1). The FTC noted in its Policy Statement on Unfairness that substantial injury ordinarily involves monetary harm.103 The Policy Statement stated that trivial or speculative harms are not cognizable under the test for substantial injury.104 The FTC also noted that an injury is ‘‘sufficiently substantial’’ if it consists of a small amount of harm to a large number of individuals or raises a significant risk of harm.105 The FTC has found that substantial injury also may involve a large amount of harm experienced by a small number of individuals.106 As described in the FTC Policy Statement, emotional effects from an act or practice might be a basis for a finding of unfairness in an extreme case in which tangible injury from the act or practice could be clearly demonstrated,107 and the D.C. Circuit has upheld an FTC conclusion that the demonstrated effects on consumers from threats to seize household possessions were sufficient to form part of the substantial injury along with financial harm.108 The Bureau has stated that emotional impact and other more subjective types of harm ‘‘will not ordinarily amount to substantial injury’’ but that, in certain circumstances, ‘‘emotional impacts may amount to or contribute to substantial injury.’’ 109 Not reasonably avoidable. The second element for a determination of unfairness under Dodd-Frank Act section 1031(c)(1) is that the substantial injury is not reasonably avoidable by consumers. As discussed above, the FTC Act unfairness standard, the FTC Policy 103 See FTC Policy Statement on Unfairness, supra note 100, at 1073. 104 Id. 105 Id. at 1073 n.12. 106 Int’l Harvester Co., 104 F.T.C. 949, 1064 (1984). 107 FTC Policy Statement on Unfairness, supra note 100, at 1073 n.16 (‘‘In an extreme case, however, where tangible injury could be clearly demonstrated, emotional effects might possibly be considered as the basis for a finding of unfairness’’). 108 See Am. Fin. Servs. Assoc. v. FTC, 767 F.2d 957, 973–74 n.20 (D.C. Cir. 1985) (‘‘the Commission found that ‘the threat to seize household possessions causes ‘great emotional suffering, humiliation, anxiety, and deep feelings of guilt, and this distress can lead to physical breakdowns or illness, disruption of the family, and undue strain on family relationships’ ’’) (internal citations omitted). 109 Bureau of Consumer Fin. Prot., CFPB Supervision and Examination Process, at UDAAP 2 (Apr. 2019), https://files.consumerfinance.gov/f/ documents/cfpb_supervision-and-examinationmanual.pdf. PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 Statement on Unfairness, rulemakings by the FTC and other Federal agencies, and related case law inform the meaning of the elements of the unfairness standard under Dodd-Frank Act section 1031(c)(1). The FTC stated that knowing the steps for avoiding injury is not enough for the injury to be reasonably avoidable; rather, the consumer must also understand and appreciate the necessity of taking those steps.110 As the FTC explained in its Policy Statement on Unfairness, most unfairness matters are brought to ‘‘halt some form of seller behavior that unreasonably creates or takes advantage of an obstacle to the free exercise of consumer decisionmaking.’’ 111 The D.C. Circuit has noted that, if such behavior exists, there is a ‘‘market failure’’ and the agency ‘‘may be required to take corrective action.’’ 112 Assessing whether an injury is reasonably avoidable also requires taking into account the costs of making a choice other than the one made and the availability of alternatives in the marketplace.113 Countervailing benefits to consumers or competition. The third element for a determination of unfairness under Dodd-Frank Act section 1031(c)(1) is that the act or practice’s countervailing benefits to consumers or to competition do not outweigh the substantial consumer injury. As discussed above, the FTC Act unfairness standard, the FTC Policy Statement on Unfairness, rulemakings by the FTC and other Federal agencies, and related cases inform the meaning of the elements of the unfairness standard under DoddFrank Act section 1031(c)(1). In applying the FTC Act’s unfairness standard, the FTC has stated that it generally is important to consider both the costs of imposing a remedy and any benefits that consumers receive as a result of the act or practice. Authorities addressing the FTC Act’s unfairness standard indicate that the countervailing benefits test does not require a precise quantitative analysis of benefits and costs, as such an analysis may be unnecessary or, in some cases, 110 See Int’l Harvester, 104 F.T.C. at 1066. Policy Statement on Unfairness, supra note 100, at 1074. 112 Am. Fin. Servs. Assoc., 767 F.2d at 976. 113 See FTC Policy Statement on Unfairness, supra note 100, at 1074 n.19 (‘‘In some senses any injury can be avoided—for example, by hiring independent experts to test all products in advance, or by private legal actions for damages—but these courses may be too expensive to be practicable for individual consumers to pursue.’’); Am. Fin. Servs. Assoc., 767 F.2d at 976–77 (reasoning that, because of factors such as substantial similarity of contracts offered by creditors, ‘‘consumers have little ability or incentive to shop for a better contract’’). 111 FTC E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules impossible; rather, the agency is expected to gather and consider reasonably available evidence.114 Public policy. As noted above, DoddFrank Act section 1031(c)(2) provides that, in determining whether an act or practice is unfair, the Bureau may consider established public policies as evidence to be considered with all other evidence. Public policy considerations, however, may not serve as a primary basis for such a determination.115 jbell on DSK3GLQ082PROD with PROPOSALS2 C. Dodd-Frank Act Section 1032 The Bureau proposes certain provisions based in part on its authority under Dodd-Frank Act section 1032. Dodd-Frank Act section 1032(a) provides that the Bureau may prescribe rules to ensure that the features of any consumer financial product or service, ‘‘both initially and over the term of the product or service,’’ are ‘‘fully, accurately, and effectively disclosed to consumers in a manner that permits consumers to understand the costs, benefits, and risks associated with the product or service, in light of the facts and circumstances.’’ 116 Under DoddFrank Act section 1032(a), the Bureau is empowered to prescribe rules regarding the disclosure of the ‘‘features’’ of consumer financial products and services generally. Accordingly, the Bureau may prescribe rules containing disclosure requirements even if other Federal consumer financial laws do not specifically require disclosure of such features. Dodd-Frank Act section 1032(b)(1) provides that ‘‘any final rule prescribed by the Bureau under this section requiring disclosures may include a model form that may be used at the option of the covered person for 114 Pa. Funeral Dirs. Ass’n v. FTC, 41 F.3d 81, 91 (3d Cir. 1994) (upholding FTC’s amendments to the Funeral Industry Practices Rule and noting that ‘‘much of a cost-benefit analysis requires predictions and speculation’’); Int’l Harvester, 104 F.T.C. at 1065 n.59 (‘‘In making these calculations we do not strive for an unrealistic degree of precision. . . . We assess the matter in a more general way, giving consumers the benefit of the doubt in close issues. . . . What is important . . . is that we retain an overall sense of the relationship between costs and benefits. We would not want to impose compliance costs of millions of dollars in order to prevent a bruised elbow.’’); see also S. Rept. 103–130, at 13 (1994) (noting that, ‘‘[i]n determining whether a substantial consumer injury is outweighed by the countervailing benefits of a practice, the Committee does not intend that the FTC quantify the detrimental and beneficial effects of the practice in every case. In many instances, such a numerical benefit-cost analysis would be unnecessary; in other cases, it may be impossible. This section would require, however, that the FTC carefully evaluate the benefits and costs of each exercise of its unfairness authority, gathering and considering reasonably available evidence.’’). 115 12 U.S.C. 5531(c)(2). 116 12 U.S.C. 5532(a). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 provision of the required disclosures.’’ 117 Dodd-Frank Act section 1032(b)(2) provides that such a model form ‘‘shall contain a clear and conspicuous disclosure that at a minimum—(A) uses plain language comprehensible to consumers; (B) contains a clear format and design, such as an easily readable type font; and (C) succinctly explains the information that must be communicated to the consumer.’’ 118 Dodd-Frank Act section 1032(b)(3) provides that any such model form ‘‘shall be validated through consumer testing.’’; 119 Dodd-Frank Act section 1032(c) provides that, in prescribing rules pursuant to Dodd-Frank Act section 1032, the Bureau ‘‘shall consider available evidence about consumer awareness, understanding of, and responses to disclosures or communications about the risks, costs, and benefits of consumer financial products or services.’’ 120 Dodd-Frank Act section 1032(d) provides that ‘‘[a]ny covered person that uses a model form included with a rule issued under this section shall be deemed to be in compliance with the disclosure requirements of this section with respect to such model form.’’ 121 D. Other Authorities Under the DoddFrank Act The Bureau proposes certain interventions based in part on its authority under Dodd-Frank Act sections 1022 and 1024. Section 1022(b)(1) of the Dodd-Frank Act provides that the Bureau’s Director ‘‘may prescribe rules and issue orders and guidance, as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of the Federal consumer financial laws, and to prevent evasions thereof.’’ 122 ‘‘Federal consumer financial laws’’ include the FDCPA and title X of the Dodd-Frank Act.123 Section 1022(b)(2) of the Dodd-Frank Act prescribes certain standards for rulemaking that the Bureau must follow in exercising its authority under DoddFrank Act section 1022(b)(1).124 See part VI for a discussion of the Bureau’s standards for rulemaking under DoddFrank Act section 1022(b)(2). Proposed § 1006.100 concerning the retention of records would be based in part on the Bureau’s authority under 117 12 U.S.C. 5532(b)(1). U.S.C. 5532(b)(2). 119 12 U.S.C. 5532(b)(3). 120 12 U.S.C. 5532(c). 121 12 U.S.C. 5532(d). 122 12 U.S.C. 5512(b)(1). 123 12 U.S.C. 5481(14). 124 12 U.S.C. 5512(b)(2). 118 12 PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 23285 Dodd-Frank Act section 1024(b)(7)(A) and (B) 125 as applied to debt collectors who are nondepository covered persons that the Bureau supervises under DoddFrank Act section 1024(a).126 The section-by-section analysis of proposed § 1006.100 contains an additional description of the authorities on which the Bureau relies for proposed § 1006.100. E. The E-SIGN Act The E-SIGN Act provides standards for determining if delivery of a disclosure by electronic record satisfies a requirement in a statute, regulation, or other rule of law that the disclosure be provided or made available to a consumer in writing. The E-SIGN Act sets forth criteria under which Federal regulatory agencies may exempt a specified category or type of record from the consent requirements for electronic disclosures in the E-SIGN Act.127 For the reasons set forth in part V, proposed § 1006.42(c) and (d) would exempt electronic delivery of certain required notices from the consent requirements of the E-SIGN Act. Pursuant to E-SIGN Act section 104(b)(1), which permits the Bureau to interpret the E-SIGN Act through the issuance of regulations, proposed comments 6(c)(1)–1 and –2 provide an interpretation of the E-SIGN Act as applied to a debt collector responding to a consumer’s notification that the consumer refuses to pay the debt or wants the debt collector to cease communication; proposed comments 38–2 and –3 provide an interpretation of the E-SIGN Act as applied to a debt collector responding to a consumer dispute or request for original-creditor information; and proposed § 1006.42(b)(1) and proposed comment 42(b)(1)–1 provide an interpretation of the E-SIGN Act as applied to certain disclosures that the regulation would require debt collectors to provide. 125 Dodd-Frank Act section 1024(b)(7)(A) authorizes the Bureau to prescribe rules to facilitate supervision of persons identified as larger participants of a market for a consumer financial product or service as defined by rule in accordance with section 1024(a)(1)(B) of the Dodd-Frank Act, and Dodd-Frank Act section 1024(b)(7)(B) authorizes the Bureau to require a person described in Dodd-Frank Act section 1024(a)(1) to retain records for the purpose of facilitating supervision of such persons and assessing and detecting risks to consumers. 126 12 U.S.C. 5514(b)(7)(A)–(B). 127 15 U.S.C. 7004(d)(1). E:\FR\FM\21MYP2.SGM 21MYP2 23286 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules V. Section-by-Section Analysis Subpart A—General Section 1006.1 and Coverage Authority, Purpose, 1(a) Authority FDCPA section 817 provides that the Bureau shall by regulation exempt from the requirements of the FDCPA any class of debt collection practices within any State if the Bureau determines that certain conditions have been met.128 Before the Bureau’s creation, FDCPA section 817 provided the same authority to the FTC, and the FTC issued a rule to describe procedures for a State to apply for such an exemption.129 After the Dodd-Frank Act granted the Bureau FDCPA rulewriting authority, the Bureau restated the FTC’s existing rule regarding State exemptions without substantive change as the Bureau’s Regulation F, 12 CFR part 1006.130 Existing § 1006.1(a) thus states that the purpose of Regulation F is to establish procedures and criteria for States to apply to the Bureau for an exemption as provided in FDCPA section 817. Consistent with the Bureau’s proposal to revise part 1006 to regulate the debt collection activities of FDCPA-covered debt collectors, the Bureau proposes to revise existing § 1006.1(a) to set forth the Bureau’s authority to issue such rules. Proposed § 1006.1(a) provides that part 1006 is known as Regulation F and is issued by the Bureau pursuant to sections 814(d) and 817 of the FDCPA,131 title X of the Dodd-Frank Act,132 and section 104(b)(1) and (d)(1) of the E–SIGN Act.133 The Bureau proposes to move the remainder of existing § 1006.1(a), regarding State-law exemptions from the FDCPA, to paragraph I(a) of appendix A of the regulation.134 1(b) Purpose jbell on DSK3GLQ082PROD with PROPOSALS2 Existing § 1006.1(b) defines terms relevant to the procedures and criteria for States to apply to the Bureau for an exemption as provided in FDCPA section 817. Consistent with the Bureau’s proposal to revise part 1006 to regulate the debt collection activities of FDCPA-covered debt collectors, the Bureau proposes to revise § 1006.1(b) to identify the purposes of part 1006. The Bureau proposes to move the definitions 128 15 U.S.C. 1692o. 16 CFR part 901. 130 76 FR 78121 (Dec. 16, 2011). 131 15 U.S.C. 1692l(d), 1692o. 132 12 U.S.C. 5481 et seq. 133 15 U.S.C. 7004(b)(1), 7004(d)(1). 134 See the section-by-section analysis of proposed § 1006.108 and appendix A. 129 See VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 in existing § 1006.1(b) to paragraph 1(b) of appendix A of the regulation.135 Consistent with FDCPA section 802, proposed § 1006.1(b) explains that part 1006 carries out the purposes of the FDCPA, which include eliminating abusive debt collection practices by debt collectors, ensuring that debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and promoting consistent State action to protect consumers against debt collection abuses. Consistent with Dodd-Frank Act section 1032, proposed § 1006.1(b) further explains that part 1006 also prescribes requirements to ensure that certain features of debt collection are fully, accurately, and effectively disclosed to consumers in a manner that permits consumers to understand the costs, benefits, and risks associated with debt collection, in light of the facts and circumstances. Finally, consistent with Dodd-Frank Act sections 1022(b)(1) and 1024(b)(7), proposed § 1006.1(b) explains that part 1006 sets forth record retention requirements to enable the Bureau to administer and carry out the purposes of the FDCPA and the Dodd-Frank Act and to prevent evasions thereof, and to facilitate supervision of debt collectors and the assessment and detection of risks to consumers. 1(c) Coverage The Bureau proposes to add § 1006.1(c) to address coverage under the proposed rule, which, with the exception of proposed § 1006.108 and appendix A, would apply to FDCPAcovered debt collectors.136 Proposed § 1006.1(c)(1) thus provides that, except as provided in § 1006.108 and appendix A regarding applications for State exemptions from the FDCPA, proposed part 1006 applies to debt collectors as defined in proposed § 1006.2(i), i.e., debt collectors covered by the FDCPA.137 Proposed § 1006.1(c)(1) also would implement FDCPA section 814(d), which provides, in part, that the Bureau may not prescribe rules under the FDCPA with respect to motor vehicle dealers as described in section 1029(a) of the Dodd-Frank Act.138 Proposed 135 See id. 136 Proposed § 1006.108 and appendix A would apply to States. 137 Section 812 of the FDCPA addresses the furnishing of deceptive forms and applies to any person, not just to debt collectors. Proposed 1006.30(e) would prohibit FDCPA-covered debt collectors from furnishing deceptive forms. Other persons would continue to be prohibited from furnishing deceptive forms under FDCPA section 812. 138 12 U.S.C. 5519(a). PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 § 1006.1(c)(1) would clarify that Regulation F would not apply to a person excluded from coverage by section 1029(a) of the Dodd-Frank Act.139 The Bureau proposes certain provisions of the proposed rule only under sections 1031 or 1032 of the Dodd-Frank Act. Dodd-Frank Act section 1031 grants the Bureau authority to write regulations applicable to covered persons and service providers to identify and prevent unfair, deceptive, or abusive acts or practices in connection with a transaction with a consumer for, or the offering of, a consumer financial product or service.140 Dodd-Frank Act section 1032 grants the Bureau authority to ensure that the features of any consumer financial product or service are fully, accurately, and effectively disclosed to consumers.141 Under the Dodd-Frank Act, collecting a debt related to any consumer financial product or service generally is, itself, a consumer financial product or service.142 Of primary relevance here, a consumer financial product or service includes the extension of consumer credit.143 Provisions proposed only under DoddFrank Act sections 1031 or 1032, if adopted, therefore would apply to FDCPA-covered debt collectors only to the extent that such debt collectors were collecting a debt related to an extension of consumer credit or another consumer financial product or service.144 This would include, for example, FDCPAcovered debt collectors collecting debts related to consumer mortgage loans or credit cards. Proposed § 1006.1(c)(2) would clarify that certain provisions in proposed Regulation F apply to FDCPA-covered debt collectors only when they are collecting consumer financial product or service debt, as defined in § 1006.2(f).145 Proposed § 1006.1(c)(2) specifies that these provisions are §§ 1006.14(b)(1)(ii), 1006.30(b)(1)(ii), 139 This proposed exclusion would apply only to Regulation F. Any motor vehicle dealers who are FDCPA-covered debt collectors would still need to comply with the FDCPA. 140 12 U.S.C. 5531(b). 141 12 U.S.C. 5532. 142 It is a financial product or service and is a consumer financial product or service if, for example, it is delivered offered, or provided in connection with a consumer financial product or service. See 12 U.S.C. 5481(5)(B), 5481(15)(A)(x). 143 12 U.S.C. 5481(15)(A)(i). The Dodd-Frank Act defines credit to mean the right granted by a person to a consumer to defer payment of a debt, incur debt and defer its payment, or purchase property or services and defer payment for such purchase. 12 U.S.C. 5481(7). 144 12 U.S.C. 5481(5). 145 See the section-by-section analysis of proposed § 1006.2(f). E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules and 1006.34(c)(2)(iv) and (3)(iv). The Bureau requests comment on all aspects of proposed § 1006.1(c), including on whether additional clarification would be helpful. Section 1006.2 Definitions FDCPA section 803 defines terms used throughout the statute.146 Proposed § 1006.2 would repurpose existing § 1006.2 to implement and interpret FDCPA section 803 and define additional terms that would be used in the regulation.147 The Bureau proposes to move existing § 1006.2, which describes how a State may apply for an exemption from the FDCPA, to paragraph II of appendix A of the regulation.148 Paragraphs (c), (g), and (l) of proposed § 1006.2 would implement the FDCPA section 803 definitions of Bureau, creditor, and State, respectively. These paragraphs generally restate the statute, with only minor wording and organizational changes for clarity, and thus are not addressed further in the section-by-section analysis below. Proposed § 1006.2(a) and (b), (d) through (f), and (h) through (k) would define other terms that would be used in the regulation, as described below. The Bureau proposes § 1006.2 to implement and interpret FDCPA section 803, pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors. In addition to the specific comment requests noted below, the Bureau generally requests comment on whether additional clarification is needed for any of the proposed definitions and on whether additional definitions would be helpful. For example, the proposal uses the term ‘‘day’’ to refer to any day, including weekends and public holidays. The Bureau requests comment on whether adding a defined term such as ‘‘calendar day’’ and using it in the final rule would be helpful. 2(a) Act or FDCPA Proposed § 1006.2(a) provides that the terms Act and FDCPA mean the Fair Debt Collection Practices Act. jbell on DSK3GLQ082PROD with PROPOSALS2 2(b) Attempt To Communicate Several of the proposed rule’s requirements would apply not only to communications as defined in 146 15 U.S.C. 1692a. section 803(7) defines the term ‘‘location information.’’ 15 U.S.C. 1692a(7). The Bureau proposes to define that term in § 1006.10, rather than in § 1006.2. See the section-by-section analysis of proposed § 1006.10(a). 148 See the section-by-section analysis of proposed § 1006.108 and appendix A. 147 FDCPA VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 § 1006.2(d) but also to communication attempts. For example, proposed § 1006.6(b) and (c) would, among other things, prohibit a debt collector from communicating or attempting to communicate with a consumer at times or places that the debt collector knows or should know are inconvenient to the consumer or after a consumer notifies the debt collector in writing that the consumer wishes the debt collector to cease further communication with the consumer. In addition, proposed § 1006.22(f)(3) and (4) would generally prohibit a debt collector from communicating or attempting to communicate with a consumer using an email address that the debt collector knows or should know is maintained by the consumer’s employer or by a social media platform that is viewable by a person other than the consumer. To facilitate compliance with the proposed provisions that apply to attempts to communicate, proposed § 1006.2(b) would define an attempt to communicate as any act to initiate a communication or other contact with any person through any medium, including by soliciting a response from such person. Proposed § 1006.2(b) further states that an attempt to communicate includes providing a limited-content message, as defined in § 1006.2(j). The Bureau proposes this definition of attempt to communicate on the basis that any outreach by a debt collector to a consumer—whether by a telephone call, text message, email, or otherwise—is designed to bring about a communication either immediately (e.g., a consumer answers a debt collector’s telephone call and they engage in a conversation about the debt) or at a later point in time (e.g., in response to a missed telephone call or a limitedcontent message from a debt collector, a consumer calls or texts the debt collector and they engage in a conversation about the debt). As proposed, an attempt to communicate covers a broader range of activity than a communication. As discussed in the section-by-section analysis of proposed § 1006.2(d), the proposed rule would define a communication, consistent with FDCPA section 803(2), as the conveying of information regarding a debt directly or indirectly to any person through any medium. The proposed definition of communication further states that a debt collector does not convey information regarding a debt directly or indirectly to any person if the debt collector provides only a limited-content message, as defined in proposed § 1006.2(j). The proposed definition of attempt to communicate, in contrast, does not PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 23287 require the conveying of information regarding a debt. As the examples in proposed comment 2(b)–1 illustrate, an attempt to communicate includes leaving a limited-content message for a consumer or placing a telephone call to a person, regardless of whether the debt collector speaks to any person or leaves any message at the dialed number. Proposed comment 2(b)–1 also would clarify that an act to initiate a communication or other contact with a person is an attempt to communicate regardless of whether the attempt, if successful, would be a communication that conveys information regarding a debt directly or indirectly to any person. Although the proposed definition of attempt to communicate covers a broader range of conduct than the proposed definition of communication, in many circumstances the same conduct may give rise to both an attempt to communicate and a communication. For example, a debt collector who places a telephone call to a consumer and speaks to the consumer about the debt has both attempted to communicate with the consumer (by initiating the call and speaking to the consumer) and communicated with the consumer (by conveying information about the debt). Sometimes, however, an attempt to communicate may not give rise to a communication. For example, a debt collector who places an unanswered telephone call to a consumer and chooses not to leave a message has attempted to communicate with the consumer but has not communicated with the consumer. The Bureau requests comment on proposed § 1006.2(b) and on proposed comment 2(b)–1. 2(d) Communicate or Communication FDCPA section 803(2) defines the term communication to mean the conveying of information regarding a debt directly or indirectly to any person through any medium.149 Proposed § 1006.2(d) would implement and interpret this definition. Proposed § 1006.2(d) first restates the statutory definition of communication, with only minor changes for clarity. Proposed § 1006.2(d) also would interpret FDCPA section 803(2) to provide that a debt collector does not convey information regarding a debt directly or indirectly to any person— and therefore does not communicate with any person—if the debt collector provides only a limited-content message, as defined in proposed § 1006.2(j). The section-by-section analysis of proposed § 1006.2(j) 149 15 E:\FR\FM\21MYP2.SGM U.S.C. 1692a(2). 21MYP2 23288 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 regarding limited-content messages explains and requests comment both on the proposed content of limited-content messages and on the Bureau’s proposal to interpret the term communication in § 1006.2(d) as excluding such messages. Proposed comment 2(d)–1 notes that a communication can occur through ‘‘any medium’’ and explains that ‘‘any medium’’ includes any oral, written, electronic, or other medium. The proposed comment states that a communication may occur, for example, in person or by telephone, audio recording, paper document, mail, email, text message, social media, or other electronic media. The Bureau proposes comment 2(d)–1 in part to clarify that debt collectors may communicate with consumers through newer communication media, such as electronic media. The Bureau elsewhere proposes provisions to clarify how debt collectors may use those media to communicate with consumers. The Bureau requests comment on proposed § 1006.2(d) and on proposed comment 2(d)–1 and on whether additional clarification about the definition of communication would be useful. 2(e) Consumer FDCPA section 803(3) defines a consumer as any natural person obligated or allegedly obligated to pay any debt.150 Proposed § 1006.2(e) would implement this definition, interpret it to include a deceased natural person who is obligated or allegedly obligated to pay a debt, and cross-reference the special definition of consumer for certain communications in connection with the collection of a debt set forth in proposed § 1006.6(a). As summarized in part I.B, the Bureau proposes to address several consumer protection concerns and ambiguities in statutory language related to the collection of debts owed by deceased consumers, also known as decedent debt. One such issue is that the FDCPA does not specify whether a consumer, as defined in section 803(3), includes a deceased consumer (or whether a natural person, as that term is used in section 803(3), includes a deceased natural person). Because the definition of consumer in FDCPA section 803(3) is silent with respect to deceased consumers, debt collectors may be uncertain, when collecting a deceased consumer’s debts, how to comply with FDCPA provisions that refer to a debt collector’s obligations to a consumer. For example, certain important FDCPA disclosure requirements, such as a debt collector’s obligation to provide 150 15 U.S.C. 1692a(3). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 a validation notice and to respond to disputes and requests for originalcreditor information, refer only to a debt collector’s obligations to consumers.151 In the absence of guidance, debt collectors may be uncertain who, if anyone, should receive the validation notice and have the right to dispute the debt if the consumer obligated or allegedly obligated to pay the debt is deceased. Without a validation notice and an opportunity to dispute the debt, individuals trying to resolve debts in a deceased consumer’s estate may experience difficulty because they lack information needed to determine whether they are being asked to pay the right debt, in the right amount, to the right debt collector, and to assert dispute rights. To address that concern, the Bureau proposes to clarify in the commentary to §§ 1006.34(a)(1) and 1006.38 that a person who is authorized to act on behalf of the deceased consumer’s estate, such as the executor, administrator, or personal representative, operates as the consumer for purposes of proposed §§ 1006.34(a)(1) and 1006.38.152 Consistent with those proposed clarifications, the Bureau proposes in § 1006.2(e) to interpret the definition of consumer in FDCPA section 803(3) to mean any natural person, whether living or deceased, who is obligated or allegedly obligated to pay any debt. The proposed interpretation should clarify the meaning of the term consumer in the decedent debt context and appears to be consistent with a modern trend in the law that favors recognizing, as a default, the continued existence of a natural person after death.153 Further, the 151 See 15 U.S.C. 1692g(a)–(b). proposed comments 34(a)(1)–1, 34(d)(1)(ii)–2, and 38–1. 153 See, e.g., Cal. Civ. Proc. Code sec. 377.20(a) (2018) (‘‘Except as otherwise provided by statute, a cause of action for or against a person is not lost by reason of the person’s death, but survives subject to the applicable limitations period.’’). Federal law often provides an unclear answer about whether claims survive the death of a natural person. Rule 25(a) of the Federal Rules of Civil Procedure allows substitution ‘‘[i]f a party dies and the claim is not extinguished,’’ but Federal statutes often do not address whether claims extinguish upon the death of a plaintiff or defendant and, in these cases, Federal common law generally permits survival of claims where they are merely remedial in nature and not penal. See Ex parte Schreiber, 110 U.S. 76, 80 (1884). Most authority suggests that claims brought under other portions of the Consumer Credit Protection Act (CCPA), of which the FDCPA is subchapter V, likely are remedial rather than penal in nature. See, e.g., Murphy v. Household Fin. Corp., 560 F.2d 206, 210 (6th Cir. 1977) (holding, in a widely adopted test, that double damages under Truth in Lending Act (TILA), subchapter I of the CCPA, are remedial rather than penal); In re Wood, 643 F.2d 188, 192 (5th Cir. 1980) (following Murphy to conclude that trustee of debtor’s estate had standing to bring claims under TILA). On the 152 See PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 Bureau notes that debt collectors often collect or attempt to collect debts from deceased consumers (i.e., from their estates), which presents many of the same consumer-protection concerns as collecting or attempting to collect debts from living consumers. In addition to proposing to clarify the meaning of the term consumer in the decedent debt context, the Bureau proposes in § 1006.2(e) to crossreference the special definition of consumer for certain communications in connection with the collection of a debt in proposed § 1006.6(a). As described in the section-by-section analysis of proposed § 1006.6, FDCPA section 805(d) identifies certain persons in addition to the section 803(3) consumer as persons with whom a debt collector may communicate in connection with the collection of any debt without violating FDCPA section 805(b)’s prohibition on third-party disclosures.154 The Bureau proposes to implement FDCPA section 805(d) in § 1006.6(a) and to cross-reference the § 1006.6(a) definition in proposed § 1006.14(h). As discussed below, proposed § 1006.14(h) would prohibit a debt collector from communicating or attempting to communicate with a consumer through a medium of communication if the consumer has requested that the debt collector not use that medium to communicate with the consumer. Accordingly, proposed § 1006.2(e) provides that, for purposes of proposed §§ 1006.6 and 1006.14(h), the term consumer has the meaning given to it in proposed § 1006.6(a). For further discussion, see the section-bysection analysis of proposed § 1006.6(a). The Bureau requests comment on the definition of consumer in proposed § 1006.2(e), including on whether the definition should include deceased consumers. 2(f) Consumer Financial Product or Service Debt As discussed in the section-by-section analysis of proposed § 1006.1(c), certain proposed provisions would apply to debt collectors only if they are collecting a debt related to a consumer other hand, some courts, for example, follow the tradition of the common law and treat a ‘‘natural person’’ as ceasing to exist at the point of death. See, e.g., Williamson v. Treasurer, 814 A.2d 1153, 1164 (N.J. Super. Ct. App. Div. 2003) (‘‘We would not describe the body or remains of a deceased person as still a human being or a natural person.’’ (interpreting the New Jersey Right to Know law and citing Natural person, Black’s Law Dictionary (7th ed. 1999))). In light of the conflicting traditions and the FDCPA’s silence, it appears appropriate to regard the statutory term ‘‘consumer’’ as ambiguous as to whether it includes or excludes a deceased consumer. 154 15 U.S.C. 1692c(d). E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules financial product or service, as that term is defined in section 1002(5) of the Dodd-Frank Act.155 Debt related to a consumer financial product or service would include, for example, debts related to consumer mortgage loans or credit cards. For ease of reference, proposed § 1006.2(f) would define the term consumer financial product or service debt to mean a debt related to a consumer financial product or service, as consumer financial product or service is defined in section 1002(5) of the Dodd-Frank Act. 2(h) Debt FDCPA section 803(5) defines the term debt for purposes of the FDCPA. Proposed § 1006.2(h) would implement FDCPA section 803(5) and generally restates the statute. Proposed § 1006.2(h) also would clarify that, for purposes of § 1006.2(f), the term debt means debt as that term is used in the Dodd-Frank Act. The Bureau proposes this clarification to ensure that, when determining whether a debt is a debt related to a consumer financial product or service for purposes of § 1006.2(f), debt collectors and other stakeholders refer to the Dodd-Frank Act rather than the FDCPA’s definition of debt. jbell on DSK3GLQ082PROD with PROPOSALS2 2(i) Debt Collector FDCPA section 803(6) defines the term debt collector for purposes of the FDCPA. The introductory language of FDCPA section 803(6) generally provides that a debt collector is any person: (1) Who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts (i.e., the ‘‘principal purpose’’ prong), or (2) who regularly collects, or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due to another (i.e., the ‘‘regularly collects’’ prong).156 FDCPA section 803(6) also sets forth several exclusions from the general definition.157 Proposed § 1006.2(i) would implement FDCPA section 803(6)’s definition of debt collector and generally restates the statute, with only minor wording and organizational changes for clarity 158 and to specify that the term excludes private entities that operate certain bad check enforcement programs that comply with FDCPA section 818.159 155 12 U.S.C. 5481(5). See the section-by-section analysis of proposed § 1006.1(c). 156 15 U.S.C. 1692a(6). 157 Id. 158 For example, to avoid obsolete language, proposed § 1006.2(i) uses the term ‘‘mail’’ instead of ‘‘the mails.’’ 159 15 U.S.C. 1692p. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 The Supreme Court recently has interpreted FDCPA section 803(6). In Henson v. Santander Consumer USA Inc., the Court held that a company may collect defaulted debts that it has purchased from another without being an FDCPA-covered debt collector.160 In so holding, the Court decided only whether, by using its own name to collect debts that it had purchased, Santander met the ‘‘regularly collects’’ prong of the introductory language in FDCPA section 803(6). The Court expressly declined to address two other ways that a debt buyer like Santander might qualify as a debt collector under FDCPA section 803(6): (1) By meeting the ‘‘regularly collects’’ prong by regularly collecting or attempting to collect debts owned by others, in addition to collecting debts that it purchased and owned; or (2) by meeting the ‘‘principal purpose’’ prong of the definition.161 The Court held that Santander was not a debt collector within the meaning of the ‘‘regularly collects’’ prong because Santander was collecting debts that it purchased and owned, not collecting debts owed to another.162 Proposed § 1006.2(i) generally would restate FDCPA section 803(6)’s definition of debt collector. Consistent with the Court’s holding in Henson, the proposed definition thus could include a debt buyer collecting debts that it purchased and owned, if the debt buyer either met the ‘‘principal purpose’’ prong of the definition or regularly collected or attempted to collect debts owned by others, in addition to collecting debts that it purchased and owned.163 2(j) Limited-Content Message FDCPA section 803(2) defines the term communication to mean the conveying of information regarding a debt directly or indirectly to any person through any medium.164 As discussed, proposed § 1006.2(d) would implement 160 Henson v. Santander Consumer USA, Inc., 137 S. Ct. 1718 (2017). In addition to Henson, the Supreme Court also recently interpreted FDCPA section 803(6) to hold that a business engaged in no more than nonjudicial foreclosure proceedings is not an FDCPA-covered debt collector, except for the limited purpose of FDCPA section 808(6). See Obduskey v. McCarthy & Holthus LLP, 139 S. Ct. 1029 (2019). 161 Henson, 137 S. Ct. at 1721. The Court had not identified these questions as being presented when it granted certiorari. Id. 162 Id. at 1721–22. 163 See, e.g., Barbato v. Greystone Alliance, LLC, 916 F.3d 260 (3d Cir. 2019) (holding that a debt buyer whose principal purpose was debt collection was an FDCPA-covered debt collector even though the debt buyer outsourced its collection activities to third parties). 164 15 U.S.C. 1692a(2). PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 23289 and interpret that definition, including by specifying that a debt collector does not engage in an FDCPA communication if the debt collector provides only a limited-content message.165 Proposed § 1006.2(j) would further interpret FDCPA section 803(2) by defining the content that a limited-content message would be required and permitted to include. For the reasons discussed below, under the Bureau’s interpretation of the term communication, a limitedcontent message would not convey information about a debt directly or indirectly to any person, and, as a result, a debt collector could provide such a message for a consumer without communicating with any person for the purposes of the FDCPA or Regulation F. The definition of communication is central to the FDCPA’s protections, many of which regulate a debt collector’s communications with a consumer or other person. For example, FDCPA section 805 166 restricts when and where a debt collector may communicate with a consumer, FDCPA sections 806 through 808 167 contain requirements concerning the form and content of a debt collector’s communications with a consumer or other person, and FDCPA section 804 168 imposes requirements on a debt collector communicating with any person other than the consumer for the purpose of acquiring location information about the consumer. Uncertainty about what constitutes a communication, however, has led to questions about how debt collectors can leave voicemails or other messages for consumers while complying with certain FDCPA provisions. Most significantly, if a voicemail or other message is a communication with a consumer, FDCPA section 807(11) requires that the debt collector identify itself as a debt collector or inform the consumer that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose.169 A debt collector who leaves a message with such disclosures, however, risks violating FDCPA section 805(b)’s prohibition against revealing debts to third parties if the disclosures are seen or heard by a third party.170 Uncertainty about what constitutes a communication may result in debt collectors repeatedly calling consumers 165 See the section-by-section analysis of proposed § 1006.2(d). 166 15 U.S.C. 1692c. 167 15 U.S.C. 1692d–1692f. 168 15 U.S.C. 1692b. 169 15 U.S.C. 1692e(11). See also the section-bysection analysis of proposed § 1006.18(e). 170 15 U.S.C. 1692c(b). See also the section-bysection analysis of proposed § 1006.6(d). E:\FR\FM\21MYP2.SGM 21MYP2 23290 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 and hanging up rather than risking liability by leaving messages. Courts interpreting the FDCPA’s definition of communication and the intersection of FDCPA sections 805(b) and 807(11) have reached conflicting results. Some courts hold that a message asking for a return call from a consumer is a communication and that a debt collector who leaves such a message violates FDCPA section 805(b)’s prohibition on communicating with third parties if the message is heard by a person other than the consumer.171 These courts also hold that, because the message is a communication with the consumer, it must include a statement pursuant to FDCPA section 807(11) that the caller is attempting to collect a debt, which further increases the likelihood that a third party hearing the message would know that the message relates to debt collection.172 Conversely, other 171 See, e.g., Cordes v. Frederick J. Hanna & Assocs., P.C., 789 F. Supp. 2d 1173, 1177 (D. Minn. 2011) (holding that debt collector violated FDCPA section 805(b) by leaving voicemail messages that disclosed that the caller was a debt collector); Marisco v. NCO Fin. Sys., Inc., 946 F. Supp. 2d 287, 289, 291–96 (E.D.N.Y. 2013) (holding that consumer stated a claim for a violation of FDCPA 805(b) where debt collector’s voicemail message was overheard by a third party and stated, in part, ‘‘This is an important message from NCO Financial Systems, Inc. The law requires that we notify that this is a debt collection company. This is an attempt to collect a debt and any information obtained will be used for that purpose. This is an attempt to collect a debt.’’); Fed. Trade Comm’n v. Check Enforcement, No. CIV.A. 03–2115 (JWB), 2005 WL 1677480, at *8 (D.N.J. July 18, 2005) (‘‘[T]he record indicates that defendants left messages on home answering machines, which were overheard by family members and other third parties, to obtain payments from alleged indebted consumers. Thus, defendants have . . . engaged in prohibited communications with third parties in violation of Section 805 of the FDCPA.’’), aff’d sub nom. Fed. Trade Comm’n v. Check Investors, Inc., 502 F.3d 159 (3d Cir. 2007); see also Foti v. NCO Fin. Sys., Inc., 424 F. Supp. 2d 643, 655–56 (S.D.N.Y. 2006) (‘‘Defendant’s voicemail message, while devoid of any specific information about any particular debt, clearly provided some information, even if indirectly, to the intended recipient of the message. Specifically, the message advised the debtor that the matter required immediate attention, and provided a specific number to call to discuss the matter. Given that the obvious purpose of the message was to provide the debtor with enough information to entice a return call, it is difficult to imagine how the voicemail message is not a communication under the FDCPA.’’). 172 Foti, 424 F. Supp. 2d at 657–58 (‘‘[A] narrow reading of the term ‘communication’ to exclude instances such as the present case where no specific information about a debt is explicitly conveyed could create a significant loophole in the FDCPA, allowing debtors to circumvent the § 1692e(11) disclosure requirement, and other provisions of the FDCPA that have a threshold ‘communication’ requirement, merely by not conveying specific information about the debt . . . . Such a reading is inconsistent with Congress’s intent to protect consumers from ‘serious and widespread’ debt collection abuses.’’); Hosseinzadeh v. M.R.S. Assocs., Inc., 387 F. Supp. 2d 1104, 1116 (C.D. Cal. 2005) (‘‘Because it appears that defendant’s VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 courts hold that a message limited to certain content—such as the debt collector’s name, a statement that the caller is a debt collector, and a call-back number—is not a communication and thus does not, itself, constitute a prohibited third-party disclosure under FDCPA section 805(b) or require an FDCPA section 807(11) disclosure.173 Many debt collectors state that they err on the side of caution and make repeated telephone calls instead of leaving messages on a consumer’s voicemail or with a third party who answers a consumer’s telephone, or sending text messages.174 Such repeated telephone calls may frustrate many consumers. Indeed, consumers often complain to the Bureau about the number of collection calls they receive and, to a lesser degree, about debt collectors’ reluctance to leave voicemails.175 In comments to the Bureau’s ANPRM and in feedback during the SBREFA process, many debt collectors stated that they would place fewer telephone calls if they were confident that leaving voicemails or other messages for consumers would not expose them to risk of liability under the FDCPA.176 The FTC and the U.S. messages are ‘communications’ subjecting defendant to the provisions of § 1692e(11), it also appears that defendant has violated § 1692e(11) because the messages do not convey the information required by § 1692e(11), in particular, that the messages were from a debt collector.’’). 173 See, e.g., Zortman v. J.C. Christensen & Assocs., Inc., 870 F. Supp. 2d 694, 701, 707–08 (D. Minn. 2012) (holding that debt collector did not violate FDCPA section 805(b) by leaving a voicemail message that stated, ‘‘We have an important message from J.C. Christensen & Associates. This is a call from a debt collector. Please call 866–319–8619.’’); Zweigenhaft v. Receivables Performance Mgmt., LLC, No. 14 CV 01074 RJD JMA, 2014 WL 6085912, at *1 (E.D.N.Y. Nov. 13, 2014) (similar); Biggs v. Credit Collections, Inc., No. CIV–07–0053–F, 2007 WL 4034997, at *4 (W.D. Okla. Nov. 15, 2007) (‘‘Words matter—in this instance, the words of the voice mails and the words of the statutory definition of a ‘communication.’ The transcript of the voice mail messages demonstrates that the voice mails ‘convey[ed]’ no ‘information regarding a debt.’ No amount of liberal construction can broaden the statutory language to encompass the words recorded in these voice mails.’’); see also Consent Order at ¶ IV.A., Fed. Trade Comm’n v. Expert Global Solutions, Inc., No. 3:13–cv–02611–M (N.D. Tex. July 16, 2013), https://www.ftc.gov/sites/ default/files/documents/cases/2013/07/ 130709ncoorder.pdf (enjoining defendant debt collector from leaving recorded messages in which defendant states both the debtor’s name and that the caller is a debt collector, unless the recipient’s voicemail greeting identifies only the debtor’s first and last name or defendant has already spoken with the debtor at the called number). 174 See, e.g., Small Business Review Panel Report, supra note 57, at 25–26. 175 See the section-by-section analysis of proposed § 1006.14(b)(2). 176 See Bureau of Consumer Fin. Prot., Advanced Notice of Proposed Rulemaking, Debt Collection (Regulation F), 78 FR 67848, 67867 (Nov. 12, 2013) PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 Government Accountability Office also have previously noted the need to clarify the law regarding debt collectors’ ability to leave voicemails for consumers.177 To address uncertainty about what constitutes an FDCPA communication and to reduce the need for debt collectors to rely on repeated telephone calls without leaving messages to establish contact with consumers, the Bureau proposes § 1006.2(j) to interpret FDCPA section 803(2) and define a message whose content would not ‘‘convey[ ] information regarding a debt directly or indirectly to any person.’’ Specifically, proposed § 1006.2(j) would provide that a limited-content message means a message for a consumer that includes all of the content described in § 1006.2(j)(1), and that may include any of the content described in § 1006.2(j)(2), but does not include other content. As discussed in the section-bysection analysis of proposed § 1006.2(b) and (d), a limited-content message would not be a communication, as defined in § 1006.2(d), but would be an attempt to communicate, as defined in § 1006.2(b). Under the proposal, a debt collector who leaves a limited-content message for a consumer would not have communicated with the consumer or any other person through that message. In turn, because FDCPA sections 805(b) and 807(11) both apply only to communications as defined by the FDCPA, the requirements described in those sections would not apply to the limited-content message. Accordingly, a limited-content message would not be required to include a disclosure pursuant to FDCPA section 807(11) (as implemented by proposed § 1006.18(e)), and a debt collector would not risk violating FDCPA section 805(b) (as (noting that debt collectors believe that recent case law presents a dilemma in which a debt collector’s voicemail for a consumer may not be able to comply with both FDCPA sections 805(b) and 807(11)); Fed. Trade Comm’n, Collecting Consumer Debts: The Challenges of Change, at 36 n.228 (Feb. 2009), https://www.ftc.gov/sites/default/files/documents/ reports/collecting-consumer-debts-challengeschange-federal-trade-commission-workshop-report/ dcwr.pdf (hereinafter FTC Modernization Report) (summarizing industry members’ comments that conflicting case law on debt collectors’ ability to communicate by newer forms of technology deters debt collectors from using such technologies, including leaving voicemails); id. at 47–49 (noting industry commenters’ concerns about their ability to leave voicemails that comply with the FDCPA and recommending that the law regarding voicemails be clarified). 177 See FTC Modernization Report, supra note 176, at 49–50; U.S. Gov’t Accountability. Off., GAO–09–748, Credit Cards: Fair Debt Collection Practices Act Could Better Reflect the Evolving Debt Collection Marketplace and Use of Technology, at 47–48, 52 (Sept. 2009), https://www.gao.gov/assets/ 300/295588.pdf. E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules implemented by proposed § 1006.6(d)) if someone other than the consumer heard or received the message. The proposal would define a limitedcontent message as, in part, a message ‘‘for a consumer.’’ As a result, any message left for a person other than a consumer would not be a limitedcontent message. FDCPA section 807(11)’s requirement that a debt collector disclose that the purpose of a communication is to collect a debt and that any information obtained will be used for that purpose applies only when a debt collector is communicating ‘‘with the consumer.’’ Concerns about the intersection of FDCPA sections 805(b) and 807(11) are thus not as relevant when a debt collector contacts a person other than a consumer. In addition, because debt collectors generally are prohibited from communicating with a person other than the consumer, they generally have no need to contact third parties, and, when such communications are permitted for obtaining location information about a consumer, FDCPA section 804 already provides a comprehensive disclosure regime. Therefore, it may not be necessary to specify the content of a message that does not constitute a communication if left by a debt collector for a person other than the consumer. The proposal would enable a debt collector to transmit a limited-content message by voicemail, by text message, or orally. Debt collectors may be most likely to use these methods to send limited-content messages, and these methods may be most likely to generate a response from a consumer. The proposal would not enable a debt collector to transmit a limited-content message by email because, as discussed below, email messages typically require additional information (e.g., a sender’s email address) that may in some circumstances convey information about a debt, and consumers may be unlikely to read or respond to an email containing solely the information included in a limited-content message (e.g., consumers may disregard such an email as spam or a security risk). In addition, other aspects of the proposed rule (e.g., the procedures described in proposed § 1006.6(d)(3) for emails and text messages) may encourage debt collectors to send debt collection communications to consumers by email. Accordingly, a rule that would enable debt collectors to send limited-content messages by email might not sufficiently protect consumers’ privacy interests or be of significant benefit to debt collectors. Proposed comment 2(j)–1 explains that any message other than a message VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 that includes the content specified in § 1006.2(j) is not a limited-content message. The comment further explains that, if a message includes any other content and such other content directly or indirectly conveys any information about a debt, including but not limited to any information that indicates that the message relates to the collection of a debt, the message would be a communication, as defined in proposed § 1006.2(d). Proposed comment 2(j)–2 provides examples of limited-content messages. Proposed comment 2(j)–3 provides examples of ways in which a debt collector could transmit a limitedcontent message to a consumer, such as by leaving a voicemail at the consumer’s telephone number, sending a text message to the consumer’s mobile telephone number, or leaving a message orally with a third party who answers the consumer’s home or mobile telephone number. Proposed comment 2(j)–3 notes, however, that leaving a limited-content message would be subject to other FDCPA provisions, including the prohibitions on harassing or abusive conduct and unfair or unconscionable practices in FDCPA sections 806 and 808, respectively.178 As the section-by-section analyses of proposed §§ 1006.2(b) and (d), 1006.6(b) and (c), 1006.14(h), and 1006.22(f)(3) and (4) explain in more detail, consumers may be harassed or otherwise injured not only by communications, but also by attempts to communicate, including when a debt collector conveys limited-content messages. Accordingly, those sections propose certain restrictions on when and how a debt collector may attempt to communicate with a person, including by leaving a limited-content message. Proposed comment 2(j)–4 would clarify that a debt collector who places a telephone call and leaves only a limited-content message for a consumer does not, with respect to that telephone call, violate FDCPA section 806(6)’s prohibition on the placement of telephone calls without meaningful disclosure of the caller’s identity. Under the proposed interpretation, the content described in proposed § 1006.2(j)(1) would meaningfully disclose the caller’s identity. The proposed interpretation would be limited to the narrow circumstance of a debt collector providing only a limited-content message to a consumer. As described below, proposed § 1006.2(j)(1) would require a limited-content message to include the name of a natural person whom the consumer could contact as 178 15 PO 00000 U.S.C. 1692d, 1692f. Frm 00019 Fmt 4701 Sfmt 4702 23291 well as a telephone number that the consumer could use to reply to the debt collector; a limited-content message could not contain any content that is not described in proposed § 1006.2(j)(1) or (2), and debt collectors would be prohibited from including false or misleading statements about the caller’s identity or the purpose of the call. As a result, the message should not mislead a consumer about the identity of the caller and the consumer could use the contact information to call a particular employee of a debt collector. Upon receiving such a call and engaging in a communication, the debt collector would be required by FDCPA section 807(11) to disclose to the consumer that the communication is from a debt collector. This sequence of events—a limited-content message followed by a communication in which the debt collector provides the FDCPA section 807(11) disclosures—may benefit consumers more than the status quo, under which many debt collectors place repeated telephone calls without leaving any message or any contact information that the consumer can use to reply to the debt collector. The interpretation in proposed comment 2(j)–4 would apply only when a debt collector places a telephone call and leaves only a limited-content message for a consumer. It would not extend to any other message a debt collector leaves for a consumer or other person, as such messages might not include all of the content that must be included in a limited-content message, might include content that is not described in proposed § 1006.2(j)(1) or (2) and that conveys a misleading impression about the caller’s identity or purpose of the call, or might constitute a communication that is subject to FDCPA section 807(11) or that otherwise would need to include different disclosures about the caller’s identity and purpose in order to satisfy FDCPA section 806(6). Similarly, the rationale in proposed comment 2(j)–4 would not extend to a telephone call that is a live conversation with the consumer because, again, the content of such a conversation would be different than the content of a limited-content message. The Bureau requests comment on whether the proposal to define a limited-content message that a debt collector could leave for a consumer without risking a violation of FDCPA sections 805(b) or 807(11) will enable debt collectors to establish contact with consumers while reducing the number of telephone calls that consumers receive. The Bureau further requests comment on the costs and benefits of E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 23292 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules permitting debt collectors to leave limited-content messages for consumers, including on whether those costs and benefits differ depending on whether a debt collector leaves a limited-content message: (1) In a voicemail message on a home, mobile, or work telephone; (2) in a live conversation with a third party who answers the consumer’s home, mobile, or work telephone number; or (3) by text message. The Bureau requests comment on whether there are other communication media, such as email, by which debt collectors should be permitted to leave limited-content messages, including in particular on the advantages and disadvantages of the proposed approach, which would not permit debt collectors to send limitedcontent messages by email. In addition, the Bureau requests comment on whether a debt collector should be permitted to leave limited-content messages with third parties only in certain circumstances (e.g., if a third party answers the consumer’s telephone number) and whether a debt collector should be able to include additional content in a limited-content message if leaving it with a third party (e.g., a request that the third party take a message). The Bureau also requests comment on the proposed commentary. In particular, the Bureau requests comment on whether proposed comment 2(j)–4 properly interprets the requirement to ‘‘meaningful[ly] disclose the caller’s identity’’ as satisfied when a debt collector places a telephone call and leaves only a limited-content message, and on whether there are other disclosures that would satisfy the meaningful disclosure requirement of FDCPA section 806(6) without causing the message to become a communication (i.e., without conveying information about a debt directly or indirectly to any person). During the SBREFA process, small entity representatives overwhelmingly supported a rule clarifying how and when a debt collector may leave a voicemail or other message for a consumer.179 They predicted that a rule defining a limited-content message that is not a communication under the FDCPA would reduce the number and frequency of collection calls as well as facilitate communications between debt collectors and consumers. The Small Business Review Panel Report recommended that the Bureau request comment on the costs and benefits of any limited-content message proposal, including on the costs and benefits of 179 Small Business Review Panel Report, supra note 57, at 36. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 providing limited-content messages by media other than telephone, and of any proposal that would require debt collectors to include a toll-free callback telephone number in a limited-content message (as the proposal then under consideration would have).180 Proposed § 1006.2(j) and the requests for comment in this section are consistent with the feedback received during the SBREFA process, which supported a definition of limited-content message, and the Panel Report’s recommendations. 2(j)(1) Required Content Proposed § 1006.2(j)(1) would require that limited-content messages include certain content to ensure that they facilitate contact between debt collectors and consumers. In particular, proposed § 1006.2(j)(1) provides that a limited-content message must include all of the following: The consumer’s name, a request that the consumer reply to the message, the name or names of one or more natural persons whom the consumer can contact to reply to the debt collector,181 a telephone number that the consumer can use to reply to the debt collector,182 and, if delivered electronically, a disclosure explaining how the consumer can stop receiving messages through that medium.183 The consumer’s name and a request that the consumer reply to the message may help to ensure that the correct person receives the message and is prompted to respond. Including in the message a telephone number that the consumer can use to reply to the message, as well as the name of at least one person the 180 Id. 181 Proposed § 1006.18(f) would clarify that a debt collector’s employee does not violate § 1006.18 by using an assumed name when communicating or attempting to communicate with a person, provided that the employee uses the assumed name consistently and that the employer can readily identify any employee who is using an assumed name. See the section-by-section analysis of proposed § 1006.18(f). 182 The proposal under consideration during the SBREFA process would have required the telephone number to be toll-free to the consumer (e.g., a 1–800 number). See Small Business Review Panel Outline, supra note 56, at 24. In light of feedback from some small entity representatives regarding the potential costs of maintaining a 1–800 number for the sole purpose of being able to transmit limited-content messages, the proposed rule would not require a toll-free telephone number. 183 Proposed § 1006.6(e) would require a debt collector who communicates or attempts to communicate with a consumer electronically in connection with the collection of a debt using, among other things, a telephone number for text messages or other electronic-medium address, to include in such communication or attempt to communicate a clear and conspicuous statement describing one or more ways the consumer can opt out of further electronic communications or attempts to communicate by the debt collector to that address or telephone number. See the sectionby-section analysis of proposed § 1006.6(e). PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 consumer can speak to, should enable the consumer to reply to the message and interact with a debt collector’s employee who has access to information about the debt in collection. In the case of a limited-content message sent by text message, a disclosure explaining how the consumer can stop receiving such messages may help prevent harassment, as further explained in the section-bysection analysis of proposed § 1006.6(e). In addition, the Bureau understands that the content required by § 1006.2(j)(1) often is included in a voicemail or other message for a person in a wide variety of non-debt collection circumstances, so a third party hearing or observing the message may not infer from its content that the consumer owes a debt. Under this proposed interpretation, none of the items in the limited-content message themselves individually or collectively convey that the consumer owes a debt or other information regarding a debt. Proposed comment 2(j)(1)(iv)–1 notes that a limited-content message must include a telephone number that the consumer can use to reply to the debt collector. The proposed comment explains that a voicemail or a text message that spells out, rather than enumerates numerically, a vanity telephone number is not a limitedcontent message. Spelling out a vanity telephone number could, in some circumstances, convey information about a debt or otherwise disclose that the message is from a debt collector. The Bureau considered permitting such telephone numbers to be included in limited-content messages on the condition that they do not convey information about a debt, but such a condition would require a case-by-case analysis to determine if a particular vanity number conveyed information about a debt. As a result, permitting the inclusion of a vanity number in any or all circumstances could undermine the certainty that the limited-content message definition is designed to provide and could increase the risk that a third party hearing or observing the message could infer that it relates to debt collection. Similarly, the sender’s email address could, in some circumstances, convey information about a debt. In part for that reason, proposed § 1002.2(j) would not permit a limited-content message to include a sender’s email address and, consequently, would effectively prohibit sending a limited-content message by email. As discussed, debt collectors also may have less of a need to send a limited-content message by email because proposed § 1006.6(d)(3) would clarify the procedures that a debt E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 collector could maintain to avoid incurring liability for a prohibited thirdparty communication by email, thereby reducing the risk to debt collectors of sending debt collection communications to consumers by email. 2(j)(2) Optional Content Proposed § 1006.2(j)(2) would permit a debt collector to include in a limitedcontent message certain content that may help prompt a consumer to reply but that, unlike the content described in proposed § 1006.2(j)(1), may not be necessary to enable the consumer to reply to the message or to prevent harassment. In particular, proposed § 1006.2(j)(2) provides that a limitedcontent message also may include one or more of the following: A salutation, the date and time of the message, a generic statement that the message relates to an account, and suggested dates and times for the consumer to reply to the message. The proposed interpretation would hold that none of these items, individually or collectively, conveys that the consumer owes a debt or other information regarding a debt. The Bureau requests comment on all aspects of proposed § 1006.2(j), including on the proposed interpretation that none of the content described in proposed § 1006.2(j)(1) and (2) conveys information regarding a debt. The Bureau also requests comment on whether the proposal to allow a limited-content message to include a generic statement that the message relates to an ‘‘account’’ raises a risk that the message would convey information about a debt to a third party hearing or observing the message, and whether there is an alternative statement that would better minimize such risk. For example, the Bureau considered proposing permitting a limited-content message to state that the message relates to a ‘‘personal,’’ ‘‘business,’’ ‘‘confidential,’’ ‘‘private,’’ ‘‘important,’’ or ‘‘time-sensitive’’ matter, but each of these might, in at least certain contexts, be misleading or confusing to a consumer. The Bureau further requests comment on whether there is sufficient information required or permitted in the limited-content message to prompt consumers to make a return call or text to the included telephone number and, if not, what additional information could be included in the message that would not cause the message to constitute a communication. The Bureau also requests comment on whether including a sender or recipient email address or a vanity telephone number in a limited-content message could convey information about a debt to a third party hearing or observing the VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 message and reduce the utility of a bright-line definition. Finally, the Bureau requests comment on the media by which debt collectors anticipate that they would send limited-content messages and on whether additional clarification is necessary regarding sending limited-content messages by media other than telephone. 2(k) Person Proposed § 1006.2(k) would define the term person to have the meaning set forth in 1 U.S.C. 1, which provides that, ‘‘in determining the meaning of any Act of Congress, unless the context indicates otherwise,’’ the term person includes ‘‘corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals.’’ 184 The FDCPA does not define the term person, and the context does not appear to indicate that a meaning other than the meaning in 1 U.S.C. 1 should apply. The term person is used throughout the FDCPA and the proposed regulation. The Bureau proposes to define this term to facilitate compliance, with only minor wording changes from the statute. Subpart B—Rules for FDCPA Debt Collectors 185 Section 1006.6 Communications in Connection With Debt Collection FDCPA section 805 generally limits how debt collectors may communicate with consumers and third parties when collecting debts.186 Proposed § 1006.6 would implement and interpret FDCPA section 805; it also would interpret FDCPA sections 806 and 808 to provide certain additional protections regarding debt collection communications. 6(a) Definition FDCPA section 805(d) provides that, for purposes of section 805, the term consumer includes certain individuals other than the person obligated or allegedly obligated to pay the debt. Accordingly, the protections in FDCPA section 805 apply to these individuals and the person obligated or allegedly obligated to pay the debt. Also, debt collectors may communicate with these individuals in connection with the collection of any debt without violating the FDCPA’s prohibition on third-party 184 See 1 U.S.C. 1. with its proposal to amend Regulation F to prescribe Federal rules governing the activities of debt collectors, the Bureau proposes to move existing §§ 1006.3 through 1006.8 regarding applications for State exemptions from the FDCPA to appendix A of the regulation. See the section-bysection analysis of proposed § 1006.108 and appendix A. 186 15 U.S.C. 1692c. 185 Consistent PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 23293 disclosures.187 For example, under FDCPA section 805(d), a debt collector may communicate not only with the consumer who owes or allegedly owes the debt, but also with the consumer’s spouse, parent (if the consumer is a minor), guardian, executor, or administrator,188 even though debt collectors generally are prohibited from communicating in connection with the collection of a debt with third parties.189 A debt collector may communicate with third parties to seek location information about consumers, but the debt collector may not state that the consumer owes any debt.190 Proposed § 1006.6(a) would implement and interpret FDCPA section 805(d) and would define consumer for purposes of proposed §§ 1006.6 and 1006.14(h). Consistent with proposed § 1006.2(e), which, as described above, would interpret consumer to include deceased persons, proposed comments 6(a)(1)–1 and 6(a)(2)–1 would clarify that surviving spouses and parents of deceased minor consumers, respectively, are consumers for purposes of proposed § 1006.6. Except for these clarifications, and except for the interpretations discussed in the section-by-section analysis of proposed § 1006.6(a)(4) and (5), proposed § 1006.6(a) generally mirrors the statute. The section-by-section analysis below therefore addresses only proposed § 1006.6(a)(4) and (5). 6(a)(4) Proposed § 1006.6(a)(4) would implement FDCPA section 805(d)’s definition of the term consumer as related to executors and administrators. Proposed § 1006.6(a)(4) generally restates the statute and its commentary also interprets FDCPA section 805(d) to include the personal representative of the deceased consumer’s estate. As discussed above, FDCPA section 805 generally limits the individuals with whom a debt collector may discuss the debt to those individuals identified as consumers in FDCPA section 805(d). If the consumer who owes or allegedly owes the debt is deceased, the consumer’s family members may find that debt collectors are reluctant to communicate with the individuals attempting to resolve any outstanding debts of the decedent unless they are among the individuals identified in FDCPA section 805(d) with whom a debt collector may generally discuss the 187 15 U.S.C. 1692c(d). 188 Id. 189 See 15 U.S.C. 1692c(b). 15 U.S.C. 1692b. For additional discussion of these provisions, see the section-by-section analyses of proposed §§ 1006.6(d) and 1006.10(c). 190 See E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 23294 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules debt, i.e., individuals with the title of executor or administrator under State law. This reluctance may delay the prompt resolution of estates. The Bureau understands that most States currently provide procedures for resolving estates that are faster and less expensive than the formal probate process that may have been more common when Congress enacted the FDCPA more than 40 years ago. Under these expedited State procedures, an individual with the authority to pay the decedent’s debts out of the assets of the estate may lack the particular title of executor or administrator under State law. The Bureau proposes to interpret the terms executor and administrator as used in the FDCPA to include personal representatives, which is defined in proposed comment 6(a)(4)–1 as any person who is authorized to act on behalf of the deceased consumer’s estate. These terms are not defined in the FDCPA, and the FDCPA does not indicate that they are limited to persons who formally have the title of executor or administrator under State law. Rather, it is ambiguous whether the terms executor and administrator include personal representatives of a consumer’s estate, as these persons serve the functions of executors or administrators but do not formally have that title. Accordingly, the Bureau proposes to interpret executor and administrator in a manner that is flexible enough to recognize the evolution in estate resolution processes over time, including the use of a personal representative to be the executor or administrator of the decedent’s estate.191 The ability to resolve the debts of estates outside of the formal probate process through informal processes may benefit consumers. If a debt collector does not communicate with an estate because no executor or administrator exists, the debt collector might force the estate into probate, which could substantially burden the resources of the estate and the deceased consumer’s heirs or beneficiaries. These burdens may be particularly acute for small estates and for individuals of limited means. Probate also adds costs and delays for debt collectors. In its Policy Statement on Decedent Debt, the FTC voiced similar concerns about unnecessarily pushing estates into probate. In light of such concerns, the FTC indicated that the agency would 191 Additionally, the word ‘‘includes’’ in FDCPA section 805(d) indicates that section 805(d) is an exemplary, rather than an exhaustive, list of the categories of individuals who are consumers for purposes of FDCPA section 805. See 15 U.S.C. 1692c(d). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 take no enforcement action against debt collectors who communicated about a decedent’s debts with an individual who has the authority to pay the debts out of the assets of the deceased consumer’s estate.192 For these reasons, and pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors, the Bureau proposes § 1006.6(a)(4). The Bureau requests comment on proposed § 1006.6(a)(4). Proposed comment 6(a)(4)–1 would clarify that the terms executor or administrator include the personal representative of the consumer’s estate, and that a personal representative of the consumer’s estate is any person who is authorized to act on behalf of the deceased consumer’s estate. The proposed comment explains that persons with such authority may include personal representatives under the informal probate and summary administration procedures of many States, persons appointed as universal successors, persons who sign declarations or affidavits to effectuate the transfer of estate assets, and persons who dispose of the deceased consumer’s assets extrajudicially. The term personal representative in comment 6(a)(4)–1 includes the same individuals as those recognized by the FTC’s Policy Statement on Decedent Debt.193 As the FTC has noted, some of the terms used to describe these individuals come from the Uniform Probate Code.194 However, proposed comment 6(a)(4)–1 adapts the general description of the term personal representative from Regulation Z, 12 CFR 1026.11(c), comment 11(c)–1 (persons ‘‘authorized to act on behalf of the estate’’) rather than the general description found in the FTC’s Policy Statement (persons with the ‘‘authority to pay the decedent’s debts from the assets of the decedent’s estate.’’). The Bureau believes that this change is nonsubstantive. The description of the term personal representative also reflects the language that a debt collector may use to acquire location information about the executor, administrator, or personal representative of the deceased consumer’s estate, as explained in 192 Statement of Policy Regarding Communications in Connection with the Collection of Decedents’ Debts, 76 FR 44915, 44919 (July 27, 2011) (hereinafter FTC Policy Statement on Decedent Debt). 193 Id. 194 Statement of Policy Regarding Communications in Connection with Collection of a Decedent Debt, 75 FR 62389, 62391–92 (Oct. 8, 2010) (describing the processes of informal probate and administration and universal succession). PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 proposed comment 10(b)(2)–1.195 The Bureau requests comment on the scope of the definition of personal representative in proposed comment 6(a)(4)–1 and on any ambiguity in the illustrative descriptions of personal representatives. The Bureau specifically requests comment on experiences under the FTC’s Policy Statement on Decedent Debt. In its Small Business Review Panel Outline, the Bureau stated that it was considering limiting the definition of personal representative to individuals recognized under State probate or estate laws.196 However, the Bureau received feedback from industry indicating that many State laws define personal representative to mean an executor or administrator. In these States, the definition of personal representative under consideration in the Small Business Review Panel Outline would have restricted communication to formally appointed executors or administrators, which would not have alleviated the harms the Bureau intended to address. Proposed comment 6(a)(4)–1, which provides that a personal representative is any person who is authorized to act on behalf of the deceased consumer’s estate, is designed to address this post-SBREFA feedback. 6(a)(5) Proposed § 1006.6(a)(5) would interpret FDCPA section 805(d)’s definition of the term consumer to include confirmed successors in interest. Under Regulations X and Z, a successor in interest is a person to whom a borrower transfers an ownership interest either in a property securing a mortgage loan subject to subpart C of Regulation X, or in a dwelling securing a closed-end consumer credit transaction under Regulation Z, provided that the transfer is: (1) A transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety; (2) a transfer to a relative resulting from the death of a borrower; (3) a transfer where the spouse or children of the borrower become an owner of the property; (4) a transfer resulting from a decree of a dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement, by which the spouse of the borrower becomes an owner of the property; or (5) a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to 195 See the section-by-section analysis of proposed § 1006.10(b). 196 Small Business Review Panel Outline, supra note 56, at 32–33. E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules a transfer of rights of occupancy in the property.197 A confirmed successor in interest, in turn, means a successor in interest once a servicer has confirmed the successor in interest’s identity and ownership interest in the relevant property type.198 As the Bureau explained in its Amendments to the 2013 Mortgage Rules under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z) (2016 Servicing Final Rule) 199 and its concurrently issued FDCPA interpretive rule (2016 FDCPA Interpretive Rule),200 the word ‘‘includes’’ in FDCPA section 805(d) indicates that section 805(d) is an exemplary, rather than an exhaustive, list of the categories of individuals who are consumers for purposes of FDCPA section 805. The Bureau explained that FDCPA section 805 recognizes the importance of permitting debt collectors to communicate with a narrow category of persons other than the individual who owes or allegedly owes the debt who, by virtue of their relationship to that individual, may need to communicate with the debt collector in connection with the collection of the debt. The Bureau further explained that, given their relationship to the individual who owes or allegedly owes the debt, confirmed successors in interest are—like the narrow categories of persons enumerated in FDCPA section 805(d)—the type of individuals with whom a debt collector needs to communicate about the debt. The Bureau therefore interpreted the term consumer for purposes of FDCPA section 805 to include a confirmed successor in interest as that term is defined in Regulation X, 12 CFR 1024.31, and Regulation Z, 12 CFR 1026.2(a)(27)(ii).201 Consistent with that interpretation, and pursuant to its authority under FDCPA section 814(d) to write rules with respect to the collection of debts by debt collectors, the Bureau proposes to interpret FDCPA section 805(d) in § 1006.6(a)(5) to provide that a confirmed successor in interest, as defined in Regulations X and Z, is a consumer for purposes of proposed § 1006.6. The Bureau requests comment on proposed § 1006.6(a)(5), including on the benefits and risks of communications about debts between debt collectors and confirmed successors in interest. 197 12 CFR 1024.31; 1026.2(a)(27)(i). 198 12 CFR 1024.31; 1026.2(a)(27)(ii). 199 81 FR 72160 (Oct. 19, 2016). 200 81 FR 71977 (Oct. 19, 2016). 201 Id. at 71979; 81 FR 72160, 72181 (Oct. 19, 2016). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 6(b) Communications With a Consumer—In General FDCPA section 805(a) restricts how a debt collector may communicate with a consumer in connection with the collection of any debt and provides certain exceptions to these prohibitions.202 The Bureau generally proposes § 1006.6(b) to implement and interpret FDCPA section 805(a) to specify circumstances in which a debt collector is prohibited from communicating with a consumer in connection with the collection of any debt. In addition, the Bureau proposes § 1006.6(b) to interpret FDCPA sections 806 and 808 to prohibit a debt collector from attempting to communicate with a consumer if FDCPA section 805(a) would prohibit the debt collector from communicating with the consumer. The Bureau proposes § 1006.6(b) pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors. Attempts To Communicate The Bureau proposes to clarify in proposed § 1006.6(b) that a debt collector is prohibited from attempting to communicate with a consumer in the same circumstances in which FDCPA section 805(a) prohibits the debt collector from communicating with the consumer. As discussed, proposed § 1006.2(b) would define an attempt to communicate to mean any attempt by a debt collector to initiate contact with any person, including by soliciting a response from such person, regardless of whether the attempt, if successful, would be a communication as defined in proposed § 1006.2(d). For example, a debt collector who places a telephone call to the consumer that goes unanswered has attempted to communicate with the consumer. The phrase attempt to communicate thus appears throughout proposed § 1006.6(b)(1) through (4). The Bureau proposes to limit attempts to communicate in § 1006.6(b) based on interpretations of FDCPA sections 806 and 808. FDCPA section 806 prohibits a debt collector from engaging in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt.203 FDCPA section 806(5) provides that causing a telephone 202 15 U.S.C. 1692c(a). Specifically, FDCPA section 805(a)(1) prohibits certain communications at unusual or inconvenient times and places, section 805(a)(2) prohibits certain communications with a consumer represented by an attorney, and section 805(a)(3) prohibits certain communications at a consumer’s place of employment. 203 15 U.S.C. 1692d. PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 23295 to ring repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number is an example of conduct the natural consequence of which is to harass, oppress, or abuse. FDCPA section 806(5) thus recognizes that telephone calls may have the natural consequence of harassment, oppression, or abuse even if no conversation ensues. A consumer who hears a telephone ringing at an inconvenient time or place but who does not answer it may experience the natural consequence of harassment from the telephone ringing in much the same way as a consumer who answers and speaks to the debt collector on the telephone. For this reason, the Bureau proposes to interpret FDCPA section 806 as prohibiting a debt collector from attempting to communicate at times when and places where a communication would be prohibited as inconvenient. FDCPA section 808 prohibits a debt collector from using unfair or unconscionable means to collect or attempt to collect any debt.204 A debt collector who places a telephone call without the intent to speak to any person who answers the telephone (thus avoiding a communication for purposes of FDCPA section 805) may be causing injury to persons at the called number without any legitimate purpose, and thus may be engaging in a prohibited unfair or unconscionable act under FDCPA section 808. Additionally, section 808 targets practices that pressure a consumer to pay debts the consumer might not otherwise have paid. A debt collector’s attempts to communicate at a time when or a place where a communication would be prohibited could pressure the consumer to pay the debt to avoid further intrusions on the consumer’s privacy, and the Bureau interprets such conduct as unfair or unconscionable under FDCPA section 808. The Bureau requests comment on its proposed interpretations regarding attempts to communicate. 6(b)(1) Prohibitions Regarding Unusual or Inconvenient Times or Places FDCPA section 805(a)(1) prohibits a debt collector from, among other things, communicating with a consumer in connection with the collection of any debt at times or places that the debt collector knows or should know are inconvenient to the consumer, subject to certain exceptions. As discussed in the section-by-section analysis below, proposed § 1006.6(b)(1)(i) and (ii) 204 15 E:\FR\FM\21MYP2.SGM U.S.C. 1692f. 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 23296 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules generally would implement and interpret FDCPA section 805(a)(1). Proposed comment 6(b)(1)–1 provides general interpretations and illustrations of the time and place restrictions in proposed § 1006.6(b)(1). Proposed comment 6(b)(1)–1 illustrates how a debt collector knows or should know that a time or place is inconvenient to a consumer. The proposed comment explains that a debt collector may know, or should know, that a time or place is inconvenient to a consumer if the consumer uses the word ‘‘inconvenient’’ to notify the debt collector. The proposed comment also explains that, even if the consumer does not use the word ‘‘inconvenient’’ to notify the debt collector, the debt collector nevertheless may know, or should know, based on the facts and circumstances, that a time or place is inconvenient. The Bureau proposes this interpretation because FDCPA section 805(a)(1) refers to what is ‘‘inconvenient to the consumer,’’ without specifying that a consumer must designate communications as inconvenient using the word ‘‘inconvenient.’’ The Bureau’s proposed interpretation also is consistent with some case law holding that a consumer need not use the precise language of the statute to invoke the protections of FDCPA section 805.205 Proposed comment 6(b)(1)–1 would further clarify that, if the consumer initiates a communication with the debt collector at a time or from a place that the consumer previously designated as inconvenient, the debt collector may respond once to that consumer-initiated communication at that time or place. Because the consumer initiated the communication, the debt collector neither knows nor should know that responding to that specific communication is inconvenient to the consumer. The debt collector is permitted to respond once. After that response, the debt collector must not communicate or attempt to communicate further with the consumer at that time or place until the consumer conveys that the time or place is no longer inconvenient. Proposed comment 6(b)(1)–1 also provides four specific examples of when a debt collector knows or should know that the time or place of a communication is inconvenient to a consumer. The Bureau requests comment on proposed § 1006.6(b)(1) and on comment 6(b)(1)–1, including on whether other general clarifications regarding inconvenient times or places would be useful or whether other 205 See, e.g., Horkey v. J.V.D.B. & Assocs., Inc., 333 F.3d 769, 773 (7th Cir. 2003). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 examples and illustrations would be instructive. The Bureau specifically requests comment on whether additional clarification is needed regarding the delivery of legally required communications at a time or place that a debt collector knows or should know is inconvenient to a particular consumer. The Bureau requests comment on whether to require a debt collector to ask a consumer at the outset of all debt collection communications whether the time or place is convenient to the consumer. The Bureau also requests comment on what effect a consumer-initiated communication should have on the times and places that a debt collector knows or should know are inconvenient to the consumer. 6(b)(1)(i) FDCPA section 805(a)(1) provides, in relevant part, that a debt collector may not communicate with a consumer in connection with the collection of any debt at any unusual time, or at a time that the debt collector knows or should know is inconvenient to the consumer.206 FDCPA section 805(a)(1) specifies that, in the absence of knowledge of circumstances to the contrary, a debt collector shall assume that the convenient time for communicating with a consumer is after 8:00 a.m. and before 9:00 p.m., local time at the consumer’s location. Proposed § 1006.6(b)(1)(i) would implement and interpret FDCPA section 805(a)(1)’s prohibitions regarding unusual or inconvenient times.207 The Bureau interprets the language in FDCPA section 805(a)(1) that a debt collector shall assume that the convenient time for communicating with a consumer is after 8:00 a.m. and before 9:00 p.m. to mean that a time before 8:00 a.m. and after 9:00 p.m. local time at the consumer’s location is inconvenient, unless the debt collector has knowledge of circumstances to the contrary. The Bureau requests comment on proposed § 1006.6(b)(1)(i).208 206 15 U.S.C. 1692c(a)(1). discussed in the section-by-section analysis of proposed § 1006.6(b), proposed § 1006.6(b)(1)(i) also would interpret FDCPA sections 806 and 808 to prohibit a debt collector from attempting to communicate with a consumer at a time when FDCPA section 805(a)(1) would prohibit the debt collector from communicating with the consumer. 208 In the Small Business Review Panel Outline, the Bureau described a proposal under consideration to define the 30-day period after the death of a consumer as an inconvenient time for communicating about the deceased consumer’s debt with surviving spouses or parents (in the case of deceased minor consumers) or persons acting as executors, administrators, or personal representatives of a deceased consumer’s estate. See Small Business Review Panel Outline, supra note 207 As PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 Proposed comment 6(b)(1)(i)–1 would clarify that, for purposes of determining the time of an electronic communication under § 1006.6(b)(1)(i), an electronic communication occurs when the debt collector sends it, not, for example, when the consumer receives or views it. Ambiguity exists about whether, for purposes of FDCPA section 805(a)(1), an electronic communication occurs at the time of sending or at the time of receipt or viewing. A rule that clarifies that an electronic communication occurs when the debt collector sends it makes it possible for a debt collector to comply. A debt collector can control the time at which it chooses to send communications, whereas it often would be impossible for a debt collector to determine when a consumer receives or views an electronic communication. Accordingly, under proposed § 1006.6(b)(1)(i), a debt collector would be prohibited from sending an electronic communication at a time that the debt collector knows or should know is inconvenient to the consumer. The Bureau requests comment on proposed comment 6(b)(1)(i)–1. Proposed comment 6(b)(1)(i)–2 would provide a safe harbor and illustrate how a debt collector could comply with proposed § 1006.6(b)(1)(i) and FDCPA section 805(a)(1) if the debt collector has conflicting or ambiguous information regarding a consumer’s location, such as telephone numbers with area codes located in different time zones or a telephone number with an area code and a physical address that are inconsistent. Proposed comment 6(b)(1)(i)–2 would clarify that, if a debt collector is unable to determine a consumer’s location, then, in the absence of knowledge of circumstances to the contrary, the debt collector would comply with the prohibition in § 1006.6(b)(1)(i) on communicating at inconvenient times if the debt collector communicated or attempted to communicate with the consumer at a time that would be convenient in all of the locations at which the debt collector’s information indicated the consumer might be located. A debt collector with such conflicting information may know or should know that it is inconvenient to contact a consumer at a time outside of the presumptively convenient times (8:00 a.m. to 9:00 p.m.) in any of the time zones in which the consumer might be located. As indicated by some industry 56, at 33. The proposed rule does not include such a waiting period. The Bureau requests evidence of specific consumer harm and benefits from debt collection communications occurring within 30 days after a consumer’s death. E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules commenters in response to the Bureau’s ANPRM, some debt collectors already have adopted this proposed approach for determining the convenient times to contact a consumer if the debt collector has conflicting location information for the consumer. Proposed comment 6(b)(1)(i)–2 also provides two examples of how a debt collector could comply with proposed § 1006.6(b)(1)(i). The Bureau requests comment on proposed comment 6(b)(1)(i)–2. 6(b)(1)(ii) FDCPA section 805(a)(1) provides, in relevant part, that a debt collector may not communicate with a consumer in connection with the collection of any debt at any unusual place, or at a place that the debt collector knows or should know is inconvenient to the consumer.209 Proposed § 1006.6(b)(1)(ii) would implement this prohibition and generally restates the statute, with only minor changes for clarity.210 211 6(b)(2) Prohibitions Regarding Consumer Represented by an Attorney FDCPA section 805(a)(2) prohibits a debt collector from communicating with a consumer in connection with the collection of any debt if the debt collector knows the consumer is represented by an attorney with respect to the debt and has knowledge of, or can readily ascertain, the attorney’s name and address, unless the attorney fails to respond within a reasonable period of time to a communication from the debt collector or unless the attorney consents to direct communication with the consumer.212 Proposed § 1006.6(b)(2) would implement this prohibition and generally restates the statute.213 The Bureau requests comment on proposed § 1006.6(b)(2), including whether additional clarification regarding this prohibition would be useful. 6(b)(3) Prohibitions Regarding Consumer’s Place of Employment 209 15 U.S.C. 1692c(a)(1). discussed in the section-by-section analysis of proposed § 1006.6(b), proposed § 1006.6(b)(1)(ii) also would interpret FDCPA sections 806 and 808 to prohibit a debt collector from attempting to communicate with a consumer at a place at which FDCPA section 805(a)(1) would prohibit the debt collector from communicating with the consumer. 211 In the Small Business Review Panel Outline, the Bureau described a proposal under consideration to designate four categories of places as presumptively inconvenient. See Small Business Review Panel Outline, supra note 56, at 29–30. In response to feedback received during the SBREFA process, the Bureau does not propose that intervention at this time. 212 15 U.S.C. 1692c(a)(2). 213 As discussed in the section-by-section analysis of proposed § 1006.6(b), proposed § 1006.6(b)(2) also would interpret FDCPA sections 806 and 808 to prohibit a debt collector from attempting to jbell on DSK3GLQ082PROD with PROPOSALS2 210 As VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 FDCPA section 805(a)(3) prohibits a debt collector from communicating with a consumer in connection with the collection of any debt at the consumer’s place of employment if the debt collector knows or has reason to know that the consumer’s employer prohibits the consumer from receiving such communication.214 Proposed § 1006.6(b)(3) would implement this prohibition and generally restates the statute.215 Even under circumstances where proposed § 1006.6(b)(3) may not apply because the debt collector does not know or have reason to know that a consumer’s employer prohibits the consumer from receiving communications in connection with the collection of a debt at the consumer’s place of employment, proposed § 1006.22(f)(3), discussed below, would prohibit the debt collector from communicating or attempting to communicate with the consumer using an email address that the debt collector knows or should know is provided to the consumer by the consumer’s employer, unless an exception under proposed § 1006.22(f)(3) applies (i.e., the debt collector has received directly from the consumer either prior consent to use that email address or an email from that email address).216 Proposed comment 6(b)(3)–1 cross-references the employer-provided email rule described in proposed § 1006.22(f)(3). The Bureau requests comment on proposed § 1006.6(b)(3). The Bureau also requests comment on whether additional clarification would be useful with respect to a debt collector’s communications or attempts to communicate with a consumer while at work, for example, on a consumer’s non-work mobile telephone or portable electronic device. 6(b)(4) Exceptions FDCPA section 805(a) provides certain exceptions to its limitations on a debt collector’s communications with a consumer. Proposed § 1006.6(b)(4) would implement and interpret the exceptions in FDCPA section 805(a). communicate with a consumer who is represented by an attorney if FDCPA section 805(a)(2) would prohibit the debt collector from communicating with that consumer. 214 15 U.S.C. 1692c(a)(3). 215 As discussed in the section-by-section analysis of proposed § 1006.6(b), proposed § 1006.6(b)(3) also would interpret FDCPA sections 806 and 808 to prohibit a debt collector from attempting to communicate with a consumer at the consumer’s place of employment if FDCPA section 805(a)(3) would prohibit the debt collector from communicating with the consumer there. 216 For additional discussion of proposed work email restrictions, see the section-by-section analysis of proposed § 1006.22(f)(3). PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 23297 6(b)(4)(i) Proposed § 1006.6(b)(4)(i) would implement the text in FDCPA section 805(a) that, in relevant part, sets forth the exception for the prior consent of the consumer given directly to the debt collector.217 Proposed § 1006.6(b)(4)(i) generally mirrors the statute, except that proposed § 1006.6(b)(4)(i) would interpret FDCPA section 805(a) to require that the consumer’s prior consent must be given during a communication that would not violate proposed § 1006.6(b)(1) through (3), i.e., the prohibitions on communications with a consumer at unusual or inconvenient times or places, communications with a consumer represented by an attorney, and communications at the consumer’s place of employment. For example, ordinarily a debt collector could not place a telephone call to a consumer at midnight and obtain the consumer’s prior consent for future debt collection communications. The Bureau interprets a consumer’s prior consent to be consent obtained in the absence of conduct that would compromise or eliminate a consumer’s ability to freely choose whether to consent. A communication that would violate proposed § 1006.6(b)(1) through (3) (e.g., consent obtained from a represented consumer where the consumer’s attorney is not present) is likely to compromise or eliminate a consumer’s ability to freely choose whether to consent. By addressing only prior consent purported to be obtained during a communication that would violate proposed § 1006.6(b)(1) through (3), the Bureau does not intend to suggest that prior consent obtained in other unlawful ways would comply with FDCPA section 805(a). Proposed comments 6(b)(4)(i)–1 and –2 would clarify the meaning of prior consent.218 Proposed comment 6(b)(4)(i)–1 explains that, if a debt collector learns during a communication that the debt collector is communicating with a consumer at an inconvenient time or place, the debt collector cannot during that communication ask the consumer to consent to the continuation of that debt collection communication. The Bureau proposes this comment because consent that satisfies proposed § 1006.6(b)(4)(i) must be ‘‘prior’’ and therefore given in advance of a communication that otherwise would violate proposed § 1006.6(b)(1) through 217 15 U.S.C. 1692c(a). interpretations and illustrations of prior consent discussed here also apply to proposed §§ 1006.14(b) and 1006.22(f), as discussed in the corresponding section-by-section analyses below. 218 The E:\FR\FM\21MYP2.SGM 21MYP2 23298 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules (3). Additionally, permitting a debt collector to ask a consumer to consent to a communication once the debt collector knows the communication is occurring at an inconvenient time or place would undermine the very protection guaranteed to the consumer under FDCPA section 805(a)(1). Although proposed comment 6(b)(4)(i)– 1 would clarify that the debt collector would be prohibited from asking the consumer to consent to the continuation of the communication at the inconvenient time or place, the comment also would clarify that a debt collector may ask the consumer what time or place would be convenient. Proposed comment 6(b)(4)(i)–2 restates the rule that the prior consent of the consumer must be given directly to the debt collector and explains that a debt collector cannot rely on the prior consent of the consumer given to the original creditor or to a previous debt collector. The Bureau proposes this interpretation because prior consent given to the original creditor or to a previous debt collector is not given ‘‘directly’’ to the debt collector, as the FDCPA expressly requires.219 The Bureau requests comment on proposed § 1006.6(b)(4)(i) and its related commentary, including on whether additional clarification regarding a consumer’s prior consent for the purposes of these rule provisions would be instructive. Additionally, because the definition of consumer for purposes of proposed § 1006.6 includes the individuals listed in proposed § 1006.6(a)(1) through (5) (e.g., the consumer’s spouse), the Bureau requests comment on whether additional clarification is needed regarding which ‘‘consumer’’ may give prior consent pursuant to proposed § 1006.6(b)(4)(i). 6(b)(4)(ii) jbell on DSK3GLQ082PROD with PROPOSALS2 Proposed § 1006.6(b)(4)(ii) would implement the text in FDCPA section 805(a) that, in relevant part, sets forth the exception for the express permission of a court of competent jurisdiction.220 Proposed § 1006.6(b)(4)(ii) generally restates the statute, with only minor changes for clarity. 219 This proposal is also consistent with the FDCPA’s legislative history. See H. Rept. No. 95– 131, at 5 (1977) (‘‘The committee intends that in section [805] the ‘prior consent’ be meaningful, i.e., that any prior consent by a consumer is to be a voluntary consent and shall be expressed by the consumer directly to the debt collector. Consequently, the committee intends that any term in a contract which requires a consumer to consent in advance to debt collection communication would not constitute ‘prior consent’ by such consumer.’’). 220 15 U.S.C. 1692c(a). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 6(c) Communications With a Consumer—After Refusal To Pay or Cease Communication Notice FDCPA section 805(c) provides that, subject to certain exceptions, if a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt (the ‘‘cease communication provision’’).221 The Bureau proposes § 1006.6(c) to implement and interpret FDCPA section 805(c) and pursuant to the Bureau’s authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors. 6(c)(1) Prohibitions Proposed § 1006.6(c)(1) would implement FDCPA section 805(c)’s cease communication provision and generally restates the statute, with only minor changes for clarity. Specifically, proposed § 1006.6(c)(1) would provide that, except as provided in proposed § 1006.6(c)(2), a debt collector must not communicate or attempt to communicate further with a consumer with respect to a debt if the consumer notifies the debt collector in writing that: (i) The consumer refuses to pay the debt; or (ii) the consumer wants the debt collector to cease further communication with the consumer.222 The Bureau proposes to interpret the applicability of the E-SIGN Act to a consumer electronically notifying a debt collector that the consumer wants the debt collector to cease further communication.223 Specifically, the Bureau proposes to interpret FDCPA section 805(c)’s writing requirement as being satisfied if a consumer notifies a debt collector using a medium of electronic communication through which a debt collector accepts electronic communications from consumers, such as email or a website portal. Thus, a debt collector would be 221 15 U.S.C. 1692c(c). the same reasons that proposed § 1006.6(b) would prohibit debt collectors from attempting to communicate with consumers if FDCPA section 805(a) would prohibit communications with consumers, proposed § 1006.6(c) would interpret FDCPA sections 806 and 808 to prohibit a debt collector from attempting to communicate with a consumer if FDCPA section 805(c) would prohibit the debt collector from communicating with the consumer. 223 Section 104(b)(1)(A) of the E-SIGN Act provides authority for a Federal regulatory agency with rulemaking authority under a statute to interpret section 101 of the E-SIGN Act with respect to that statute by regulation. 15 U.S.C. 7004(b)(1)(A). 222 For PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 required to give legal effect to a consumer’s notification submitted electronically only if the debt collector generally chose to accept electronic communications from consumers. The Bureau proposes to codify this interpretation of the E-SIGN Act in proposed comment 6(c)(1)–2. Proposed comment 6(c)(1)–1 would implement FDCPA section 805(c)’s provision that, if such notice is made by mail, a consumer’s notification is complete upon receipt by the debt collector.224 Proposed comment 6(c)(1)– 1 would apply this standard to all written or electronic forms of a consumer’s notification. The Bureau notes that FDCPA section 805(c) does not state that only mail notifications are complete upon receipt, but rather leaves vague when other forms of notification are complete. The Bureau proposes to clarify this ambiguity by providing that written or electronic forms of notification are complete upon receipt. The Bureau proposes this clarification on the basis that, regardless of the medium, before a debt collector has received a notification, it may not be reasonable to consider the debt collector to have been notified. On the other hand, once the debt collector has received a notification, the debt collector can reasonably be considered to have been notified. The Bureau requests comment on proposed § 1006.6(c)(1) and on proposed comment 6(c)(1)–1, including on: Whether additional clarification is needed with respect to a consumer’s notification pursuant to proposed § 1006.6(c)(1) being complete upon receipt by the debt collector; whether a debt collector should be afforded a certain period of time to update its systems to reflect the consumer’s request even after the notification is received, and, if so, how long; and whether receipt works differently for different written and electronic communication media. Additionally, because the definition of consumer for purposes of proposed § 1006.6 includes the individuals listed in proposed § 1006.6(a)(1) through (5) (e.g., the consumer’s spouse), the Bureau requests comment on whether additional clarification is needed regarding which ‘‘consumer’’ may notify the debt collector pursuant to proposed § 1006.6(c)(1). 6(c)(2) Exceptions FDCPA section 805(c) provides exceptions to the cease communication provision. The exceptions allow a debt collector to communicate with a 224 15 E:\FR\FM\21MYP2.SGM U.S.C. 1692c(c). 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules consumer even after a consumer has notified a debt collector pursuant to FDCPA section 805(c)’s cease communication provision: (1) To advise the consumer that the debt collector’s further efforts are being terminated; (2) to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor; or (3) where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy.225 Proposed § 1006.6(c)(2) would implement these exceptions and generally restates the statute, with only minor changes for clarity. In the 2016 Servicing Final Rule 226 and the concurrently issued 2016 FDCPA Interpretive Rule,227 the Bureau interpreted the written early intervention notice required in Regulation X, 12 CFR 1024.39(d)(3), to fall within the exceptions to the cease communication provision in FDCPA section 805(c)(2) and (3). As the Bureau explained in the 2016 Servicing Final Rule, the Bureau concluded that, because failure to provide the written early intervention notice required by Regulation X, 12 CFR 1024.39(d)(3), is closely linked to the ability of a mortgage servicer (who also is a debt collector subject to the FDCPA with respect to a mortgage loan) to invoke its specified remedy of foreclosure, the notice falls within the exceptions in FDCPA sections 805(c)(2) and (3).228 For a further discussion of the requirement in Regulation X, see the 2016 Servicing Final Rule’s section-by-section analysis discussion of 12 CFR 1024.39(d)(3).229 The Bureau proposes comment 6(c)(2)– 1 to incorporate by reference this interpretation, which applies to a mortgage servicer who also is a debt collector subject to the FDCPA with respect to a mortgage loan. 6(d) Communications With Third Parties FDCPA section 805(b) prohibits a debt collector from communicating, in connection with the collection of any debt, with any person other than the consumer or certain other persons.230 FDCPA section 805(b) also identifies 225 15 U.S.C. 1692c(c)(1)–(3). FR 72160 (Oct. 19, 2016). 227 81 FR 71977 (Oct. 19, 2016). 228 81 FR 72160, 72232 (Oct. 19, 2016). 229 Id. at 72233–38. 230 15 U.S.C. 1692c(b). Specifically, FDCPA section 805(b) prohibits communicating with any person other than the consumer, the consumer’s attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the creditor’s attorney, or the debt collector’s attorney. jbell on DSK3GLQ082PROD with PROPOSALS2 226 81 VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 certain exceptions to this prohibition. Proposed § 1006.6(d)(1) would implement FDCPA section 805(b)’s general prohibition against communicating with third parties, and proposed § 1006.6(d)(2) would implement the exceptions. Proposed § 1006.6(d)(3) would specify, for purposes of FDCPA section 813(c), procedures that are reasonably adapted to avoid an error in sending an email or text message that would result in a violation of FDCPA section 805(b). The Bureau proposes § 1006.6(d) pursuant to its authority under FDCPA section 814(d) to write rules with respect to the collection of debts by debt collectors. 6(d)(1) Prohibitions With limited exceptions, FDCPA section 805(b) prohibits a debt collector from communicating, in connection with the collection of any debt, with any person other than the consumer (as defined in FDCPA section 805(d)) or certain other persons. Proposed § 1006.6(d)(1) would implement FDCPA section 805(b) and generally restates the statute, with minor wording and organizational changes for clarity. Proposed comment 6(d)(1)–1 explains that, because a limited-content message is not a communication, a debt collector does not violate § 1006.6(d)(1) if the debt collector leaves a limited-content message for a consumer orally with a third party who answers the consumer’s home or mobile telephone.231 The comment explains that the message would be an attempt to communicate with the consumer (as defined in proposed § 1006.2(b)). It further explains, however, that if, during the course of the interaction with the third party, the debt collector conveys content other than the specific limited-contentmessage items described in proposed § 1006.2(j)(1) and (2), and such other content directly or indirectly conveys any information regarding a debt, the message is a communication, subject to the prohibition on third-party communications in proposed § 1006.6(d)(1). The Bureau requests comment on proposed § 1006.6(d)(1) and on whether additional clarification would be useful. 6(d)(2) Exceptions FDCPA section 805(b) specifies exceptions to the general prohibition against a debt collector communicating with third parties, including that a debt collector may engage in an otherwise 231 The Bureau separately requests comment in the section-by-section analysis of proposed § 1006.2(j) defining limited-content messages on whether to permit a debt collector to leave limitedcontent messages with third parties. PO 00000 Frm 00027 Fmt 4701 Sfmt 4702 23299 prohibited communication with the prior consent of the consumer given directly to the debt collector. Proposed § 1006.6(d)(2) would implement the exceptions in FDCPA section 805(b) and generally restates the statute, with minor wording and organizational changes for clarity. Proposed comment 6(d)(2)–1 refers to the commentary to proposed § 1006.6(b)(4)(i) for guidance concerning a consumer giving prior consent directly to a debt collector. Additionally, because the definition of consumer for purposes of proposed § 1006.6 includes those individuals listed in proposed § 1006.6(a)(1) through (5) (e.g., the consumer’s spouse), the Bureau requests comment on whether additional clarification is needed regarding which consumer under proposed § 1006.6(a) may give prior consent pursuant to proposed § 1006.6(d). 6(d)(3) Reasonable Procedures for Email and Text Message Communications FDCPA section 813(c) provides that a debt collector may not be held liable in any action brought under the FDCPA if the debt collector shows by a preponderance of evidence that the violation was not intentional, that it resulted from a bona fide error, and that it occurred even though the debt collector maintained procedures reasonably adapted to avoid the error.232 Proposed § 1006.6(d)(3) identifies procedures that a debt collector may use to obtain a safe harbor from civil liability for unintentionally violating the third-party disclosure prohibition in proposed § 1006.6(d)(1) and, by extension, FDCPA section 805(b), as a result of a bona fide error resulting from a communication by email or text message. FDCPA section 805(b) generally prohibits a debt collector from communicating with any person other than the consumer unless the consumer provides consent directly to the debt collector. FDCPA section 803(2), in turn, defines the term communication to include the conveying of information regarding a debt directly or indirectly to any person.233 In the context of oral communications, courts have found that, if a debt collector leaves a voice message that is overheard by a third party, the debt collector may violate FDCPA section 805(b) by indirectly conveying information regarding a debt to a person other than the consumer.234 232 15 U.S.C. 1692k(c). the section-by-section analysis of proposed § 1006.2(d). 234 See the section-by-section analysis of proposed § 1006.2(j). 233 See E:\FR\FM\21MYP2.SGM 21MYP2 23300 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 While nothing in the FDCPA prohibits debt collectors from communicating using newer communication media such as email and text messages, the case law regarding communications has given rise to uncertainty about how FDCPA section 805(b) applies to such media, because of the potential for inadvertent disclosure of communications to third parties. In pre-proposal feedback, several industry stakeholders asserted that this uncertainty, particularly about liability for third-party disclosures, discourages the use of electronic communications in debt collection.235 Consistent with this feedback, the Bureau’s Consumer Survey found that only 8 percent of consumers contacted by a debt collector were contacted by email—even though email is widely available and less expensive than other forms of communication, and 15 percent of surveyed consumers said that email was their most preferred method of being contacted about a debt in collection.236 In pre-proposal feedback, industry participants expressed interest in communicating with consumers using electronic technologies. They therefore requested that the Bureau clarify how FDCPA section 805(b) applies to the inadvertent disclosure of an electronic communication to a third party not authorized to receive it.237 In light of this feedback and evidence suggesting that some consumers may prefer debt collectors to communicate 235 An industry trade association commenting on the Bureau’s ANPRM surveyed its members and found that only 15 percent of respondents communicated electronically with consumers, primarily because of concerns about liability. A later study by a consulting firm, released in 2017, reported that about one-third of debt collectors communicate with consumers by email. Ernst & Young, The Impact of Third-Party Debt Collection on the US National and State Economies in 2016: Prepared for ACA Int’l, at 5 (Nov. 2017), https:// www.acainternational.org/assets/ernst-young/ey2017-aca-state-of-the-industry-report-final-5.pdf; see also Gov’t Accountability Off., No. GAO–09– 748, Fair Debt Collection Practices Act Could Better Reflect the Evolving Debt Collection Marketplace and Use of Technology, at 48 (Sept. 2009), https:// www.gao.gov/assets/300/295588.pdf (‘‘Debt collection agencies have been reluctant to use email and faxes to communicate with debtors because of the risk that someone other than the debtor may read the transmission, which could violate FDCPA’s prohibition on disclosure to third parties.’’). 236 See CFPB Debt Collection Consumer Survey, supra note 18, at 37, 42. 237 For example, one industry trade association suggested that the Bureau establish a presumption against liability when debt collectors use consumerprovided email addresses and telephone numbers. In addition, a Federal regulator recently recommended that the Bureau ‘‘codify that reasonable digital communications, especially when they reflect a consumer’s preferred method, are appropriate for use in debt collection.’’ U.S. Dept. of Treasury, A Financial System that Creates Economic Opportunities: Nonbank Financials, FinTech, and Innovation, at 21 (July 2018), https:// home.treasury.gov/news/press-releases/sm447. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 by newer media, the Bureau proposes to identify procedures that debt collectors may use to reduce the risk of liability from communicating with consumers by email or text message. Pursuant to its authority to implement and interpret FDCPA sections 805(b) and 813(c), the Bureau proposes § 1006.6(d)(3) to specify when a debt collector maintains procedures that are reasonably adapted, for purposes of FDCPA section 813(c), to avoid a bona fide error in sending an email or text message communication that would result in a violation of § 1006.6(d)(1). A debt collector would maintain such procedures if, when communicating with a consumer using an email address or, in the case of a text message, a telephone number, the debt collector’s procedures include steps to reasonably confirm and document that the debt collector: (1) Has obtained and used the email address or telephone number in accordance with one of the three methods specified in § 1006.6(d)(3)(i); and (2) has taken the additional steps specified in § 1006.6(d)(3)(ii). The procedures in proposed § 1006.6(d)(3) are designed to ensure that a debt collector who uses a specific email address or telephone number to communicate with a consumer by email or text message does not have a reason to anticipate that an unauthorized thirdparty disclosure may occur. The FTC staff and some courts have found that debt collectors do not violate the prohibition on third-party disclosures unless they have reason to anticipate that the disclosure may be heard or read by third parties.238 Designing the procedures around the reason-toanticipate standard is consistent with these principles. A debt collector who follows the procedures in proposed § 1006.6(d)(3) may not have reason to anticipate that a disclosure may be heard or read by a third party. Proposed § 1006.6(d)(3) would not fully eliminate a debt collector’s risk of liability for third-party disclosures. To be protected from civil liability under FDCPA 813(c), a debt collector would need to show, by a preponderance of the evidence, that the debt collector’s disclosure to the third party was 238 See, e.g., Statements of General Policy or Interpretation: Staff Commentary on the FDCPA, 53 FR 50097, 50104 (Dec. 13, 1988) (‘‘A debt collector does not violate [FDCPA section 805(b)] when an eavesdropper overhears a conversation with the consumer, unless the debt collector has reason to anticipate the conversation will be overheard.’’); Peak v. Prof’l Credit Serv., No. 6:14–cv–01856–AA, 2015 WL 7862774, at *5–6 (D. Or. Dec. 2, 2015); Berg v. Merchants Ass’n Collection Div., Inc., 586 F. Supp. 2d 1336, 1342, 1345 (S.D. Fla 2008); Chlanda v. Wymard, No. C–3–93–321, 1995 WL 17917574, at *2 (S.D. Ohio Sept. 5, 1995). PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 unintentional and that the debt collector, in fact, maintained the specified procedures. As proposed, this would require a debt collector to show that the procedures included steps to reasonably confirm and document that the debt collector acted in accordance with proposed § 1006.6(d)(3)(i) and (ii). For example, procedures that permitted a debt collector to use obviously incorrect email addresses merely because the addresses were obtained consistent with one of the three methods would not satisfy proposed § 1006.6(d)(3)’s reasonableness requirement.239 The procedures in proposed § 1006.6(d)(3) address email and text message communications only. At this time, the Bureau does not propose procedures related to the use of lessdeveloped and less-widespread forms of electronic communication because consumers do not appear accustomed to using such technologies in their financial lives. The Bureau may revisit this conclusion if consumer use of these technologies changes. The Bureau also does not propose procedures related to the use of voicemails. The limitedcontent message described in proposed § 1006.2(j) is designed to enable debt collectors to leave voicemails for consumers without risking third-party disclosures. Proposed § 1006.6(d)(3) does not identify the only circumstances in which a debt collector may communicate with a consumer by email or text message, nor does it identify the only procedures that may be reasonably adapted to avoid a violation of proposed § 1006.6(d)(1) and FDCPA section 805(b). Thus, a debt collector would not necessarily violate proposed § 1006.6(d)(1) or FDCPA section 805(b) if the debt collector communicated with a consumer by email or text message without following the procedures in proposed § 1006.6(d)(3). Depending on the facts, a debt collector could show by a preponderance of the evidence that any third-party disclosures were unintentional and that the debt collector employed procedures reasonably adapted to avoid them. The Bureau requests comment on proposed § 1006.6(d)(3). In particular, the Bureau requests comment on the risk of third-party disclosure and resulting consumer harm posed by debt collection communications that take place by email or text message. The 239 In addition, a debt collector who communicates with a consumer consistent with proposed § 1006.6(d)(3) would not be protected from liability for violations unrelated to third-party disclosures (e.g., for failure to include the opt-out notice that proposed § 1006.6(e) would require). E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules Bureau is especially interested in any data or other information bearing on the harm associated with such disclosure. The Bureau also requests comment on whether the procedures identified in proposed § 1006.6(d)(3) are likely to increase debt collectors’ use of emails and text messages to communicate with consumers. The Bureau also requests comment on whether additional clarification is needed about the requirement that a debt collector’s procedures include steps to reasonably confirm and document that the debt collector acted in accordance with proposed § 1006.6(d)(3)(i) and (ii). In addition, the Bureau requests comment on whether to clarify the meaning of the term email in proposed § 1006.6(d)(3), such as by specifying that it includes direct messaging technology in mobile applications or on social media platforms. 6(d)(3)(i) Method of Obtaining and Using an Email Address or Telephone Number Proposed § 1006.6(d)(3)(i) describes three methods of obtaining and using an email address or, in the case of a text message, a telephone number. As discussed below, a debt collector whose policies and procedures include steps to reasonably confirm and document compliance with proposed § 1006.6(d)(3)(i) would be entitled to a safe harbor from liability for an unintentional third-party disclosure resulting from use of one of the three methods, assuming the debt collector’s procedures also include steps to reasonably confirm and document compliance with proposed § 1006.6(d)(3)(ii). jbell on DSK3GLQ082PROD with PROPOSALS2 6(d)(3)(i)(A) A debt collector who communicates with a consumer electronically using an email address or telephone number that the consumer recently used to contact the debt collector electronically may not have reason to anticipate that the communication may be read by third parties with whom the debt collector is not otherwise permitted to communicate about the debt. This is because, the Bureau believes, a consumer generally is better positioned than a debt collector to determine whether third parties have access to a specific email address or telephone number, and a consumer’s decision to communicate electronically using a specific email address or telephone number may suggest that the consumer has assessed the risk of third-party disclosure to be low. For this reason, proposed § 1006.6(d)(3)(i)(A) provides VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 that a debt collector could obtain 240 a safe harbor from liability for an unintentional third-party disclosure if the debt collector maintained procedures to reasonably confirm and document that the debt collector communicated with the consumer using an email address or, in the case of a text message, a telephone number that the consumer recently used to contact the debt collector for purposes other than opting out of electronic communications.241 Proposed § 1006.6(d)(3)(i)(A) would apply to any email address or, in the case of a text message, any telephone number—including any work email address or any work telephone number—the consumer used to contact the debt collector for purposes other than opting out of electronic communications. As discussed in the section-by-section analysis of proposed § 1006.22(f)(3), the proposed rule generally would prohibit a debt collector from attempting to communicate with a consumer using an email address that the debt collector knows or should know is maintained by the consumer’s employer. Work emails appear to present a heightened risk of third-party disclosure because many employers have a legal right to read messages sent or received by employees on work email accounts, and some employers exercise that right. Text messages sent to a work telephone number appear to present a heightened risk of third-party disclosure for the same reason. However, some consumers may be in a position to assess the risk that an employer will read their work emails or work text messages based on, among other things, their knowledge of work policies and practices, so it may be reasonable for a debt collector to presume that a consumer who initiates an electronic communication with a debt collector using a work email address or work telephone number has assessed that risk to be low. In addition, proposed § 1006.6(d)(3)(i)(A) would apply only if the consumer recently used the email address or telephone number to contact 240 To be entitled to a safe harbor, the debt collector’s procedures also would need to comply with proposed § 1006.6(d)(3)(ii). 241 As discussed in the section-by-section analysis of proposed § 1006.14(h)(2), if a consumer opts out of receiving electronic communications from a debt collector, the debt collector would be permitted to reply once to confirm the consumer’s request to opt out, provided that the reply contains no information other than a statement confirming the consumer’s request. Proposed § 1006.6(d)(3)(i)(A)’s safe harbor would not be available to a debt collector who sends the reply to an email address or, in the case of a text message, a telephone number that the consumer used only for purposes of opting out of electronic communications. PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 23301 the debt collector. Telephone numbers frequently are disconnected and reassigned from one person to another. In fact, according to a recent Federal Communications Commission (FCC) notice of proposed rulemaking, nearly 35 million telephone numbers are disconnected and made available for reassignment each year.242 Given the frequency with which telephone numbers are reassigned, it may be reasonable for a debt collector to anticipate that sending a text message to a telephone number that the consumer has not recently used could result in the disclosure of sensitive information to third parties—namely, persons to whom the consumer’s telephone number has been reassigned. Because a telephone number the consumer recently used may be less likely to have been reassigned than a telephone number the consumer used in the more distant past, proposed § 1006.6(d)(3)(i)(A)’s recency requirement may limit the third-party disclosure risk posed by the reassignment of telephone numbers. Although email addresses do not appear to carry as great a risk of reassignment as telephone numbers,243 for consistency and ease of administration of the regulation, the Bureau nevertheless proposes to apply the same recency requirement to email addresses. The Bureau requests comment on proposed § 1006.6(d)(3)(i)(A). In particular, the Bureau requests comment on what, if anything, a consumer’s decision to contact a debt collector using a work email address or, in the case of a text message, a work telephone number may suggest about the consumer’s assessment of the risk of third-party disclosure. The Bureau also requests comment on what, if anything, a consumer’s decision to contact a debt collector using a non-work email address or, in the case of a text message, a non-work telephone number may suggest about the consumer’s 242 Advanced Methods to Target and Eliminate Unlawful Robocalls, 83 FR 17631, 17632 (Apr. 23, 2018) (‘‘Consumers disconnect their old numbers and change to new telephone numbers for a variety of reasons, including switching wireless providers without porting numbers and getting new wireline telephone numbers when they move.’’). 243 Although email addresses can be reassigned, the Bureau has not identified evidence suggesting that reassignment happens frequently. For example, one of the largest email providers states it does not reassign email addresses. See Delete Your Gmail Service, Google Account Help, https:// support.google.com/accounts/answer/ 61177?co=GENIE.Platform%3DDesktop&hl=en (last visited May 6, 2019). One industry report suggests that a majority of consumers have never deactivated an email account. Direct Marketing Ass’n, Consumer Email Tracker 2017, at 6 (2017), https:// dma.org.uk/uploads/misc/5a1583ff3301aconsumer-email-tracking-report-2017-(2)_ 5a1583ff32f65.pdf. E:\FR\FM\21MYP2.SGM 21MYP2 23302 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 assessment of the risk of third-party disclosure. In addition, the Bureau requests comment on the third-party disclosure risks to consumers posed by the practice of reassigning telephone numbers. The Bureau also requests comment on whether the recency requirement in proposed § 1006.6(d)(3)(i)(A) adequately addresses those risks, and, if not, on how the Bureau could address them in a final rule. In addition, the Bureau requests comment on whether to apply the recency requirement to emails. The proposed rule does not define when a consumer’s contact would qualify as recent. The Bureau therefore also requests comment on whether and how to define recent in the context of proposed § 1006.6(d)(3)(i)(A), including on whether contact by the consumer in the past year should qualify as recent. 6(d)(3)(i)(B) A debt collector may not have reason to anticipate that an electronic communication to a consumer’s nonwork email address or non-work telephone number may be read by third parties with whom the debt collector is not otherwise permitted to communicate about the debt if the consumer has received notice and a reasonable opportunity to opt out of such communications, but the consumer has not done so. This is because, the Bureau believes, a consumer’s failure to opt out in these circumstances may suggest that the consumer has assessed the risk of such a disclosure to be low. For this reason, proposed § 1006.6(d)(3)(i)(B) provides that a debt collector could obtain 244 a safe harbor from liability for an unintentional thirdparty disclosure if the debt collector maintained procedures to reasonably confirm and document that: (1) The debt collector communicated with the consumer using a non-work email address or, in the case of a text message, a non-work telephone number, after the creditor or the debt collector provided the consumer with notice that the debt collector might use that non-work email address or non-work telephone number for debt collection communications and a reasonable opportunity to opt out; and (2) the consumer did not opt out. Proposed § 1006.6(d)(3)(i)(B) would apply only to non-work email addresses and non-work telephone numbers; it would not apply to work email addresses or work telephone numbers. A notice-and-opt-out process may not be reasonably designed to prevent 244 To be entitled to a safe harbor, the debt collector’s procedures also would need to comply with proposed § 1006.6(d)(3)(ii). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 employers from reading electronic debt collection communications sent to work email addresses and work telephone numbers. Unlike a consumer’s affirmative decision to contact a debt collector using a work email address or, in the case of a text message, a work telephone number, as described in proposed § 1006.6(d)(3)(i)(A), a consumer’s failure to opt out of the debt collector’s use of a work email address or a work telephone number may not indicate that the consumer has assessed the risk of third-party disclosure to be low. Instead, it may reflect an unwillingness to engage with a debt collector in any manner—even to opt out of further communications—using a work email address or a work telephone number. Proposed comment 6(d)(3)(i)–1 would clarify that an email address qualifies as a non-work email address unless the debt collector knows or should know that the email address is provided to the consumer by the consumer’s employer. The proposed comment also refers to § 1006.22(f)(3) and its related commentary for further clarification regarding whether a debt collector knows or should know that an email address is provided by a consumer’s employer. The proposed comment also would clarify that a telephone number qualifies as a non-work telephone number unless the debt collector knows or should know that the telephone number is provided to the consumer by the consumer’s employer. The Bureau requests comment on proposed § 1006.6(d)(3)(i)(B) and on comment 6(d)(3)(i)–1. In particular, the Bureau requests comment on what, if anything, a consumer’s failure to opt out of a debt collector’s use of a non-work email address or, in the case of a text message, a non-work telephone number may suggest about the consumer’s assessment of the risk of third-party disclosure. The Bureau also requests comment on what, if anything, a consumer’s failure to opt out of a debt collector’s use of a work email address or, in the case of a text message, a work telephone number may suggest about the consumer’s assessment of the risk of third-party disclosure. 6(d)(3)(i)(B)(1) Proposed § 1006.6(d)(3)(i)(B)(1) describes three requirements that a debt collector using the notice-and-opt-out approach would need to confirm and document had been satisfied. First, the creditor or the debt collector would need to notify the consumer clearly and conspicuously that the debt collector might use a specific non-work email address or a specific non-work PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 telephone number for debt collection communications by email or text message. The creditor or the debt collector may provide the notice orally, in writing, or electronically, but, if provided electronically, the notice could not be sent to the specific nonwork email address or non-work telephone number the debt collector seeks to use for future communications. This limitation may help avoid a thirdparty disclosure through the notice itself, which could occur if the opt-out notice were sent to the email address or telephone number identified in the notice. Second, the creditor or the debt collector would need to provide the notice no more than 30 days before the debt collector engages in debt collection communications by email or text message. This timing component is meant to ensure that the consumer has made a decision about whether to opt out, including based on the risk of thirdparty disclosure, at a time reasonably contemporaneous with the proposed electronic communications. Third, the notice would need to identify the legal name of the debt collector and the non-work email address or non-work telephone number the debt collector proposes to use, describe one or more ways the consumer could opt out of such communications, and provide the consumer with a specified reasonable period during which to opt out before the debt collector would begin such communications. The content of the notice is meant to ensure that the notice includes enough information for the consumer to make an adequately informed decision about whether to opt out and, should the consumer elect not to opt out, to prepare to receive any electronic communications.245 Although the procedures described in proposed § 1006.6(d)(3)(i)(B) include steps to reasonably confirm and document that the creditor or the debt collector provided the opt-out notice described in proposed § 1006.6(d)(3)(i)(B)(1), they do not include a requirement to provide the notice itself in writing. Proposed comment 6(d)(3)(i)(B)(1)–1 would clarify that the opt-out notice described in § 1006.6(d)(3)(i)(B)(1) may be provided orally, in writing, or 245 As explained below, the Bureau proposes comment 6(d)(3)(i)(B)(1)–2 to clarify that, when an opt-out notice is provided orally, the creditor or the debt collector may require the consumer to make an opt-out decision during that same communication. As also noted below, the Bureau does not propose to specify what would qualify as a reasonable optout period when an opt-out notice is provided in writing or electronically; however, the Bureau requests comment on this issue. E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules electronically. The proposed comment also would clarify that the opt-out notice must be provided clearly and conspicuously, as defined in § 1006.34(b)(1), and that, if the opt-out notice is provided in writing or electronically, it must comply with the requirements of § 1006.42(a) for providing required disclosures.246 The Bureau proposes comment 6(d)(3)(i)(B)(1)–1 to provide consumers, debt collectors, and creditors with the flexibility to satisfy the proposed noticeand-opt-out requirements orally or electronically, which may be more convenient or efficient in some circumstances. Proposed comment 6(d)(3)(i)(B)(1)–2 would clarify how to provide the optout notice described in proposed § 1006.6(d)(3)(i)(B)(1) to the consumer in an oral communication, such as in a telephone or in-person conversation. The comment explains that, if a creditor or a debt collector provides the opt-out notice orally, the creditor or the debt collector may require the consumer to make an opt-out decision during that same communication. Proposed comment 6(d)(3)(i)(B)(1)–2 appears consistent with industry practice in other markets for consumer financial products and services, where consumers may commonly make decisions about their communication preferences at one time, often at origination. Proposed comment 6(d)(3)(i)(B)(1)–3 would clarify that a debt collector or a creditor may provide the opt-out notice together with other notices required under the rule. As discussed in the section-by-section analysis of proposed § 1006.42(c)(2)(ii) and (d), the proposed rule would permit a debt collector to deliver required disclosures by hyperlink if, among other things, the debt collector or a creditor first provided the consumer with notice and an opportunity to opt out. Because it may be more convenient and cost effective for consumers, debt collectors, and creditors if consumers can make their various communication preferences known at the same time, proposed comment 6(d)(3)(i)(B)(1)–3 would clarify that a debt collector or a creditor may include the opt-out notice described in § 1006.6(d)(3)(i)(B)(1) in the same communication as the opt-out notice described in § 1006.42(d)(1) or (2), as applicable. The Bureau requests comment on proposed § 1006.6(d)(3)(i)(B)(1) and its 246 As discussed in the section-by-section analysis of proposed § 1006.42(a)(1), that section would apply when debt collectors provide certain required disclosures in writing or electronically; it would not apply when debt collectors provide those disclosures orally. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 related commentary. In particular, the Bureau requests comment on whether to limit further the email addresses or telephone numbers to which a creditor or a debt collector may send the opt-out notice that would be required by proposed § 1006.6(d)(3)(i)(B)(1) and, if so, what those limitations should be. The Bureau also requests comment on proposed § 1006.6(d)(3)(i)(B)(1)’s requirement to provide the notification no more than 30 days before the debt collector’s first communication pursuant to proposed § 1006.6(d)(3)(i)(B), including on whether the period should be shortened or lengthened. The Bureau also requests comment on whether to clarify, for purposes of proposed § 1006.6(d)(3)(i)(B)(1), what constitutes a reasonable period within which to opt out when an opt-out notice is not provided through a telephone conversation. In addition, the Bureau requests comment on whether, in other consumer financial products and services markets, consumers commonly make decisions about their communication preferences during a single telephone call. The Bureau also requests comment on the benefits and risks of allowing debt collectors and creditors to include the opt-out notice described in proposed § 1006.6(d)(3)(i)(B)(1) in the same communication as the opt-out notice described in proposed § 1006.42(d)(1) or (2), as applicable. 6(d)(3)(i)(B)(2) As discussed above, proposed § 1006.6(d)(3)(i)(B)(1) describes requirements that a debt collector using the notice-and-opt-out approach would need to confirm and document had been satisfied. One such requirement is to provide the consumer with a reasonable period during which to opt out of receiving debt collection communications by email or text message to the non-work email address or non-work telephone number identified in the opt-out notice. The consumer’s failure to opt out in these circumstances may suggest that the consumer has assessed the risk of thirdparty disclosure to be low.247 For this 247 By contrast, as explained in the section-bysection analysis of proposed § 1006.6(d)(3)(i)(B), a consumer’s failure to opt out of a debt collector’s use of a work email address or, in the case of a text message, a work telephone number may not indicate that the consumer has assessed the risk of third-party disclosure to be low. When it comes to a debt collector’s use of a non-work email address or non-work telephone number, a consumer likely possesses the information necessary to assess the risk of unwanted third-party disclosure. With respect to work email addresses and telephone numbers, however, a consumer who receives a debt PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 23303 reason, proposed § 1006.6(d)(3)(i)(B)(2) provides that, if the opt-out period specified in the notice has expired and the consumer has not opted out, the debt collector may use the specific nonwork email address or non-work telephone number to send debt collection communications by email or text message. Proposed comment 6(d)(3)(i)(B)(2)–1 would clarify how proposed § 1006.6(d)(3)(i)(B)(2) would work with proposed § 1006.14(h), which would prohibit a debt collector from communicating or attempting to communicate with a consumer through a medium of communication if the consumer has requested that the debt collector not use that medium to communicate with the consumer.248 Proposed comment 6(d)(3)(i)(B)(2)–1 provides that, if a consumer requests after the expiration of the opt-out period set forth in the § 1006.6(d)(3)(i)(B)(1) opt-out notice that a debt collector not use the non-work email address or nonwork telephone number specified in that notice, § 1006.14(h) would prohibit the debt collector from communicating or attempting to communicate with the consumer using that email address or telephone number. Likewise, if the consumer requests after the expiration of the opt-out period that the debt collector not communicate with the consumer by email or text message, § 1006.14(h) prohibits the debt collector from communicating or attempting to communicate with the consumer by email or text message, including by using the non-work email address or non-work telephone number specified in the § 1006.6(d)(3)(i)(B)(1) opt-out notice. The Bureau requests comment on proposed § 1006.6(d)(3)(i)(B)(2) and its related commentary. 6(d)(3)(i)(C) A debt collector who communicates with a consumer electronically using the consumer’s non-work email address or non-work telephone number recently used by the creditor or a prior debt collector may not have reason to anticipate that the communication may be read by third parties with whom the debt collector is not otherwise permitted to communicate about the debt. The Bureau has not identified data suggesting that creditors communicate with consumers at non-work email addresses or non-work telephone numbers that are generally accessible to collection communication may not wish to engage with a debt collector in any manner—even to opt out of further communications—using a work email address or telephone number. 248 See the section-by-section analysis of proposed § 1006.14(h). E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 23304 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules such individuals. Further, the Bureau believes that a consumer’s decision to communicate with a creditor or a prior debt collector using a non-work email address or non-work telephone number may suggest that the consumer has assessed the risk of third-party disclosure to be low. For these reasons, proposed § 1006.6(d)(3)(i)(C) provides that a debt collector could obtain 249 a safe harbor from liability for an unintentional thirdparty disclosure if the debt collector maintained procedures to reasonably confirm and document that: (1) The debt collector communicated with the consumer using a non-work email address or, in the case of a text message, a non-work telephone number that the creditor or a prior debt collector obtained from the consumer to communicate about the debt; (2) before the debt was placed with the debt collector, the creditor or the prior debt collector recently sent communications about the debt to the non-work email address or non-work telephone number; and (3) the consumer did not request the creditor or the prior debt collector to stop using the non-work email address or non-work telephone number to communicate about the debt. Proposed § 1006.6(d)(3)(i)(C) would apply only to non-work email addresses and non-work telephone numbers. As noted above, some employers monitor work email addresses, and some employers may also monitor text messages sent to and from work telephone numbers. A consumer might agree to receive electronic communications from a creditor to a work email address or work telephone number without regard to the risk that an employer might monitor or read those communications because a consumer may not consider communications from a creditor to be as sensitive as communications from a debt collector. In other words, consumer consent to a creditor’s use of a work email address or, in the case of a text message, a work telephone number might not mean that the risk of thirdparty disclosure is low. Therefore, procedures that permit a debt collector to communicate using a work email address or work telephone number merely because the creditor communicated using that email address or telephone number might not prevent unintentional disclosures of debt collection communications to 249 To be entitled to a safe harbor, the debt collector’s procedures also would need to comply with proposed § 1006.6(d)(3)(ii). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 employers.250 Nor does the Bureau propose that a prior debt collector’s use of a consumer’s work email address or work telephone number would be sufficient to justify a later debt collector’s use of that email address or telephone number. Even if a consumer had indicated to a prior debt collector that the risk of monitoring by an employer was low, an employer’s monitoring policies and practices can change and debt collectors may differ in their approach to communications with consumers. Proposed § 1006.6(d)(3)(i)(C) would apply only if the creditor or a prior debt collector recently used the non-work email address or non-work telephone number to send communications about the debt. The Bureau proposes this recency requirement for the same reasons that it proposes the recency requirement in § 1006.6(d)(3)(i)(A).251 The Bureau requests comment on proposed § 1006.6(d)(3)(i)(C), including on how often creditors communicate with consumers using non-work email addresses and, in the case of text messages, non-work telephone numbers. The Bureau also requests comment on what, if anything, a consumer’s decision to communicate with a creditor or a prior debt collector using a non-work email address or non-work telephone number may suggest about the consumer’s assessment of the risk of third-party disclosure. In addition, the Bureau requests comment on the thirdparty disclosure risks to consumers posed by the practice of reassigning telephone numbers. The Bureau also requests comment on whether the recency requirement in proposed § 1006.6(d)(3)(i)(C) adequately addresses these risks, and, if not, on how the Bureau could address them in a final rule. In addition, the Bureau requests comment on whether to apply the recency requirement to email addresses. The proposed rule does not define when a creditor’s or a prior debt collector’s communication about the debt would qualify as recent. The Bureau therefore also requests comment on whether and how to define recent in the context of proposed § 1006.6(d)(3)(i)(C), including on whether a communication by the creditor or a prior debt collector in the past year should qualify as recent. 250 The special sensitivity of debt collection communications is reflected in the law: The FDCPA regulates a debt collector’s communications at the consumer’s place of employment, while consumer credit origination and servicing laws, such as the Truth in Lending Act, generally do not. See 15 U.S.C. 1692c(a)(3). 251 See the section-by-section analysis of proposed § 1006.6(d)(3)(i)(A). PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 6(d)(3)(ii) Additional Requirements To fall within the safe harbor from liability that proposed § 1006.6(d)(3) would establish for unintentional violations of proposed § 1006.6(d)(1) and FDCPA section 805(b), a debt collector’s procedures would not only need to include steps to reasonably confirm and document that the debt collector obtained and used an email address or, in the case of a text message, a telephone number consistent with one of the three methods identified in proposed § 1006.6(d)(3)(i), but the procedures also would need to comply with proposed § 1006.6(d)(3)(ii). Proposed § 1006.6(d)(3)(ii) would require a debt collector to take steps to prevent communications using an email address or telephone number that the debt collector knows has led to a disclosure prohibited by § 1006.6(d)(1).252 The Bureau proposes § 1006.6(d)(3)(ii) on the basis that a debt collector whose procedures are not designed to prevent recurrence of a known violation may intend to convey information related to the debt or its collection to a third party. The Bureau requests comment on proposed § 1006.6(d)(3)(ii), including on whether the procedures described in proposed § 1006.6(d)(3)(ii) are reasonably adapted to avoid a violation of the prohibition on third-party disclosures in proposed § 1006.6(d)(1) and FDCPA section 805(b). 6(e) Opt-Out Notice for Electronic Communications or Attempts To Communicate The Bureau’s proposal includes several provisions designed to facilitate debt collectors’ use of electronic communication media, such as emails and text messages, when collecting debts. Some consumers, however, may not wish to receive electronic debt collection communications because, for example, they receive too many such communications or because such communications force them to incur charges.253 To address this concern, proposed § 1006.6(e) would require debt 252 As noted above, even if a debt collector selects an email address or telephone number in accordance with the procedures in proposed § 1006.6(d)(3), the debt collector would not be permitted to communicate or attempt to communicate with a consumer using that email address or telephone number if doing so would violate another provision of the proposed rule, such as the opt-out-notice requirements of proposed § 1006.6(e). 253 CFPB Debt Collection Consumer Survey, supra note 18, at 36–37 (noting that almost one-half of consumers said they would most prefer to be reached by written letter and that the second most common preference for contact was through some kind of telephone other than a work telephone). E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 collectors to notify consumers how to opt out of receiving electronic debt collection communications or communication attempts directed at a specific email address, telephone number for text messages, or other electronic-medium address. The Bureau generally believes that the use of electronic media for debt collection communications can further the interests of both consumers and debt collectors. But electronic communications also pose potential consumer harms. One potential harm relates to consumer harassment. The FDCPA recognizes this harm in section 806, which prohibits conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. Because communicating with consumers electronically is essentially costless, debt collectors may have little economic incentive to limit the number of such communications. As discussed in the section-by-section analysis of proposed § 1006.14(b), however, repeated or continuous debt collection communications may have the natural consequence of harassing, oppressing, or abusing the recipient. In part for this reason, the proposed rule would establish bright-line rules limiting the frequency with which a debt collector may place telephone calls in connection with the collection of a debt. However, the frequency limits in the proposed rule would not apply to emails or text messages.254 Another potential consumer harm relates to communication costs. The FDCPA recognizes this harm in section 808(5), which prohibits debt collectors from causing charges to be made to any person for communications by concealment of the true purpose of the communication and specifies that such charges include, but are not limited to, collect telephone calls. Although many consumers have unlimited text messaging plans, some do not.255 Consumers without unlimited text 254 See the section-by-section analysis of proposed § 1006.14(b). Proposed § 1006.14(b)(2) provides that, subject to § 1006.14(b)(3), a debt collector violates § 1006.14(b)(1) by placing a telephone call to a particular person in connection with the collection of a particular debt either: (i) More than seven times within seven consecutive days, or (ii) within a period of seven consecutive days after having had a telephone conversation with the person in connection with the collection of such debt, with the date of the telephone conversation being the first day of the seven-consecutive-day period. 255 According to one 2015 estimate, approximately 10 percent of U.S. mobile telephone numbers are not enrolled in an unlimited text plan. See Josh Zagorsky, Almost 90% of Americans Have Unlimited Texting, Instant Census Blog (Dec. 8, 2015), https://instantcensus.com/blog/almost-90-ofamericans-have-unlimited-texting. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 messaging plans may incur a charge each time they receive a text message, or each time they receive a text message that exceeds a specified limit.256 For these consumers, receiving a text message from a debt collector may be similar to accepting a collect call from a debt collector. One way to help consumers address potentially harassing or costly electronic communications or communication attempts is to provide them with a convenient way to opt out of such communications. In pre-proposal feedback, a debt collector and several consumer advocates supported an optout requirement. An opt-out requirement also would be consistent with several established public policies protecting consumers who receive electronic communications.257 For these reasons, proposed § 1006.6(e) would require a debt collector who communicates or attempts to communicate with a consumer electronically in connection with the collection of a debt using a specific email address, telephone number for text messages, or other electronicmedium address to include in each such communication or attempt to communicate a clear and conspicuous statement describing one or more ways 256 The FCC has found, for example, that unwanted calls and text messages can create substantial costs for consumers when aggregated across many contacts. See, e.g., In re Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 30 F.C.C.Rcd. 7961, 8021 (2015) (‘‘In addition to the invasion of consumer privacy for all wireless consumers, the record confirms that some are charged for incoming calls and messages. These costs can be substantial when they result from the large numbers of voice calls and texts autodialers can generate.’’), set aside in part by ACA Int’l v. Fed. Commc’ns Comm’n, 885 F.3d 687 (D.C. Cir. 2018). 257 For example, with respect to emails, the Controlling the Assault of Non-Solicited Pornography and Marketing (CAN–SPAM) Act reflects a public policy in favor of providing consumers with a specific mechanism to opt out of certain email messages. See 15 U.S.C. 7704(a)(3) (requiring that commercial emails include a functioning return email address or other internetbased mechanism, clearly and conspicuously displayed, for the recipient to request not to receive future email messages from the sender at the address where the message was received); Fed. Trade Comm’n, CAN–SPAM Act: A Compliance Guide for Business (Sept. 2009), https:// www.ftc.gov/tips-advice/business-center/guidance/ can-spam-act-compliance-guide-business (explaining that messages covered by the CAN– SPAM Act ‘‘must include a clear and conspicuous explanation of how the recipient can opt out of getting email from [the sender] in the future’’). In addition, the FTC’s regulations implementing the CAN–SPAM Act prohibit charging a fee or imposing other requirements on recipients who wish to opt out of certain email communications. 16 CFR 316.5; see also Definitions & Implementation Under the CAN–SPAM Act, 73 FR 29654, 29675 (May 21, 2008) (concluding that, to implement an unsubscribe function, requests for personal information are unnecessary). PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 23305 the consumer can opt out of further electronic communications or attempts to communicate by the debt collector to that address or telephone number. Proposed § 1006.6(e) also would prohibit a debt collector from requiring, directly or indirectly, that the consumer, in order to opt out, pay any fee or provide any information other than the email address, telephone number for text messages, or other electronicmedium address subject to the opt-out. The Bureau proposes to require debt collectors to provide consumers with opt-out instructions to help ensure that a consumer who receives written electronic communications from a debt collector can, with minimal effort and cost, stop the debt collector from sending further written electronic communications or communication attempts directed at a specific address or telephone number.258 Proposed comment 6(e)–1 would clarify that clear and conspicuous under § 1006(e) has the same meaning as in § 1006.34(b)(1) regarding validation notices and provides examples illustrating the proposed rule. Proposed § 1006.6(e) seeks to address a group of concerns that are unique to written electronic communications and attempts to communicate. With respect to concerns about harassment from excessive communications of other types, consumers likely know how to request debt collectors to stop placing unwanted telephone calls, and proposed § 1006.14(h) would require debt collectors to honor such requests. In addition, the frequency limitations in proposed § 1006.14(b)(2) would apply to telephone calls. Moreover, debt collectors are unlikely to communicate by mail repeatedly because of the cost.259 With respect to concerns about costs, consumers generally do not incur costs when they receive written letters, whereas some consumers do incur costs when they receive text messages. Accordingly, proposed § 1006.6(e) would not apply to non-electronic communications and attempts to 258 For ease of reference, throughout the sectionby-section analysis of proposed § 1006.6(e), the Bureau uses the phrase ‘‘written electronic communications’’ to refer to emails, text messages, and other electronic communications that are readable. The Bureau’s use of this phrase has no bearing on the Bureau’s interpretation of the terms ‘‘written’’ or ‘‘in writing’’ under any law or regulation, including the FDCPA or the E-SIGN Act. 259 See, e.g., 15 U.S.C. 7701(a)(1) (noting Congressional finding, in connection with CAN– SPAM Act, that the ‘‘low cost’’ of email makes it ‘‘extremely convenient and efficient’’); Arthur Middleton Hughes, Why Email Marketing is King, Harv. Bus. Rev. (Aug. 21, 2012), https://hbr.org/ 2012/08/why-email-marketing-is-king (‘‘Direct mail costs more than $600 per thousand pieces. With email, there are almost no costs at all.’’). E:\FR\FM\21MYP2.SGM 21MYP2 23306 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 communicate with a consumer, such as letters. Nor would it apply to telephone calls. While emails and text messages are common forms of written electronic communications today, technology likely will evolve to introduce newer forms of written electronic communications. Proposed § 1006.6(e) would apply to all written electronic communications, regardless of whether they are specified in the rule and regardless of whether they exist now or come to exist in the future. For example, direct messaging communications on social media and communications in an application on a private website, mobile telephone, or computer, would be covered by proposed § 1006.6(e). In its Small Business Review Panel Outline, the Bureau described a proposal under consideration to require debt collectors, absent consumer consent, to use free-to-end-user (FTEU) text messages so that the debt collector, rather than the consumer, would incur any charge for the message.260 On balance, however, requiring FTEU technology may be too restrictive. FTEU technology may only be supported by certain wireless platforms, and industry standards may only permit its use with affirmative consumer consent.261 Requiring debt collectors to use FTEU technology could therefore disadvantage some consumers by preventing them from receiving text messages, even when text messages are an equal or preferred medium of communication. The Bureau requests comment on proposed § 1006.6(e) and its related commentary, including on the costs to debt collectors and benefits to consumers. In addition, the Bureau requests comment on the potential consumer harms posed by written electronic communications, including the proportion of consumers in debt collection that do not maintain unlimited text messaging plans and the cost to such consumers of receiving text messages. The Bureau also requests comment on whether consumers are likely to find it harassing, oppressive, or abusive to receive written electronic 260 Small Business Review Panel Outline, supra note 56, at appendix H at 1. 261 According to one industry website, FTEU is supported by six carriers (AT&T, Boost, Sprint, TMobile, Verizon Wireless, and Virgin Mobile). iVision Mobile, Free to End User (FTEU), https:// www.ivisionmobile.com/text-messaging-software/ free-to-end-user-fteu.asp (last visited May 6, 2019); Mobile Mkt’g Ass’n, U.S. Consumer Best Practices for Messaging: Version 7.0, at 43 (Oct. 16, 2012), https://www.mmaglobal.com/files/bestpractices.pdf (describing FTEU ‘‘Cross Carrier Guidelines’’ as providing that ‘‘[c]ontent providers must obtain optin approval from subscribers before sending them any SMS or MMS messages or other content from a short code’’). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 communications, such as emails and text messages, without having a simple mechanism to make them stop, and the costs consumers incur when trying to unsubscribe from written electronic communications that do not contain an unsubscribe option. In addition, the Bureau requests comment on whether to identify a non-exclusive list of words or phrases that express an opt-out instruction. In pre-proposal outreach, for example, one consumer advocate urged that debt collectors be required to honor standard phrases, such as ‘‘stop,’’ ‘‘unsubscribe,’’ ‘‘end,’’ ‘‘quit,’’ and ‘‘cancel.’’ The Bureau also requests comment on whether to specify the period within which a debt collector must process a consumer’s request to opt out pursuant to proposed § 1006.6(e), and, if so, what that period should be. The Bureau proposes § 1006.6(e) as an interpretation of FDCPA section 806 pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors. FDCPA section 806 prohibits conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. It is essentially costless for debt collectors to send written electronic communications, such as emails and text messages, to consumers. Debt collectors may therefore have little economic incentive to limit the number of such communications. Individual consumers may find it harassing, oppressive, or abusive to receive written electronic communications, such as emails and text messages, without having a simple mechanism to make them stop. The Bureau proposes § 1006.6(e) to provide consumers with a way to stop written electronic communications that they find harassing, oppressive, or abusive. The Bureau also proposes § 1006.6(e) as an interpretation of FDCPA section 808 pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors. FDCPA section 808 prohibits the use of unfair or unconscionable means to collect or attempt to collect any debt. It may be unfair or unconscionable for a debt collector to send a consumer a written electronic communication, such as an email or text message, without providing an unsubscribe option. Because written electronic communications, such as emails and text messages, are essentially costless for debt collectors, failing to provide consumers with an unsubscribe option may lead to excessive written electronic communications. In the absence of a PO 00000 Frm 00034 Fmt 4701 Sfmt 4702 convenient unsubscribe option, a consumer who wishes to unsubscribe from written electronic communications may incur time and cost doing so. The process may require the consumer to write an unsubscribe request, search for and identify the debt collector (an entity with whom the consumer may not be familiar), obtain contact information for the debt collector, and follow up with the debt collector if necessary. On balance, these costs to consumers do not appear to outweigh the benefit to debt collectors of omitting an unsubscribe option from written electronic communications. Further, FDCPA section 808(5) specifically prohibits debt collectors from causing charges to be incurred through the concealment of the true purpose of a communication, and it specifies that such charges include collect telephone calls. A debt collector who sends a text message to a consumer who lacks an unlimited text messaging plan may—similar to a debt collector who places a collect call to a consumer while concealing the purpose of the call—cause the consumer to incur communications charges that the consumer does not wish to incur. The Bureau proposes § 1006.6(e) to limit written electronic communications that cause consumers to incur such charges. The Bureau also proposes § 1006.6(e) pursuant to its authority under section 1032(a) of the Dodd-Frank Act to prescribe rules to ensure that the features of any consumer financial product or service are fully, accurately, and effectively disclosed to consumers in a manner that permits consumers to understand the costs, benefits, and risks associated with the product or service, in light of the facts and circumstances. A consumer’s ability to opt out of written electronic communications from a debt collector is a feature of debt collection, and the opt-out instructions required by proposed § 1006.6(e) disclose that feature to consumers. Section 1006.10 Acquisition of Location Information FDCPA section 804 imposes certain requirements and limitations on a debt collector who communicates with any person other than the consumer for the purpose of acquiring location information about the consumer.262 FDCPA section 803(7) defines the term location information.263 The Bureau understands that there may be some uncertainty regarding aspects of these provisions, such as how to determine whether a debt collector who has acquired some information about a 262 15 263 15 E:\FR\FM\21MYP2.SGM U.S.C. 1692c. U.S.C. 1692a(7). 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules consumer’s whereabouts no longer has the purpose of acquiring location information when communicating with a person other than the consumer. Such uncertainty may relate at least in part to broader issues regarding the information debt collectors receive from creditors. The Bureau will continue to consider these and other issues related to location information communications to identify areas that pose a risk of consumer harm or require clarification. Accordingly, proposed § 1006.10 would implement FDCPA sections 803(7) and 804 and generally mirrors the statute, with minor wording and organizational changes for clarity.264 Proposed 1006.10(c), however, would clarify that a debt collector who is subject to the frequency restrictions in FDCPA section 804 also must comply with the frequency restrictions in proposed 1006.14(b)—that is, the proposal’s limits on telephone calls also apply to location calls. The Bureau proposes § 1006.10 pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors. The Bureau also proposes two comments clarifying what is location information in the decedent debt context. Proposed comment 10(a)–1 would clarify the definition of location information in the decedent debt context by providing that, if a consumer obligated or allegedly obligated to pay any debt is deceased, location information includes the information described in proposed § 1006.10(a) for a person who is authorized to act on behalf of the deceased consumer’s estate. The Bureau proposes this comment on the basis that, as discussed in the section-by-section analysis of proposed § 1006.2(e) (definition of consumer), the term consumer under the FDCPA includes deceased consumers. A debt collector may obtain location information for such consumers by obtaining location information for the person with the authority to act on behalf of the deceased consumer’s estate. Proposed comment 10(a)–1 would enable debt collectors who are trying to collect a deceased consumer’s debts to locate a person with the authority to act on behalf of the deceased consumer’s estate, thereby facilitating the prompt resolution of estates. Proposed comment 10(b)(2)–1 would interpret FDCPA section 804(2) in the decedent debt context. Proposed 264 For example, while no change in meaning is intended, the proposal substitutes the phrase ‘‘by mail’’ for the phrase ‘‘effected by the mails or telegram’’ in FDCPA section 804(5) to avoid obsolete language. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 comment 10(b)(2)–1 explains that, if the consumer obligated or allegedly obligated to pay the debt is deceased, and the debt collector is attempting to locate a person with the authority to act on behalf of the deceased consumer’s estate, the debt collector does not violate § 1006.10(b)(2) by stating that the debt collector is seeking to identify and locate a person who is authorized to act on behalf of the deceased consumer’s estate. In its Policy Statement on Decedent Debt, the FTC stated that it would refrain from taking enforcement action under FDCPA section 804(2) against debt collectors who state that they are seeking to locate a person ‘‘with the authority to pay any outstanding bills of the decedent out of the decedent’s estate.’’ 265 FDCPA section 804(2) prohibits debt collectors communicating with third parties from stating that the consumer owes any debt. The FTC believed that, unlike the word ‘‘debts,’’ a reference to ‘‘outstanding bills’’ would be unlikely to reveal information about whether the deceased consumer was delinquent on those bills because nearly all consumers leave some bills at the time of their death.266 The Bureau is concerned that even references to ‘‘outstanding bills’’ may convey that the consumer owes a debt because the definition of ‘‘debt’’ in FDCPA section 803(5) broadly includes ‘‘any obligation or alleged obligation of a consumer to pay money arising out of a transaction . . . primarily for personal, family, or household purposes.’’ Accordingly, the Bureau proposes to limit debt collectors to asking for information about a person authorized to act on behalf of the deceased consumer’s estate. However, the FTC’s phrase ‘‘with the authority to pay any outstanding bills of the decedent out of the decedent’s estate’’ may be more understandable than the Bureau’s proposed phrase ‘‘who is authorized to act on behalf of the deceased consumer’s estate.’’ The Bureau requests comment on proposed comment 10(b)(2)–1, including on any experiences with the language contained in the FTC’s Policy Statement on Decedent Debt and on whether the rule should follow the FTC’s approach. Section 1006.14 Harassing, Oppressive, or Abusive Conduct FDCPA section 806 prohibits a debt collector from engaging in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a 265 FTC Policy Statement on Decedent Debt, supra note 192, at 44918–23. 266 Id. at 44921 n.56. PO 00000 Frm 00035 Fmt 4701 Sfmt 4702 23307 debt.267 It lists six non-exhaustive examples of such prohibited conduct. Proposed § 1006.14 would implement and interpret FDCPA section 806. Except with respect to proposed § 1006.14(b) and (h), proposed § 1006.14 generally restates the statute, with only minor wording and organizational changes for clarity. Paragraph (a) and paragraphs (c) through (g) of proposed § 1006.14 are not addressed further in the section-by-section analysis below.268 14(b) Repeated or Continuous Telephone Calls or Telephone Conversations FDCPA section 806 generally prohibits a debt collector from engaging in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. FDCPA section 806(5) describes one example of conduct prohibited by section 806: Causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.269 Proposed § 1006.14(b)(1) through (5) would implement and interpret FDCPA section 806(5)—and, by extension, FDCPA section 806 270—by restating the language of section 806(5), with one clarification, and by proposing numerical limits on the frequency with which a debt collector may place telephone calls to a person. The proposed frequency limits include certain exceptions and would establish whether a debt collector has violated or has complied with FDCPA section 806(5). For debt collectors collecting a consumer financial product or service debt, as defined in proposed § 1006.2(f), proposed § 1006.14(b)(1) through (5) also would identify an unfair act or practice under section 1031(b) of the Dodd-Frank Act and would prescribe requirements for the purpose of preventing covered persons from engaging in that unfair act or 267 15 U.S.C. 1692d. § 1006.14(a) would implement FDCPA section 806’s general prohibition against conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. Proposed § 1006.14(c) through (g) would implement FDCPA section 806(1) through (4) and (6) (15 U.S.C. 1692d(1)–(4), (6)). 269 15 U.S.C. 1692d(5). 270 Because the conduct described in FDCPA section 806(5) merely illustrates conduct that section 806 prohibits, proposed § 1006.14(b)(1) through (5) necessarily implements and interprets both FDCPA section 806 and 806(5). For efficiency, the section-by-section analysis of proposed § 1006.14(b)(1) through (5) focuses primarily on interpreting the language of FDCPA section 806(5). 268 Proposed E:\FR\FM\21MYP2.SGM 21MYP2 23308 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules practice.271 Although FDCPA section 806 and 806(5) and section 1031(b) of the Dodd-Frank Act define the conduct they proscribe differently, in the interest of brevity, the discussion below generally uses the catchalls ‘‘harass’’ and ‘‘harassment’’ to refer to the conduct addressed by proposed § 1006.14(b)(1) through (5). The Bureau proposes § 1006.14(b)(1) through (5) pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors, as well as its authority under section 1031(b) of the Dodd-Frank Act to prescribe rules to identify and prevent unfair acts or practices in connection with the collection of a consumer financial product or service debt, as that term is defined in proposed § 1006.2(f). jbell on DSK3GLQ082PROD with PROPOSALS2 14(b)(1) In General 14(b)(1)(i) FDCPA Prohibition FDCPA section 806(5) prohibits a debt collector from ‘‘causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.’’ Since the FDCPA’s 1977 enactment, telephone-calling technology has evolved, and changes in technology may create uncertainty about whether a debt collector has ‘‘caus[ed] a telephone to ring.’’ It now is common to place a telephone call and be connected to the dialed number without ever causing a traditional, audible ring. For example, many telephones afford users the option to have their telephones ring in the form of vibrating, visual, or customized audio alerts. In addition, many callers, including many debt collectors, now can bypass a person’s opportunity to answer the telephone by connecting directly to the person’s voicemail. As a result, debt collectors can place telephone calls or leave voicemail messages for a person without ever causing a traditional, audible ring. Such telephone calls, if made repeatedly and continuously, nonetheless may be intended to harass or may have the effect of harassing a person in ways that the FDCPA prohibits. For that reason, even if a debt collector’s telephone call may not cause a traditional ring, the Bureau’s proposal treats the call as within the scope of FDCPA section 806(5), or in any event within the scope of FDCPA section 806, if the call is connected to the dialed number. 271 Dodd-Frank Act section 1031 applies to covered persons and service providers. Debt collectors collecting consumer financial product or service debt are covered persons. 12 U.S.C. 5481(5), (6), (15)(A)(x). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 Accordingly, the Bureau proposes to interpret the prohibitions in FDCPA section 806 and 806(5) as applying when a debt collector ‘‘places’’ a telephone call.272 For these reasons, and pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors, as well as pursuant to its authority to implement and interpret FDCPA section 806 and 806(5), the Bureau proposes to provide in § 1006.14(b)(1)(i) that, in connection with the collection of a debt, a debt collector must not place telephone calls or engage any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number. The Bureau proposes comment 14(b)(1)–1 to clarify that placing a telephone call includes placing a telephone call that results in a ringless voicemail (or ‘‘voicemail drop’’) but does not include sending an electronic message (e.g., a text message or an email) to a mobile telephone.273 The Bureau proposes this clarification because, given the specific language of FDCPA section 806(5), the Bureau believes that Congress may have intended for this provision to apply to communications that present the opportunity for the parties to engage in a live telephone conversation or that result in an audio message. In addition, as discussed in the section-by-section analysis of proposed § 1006.14(b)(2), the Bureau understands that few debt collectors contact consumers using such electronic messages and, as a result, that debt collectors have not been sending electronic messages to consumers repeatedly or continuously with intent to harass them or to cause substantial injury. The Bureau requests comment on proposed § 1006.14(b)(1)(i) and on comment 14(b)(1)–1. The Bureau also requests comment on whether to interpret FDCPA section 806 and 806(5) as prohibiting debt collectors from using communication media other than telephone calls frequently and repeatedly with intent to annoy, abuse, or harass any person in connection with the collection of any debt. For example, the Bureau considered proposing a broader version of proposed 272 As explained in the section-by-section analysis of proposed § 1006.14(b)(3)(iii), the proposed rule also provides that a debt collector’s telephone calls that are unable to connect to the dialed number do not count toward, and are permitted in excess of, the frequency limits in proposed § 1006.14(b)(2). 273 Proposed comment 14(b)(1)–1 also would clarify that the same interpretation of ‘‘placing a telephone call’’ applies with respect to proposed § 1006.14(b)(1)(ii). PO 00000 Frm 00036 Fmt 4701 Sfmt 4702 § 1006.14(b)(1)(i) that would have prohibited repeated or continuous attempts to contact a person by other media, such as by sending letters, emails, or text messages. Under such an approach, contacts by such other media also could be subject to a bright-line frequency limit, similar to the structure for telephone calls in proposed § 1006.14(b)(2). The Bureau does not propose subjecting communication media other than telephone calls to the prohibitions on repeated or continuous contacts (or to bright-line limits on the number of permissible contacts per week) primarily because the Bureau is not aware of evidence demonstrating that debt collectors commonly harass consumers or others through repeated or continuous debt collection contacts by media other than telephone calls. As to mail, the Bureau has received few complaints about debt collectors sending excessive letters; in fact, available evidence suggests that a significant percentage of consumers prefer to communicate with debt collectors by mail.274 In addition, in feedback to the Bureau after publication of the Small Business Review Panel Outline, industry stakeholders and consumer advocates agreed that there currently is not evidence of a need to regulate the frequency with which debt collectors communicate with consumers or others by mail. The cost of sending mail—currently about $0.50 to $0.80 cents to print and mail a letter, as noted in part VI—is significantly greater than the cost of making telephone calls and may deter debt collectors from sending excessive communications by mail.275 As to email and text messages, debt collectors generally have not yet begun communicating with consumers using these or other newer communication media.276 The Bureau thus is unaware of evidence, including from consumer complaints or feedback from industry stakeholders or consumer advocates, demonstrating that debt collectors commonly use such media to contact consumers repeatedly or continuously with intent to harass or with the effect of harassing them. Indeed, both industry 274 Forty-two percent of respondents to the Bureau’s Debt Collection Consumer Survey who had been contacted about a debt in the prior year identified mail as their preferred medium of communication for debt collection. See CFPB Debt Collection Consumer Survey, supra note 18, at 37. 275 The Bureau notes that the Commonwealth of Massachusetts’s debt collection regulations, which include communication frequency limits for debt collectors and creditors, exclude postal mail from those limits. See 209 Code. Mass. Regs 18.14(1)(d); 940 Code Mass. Regs. 7.04(1)(f) (frequency limits apply to telephone calls and text messages). 276 See generally the section-by-section analysis of proposed § 1006.6(d)(3). E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 stakeholders and consumer advocates have suggested that such media may be inherently less harassing than telephone calls because, for example, recipients may have more freedom to decide when to engage with an email or a text message than with a debt collection telephone call.277 Although the Bureau currently is unaware of sufficient evidence of consumer injury that would suggest a need for restricting the frequency of email and text message communications, the Bureau recognizes that the use of such media, if abused, could harass consumers in some of the same ways as repeated or continuous telephone calls or telephone conversations.278 The Bureau notes that proposed § 1006.14(a)—which generally prohibits any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of any debt—would apply to harassment through media other than telephone calls and could provide sufficient protection to consumers. The Bureau requests comment on the proposed approach, including on whether the frequency limits should apply to communication media other than telephone calls and, if so, to which media.279 During the SBREFA process, the Bureau’s proposal under consideration to establish numerical limits on the frequency with which debt collectors communicate and attempt to communicate with consumers and others would have applied to all forms of communication media, not just to telephone calls. Several small entity representatives suggested that, in their experience, consumers increasingly prefer communicating by email, and that excluding email from any frequency limits would encourage debt collectors to use email instead of potentially more harassing communication strategies, such as placing repeated telephone calls. One small entity representative advised that using email to contact 277 As with mail, the Bureau notes that Massachusetts’s debt collection regulations do not limit the frequency of a debt collector’s email communications. See supra note 275. 278 Cf. Clements v. HSBC Auto Fin., Inc., Civ. A. No. 5:09–cv–0086, 2011 WL 2976558, at *5 (S.D. W. Va. July 21, 2011) (‘‘That Plaintiffs were not at home all of the time and, therefore, could not have heard each one of the calls is of little moment. They had notice of every missed call through Caller ID. . . . Missed calls communicate more than a phone number. They can, depending on volume and frequency, communicate urgency and panic.’’). 279 The Bureau notes in particular that the FCC has interpreted a statutory reference to ‘‘mak[ing] any call’’ as encompassing the sending of text messages. See In re Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 18 FCC Rcd. 14,014, 14,115 ¶ 165 (2003). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 consumers allowed it to greatly reduce its number of outbound telephone calls, resulting in fewer consumer complaints and enabling it to monitor communications for compliance with the FDCPA more easily. In addition, small entity representatives suggested that written correspondence (e.g., mailed letters) should be excluded from any frequency limits. The Small Business Review Panel therefore recommended that the Bureau consider whether the frequency limits should apply equally to all communication channels.280 Limiting proposed § 1006.14(b)(1)(i) and (2) to a prohibition against repeated and continuous telephone calls should address small entity representatives’ concerns about a frequency limit that would apply to all types of communication media. 14(b)(1)(ii) Identification and Prevention of Dodd-Frank Act Unfair Act or Practice The Bureau proposes § 1006.14(b)(1)(ii) to identify that a debt collector who is engaged in the collection of a consumer financial product or service debt, as that term is defined in proposed § 1006.2(f), engages in an unfair act or practice by placing telephone calls or engaging any person in telephone conversation repeatedly or continuously, such that the natural consequence is to harass, oppress, or abuse any person at the called number. The Bureau proposes § 1006.14(b)(1)(ii) on the basis that such conduct by debt collectors is an unfair act or practice as described in Dodd-Frank Act section 1031(c) because, as discussed in the section-by-section analysis of proposed § 1006.14(b)(2) below,281 the conduct causes or is likely to cause substantial injury to consumers that consumers cannot reasonably avoid and that is not outweighed by countervailing benefits to consumers or to competition.282 The Bureau also proposes § 1006.14(b)(1)(ii) to provide requirements to prevent such an unfair act or practice; specifically, under the proposal, a debt collector engaged in the collection of a consumer 280 Small Business Review Panel Report, supra note 57, at 37. 281 Section 1006.14(b)(2) proposes bright-line frequency limits that would determine whether a debt collector has violated § 1006.14(b)(1). 282 Section 1031(c) of the Dodd-Frank Act defines unfairness without regard to a covered person’s or service provider’s intent. For FDCPA-covered debt collectors who are collecting a consumer financial produce or service debt, the Bureau’s proposal therefore identifies the unfair act or practice as repeated or continuous telephone calls that have the natural consequence of harassment, oppression, or abuse, without regard to the debt collector’s intent. PO 00000 Frm 00037 Fmt 4701 Sfmt 4702 23309 financial product or service debt must not exceed the calling frequency limits proposed in § 1006.14(b)(2). The Bureau proposes § 1006.14(b)(1)(ii) pursuant to its authority under section 1031(b) of the Dodd-Frank Act to prescribe rules to identify and prevent unfair acts or practices in connection with the collection of a consumer financial product or service debt, as that term is defined in proposed § 1006.2(f). 14(b)(2) Frequency Limits Proposed § 1006.14(b)(2) sets forth bright-line frequency limits for debt collection telephone calls. This sectionby-section analysis discusses the Bureau’s proposal to establish brightline frequency limits generally; the section-by-section analysis of proposed § 1006.14(b)(2)(i) and (ii) addresses the specific numerical frequency limits that the Bureau proposes. As noted, FDCPA section 806 prohibits a broad range of debt collection communication practices that harm consumers and others, and section 806(5) in particular prohibits debt collectors from making telephone calls or engaging a person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass. Section 806(5) does not identify a specific number of telephone calls or telephone conversations within any particular timeframe that would violate the statute. In the years since the FDCPA was enacted, courts interpreting FDCPA section 806(5) have not developed a consensus or bright-line rule regarding call frequency.283 While several States and localities have imposed numerical limits on debt collection contacts, the limits vary, and the large majority of jurisdictions have not established any numerical limits.284 Also in the years since the FDCPA was enacted, technological developments have intensified the 283 See, e.g., Turner v. Prof’l Recovery Servs., Inc., 956 F. Supp. 2d 573, 578 (D.N.J. 2013) (noting the lack of consensus or bright-line rule); Neu v. Genpact Servs., LLC, No. 11–CV–2246 W KSC, 2013 WL 1773822, at *4 (S.D. Cal. Apr. 25, 2013) (same); Hicks v. Am.’s Recovery Sols., LLC, 816 F. Supp. 2d 509, 515 (N.D. Ohio 2011) (same). 284 For example, the Commonwealth of Massachusetts and City of New York generally limit debt collectors to initiating two communications per week with a consumer. See 209 Code. Mass. Regs 18.14(1)(d) (limiting contacts by debt collectors); 940 Code Mass. Regs. 7.04(1)(f) (limiting contacts by creditors engaged in debt collection); N.Y.C. Admin. Code 5–77(b)(1)(iv) (limiting contacts by debt collectors). The State of Washington generally limits debt collectors to three total communications and one workplace communication per week with a consumer. See Wash. Rev. Code 19.16.250(13)(a), (b). The States of New Hampshire and Oregon limit the frequency of workplace communications. See N.H. Rev. Stat. Ann. 358–C:3(I)(c); Or. Rev. Stat. 646.639(2)(g). E:\FR\FM\21MYP2.SGM 21MYP2 23310 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 consumer-protection concerns underlying FDCPA section 806(5). In 1977, placing a telephone call was typically a manual process that required a caller to dial a telephone number one digit at a time. Since then, the development of ‘‘predictive dialers’’ has enabled callers, such as debt collectors, to load a large number of telephone numbers into a program that automatically dials the numbers and, if the call is answered, connects the call to a debt collector. Predictive dialers have substantially reduced the cost to debt collectors of placing telephone calls and have enabled debt collectors to place many more calls at a very low cost.285 In light of these developments, and in the absence of a bright-line rule about how many telephone calls is too many, numerous problems with call frequency persist. Frequent telephone calls are a consistent source of consumer-initiated litigation and consumer complaints to Federal and State regulators. Consumers’ lawsuits allege injuries such as feeling harassed, stressed, intimidated, or threatened, and sometimes allege adverse impacts on employment.286 In addition, from 2011 through 2018, the Bureau and the FTC received over 100,000 complaints about repeated debt collection telephone calls.287 Some consumers submit 285 See In re Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 30 F.C.C. Rcd. 7961, 8021 (2015) (‘‘Autodialers can quickly dial thousands of numbers, a function that costs large numbers of wireless consumers money and aggravation.’’), set aside in part by ACA Int’l v. Fed. Commc’ns Comm’n, 885 F.3d 687 (D.C. Cir. 2018). 286 See, e.g., Meadows v. Franklin Collection Serv., Inc., 414 F. App’x 230, 233–34 (11th Cir. 2011) (reversing district court’s dismissal of consumer’s FDCPA section 806(5) claim where ‘‘[plaintiff] testified that [the debt collector’s] phone calls eventually made her feel harassed, stressed, upset, aggravated, inconvenienced, frustrated, shaken up, intimidated, and threatened on occasion. And, several times the calls woke her up from sleep and caused her difficulty sleeping.’’); Roots v. Am. Marine Liquidators, Inc., No. 0:12– CV–00602–JFA, 2012 WL 3136462, at *1–2 (D.S.C. Aug. 1, 2012) (awarding damages to consumer where, among other things, ‘‘[p]laintiff testified that after his manager learned that Plaintiff was getting repeated collection calls at work, they treated him differently which caused him to seek out other employment. Plaintiff took a new job in April, 2012, which resulted in a pay reduction of $2.00 per hour for a period of 52 weeks. He works 40 hours each week, for a total loss of income in the amount of $ 4,160.’’). 287 See 2019 FDCPA Annual Report, supra note 11, at 15–17; 2018 FDCPA Annual Report, supra note 16, at 14–16; 2017 FDCPA Annual Report, supra note 21, at 15–17; Bureau of Consumer Fin. Prot., Fair Debt Collection Practices Act: CFPB Annual Report 2016, at 18–19 (Mar. 2016), https:// files.consumerfinance.gov/f/201603_cfpb-fair-debtcollection-practices-act.pdf; Bureau of Consumer Fin. Prot., Fair Debt Collection Practices Act: CFPB Annual Report 2015, at 12–14 (Mar. 2015), https:// files.consumerfinance.gov/f/201503_cfpb-fair-debt- VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 narrative descriptions along with their complaints to the Bureau, providing a window into their experiences with repeated telephone calls. Some consumers describe being called multiple times per day, every day of the week, for weeks or months at a time.288 Some consumers report that repeated calls make them feel upset, stressed, intimidated, hounded, or weary, or that such calls interfere with their health or sleep or—when debt collection voicemails fill their inboxes—their ability to receive other important messages.289 When Congress conferred FDCPA rulemaking authority on the Bureau through the Dodd-Frank Act in 2010, it relied, in part, on consumers’ experiences with repeated or continuous debt collection telephone calls to observe that case-by-case enforcement of the FDCPA had not ended the consumer harms that the statute was designed to address. In a 2010 report prepared in connection with the Restoring American Financial Stability Act of 2010 (the Senate’s predecessor bill to the Dodd-Frank Act), the Senate Committee on Banking, Housing, and Urban Affairs cited consumer complaints to the FTC about, among other things, debt collectors ‘‘bombarding [them] with continuous calls’’ to conclude that abusive debt collection practices had continued to proliferate since the FDCPA’s passage.290 In connection with that finding, among others, Congress granted the Bureau the authority to prescribe rules with respect to the activities of FDCPA-covered debt collectors, as well collection-practices-act.pdf; Bureau of Consumer Fin. Prot., Fair Debt Collection Practices Act: CFPB Annual Report 2014, at 11–13, 19 (Mar. 2014), https://files.consumerfinance.gov/f/201403_cfpb_ fair-debt-collection-practices-act.pdf; 2013 FDCPA Annual Report, supra note 9, at 17; Bureau of Consumer Fin. Prot., Fair Debt Collection Practices Act: CFPB Annual Report 2012, at 8 (Mar. 2012), https://files.consumerfinance.gov/f/201203_cfpb_ FDCPA_annual_report.pdf. This total reflects complaints about all persons collecting debt, including creditors and other first-party collectors in addition to debt collectors covered by the FDCPA. For complaints submitted to the Bureau, complaint data reflects the number of complaints that consumers self-identified as being primarily about frequent or repeated debt collection communications (consumers must choose only one topic when filing their complaints). The Bureau has not attempted to identify the specific number of communications-related consumer complaints that it has received because many complaints that consumers self-identify as being primarily about a different issue also may include concerns about a debt collector’s communication practices. 288 See generally Bureau of Consumer Fin. Prot., Consumer Complaints, https:// data.consumerfinance.gov/dataset/ConsumerComplaints/s6ew-h6mp (last visited May 6, 2019). 289 Id. 290 S. Rept. 111–176, at 19 (2010). PO 00000 Frm 00038 Fmt 4701 Sfmt 4702 as to issue regulations to prevent and prohibit persons covered under the Dodd-Frank Act from engaging in unfair, deceptive, or abusive acts or practices.291 Consumers’ experiences with, and complaints about, repeated or continuous debt collection telephone calls do not necessarily establish that the conduct in each instance would have violated FDCPA section 806(5). They do, however, suggest a widespread consumer protection problem that has persisted for 40 years notwithstanding the FDCPA’s existing prohibitions and case-by-case enforcement by the FTC and the Bureau as well as private FDCPA actions.292 To address this persistent harm, the Bureau proposes § 1006.14(b)(2) to establish bright-line rules for determining whether a debt collector has violated FDCPA section 806(5) (and, in turn, FDCPA section 806), as implemented and interpreted in proposed § 1006.14(b)(1). Proposed § 1006.14(b)(2) provides that, subject to § 1006.14(b)(3), a debt collector violates proposed § 1006.14(b)(1) by placing a telephone call to a particular person in connection with the collection of a particular debt either: (i) More than seven times within seven consecutive days, or (ii) within a period of seven consecutive days after having had a telephone conversation with the person in connection with the collection of such debt, with the date of 291 15 U.S.C. 1692l; Dodd-Frank Act sections 1031(b), 1032; 12 U.S.C. 5531(b), 5532 (2010). 292 See, e.g., Complaint at ¶¶ 63, 124–28, Fed. Trade Comm’n & Consumer Fin. Prot. Bureau v. Green Tree Servicing LLC, No. 0:15–cv–02064 (D. Minn. Apr. 21, 2015), https://www.ftc.gov/ enforcement/cases-proceedings/112-3008/greentree-servicing-llc (alleging that defendant violated FDCPA section 806(5) by, among other things, having frequently called consumers between seven and 20 times per day, every day, week after week); Complaint at ¶¶ 20–22, 41, Fed. Trade Comm’n v. K.I.P., LLC, No. 1:15–cv–02985 (N.D. Ill. Apr. 6, 2015), https://www.ftc.gov/enforcement/casesproceedings/152-3048/kip-llc-payday-loanrecovery-group (alleging that defendant violated FDCPA section 806(5) by, among other things, ‘‘call[ing] consumer multiple times per day or night . . . over an extended period of time’’); Complaint at ¶¶ 22, 50–53, Fed. Trade Comm’n v. Expert Glob. Sols, Inc., No. 3–13 CV 2611–M (N.D. Tex. July 8, 2013), https://www.ftc.gov/enforcement/casesproceedings/1023201/expert-global-solutions-incnco-group-inc (alleging that defendants violated FDCPA section 806(5) by, among other things, ‘‘call[ing] multiple times per day or frequently over an extended period of time [including,] for example, calling some persons three or more time per day’’); Complaint at ¶¶ 80, 97(b), Fed Trade Comm’n v. Jefferson Capital Sys., LLC, No. 1:08–cv– 1976 BBM (N.D. Ga. June 10, 2008), https:// www.ftc.gov/enforcement/cases-proceedings/0623212/compucredit-corporation-jefferson-capitalsystems-llc (alleging that defendant violated FDCPA section 806(5) by, among other things, ‘‘[calling] individual consumers in excess of twenty times per day, in some cases, at intervals of only twenty to thirty minutes’’). E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 the telephone conversation being the first day of the seven-consecutive-day period.293 As discussed in the sectionby-section analysis of proposed § 1006.14(b)(2)(i) and (ii), which addresses the specific frequency limits that the Bureau proposes, the Bureau proposes § 1006.14(b)(2) pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors, its authority to implement and interpret FDCPA section 806 and 806(5), and its authority under Dodd-Frank Act section 1031(b) to prescribe rules to prevent Bureau-identified unfair acts or practices in connection with any transaction with a consumer for a consumer financial product or service. Proposed § 1006.14(b)(2) would apply not only to debt collection calls placed to consumers who owe or are alleged to owe debt, but to any person (with certain exceptions described below). Congress recognized the potential harm from debt collectors placing repeated or continuous telephone calls to persons other than consumers when it enacted FDCPA section 806(5), which protects ‘‘any person’’ from repeated or continuous telephone calls or conversations made with intent to annoy, abuse, or harass. Likewise, Dodd-Frank Act section 1031 applies to acts or practices ‘‘in connection with a transaction with a consumer for a consumer financial product or service’’ (or ‘‘the offering of a consumer financial product or service’’), provided that ‘‘the act or practice causes or is likely to cause substantial injury to consumers’’ and meets the other criteria for unfairness. Like the language of FDCPA section 806(5), the language of DoddFrank Act section 1031 suggests that an act or practice may be unfair to consumers generally, presumably even if the injury is to a consumer who is not a party to the transaction creating the debt, so long as the injury is ‘‘in connection with’’ a transaction with a consumer for a consumer financial product or service. The frequency limits in proposed § 1006.14(b)(2) thus would apply to any person (with certain exceptions described below), not only to 293 Because proposed § 1006.14(b)(1)(ii) provides that a debt collector engaged in the collection of a consumer financial product or service debt must not exceed the calling frequency limits proposed in § 1006.14(b)(2), such a debt collector who exceeds the frequency limits also would violate proposed § 1006.14(b)(1)(ii). Separately, proposed § 1006.14(b)(4) provides a parallel bright-line rule that debt collectors who place telephone calls or engage in telephone conversations at or below the levels in § 1006.14(b)(2) do not, based on their calling frequency, violate the FDCPA, the DoddFrank Act, or § 1006.14(b)(1). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 the consumer who is alleged to owe the debt.294 The Bureau requests comment on the proposal to establish a bright-line rule to determine when a debt collector’s calling frequency has violated FDCPA section 806(5) and the prohibition in proposed § 1006.14(b)(1)(i), as well as to prevent an unfair act or practice under Dodd-Frank Act section 1031(b). As discussed, under such a bright-line rule, a debt collector who exceeds the frequency limits would per se violate FDCPA section 806(5) and the prohibitions in proposed § 1006.14(b)(1), while a debt collector who stays within the frequency limits would per se comply with those provisions. In lieu of a bright-line rule, it would be possible, for example, to have a rebuttable-presumption rule. Under a rebuttable presumption, a debt collector who exceeded the frequency limits presumptively would violate FDCPA section 806(5) and the prohibitions in proposed § 1006.14(b)(1), but the debt collector would have the opportunity to rebut that presumption. As discussed further in the sectionby-section analysis of proposed § 1006.14(b)(4) below, the Bureau does not propose a rebuttable presumption because the benefits of a rebuttable presumption approach are unclear. It appears that most, if not all, of the circumstances that might require a debt collector to exceed the frequency limits could be addressed by specific exceptions to a bright-line rule.295 It thus appears that a well-defined, brightline rule with specific exceptions could provide needed flexibility without sacrificing the clarity of a bright-line rule. A bright-line rule may also promote predictability and reduce the risk and uncertainty of litigation. The Bureau requests comment on this aspect of the proposal and on whether, if a rebuttable presumption approach were adopted, the Bureau should retain any of the exceptions described in proposed § 1006.14(b)(3). During the SBREFA process, the Bureau’s proposal under consideration would have applied to any of a debt collector’s communications or attempts to communicate. The Bureau’s Small Business Review Panel Outline noted that a bright-line rule could provide 294 While proposed § 1006.14(b)(2) would apply to ‘‘any person,’’ the Bureau uses the term ‘‘consumer’’ throughout this section-by-section analysis as a shorthand to refer both to consumers, as defined by the FDCPA, and others who may be contacted by debt collectors. 295 See the section-by-section analysis of proposed § 1006.14(b)(3) for a discussion of the Bureau’s proposed exceptions. PO 00000 Frm 00039 Fmt 4701 Sfmt 4702 23311 exceptions for certain types of contacts, but the Outline did not identify any particular exceptions that were under consideration.296 Small entity representatives suggested that contacts initiated by consumers should not count toward the frequency limits, and the Small Business Review Panel Report recommended that the Bureau consider whether consumer-initiated contacts should be excluded.297 Proposed § 1006.14(b)(2) would count only telephone calls that a debt collector ‘‘places’’ to a person toward the frequency limits, which may help to address small entity representatives’ concerns about consumer-initiated contacts. 14(b)(2)(i) Proposed § 1006.14(b)(2)(i) provides that, subject to the exceptions in § 1006.14(b)(3), a debt collector violates § 1006.14(b)(1)(i) by placing a telephone call to a person more than seven times within seven consecutive days in connection with the collection of a particular debt. Under this bright-line rule, and subject to the exceptions in proposed § 1006.14(b)(3), a debt collector who places more than seven telephone calls to any person within seven consecutive days about a debt would per se violate FDCPA section 806 and 806(5) and the prohibitions in proposed § 1006.14(b)(1).298 The Bureau’s proposed frequency limits take into account a number of competing considerations. One consideration is that, for many— perhaps most—people, even a small number of debt collection telephone calls may have the natural consequence of causing them to experience harassment, oppression, or abuse, and therefore, assuming a debt collector is aware of this effect, the debt collector’s placement of even a small number of such calls may indicate that the debt collector has the requisite intent to annoy, abuse, or harass. In the Bureau’s Debt Collection Consumer Survey, nearly 90 percent of respondents who 296 Small Business Review Panel Outline, supra note 56, at 25. 297 See Small Business Review Panel Report, supra note 57, at 37. 298 Because proposed § 1006.14(b)(1)(ii) provides that a debt collector engaged in the collection of a consumer financial product or service debt must not exceed the frequency limits proposed in § 1006.14(b)(2), such a debt collector who places more than seven telephone calls within seven consecutive days also would violate § 1006.14(b)(1)(ii). Separately, under the proposal, a debt collector who placed seven or fewer telephone calls within a period of seven consecutive days would per se not have placed telephone calls repeatedly or continuously to the person at the called number. See the section-by-section analysis of proposed § 1006.14(b)(4). E:\FR\FM\21MYP2.SGM 21MYP2 23312 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 said they were contacted more than three times per week indicated that they were contacted too often; 74 percent of respondents who said they were contacted one to three times per week indicated that that they were contacted too often; and 22 percent of respondents who said that they were contacted less than once per week indicated that even this level of contact was too often.299 The effect on a consumer of a single debt collector placing repeated or continuous telephone calls is amplified by the fact that, according to the Bureau’s research, almost 75 percent of consumers with at least one debt in collection have multiple debts in collection, such that many consumers may receive calls from multiple debt collectors each week.300 Debt collectors who are aware that many consumers have multiple debts in collections and that these consumers are already receiving telephone calls from other debt collectors may be placing additional calls with intent to annoy, abuse, or harass those consumers. At the same time, debt collectors have a legitimate interest in reaching consumers. The FDCPA’s purposes include ‘‘eliminat[ing] abusive debt collection practices by debt collectors’’ and ensuring that debt collectors who refrain from such practices ‘‘are not competitively disadvantaged.’’ 301 The FDCPA does not contemplate that the elimination of abusive practices entails the elimination of ‘‘the effective collection of debts.’’ 302 Communicating with consumers is central to debt collectors’ ability to recover amounts owed to creditors. Debt collectors typically must make multiple attempts before establishing what in industry parlance is referred to as ‘‘right-party contact’’—that is, before they actually speak to a consumer. Too greatly restricting the ability of debt collectors 299 See CFPB Debt Collection Consumer Survey, supra note 18, at 31. Consumers were asked ‘‘How often did this creditor or debt collector usually try to reach you each week, including times they did not reach you?’’ Response options included: Less than once per week; one to three times per week; four to seven times per week; eight to 14 times per week; 15 to 21 times per week; and more than 21 times per week. A separate question asked consumers whether the debt collector had contacted them too often. Survey respondents had the option of indicating that they were not sure whether contacts had come from a debt collector, creditor, or another source. The data reflects responses given by any respondent who reported being contacted about a debt in collection. Limitations on the survey data include that respondents were not asked to distinguish between contact attempts and actual contacts and were not asked to specify whether they already had spoken with the debt collector who was trying to contact them. Id. at 30–31. 300 Id. at 13, table 1. 301 15 U.S.C. 1692(e) (emphasis added). 302 15 U.S.C. 1692(c). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 and consumers to communicate with one another could prevent debt collectors from establishing right-party contact and resolving debts, even when doing so is in the interests of both consumers and debt collectors. For example, during the SBREFA process, small entity representatives reported that consumers who do not communicate with a debt collector may have negative information furnished to consumer reporting agencies or may face additional fees or a collection lawsuit, which can entail the financial or opportunity cost of the lawsuit or subject a consumer to wage garnishment. And as much as some consumers might prefer to avoid speaking to debt collectors, many consumers benefit from communications that enable them to promptly resolve a debt through partial or full payment or an acknowledgement that the consumer does not owe some or all of the alleged debt. The Bureau also has considered whether debt collectors’ reliance on making repeated telephone calls to establish contact with consumers could be reduced by other aspects of the proposed rule that are designed to address legal ambiguities regarding how and when debt collectors may communicate with consumers. For example, as discussed above, debt collectors who leave voicemails for consumers currently face a dilemma about whether to risk liability under FDCPA sections 806(6) and 807(11) by omitting disclosures required under those sections, or risk liability under FDCPA section 805(b) by including the disclosures and potentially disclosing a debt to a third party who might overhear the message. Proposed § 1006.2(j) seeks to address that dilemma by defining a limited-content message that debt collectors may leave for consumers without violating FDCPA sections 805(b), 806(6), or 807(11). Permitting such messages should ensure that debt collectors can leave voicemails with a return call number for a consumer to use at the consumer’s convenience, which may help reduce the need for debt collectors to place repeated telephone calls to contact consumers.303 Another legal ambiguity regarding how and when debt collectors may communicate with consumers is that the FDCPA does not address how debt collectors may use electronic communication media such as emails or text messages to communicate. The Bureau’s proposals in §§ 1006.6(d)(3) 303 See the section-by-section analysis of proposed § 1006.2(j) for a full discussion of the proposed limited-content message. PO 00000 Frm 00040 Fmt 4701 Sfmt 4702 and 1006.42 are designed to clarify that ambiguity so that debt collectors may communicate electronically with consumers who prefer to communicate that way. Further, for the reasons discussed in the section-by-section analysis of proposed § 1006.14(b)(1), the Bureau does not propose subjecting email, text messages, or other electronic communications to the proposed frequency limits. Taking all of these factors into account, the Bureau proposes to draw the line at which a debt collector places telephone calls repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number (and the line at which such calls have the natural consequence of harassing, oppressing, or abusing any person) 304 at seven telephone calls in a seven-day period about a particular debt. The proposal would allow debt collectors to call up to seven times per week across multiple telephone numbers (e.g., a home landline, mobile, and work), and to leave a limitedcontent message each time. It also would not limit how many mailed letters, emails, and text messages debt collectors could send. At the same time, by making clear that debt collectors cannot call consumers more than seven times each week about a particular debt in collection, the proposal would protect consumers and others from being harmed by debt collectors making repeated or continuous telephone calls with intent to annoy, abuse, or harass. For the reasons discussed above, the Bureau proposes § 1006.14(b)(2)(i) to provide that, subject to proposed § 1006.14(b)(3), a debt collector violates proposed § 1006.14(b)(1)(i) by placing more than seven telephone calls within seven consecutive days to a particular person in connection with the collection of a particular debt. Proposed comment 14(b)(2)(i)–1 provides illustrative examples of the proposed rule.305 304 Litt v. Portfolio Recovery Assocs. LLC, 146 F. Supp. 3d 857, 873 (E.D. Mich. 2015) (‘‘[W]hile the general proscription of § 1692d does not use the word ‘intent,’ such a requirement is inferred from the necessity to establish that the natural tendency of the conduct is to embarrass, upset or frighten a debtor. If the natural tendency of certain conduct is to embarrass, upset or frighten, then one who engages in such conduct can be presumed to have intended the natural consequences of his act.’’); see also United States v. Falstaff Brewing Corp., 410 U.S. 526, 570 n.22 (1973) (Marshall, J., concurring in result) (‘‘[P]erhaps the oldest rule of evidence— that a man is presumed to intend the natural and probable consequences of his acts—is based on the common law’s preference for objectively measurable data over subjective statements of opinion and intent.’’). 305 The examples would clarify how the proposed rule would apply to calls to consumers or to third parties. The Bureau understands that debt collectors may make location calls to several numbers, but E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 Proposed comment 14(b)(2)(i)–2 would clarify how to determine the number of telephone calls a debt collector has placed if the debt collector learns that the telephone number that the debt collector previously used to call a person is not, in fact, that person’s number. The comment would clarify that telephone calls placed to the wrong number are not counted towards the frequency limit in proposed § 1006.14(b)(2)(i) with respect to the person the debt collector is trying to contact. The Bureau proposes this clarification because a person is unlikely to be harassed by debt collection calls that are placed to a number that belongs to someone else. The Bureau requests comment on several aspects of proposed § 1006.14(b)(2)(i). First, the Bureau requests comment on the proposal to set the frequency limit at seven telephone calls to a particular consumer within seven consecutive days regarding a particular debt, including on the harms to consumers that may be prevented by this limit and on how such a limit may impact debt collectors. Some stakeholders may take the position that this proposed line should be adjusted upward or downward to account for certain concerns. Debt collectors and other industry stakeholders have advised the Bureau that, today, they often need to make more telephone calls than would be allowed under the proposal in order to establish right-party contact; they have expressed concern that a too-restrictive limit may hamper their ability to reach consumers and collect debts. Consumer advocates have suggested that a lower call limit is necessary to prevent harassment in part because consumers with multiple debts in collection could receive multiple calls about each debt each week; under the proposed limits, for example, a consumer with four or five debts in collection could receive up to two or three dozen telephone calls each week.306 Some consumer advocates that location calls do not generally involve frequently calling each number. Therefore the Bureau does not expect that debt collectors would be affected by the proposed limits as they apply to location calls made to third parties. 306 The proposed frequency limits generally would apply per debt in collection (see proposed § 1006.14(b)(5)), and the Bureau’s research shows that a majority of consumers who have at least one debt in collection have multiple debts in collection. For example, 57 percent of consumers with at least one debt in collection reported having between two and four debts in collection. See CFPB Debt Collection Consumer Survey, supra note 18, at 13, table 1. Overall, the Bureau’s research shows that almost 75 percent of consumers with at least one debt in collection have multiple debts in collection. See id.; see also CFPB Medical Debt Report, supra note 20, at 20 (reporting that most consumers with one tradeline have multiple tradelines). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 therefore have recommended that the Bureau prohibit a debt collector from placing, for example, more than three telephone calls per week to any one consumer, regardless of how many debts the debt collector is trying to recover from that consumer. The Bureau encourages commenters who believe the Bureau should set a higher or lower limit to provide data supporting any recommended numbers, such as data regarding the frequency of calls that debt collectors currently make and how that frequency relates to the time needed to establish right-party contact and payments received from consumers. The Bureau also encourages commenters to provide data demonstrating the marginal impact on consumers and debt collectors, as well as on competition and the cost of credit, of adjusting the weekly limit on telephone calls from the proposed seven calls per week to a different number. To the extent that a commenter recommends a higher limit on telephone calls to permit debt collectors to recover more payments from consumers, the Bureau encourages the commenter to submit data quantifying the benefits such increased recovery would have on competition or consumers, such as by lowering the cost of credit. The Bureau also requests data regarding the financial, emotional, or other impact on consumers of calls from debt collectors at varying levels of frequency. In addition, the Bureau requests comment on whether debt collectors currently are able to, or under the proposed rule would expect to be able to, establish right-party contact through voicemails or electronic media, such that debt collectors may have less of a need to place repeated telephone calls to consumers. Second, the Bureau requests comment on the proposal to measure the frequency of telephone calls on a perweek basis. This framework could result in debt collectors placing, for example, seven telephone calls about one debt to a consumer in one day. The Bureau considered combining a seven-day frequency limit with a per-day frequency limit that would have prohibited, for example, more than one telephone call to a consumer per debt per day, up to a limit of seven telephone calls per consumer per debt every seven days. The Bureau does not propose a combined daily and weekly limit because, while such an approach would eliminate multiple telephone calls about a single debt on any given day, it might not provide flexibility for unforeseen situations or the need to attempt to contact some consumers at different telephone numbers and at different PO 00000 Frm 00041 Fmt 4701 Sfmt 4702 23313 times of the day. It also is not clear that many debt collectors would respond to the proposed weekly limit on telephone calls by placing all of their permitted calls in rapid succession, thus foregoing the opportunity to call the consumer at a different time of day or on a different day of the week for the following seven days. Further, a rule with both daily and weekly frequency limits would sacrifice the ease of implementing and monitoring one frequency limit. The Bureau requests comment on its approach and on the merits of limiting telephone calls based on a different time period (e.g., by day, by month, or through a combination of time periods). Third, the Bureau requests comment on the proposal to apply frequency limits on a per-debt, rather than on a per-consumer, basis.307 As proposed, § 1006.14(b)(2)(i) could permit, for example, a debt collector who is attempting to collect two debts from the same consumer to place up to 14 telephone calls in one week to that consumer without violating the FDCPA, the Dodd-Frank Act, or Regulation F based on the frequency of its calling. The Bureau requests comment on this aspect of the proposal, which also is discussed further in the section-bysection analysis of proposed § 1006.14(b)(5). Fourth, the Bureau requests comment on the proposal to count telephone calls placed about a particular debt to different telephone numbers associated with the same consumer together for purposes of determining whether a debt collector has exceeded the limit in proposed § 1006.14(b)(2)(i) (i.e., an aggregate approach). The Bureau considered a proposal that would have limited the number of calls permitted to any particular telephone number (e.g., at most two calls to each of a consumer’s landline, mobile, and work telephone numbers). The Bureau considered such a limit either instead of or in addition to an overall limit on the frequency of telephone calls to one consumer. The Bureau instead proposes an aggregate approach because of concerns that a more prescriptive, per-telephone number approach could produce undesirable results—for example, some consumers could receive (and some debt collectors could place) more telephone calls simply based on the number of telephone numbers that certain consumers happened to have (and that 307 As discussed in the section-by-section analysis of proposed § 1006.14(b)(5), with respect to student loan debts, all debts that a consumer owes or allegedly owes that were serviced under a single account number at the time the debts were obtained by the debt collector would be treated as a single debt for purposes of the frequency limits. E:\FR\FM\21MYP2.SGM 21MYP2 23314 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 debt collectors happened to know about). Such an approach also could incentivize debt collectors to place telephone calls to less convenient telephone numbers after exhausting their telephone calls to consumers’ preferred numbers. The Bureau requests comment on the merits of an aggregate versus a per-telephone number limit. Finally, the Bureau requests comment on proposed comment 14(b)(2)(i)–2. In particular, the Bureau requests comment on whether the Bureau should provide additional clarification about how a debt collector determines that a telephone number is not associated with a particular person, or whether, for purposes of the proposed frequency limits, there is an alternative way to treat telephone calls inadvertently made to the wrong person. The Bureau’s Small Business Review Panel Outline described a proposal under consideration that would have limited a debt collector’s weekly contact attempts with consumers by any communication medium. Before a debt collector confirmed contact with a consumer, the proposal under consideration would have imposed weekly limits of (i) three contact attempts per unique communication medium and (ii) six total contact attempts. After confirming contact with the consumer, a debt collector would have been subject to weekly limits of (i) two contact attempts per unique communication medium and (ii) three total contact attempts.308 Many small entity representatives expressed a strong preference for bright-line, simplified rules. Many also stated that the proposal under consideration would inhibit communications between debt collectors and consumers and extend the time necessary to reach consumers. In particular, small entity representatives stated that they regularly attempt to contact consumers more than seven times per week when trying to establish right-party contact. Small entity representatives suggested several 308 The proposals under consideration described in the Small Business Review Panel Outline would have applied the same limits for contact attempts to individuals other than the consumer, except that all third-party contact attempts would have been prohibited after the debt collector had successfully contacted the consumer, on the theory that the debt collector at that point would have had no reason to continue to engage in third-party outreach. The Bureau’s proposal does not include the aspect of the Small Business Review Panel Outline that would have prohibited third-party contact attempts after the debt collector had successfully contacted the consumer. Proposed § 1006.10, which would implement FDCPA section 804’s general prohibition against communicating more than once with a person to obtain location information, may provide sufficient protection regarding the making of location information communications when location information has already been obtained. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 exceptions to the proposal under consideration, including telephone calls about which a consumer was unaware because, for example, the telephone number called was not, in fact, associated with that consumer.309 In its report, the Small Business Review Panel recommended, among other things, that the Bureau consider whether the frequency limits should apply equally to all communication media (e.g., telephone, postal mail, email, text messages, and other newer communication media).310 The Bureau considered the small entity representatives’ feedback in developing the proposed frequency limits and believes that proposed § 1006.14(b)(2)(i) responds to many of the small entity representatives’ concerns. In particular, proposed § 1006.14(b)(2)(i) would permit a debt collector to place seven telephone calls to a consumer in a seven-day period regarding a particular debt, without a different numerical limit on the number of calls the debt collector could make during a seven-day period after having established initial contact with the consumer. The proposal thus avoids potential ambiguities regarding when a debt collector has confirmed or lost contact with a consumer and may represent the type of bright-line, simplified approach that small entity representatives sought. The proposal would not limit debt collectors to sending a particular number of letters, emails, and text messages, and proposed comment 14(b)(2)(i)–2 would clarify that a telephone call to a number that the debt collector later determines is not associated with the consumer does not count toward the frequency limit. As discussed in the section-by-section analysis of proposed § 1006.14(b)(3), the Bureau proposes several other exceptions to the frequency limits in response to small entity representatives’ feedback. As noted above, the Bureau proposes § 1006.14(b)(2)(i) and its related commentary pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors, and as an interpretation of FDCPA section 806(5), because a debt collector who places more than seven telephone calls to a particular person about a particular debt within seven consecutive days may have the intent to annoy, abuse, or harass the person.311 309 See Small Business Review Panel Report, supra note 57, at 36–37. 310 Id. at 37. 311 Calls in excess of this limit may have the natural consequence of harassing, oppressing, or PO 00000 Frm 00042 Fmt 4701 Sfmt 4702 Some debt collectors may, in fact, place more than seven telephone calls to a person each week precisely because they believe that additional telephone calls may cause sufficient harassment or annoyance to pressure the person to respond or make a payment that the person otherwise would not have made. With respect to a debt collector who is collecting a consumer financial product or service debt, as defined in proposed § 1006.2(f), the Bureau also proposes § 1006.14(b)(2)(i) pursuant to its authority under section 1031(b) of the Dodd-Frank Act to prescribe rules applicable to a covered person or service provider that identify, and that may include requirements to prevent, unfair acts or practices in connection with any transaction with a consumer for a consumer financial product or service. To identify an act or practice as unfair under the Dodd-Frank Act, the Bureau must have a reasonable basis to conclude that: (1) The act or practice causes or is likely to cause substantial injury to consumers, which consumers cannot reasonably avoid; and (2) such substantial injury is not outweighed by countervailing benefits to consumers or to competition.312 The Bureau proposes § 1006.14(b)(2)(i) to prevent 313 the unfair act or practice, identified in proposed § 1006.14(b)(1)(ii), of placing, in connection with the collection of a consumer financial product or service debt, telephone calls to any person repeatedly or continuously such that the natural consequence is to harass, oppress, or abuse any person at the called number. The Bureau proposes to set the frequency limit at seven telephone calls within seven consecutive days about a particular debt because such a limit appears to bear a reasonable relationship to preventing the unfair practice.314 abusing a person at the called number, and, as noted above, the Bureau assumes that debt collectors intend the natural consequences of their actions. 312 Dodd-Frank Act section 1031(c), 12 U.S.C. 5531(c). 313 The Bureau has not determined in connection with this proposal whether telephone calls in excess of the limit in proposed § 1006.14(b)(2)(i) by creditors and others generally not covered by the FDCPA would constitute an unfair act or practice under section 1031(c) of the Dodd-Frank Act if engaged in by those persons, rather than by an FDCPA-covered debt collector. The Bureau’s proposal does not address, for example, whether consumers could reasonably avoid harm from creditor contacts or whether frequent creditor contacts provide greater benefits to consumers or competition. 314 Dodd-Frank Act section 1031(c). Some courts have held that the consumer stated a claim under FDCPA section 806(5) where the debt collector called, on average, more than seven times per week. See, e.g., U.S. v. Cent. Adjustment Bureau, Inc., 667 E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules Consumers may suffer or be likely to suffer substantial injury from repeated or continuous debt collection telephone calls. Consumers have alleged in complaints lodged with the FTC and the Bureau, and in litigation, that such telephone calls can cause them, among other things, to suffer great emotional distress and anxiety, and that such calls can interfere with their health or sleep.315 Consumers may pay debts that they otherwise might not have paid simply to stop the telephone calls. For example, consumers may pay debts that they do not owe or to which they have legal defenses; pay debts using funds that are exempt from collection; or pay the particular debt being collected instead of other debts or expenses that the consumer otherwise would prioritize, such as a secured or nondischargable debt or expenses for food, shelter, clothing, or medical treatment. A debt collector’s telephone calls also may cause some consumers to incur charges on their mobile telephones.316 Although the charge for an individual call may be minimal, the FCC has found that ‘‘[t]hese costs can be substantial’’ when aggregated across all consumers,317 which is consistent with the FTC’s and the Bureau’s approach of aggregating all injuries (including small injuries) caused by a practice to determine whether the practice is unfair.318 Consumers may not be reasonably able to avoid the substantial injuries that could stem from frequent or repeated debt collection telephone calls. Many consumers carry their mobile telephones at all times to coordinate essential tasks or to be available in case of emergency.319 Consumers also may share their mobile or landline telephones with family members. For these consumers, disengaging from all telephone calls to avoid debt collectors may not be an option. Moreover, courts have held that the ringing or vibrating alert caused by a debt collector’s calls can contribute to harassment by conveying a sense of urgency to the consumer,320 which can overwhelm some consumers, especially those with multiple debts in collection. FDCPA section 805(c) provides, in part, that a debt collector generally shall not communicate further with a consumer with respect to a debt if the consumer notifies the debt collector in writing that the consumer wishes the debt collector to cease further F. Supp. 370, 376, 394 (N.D. Tex. 1986), aff’d as modified, 823 F.2d 880 (5th Cir. 1987) (per curiam) (holding that debt collector violated FDCPA section 806(5) by, among other things, placing successive telephone calls in a single day and calling at least one consumer four-to-five times in a single day); Schwartz-Earp v. Advanced Call Ctr. Techs., LLC, No. 15–CV–01582–MEJ, 2016 WL 899149, at *4 (N.D. Cal. Mar. 9, 2016) (denying debt collector’s summary judgment motion where the debt collector called the consumer ‘‘multiple times a day, with as many as five calls in a day,’’ and remarking that ‘‘the volume and pattern of calls alone is sufficient to raise a genuine dispute of material fact’’); Neu v. Genpact Servs., LLC, No. 11–CV–2246 W KSC, 2013 WL 1773822, at *4 (S.D. Cal. Apr. 25, 2013) (holding that 150 telephone calls in 51 days raised a triable issue of fact as to the debt collector’s intent to harass and observing that ‘‘[a] reasonable trier of fact could find that [calling the consumer six times in one day] alone, apart from the sheer volume of calls placed by [the debt collector], is sufficient to find that [the debt collector] had the ‘intent to annoy, abuse or harass’ ’’); Forrest v. Genpact Servs., LLC, 962 F. Supp. 2d 734, 737 (M.D. Pa. 2013) (holding that consumer stated a claim under FDCPA section 806(5) by alleging that debt collector called the consumer 225 times within 54 days); Bassett v. I.C. Sys., Inc., 715 F. Supp. 2d 803, 810 (N.D. Ill. 2010) (denying debt collector’s summary judgment motion where debt collector called the consumer 31 times in 12 days). 315 See supra notes 286 and 287. 316 See the section-by-section analysis of proposed § 1006.6(e). 317 Fed. Comms. Comm’n, In re Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 30 FCC Rcd. 7961, 8020 ¶ 118 (2015) (‘‘In addition to the invasion of consumer privacy for all wireless consumers, the record confirms that some are charged for incoming calls and messages. These costs can be substantial when they result from the large numbers of voice calls and texts autodialers can generate.’’). 318 Fed. Trade. Comm’n v. Pantron I Corp., 33 F.3d 1088, 1102–03 (9th Cir. 1994) (‘‘Both the Commission and the courts have recognized that consumer injury is substantial when it is the aggregate of many small individual injuries.’’) (citing Orkin Exterminating Co. v. Fed. Trade. Comm’n, 849 F.2d 1354, 1365 (11th Cir. 1988)); FTC Policy Statement on Unfairness, supra note 100, at 1073 n.12 (‘‘An injury may be sufficiently substantial . . . if it does a small harm to a large number of people, or if it raises a significant risk of concrete harm.’’); Bureau of Consumer Fin. Prot., CFPB Examination Procedures, Unfair, Deceptive, or Abusive Acts or Practices, at 2 (Oct. 2012), https://www.consumerfinance.gov/documents/ 4576/102012_cfpb_unfair-deceptive-abusive-actspractices-udaaps_procedures.pdf (‘‘An act or practice that causes a small amount of harm to a large number of people may be deemed to cause substantial injury.’’). 319 See, e.g., Fed. Comms. Comm’n, In re Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 30 FCC Rcd. 7961, 7996 ¶ 61 (2015) at 7996 ¶ 61 (‘‘Indeed, some consumers may find unwanted intrusions by phone more offensive than home mailings because they can cost them money and because, for many, their phone is with them at almost all times.’’). 320 See, e.g., Clements v. HSBC Auto Fin., Inc., Civ. A. No. 5:09–cv–0086, 2011 WL 2976558, at *5 (S.D. W. Va. July 21, 2011) (noting that ‘‘[m]issed calls communicate more than a phone number’’ and ‘‘can, depending on volume and frequency, communicate urgency and panic,’’ but nevertheless finding that, based on the facts of the case, plaintiffs had suffered minimal emotional harm); Bassett v. I.C. Sys., Inc., 715 F. Supp. 2d 803, 807–810 (N.D. Ill. 2010) (denying debt collector’s summary judgment motion where debt collector placed 31 telephone calls to a consumer’s blocked telephone and explaining that, although the consumer’s telephone did not ring, the consumer could still have been harassed because the telephone displayed the incoming calls). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 PO 00000 Frm 00043 Fmt 4701 Sfmt 4702 23315 communication.321 Section 805(c), however, may be insufficient to permit consumers to reasonably avoid injuries from repeated or continuous telephone calls. First, many consumers may invoke the cease communication right only after they are harassed. Second, some consumers, even if they are aware of their rights, may not invoke them because ceasing communication entirely could make it more difficult to resolve the debt and, in turn, subject the consumer to other injuries. In particular, an unresolved debt could cause the consumer to incur additional fees, interest, adverse credit reporting, or, in the case of secured debts, loss of a home, automobile, or other property. Numerous debt collectors also have reported that a consumer who ceases communications is more likely to be sued and subjected to wage garnishment because the debt collector has no other way to recover on the debt.322 Accordingly, a consumer who is aware of these potential outcomes, even if only in the abstract, or who wishes to resolve the debt in the future, may be reluctant to invoke the cease communication right to prevent harassment. Moreover, it may not be reasonable to expect a consumer to avoid harassment by invoking the cease communication right if doing so makes it more likely that the debt collector will sue the consumer to recover on the debt. Third, only a consumer as defined in FDCPA sections 803(3) and 805(d) may invoke the cease communication right, leaving other persons unable to invoke this remedy. The Bureau proposes § 1006.14(b)(2)(i) because the injuries described above appear not to be outweighed by the countervailing benefits to consumers or to competition of more frequent telephone calls from FDCPA-covered debt collectors. If the proposed limit on telephone calls adversely affects debt collectors’ ability to collect debts, the reduction in recoveries and corresponding increases in losses could result in an increase in the cost of credit. However, as discussed above and more fully in part VI, debt collectors may not need to make repeated or continuous telephone calls to collect debts effectively, and debt collectors may face diminishing returns as they increase the frequency of their calling. Further, the Bureau has sought 321 15 U.S.C. 1692c(c). Proposed § 1006.6(c) would implement FDCPA section 805(c). 322 As noted earlier in this section-by-section analysis, the Bureau has received feedback from small entity representatives and other industry stakeholders that overly restrictive frequency limits could result in some of these same consumer harms, and the Bureau requests comment on the proposed frequency limits for that reason. E:\FR\FM\21MYP2.SGM 21MYP2 23316 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 to mitigate concerns about increasing the cost of credit by limiting only the number of telephone calls placed per seven days, not the total number of telephone calls placed throughout the course of collections, thus permitting debt collectors to continue making as many telephone calls as needed, albeit over a longer period. Further, even if preventing harassing or oppressive contacts did have some marginal effect on collections success, the injuries caused by such contacts do not appear to be outweighed by countervailing benefits to consumers or to competition. For similar reasons, the FTC and the Bureau previously have alleged through enforcement actions that repeated or continuous telephone calls or telephone conversations can constitute an unfair act or practice in violation of section 5 of the FTC Act and section 1031 of the Dodd-Frank Act.323 For example, the FTC has alleged that a party engaged in an unfair act or practice under section 5 by making repeated or continuous 323 Complaint at ¶¶ 56–58, Fed. Trade Comm’n v. Citigroup Inc., No. 1:01–CV–00606 JTC (N.D. Ga. Mar. 6, 2001), https://www.ftc.gov/sites/default/ files/documents/cases/2001/03/ citigroupcmp.pdf(alleging that defendant engaged in an unfair act or practice under section 5 of the FTC Act by ‘‘making repeated and continuous telephone calls to consumers with intent to annoy, abuse, or harass any person at the called number’’); Consent Order at ¶¶ 5, 6, 19, In re Avco Fin. Servs., 104 F.T.C. 485, 1984 WL 565343, at *2–3 (1984) (settling FTC’s allegations that defendant engaged in an unfair act or practice under section 5 of the FTC Act by ‘‘[m]aking repeated or continuous telephone calls to debtors or third parties with intent to harass or abuse persons at the called number,’’ and explaining that these ‘‘acts and practices * * * had and now [have] the capacity and tendency to cause substantial injury to debtors or third parties who are contacted by [defendant] by, among other things, adversely affecting the debtor’s reputation, interfering with the debtor’s or third party’s employment relations including, but not limited to, causing warnings by employers of possible discharge, impairing the debtor’s relations with friends, relatives, neighbors, and co-workers, and inducing the payment of disputed debts.’’); Consent Order at ¶¶ 12, 19–23, In re Ace Cash Express, No. 2014–CFPB–0008 (July 10, 2014), https://files.consumerfinance.gov/f/201407_cfpb_ consent-order_ace-cash-express.pdf (settling Bureau’s allegations that defendant engaged in unfair acts or practices under section 1031 of the Dodd-Frank Act by, among other things, ‘‘[m]aking an excessive number of calls to consumers’ home, work, and cell phone numbers’’ and ‘‘[c]ontinuing to call consumers with no relation to the debt after being told that [defendant] had the wrong person’’); see also Consent Order, In re DriveTime Auto. Grp., Inc., 2014–CFPB–0017 (Nov. 19, 2014), https:// files.consumerfinance.gov/f/201411_cfpb_consentorder_drivetime.pdf (settling Bureau’s allegations that defendant engaged in unfair acts or practices under section 1031 of the Dodd-Frank Act ‘‘by failing: (A) To prevent account servicing and collection calls to consumers’ workplaces after consumers asked [defendant] to stop such calls; (B) to prevent calls to consumers’ third-party references after the references or consumers asked [defendant] to stop calling them; and (C) to prevent calls to people at wrong numbers after they have asked [defendant] to stop calling’’). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 telephone calls with intent to harass or abuse either consumers who owed debts or third parties, explaining that these calls can cause substantial injuries by, among other things, affecting the consumer’s reputation, impairing the consumer’s relationship with family, friends, and co-workers, and inducing the payment of disputed debts.324 Similarly, the Bureau has alleged that a party engaged in unfair acts or practices under section 1031 by making an excessive number of telephone calls to consumers and by calling third parties repeatedly even after being informed that the calls were to the wrong person.325 Section 1031(c)(2) of the Dodd-Frank Act allows the Bureau to ‘‘consider established public policies as evidence to be considered with all other evidence’’ in determining whether an act or practice is unfair, as long as the public policy considerations are not the primary basis of the determination.326 Established public policy appears to support the Bureau’s proposed finding that it is an unfair act or practice for a debt collector who is collecting a consumer financial product or service debt to place telephone calls repeatedly or continuously such that the natural consequence is to harass, oppress, or abuse any person at the called number. Several consumer financial statutes and regulations, as well as industry standards,327 require or recommend that debt collectors or others who are engaged in marketing or collections limit the frequency of their telephone calls to consumers. These include several State and local laws that limit the number of times a debt collector or creditor may call a consumer each week,328 as well as the Telemarketing and Consumer Fraud and Abuse Prevention Act, the Telephone Consumer Protection Act, and related FTC and FCC rulemakings that establish the Do Not Call Registry, limit the use of autodialers, and impose requirements related to Caller ID.329 In short, Congress, State and local legislatures, 324 Avco Fin. Servs., 104 F.T.C. 485, 1984 WL 565343, at *2–3. 325 Ace Cash Express, No. 2014–CFPB–0008. 326 12 U.S.C. 5531(c)(2). 327 Many creditors and debt collectors have found it advantageous to adopt voluntary daily or weekly limits on telephone calls that they or their service provider make in connection with collecting debts. See, e.g., Bureau of Consumer Fin. Prot., The Consumer Credit Card Market, at 313–14 (Dec. 2017), https://files.consumerfinance.gov/f/ documents/cfpb_consumer-credit-card-marketreport_2017.pdf. See also infra part VI.B.2. 328 See supra note 284. 329 15 U.S.C. 6101 et seq.; 47 U.S.C. 227; 16 CFR part 310; 47 CFR 64.1200 et seq.; 47 CFR 64.1600 et seq. PO 00000 Frm 00044 Fmt 4701 Sfmt 4702 and other agencies have found that consumers are harmed by repeated telephone calls. These established policies support a finding that it is an unfair act or practice for a debt collector who is collecting a consumer financial product or service debt to place telephone calls to a person repeatedly or continuously such that the natural consequence is to harass, oppress, or abuse any person at the called number, and they evince public policy that supports the Bureau’s proposed frequency limits. The Bureau gives weight to this policy and bases its proposed finding that the identified act or practice is unfair in part on this body of public policy. 14(b)(2)(ii) Proposed § 1006.14(b)(2)(ii) would provide that, subject to the exceptions in proposed § 1006.14(b)(3), a debt collector must not place a telephone call to a person in connection with the collection of a particular debt after already having had a telephone conversation with that person in connection with the collection of such debt within a period of seven consecutive days ending on the date of the call. Proposed comment 14(b)(2)(ii)– 1 provides examples of the proposed rule. In developing this proposal, the Bureau has considered both the legitimate interests of consumers and debt collectors in resolving debts and the potentially harmful effects on consumers of repeated or continuous telephone calls after a telephone conversation. A debt collector who already has engaged in a telephone conversation with a consumer about a debt may have less of a need to place additional telephone calls to that consumer about that debt within the next seven days than a debt collector who has yet to reach a consumer. As a result, the debt collector who has already conversed with a consumer may be more likely than the debt collector who has not conversed with a consumer to intend to annoy, abuse, or harass the consumer by placing additional telephone calls within one week after a telephone conversation. At the same time, a consumer who has spoken to a debt collector about a debt by telephone may be more likely than a consumer who has not spoken to a debt collector about a debt by telephone to experience annoyance, abuse, or harassment if the debt collector places additional, unwanted telephone calls to the consumer about that debt again within the next seven days. A consumer may experience, and a debt collector may intend to cause, such E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules annoyance, abuse, or harassment from a second telephone conversation within one week even if the consumer, rather than the debt collector, initiated the first telephone conversation. Therefore, under the proposal, if a consumer initiated a telephone conversation with the debt collector, that telephone conversation generally would count as the debt collector’s one permissible telephone conversation for the next week. In some instances, a consumer might request additional information when speaking with a debt collector and would not view a follow-up telephone call from the debt collector as harassing. For that reason, proposed § 1006.14(b)(3)(i), discussed below, would create an exception for telephone calls that are made to respond to a request for information from the consumer. Similarly, proposed § 1006.14(b)(3)(ii), also discussed below, would create an exception under which a consumer who wishes to speak to a debt collector more than once in one week could consent, in the first telephone conversation or by other media, to additional telephone calls from the debt collector. The Bureau requests comment on proposed § 1006.14(b)(2)(ii). The Bureau considered, but does not propose, a frequency limit that would have limited only the total number of telephone calls that a debt collector could place to a person about a debt during a defined time period, regardless of whether the debt collector had engaged in a telephone conversation with that person about that debt during the relevant time period. The Bureau requests comment on the merits of such an alternative approach. The Bureau proposes § 1006.14(b)(2)(ii) and its commentary pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors and its authority to interpret FDCPA section 806(5). The Bureau proposes § 1006.14(b)(2)(ii) on the basis that, unless an exception (such as consent) applies, once a debt collector and a consumer engage in a telephone conversation regarding a particular debt, a debt collector who places additional calls to that person about that debt within the following seven days may intend to annoy, abuse, or harass the person.330 330 Unless an exception applies, a person who receives such a telephone call after already having spoken to the debt collector within the previous seven days may naturally feel harassed, oppressed, or abused, and, as noted above, the Bureau assumes that debt collectors intend the natural consequences of their actions. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 With respect to a debt collector who is collecting a consumer financial product or service debt, as defined in proposed § 1006.2(f), the Bureau also proposes § 1006.14(b)(2)(ii) pursuant to its authority under section 1031(b) of the Dodd-Frank Act to prescribe rules identifying and preventing unfair acts or practices.331 Specifically, the Bureau proposes § 1006.14(b)(2)(ii) to prevent the unfair act or practice described in proposed § 1006.14(b)(1)(ii).332 For the reasons discussed in the section-bysection analysis of proposed § 1006.14(b)(2)(i), and based on the evidence currently available to the Bureau, the Bureau believes that, if a debt collector places a telephone call to a particular person about a particular debt after already having spoken to that person about that debt within the previous seven days, the person naturally may feel harassed by the subsequent telephone call. For the reasons discussed in the section-bysection analysis of proposed § 1006.14(b)(2)(i), the debt collector’s conduct may cause or be likely to cause the person to suffer substantial injury that is not reasonably avoidable and is not outweighed by countervailing benefits to consumers or to competition.333 The Bureau thus proposes § 1006.14(b)(2)(ii) to establish a frequency limit that would prevent debt collectors from engaging in this unfair act or practice and, as detailed above, the Bureau proposes a limit of one telephone conversation per seven days on the theory that such a limit bears a reasonable relationship to preventing the unfair practice. 14(b)(3) Certain Telephone Calls Excluded From the Frequency Limits Proposed § 1006.14(b)(3) describes four types of telephone calls that would not count toward, and that would be permitted in excess of, the frequency limits in proposed § 1006.14(b)(2). These are telephone calls that are: (i) Made to respond to a request for information from the person whom the debt collector is calling; (ii) made with such person’s consent given directly to the debt collector; (iii) unable to connect to the dialed number; or (iv) placed to a person described in proposed 331 The Bureau has not determined in connection with this proposal whether telephone calls in excess of the limit in proposed § 1006.14(b)(2)(ii) by creditors and others not covered by the FDCPA would constitute an unfair act or practice under Dodd-Frank Act 1031(c) if engaged in by those persons, rather than by an FDCPA-covered debt collector. 332 As with § 1006.14(b)(2)(i), proposed § 1006.14(b)(2)(ii) would apply when a debt collector places a telephone call to ‘‘a person.’’ 333 12 U.S.C. 5531(c). PO 00000 Frm 00045 Fmt 4701 Sfmt 4702 23317 § 1006.6(d)(1)(ii) through (vi). As discussed in the section-by-section analysis of proposed § 1006.14(b)(3)(i) through (iv) below, the Bureau proposes these exclusions pursuant to its authority under FDCPA section 814(d) to prescribe rules for the collection of debts by debt collectors and to implement and interpret FDCPA section 806(5). The Bureau proposes to exclude these telephone calls from counting toward the proposed frequency limits because they are unlikely to be harassing to consumers, and debt collectors are unlikely to place such calls with intent to annoy, abuse, or harass a person. The Bureau further proposes to exclude these telephone calls from counting toward the proposed frequency limits because they are unlikely to contribute to substantial injury that a person cannot reasonably avoid and that is not outweighed by countervailing benefits to consumers or competition. The Bureau requests comment on proposed § 1006.14(b)(3) and its related commentary, including on whether any other types of telephone calls should be excluded from the frequency limits. During the SBREFA process, the Bureau’s proposal under consideration noted that a bright-line frequency limit could except certain types of contacts, but it did not identify any specific exceptions. Many small entity representatives suggested exceptions, including for: (1) Contacts that respond to a consumer’s request or question; (2) contact attempts that leave no ‘‘footprint,’’ such that the consumer is unaware of the telephone call or other contact attempt; (3) contacts with a consumer’s attorney; and (4) contacts that are legally required. The Small Business Review Panel Report recommended that the Bureau consider incorporating such exceptions into the proposal.334 The Panel Report also specifically recommended that the Bureau consider whether the frequency limits should be modified for communications that occur after a law firm files a complaint, on the grounds that one conversation per week might not be sufficient in various litigation situations. Proposed § 1006.14(b)(3) takes into account the small entity representatives’ suggestions and the recommendations in the Panel Report. The Bureau does not propose an 334 See Small Business Review Panel Report, supra note 57, at 36. Other suggested exceptions in the Small Business Review Panel Report—including for contacts initiated by the consumer, contacts that occur through written correspondence (e.g., letters), and misdirected contact attempts—are addressed elsewhere in the section-by-section analysis of proposed § 1006.14(b). E:\FR\FM\21MYP2.SGM 21MYP2 23318 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules exception for legally required communications because the Bureau understands that very few legally required communications must be delivered by telephone and that, with respect to the few such communications that must be delivered telephonically, it appears unlikely that a debt collector would need to place more than seven telephone calls to a consumer within a period of seven consecutive days to deliver the required communication. 14(b)(3)(i) Proposed § 1006.14(b)(3)(i) would exclude from the frequency limits telephone calls that a debt collector places to a person to respond to a request for information from that person. The Bureau proposes this exclusion because the Bureau believes that, if a person is speaking to a debt collector and asks for information that the debt collector does not have at the time of the telephone conversation, the person likely would expect (and not be harassed by) a return telephone call (or calls) from the debt collector providing the requested information; nor would the debt collector place the return telephone call with intent to annoy, abuse, or harass the person. Proposed comment 14(b)(3)(i)–1 would clarify that, once a debt collector provides a response to a person’s request for information, the exception in proposed § 1006.14(b)(3)(i) would not apply to subsequent telephone calls placed by the debt collector to the person, unless the person makes another request. Proposed comment 14(b)(3)(i)–2 provides an example of the rule.335 The Bureau requests comment on the proposal to exclude from the frequency limits the placement of telephone calls that are made to respond to a request for information. The Bureau specifically requests comment on whether there should be any separate limit on the number of telephone calls a debt collector could place under the exception. As proposed, § 1006.14(b)(3)(i) would permit a debt collector who engages in a telephone conversation with a consumer to place jbell on DSK3GLQ082PROD with PROPOSALS2 335 Some State and local laws exclude responsive communications from their frequency limits. For example, Massachusetts’ creditor-collection law provides that ‘‘a creditor shall not be deemed to have initiated a communication with a debtor if the communication by the creditor is in response to a request made by the debtor for said communication’’). 940 Code Mass. Regs. 7.04(1)(f). See also 9 Wash. Rev. Code 19.16.250(13)(a) (debt collector may exceed the weekly contact limit when ‘‘responding to a communication from the debtor or spouse’’); N.Y.C. Admin. Code 5–77(b)(1)(iv) (weekly contact limit does not include ‘‘any communication between a consumer and the debt collector which is in response to an oral or written communication from the consumer’’). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 an unlimited number of unanswered telephone calls to the consumer during the next seven days in an effort to provide the requested information. As proposed, § 1006.14(b)(3)(i) also would permit the debt collector to continue to exceed the frequency limits until the debt collector reached the consumer to respond to the request. A debt collector responding to a person’s request for information may not need to place repeated or continuous telephone calls to reach the consumer, however, because such a debt collector is likely to have reliable contact information and the consumer presumably will be expecting the debt collector’s telephone call. The Bureau requests comment on this approach and on alternatives to it. The Bureau also requests comment on whether additional clarification is needed on how to determine whether a debt collector makes a particular telephone call in response to a request for information, as opposed to for some other purpose, or on how to determine whether the debt collector has responded to a request for information, such that the exclusion no longer applies. 14(b)(3)(ii) Proposed § 1006.14(b)(3)(ii) would exclude from the proposed frequency limits telephone calls that a debt collector places to a person with the person’s prior consent given directly to the debt collector. The Bureau proposes to exclude such telephone calls from the frequency limits because the Bureau believes that a person can determine when additional telephone calls from, or telephone conversations with, a debt collector would not be harassing, and that a debt collector who has a person’s consent to additional telephone calls would not be likely to place such calls with intent to annoy, abuse, or harass the person. The Bureau also believes that proposed § 1006.14(b)(3)(ii) may address small entity representatives’ concerns about the frequency limits precluding necessary conversations in various litigation contexts because it would enable a person to consent to additional telephone calls if, for example, the parties were negotiating a settlement or resolving a discovery dispute. Proposed comment 14(b)(3)(ii)–1 refers to the commentary to proposed § 1006.6(b)(4)(i) for guidance concerning a person giving prior consent directly to a debt collector. Proposed comment 14(b)(3)(ii)–2 provides an example of the rule. The Bureau requests comment on proposed § 1006.14(b)(3)(ii) and its related commentary, including on whether there should be a separate limit PO 00000 Frm 00046 Fmt 4701 Sfmt 4702 on the number of telephone calls that a debt collector could place under the proposed exception or whether there should be any other type of limitation or condition on the proposed exception. 14(b)(3)(iii) Proposed § 1006.14(b)(3)(iii) would exclude from the frequency limits telephone calls that a debt collector places to a person but that are unable to connect to the dialed number (e.g., that result in a busy signal or are placed to an out-of-service number). The Bureau proposes this exclusion because a person is unlikely to know about, let alone be harassed by, a debt collector’s telephone call in response to which the debt collector receives a busy signal or a message indicating that the dialed number is not in service. Similarly, it appears that a debt collector who places several calls to a person in response to which the debt collector receives a busy signal or out-of-service notification is likely to place additional telephone calls to the person in an effort to contact the person and not with the intent to annoy, abuse, or harass the person.336 The proposed exclusion also responds to feedback from small entity representatives suggesting that, for example, a telephone call met with a busy signal should not count toward the frequency limit.337 Proposed comment 14(b)(3)(iii)–1 and –2 provide examples of telephone calls that are able and unable to connect to the dialed number. The Bureau requests comment on proposed § 1006.14(b)(3)(iii), including on whether the Bureau should include any other specific examples in commentary. 14(b)(3)(iv) Proposed § 1006.14(b)(3)(iv) would exclude from the frequency limits telephone calls that a debt collector places to the persons described in proposed § 1006.6(d)(1)(ii) through (vi). Proposed § 1006.6(d)(1)(ii) through (vi) would implement, in part, FDCPA section 805(b)’s exception from the general prohibition on communicating 336 The Bureau’s approach in proposed § 1006.14(b)(3)(iii) is informed, in part, by State and local laws that exclude undeliverable contact attempts from their frequency limits. See Commonwealth of Mass., Off. of the Att’y Gen., Guidance with Respect to Debt Collection Regulations (2013), https://www.mass.gov/files/ documents/2016/08/xc/debt-collection-guidance2013.pdf (‘‘unsuccessful attempts . . . to reach a debtor via telephone’’ do not count toward the frequency limit in 940 Code Mass. Regs. 7.04(1)(f) ‘‘if the creditor is truly unable to reach the debtor or to leave a message for the debtor); N.Y.C. Admin. Code 5–77(b)(1)(iv) (weekly contact limit does not include ‘‘returned unopened mail’’). 337 See Small Business Review Panel Report, supra note 57, at 37. E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 about a debt with a person other than the consumer; it would permit a debt collector to communicate with a consumer’s attorney, a consumer reporting agency, a creditor, a creditor’s attorney, or a debt collector’s attorney. Proposed § 1006.14(b)(3)(iv) would exclude from the frequency limits telephone calls placed to such persons on the basis that these persons are unlikely to be harassed by frequent and repeated telephone calls from a debt collector and that a debt collector is unlikely to place calls to such persons with intent to annoy, abuse, or harass them. Unlike most consumers, each of these persons has professional training and experience in, and is likely engaging in, the debt collection process in a professional capacity. Moreover, the Bureau is not aware of evidence that such persons receive an excessive number of telephone calls from debt collectors. The Bureau also proposes to exclude telephone calls to such persons from the frequency limits because debt collectors may have non-harassing reasons for calling these persons more often than proposed § 1006.14(b)(2) would permit. For example, during litigation, a debt collector may need to speak frequently with its own attorneys, as well as with the creditor’s or the consumer’s attorneys; the Bureau’s proposal would not limit such contacts. The Bureau requests comment on proposed § 1006.14(b)(3)(iv), including on whether telephone calls that a debt collector places to certain other persons also should be excluded from the frequency limits and, if so, which categories of persons should be excluded. 14(b)(4) Effect of Complying With Frequency Limits Proposed § 1006.14(b)(4) would clarify the effect of complying with the frequency limits in § 1006.14(b)(2). Under proposed § 1006.14(b)(4), a debt collector who complies with (i.e., does not exceed) the frequency limits in § 1006.14(b)(2) would per se comply with § 1006.14(b)(1). Proposed § 1006.14(b)(4) also would clarify that a debt collector who complies with § 1006.14(b)(2) does not violate either: (1) FDCPA section 806’s general prohibition as it applies to placing telephone calls or engaging any person in telephone conversation repeatedly or continuously such that the natural consequence is to harass, oppress, or abuse the person; or (2) FDCPA section 806(5)’s specific prohibition against causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 to annoy, abuse, or harass the person. Based on the evidence currently available to the Bureau, the Bureau believes that a debt collector who places seven or fewer telephone calls to, and engages in one telephone conversation with, a particular consumer about a particular debt within a period of seven consecutive days, including the additional telephone calls permitted under proposed § 1006.14(b)(3), may not have the natural consequence of harassing, oppressing or abusing a person; that a debt collector who places such calls or engages in such conversations does not intend to annoy, abuse, or harass the person; and that such a frequency of telephone calls and conversations would not be repeated or continuous as those terms are used in FDCPA section 806(5). Proposed § 1006.14(b)(4) also would clarify the consequence under the DoddFrank Act of complying with the frequency limits. Proposed § 1006.14(b)(4) provides that a debt collector who complies with § 1006.14(b)(2) does not violate DoddFrank Act sections 1031(c) or 1036(a)(1)(B) by engaging in the unfair act or practice of, in connection with the collection of a consumer financial product or service debt, placing telephone calls or engaging any person in telephone conversation repeatedly or continuously such that the natural consequence is to harass, oppress, or abuse the person. The Bureau proposes § 1006.14(b)(4) on the basis that telephone calls that do not exceed the frequency limits in § 1006.14(b)(2) do not cause substantial injury and that any possible injury is outweighed by the benefits to consumers or to competition. Under this interpretation, telephone calls at or below the frequency limits are unlikely to harass consumers and, in turn, are unlikely to cause substantial injury. Further, under this interpretation, debt collection provides substantial benefits to the consumer credit marketplace, and debt collectors may need to make telephone calls up to the frequency limits to collect debts effectively. Given these premises, any injury that might result from telephone calls at or below the frequency limits would be outweighed by the benefits to consumers or to competition. The Bureau further believes that clarifying the effect of complying with proposed § 1006.14(b)(2), and creating a bright-line rule for compliance with it, could benefit both consumers and debt collectors. For debt collectors, the clarification should provide greater legal certainty and, in turn, should reduce the costs of litigation and threats of litigation about repeated or continuous PO 00000 Frm 00047 Fmt 4701 Sfmt 4702 23319 contacts under FDCPA section 806 and 806(5). Consistent with this view, during the SBREFA process, small entity representatives expressed a preference for a bright-line approach. For consumers, a bright-line rule could make it easier to identify violations of the FDCPA. Providing a bright-line rule for determining compliance with the FDCPA and the Dodd-Frank Act therefore may be appropriate to advance the objectives of the FDCPA and title X of the Dodd-Frank Act. Proposed § 1006.14(b)(4) would not provide a debt collector with protection from liability as to any other provision of the proposed rule, the FDCPA, or the Dodd-Frank Act. For example, proposed § 1006.14(b)(4) would not protect a debt collector from liability for using obscene language or false representations in connection with collection of a debt, in violation of FDCPA sections 806 or 807 (as proposed to be implemented by §§ 1006.14 and 1006.18). Similarly, proposed § 1006.14(b)(4) would not protect a debt collector from liability for communicating with a consumer in violation of FDCPA section 805(a) or (c) (as proposed to be implemented by § 1006.6(b)(1) and (c)). Nor would proposed § 1006.14(b)(4) protect a debt collector from liability under the DoddFrank Act for engaging in other unfair, deceptive, or abusive acts or practices. The Bureau requests comment on all aspects of proposed § 1006.14(b)(4). The Bureau specifically requests comment on whether proposed § 1006.14(b)(4) adequately addresses concerns about debt collectors making telephone calls in rapid succession and, if not, what approach would address such calling behavior without imposing undue or unnecessary costs on debt collectors. For example, under the Bureau’s proposed approach, a debt collector would not violate § 1006.14(b)(1) by placing seven or fewer telephone calls in rapid succession, so long as the debt collector did not exceed seven telephone calls or one telephone conversation with the same person about the same debt during a period of seven consecutive days. The Bureau also requests comment on whether, instead of a bright-line rule, the Bureau should adopt a rebuttable presumption of compliance and of a violation. Under a rebuttable presumption approach, a debt collector who places telephone calls at or below the frequency limits presumptively would comply with § 1006.14(b)(1). Likewise, a debt collector who exceeds the frequency limits presumptively would violate § 1006.14(b)(1). These presumptions could be rebutted based on the facts and circumstances of a E:\FR\FM\21MYP2.SGM 21MYP2 23320 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 particular situation. For example, a consumer could rebut the presumption of compliance for a debt collector who stayed below the frequency limits by showing that the debt collector knew or should have known that telephone calls, even below the frequency limits, would have the natural consequence of harassing, oppressing, or abusing the consumer. Similarly, a debt collector who exceeded the frequency limits could rebut the presumption of a violation by showing that, under the circumstances, additional calls above the limits would not have the natural consequence of harassing, oppressing, or abusing the consumer. Finally, the Bureau requests comment on the alternative of adopting only a rebuttable presumption of a violation or only a rebuttable presumption of compliance. For example, one alternative would be to provide a safe harbor only for telephone calls below the frequency limits, with no provision for telephone calls above the frequency limits. Such an approach would provide certainty to both debt collectors and consumers about a per se permissible level of calling, but it would leave open the question of how many telephone calls is too many under the FDCPA and the Dodd-Frank Act. The Bureau does not propose such an approach because it appears that it would not provide the clarity that debt collectors and consumers have sought; nor does it appear to provide the same degree of consumer protection as a per se prohibition against telephone calls in excess of a specified frequency. Another alternative that the Bureau considered is a safe harbor for telephone calls below the limits paired with a rebuttable presumption of a violation for telephone calls above the limits. (The Bureau also considered the opposite: A rebuttable presumption of compliance for telephone calls below the limits paired with a per se prohibition against telephone calls in excess of the limits). The Bureau requests comment on the merits of these alternative approaches and others that the Bureau may not have considered. 14(b)(5) Definition Proposed § 1006.14(b)(5) generally would define the term particular debt, as that term is used in proposed § 1006.14(b)(2), to mean each of a consumer’s debts in collection. With respect to student loan debts, however, the term particular debt would mean all debts that a consumer owes or allegedly owes that were serviced under a single account number at the time the debts were obtained by the debt collector. Proposed § 1006.14(b)(5) would clarify VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 how the frequency limits in § 1006.14(b)(2) would apply when a consumer has multiple debts being collected by the same debt collector at the same time.338 In some cases, when a consumer has multiple debts in collection, either from one creditor or from multiple creditors, a single debt collector will attempt to collect some or all of them. Debt collectors in this situation typically make distinct efforts to collect each debt rather than, for example, asking the consumer about all of the debts during a single telephone call. One reason for this segregation is that larger debt collectors often collect multiple debts owed by the same consumer to different creditors, and each creditor may require its debt collectors to keep information about its debts separate from information about other creditors’ debts. A creditor may require this so that it can ensure that debt collectors are complying with the creditor’s specific debt collection guidelines. Consequently, some larger debt collectors may have groups of employees dedicated to collecting only a particular creditor’s debts. In addition, some debt collectors segregate debts because they have employees who specialize in collecting different types of debts. In other cases, such as with medical debts, privacy concerns or State or Federal laws may require a debt collector to segregate information about a particular debt from information about a consumer’s other debts. A consumer’s debts also may enter collection at different points in time and thus be at different stages of the collections process, such that the different debts may be eligible for different types of settlement offers. Debt collectors report that, in many cases, their systems are not structured to consolidate information about different debts owed by the same consumer. Finally, debt collectors may not find it productive to discuss multiple debts on a single telephone call because consumers may not be able or prepared to discuss more than one debt during the telephone call or may find it overwhelming, confusing, or simply too time consuming to discuss multiple debts, with different related terms and offers, during a single telephone call. The Bureau considered proposing a limit on the number of times a debt 338 This clarification may be necessary because most consumers with at least one debt in collection have multiple debts in collection. See CFPB Debt Collection Consumer Survey, supra note 18, at 13, table 1; see also CFPB Medical Debt Report, supra note 20, at 20 (reporting that most consumers with one collections tradeline have multiple collections tradelines). PO 00000 Frm 00048 Fmt 4701 Sfmt 4702 collector could place telephone calls to any one person within seven days (i.e., a per-person limit), regardless of how many debts the debt collector was attempting to collect from that person. Creditors, however, could sidestep a per-person limit by placing debts with debt collectors who collect for only one or a limited number of creditors, or by assigning only a single debt to any one debt collector. Alternatively, if one debt collector were collecting multiple debts for multiple creditors, a per-person limit could incentivize the debt collector to discuss all of those debts with the consumer in the single permissible telephone conversation each week. This could result in consumers receiving an overwhelming amount of information about, for example, different settlement or payment structures for different creditors. This also could complicate debt collection conversations if, for example, consumers wanted to dispute one or some, but not all, of the debts. Alternatively, a per-person limit could encourage debt collectors to sequence collection of a consumer’s debts, thereby prolonging the collections process for some debts. For these reasons, and pursuant to its authority under FDCPA section 814(d) to prescribe rules for the collection of debt by debt collectors, the Bureau proposes § 1006.14(b)(5) to define the term particular debt, as used in proposed § 1006.14(b)(2), generally to mean each of a consumer’s debts in collection. The concerns outlined above may not apply to the collection of multiple student loan debts that were serviced under a single account number at the time the debts were obtained by the debt collector. In these situations, the debt collector and consumer appear to interact as if there were only a single debt. This would be consistent with how the loans were likely serviced before entering collection, as multiple student loan debts are often serviced under a single account number and billed on a single, combined account statement, with a single total amount due and requiring a single payment from the consumer. For this reason, in the case of student loan debts, the Bureau proposes to define the term particular debt to mean all such debts that a consumer owes or allegedly owes that were serviced under a single account number at the time the debts were obtained by the debt collector. Under proposed § 1006.14(b)(5), the frequency limits in proposed § 1006.14(b)(2) would apply to all such debts collectively. Proposed comment 14(b)(5)–1 provides illustrative examples. E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules The Bureau requests comment on the proposed definition of particular debt. The Bureau specifically requests comment on the proposal to apply the frequency limits in proposed § 1006.14(b)(2) generally on a per-debt, as opposed to per-person, basis. The Bureau requests comment on whether, if the proposed per-debt approach is adopted, additional clarification is needed about how to count telephone calls when a debt collector places one telephone call to a consumer to discuss more than one particular debt. In particular, the Bureau requests comment on whether the rule should clarify how the frequency limits apply when a debt collector places an unanswered telephone call to a consumer to discuss two of the consumer’s debts (e.g., a credit card debt and a medical debt), or when a debt collector who is collecting two such debts leaves the consumer only a general message that does not refer specifically to either debt (e.g., ‘‘Please remember to pay what you owe’’). The Bureau similarly requests comment on whether clarification is needed for the situation in which a debt collector has a telephone conversation with a consumer about more than one debt but does not specifically refer to either debt, and on whether the proposal appropriately counts the single conversation as having been about all of the debts for purposes of the frequency limits. Finally, the Bureau requests comment on: (1) The proposal to aggregate certain student loan debts for purposes of § 1006.14(b)(2), including whether some student loan debts serviced under the same account number should be counted separately; and (2) whether any types of debts other than student loans should be aggregated, such that multiple debts that were serviced under a single account number at the time the debts were obtained by the debt collector (or met other specified conditions) would be treated as a single debt for purposes of the frequency limits. Under such an approach, for example, multiple medical debts could be aggregated for purposes of § 1006.14(b)(2) if they met certain conditions, such as being serviced under the same account number at the time the debt collector obtained them. The Bureau requests comment on such an approach, including on the possible difficulties of aggregating accounts other than student loan accounts given the different facts that could apply to each debt. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 14(h) Prohibited Communication Media 339 14(h)(1) In General Proposed § 1006.14(h)(1) would prohibit a debt collector from communicating or attempting to communicate with a consumer through a medium of communication if the consumer has requested that the debt collector not use that medium to communicate with the consumer. Pursuant to its authority under FDCPA section 814(d) to write rules with respect to the collection of debts by debt collectors, the Bureau proposes § 1006.14(h)(1) as an interpretation of FDCPA section 806, which, as discussed in part IV, prohibits a debt collector from engaging in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. Since the enactment of the FDCPA, the possible media through which communications generally are conducted has expanded beyond telephone, mail, and in-person conversations to include various mobile and portable technologies that were not contemplated in 1977. For example, with the advent of the mobile telephone, a consumer may receive a telephone call at any time or place. As the CFPB Debt Collection Consumer Survey indicated, consumers have varied but strong preferences about the media that debt collectors use to communicate with them.340 Once a consumer has requested that a debt collector not use a specific medium of communication to communicate with the consumer, the Bureau believes that the natural consequence of further communications or attempts to communicate from the debt collector to the consumer using that same medium likely is harassment, oppression, or abuse of the consumer. Consistent with this interpretation, the Bureau understands that some debt collectors currently refrain from communicating with a consumer through a medium that the consumer has requested that the debt collector not use to communicate with the consumer, including, for example, specific telephone numbers that the consumer has asked the debt collector not to call. For these reasons, the Bureau proposes § 1006.14(h)(1) to provide that, in connection with the collection of any 339 As noted above, proposed § 1006.14(c) through (g) generally mirror the statute, with minor wording and organizational changes for clarity, and are not discussed further in this section-by-section analysis. 340 See CFPB Debt Collection Consumer Survey, supra note 18, at 36–37. PO 00000 Frm 00049 Fmt 4701 Sfmt 4702 23321 debt, a debt collector must not communicate or attempt to communicate with a consumer through a medium of communication if the consumer has requested that the debt collector not use that medium to communicate with the consumer. The Bureau also proposes commentary to § 1006.14(h)(1). Proposed comment 14(h)(1)–1 refers to comment 2(d)–1 for examples of communication media. Proposed comment 14(h)(1)–2 would clarify that, within a medium of communication, a consumer may request that a debt collector not use a specific address or telephone number and provides an example. The Bureau proposes this comment on the grounds that a specific address or telephone number may be considered a medium, and that contacting a consumer through a specific address or telephone number that the consumer has requested the debt collector not use may be just as harassing as contacting the consumer through a medium of communication that the consumer has requested the debt collector not use. The Bureau requests comment on proposed § 1006.14(h)(1) and its related commentary. As discussed above, pursuant to its authority under FDCPA section 814(d) to write rules with respect to the collection of debts by debt collectors, the Bureau proposes § 1006.14(h)(1) as an interpretation of FDCPA section 806, on the basis that once a consumer has requested that a debt collector not use a specific medium of communication to communicate with the consumer, a debt collector who nevertheless continues to communicate or attempt to communicate with the consumer using that medium is engaging in conduct the natural consequence of which is to harass, oppress, or abuse. The Bureau believes that proposed § 1006.14(h)(1) is consistent with this statutory language and the purpose of the FDCPA. As FDCPA section 802(e) explains, in relevant part, the purpose of the Act is to eliminate abusive debt collection practices by debt collectors.341 The Bureau interprets FDCPA section 806’s general prohibition on engaging in conduct the natural consequence of which is to harass, oppress, or abuse in light of this purpose specified in the FDCPA, as well as in light of similar conduct specifically prohibited by the FDCPA. 14(h)(2) Exceptions Proposed § 1006.14(h)(2) provides two exceptions to the general prohibition in proposed § 1006.14(h)(1). Proposed 341 15 E:\FR\FM\21MYP2.SGM U.S.C. 1692(e). 21MYP2 23322 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 § 1006.14(h)(2)(i) provides that, notwithstanding the prohibition in § 1006.14(h)(1), if a consumer opts out in writing of receiving electronic communications from a debt collector, a debt collector may reply once to confirm the consumer’s request to opt out, provided that the reply contains no information other than a statement confirming the consumer’s request. Proposed § 1006.14(h)(2)(ii) provides that, if a consumer initiates contact with a debt collector using an address or a telephone number that the consumer previously requested the debt collector not use, the debt collector may respond once to that consumer-initiated communication. The Bureau proposes § 1006.14(h)(2) because a single communication from a debt collector of the types described likely would not have the natural consequence of harassing, oppressing, or abusing the consumer within the meaning of FDCPA section 806.342 The Bureau requests comment on the exceptions in proposed § 1006.14(h)(2). As discussed above, a consumer may request that a debt collector not communicate with the consumer using a specific medium of communication. However, there may be circumstances in which applicable law requires the debt collector to communicate with the consumer only through that specific medium and does not offer an alternative medium for compliance (e.g., by permitting a debt collector to electronically provide a notice that otherwise would be mailed). The Bureau requests comment on whether there are specific laws that require communication with the consumer through one specific medium, and if so, whether additional clarification is needed regarding the delivery of legally required communications through a specific medium of communication required by applicable law if the consumer has generally requested that the debt collector not use that medium to communicate with the consumer. Section 1006.18 False, Deceptive, or Misleading Representations or Means FDCPA section 807 generally prohibits a debt collector from using any false, deceptive, or misleading representations or means in connection with the collection of any debt. The section lists 16 non-exhaustive examples of such prohibited conduct.343 Proposed § 1006.18 would implement FDCPA section 807. Except for certain 342 Proposed § 1006.14(h)(2) also is consistent with the regulations implementing the CAN–SPAM Act, which permit senders to send a reply electronic message. See 16 CFR 316.5. 343 15 U.S.C. 1692e. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 organizational changes and interpretations in § 1006.18(e) through (g), which are discussed below, proposed § 1006.18 generally restates the statute with only minor wording changes for clarity. The Bureau proposes § 1006.18 pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors. The Bureau proposes to organize § 1006.18 by grouping the 16 nonexhaustive examples of prohibited false or misleading representations in FDCPA section 807 into categories of related conduct, as follows. Proposed § 1006.18(a) would implement the general prohibition in FDCPA section 807 by prohibiting a debt collector from using any false, deceptive, or misleading representation or means in connection with the collection of any debt. Proposed § 1006.18(b) restates FDCPA section 807’s examples of false, deceptive, or misleading representations.344 Proposed § 1006.18(c) restates FDCPA section 807’s examples of false, deceptive, or misleading collection means.345 Proposed § 1006.18(d) restates the catchall prohibition against false representations or deceptive means as described in FDCPA section 807(10). Proposed § 1006.18(e) addresses the disclosures required under FDCPA section 807(11). Finally, proposed § 1006.18(f) addresses the use of assumed names by debt collectors’ employees, and proposed § 1006.18(g) addresses misrepresentations of meaningful attorney involvement in debt collection litigation. 18(e) Disclosures Required FDCPA section 807(11) requires debt collectors to disclose in their initial communications with consumers that they are attempting to collect a debt and that any information obtained will be used for that purpose, and to disclose in their subsequent communications with consumers that the communication is from a debt collector, except in a formal pleading made in connection with a 344 Proposed § 1006.18(b)(1)(i) through (viii) would implement, respectively, paragraphs (1), (16), (3), (7), (6), (12), (13), and (15) of FDCPA section 807, and proposed § 1006.18(b)(2) would implement FDCPA section 807(2). Restating the statutory language is not intended to suggest any particular interpretation of that language. For example, the omission of the words ‘‘or imply’’ from the introductory language to § 1006.18(b)(2) consistent with the statutory language in FDCPA section 807(2) is not intended to suggest that the Bureau would not regard implied false representations as violations of FDCPA section 807 or 807(2) or proposed § 1006.18(b)(2). 345 Proposed § 1006.18(c)(1) through (4) would implement, respectively, paragraphs (5), (8), (9), and (14) of FDCPA section 807. PO 00000 Frm 00050 Fmt 4701 Sfmt 4702 legal action.346 Proposed § 1006.18(e) would implement FDCPA section 807(11). Proposed comment 18(e)(1)–1 describes the circumstances in which debt collectors would be required to provide disclosures in initial communications under proposed § 1008.18(e)(1). Proposed comment 18(e)(1)–1 specifies that a debt collector must provide the disclosures in the debt collector’s initial communication with the consumer, regardless of whether that initial communication is written or oral, and regardless of whether the debt collector or the consumer initiated the communication. Proposed comment 18(e)(1)–1 also provides an example of the rule regarding required disclosures during initial communications. Proposed comment 18(e)–1 provides general commentary to explain how the disclosure requirements in proposed § 1006.18(e) interact with the proposed rule’s limited-content message, a message that is not a communication under proposed § 1006.2(d). Proposed comment 18(e)–1 would clarify that, because a limited-content message is not a communication, a debt collector who leaves only a limited-content message for a consumer does not need to provide the disclosures required under proposed § 1008.18(e)(1) and (2). For a more detailed discussion of the terms communication and limited-content message, see the section-by-section analysis of proposed § 1006.2(d) and (j), respectively. The Bureau requests comment on all aspects of proposed § 1006.18 and on whether additional clarification would be useful. In particular, the Bureau requests comment on whether additional clarification regarding false or misleading representations would be helpful in the decedent debt context, or whether to require any affirmative disclosures when debt collectors communicate in connection with the collection of a debt owed by a deceased consumer. As discussed in the sectionby-section analysis of proposed §§ 1006.2(e) and 1006.6(a)(4), this proposal would define the term consumer to clarify with whom debt collectors may communicate when attempting to resolve the debts of a deceased consumer. In its Policy Statement on Decedent Debt, the FTC expressed concern that, even absent explicit misrepresentations, a debt collector might violate FDCPA section 807 by communicating with such individuals in a manner that conveys the misleading impression that the individual is personally liable for the 346 15 E:\FR\FM\21MYP2.SGM U.S.C. 1692e(11). 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 deceased consumer’s debts, or that the debt collector could seek assets outside of the deceased consumer’s estate to satisfy the consumer’s debt. The FTC’s Policy Statement suggested two possible disclosures that debt collectors generally could use to avoid deceiving such individuals about their liability for the decedent’s debts.347 The FTC also noted that the information that would need to be disclosed to avoid deception would depend on the circumstances. While the Bureau believes that the FTC’s suggested disclosures generally would be sufficient to avoid deception in many circumstances, proposed § 1006.18 would not require such disclosures. Since the FTC issued its Policy Statement in 2011, neither the FTC nor the Bureau has brought any cases against debt collectors for making deceptive claims in the decedent debt context, including any such claims concerning the liability of other individuals for the decedent’s debts. Proposed § 1006.18’s general prohibition against false, deceptive, or misleading representations, however, would apply to express or implied misrepresentations that a personal representative is liable for the deceased consumer’s debts. The Bureau requests comment on whether the general prohibition against false, deceptive, or misleading representations in proposed § 1006.18 is sufficient to protect individuals who communicate with debt collectors about a deceased consumer’s debts, or whether affirmative disclosures in the decedent debt context are needed. 18(f) Use of Assumed Names Debt collectors commonly instruct or permit their employees to use assumed names when interacting with consumers, including by telephone. They do so for a variety of reasons. For example, some employees may have names that are difficult for some consumers to spell or pronounce. These employees may find that assuming a simpler name facilitates communications with consumers. Other employees may have privacy or safety concerns about revealing their true name and employer to a potentially large number of consumers. From a consumer’s perspective, it may not be relevant whether employees use true names or assumed names, 347 FTC Policy Statement on Decedent Debt, supra note 192, at 44922. The FTC’s suggested disclosures were: ‘‘(1) That the collector is seeking payment from the assets in the decedent’s estate; and (2) [that] the individual could not be required to use the individual’s assets or assets the individual owned jointly with the decedent to pay the decedent’s debt.’’ Id. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 provided that the name used does not mislead the consumer about the debt at issue and who is attempting to collect it. For example, the FTC previously issued guidance stating that a debt collector’s employee does not violate the FDCPA by using an assumed name if the employee uses the assumed name consistently and the debt collector can readily ascertain the employee’s identity.348 An employee’s consistent use of that name is not likely to affect the decisions a consumer makes about the debt. Further, a debt collector’s ability to readily ascertain the employee’s identity would enable the debt collector to monitor and address the conduct of such employee. Therefore, an approach similar to the FTC’s prior guidance may be appropriate for the use of assumed names. For these reasons, proposed § 1006.18(f) provides that nothing in § 1006.18 prohibits a debt collector’s employee from using an assumed name when communicating or attempting to communicate with a person, provided that the employee uses the assumed name consistently and that the employer can readily identify the employee even if the employee is using the assumed name. The Bureau requests comment on proposed § 1006.18(f), including on the use of assumed names by debt collectors’ employees in general, as well as on whether and how employers can readily identify their employees who are using assumed names. The Bureau proposes § 1006.18(f) pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors. Specifically, the Bureau interprets FDCPA section 807’s prohibition on false or misleading representations, and 806(6)’s prohibition on placing telephone calls without ‘‘meaningful disclosure of the caller’s identity,’’ to allow a debt collector’s employee to disclose an assumed name as long as the employee uses the name consistently and the debt collector can readily ascertain that employee’s true identity. 348 Fed. Trade Comm’n, Staff Commentary on the Fair Debt Collection Practices Act, 53 FR 50097, 50105 (Dec. 13, 1988) (‘‘1. Aliases. A debt collector employee’s use of an alias that permits identification of the debt collector (i.e., where he uses the alias consistently, and his true identity can be ascertained by the employer) constitutes a ‘‘meaningful disclosure of the caller’s identity.’’); see also id. at 50103 (‘‘An individual debt collector may use an alias if it is used consistently and if it does not interfere with another party’s ability to identify him (e.g., the true identity can be ascertained by the employer).’’). PO 00000 Frm 00051 Fmt 4701 Sfmt 4702 23323 18(g) Safe Harbor for Meaningful Attorney Involvement in Debt Collection Litigation Submissions FDCPA section 807 contains certain provisions designed to protect consumers from false, deceptive, or misleading representations made by, or means employed by, attorneys in debt collection litigation. FDCPA section 807(3) prohibits the false representation or implication that any individual is an attorney or that any communication is from an attorney. In addition, debt collection communications sent under an attorney’s name may violate FDCPA section 807(10) if the attorney was not meaningfully involved in the preparation of the communication.349 The meaningful attorney involvement case law has been applied in the specific context of debt collection litigation submissions.350 It may be particularly important for consumers, attorneys, and law firms engaged in such litigation to be protected by a clear articulation of what meaningful attorney involvement in debt collection litigation submissions means under FDCPA section 807, as would be implemented by proposed § 1006.18. A clear articulation of meaningful attorney involvement also may be useful to avoid confusion and unnecessary conflicts between State standards and Federal standards under the FDCPA and any implementing regulations. To provide clarity for law firms and attorneys submitting pleadings, written motions, or other papers to courts in debt collection litigation, proposed section § 1006.18(g) provides a safe harbor for attorneys and law firms against claims that they violated § 1006.18 due to the lack of meaningful attorney involvement in debt collection litigation materials signed by the attorney and submitted to the court, 349 See, e.g., Clomon v. Jackson, 988 F.2d 1314, 1320 (2d Cir. 1993); Nielsen v. Dickerson, 307 F.3d 623, 635 (7th Cir. 2002). Courts have found violations of other subsections of FDCPA section 807 for similar conduct. See e.g., Avila v. Rubin, 84 F.3d 222, 229 (7th Cir. 1996); Lesher v. Law Offices of Mitchell N. Kay, PC, 650 F.3d 993, 1002 (3d Cir. 2011). 350 See Miller v. Upton, Cohen & Slamowitz, 687 F.Supp.2d 86, 100 (applying meaningful involvement liability to, among other actions, filing of complaint in court); Bock v. Pressler & Pressler, 30 F.Supp.3d 283, 303 (D.N.J. 2014) (‘‘The claimed misrepresentation here does not relate to the ultimate veracity of the numbered factual allegations of the complaint; it concerns the veracity of the implied representation that an attorney was meaningfully involved in the preparation of the complaint. If, in fact, the attorney who signed the complaint is not involved and familiar with the case against the debtor, then the debtor has been unfairly misled and deceived within the meaning of the FDCPA. . . .’’), reaff’d on remand, 254 F.Supp.3d 724, 729 (D.N.J. 2017). E:\FR\FM\21MYP2.SGM 21MYP2 23324 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 provided that they meet the requirements in proposed § 1006.18(g). Proposed § 1006.18(g) provides that an attorney has been meaningfully involved in the preparation of debt collection litigation submissions if the attorney: (1) Drafts or reviews the pleading, written motion, or other paper; and (2) personally reviews information supporting the submission and determines, to the best of the attorney’s knowledge, information, and belief, that, as applicable: The claims, defenses, and other legal contentions are warranted by existing law; the factual contentions have evidentiary support; and the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or lack of information. The factors in proposed § 1008.18(g) are similar to some of the nationally recognized standards for attorneys making submissions in civil litigation.351 Because most FDCPA claims are considered by Federal courts, and Federal court rules are adopted and apply nationwide, Federal Rule of Civil Procedure 11(b)(2) through (4) as currently adopted may provide an appropriate guide for judging whether a submission to the court has complied with § 1006.18(g). Indeed, courts that have applied the meaningful attorney involvement doctrine to litigation submissions have considered that standard.352 Accordingly, the safe harbor in proposed § 1006.18(g) restates certain provisions of Federal Rule of Civil Procedure Rule 11(b). An attorney or law firm who establishes compliance with the factors set forth in proposed § 1006.18(g), including when a court in debt collection litigation determines that the debt collector has complied 351 The factors in proposed § 1008.18(g) omit the following two aspects of Federal Rule of Civil Procedure 11(b)(2) through (4): First, that the claims, defenses, or other legal contentions are a non-frivolous argument for extending, modifying, or reversing existing law or for establishing new law; and second, that the factual contentions are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery. This safe harbor is proposed in part to set clearer standards for routine debt collection litigation cases, in which there is unlikely to be an argument to extend, modify, or reverse existing law or to establish new law. The Bureau also understands that most factual contentions pled in debt collection litigation should be supported by evidence in the creditor’s or debt collector’s possession, thereby negating the need for further investigation or discovery. Moreover, proposed § 1006.18(g) would provide a safe harbor; thus, meeting one of these omitted aspects may permit an attorney to establish meaningful attorney involvement even if doing so would not entitle the attorney to the safe harbor that proposed § 1006.18(g) would establish. 352 See, e.g., Bock v. Pressler & Pressler, 2017 WL 4711472 at *7 n.5 (discussing initial decision at 30 F.Supp.3d 283, 299–302); Miller, 687 F.Supp.2d at 101 (analogizing to Rule 11). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 with a court rule that is substantially similar to the standard in § 1006.18(g), will have complied with FDCPA section 807 regarding the attorney’s meaningful involvement in submissions made in debt collection litigation. The Bureau requests comment on whether the safe harbor proposed for meaningful attorney involvement in debt collection litigation submissions provides sufficient clarity for consumers, attorneys, and law firms. Section 1006.22 Unfair or Unconscionable Means FDCPA section 808 prohibits a debt collector from using any unfair or unconscionable means to collect or attempt to collect any debt and lists eight non-exhaustive examples of such prohibited conduct.353 The Bureau proposes § 1006.22 to implement and interpret FDCPA section 808 and pursuant to its authority under FDCPA section 814(d) to write rules with respect to the collection of debts by debt collectors. Proposed § 1006.22(a) would implement FDCPA section 808’s general prohibition against unfair debt collection practices, and proposed § 1006.22(b) through (f)(2) would implement the prohibited conduct examples in FDCPA section 808.354 These proposed paragraphs generally mirror the statute, with minor wording and organizational changes for clarity. The following section-by-section analysis thus discusses only proposed § 1006.22(f)(3) and (4) and (g). 22(f) Restrictions on Use of Certain Media Proposed § 1006.22(f)(3) and (4) would restrict a debt collector’s use of two specific types of electronic media: Work email accounts and public-facing social media. As to electronic media more generally, the Bureau plans to monitor their evolution and use by debt collectors, as well as any trends in FDCPA section 808 litigation concerning such media, to identify issues that pose a risk of consumer harm or require clarification as part of any future rulemakings. 22(f)(3) Proposed § 1006.22(f)(3) would prohibit a debt collector from communicating or attempting to 353 15 U.S.C. 1692f. proposed § 1006.22(b) would implement FDCPA section 808(1); proposed § 1006.22(c) would implement FDCPA section 808(2) through (4); proposed § 1006.22(d) would implement FDCPA section 808(5); proposed § 1006.22(e) would implement FDCPA section 808(6); proposed § 1006.22(f)(1) would implement FDCPA section 808(7); and proposed § 1006.22(f)(2) would implement FDCPA section 808(8). 354 Specifically, PO 00000 Frm 00052 Fmt 4701 Sfmt 4702 communicate with a consumer using an email address that the debt collector knows or should know is provided to the consumer by the consumer’s employer, unless the debt collector has received directly from the consumer either prior consent to use that email address or an email from that email address. The FDCPA contains both general and specific prohibitions intended to protect consumers from the harms that workplace collections communications can cause. For example, absent obtaining the consumer’s prior consent, a debt collector who discloses a debt to a consumer’s employer generally would violate FDCPA section 805(b)’s prohibition on communicating with a third party about a debt.355 A debt collector also could violate FDCPA section 805(a)(3) by communicating with the consumer at the consumer’s place of employment if the debt collector knows or has reason to know that the consumer’s employer prohibits the consumer from receiving such communications.356 Debt collectors and consumers may have questions about how the FDCPA’s protections against third-party disclosures apply to workplace contacts by newer means of communication, such as email. Debt collectors should be aware that many employers have a legal right to read, and in fact frequently do read, messages sent or received by employees on their work email accounts.357 Workplace emails therefore present a particularly high risk of thirdparty disclosure through an employer reading an email sent by a debt collector to a consumer’s work account. In addition, Congress and the courts have recognized that an employer learning that an employee has a debt in collection may cause the consumer to suffer significant harms, including loss 355 15 U.S.C. 1692c(b). U.S.C. 1692c(a)(3). 357 See, e.g., Am. Mgmt. Ass’n & ePolicy Inst., Electronic Monitoring and Surveillance 2007 Survey (2008), https://www.amanet.org/training/articles/ 2007-electronic-monitoring-and-surveillancesurvey-41.aspx (reporting that a survey of employers conducted in 2007 found that, among other things, 43 percent of employers monitored their employees’ email accounts and 66 percent of employers monitored their employees’ internet connection, with 45 percent of employers tracking the content, keystrokes, and time spent at the keyboard); Bingham v. Baycare Health Sys., No. 8:14–CV–73–T–23JSS, 2016 WL 3917513, at *4 (M.D. Fla. July 20, 2016) (collecting cases and concluding that ‘‘the majority of courts have found that an employee has no reasonable expectation of privacy in workplace emails when the employer’s policy limits personal use or otherwise restricts employees’ use of its system and notifies employees of its policy’’). 356 15 E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 of employment.358 The Bureau proposes § 1006.22(f)(3) on the ground that a debt collector who sends a communication to a consumer’s work email account violates the FDCPA if the debt collector knows or can reasonably anticipate that a communication sent to a consumer’s work email account might be opened and read by someone other than the consumer. There is support for this interpretation in court decisions holding that a debt collector who sends a letter to a consumer’s place of employment violates the FDCPA if the debt collector ‘‘knew or could reasonably anticipate that [such] a letter . . . might be opened and read by someone other than the debtor as it made its way to [the consumer].’’ 359 358 S. Rept. No. 382, supra note 70, at 1699 (‘‘[A] debt collector may not contact third persons such as a consumer’s friends, neighbors, relatives, or employer. Such contacts are not legitimate collection practices and result in serious invasions of privacy, as well as the loss of jobs.’’); id. at 1696 (‘‘Collection abuse takes many forms, including . . . disclosing a consumer’s personal affairs to friends, neighbors, or an employer.’’); 122 Cong. Rec. H730707 (daily ed. July 19, 1976) (remarks of Rep. Annunzio on H. Rept. 13720) (Clearinghouse No. 31,059U) (‘‘Communication with a consumer at work or with his employer may work a tremendous hardship for a consumer because such calls can embarrass a consumer and can result in his losing a deserved promotion’’ and ‘‘[i]f a consumer loses his job, he is in a worse, not better, position to pay the debt.’’); Am. Fin. Servs. Ass’n v. Fed. Trade Comm’n, 767 F.2d 957, 974 (D.C. Cir. 1985) (upholding provision in the FTC’s Credit Practices Rule that prohibited certain wage assignments because, among other things, the rulemaking record showed that ‘‘employers tend to view the consumer’s failure to repay the debt as a sign of irresponsibility. As a consequence many lose their jobs after wage assignments are filed. Even if the consumer retains the job, promotions, raises, and job assignments may be adversely affected.’’) (citing Credit Practices Rule, 49 FR 7740, 7758 (1984) (codified at 16 CFR 444)); Fed. Trade Comm’n v. LoanPointe, LLC, No. 2:10–CV–225DAK, 2011 WL 4348304, at *6–8 (D. Utah Sept. 16, 2011) (holding that ‘‘Defendants’ practice of disclosing debts and the amount of the debts to consumers’ employers’’ violated the FDCPA and ‘‘qualifies as an unfair practice under the FTC Act’’), aff’d, 525 F. App’x 696 (10th Cir. 2013). The State of New York prohibits a debt collector from corresponding with a consumer by email unless, among other things, the consumer voluntarily provided the email address to the debt collector and has affirmed that the email is not ‘‘furnished or owned by the consumer’s employer.’’ 23 N.Y. Comp. Codes R. & Regs. tit. 23, sec. 1.6(a) (2018). 359 Evon v. Law Offices of Sidney Mickell, 688 F.3d 1015, 1025–26 (9th Cir. 2012) (holding that a letter addressed ‘‘in care of [consumer’s] employer’’ and delivered to her at work, ‘‘manifestly constitutes a violation [of the FDCPA because the debt collector] knew or could reasonably anticipate that a letter sent to a class member’s employer might be opened and read by someone other than the debtor as it made its way to him/her. This is exactly what happened to [the consumer], causing her stress and embarrassment, precisely what the Act is designed to prevent.’’); see also Fed. Trade Comm’n, Staff Commentary on the Fair Debt Collection Practices Act, 53 FR 50097–02, 50104 (Dec. 13, 1988) (‘‘Accessibility by third party. A debt collector may not send a written message that is VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 As suggested by numerous consumer advocacy groups and a consortium of State attorneys general in comments to the Bureau’s ANPRM, requiring a debt collector to obtain a consumer’s consent, or to have received an email from the consumer, before sending emails to the consumer’s work account could protect the consumer’s privacy interest in avoiding the disclosure of the debt to the consumer’s employer. This privacy interest is implicated by both communications and attempts to communicate. A debt collector’s initial, unsolicited email that does not convey information regarding a debt nonetheless may induce a recipient such as a consumer or an employer to inquire about the purpose of the debt collector’s message. The debt collector’s attempt to communicate thus may lead to the disclosure of the debt to a third party before the consumer has had a meaningful opportunity to provide prior consent. A consumer who chooses to use a work email account to contact a debt collector, or who provides prior consent for the debt collector to use such an email account to contact the consumer, presumably has made a determination that the benefits of communicating with a debt collector about a debt using a work email account outweigh the potential risks, and a debt collector who receives such an email or prior consent from the consumer may not reasonably anticipate that its emails to the consumer would be read by the consumer’s employer. Accordingly, after a consumer uses the work email account to contact the debt collector or provides prior consent, it would not appear to be an unfair or unconscionable practice under FDCPA section 808 for a debt collector to communicate or attempt to communicate with the consumer using an email address that the debt collector knows or should know is provided by the consumer’s employer. For all of these reasons, pursuant to its authority to implement and interpret FDCPA section 808 and its authority under FDCPA section 814(d) to write rules with respect to the collection of debts by debt collectors, the Bureau proposes § 1006.22(f)(3) to prohibit a debt collector from communicating or attempting to communicate with a consumer using an email address that the debt collector knows or should know is provided to the consumer by the consumer’s employer, unless the debt collector has received directly from easily accessible to third parties. For example, he may not use a computerized billing statement that can be seen on the envelope itself. A debt collector may use an ‘in care of’ letter only if the consumer lives at, or accepts mail at, the other party’s address.’’). PO 00000 Frm 00053 Fmt 4701 Sfmt 4702 23325 the consumer either prior consent to use that email address or an email from that email address. Proposed comment 22(f)(3)–1 notes that, even after providing prior consent directly to a debt collector, a consumer could opt out of receiving emails at a work email address at any time using instructions provided by a debt collector pursuant to proposed § 1006.6(e), or otherwise request not to receive emails at that address pursuant to proposed § 1006.14(h). Proposed comment 22(f)(3)–1 also refers to the commentary to proposed § 1006.6(b)(4)(i) for additional guidance on prior consent. Proposed comment 22(f)(3)–2 would clarify that a debt collector who receives an email directly from a consumer from an email address provided by the consumer’s employer may communicate or attempt to communicate with the consumer at that email address, even if the consumer’s email does not provide prior consent to the debt collector. Proposed comment 22(f)(3)–2 also provides an example of such a situation. Proposed comment 22(f)(3)–3 provides examples of email addresses that a debt collector knows or should know are provided to the consumer by the consumer’s employer. Proposed comment 22(f)(3)–3 also states that, in the absence of contrary information, a debt collector neither would know nor should know that an email address is provided to the consumer by the consumer’s employer if the email address’s domain name is one commonly associated with a provider of non-work email addresses. Examples of domain names that are commonly associated with a provider of non-work email addresses would include gmail.com, yahoo.com, hotmail.com, aol.com, or msn.com, among others.360 During the SBREFA process, small entity representatives sought guidance on how they would know whether an email address is provided to a consumer by an employer and also suggested that a consumer’s consent to use a work email should transfer from the creditor to the debt collector.361 Proposed comment 22(f)(3)–3, which addresses when a debt collector knows or should 360 See, e.g., Email-Verify.My.Addr.com, List of Most Popular Email Domains (By Number of Live Emails), https://email-verify.my-addr.com/list-ofmost-popular-email-domains.php (last visited May 6, 2019) (listing the most popular email domain names, ranked by number of live emails). 361 These comments were similar to ANPRM comments submitted by several industry members, who noted that debt collectors may not be able to determine accurately whether an email address is provided by an employer because, among other things, the domain name may not signify that it is a work email or the consumer may consolidate multiple email accounts. E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 23326 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules know that an email address is provided by a consumer’s employer, is designed to provide such guidance. In addition, proposed § 1006.22(f)(3) would not apply a strict liability standard, so a debt collector would not violate the rule if the debt collector neither knew nor should have known that the debt collector used a consumer’s work email address. The Bureau does not propose, however, that a consumer’s prior consent to receive email on the consumer’s work account from a creditor would transfer to a debt collector. A consumer may enter into a transaction with, and consent to receiving emails on their work account from, a creditor based on the characteristics of that particular creditor; in contrast, consumers generally have no ability to choose which debt collector attempts to collect their debt. One small entity representative recommended that emails to a consumer’s work address be presumptively prohibited only if the debt collector knows or should know that the employer prohibits such contact (i.e., applying the FDCPA section 805(a)(3) framework to work email accounts).362 As discussed above, workplace email communications present a particularly high risk of thirdparty disclosure because many employers have a legal right to read messages sent or received by employees on their work email accounts. For this reason, the prohibition in proposed § 1006.22(f)(3) does not apply the FDCPA section 805(a)(3) framework. Rather, to protect consumers from loss of employment and risk of embarrassment, the Bureau proposes to require that a debt collector obtain prior consent to use that email address directly from the consumer, or have received an email sent from the consumer’s work email account, before using the consumer’s work email account. The Bureau requests comment on all aspects of proposed § 1006.22(f)(3). In particular, the Bureau requests comment on whether FDCPA section 805(a)(3)’s framework should apply to emails to a consumer’s work account, so that such emails are presumptively prohibited only when a debt collector knows or should know that a consumer’s employer prohibits the consumer from receiving such communications. The Bureau also requests comment on whether more clarification is necessary regarding when a debt collector knows or should know that the debt collector 362 See the section-by-section analysis of proposed § 1006.6(b)(3). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 is communicating using a consumer’s work email address and, if so, what circumstances should indicate to a debt collector that an email address is provided by a consumer’s employer. The Bureau further requests comment on the scope of proposed § 1006.22(f)(3). As proposed, it would apply only to email contacts with the person obligated or allegedly obligated to pay a debt (i.e., a person defined as a consumer under proposed § 1006.2(e)). The Bureau requests comment on whether it should be broadened to apply to email contacts with a consumer as defined in proposed § 1006.6(a). 22(f)(4) Proposed § 1006.22(f)(4) provides that a debt collector must not communicate or attempt to communicate with a consumer in connection with the collection of a debt by a social media platform that is viewable by a person other than the consumer or other person described in proposed § 1006.6(d)(1)(i) through (vi). The FDCPA contains numerous provisions that guard against the disclosure of the consumer’s financial affairs to individual third parties or the broader public.363 For example, FDCPA section 805(b) generally prohibits communicating with third parties in connection with the collection of a debt; FDCPA section 806(3) prohibits publishing public ‘‘shame lists’’ of consumers who allegedly refuse to pay their debts; 364 and FDCPA section 808(7) and (8) prohibits communicating with a consumer regarding a debt by postcard or using most language or symbols on the outside of an envelope. The Bureau believes that communications or attempts to communicate by social media platforms that are viewable by a person other than a person with whom a debt collector may communicate under FDCPA section 805(b) similarly risk exposing a consumer’s affairs to the public. For example, a debt collector’s message to a consumer posted on a public-facing social media page may be viewed by 363 Invasion of individual privacy appears to have been one of the primary harms that Congress sought to eliminate through the FDCPA. FDCPA section 802(a), (e); 15 U.S.C. 1692(a), (e); S. Rept. No. 382, supra note 70, at 1699 (‘‘[A] debt collector may not contact third persons such as a consumer’s friends, neighbors, relatives, or employer. Such contacts are not legitimate collection practices and result in serious invasions of privacy, as well as the loss of jobs.’’); id. at 1696 (‘‘Collection abuse takes many forms, including . . . disclosing a consumer’s personal affairs to friends, neighbors, or an employer.’’); see also Douglass v. Convergent Outsourcing, 765 F.3d 299, 303 (3d Cir. 2014) (describing ‘‘the invasion of privacy’’ as ‘‘a core concern animating the FDCPA’’). 364 S. Rept. No. 382, supra note 70, at 1696. PO 00000 Frm 00054 Fmt 4701 Sfmt 4702 many of the consumer’s social or professional contacts, who may interpret a widely distributed message asking that the consumer return a call as an indication that the consumer is delinquent on an obligation. Accordingly, a debt collector may engage in an unfair or unconscionable act by, in connection with the collection of a debt, communicating or attempting to communicate with a consumer by publicly viewable social media platform. Such conduct also may have the natural consequence of harassing, oppressing, or abusing the consumer. Although some social media contacts, such as a limited-content message, may not convey information regarding a debt directly or indirectly to any person, given the many other ways a debt collector could attempt to communicate with a consumer that are not viewable by a potentially wide array of the consumer’s social or professional colleagues—such as by telephone, text message, postal mail, email, or private message through the same social media platform—a debt collector may have no legitimate purpose in contacting a consumer by publicly viewable social media. As a result, such conduct may serve only to harass, oppress, or abuse. For these reasons, and pursuant to its authority under FDCPA section 814(d) and to interpret FDCPA sections 806 and 808, proposed § 1006.22(f)(4) provides that a debt collector must not communicate or attempt to communicate with a consumer in connection with the collection of a debt by a social media platform that is viewable by a person other than a person described in proposed § 1006.6(d)(1)(i) through (vi). Proposed comment 22(f)(4)–1 provides examples illustrating the proposed rule. The Bureau requests comment on all aspects of proposed § 1006.22(f)(4), including on whether debt collectors anticipate that they will use social media platforms to contact consumers. The Bureau also requests comment on whether debt collectors have any nonharassing purpose for attempting to communicate with consumers using public-facing social media platforms and, if so, whether proposed § 1006.22(f)(4) should have an exception for attempts to communicate such as limited-content messages. The Bureau further requests comment on the scope of proposed § 1006.22(f)(4). As proposed, it would apply only to social media contacts with the person obligated or allegedly obligated to pay a debt (i.e., a person defined as a consumer under proposed § 1006.2(e)). The Bureau requests comment on E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules whether it should be broadened to apply to social media contacts with any person described as a consumer in proposed § 1006.6(a). jbell on DSK3GLQ082PROD with PROPOSALS2 22(g) Safe Harbor for Certain Emails and Text Messages Relating to the Collection of a Debt FDCPA section 808 contains certain provisions designed to protect consumer privacy. As noted, FDCPA section 808(7) prohibits a debt collector from communicating with a consumer regarding a debt by postcard, and FDCPA section 808(8) generally prohibits a debt collector from using any language or symbol, other than the debt collector’s address, on any envelope when communicating with a consumer by postal mail. As courts have recognized, these provisions aim to protect consumer privacy by limiting public disclosure of a consumer’s debts.365 The examples in FDCPA section 808(7) and (8) apply to postal mail practices. In pre-proposal feedback, industry groups noted that uncertainty about how similar prohibitions might be applied to emails and text messages discourages the use of those technologies to communicate with consumers. To mitigate such uncertainty while also protecting consumer privacy, proposed § 1006.22(g) provides that a debt collector who communicates with a consumer using an email address, or telephone number for text messages, and follows the procedures described in proposed § 1006.6(d)(3) does not violate § 1006.22(a) by revealing in the email or text message the debt collector’s name or other information indicating that the communication relates to the collection of a debt. The procedures in proposed § 1006.6(d)(3) are designed to ensure that a debt collector who uses a particular email address or telephone number to communicate with a consumer by email or text message does not have a reason to anticipate that an unauthorized third-party disclosure may occur. If the proposed procedures work as designed, there would not be a reason to anticipate that a third party would see the debt collector’s name or other debt-collection-related information included in a communication sent to such an email address or telephone number. Some pre-proposal feedback raised the possibility that a third party could read an electronic communication on, for example, the consumer’s mobile telephone by looking over the 365 See, e.g., Douglass v. Convergent Outsourcing, 765 F.3d 299, 302 (3d Cir. 2014) (‘‘Section 1692f evinces Congress’s intent to screen from public view information pertinent to the debt collection.’’). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 consumer’s shoulder. However, this feedback did not include any actual evidence of the prevalence of such behavior. Moreover, consumers generally should be able to manage over-the-shoulder risk by choosing where and when to read electronic communications and how to configure their devices. Proposed § 1006.22(g) would provide a safe harbor only as to claims that a debt collector violated § 1006.22 by revealing in the email or text message the debt collector’s name or other information indicating that the communication relates to the collection of a debt. The proposed provision would not provide a safe harbor as to claims that a debt collector’s email or text message violated the FDCPA or Regulation F in other ways. The Bureau requests comment on proposed § 1006.22(g). In the Small Business Review Panel Outline, the Bureau described a proposal under consideration to prohibit a debt collector from sending an email message to a consumer if the ‘‘from’’ or ‘‘subject’’ lines contained information revealing that the email was about a debt.366 The Bureau’s concern was that such information could reveal to others that the communication related to a debt.367 The Bureau does not propose this restriction described in the Small Business Review Panel Outline. In pre-proposal feedback, debt collectors suggested that the restriction would make electronic communication generally more difficult. Some industry participants predicted that, if debt collectors were required to exclude from an email’s ‘‘from’’ or ‘‘subject’’ lines all information suggestive of debt collection, consumers would be less likely to understand the email’s purpose and more likely to treat the email like spam and delete or ignore it. This is consistent with research suggesting that the most important factors in whether a consumer will open an email are whether they recognize the sender and the content of the subject line.368 Proposed § 1006.6(d)(3), which, as noted above, describes procedures for obtaining and using an email address or a telephone number that is unlikely to lead to a third-party disclosure, may be a more effective initial step to minimize the risk of third-party disclosure. 366 Small Business Review Panel Outline, supra note 56, at appendix H. 367 Id. 368 Direct Marketing Ass’n, Consumer Email Tracker 2017, at 18 (2017), https://dma.org.uk/ uploads/misc/5a1583ff3301a-consumer-emailtracking-report-2017-(2)_5a1583ff32f65.pdf. PO 00000 Frm 00055 Fmt 4701 Sfmt 4702 Section 1006.26 Barred Debts 23327 Collection of Time- Proposed § 1006.26 contains interventions related to the collection of time-barred debts. Proposed § 1006.26(a) would define several terms, and proposed § 1006.26(b) would prohibit debt collectors from suing or threatening to sue consumers to collect time-barred debts. The Bureau proposes § 1006.26 pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors. 26(a) Definitions Proposed § 1006.26(a) would define several terms used in § 1006.26 but not defined in the FDCPA. These definitions would facilitate compliance with proposed § 1006.26(b), which would interpret FDCPA section 807 to prohibit debt collectors from suing and threatening to sue consumers to collect time-barred debts. 26(a)(1) Statute of Limitations Proposed § 1006.26(a)(2), discussed below, would define the term timebarred debt to mean a debt for which the applicable statute of limitations has expired. Proposed § 1006.26(a)(1), in turn, would define the term statute of limitations to mean the period prescribed by applicable law for bringing a legal action against the consumer to collect a debt. Statutes of limitations typically are established by State law and provide time limits for bringing suit on legal claims.369 They reflect a public policy determination that it is unjust to subject defendants to suit after a specified period.370 For debt collection claims, the length of the applicable statute of limitations often varies by State and, within each State, by debt type.371 Most statutes of limitations applicable to debt collection claims are between three and six years, although some are as long as 15 years.372 369 Federal law sometimes establishes the statute of limitations. For example, legal actions to recover certain telecommunications debt are subject to a statute of limitations set by Federal law. See 47 U.S.C. 415(a). 370 See, e.g., United States v. Kubrick, 444 U.S. 111, 117 (1979) (‘‘Statutes of limitations . . . represent a pervasive legislative judgment that it is unjust to fail to put the adversary on notice to defend within a specified period of time and that the right to be free of stale claims in time comes to prevail over the right to prosecute them.’’ (internal citation and quotation marks omitted)). 371 See Fed. Trade Comm’n, Repairing a Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration, at 24 (July 2010) (hereinafter FTC Litigation Report). 372 See FTC Debt Buying Report, supra note 14, at 42. E:\FR\FM\21MYP2.SGM 21MYP2 23328 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules Debt collectors generally are familiar with the concept of statutes of limitations, and the proposed definition generally should be consistent with debt collectors’ understanding of the term. The Bureau requests comment on the proposed definition and whether any additional clarification is needed. 26(a)(2) Time-Barred Debt Proposed § 1006.26(a)(2) would define the term time-barred debt to mean a debt for which the applicable statute of limitations has expired. Debt collectors generally are familiar with the concept of time-barred debt, and the definition of time-barred debt in proposed § 1006.26(a)(2) is consistent with debt collectors’ understanding of the term. Many debt collectors already determine whether the statute of limitations applicable to a debt has expired. Some do so to comply with State and local disclosure laws that require them to inform consumers when debts are time barred.373 Others do so to assess whether they can sue to collect the debt, which may affect their collection strategy. The information that debt buyers generally receive when bidding on and purchasing debts, and the information that other debt collectors generally receive at placement, should allow them to determine whether the applicable statute of limitations has expired.374 The Bureau requests comment on the proposed definition and on whether any additional clarification is needed. jbell on DSK3GLQ082PROD with PROPOSALS2 26(b) Suits and Threats of Suit Prohibited Under the laws of most States, expiration of the applicable statute of limitations, if raised by the consumer as an affirmative defense, precludes the debt collector from recovering on the debt using judicial processes, but it does not extinguish the debt itself.375 In other 373 See, e.g., Cal. Civ. Code § 1788.52(d)(3); Conn. Gen. Stat. § 36a–805(a)(14); Mass. Code Regs., tit. 940, § 7.07(24); N.M. Code. R. § 12.2.12.9(A); N.Y. Comp. Codes R. & Regs., tit. 23, § 1.3; New York City, N.Y., Rules, tit. 6, § 2–191(a); W. Va. Code § 46a–2–128(f). 374 See FTC Debt Buying Report, supra note 14, at 49 (‘‘The data the Commission received from debt buyers suggests that debt buyers usually are likely to know or be able to determine whether the debts on which they are collecting are beyond the statute of limitations.’’); CFPB Debt Collection Operations Study, supra note 45, at 23 (noting that the majority of respondents reported always or often receiving, among other things, debt balance at charge off, account agreement documentation, and billing statements). 375 In Mississippi and Wisconsin, debts are extinguished when the applicable statute of limitations expires. See Miss. Code Ann. § 15–1–3 (‘‘The completion of the period of limitation prescribed to bar any action, shall defeat and extinguish the right as well as the remedy.’’); Wis. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 words, in most States, a debt collector may use non-litigation means to collect a time-barred debt, as long as those means do not violate the FDCPA or other laws. If a debt collector does sue to collect a time-barred debt and the consumer proves the expiration of the statute of limitations as an affirmative defense, the court will dismiss the suit. Multiple courts have held that suits and threats of suit on time-barred debt violate the FDCPA, reasoning that such practices violate FDCPA section 807’s prohibition on false or misleading representations, FDCPA section 808’s prohibition on unfair practices, or both.376 The FTC has also concluded that the FDCPA bars actual and threatened suits on time-barred debt.377 In addition, at least one industry group requires its members to refrain from suing or threatening to sue on timebarred debts.378 Nevertheless, the Bureau’s enforcement experience suggests that some debt collectors may continue to sue or threaten to sue on time-barred debts.379 A debt collector who sues or threatens to sue a consumer on a time-barred debt may explicitly or implicitly misrepresent to the consumer that the debt is legally enforceable, and that misrepresentation likely is material to consumers because it may affect their Stat. Ann. § 893.05 (‘‘When the period within which an action may be commenced on a Wisconsin cause of action has expired, the right is extinguished as well as the remedy.’’). 376 See, e.g., Pantoja v. Portfolio Recovery Assocs., LLC, 852 F.3d 679, 683–84 (7th Cir. 2017); McMahon v. LVNV Funding, LLC, 744 F.3d 1010, 1020 (7th Cir. 2014); Phillips v. Asset Acceptance, LLC, 736 F.3d 1076, 1079 (7th Cir. 2013); Huertas v. Galaxy Asset Mgmt., 641 F.3d 28, 33 (3d Cir. 2011); Goins v. JBC & Assocs., P.C., 352 F. Supp. 2d 262, 273 (D. Conn. 2005); Kimber v. Fed. Fin. Corp., 668 F. Supp. 1480, 1487–89 (M.D. Ala. 1987). 377 FTC Litigation Report, supra note 371, at 23. 378 Receivables Mgmt. Ass’n Int’l, Receivables Management Certification Program, at 32 (Jan. 2018), https://rmassociation.org/wp-content/ uploads/2018/02/Certification-Policy-version-6.0FINAL-20180119.pdf (‘‘A Certified Company shall not knowingly bring or imply that it has the ability to bring a lawsuit on a debt that is beyond the applicable statute of limitations, even if state law revives the limitations period when a payment is received after the expiration of the statute.’’); see also David E. Reid, Out-of-Statute Debt: What is a Smart, Balanced, and Responsible Approach, at 8 (Receivables Mgmt. Ass’n Int’l, White Paper, 2015), https://rmassociation.org/wp-content/uploads/ 2017/04/RMA_Whitepaper_OOS.pdf (‘‘Although, as noted, the statute of limitations is an affirmative defense that, in almost all states, must be raised by the defendant or it is waived, it is improper to knowingly file OSD [i.e., out-of-statute debt] suits and wait to see if the defense is pled.’’). 379 Consent Order at ¶¶ 65–69, In re Encore Capital Group, Inc., No. 2015–CFPB–0022 (Sept. 9, 2015), https://files.consumerfinance.gov/f/201509_ cfpb_consent-order-encore-capital-group.pdf; Consent Order at ¶¶ 56–59, In re Portfolio Recovery Assocs. LLC, No. 2015–CFPB–0023 (Sept. 9, 2015), https://files.consumerfinance.gov/f/201509_cfpb_ consent-order-portfolio-recovery-associates-llc.pdf. PO 00000 Frm 00056 Fmt 4701 Sfmt 4702 conduct with regard to the collection of that debt, including, for example, whether to pay it.380 In response to the Bureau’s ANPRM, some consumer advocacy groups and State Attorneys General observed that consumers are often uncertain about their rights concerning time-barred debt. The Bureau’s consumer testing to date is consistent with those observations.381 In addition, as courts have recognized, the passage of time ‘‘dulls the consumer’s memory of the circumstances and validity of the debt’’ and ‘‘heightens the probability that [the consumer] will no longer have personal records detailing the status of the debt.’’ 382 Consumers sued or threatened with suit on a timebarred debt may not recognize that the debt is time barred, that time-barred debts are unenforceable in court, or that generally they must raise the expiration of the statute of limitations as an affirmative defense. Suits and threats of suit on timebarred debts can harm consumers in multiple ways. A debt collector’s threat to sue on a time-barred debt may prompt some consumers to pay or prioritize that debt over others in the mistaken belief that doing so is necessary to forestall litigation. Similarly, suits on time-barred debts may lead to judgments against consumers on claims for which those consumers had meritorious defenses, including, but not limited to, a statuteof-limitations defense. Such judgments may be especially likely given that few consumers sued for allegedly unpaid debts—whether time-barred or not— actually defend themselves in court, and those who do often are unrepresented. As a result, the vast majority of judgments on unpaid debts, including on time-barred debts, are default judgments, entered solely on the representations contained in the debt collector’s complaint.383 380 See, e.g., Kimber, 668 F. Supp. at 1489 (‘‘By threatening to sue Kimber on her alleged debt . . . FFC implicit[ly] represented that it could recover in a lawsuit, when in fact it cannot properly do so.’’). 381 See FMG Focus Group Report, supra note 38, at 9–10; FMG Cognitive Report, supra note 40, at 36–37; FMG Summary Report, supra note 42, at 35– 36; see also FTC Litigation Report, supra note 371, at iii, 26. 382 Phillips, 736 F.3d at 1079 (quoting Kimber, 668 F. Supp. at 1487). 383 See FTC Debt Buying Report, supra note 14, at 45 (observing that ‘‘90 percent or more of consumers sued in [debt collection actions] do not appear in court to defend,’’ which ‘‘creates a risk that consumer will be subject to a default judgment on a time-barred debt’’); Peter A. Holland, The One Hundred Billion Dollar Problem in Small Claims Court: Robo-Signing and Lack of Proof in Debt Buyer Cases, 6 J. Bus. & Tech. L. 259, 265 (2011) (‘‘In the majority of debt buyer cases, the courts grant the debt buyer a default judgment because the consumer has failed to appear for trial. . . . Debtors E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 According to the small entity representatives who participated in the SBREFA process, debt collectors generally do not sue on debt they know to be time barred. Similarly, a trade association representing debt buyers has reported that, in a poll of its members, not one responded that they knowingly or intentionally file lawsuits after the applicable statute of limitations has expired.384 During the SBREFA process, however, several small entity representatives stated that determining whether the statute of limitations has expired can be complex. The determination may involve analyzing which statute of limitations applies, when the statute of limitations began to run, and whether the statute of limitations has been tolled or reset. The Bureau believes that, in many cases, a debt collector will know, or can readily determine, whether the statute of limitations has expired. In some instances, however, a debt collector may be genuinely uncertain even after undertaking a reasonable investigation; this could occur, for example, when the case law in a State is unclear as to which statute of limitations applies to a particular type of debt. For these reasons, the Bureau proposes to interpret FDCPA section 807 to provide that a debt collector must not bring or threaten to bring a legal action against a consumer to collect a debt that the debt collector knows or should know is a time-barred debt. FDCPA section 807 generally prohibits debt collectors from using ‘‘any false, deceptive, or misleading representation or means in connection with the collection of any debt,’’ and FDCPA section 807(2)(A) specifically prohibits falsely representing ‘‘the character, amount, or legal status of any debt.’’ The Bureau interprets FDCPA section 807 and 807(2)(A) to prohibit debt collectors from suing or threatening to sue consumers on debts they know or who do receive notice usually appear without legal representation.’’); CFPB Debt Collection Operations Study, supra note 45, at 18 (observing that respondents reported obtaining default judgments in 60 to 90 percent of their filed suits); cf. Kimber, 668 F. Supp. at 1487 (‘‘Because few unsophisticated consumers would be aware that a statute of limitations could be used to defend against lawsuits based on stale debts, such consumers would unwittingly acquiesce to such lawsuits. And, even if the consumer realizes that she can use time as a defense, she will more than likely still give in rather than fight the lawsuit because she must still expend energy and resources and subject herself to the embarrassment of going into court to present the defense; this is particularly true in light of the costs of attorneys today.’’). 384 See David E. Reid, Out-of-Statute Debt: What is a Smart, Balanced, and Responsible Approach, at 8, (Receivables Mgmt. Ass’n Int’l, White Paper, 2015), https://rmassociation.org/wp-content/ uploads/2017/04/RMA_Whitepaper_OOS.pdf. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 should know are time-barred debts because such suits and threats of suit explicitly or implicitly misrepresent, and may cause consumers to believe, that the debts are legally enforceable. In addition, threats to sue consumers on time-barred debts are similar to threats to take actions that cannot legally be taken, which FDCPA section 807(5) specifically prohibits, because both involve the threat of action to which the consumer has a complete legal defense. The Bureau’s proposed interpretation of FDCPA section 807 is generally consistent with well-established case law holding that lawsuits and threats of lawsuits on time-barred debt violate FDCPA section 807.385 The proposed rule may provide debt collectors with greater certainty as to what the law prohibits while also protecting consumers and enabling them to prove legal violations without having to litigate in each case whether lawsuits and threats of lawsuits on time-barred debt violate the FDCPA. The Bureau requests comment on proposed § 1006.26(b) and on whether any additional clarification is needed. In particular, the prohibitions in proposed § 1006.26(b) would apply only if the debt collector knows or should know that the applicable statute of limitations has expired. It sometimes may be difficult, however, to determine whether a ‘‘know or should have known’’ standard has been met. Such uncertainty could increase litigation costs and make enforcement of proposed § 1006.26(b) more difficult. In part to address this concern, the Small Business Review Panel Outline described an alternative strict-liability standard pursuant to which a debt collector would be liable for suing or threatening to sue on a time-barred debt even if the debt collector neither knew nor should have known that the debt was time barred.386 The Bureau specifically requests comment on using a ‘‘knows or should know’’ standard in proposed § 1006.26(b) and on the merits of using a strict liability standard instead. 26(c) Reserved The Bureau is likely to propose that debt collectors must provide disclosures to consumers when collecting timebarred debts. The Bureau currently is completing its evaluation of whether consumers take away from nonlitigation collection efforts that they can or may be sued on a debt and, if so, 385 See, e.g., Pantoja, 852 F.3d at 683; McMahon, 744 F.3d at 1020; Phillips, 736 F.3d at 1079; Kimber, 668 F. Supp. at 1488–89. 386 Small Business Review Panel Outline, supra note 56, at 20. PO 00000 Frm 00057 Fmt 4701 Sfmt 4702 23329 whether that take-away changes depending on the age of the debt. In many States, a consumer’s partial payment on a time-barred debt or acknowledgment of a time-barred debt in writing restarts the statute of limitations period and ‘‘revives’’ the debt collector’s right to sue for the full amount. The Bureau is also completing its evaluation of how a time-barred debt disclosure might affect consumers’ understanding of whether debts can be revived. The disclosures under consideration include a disclosure that would inform a consumer that, because of the age of the debt, the debt collector cannot sue to recover it. They also include, where applicable, a disclosure that would inform a consumer that the right to sue on a time-barred debt can be revived in certain circumstances. The Small Business Review Panel Outline discussed certain such disclosures, and the Bureau has received feedback from stakeholders about both the need for, and the content of, such disclosures.387 The Bureau plans to conduct additional consumer testing of possible time-barred debt and revival disclosures, and expects this additional testing to further inform the Bureau’s evaluation of any time-barred debt disclosures. At a later date, the Bureau intends to issue a report on such testing and any disclosure proposals related to the collection of time-barred debt. Stakeholders will have an opportunity to comment on such testing if the Bureau intends to use it to support disclosure requirements in a final rule. The Bureau reserves § 1006.26(c) and appendix B of the regulation for any such proposals. Section 1006.30 Other Prohibited Practices Proposed § 1006.30 contains several measures designed to protect consumers from certain harmful debt collection practices. Specifically, proposed § 1006.30(a) would regulate debt collectors’ furnishing practices under certain circumstances; proposed § 1006.30(b) would limit the transfer of certain debts; and proposed § 1006.30(c), (d), and (e) would generally restate statutory provisions regarding allocation of payments, venue, and the furnishing of certain deceptive forms, respectively. 30(a) Communication Prior to Furnishing Information Debt collectors may actively attempt to collect debts about which they furnish information to consumer reporting agencies by, for example, 387 Id. E:\FR\FM\21MYP2.SGM at 20–21. 21MYP2 23330 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 calling or writing to consumers. However, some debt collectors engage in ‘‘passive’’ collections by furnishing information to consumer reporting agencies for inclusion in consumer reports without first communicating with consumers.388 Debt collectors may attempt to collect debts passively where the expected return from that technique exceeds the cost of attempting to collect the debt by communicating with consumers.389 A consumer may suffer harm if a debt collector furnishes information to a consumer reporting agency without first communicating with the consumer. If debt collectors do not communicate with consumers prior to furnishing, consumers are likely to be unaware that they have a debt in collection unless they obtain and review their consumer report. In turn, many consumers may not obtain and review their consumer reports until they apply for credit, housing, employment, or another product or service provided by an entity that reviews consumer reports during the application process. At that point, consumers may face pressure to pay debts that they otherwise would dispute, including debts that they do not owe,390 in an effort to remove the debts from their consumer reports and more quickly obtain a mortgage or job or desired product or service. Consumers unaware of the debt before a financial institution, landlord, employer, or other similar person makes a decision also may face the denial of an application, a higher interest rate, or other negative consequences.391 If the debt collector had instead communicated with the consumer prior to furnishing by, for example, sending the consumer a validation notice, then the consumer would have been more likely to have information about the debt and to have the opportunity to resolve the debt with the debt collector by either paying or disputing it. These consumer harms could be avoided if debt collectors communicated with consumers before 388 See CFPB Medical Debt Report, supra note 20, at 36. 389 See id. 390 In some cases, the information furnished to consumer reporting agencies may be inaccurate. See id. at 51 (‘‘Significant questions exist as to the accuracy of collections tradeline reporting.’’). 391 Such consumers generally would receive adverse action notices alerting them to the negative item on their consumer report, but these notices would occur too late to prevent the initial harm from passive collection practices. See 15 U.S.C. 1681m(a). Consumers who obtained credit from financial institutions also generally would have received notices that the financial institutions furnish negative information to nationwide consumer reporting agencies. See 15 U.S.C. 1681s– 2(a)(7). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 furnishing information about debts in collection. The Bureau thus proposes § 1006.30(a), which provides that a debt collector must not furnish to a consumer reporting agency, as defined in section 603(f) of the Fair Credit Reporting Act (FCRA),392 information regarding a debt before communicating with the consumer about the debt. Taken together with proposed § 1006.34— which generally would require debt collectors to provide consumers important information about debts at the outset of collection, including consumers’ options for resolving them— proposed § 1006.30(a) should reduce the harms that result from consumers being unaware of or uninformed about their debts in collection. During the SBREFA process, small entity representatives expressed concern over the potential burden to a debt collector of documenting, such as by using certified mail, that a consumer received a communication. The Small Business Review Panel recommended that the Bureau consider clarifying the type of communication that would be sufficient to satisfy the requirement, including clarifying that debt collectors do not need to send the validation notice by certified mail. Proposed comment 30(a)–1 is designed to address the Panel’s recommendation. Proposed comment 30(a)–1 would clarify that a debt collector would satisfy proposed § 1006.30(a)’s requirement to communicate if the debt collector conveyed information regarding a debt directly or indirectly to the consumer through any medium, but a debt collector would not satisfy the communication requirement if the debt collector attempted to communicate with the consumer but no communication occurred. For example, a debt collector communicates with the consumer if the debt collector provides a validation notice to the consumer, but a debt collector does not communicate with the consumer by leaving a limitedcontent message for the consumer. Proposed comment 30(a)–1 also would clarify that a debt collector may refer to proposed § 1006.42 for more information on how to provide disclosures in a manner that is reasonably expected to provide actual notice to consumers. The Bureau requests comment on proposed § 1006.30(a) and its related commentary. The Bureau proposes § 1006.30(a) pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors; its authority to interpret 392 15 PO 00000 U.S.C. 1681a(f). Frm 00058 Fmt 4701 Sfmt 4702 FDCPA section 806 regarding harassment, oppression, or abuse in connection with the collection of a debt; and its authority to interpret FDCPA section 808 regarding unfair or unconscionable means to collect or attempt to collect any debt. As discussed in part IV, a debt collector violates FDCPA section 806 if the debt collector engages in conduct that has the natural consequence of harassing, oppressing, or abusing any person in connection with the collection of a debt. A debt collector violates FDCPA section 808 if the debt collector uses unfair or unconscionable means to collect or attempt to collect any debt. Courts have interpreted FDCPA sections 806 and 808 to prohibit certain coercive collection methods that may cause consumers to pay debts not actually owed.393 Passive collection practices are similar to these other types of prohibited conduct because, as discussed above, they exert significant pressure in circumstances that undermine the ability of consumers to decide whether to pay debts, sometimes resulting in them paying debts they do not owe or would have otherwise disputed. The Bureau thus proposes § 1006.30(a) to prohibit a debt collector from furnishing information about a debt to consumer reporting agencies prior to communicating with the consumer about that debt, on the basis that subjecting a consumer to pressure by furnishing information to a consumer reporting agency without first providing notice to the consumer constitutes conduct that may have the natural consequence of harassment, oppression, or abuse in violation of FDCPA section 806, and that is an unfair or unconscionable means to collect or attempt to collect a debt under FDCPA section 808. 30(b) Prohibition on the Sale, Transfer, or Placement of Certain Debts 30(b)(1) In General The sale, transfer, and placement for collection of debts that have been paid or settled or discharged in bankruptcy, 393 See, e.g., Fox v. Citicorp Credit Servs., Inc., 15 F.3d 1507, 1517 (9th Cir. 1994) (reversing grant of summary judgment to debt collector in part because ‘‘a jury could rationally find’’ that filing writ of garnishment was unfair or unconscionable under section 808 when debt was not delinquent); Ferrell v. Midland Funding, LLC, No. 2:15–cv–00126–JHE, 2015 WL 2450615, at *3–4 (N.D. Ala. May 22, 2015) (denying debt collector’s motion to dismiss section 806 claim where debt collector allegedly initiated collection lawsuit even though it knew plaintiff did not owe debt); Pittman v. J.J. Mac Intyre Co. of Nev., Inc., 969 F. Supp. 609, 612–13 (D. Nev. 1997) (denying debt collector’s motion to dismiss claims under sections 807 and 808 where debt collector allegedly attempted to collect fully satisfied debt). E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 or that are subject to an identity theft report creates risk of consumer harm. If a debt is paid or settled, or discharged in bankruptcy, the debt is either extinguished or uncollectible. If a debt is listed on an identity theft report, the debt likely resulted from fraud, in which case the consumer may not have a legal obligation to repay it. Identity theft frequently results in fraudulent use of credit and often is discovered only after unauthorized account activity has occurred.394 Because debts that have been paid or settled or discharged in bankruptcy are either extinguished or uncollectible, and because consumers likely do not owe debts that are subject to an identity theft report, debt collectors seeking to collect such debts almost inevitably will make an express or implied false claim that consumers owe the debts. For example, in response to the ANPRM, consumer advocates noted that debt collectors who sue consumers to recover debts that were paid or settled with previous creditors may rely on an incomplete account history that does not reflect a consumer’s prior payment or settlement. The FDCPA in many places reflects a concern with debt collectors collecting or attempting to collect debts that consumers likely do not owe.395 When the FDCPA became law in 1977, debt sales and related transfers were not common. In subsequent years, debt sales and transfers have become 394 In 2014, approximately 86 percent of identity theft victims reported that their most recent incident involved unauthorized charges on an existing credit card or bank account. More than 60 percent of victims learned of the identity theft when either a financial institution notified them of suspicious activity in an account or the victim noticed fraudulent charges on an account statement. Erika Harrell, Bureau of Justice Stats., Victims of Identity Theft, 2014, at 2, 5, U.S. Dep’t of Justice, (revised Nov. 13, 2017), https://www.bjs.gov/ content/pub/pdf/vit14.pdf. 395 See, e.g., 15 U.S.C. 1692f(1) (prohibiting ‘‘[t]he collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law’’); see also Jacobson v. Healthcare Fin. Servs., Inc., 516 F.3d 85, 89 (2d Cir. 2008) (quoting S. Rept. No. 382, supra note 70, at 4); Fox v. Citicorp Credit Servs., Inc., 15 F.3d 1507, 1517 (9th Cir. 1994) (reversing grant of summary judgment to debt collector in part because ‘‘a jury could rationally find’’ that filing writ of garnishment was unfair or unconscionable under section 808 when debt was not delinquent); Ferrell v. Midland Funding, LLC, No. 2:15–cv–00126–JHE, 2015 WL 2450615, at *3–4 (N.D. Ala. May 22, 2015) (denying debt collector’s motion to dismiss section 806 claim where debt collector allegedly initiated collection lawsuit even though it knew plaintiff did not owe debt); Pittman v. J.J. Mac Intyre Co. of Nev., Inc., 969 F. Supp. 609, 612–13 (D. Nev. 1997) (denying debt collector’s motion to dismiss claims under sections 807 and 808 where debt collector allegedly attempted to collect fully satisfied debt). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 more frequent.396 The general growth in debt sales and transfers may have increased the likelihood that a debt that has been paid, settled, or discharged in bankruptcy may be transferred or sold.397 Moreover, identity theft, which has emerged as a major consumer protection concern, may increase the number of debts that are created if consumers’ identities are stolen and their personal information misused.398 Other Federal regulators have raised similar concerns about the risk of consumer harm from the sale, transfer, and placement of these categories of debt. The FTC has considerable expertise with respect to the debt buying industry 399 and has identified a risk of consumer harm if a debt collector purchases and seeks to collect discharged debt.400 The Office of the Comptroller of the Currency (OCC) has advised its supervised institutions that certain categories of debt—including settled debts, debts belonging to borrowers seeking bankruptcy protection, and debts incurred as a result of fraudulent activity—are not appropriate for sale because of the reputational risk and the threat of legal liability related to the unlawful tactics employed to collect these debts.401 Segments of the debt collection industry also appear to recognize the risks of transferring these categories of debt. Some debt collectors have adopted policies to identify and exclude certain debts from sale or transfer. For example, a trade association representing debt buyers administers a certification program that prohibits the sale of debts that have been settled in full, paid in full, or are the result of identity theft or fraud.402 396 In 2009, the FTC stated that the ‘‘most significant change in the debt collection business in recent years has been the advent and growth of debt buying.’’ FTC Modernization Report, supra note 176, at 4. 397 See, e.g., Bureau of Consumer Fin. Prot., Supervisory Highlights, Issue No. 12, at 6–7 (Summer 2016), https://www.consumerfinance.gov/ data-research/research-reports/supervisoryhighlights-issue-no-12-summer-2016/ (discussing examinations finding that debt sellers failed to code accounts to reflect that they were in bankruptcy, the product of fraud, or settled in full). 398 See generally Kristin Finklea, Identity Theft: Trends and Issues, Cong. Research Serv., RL40599 (2014), https://fas.org/sgp/crs/misc/R40599.pdf. 399 See generally, e.g., FTC Debt Buying Report, supra note 14. 400 FTC Modernization Report, supra note 176, at 64–65. 401 See Off. of the Comptroller of the Currency, Bulletin 2014–37, Description: Risk Management Guidance (Aug. 4, 2014), https://www.occ.gov/newsissuances/bulletins/2014/bulletin-2014-37.html. 402 See Receivables Mgmt. Ass’n Int’l, Receivables Management Certification Program, Certification Governance Document, at 43 (2018), https:// rmassociation.org/wp-content/uploads/2018/02/ Certification-Policy-version-6.0-FINAL- PO 00000 Frm 00059 Fmt 4701 Sfmt 4702 23331 For these reasons, proposed § 1006.30(b)(1)(i) generally would prohibit a debt collector from selling, transferring, or placing for collection a debt if the debt collector knows or should know that the debt has been paid or settled, discharged in bankruptcy, or that an identity theft report has been filed with respect to the debt.403 The Bureau understands that debt collectors may be required to sell or transfer such debts for non-debt collection purposes and proposes certain exceptions in § 1006.30(b)(2) to accommodate those situations. Proposed comment 30(b)(1)(i)(C)–1 provides an example clarifying that a debt collector knows or should know that an identity theft report was filed with respect to a debt if, for example, the debt collector has received a copy of the identity theft report. The Bureau proposes § 1006.30(b)(1)(i) pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors, and pursuant to its authority to interpret FDCPA section 808 regarding unfair or unconscionable debt collection practices. The Bureau proposes to prohibit the sale, transfer, or placement of such debts as unfair under FDCPA section 808 on the basis that, because consumers do not owe or cannot be subject to collections on alleged debts that have been paid or settled or discharged in bankruptcy, and likely do not owe alleged debts that are subject to identity theft reports, the sale, transfer, or placement of such debts is unfair or unconscionable. Further, the sale, transfer or placement of such debts is unfair under section 1031 of the DoddFrank Act because it is likely to cause substantial injury to consumers that is not reasonably avoidable by consumers where the substantial injury is not outweighed by countervailing benefits to consumers or to competition. Prohibiting the sale, transfer, or placement of such debts is reasonably designed to prevent this unfair practice. With respect to a debt collector who is collecting a consumer financial product or service debt, as defined in proposed § 1006.2(f), the Bureau also proposes § 1006.30(b)(1)(i) pursuant to its authority under section 1031(b) of the Dodd-Frank Act to prescribe rules to identify and prevent the commission of unfair acts or practices by Dodd-Frank Act covered persons, and the Bureau 20180119.pdf. A large debt buyer also indicated in preproposal feedback that it has adopted policies to exclude certain debts from debt sales transactions. 403 Proposed § 1006.30(b) would define ‘‘identity theft report’’ as defined in the FCRA, 15 U.S.C. 1681a(q)(4). E:\FR\FM\21MYP2.SGM 21MYP2 23332 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules proposes § 1006.30(b)(1)(ii) to identify this unfair act or practice.404 As discussed in part IV.B, to declare an act or practice unfair under Dodd-Frank Act section 1031(b), the Bureau must have a reasonable basis to conclude that: (1) The act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers; and (2) such substantial injury is not outweighed by countervailing benefits to consumers or to competition. Selling, transferring, or placing for collection debts described in proposed § 1006.30(b)(1)(i) likely causes substantial injury to consumers because the collection of such debts likely results in deceptive claims of indebtedness and the unfair collection of amounts not owed.405 Consumers cannot reasonably avoid this harm because they have no control over debt sales, transfers, or placements or collection activity arising subsequent to those sales, transfers or placements. The collection of debts that are either not owed or likely not owed does not benefit consumers or competition. The Bureau requests comment on all aspects of proposed § 1006.30(b)(1). In particular, the Bureau requests comment on whether additional categories of debt, such as debt currently subject to litigation and debt lacking clear evidence of ownership, should be included in any prohibition adopted in a final rule. The Bureau also requests comment on how frequently consumers identify a specific debt when filing an identity theft report, and on how frequently debt collectors learn that an identity theft report was filed in error and proceed to sell or transfer the debt. The Bureau also requests comment on any potential disruptions that proposed § 1006.30(b)(1)(i) would cause for secured debts, such as by preventing servicing transfers or foreclosure activity related to mortgage loans. Finally, the Bureau requests comment on whether any of the currently proposed categories of debts should be clarified and, if so, how; and on whether additional clarification is needed regarding the proposed ‘‘know or should know’’ standard. jbell on DSK3GLQ082PROD with PROPOSALS2 30(b)(2) Exceptions Allowing the sale, transfer, or placement of the debts described in proposed § 1006.30(b)(1)(i) for certain 404 See part IV.B for a discussion of the Bureau’s framework for interpreting Dodd-Frank Act section 1031(b). 405 Cf. Fed. Trade Comm’n v. Neovi, Inc., 604 F.3d 1150, 1157 (9th Cir. 2010) (holding that the defendant engaged in an unfair practice by creating a website that fraudsters predictably used to injure consumers). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 bona fide business purposes other than debt collection may not create a significant risk of deceptive or unfair collections activity. Proposed § 1006.30(b)(2) sets forth four narrow exceptions to proposed § 1006.30(b)(1) to accommodate such circumstances. Proposed § 1006.30(b)(2)(i) would allow a debt collector to transfer a debt described in proposed § 1006.30(b)(1)(i) to the debt’s owner. This exception would permit a third-party debt collector who identifies such a debt among its collection accounts to return that debt to the debt’s owner. Allowing a debt collector to return a debt to the debt’s owner likely would not raise the risk of deceptive or unfair collections activity. Debts frequently are returned to a debt’s owner after unsuccessful collections efforts.406 Moreover, unlike a debt collector, whose overriding economic incentive is to secure a debt’s repayment, certain debt owners may have other priorities that make it less likely that the owner will place the debt with another debt collector or try to collect the debt itself.407 For creditors in particular, these moderating factors include general reputational concerns and a desire to preserve the specific customer relationship. Proposed comment 30(b)(2)(i)–1 would clarify that a debt collector may not engage in an otherwise prohibited transfer with any other entity on behalf of a debt’s owner unless another exception applies. The Bureau proposes three additional exceptions that parallel the exceptions in the FCRA to the prohibition on the sale, transfer, or placement of debt caused by identity theft.408 Section 615(f) of the FCRA prohibits a person from selling, transferring for consideration, or placing for collection a debt after being notified that a consumer reporting agency identified that debt as having resulted from identity theft.409 Because proposed § 1006.30(b)(1) also would prohibit the sale, transfer, or placement of debts subject to an identity theft report, the Bureau proposes to adopt the exceptions under FCRA section 615(f)(3) regarding the repurchase, securitization, or transfer of a debt as the result of a merger or acquisition, since these exceptions would appear to be equally relevant and provide some consistency between proposed Regulation F and the 406 CFPB Debt Collection Operations Study, supra note 45, at 13. 407 When passing the FDCPA, Congress determined that creditors ‘‘generally are restrained by their desire to protect their good will when collecting past due accounts,’’ unlike debt collectors. S. Rept. No. 382, supra note 70, at 2. 408 See 15 U.S.C. 1681m(f)(3). 409 See 15 U.S.C. 1681m(f). PO 00000 Frm 00060 Fmt 4701 Sfmt 4702 FCRA’s existing identity theft requirements. Further, the FCRA’s exceptions may provide debt collectors with sufficient flexibility to transfer debts for bona fide non-debt collection business purposes. Proposed § 1006.30(b)(2)(ii) would allow a debt collector to transfer a debt described in proposed § 1006.30(b)(1)(i) to a previous owner if transfer is authorized by contract. Creditors may include provisions in debt sales contracts that authorize repurchase or transfer when certain issues, such as consumer disputes or identity theft, surface.410 Such agreements may benefit debt collectors by removing nonperforming debts from collection portfolios, which allows debt collectors to focus their efforts on accounts with higher recovery rates. These agreements also may benefit consumers because interactions with creditors may be less adversarial and offer speedier and fuller resolution than interactions with debt collectors.411 The Bureau proposes § 1006.30(b)(2)(ii) to avoid impeding these agreements in debt sales contracts. Proposed § 1006.30(b)(2)(iii) would permit a debt collector to securitize a debt described in proposed § 1006.30(b)(1)(i), or to pledge a portfolio of such debt as collateral in connection with a borrowing. The Bureau understands that, if a debt collector securitizes or pledges a portfolio of debt, the debt collector may be unable to exclude the debts described in proposed § 1006.30(b)(1)(i) from the portfolio. The Bureau proposes § 1006.30(b)(2)(iii) to allow a debt collector to securitize or pledge portfolios in connection with its own commercial borrowing without violating Regulation F. Proposed § 1006.30(b)(2)(iv) would allow a debt collector to transfer a debt 410 Creditors may include such repurchase provisions in debt sales agreements based on compliance and reputational concerns. For national banks and Federal savings associations in particular, regulatory guidance may incentivize this practice. See, e.g., Off. of the Comptroller of the Currency, Bulletin 2014–37, Description: Risk Management Guidance (Aug. 4, 2014), https:// www.occ.gov/news-issuances/bulletins/2014/ bulletin-2014-37.html. 411 See CFPB Debt Collection Consumer Survey, supra note 18, at 46–47 (‘‘Consumers reported more favorable experiences with creditors than debt collectors along many of the dimensions surveyed. About three-quarters (77 percent) of consumers who reported being contacted by a creditor, for example, said that the creditor provided accurate information compared with 49 percent of consumers contacted by a debt collector. Consumers contacted by creditors similarly were more likely to say that the creditor provided options to pay the debt, addressed their questions, and was polite. Finally, those contacted by creditors were less likely than those contacted by debt collectors to agree with less-favorable characterization of interactions such as reporting that the creditor threatened them.’’). E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules described in proposed § 1006.30(b)(1)(i) as a result of a merger, acquisition, purchase and assumption transaction, or transfer of substantially all of the debt collector’s assets. Transfers in these circumstances are not likely to raise the risk of unlawful collections activities because the transfers are for a bona fide non-debt collection business purpose. Further, excluding the categories of debt in proposed § 1006.30(b)(1)(i) from a business acquisition may be impracticable. The Bureau requests comment on proposed § 1006.30(b)(2), including on whether additional exceptions are necessary to allow for transfers of debts for non-debt collection business purposes, and on whether the proposed exceptions should be more narrowly tailored or clarified. The Bureau also requests comment on the costs and benefits to consumers of allowing debts to be transferred under the proposed exceptions. 30(c) Multiple Debts FDCPA section 810 provides that, if any consumer owes multiple debts and makes any single payment to any debt collector with respect to such debts, that debt collector must not apply the consumer’s payment to any debt which is disputed by the consumer and must apply the payment in accordance with the consumer’s directions, if any.412 Pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors, the Bureau proposes § 1006.30(c) to implement FDCPA section 810. Proposed § 1006.30(c) mirrors the statute, except that minor changes have been made for organization and clarity. The Bureau requests comment on proposed § 1006.30(c), including on whether additional clarification is needed. jbell on DSK3GLQ082PROD with PROPOSALS2 30(d) Legal Actions by Debt Collectors FDCPA section 811 restricts the venue in which a debt collector may initiate legal action on a debt against a consumer.413 Pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors, the Bureau proposes § 1006.30(d) to implement FDCPA section 811. Proposed § 1006.30(d) mirrors the statute, except that minor changes have been made for organization and clarity. The Bureau requests comment on proposed § 1006.30(d), including on 412 15 413 15 U.S.C. 1692h. U.S.C. 1692i. VerDate Sep<11>2014 22:03 May 20, 2019 whether additional clarification is needed. 30(e) Furnishing Certain Deceptive Forms FDCPA section 812(a) prohibits any person from knowingly designing, compiling, and furnishing any form that would be used to create the false belief in a consumer that a person other than the consumer’s creditor is participating in the collection of, or in an attempt to collect, a debt the consumer allegedly owes, if in fact the creditor is not participating.414 Pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors, the Bureau proposes § 1006.30(e) to implement FDCPA section 812(a). Because the Bureau’s rulemaking authority under FDCPA section 814(d) is limited to debt collectors, as that term is defined in the FDCPA, proposed § 1006.30(e)’s coverage is more limited than that of FDCPA section 812(a), which applies to any person. Proposed § 1006.30(e) would not narrow coverage under the statute. Proposed § 1006.30(e) otherwise generally mirrors the statute, except that minor changes have been made for organization and clarity. The Bureau requests comment on proposed § 1006.30(e), including on whether additional clarification is needed. Section 1006.34 of Debts Notice for Validation FDCPA section 809(a) generally requires a debt collector to provide certain information to a consumer either at the time that, or shortly after, the debt collector first communicates with the consumer in connection with the collection of a debt. The required information—i.e., the validation information—includes details about the debt and about consumer protections, such as the consumer’s rights to dispute the debt and to request information about the original creditor.415 The requirement to provide validation information is an important component of the FDCPA and was intended to improve the debt collection process by helping consumers to recognize debts that they owe and raise concerns about debts that are unfamiliar. Congress in 1977 considered the requirement a ‘‘significant feature’’ of the statute, explaining that it was designed to ‘‘eliminate the recurring problem of debt collectors dunning the wrong person or attempting to collect debts which the 414 15 U.S.C. 1692j. 15 U.S.C. 1692g(a). consumer has already paid.’’ 416 Despite the FDCPA’s requirement that debt collectors provide validation information, Congress provided the Bureau with rulemaking authority in 2010 apparently to address inadequacies around validation and verification, among other things.417 In addition, debt collectors have sought clarification about how to provide additional information consistent with the statute. For these reasons, and as discussed in more detail below, the Bureau proposes § 1006.34 to require debt collectors to provide certain validation information to consumers and to specify when and how the information must be provided. 34(a)(1) Validation Information Required FDCPA section 809(a) provides, in relevant part, that, within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall send the consumer a written notice containing certain information, unless that information is contained in the initial communication or the consumer has paid the debt.418 Proposed § 1006.34(a)(1) would implement and interpret this general requirement.419 Proposed § 1006.34(a)(1)(i) addresses situations in which the debt collector provides the validation information in writing or electronically.420 Proposed § 1006.34(a)(1)(i) would clarify that, in those situations, a debt collector may provide the validation information by sending the consumer a validation notice either in the initial communication or within five days of that communication.421 In either case, 416 S. Rept. No. 382, supra note 70, at 4; see also Jacobson v. Healthcare Fin. Servs., Inc., 516 F.3d 85, 95 (2d Cir. 2008) (validation notices ‘‘make the rights and obligations of a potentially hapless debtor as pellucid as possible’’); Wilson v. Quadramed Corp., 225 F.3d 350, 354 (3d Cir. 2000); Miller v. Payco-Gen. Am. Credits, Inc., 943 F.2d 482, 484 (4th Cir. 1991); Swanson v. S. Oregon Credit Serv., Inc., 869 F.2d 1222, 1225 (9th Cir. 1988). 417 See S. Rept. No. 111–176, at 19 (‘‘In addition to concerns about debt collection tactics, the Committee is concerned that consumers have little ability to dispute the validity of a debt that is being collected in error.’’). 418 See 15 U.S.C. 1692g(a). FDCPA section 809(a) provides that a debt collector need not send the written notice if the consumer pays the debt before the time that the notice is required to be sent. Proposed § 1006.34(a)(2) would implement that exception. 419 Proposed § 1006.34(c) describes the validation information that proposed § 1006.34(a)(1) would require debt collectors to provide. 420 Proposed § 1006.34(b)(4) would define a validation notice as any written or electronic notice that provides the validation information described in § 1006.34(c). 421 Proposed § 1006.34(b)(2) provides that, with limited exceptions, initial communication means 415 See Jkt 247001 PO 00000 Frm 00061 Fmt 4701 Sfmt 4702 23333 Continued E:\FR\FM\21MYP2.SGM 21MYP2 23334 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 the debt collector would be required to provide the validation notice in a manner that satisfies the delivery requirements in § 1006.42(a).422 Proposed § 1006.34(a)(1)(ii) would clarify that a debt collector could provide the validation information orally in the initial communication.423 The Bureau requests comment on whether clarification regarding content and formatting requirements is needed for a debt collector who provides the validation information orally. Proposed comment 34(a)(1)–1 would clarify the provision of validation notices if the consumer is deceased. As described in the section-by-section analysis of proposed § 1006.2(e), the failure to provide a validation notice to a person who is authorized to act on behalf of the deceased consumer’s estate, such as the executor, administrator, or personal representative, may cause difficulty or delay in resolving the estate’s debts. Proposed comment 34(a)(1)–1 explains that, if the debt collector knows or should know that the consumer is deceased, and if the debt collector has not previously provided the deceased consumer the validation information, a person who is authorized to act on behalf of the deceased consumer’s estate operates as the consumer for purposes of providing a validation notice under § 1006.34(a)(1).424 As explained in the section-by-section analysis of proposed § 1006.2(e), the Bureau proposes to interpret the term consumer to include deceased consumers. The Bureau’s interpretation of FDCPA section 809 in proposed § 1006.34(a)(1) would require a debt collector to provide the validation information the first time that, in connection with the collection of a debt, a debt collector conveys information, directly or indirectly, to the consumer regarding the debt. 422 As discussed in the section-by-section analysis of proposed § 1006.42, the proposed rule would provide a general standard for the delivery of required disclosures, including the validation notice, in writing or electronically, and would clarify, among other things, how debt collectors may provide required notices to consumers by email or text message. 423 While FDCPA section 809(a) does not prohibit a debt collector from providing validation information orally in the debt collector’s initial communication, it may be impractical for debt collectors to do so given that proposed § 1006.34(c) would require a significant amount of validation information that debt collectors may not currently provide. In addition, debt collectors providing the validation information orally would not be able to use Model Form B–3 in appendix B to receive a safe harbor for compliance with § 1006.34(a). 424 This interpretation is supported by the proposed definition of consumer, which, as discussed in the section-by-section analysis of proposed § 1006.2(e), is defined to include ‘‘[a]ny natural person, whether living or deceased, who is obligated or allegedly obligated to pay any debt.’’ VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 when collecting debt from a deceased consumer if the debt collector has not previously provided the consumer the validation information. In such circumstances, under proposed comment 34(a)(1)–1, the debt collector must provide the validation information to an individual that the debt collector identifies by name who is authorized to act on behalf of the deceased consumer’s estate. If a debt collector knows or should know that the consumer is deceased, it may be unclear whether the debt collector should continue to address the validation notice to the deceased consumer, or whether the debt collector instead should address the notice to the individual who is authorized to act on behalf of the deceased consumer’s estate. In light of this uncertainty, the Bureau proposes to interpret sending the validation information to a deceased consumer (i.e., the deceased consumer’s estate) to mean providing the validation information to an individual that the debt collector identifies by name who is authorized to act on behalf of the deceased consumer’s estate. As explained below, this interpretation may be preferable to addressing the validation information using the name of the deceased consumer or using ‘‘the estate of’’ with the name of the deceased consumer. Accordingly, just as a debt collector attempting to collect a debt from a living consumer generally would provide a validation notice to the consumer within five days after the initial communication with such consumer (where the validation information was not contained in the initial communication), the proposal generally would require a debt collector attempting to collect a debt from a deceased consumer’s estate to provide the validation notice to the named person who is authorized to act on behalf of the deceased consumer’s estate. The validation notice would have to be provided within five days after the initial communication with such person. In its Policy Statement on Decedent Debt, the FTC expressed concern about debt collectors addressing substantive written communications to the decedent’s estate, or to an unnamed executor or administrator.425 In the FTC’s experience, individuals who lack the authority to resolve the estate but who wish to be helpful are likely to open these communications, which makes such communications insufficiently targeted to a consumer 425 FTC Policy Statement on Decedent Debt, supra note 192. PO 00000 Frm 00062 Fmt 4701 Sfmt 4702 with whom the debt collector may generally discuss the debt. Therefore, according to the FTC, ‘‘communication[s] addressed to the decedent’s estate, or an unnamed executor or administrator, [are] location communication[s] and must not refer to the decedent’s debts.’’ 426 The FTC also noted that letters addressed to deceased consumers raised similar concerns, although there may be circumstances where a debt collector neither knows nor has reason to know that the consumer has died. The Bureau agrees with these concerns. The requirement in proposed comment 34(a)(1)–1 to send any required validation notice to a named person who is authorized to act on behalf of the deceased consumer’s estate would limit the practice of addressing validation notices to deceased consumers or unnamed executors, administrators, or personal representatives because a debt collector would be required to identify a person who is authorized to act on behalf of the deceased consumer’s estate in order to properly direct any communication to that individual. The Bureau requests comment on the effects of any potential inconsistency between proposed comment 34(a)(1)–1 and the consumer protections that the FTC sought to achieve when it published its Policy Statement on Decedent Debt. The Bureau proposes § 1006.34(a)(1) to implement and interpret FDCPA section 809(a) and pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors. The Bureau requests comment on proposed § 1006.34(a)(1) and its related commentary. 34(a)(2) Exception FDCPA section 809(a) contains a limited exception that provides that, if required information is not contained in the initial communication, a debt collector need not send the consumer a written notice within five days of the debt collector’s initial communication with the consumer in connection with the collection of the debt if the consumer has paid the debt prior to the time that the notice is required to be sent.427 Pursuant to its authority to implement and interpret FDCPA section 809(a) and its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors, the Bureau proposes § 1006.34(a)(2) to implement this exception. Proposed § 1006.34(a)(2) provides that a debt collector who 426 Id. at 44920. 15 U.S.C. 1692g(a). 427 See E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules otherwise would be required to send a validation notice pursuant to proposed § 1006.34(a)(1)(i)(B) is not required to do so if the consumer has paid the debt prior to the time that proposed § 1006.34(a)(1)(i)(B) would require the validation notice to be sent. Proposed § 1006.34(a)(2) generally restates the statute, except for minor changes for organization and clarity. jbell on DSK3GLQ082PROD with PROPOSALS2 34(b) Definitions To facilitate compliance with § 1006.34, proposed § 1006.34(b) would define several terms that appear throughout the section. Except as discussed otherwise below, the Bureau proposes these definitions to implement and interpret FDCPA section 809(a) and pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors. 34(b)(1) Clear and Conspicuous To facilitate compliance with proposed § 1006.34(d)(1), which would require that the validation information described in § 1006.34(c) be clear and conspicuous, proposed § 1006.34(b)(1) would define the term clear and conspicuous. The Bureau proposes to define the term clear and conspicuous for purposes of Regulation F consistent with the standards used in other consumer financial services laws and their implementing regulations, including Regulation E, subpart B (Remittance Transfers).428 Proposed § 1006.34(b)(1) thus provides that disclosures are clear and conspicuous if they are readily understandable and, in the case of written and electronic disclosures, the location and type size are readily noticeable to consumers. Oral disclosures are clear and conspicuous if they are given at a volume and speed sufficient for a consumer to hear and comprehend them. The Bureau proposes to adopt this standard to help ensure that required disclosures, including disclosures containing validation information, are readily understandable and noticeable to consumers. Disclosures that are not clear and conspicuous will not be effective, defeating the purpose of the disclosures. The Bureau requests comment on proposed § 1006.34(b)(1), including on whether basing the clear and conspicuous standard on existing regulations, such as Regulation E, presents any consumer protection or compliance issues, including for validation information delivered 428 See 12 CFR 1005.31(a)(1), comment 31(a)(1)– 1. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 electronically or orally. The Bureau also requests comment on whether additional clarification about the meaning of clear and conspicuous would be useful in the context of the specific information that proposed § 1006.34(a)(1) would require. 34(b)(2) Initial Communication As discussed above, FDCPA section 809(a) requires debt collectors to provide consumers with certain validation information either in the debt collector’s initial communication with the consumer in connection with the collection of the debt, or within five days after that initial communication. FDCPA section 803(2) defines the term communication broadly to mean the conveying of information regarding a debt directly or indirectly to any person through any medium.429 FDCPA section 809(d) and (e) identifies particular communications that are not initial communications with the consumer in connection with the debt for purposes of FDCPA section 809(a) and that therefore do not trigger the validation notice requirement.430 Pursuant to FDCPA section 809(d), an initial communication excludes a communication in the form of a formal pleading in a civil action. Pursuant to FDCPA section 809(e), an initial communication also excludes the sending or delivery of any form or notice that does not relate to the collection of the debt and is expressly required by the Internal Revenue Code of 1986, title V of the Gramm-LeachBliley Act, or any provision of Federal or State law relating to notice of a data security breach or privacy, or any regulation prescribed under any such provision of law. Proposed § 1006.34(b)(2) would implement FDCPA section 809(a), (d), and (e) by defining the term initial communication to mean the first time that, in connection with the collection of a debt, a debt collector conveys information, directly or indirectly, regarding the debt to the consumer, other than a communication in the form of a formal pleading in a civil action, or a communication in any form or notice that does not relate to the collection of the debt and is expressly required by any of the laws referenced in FDCPA section 809(e). The Bureau requests comment on proposed § 1006.34(b)(2) and on whether additional clarification about the term initial communication would be helpful. The Bureau specifically 429 See 15 U.S.C. 1692a(2). See also the sectionby-section analysis of proposed § 1006.2(d). 430 See 15 U.S.C. 1692g(d), (e). PO 00000 Frm 00063 Fmt 4701 Sfmt 4702 23335 requests comment on the scenario in which a debt collector’s first attempt to communicate with a consumer is through an electronic communication method, such as an email or a text message, and the consumer provides no response. For example, as proposed, if a debt collector sends a consumer an email notifying the consumer that a debt has been placed with the debt collector but includes no other information, the debt collector would be required to send the consumer a validation notice within five days, even if the consumer did not reply to the debt collector’s email. The Bureau requests comment about the risks, costs, and benefits to industry and consumers of treating these types of debt collection communications as initial communications that would trigger § 1006.34(a)(1). 34(b)(3) Itemization Date FDCPA section 809(a)(1) requires debt collectors to disclose to consumers, either in the debt collector’s initial communication in connection with the collection of the debt, or within five days after that communication, the amount of the debt.431 In proposed § 1006.34(c)(2)(vii) through (ix), the Bureau would interpret the phrase ‘‘amount of the debt’’ to mean that debt collectors must disclose information about the amount of the debt as of a particular ‘‘itemization date.’’ 432 To facilitate compliance with § 1006.34(c)(2)(vii) through (ix), proposed § 1006.34(b)(3) would define the term itemization date. Account information available to debt collectors may vary by debt type because some account information is not universally tracked or used across product markets. For example, the Bureau understands that charge off is fundamental account information for credit card debt, but appears not to be applicable for some other debt types. To ensure that debt collectors working in a variety of product markets can comply with proposed § 1006.34(c)(2)(vii) through (ix), the Bureau proposes to define the term itemization date to mean any one of four reference dates for which a debt collector can ascertain the amount of the debt: (1) The last statement date, (2) the charge-off date, (3) the last payment date, or (4) the 431 See 15 U.S.C. 1692g(a)(1). § 1006.34(c)(2)(vii) and (viii) would require debt collectors to disclose, respectively, the itemization date and the amount of the debt on the itemization date. Proposed § 1006.34(c)(2)(ix) would require debt collectors to disclose an itemization of the debt reflecting interest, fees, payments, and credits since the itemization date. For additional discussion of these provisions, see the section-by-section analysis of proposed § 1006.34(c)(2)(vii) through (ix). 432 Proposed E:\FR\FM\21MYP2.SGM 21MYP2 23336 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 transaction date.433 As discussed further in the section-by-section analysis of proposed § 1006.34(b)(3)(i) through (iv), the proposed definition is designed to allow the use of dates that debt collectors could identify with relative ease because they reflect routine and recurring events and that correspond to notable events in the debt’s history that consumers may recall or be able to verify with records. The proposed definition also is designed to include dates for which debt collectors typically may receive account information from debt owners and that, therefore, debt collectors should be able to use to provide the disclosures described in § 1006.34(c)(vii) through (ix). Proposed comment 34(b)(3)–1 explains that a debt collector may select any of the potential reference dates listed in proposed § 1006.34(b)(3) as the itemization date to comply with § 1006.34. Once a debt collector uses one of the reference dates for a specific debt in a communication with an individual consumer, however, the debt collector would be required to use that reference date for that debt consistently when providing disclosures as proposed by § 1006.34 to that consumer. If a debt collector provides the consumer with validation information based on different reference dates for the same debt, the consumer may have difficulty recognizing the debt and be less likely to engage with the debt collector. Thus, a debt collector who used reference dates inconsistently for the same debt could undermine the purpose of proposed § 1006.34. The Bureau’s Small Business Review Panel Outline described a proposal under consideration that would have required a debt collector to provide an itemization of the debt based on a single reference date, the date of default.434 Multiple small entity representatives expressed concern with that proposal, noting both that default has no established definition and that the default concept may be inapplicable to some debt types, such as medical debt.435 Small entity representatives also noted that determining a date of default can involve State law interpretations that impose significant costs. Consistent with these concerns, the Small Business Review Panel Report recommended that the Bureau consider alternatives to the date of default and 433 The four reference dates are set forth in proposed § 1006.34(b)(3)(i) through (iv). See the section-by-section analysis of proposed § 1006.34(b)(3)(i) through (iv). 434 See Small Business Review Panel Outline, supra note 56, at appendix F. 435 See Small Business Review Panel Report, supra note 57, at 18. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 suggested the charge-off date, last payment date, or date of service instead.436 Based in part on this feedback, the Bureau believes that it may be difficult to identify a single reference date that applies to all debt types across all relevant markets and, as a result, proposes to define itemization date as one of the four potential reference dates. The Bureau requests comment on proposed § 1006.34(b)(3) and on comment 34(b)(3)–1, including on whether the itemization date definition will facilitate compliance with the requirement to disclose the validation information in § 1006.34(c)(vii) through (ix), and on whether additional clarification regarding the itemization date definition is needed. The Bureau also requests comment on whether the proposed itemization date definition would not capture certain debt types, such as mortgage debt where coupon books are provided instead of periodic statements, and on whether additional or alternative reference dates should be considered. The Bureau also requests comment on whether creditors’ data management systems capture information related to the reference dates that the proposed itemization date definition would incorporate. Further, the Bureau requests comment on whether the proposed definition should mandate a single reference date, which would standardize validation notices across all relevant markets, and if so, what reference date might be suitable for all types of debt. In addition, the Bureau requests comment on how the proposed definition should function with respect to a debt that multiple debt collectors have attempted to collect. For example, the Bureau requests comment on whether a subsequent debt collector should be permitted to use a different itemization date than a prior debt collector used for the same debt. Finally, the Bureau requests comment on whether the proposed itemization date definition should be structured as a prescriptive ordering of potential reference dates, such as a hierarchy. For example, this alternative approach could require a debt collector to determine the itemization date by identifying the first date in a hierarchy of four reference dates set forth in proposed § 1006.34(b)(3)(i) through (iv) for which a debt collector could ascertain the amount of the debt using readily available information. With respect to this alternative approach, the Bureau requests comment on whether the use of any particular reference date, such as the last statement date, is more 436 Id. PO 00000 Frm 00064 Fmt 4701 Sfmt 4702 likely than other reference dates, such as the charge-off date, to improve consumer understanding of the required disclosures. The Bureau also requests comment on whether, for purposes of a hierarchy, any particular reference date would be more likely than others to impose costs or burdens on debt collectors. The Bureau proposes § 1006.34(b)(3), including the specific dates described in proposed § 1006.34(b)(3)(i) through (iv), pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors. The Bureau also proposes § 1006.34(b)(3) pursuant to its authority under section 1032(a) of the Dodd-Frank Act to prescribe rules to ensure that the features of consumer financial products and services are disclosed to consumers fully, accurately, and effectively. 34(b)(3)(i) When placing a debt for collection, creditors frequently may provide debt collectors with the last periodic or written account statements provided to consumers. Therefore, in many cases, last statement information should be readily available to debt collectors. In addition, many consumers may recall the amount of the debt on the last statement because this figure may be the most recent amount of the debt the consumer has seen, or the consumer may be able to verify that amount with their records. For these reasons, proposed § 1006.34(b)(3)(i) would permit debt collectors to use the last statement date as the itemization date. Pursuant to proposed § 1006.34(b)(3)(i), last statement date would mean the date of the last periodic statement or written account statement or invoice provided to the consumer. Proposed comment 34(b)(3)(i)–1 explains that a statement provided by a creditor or a third party acting on the creditor’s behalf, including a creditor’s service provider, may constitute the last statement provided to the consumer for purposes of § 1006.34(b)(3)(i). The Bureau requests comment on proposed § 1006.34(b)(3)(i) and on comment 34(b)(3)(i)–1, including on how often creditors provide periodic statements, written statements, and invoices to debt collectors, and on whether there are specific debt types for which creditors may not provide such statements. In addition, the Bureau requests comment on whether a validation notice that a previous debt collector provided to the consumer should constitute a last statement for purposes of proposed § 1006.34(b)(3)(i). E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 34(b)(3)(ii) When placing credit card accounts for collection, creditors frequently may provide debt collectors with account information at charge off, including the charge-off date. For this reason, some small entity representatives suggested during the SBREFA process that, for credit card debt, the Bureau should define the itemization date to mean the charge-off date.437 Charge off is relevant to debt types other than credit cards, as well, and consumers may approximately recognize the amount of a debt due at charge off because charge off often occurs shortly after a last account statement is provided. For these reasons, proposed § 1006.34(b)(3)(ii) would permit debt collectors to use the charge-off date— i.e., the date that the debt was charged off—as the itemization date. The Bureau requests comment on proposed § 1006.34(b)(3)(ii). The Bureau generally requests comment on how often creditors provide charge-off information to debt collectors and on whether there are specific debt types for which charge off is not a relevant concept. In addition, the Bureau requests comment on whether creditors assess fees or penalties at charge off, which would cause the amount the consumer owed at charge off to differ significantly from the amount that appeared on the last periodic statement, invoice, or other written statement that the consumer received. 34(b)(3)(iii) In some cases, creditors may provide debt collectors with account information related to a consumer’s last payment. For this reason, some small entity representatives suggested during the SBREFA process that the Bureau define the itemization date to mean the last payment date.438 Consumers also may recognize the amount of a debt that reflects the balance after the consumer’s last payment.439 Proposed § 1006.34(b)(3)(iii) thus would permit debt collectors to use the last payment date—i.e., the date the last payment was applied to the debt—as the itemization date. The Bureau requests comment on proposed § 1006.34(b)(3)(iii), including on how often creditors provide debt collectors with last payment date information. The Bureau also requests comment on how proposed § 1006.34(b)(3)(iii) should be applied if a third party made the last payment on the debt. For example, such a third- party payment might include a partial payment on a consumer’s medical debt by an insurance provider. 34(b)(3)(iv) For some debt types, including for medical debt, creditors may provide debt collectors with account information related to the transaction date (e.g., the date a service or good was provided to a consumer). Some small entity representatives thus suggested during the SBREFA process that the Bureau define the itemization date for medical debt to mean the date of service.440 In addition, consumers may recognize the amount of a debt on the transaction date, which may be reflected in a copy of a contract or a bill provided by a creditor. For these reasons, proposed § 1006.34(b)(3)(iv) would permit debt collectors to use the transaction date—i.e., the date of the transaction that gave rise to the debt— as the itemization date. Proposed comment 34(b)(3)(iv)–1 explains that the transaction date is the date that a creditor provided, or made available, a good or service to a consumer and includes examples of transaction dates. The comment also explains that, if a debt has more than one potential transaction date, a debt collector may use any such date as the transaction date but must use whichever transaction date it selects consistently, as described in comment 34(b)(3)–1. The Bureau requests comment on proposed § 1006.34(b)(3)(iv) and on comment 34(b)(3)(iv)–1, including on how often creditors provide transaction date information to debt collectors and on whether the transaction date concept is inapplicable to certain debt types. 34(b)(4) Validation Notice As already discussed, FDCPA section 809(a) provides, in relevant part, that, within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall send the consumer a written notice containing certain information, unless that information is contained in the initial communication or the consumer has paid the debt.441 If debt collectors have provided the validation information in writing, whether in the initial communication or within five days after that communication, debt collectors and others commonly have referred to the document containing the information as a ‘‘validation notice,’’ or ‘‘g notice.’’ The Bureau understands that most debt 437 Id. 438 Id. 439 See FMG Focus Group Report, supra note 38, at 20–21. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 440 Small Business Review Panel Report, supra note 57, at 18. 441 See 15 U.S.C. 1692g(a). PO 00000 Frm 00065 Fmt 4701 Sfmt 4702 23337 collectors do not currently send validation notices electronically. As discussed in the section-by-section analysis of proposed § 1006.42, the Bureau proposes to clarify how debt collectors may send validation notices electronically in compliance with applicable law. To facilitate compliance with proposed § 1006.34, as well as to account for the possibility that more debt collectors may begin providing the validation information electronically, proposed § 1006.34(b)(4) would define validation notice to mean a written or electronic notice that provides the validation information described in proposed § 1006.34(c). The Bureau requests comment on proposed § 1006.34(b)(4). 34(b)(5) Validation Period FDCPA section 809(b) contains certain requirements that a debt collector must satisfy if a consumer disputes a debt or requests the name and address of the original creditor. If a consumer disputes a debt in writing within 30 days of receiving the validation information, a debt collector must stop collection of the debt until the debt collector obtains verification of the debt or a copy of a judgment against the consumer and mails it to the consumer.442 Similarly, if a consumer requests the name and address of the original creditor in writing within 30 days of receiving the validation information, FDCPA section 809(b) requires the debt collector to cease collection of the debt until it obtains and mails such information to the consumer.443 FDCPA section 809(b) also prohibits a debt collector, during the 30day period consumers have to dispute a debt or request information about the original creditor, from engaging in collection activities and communications that overshadow, or are inconsistent with, the disclosure of the consumer’s rights to dispute the debt and request original-creditor information, which are sometimes referred to as ‘‘verification rights.’’ 444 As described in the section-by-section analysis of § 1006.34(c)(3)(i) through (iii), the proposed rule would require debt collectors to disclose to a consumer the date certain on which the consumer’s FDCPA section 809(b) verification rights expire. Without additional clarification, debt collectors may be uncertain how to calculate this 442 15 U.S.C. 1692g(b). id. The Bureau refers to the consumer’s rights to dispute the validity of the debt and to request original-creditor information collectively as the consumer’s ‘‘verification rights.’’ 444 Id. 443 See E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 23338 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules date certain. First, debt collectors may be unsure how to reliably determine when a consumer has received the validation information (i.e., the event that triggers the running of the 30-day period). In addition, some debt collectors may honor disputes and original-creditor information requests that a consumer provides after the 30day period to dispute a debt or request information about the original creditor set forth in the FDCPA expires and may benefit from clarification about how to specify a longer period. To facilitate compliance with the proposed requirement to provide the date certain on which the consumer’s verification rights expire, proposed § 1006.34(b)(5) would define the term validation period to mean the period starting on the date that a debt collector provides the validation information described in § 1006.34(c) and ending 30 days after the consumer receives or is assumed to receive the validation information. To clarify how to calculate the end of the validation period— including how debt collectors may disclose a period that provides consumers additional time to exercise their validation rights—proposed § 1006.34(b)(5) also would provide that a debt collector may assume that a consumer receives validation information on any day that is at least five days (excluding legal public holidays, Saturdays, and Sundays) after the debt collector provides it. Proposed § 1006.34(b)(5) is designed to provide a debt collector with a straightforward yet flexible way to determine the last date of the validation period referenced in § 1006.34(c)(3)(i) through (iii). The Bureau proposes § 1006.34(b)(5) on the basis that consumers will typically receive a validation notice no more than five days (excluding legal public holidays, Saturdays, and Sundays) after the debt collector provides it. Further, proposed § 1006.34 would not prohibit a debt collector from honoring a consumer’s request to exercise verification rights after the date certain that appears in the validation notice pursuant to § 1006.34(c)(3)(i) through (iii). Proposed comment 34(b)(5)–1 would clarify that, if a debt collector sends a subsequent validation notice to a consumer because the consumer did not receive the original validation notice, and the consumer has not otherwise received the validation information, the debt collector must calculate the end of the validation period based on the date the consumer receives or is assumed to receive the subsequent validation notice. In other words, proposed comment 34(b)(5)–1 would clarify that, VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 if a debt collector sends an initial validation notice that was not received and then sends a subsequent validation notice, the validation period ends 30 days after the consumer receives or is assumed to receive the subsequent validation notice. The Bureau requests comment on proposed § 1006.34(b)(5) and on comment 34(b)(5)–1. In particular, the Bureau requests comment on debt collectors’ current practices for determining the end of the validation period. The Bureau also requests comment on whether the length of the five-day timing presumption should be modified and on whether different timing presumptions should apply depending on whether a validation notice is delivered by mail or electronically, for example by email or text message. Finally, the Bureau requests comment on whether a different timing presumption should apply if validation information is provided orally. 34(c) Validation Information Proposed § 1006.34(c) sets forth the validation information that debt collectors would be required to disclose under § 1006.34(a)(1). As described below, the validation information that proposed § 1006.34(c) would require consists of four general categories: Information to help consumers identify debts (including the information specifically referenced in FDCPA section 809(a)); information about consumers’ protections in debt collection; information to facilitate consumers’ ability to exercise their rights with respect to debt collection; and certain other statutorily required information. 34(c)(1) Debt Collector Communication Disclosure FDCPA section 807(11) requires a debt collector to disclose in its initial written communication with a consumer—and if the initial communication is oral, in that oral communication as well—that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose. FDCPA section 807(11) also requires a debt collector to disclose in each subsequent communication that the communication is from a debt collector.445 As discussed above, the Bureau proposes the § 1006.18(e) disclosure to implement FDCPA section 807(11). If a debt collector provides validation information, the debt collector engages 445 See the section-by-section analysis of proposed § 1006.18(e). PO 00000 Frm 00066 Fmt 4701 Sfmt 4702 in a debt collection communication and must make an appropriate FDCPA section 807(11) disclosure.446 The Bureau proposes § 1006.34(c)(1) to provide that the § 1006.18(e) disclosure is validation information that must be provided to the consumer pursuant to § 1006.34(a)(1). The Bureau requests comment on proposed § 1006.34(c)(1). 34(c)(2) Information About the Debt While validation notices in use today typically contain the specific information required under FDCPA section 809(a), the Bureau understands that debt collectors often do not include any other information to help consumers identify debts.447 As a result, validation notices in use today may lack sufficient information to enable some consumers to exercise their FDCPA section 809 rights. For example, the Bureau’s qualitative consumer research indicates that certain information that appears to help consumers to recognize a debt—including a debt’s original account number or an itemization of interest and fees—may not consistently appear on validation notices.448 Complaints about insufficient information to verify debts consistently rank among the most frequent types of consumer debt collection complaints received by the Bureau.449 Further, validation notices in use today may not be written in plain language that promotes consumer understanding. Thus, in some cases, consumers may not understand information about the debt that appears on the validation notice. The Bureau’s understanding is consistent with FTC findings, as well as with consumer advocate and industry feedback. According to the FTC, debt collectors do not provide sufficient information to allow consumers to determine whether they owe a debt in question or to exercise their FDCPA rights.450 Observing that validation notices lack sufficient detail for consumers to recognize whether a debt belongs to them, the FTC has suggested that more information about the debt 446 See, e.g., Dorsey v. Morgan, 760 F. Supp. 509 (D. Md. 1991). 447 See Small Business Review Panel Outline, supra note 56, at 15. 448 See FMG Cognitive Report, supra note 40, at 8–11. 449 In its 2019 FDCPA Annual Report, the Bureau noted that 72 percent of consumers who complain about written notifications about debt stated that they did not receive enough information to verify the debt. 2019 FDCPA Annual Report, supra note 11, at 17. Consumers have consistently complained to the Bureau about receiving insufficient information to verify debts. See 2018 FDCPA Annual Report, supra note 16, at 15–16; 2017 FDCPA Annual Report, supra note 21, at 16. 450 FTC Modernization Report, supra note 176, at 21. E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules should appear in validation notices.451 In response to the Bureau’s ANPRM, consumer advocates stated that many validation notices contain insufficient information for consumers to evaluate whether they owe a debt. Industry commenters also identified additional information for validation notices that would help consumers recognize debts, such as the date of the consumer’s last payment and itemization information. The lack of information about the debt currently provided in validation notices—combined with limited disclosure of consumers’ rights with respect to debt collection, which is discussed in the section-by-section analysis of proposed § 1006.34(c)(3)— may disadvantage both consumers and debt collectors. If a consumer receives a validation notice for an unfamiliar debt, the consumer may experience uncertainty, which may lead to the consumer disputing a debt that is owed. If a consumer disputes a debt the consumer owes but does not recognize, the debt collector must spend time and resources responding to a dispute that could have been avoided had the consumer initially received more complete information. Participants in the Bureau’s consumer testing also reported that the inability to recognize a debt is a major concern because of the risk of potential fraud or identity theft.452 In addition, a consumer may, in some instances, pay an unfamiliar debt that the consumer did not owe.453 In light of these concerns, proposed § 1006.34(c)(2) would describe the information about the debt and the parties related to the debt that debt collectors must provide to the consumer 451 Id. at 29. Focus Group Report, supra note 38, at 452 FMG jbell on DSK3GLQ082PROD with PROPOSALS2 13. 453 Academic research and agency experience offer insight into why some consumers may pay debts that they do not owe in response to debt collection efforts. In one study of how consumers would react to a validation notice concerning a debt that they did not owe, 3 percent of respondents stated that they would pay the debt rather than dispute it. The study’s authors hypothesized that fear of negative credit reporting may explain this behavior. See Jeff Sovern et al., Validation and Verification Vignettes: More Results from an Empirical Study of Consumer Understanding of Debt Collection Validation Notices, Rutgers L. Rev. (forthcoming) (manuscript at 46–47), https:// papers.ssrn.com/sol3/papers.cfm?abstract_ id=3219171. In a settlement agreement with a debt collector, the FTC alleged that many consumers paid purported debts that they did not owe because they believed that the debts were real, or because they wanted to stop harassing debt collection efforts. See Complaint at ¶ 22, Fed. Trade Comm’n v. Lombardo Daniels & Moss, LLC. No. 3:17–CV– 503–RJC (W.D.N.C. Aug. 21, 2017), https:// www.ftc.gov/system/files/documents/cases/ lombardo_complaint_8-29-17.pdf. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 under § 1006.34(a)(1).454 The sectionby-section analysis of proposed § 1006.34(c)(2)(i) through (x) discusses the specific items of information, which would include existing statutory disclosures, designed to help consumers recognize debts. Except where noted— for example, in the case of merchant brand information for credit card debt under proposed § 1006.34(c)(2)(iii)—the information described in proposed § 1006.34(c) is not conditioned on availability. Thus, if a debt collector does not have a piece of information for a debt, the debt collector would be unable able to comply with proposed § 1006.34(a)(1) for that debt. The Bureau requests comment on proposed § 1006.34(c)(2), including on whether any of the proposed items should be excluded or any additional items should be added. The Bureau also requests comments on whether proposed § 1006.34(c)(2)’s content requirements risk overwhelming consumers and decreasing their understanding, thereby making the proposed disclosures less effective. Except with respect to § 1006.34(c)(2)(iv), the Bureau proposes § 1006.34(c)(2) pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors and, as described more fully below, its authority to implement and interpret FDCPA section 809. Except with respect to § 1006.34(c)(2)(vi) and (x), the Bureau also proposes § 1006.34(c)(2) pursuant to its authority under section 1032(a) of the Dodd-Frank Act, on the basis that the validation information describes the debt, which is a feature of debt collection. Requiring disclosure of validation information may help to ensure that the features of debt collection are fully, accurately, and effectively disclosed to consumers, such that consumers may better understand whether they owe particular debts and, consequently, the costs, benefits, and risks associated with paying or not paying those debts. 34(c)(2)(i) FDCPA section 809(b) provides that a consumer may notify a debt collector in writing, within 30 days after receipt of the information required by FDCPA section 809(a), that the consumer is exercising certain verification rights, including the right to dispute the debt. FDCPA section 809(a)(3) through (5), in turn, requires debt collectors to disclose how consumers may exercise their 454 Proposed § 1006.34(c)(5) would establish a special rule for information about the debt for certain residential mortgage debt. PO 00000 Frm 00067 Fmt 4701 Sfmt 4702 23339 verification rights. To notify a debt collector in writing that the consumer is exercising the consumer’s verification rights, the consumer must have the debt collector’s name and address.455 For this reason, and pursuant to its authority to interpret FDCPA section 809(a)(3) through (5) and (b), as well as its authority under Dodd-Frank Act section 1032(a), the Bureau proposes § 1006.34(c)(2)(i) to provide that the debt collector’s name and mailing address is validation information that must be provided to the consumer under § 1006.34(a)(1). The Bureau requests comment on proposed § 1006.34(c)(2)(i) and on whether additional clarification would be useful. 34(c)(2)(ii) FDCPA section 809(a) requires debt collectors to disclose information about the debt itself that helps consumers identify the debt and facilitate resolution of the debt. Like the information specifically referenced in FDCPA section 809(a), the consumer’s name and address is essential information about the debt that may help a consumer determine whether the consumer owes a debt and is the intended recipient of a validation notice. For this reason, and pursuant to its authority to interpret FDCPA section 809(a), as well as its authority under Dodd-Frank Act section 1032(a), the Bureau proposes § 1006.34(c)(2)(ii) to provide that the consumer’s name and mailing address is validation information that must be provided to the consumer under § 1006.34(a)(1).456 To avoid confusing or misleading consumers, the consumer’s name and mailing address used by the debt collector in a validation notice would be the most complete information that the debt collector obtained from the creditor or another source. For example, a consumer advocate has noted that including the consumer’s complete name in the validation notice would help senior consumers who may be contacted about a debt owed by a spouse or an adult child. Because a consumer may share the same last name as a spouse or an adult child, the consumer may need complete name information—for example, a name suffix such as ‘‘Junior’’ or ‘‘Senior’’—to determine whether the consumer is the 455 Participants in the Bureau’s consumer testing reported that contact information for debt collectors, including the debt collector’s mailing address, is important. FMG Focus Group Report, supra note 38, at 15–16. 456 As discussed in part VI, debt collectors may already include the consumer’s complete name information available on validation notices, so proposed § 1006.34(c)(2)(ii) may not pose significant operational challenges. E:\FR\FM\21MYP2.SGM 21MYP2 23340 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules validation notice’s intended recipient, or whether the consumer received the validation notice in error. Proposed comment 34(c)(2)(ii)–1 therefore would clarify that the consumer’s name should reflect what the debt collector reasonably determines is the most complete version of the name information about which the debt collector has knowledge, whether obtained from the creditor or another source. Proposed comment 34(c)(2)(ii)– 1 further explains that a debt collector would not be able to omit name information in a manner that would create a false, misleading, or confusing impression about the consumer’s identity. The Bureau requests comment on proposed § 1006.34(c)(2)(ii) and on comment 34(c)(2)(ii)–1, including on whether additional clarification would be useful. The Bureau specifically requests comment on how debt collectors currently determine the complete version of a consumer’s name if creditors or third parties, such as a skip tracing vendors, provide conflicting name information. The Bureau also requests comment on what a debt collector should be required to do to reasonably determine the consumer’s complete name information. jbell on DSK3GLQ082PROD with PROPOSALS2 34(c)(2)(iii) The purpose of FDCPA section 809 is to ‘‘eliminate the recurring problem of debt collectors dunning the wrong person or attempting to collect debts which the consumer has already paid.’’ 457 Consistent with this purpose, FDCPA section 809(a) requires debt collectors to disclose to consumers certain information, including the name of the creditor, to help consumers identify debts and determine whether they owe them. For credit card debts, the merchant brand appears to be an integral part of the name of the creditor that helps consumers identify debts and determine whether they owe them. Merchant brands appear to be salient information for debts arising from use of co-branded or private-label credit cards because consumers may associate such debts more closely with merchant brands than with credit card issuers.458 For example, the Bureau’s consumer focus group findings indicate consumers 457 S. Rept. No. 382, supra note 70, at 4. Bureau believes that merchant brand information is unique to credit card debt. Other types of debt do not typically involve an entity like a merchant, whom the consumer may associate with the debt but who did not provide the credit, product, or service that gave rise to the debt. 458 The VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 use merchant brands to recognize credit card debts.459 For this reason, and pursuant to its authority to interpret FDCPA section 809(a), as well as its authority under Dodd-Frank Act section 1032(a), the Bureau proposes § 1006.34(c)(2)(iii) to provide that the merchant brand, if any, associated with a credit card debt, to the extent available to the debt collector, is validation information that must be provided to the consumer under § 1006.34(a)(1). Proposed comment 34(c)(2)(iii)–1 provides an example of merchant brand information that the Bureau believes would be available to a debt collector and must be included on a validation notice. The Bureau requests comment on proposed § 1006.34(c)(2)(iii) and on comment 34(c)(2)(iii)–1. In particular, the Bureau requests comment on whether merchant brand or similar information should be required for debts other than credit card debts. 34(c)(2)(iv) FDCPA section 809(a)(2), which requires debt collectors to disclose to consumers the name of the creditor to whom the debt is owed, typically is understood to refer to the current creditor.460 When the original creditor (or the creditor as of the itemization date) and the current creditor are the same, a consumer is more likely to recognize the creditor’s name. If they are different, however, a consumer may be less likely to recognize the current creditor. For example, after the itemization date, a creditor may have sold a debt to a debt buyer, or may have changed its corporate identity following a merger or acquisition, and the consumer may not have had any contact with the new entity before collections began. In these cases, the consumer may be more likely to recognize the name of the creditor as of the itemization date than the name of the current creditor. This is because (as discussed in the section-by-section analysis of proposed § 1006.34(b)(3)) the itemization date is intended to reflect a notable event in a debt’s history that the consumer may recall, or for which the consumer may have records. A consumer may be more likely to recognize the creditor as of that date than the current creditor, with whom the consumer may have no prior relationship. 459 FMG Focus Group Report, supra note 38, at 13–14; FMG Usability Report, supra note 41, at 43– 44. 460 See the section-by-section analysis of proposed § 1006.34(c)(2)(vi) regarding FDCPA section 809(a)(2)’s requirement to disclose the name of the creditor to whom the debt is owed. PO 00000 Frm 00068 Fmt 4701 Sfmt 4702 For these reasons, and pursuant to its authority under Dodd-Frank Act section 1032(a), the Bureau proposes § 1006.34(c)(2)(iv) to provide that, if a debt collector is collecting a consumer financial product or service debt, as that term is defined in § 1006.2(f), the name of the creditor to whom the debt was owed on the itemization date is validation information that the debt collector must provide to the consumer under § 1006.34(a)(1). The Bureau requests comment on proposed § 1006.34(c)(2)(iv). 34(c)(2)(v) The purpose of FDCPA section 809 is to ‘‘eliminate the recurring problem of debt collectors dunning the wrong person or attempting to collect debts which the consumer has already paid.’’ 461 The Bureau believes that the problem of debt collectors attempting to collect debts from consumers who do not owe the debts continues today. For example, ‘‘attempts to collect debt not owed’’ is consistently the most common type of debt collection complaint consumers provide to the Bureau.462 Consistent with the FDCPA’s purpose, FDCPA section 809(a) requires debt collectors to disclose to consumers certain information, such as the amount of the debt itself, to help consumers identify debts. An account number associated with a debt on the itemization date may be integral information that a consumer uses to identify the debt itself. For example, the Bureau’s consumer testing suggests that a validation notice that includes an account number appears to ease concerns that a debt is fraudulent because the consumer may recognize the number or be able to verify the debt with their records.463 In addition, in response to the Bureau’s ANPRM, State attorneys general, consumer advocates, and industry stakeholders all provided feedback that the account number associated with a debt may help a consumer recognize the debt. For these reasons, and pursuant to its authority to interpret FDCPA section 809(a), as well as its authority under Dodd-Frank Act section 1032(a), the Bureau proposes § 1006.34(c)(2)(v) to provide that the account number, if any, associated with the debt on the itemization date, or a 461 S. Rept. No. 382, supra note 70, at 4. 2019 FDCPA Annual Report, supra note 11, at 16 (40 percent of consumer complaints about debt collection involve attempts to collect debt not owed); 2018 FDCPA Annual Report, supra note 16, at 15 (39 percent of consumer complaints about debt collection involve attempts to collect debt not owed). 463 FMG Focus Group Report, supra note 38, at 19. 462 See E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules truncated version of that number, is validation information that the debt collector must provide to the consumer under § 1006.34(a)(1). Debt collectors may wish to truncate account numbers to prevent disclosure of consumer account information, or to comply with applicable privacy rules, such as the FTC Safeguards Rule.464 Proposed comment 34(c)(2)(v)–1 explains that debt collectors may do so provided that the account number remains recognizable. For example, in lieu of disclosing a complete account number, debt collectors may disclose only the last four digits of the number. The Bureau requests comment on proposed § 1006.34(c)(2)(v) and on comment 34(c)(2)(v)–1, including on whether the Bureau should mandate truncation of account numbers rather than making truncation optional. Further, the Bureau requests comment on whether additional clarification about truncation would be helpful. For example, such clarification might explain when a truncated account number is recognizable, or how debt collectors may indicate that digits have been omitted from a truncated account number. jbell on DSK3GLQ082PROD with PROPOSALS2 34(c)(2)(vi) FDCPA section 809(a)(2) requires debt collectors to disclose to consumers the name of the creditor to whom the debt is owed. By using the present tense ‘‘is owed,’’ the statute appears to refer to the creditor to whom the debt is owed when the debt collector makes the disclosure. For this reason, and pursuant to its authority to implement and interpret FDCPA section 809(a)(2), the Bureau proposes § 1006.34(c)(2)(vi) to provide that the name of the current creditor is validation information that the debt collector must provide to the consumer under § 1006.34(a)(1). 34(c)(2)(vii) FDCPA section 809(a)(1) requires debt collectors to disclose to consumers the amount of the debt. In § 1006.34(c)(2)(viii), the Bureau proposes to interpret FDCPA section 809(a)(1), and to use its authority under Dodd-Frank Act section 1032(a), to provide that the amount of the debt on the itemization date is validation information that the debt collector must disclose under § 1006.34(a)(1).465 Consistent with proposed § 1006.34(c)(2)(viii)—and for the same reasons and pursuant to the same authority discussed in the section-by464 See 16 CFR part 314. the section-by-section analysis of proposed § 1006.34(c)(2)(viii). 465 See VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 section analysis thereof—the Bureau proposes § 1006.34(c)(2)(vii) to provide that the itemization date, as defined in § 1006.34(b)(3), also is validation information that must be provided to the consumer under § 1006.34(a)(1).466 The itemization date would indicate the beginning of the time period that the itemization of the debt in proposed § 1006.34(c)(2)(ix) is intended to capture. The Bureau requests comment on proposed § 1006.34(c)(2)(vii). 34(c)(2)(viii) FDCPA section 809(a)(1) requires debt collectors to disclose to consumers the amount of the debt. The phrase ‘‘the amount of the debt’’ is ambiguous; it does not specify which debt amount is being referred to, even though the debt amount may change over time. For example, because of accrued interest or fees, the current amount of the debt (i.e., the amount on the date that the validation information is provided) may be more than the amount of the debt at origination. Because of applied payments or credits, the current amount of the debt also may be less than the amount of the debt the consumer originally incurred. If the amount of the debt has changed over time, consumers may not recognize the debt or the current amount of the debt. By contrast, consumers may recognize the amount of the debt as of the itemization date. As discussed in the section-by-section analysis of proposed § 1006.34(b)(3), the itemization date reflects a notable event in a debt’s history that a consumer may recall or be able to verify with records, particularly if that amount is itemized as described in § 1006.34(c)(ix). Because the amount of the debt on the itemization date may help a consumer recognize a debt and determine whether the amount of a debt is accurate, the Bureau proposes to interpret FDCPA section 809(a)(1), and to use its authority under Dodd-Frank Act section 1032(a), to provide in § 1006.34(c)(2)(viii) that the amount of the debt on the itemization date is validation information that the debt collector must provide to the consumer under § 1006.34(a)(1).467 Proposed comment 34(c)(2)(viii)–1 explains that 466 As discussed in the section-by-section analysis of proposed § 1006.34(b)(3) and (c)(2)(viii) and (ix), the itemization date is the reference date for, among other things, the itemization of the debt, which the Bureau believes may help a consumer identify an alleged debt. For additional discussion of these provisions, see the section-by-section analysis of proposed § 1006.34(c)(2)(iv) and (v). 467 Proposed § 1006.34(c)(2)(x) separately provides that the current amount of the debt also is validation information that must be disclosed under § 1006.34(a)(1). See the section-by-section analysis of proposed § 1006.34(c)(2)(x). PO 00000 Frm 00069 Fmt 4701 Sfmt 4702 23341 this amount includes any fees, interest, or other charges owed as of the itemization date. The Bureau requests comment on proposed § 1006.34(c)(2)(viii) and on comment 34(c)(2)(viii)–1. 34(c)(2)(ix) FDCPA section 809(a)(1) requires a debt collector to disclose to consumers the amount of the debt. This disclosure is intended to help consumers recognize debts that they owe and raise concerns about debts that are unfamiliar or inaccurate. For the reasons discussed in the section-by-section analysis of proposed § 1006.34(c)(2)(viii) and (x), the Bureau proposes to implement and interpret FDCPA section 809(a)(1) to provide that debt collectors must disclose to consumers both the amount of the debt on the itemization date and the current amount of the debt (i.e., the amount of the debt on the date that the validation information is provided). In conjunction with the amount of the debt on the itemization date and the current amount of the debt, an itemization of how the amount of the debt changed between those dates may be an integral part of the amount of the debt. Specifically, consumers may be better positioned to recognize whether they owe a debt and to evaluate whether the current amount alleged due is accurate if they understand how the amount changed over time due, for example, to interest, fees, payments, and credits that have been assessed or applied to the debt. The Bureau’s qualitative consumer testing indicates that an itemization appears to improve consumer understanding about and recognition of the debt.468 In particular, some testing participants emphasized that an itemization in a tabular format helped them understand specific fees and charges.469 The FTC has also suggested that the validation notice should contain an itemization that includes principal, interest, and fees.470 Some State debt collection laws also require that the validation notice include an itemization.471 Courts have also observed that an itemization may enhance consumer understanding. Some courts have opined that an itemized accounting helps a consumer assess the validity of 468 FMG Usability Report, supra note 41, at 16– 19. 469 FMG 470 FTC Cognitive Report, supra note 40, at 10. Modernization Report, supra note 176, at v. 471 See Cal. Civ. Code sec. 1788.52(a)(2); NYCRR § 1.2(b)(2). E:\FR\FM\21MYP2.SGM 21MYP2 23342 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 an alleged debt.472 Further, some courts have held that a debt collector’s failure to properly disclose interest and fees— or to disclose that a debt may increase in the future due to interest and fees— may violate the FDCPA.473 An itemization also may discourage debt collectors from engaging in unfair, deceptive, or abusive practices by ensuring that consumers have, as a matter of course, sufficient information to evaluate claims of indebtedness presented in validation notices. For example, requiring a debt collector to disclose an itemization of the debt may help a consumer identify erroneous or fabricated fees that a creditor or debt collector may have added that inflated the amount of an alleged debt. An itemization requirement also may help debt collectors disclose interest and fees in a manner that provides essential information to consumers and reduces debt collectors’ legal risk when providing validation notices. For these reasons, and pursuant to its authority to interpret FDCPA section 809(a)(1), as well as its authority under Dodd-Frank Act section 1032(a), the Bureau proposes § 1006.34(c)(2)(ix) to provide that an itemization of the current amount of the debt, in a tabular format reflecting interest, fees, payments, and credits since the itemization date, is validation information that must be provided to the consumer under § 1006.34(a)(1). Proposed comment 34(c)(2)(ix)–1 would clarify how debt collectors can disclose that no interest, fees, payments, or credits were assessed or applied to a debt. The Bureau requests comment on proposed § 1006.34(c)(2)(ix) and on comment 34(c)(2)(ix)–1. In particular, the Bureau requests comment on whether the itemization should be more detailed—for example, by reflecting each fee charged and each payment received—or whether certain itemization categories, such as credits and payments, should be combined. The Bureau also requests comment on 472 See, e.g., Haddad v. Alexander, Zelmanski, Danner & Fioritto, PLLC, 758 F. 3d 777, 785 (6th Cir. 2015). 473 See Avila v. Riexinger & Associates, LLC, 817 F.3d 72, 76 (2d Cir. 2016) (holding that 15 U.S.C. 1692e requires debt collectors to disclose when the amount of a debt may increase due to interest and fees); Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, and Clark, LLC, 214 F.3d 872, 875–76 (7th Cir. 2000) (finding that a validation notice’s omission of accrued interest and fees violated 15 U.S.C. 1692g(a)(1)’s requirement to disclose the amount of the debt); Wood v. Allied Interstate, LLC (17 C 4921), 2018 WL 2967061, at *2–3 (N.D. Ill. June 13, 2018) (holding that an itemization that listed ‘‘$0.00’’ due in interest and fees, when interest and fees were not allowed, could violate 15 U.S.C. 1692e and 1692f). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 whether the itemization proposal is practicable across all categories of debt or conflicts with disclosure requirements established by other applicable law, such as State case law, statutory law, and regulatory law, as well as disclosures required by judicial opinions or orders. 34(c)(2)(x) FDCPA section 809(a)(1) requires debt collectors to disclose to consumers the amount of the debt. As noted, however, the phrase ‘‘the amount of the debt’’ is ambiguous; it does not specify which debt amount is being referred to, even though the debt amount may change over time. One reasonable interpretation of FDCPA section 809(a)(1) is that ‘‘amount of the debt’’ refers to the current amount of the debt, which is the amount of the debt on the date that the validation information is provided. For this reason, and pursuant to its authority to implement and interpret FDCPA section 809(a)(1), proposed § 1006.34(c)(2)(x) provides that the current amount of the debt is validation information that the debt collector must provide to the consumer under § 1006.34(a)(1). Proposed comment 34(c)(2)(x)–1 explains that, for residential mortgage debt subject to § 1006.34(c)(5), a debt collector may comply with § 1006.34(c)(2)(x) by including in the validation notice the total balance of the outstanding mortgage, including principal, interest, fees, and other charges. The Bureau proposes this to accommodate debt collectors collecting mortgage debt, who sometimes disclose to consumers the total balance of the outstanding mortgage, rather than the current amount due on a given date when providing the amount of the debt pursuant to FDCPA section 809(a)(1).474 The Bureau requests comment on proposed § 1006.34(c)(2)(x) and on comment 34(c)(2)(x)–1. 34(c)(3) Information About Consumer Protections The disclosures in FDCPA section 809(a) help consumers determine if a particular debt is theirs and facilitate action in response to a collection 474 Under Regulation Z, 12 CFR 1026.41(d)(3), certain mortgage servicers are required to provide a past-payment breakdown that may be functionally equivalent to, and as useful for the consumer, as the disclosures that would be required by proposed § 1006.34(c)(2)(vii) through (ix). As discussed in the section-by-section analysis of proposed § 1006.34(c)(5), the Bureau proposes a special rule that would allow servicers of certain residential mortgage debt to satisfy the requirements of proposed § 1006.34(c)(2)(vii) through (ix) by providing disclosures required by Regulation Z, 12 CFR 1026.41(d)(3). PO 00000 Frm 00070 Fmt 4701 Sfmt 4702 attempt. The Bureau understands, however, that debt collectors typically may disclose only the information that FDCPA section 809(a) specifically references and may provide the FDCPA section 809 information using statutory language, rather than plain language that consumers can more easily comprehend. Consumer advocates, State agencies, and State attorneys general provided ANPRM feedback that validation notices do not contain enough information about a consumer’s rights with respect to debt collection.475 The FTC similarly has asserted that debt collectors generally do not provide enough information about the actions consumers may take under the FDCPA, which makes it difficult for some consumers to exercise those rights.476 The Bureau’s consumer focus group findings also indicate that consumers often are unfamiliar with or have erroneous beliefs about their FDCPA rights.477 Many testing participants responded favorably to sample validation notices that disclosed additional rights and protections.478 Consumer testing also suggests that consumers generally prefer disclosures written in plain language, as opposed to statutory language.479 To address these concerns, proposed § 1006.34(c)(3) would deem certain information about a consumer’s rights with respect to debt collection to be validation information that must be provided to the consumer under § 1006.34(a)(1). This information, which is discussed in the section-by-section analysis of proposed § 1006.34(c)(3)(i) through (vi), would include disclosures specifically referenced in FDCPA 475 Consumer complaints received by the Bureau tend to corroborate this feedback. In its 2019 FDCPA Annual Report, the Bureau noted that 25 percent of consumers who complained about written notifications about debt stated that they did not receive a notice of their right to dispute. See 2019 FDCPA Annual Report, supra note 11, at 17. 476 FTC Modernization Report, supra note 176, at v. The notion that some consumers may have difficulty exercising FDCPA verification rights is supported by one academic study that found a substantial proportion of survey respondents did not understand they would need to dispute a debt in writing to trigger certain FDCPA protections. According to the study, 75 percent of consumers who were shown a court-approved validation notice believed that they could orally exercise their verification rights, even though the notice expressly stated that disputes must be in writing. See Jeff Sovern & Kate E. Walton, ‘‘Are Validation Notices Valid? An Empirical Evaluation of Consumer Understanding of Debt Collection Validation Notices,’’ 70 SMU L. Rev. 63, at 94–98 (2017). 477 FMG Focus Group Report, supra note 38, at 6– 8. 478 FMG Cognitive Report, supra note 40, at 27– 33. 479 Id. at 26–27; FMG Summary Report, supra note 42, at 25–26. E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules section 809(a)(4) and (5), as well as additional disclosures intended to help consumers understand their debt collection rights.480 The Bureau requests comment on proposed § 1006.34(c)(3) generally, including on whether any of the proposed items should be excluded or any additional items should be added. The Bureau proposes § 1006.34(c)(3)(i) through (iii) and (v) pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors and, as described more fully below, its authority to implement and interpret FDCPA section 809. The Bureau also proposes § 1006.34(c)(3) pursuant to its authority under section 1032(a) of the Dodd-Frank Act, on the basis that a consumer’s rights are a feature of debt collection. Requiring disclosure of information about these rights may help to ensure that the features of debt collection are fully, accurately, and effectively disclosed to consumers, such that consumers may better understand the costs, benefits, and risks associated with debt collection. jbell on DSK3GLQ082PROD with PROPOSALS2 34(c)(3)(i) FDCPA section 809(a)(4) requires debt collectors to disclose to consumers their right under FDCPA section 809(b) to dispute the validity of the debt within 30 days after receipt of the validation information (i.e., during the validation period). As discussed in the section-bysection analysis of proposed § 1006.38, if a consumer disputes a debt in accordance with FDCPA section 809(b), a debt collector must cease collecting the debt until the debt collector provides verification to the consumer; this is sometimes referred to as the collections pause. FDCPA section 809(a)(4) does not expressly indicate that a debt collector must disclose to consumers that a dispute triggers FDCPA section 809(b)’s collections pause, or whether a debt collector must disclose the end date of the validation period. FDCPA section 809(b)’s collections pause is an integral feature of the dispute right disclosure required by FDCPA section 809(a)(4). Unless debt collectors disclose the collections pause, consumers may not fully appreciate their FDCPA dispute right. Participants in the Bureau’s consumer testing reported that knowing about the collections pause was important and would encourage them to exercise their dispute right if they question a debt’s 480 See 15 U.S.C. 1692g(a)(4) and (5). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 validity.481 This is consistent with the FTC’s observation that consumers are generally unaware of the collections pause, even though it may benefit them.482 The validation period end date similarly is an integral feature of a consumer’s dispute right. Unless debt collectors disclose the end date of the validation period, consumers may be uncertain about the time period during which they are entitled to dispute the debt under FDCPA section 809(b). For these reasons, and pursuant to its authority to interpret FDCPA section 809(a)(4) and (b), as well as its authority under Dodd-Frank Act section 1032(a), the Bureau proposes § 1006.34(c)(3)(i) to provide that validation information includes a statement that specifies the end date of the validation period and states that, if the consumer notifies the debt collector in writing before the end of the validation period that the debt, or any portion of the debt, is disputed, the debt collector must cease collection of the debt until the debt collector sends the consumer either the verification of the debt or a copy of a judgment. The Bureau requests comment on proposed § 1006.34(c)(3)(i). 34(c)(3)(ii) FDCPA section 809(a)(5) requires debt collectors to disclose to consumers their right under FDCPA section 809(b) to request, within 30 days after receipt of the validation information, the name and address of the original creditor, if different than the current creditor. FDCPA section 809(a)(5) does not expressly indicate that a debt collector must disclose to consumers that an original-creditor information request invokes FDCPA section 809(b)’s collections pause, or whether a debt collector must disclose the end date of the validation period. FDCPA section 809(b)’s collections pause is an integral feature of the consumer’s right to request originalcreditor information under FDCPA section 809(a)(5). Unless debt collectors disclose the collections pause, consumers may not fully appreciate their right to request original-creditor information under FDCPA section 809(b). The validation period end date similarly is an integral feature of a consumer’s right to request originalcreditor information. Unless debt collectors disclose the validation period end date, consumers may be uncertain 481 FMG Cognitive Report, supra note 40, at 30; see also FMG Summary Report, supra note 42, at 25. 482 FTC Modernization Report, supra note 176, at 26–27. PO 00000 Frm 00071 Fmt 4701 Sfmt 4702 23343 about the time period during which they are entitled to request original-creditor information under FDCPA section 809(b). For these reasons, and pursuant to its authority to interpret FDCPA section 809(a)(5) and (b), as well as its authority under Dodd-Frank Act section 1032(a), the Bureau proposes § 1006.34(c)(3)(ii) to provide that validation information includes a statement that specifies the end date of the validation period and states that, if the consumer requests in writing before the end of the validation period the name and address of the original creditor, the debt collector must cease collection of the debt until the debt collector sends the consumer the name and address of the original creditor, if different from the current creditor. The Bureau requests comment on proposed § 1006.34(c)(3)(ii). In particular, the Bureau notes that the proposed § 1006.34(c)(3)(ii) disclosure language that appears on proposed Model Form B–3 omits the statutory phrase, ‘‘if different from the current creditor.’’ The Bureau intentionally omitted this phrase to achieve a plain language disclosure that enhances consumer understanding. The Bureau requests comment on whether omitting this phrase on proposed Model Form B– 3 would enhance consumer understanding by simplifying the statutory language, or whether it might lead consumers incorrectly to conclude that a debt collector always would need to cease collection upon request for original-creditor information, even if the original creditor and the current creditor were the same. 34(c)(3)(iii) FDCPA section 809(a)(3) requires a debt collector to disclose to a consumer that, unless the consumer disputes the validity of the debt within 30 days of receipt of the validation information, the debt collector will assume the debt to be valid. The Bureau is aware that courts in various jurisdictions have reached different conclusions about whether FDCPA section 809(a)(3) requires debt collectors to recognize oral disputes, received within 30 days of a consumer’s receipt of the validation information, about the validity of the debt.483 These differing decisions 483 Compare Clark v. Absolute Collection Serv., Inc., 741 F.3d 487, 490 (4th Cir. 2014) (holding that oral disputes trigger certain FDCPA protections, including under FDCPA section 809(a)(3)), Hooks v. Forman, Holt, Eliades & Ravin, LLC, 717 F.3d 282, 286 (2d Cir. 2013) (same), and Camacho v. Bridgeport Fin. Inc., 430 F.3d 1078, 1082 (9th Cir. 2005) (same), with Graziano v. Harrison, 950 F.2d 107, 112 (3d Cir. 1991) (‘‘[A] dispute, to be effective, must be in writing’’), and Durnell v. Stoneleigh E:\FR\FM\21MYP2.SGM Continued 21MYP2 23344 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 principally arise from the fact that, whereas FDCPA section 809(a)(4) and (5) explicitly require a consumer to submit a written dispute to invoke the FDCPA’s verification rights, FDCPA section 809(a)(3) specifies no writing requirement. In the absence of an express writing requirement in FDCPA section 809(a)(3), the majority of circuit courts that have considered this issue have determined that a consumer’s oral dispute triggers certain FDCPA protections, including, for example, FDCPA section 810’s payment application requirement.484 These decisions have created uncertainty for debt collectors in some jurisdictions when seeking to comply with FDCPA section 809(a)’s disclosure requirements.485 Consistent with the position articulated by the majority of circuit courts, and pursuant to its authority to implement and interpret FDCPA section 809(a)(3) as well as its authority under Dodd-Frank Act section 1032(a), the Bureau proposes to interpret FDCPA 809(a)(3) to allow oral disputes. The Bureau believes that this may be the most persuasive interpretation of Congressional intent, given the lack of the words ‘‘in writing’’ in FDCPA 809(a)(3), as compared to the presence of those words throughout FDCPA 809(a)’s other provisions. Accordingly, the Bureau proposes § 1006.34(c)(3)(iii) to provide that validation information includes a statement that specifies the end date of the validation period and states that, unless the consumer contacts the debt collector to dispute the validity of the debt, or any portion of the debt, before the end of the validation period, the debt collector will assume that the debt is valid. Model Form B–3 would inform consumers that they have the option to ‘‘call’’ or ‘‘write’’ a debt collector to dispute the validity of a debt Recovery Assocs., LLC, (No. 18–2335), 2019 WL 121197, at *3–4 (E.D. Pa. Jan. 7, 2019) (holding that a validation notice that ‘‘mirror[ed] the language’’ of the FDCPA section 809 still violated the FDCPA because disputes must be in writing). 484 See 15 U.S.C. 1692i; Camacho, 430 F.3d at 1081–82 (holding that oral disputes trigger certain FDCPA protections, including under FDCPA sections 807(8) and 810). 485 See, e.g., Caprio v. Healthcare Revenue Recovery Grp., 709 F.3d 142, 151–52 (3d Cir. 2013) (holding that a collection letter encouraging a consumer to ‘‘please call’’ the debt collector violated FDCPA section 809(a)); Riggs v. Prober & Raphael, 681 F.3d 1097, 1103–04 (9th Cir. 2012) (holding that a validation notice that implied a written dispute requirement—but that did not expressly require a written dispute—did not violate FDCPA section 809(a)(3)); Homer v. Law Offices of Frederic I. Weinberg & Assocs., P.C., 292 F. Supp. 3d 629, 633–34 (E.D. Pa. 2017) (holding that a validation notice that used ‘‘hears from you’’ language was deceptive because it suggested that disputes could be made orally). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 during the validation period. While Model Form B–3 would alert consumers to an oral dispute option, the form would clarify that only a written dispute would invoke verification rights pursuant to FDCPA sections 809(a)(4) and (5).486 As discussed in the sectionby-section analysis of proposed § 1006.34(d)(2), the use of Model Form B–3 would provide debt collectors with a safe harbor for compliance with FDCPA section 809(a)’s disclosure requirements.487 The Bureau requests comment on whether debt collectors require additional clarification about how to comply with FDCPA section 809(a)(3). 34(c)(3)(iv) As discussed in the section-by-section analysis of proposed § 1006.34(c)(3), consumers may not receive sufficient information about their rights and protections in debt collection. While validation information helps consumers determine if a particular debt is theirs and facilitates action in response to a collection attempt, consumers could benefit if validation information included additional information about consumer protections in debt collection. The Bureau makes such information available on its website and intends to develop additional resources to enhance consumer understanding of these protections and the debt collection process in general. The Bureau is developing a reference document that would describe certain legal protections relevant to debt collection. This reference document was initially conceived as a mandatory disclosure that debt collectors would be required to provide to consumers along with the validation notice. Although the Bureau does not propose to require debt collectors to provide the reference document to consumers, if the Bureau finalizes proposed § 1006.34(c)(3)(iv), the Bureau would publish a version of the document as a consumer resource on the Bureau’s website before the final rule’s effective date.488 To enhance consumer understanding of protections available during the debt collection process, and pursuant to its authority under Dodd-Frank Act section 1032(a), the Bureau proposes § 1006.34(c)(3)(iv) to provide that, if a debt collector is collecting a consumer financial product or service debt, as 486 See the section-by-section analysis of proposed § 1006.34(c)(3)(i) and (ii). 487 See the section-by-section analysis of proposed § 1006.34(d)(2). 488 For additional detail about information that may appear on the reference document, refer to appendix G of the Small Business Review Panel Outline, supra note 56. PO 00000 Frm 00072 Fmt 4701 Sfmt 4702 defined in § 1006.2(f), then validation information includes a statement that informs the consumer that additional information regarding consumer rights in debt collection is available on the Bureau’s website at https:// www.consumerfinance.gov.489 The Bureau proposes this requirement on the basis that this information informs consumers how to exercise their FDCPA rights and protections and therefore is a feature of debt collection. The Bureau requests comment on proposed § 1006.34(c)(3)(iv). 34(c)(3)(v) As discussed below, proposed § 1006.34(c)(4) would provide that validation information includes information that a consumer can use to take certain actions, which generally include disputing a debt or requesting original-creditor information.490 As discussed in the section-by-section analysis of proposed § 1006.34(c)(3)(i) and (ii), FDCPA section 809(b) provides that consumers must notify a debt collector ‘‘in writing’’ to dispute a debt or request original-creditor information. As discussed in the section-by-section analysis of proposed § 1006.38, the Bureau would interpret FDCPA section 809(b)’s writing requirement as being satisfied when a consumer submits a dispute or request for original-creditor information to the debt collector via a medium of electronic communication through which a debt collector accepts electronic communications from consumers, such as email or a website portal. Thus, debt collectors only would be required to give legal effect to consumer disputes or requests for original-creditor information submitted electronically where a debt collector chooses to accept electronic communications from consumers. This would apply regardless of whether the validation notice itself is delivered electronically. Further, FDCPA section 809(b) prohibits debt collector communications during the validation period that are inconsistent with the disclosure of a consumer’s verification rights. If debt collectors refuse to accept consumers’ disputes or requests for original-creditor information through a medium of electronic communication after 489 To the extent that the Bureau develops a more specific landing page for information about consumer protections during the debt collection process, the Bureau would include the website address for that landing page in a final rule. 490 Proposed § 1006.34(c)(4) would set forth required consumer response information. Proposed § 1006.34(d)(3)(iii)(B) and (vi)(B) would permit certain other consumer response information related to payment requests and requests for Spanish-language validation notices. E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules providing an electronic validation notice through that same medium, consumers may become confused about how to exercise their verification rights. While the FDCPA does not directly address electronic debt collection communications, a reasonable consumer could expect to be able to respond to a debt collector through the same medium of electronic communication that the debt collector used to contact the consumer. Because of the potential for confusion, a debt collector’s refusal to accept a dispute or request for originalcreditor information electronically after providing a validation notice electronically may be inconsistent with the effective disclosure of the consumer’s verification rights. For these reasons, and pursuant to its authority to interpret FDCPA section 809(a) and (b), as well as its authority under Dodd-Frank Act section 1032(a), the Bureau proposes § 1006.34(c)(3)(v) to provide that validation information includes a statement explaining how a consumer can take the actions described in § 1006.34(c)(4) electronically, if the debt collector sends the validation notice electronically. Proposed comment 34(c)(3)(v)–1 explains that a debt collector may provide the information described in proposed § 1006.34(c)(3)(v) by including the statements, ‘‘We accept disputes electronically,’’ using that phrase or a substantially similar phrase, followed by an email address or website portal that a consumer can use to take the action described in § 1006.34(c)(4)(i), and ‘‘We accept original creditor information requests electronically,’’ using that phrase or a substantially similar phrase, followed by an email address or website portal that a consumer can use to take the action described in § 1006.34(c)(4)(ii). Proposed comment 34(c)(3)(v)–1 also would clarify that, if a debt collector accepts electronic communications from consumers through more than one medium, such as by email and through a website portal, the debt collector is only required to provide information regarding one of these media but may provide information about additional media. During the SBREFA process, small entity representatives supported the Bureau’s proposal to clarify how debt collectors could use newer communication technologies, such as email and text messages, which some consumers may prefer.491 Consistent with this feedback, the Small Business Review Panel Report recommended that the Bureau consider whether the debt collection rule should promote newer communication technologies, and, if so, establish guidelines for the appropriate use of such technologies.492 Proposed § 1006.34(c)(3)(v) is responsive to this feedback. The Bureau requests comment on proposed § 1006.34(c)(3)(v) and on comment 34(c)(3)(v)–1. 491 See Small Business Review Panel Report, supra note 57, at 16–17; see also CFPB Debt Collection Consumer Survey, supra note 18, at 37 (finding that email was the most preferred contact method for 11 percent of consumers contacted about a debt in collection). 492 Small Business Review Panel Report, supra note 57, at 38. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 34(c)(3)(vi) As discussed elsewhere in this proposed rule—for example, in the section-by-section analysis of proposed § 1006.42—the use of electronic media such as email and text messages for debt collection communications may further the interests of both consumers and debt collectors, but communications sent by such media may require tailored protections for consumers. One such protection, as proposed in § 1006.6(e), would require a debt collector who communicates or attempts to communicate with a consumer electronically in connection with the collection of a debt using a specific email address, telephone number for a text message, or other electronicmedium address to include in such communication or attempt to communicate a clear and conspicuous statement describing one or more ways the consumer can opt out of further electronic communications or attempts to communicate by the debt collector to that address or telephone number. Consistent with proposed § 1006.6(e), and pursuant to the legal authorities discussed in the section-by-section analysis thereof, the Bureau proposes § 1006.34(c)(3)(vi) to provide that, for a validation notice delivered in the body of an email pursuant to § 1006.42(b)(1) or (c)(2)(i), validation information includes the opt-out statement required by § 1006.6(e). Proposed comment 34(c)(3)(vi)–1 explains that, if a validation notice is delivered on a website pursuant to § 1006.42(c)(2)(ii), the validation notice need not contain the opt-out statement because the statement will be required in any email or text message that provides a hyperlink to the website where the notice is placed. Proposed comment 34(c)(3)(vi)–1 further explains that delivery of a validation notice that a debt collector previously provided pursuant to § 1006.42(b)(1) or (c)(2)(i) or (ii) is not rendered ineffective because a consumer opts out of future electronic PO 00000 Frm 00073 Fmt 4701 Sfmt 4702 23345 communications. The Bureau requests comment on proposed § 1006.34(c)(3)(vi) and on comment 34(c)(3)(vi)–1. 34(c)(4) Consumer Response Information The FTC has noted that some consumers do not receive sufficient information explaining how they may exercise their FDCPA rights.493 This observation is consistent with at least one academic study, which found that many consumers did not understand how to properly exercise their FDCPA verification rights even after reviewing a typical validation notice.494 During the development of this proposal, the Bureau tested validation notices that included information about how consumers could exercise their FDCPA verification rights using a separate section of the notice, which consumers could detach and return to the debt collector. For purposes of this section-by-section analysis, the Bureau refers to this information as consumer response information. The Bureau’s usability testing indicated that consumers understood that they could use the consumer response information to dispute a debt, or to communicate that information about the debt in the validation notice was incorrect.495 The usability testing findings thus indicated that the consumer response information enhanced consumers’ comprehension of their dispute rights.496 The Bureau’s testing suggests that requiring debt collectors to disclose consumer response information, segregated from other validation information, appears to help consumers exercise their FDCPA section 809(b) rights to dispute the validity of a debt and to request original-creditor information. Further, the consumer response information may facilitate a debt collector’s ability to process and understand a consumer’s response to a validation notice. For example, by requiring the consumer response information section to include statements describing specific reasons for disputes, proposed § 1006.34(c)(4) could reduce the burden of responding to generic or ambiguous disputes. While the proposal would not require consumers to indicate a specific dispute 493 See FTC Modernization Report, supra note 176, at v. 494 See Jeff Sovern & Kate E. Walton, Are Validation Notices Valid? An Empirical Evaluation of Consumer Understanding of Debt Collection Validation Notices, 70 SMU L. Rev. 63, 94–98 (2017). 495 See FMG Usability Report, supra note 41, at 59–60. 496 See id. E:\FR\FM\21MYP2.SGM 21MYP2 23346 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 description listed in the consumer response information, consumers may be likely to do so, thereby lessening the number of generic disputes (e.g., a communication that only contains the statement ‘‘I dispute’’ with no further detail) sent to debt collectors.497 For these reasons, the Bureau proposes requiring a consumer response information section on the validation notice. Specifically, proposed § 1006.34(c)(4) provides that the validation information that must be disclosed under § 1006.34(a)(1) includes certain consumer response information situated next to prompts that the consumer could use to indicate that action or request. The information, which is discussed in the section-bysection analysis of proposed § 1006.34(c)(4)(i) through (iii), would include statements describing certain actions that a consumer could take, including submitting a dispute, identifying the reason for the dispute, providing additional detail about the dispute, and requesting original-creditor information.498 Proposed § 1006.34(c)(4) provides that the consumer response information section must be segregated from the validation information described in § 1006.34(c)(1) through (3) and from any optional information included pursuant to § 1006.34(d)(3)(i), (ii), (iv), or (v) and, if the validation information is provided in writing or electronically, located at the bottom of the notice and under the headings, ‘‘How do you want to respond?’’ and ‘‘Check all that apply:’’. Requiring the consumer response information section to be presented in this manner may help consumers respond to the disclosures required under § 1006.34(a)(1). Specifically, requiring the information to be located at the bottom of a validation notice may enable consumers to use the bottom section of the notice to reply to the debt collector while retaining the required disclosures located in the validation notice’s upper section. Proposed comment 34(c)(4)–1 would clarify that, if the validation information is provided in writing or electronically, a prompt described in § 1006.34(c)(4) may be formatted as a checkbox, as in Model Form B–3. The Bureau requests comment on proposed § 1006.34(c)(4). The Bureau 497 Usability testing findings suggested that consumers generally understood how to use the consumer response information section to indicate a specific reason for a dispute. See id. at 59–61. 498 As discussed in the section-by-section analysis of proposed § 1006.34(d)(3)(iii)(B) and (vi)(B), a debt collector also could choose to include a payment disclosure and Spanish-language validation notice request disclosure as consumer response information. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 specifically requests comment on whether validation information should include consumer response information, and, if so, on whether any of the proposed items should be excluded or any additional items should be added. The Bureau proposes § 1006.34(c)(4) pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors and, as described more fully below, its authority to implement and interpret FDCPA section 809. The Bureau also proposes § 1006.34(c)(4) pursuant to its authority under section 1032(a) of the Dodd-Frank Act, on the basis that the information in proposed § 1006.34(c)(4)(i) through (iii) informs consumers how to exercise their rights under FDCPA section 809(b) and therefore is a feature of debt collection. Requiring disclosure of the information may help to ensure that the features of debt collection are fully, accurately, and effectively disclosed to consumers, such that consumers may better understand the costs, benefits and risks associated with debt collection. 34(c)(4)(i) Dispute Prompts FDCPA section 809(a)(4) requires a debt collector to disclose to consumers their right under FDCPA section 809(b) to dispute the validity of the debt within 30 days after receipt of the validation notice. As discussed in the section-bysection analysis of proposed § 1006.34(c)(3)(i), which would implement and interpret FDCPA section 809(a)(4), some consumers may not adequately understand this FDCPA dispute right or may face challenges when attempting to exercise it. Providing consumers with prepared dispute statements may assist consumers by helping them articulate the nature of their disputes. Enabling consumers to communicate specific information about their disputes also may reduce the number of burdensome, generic disputes received by debt collectors and may allow debt collectors to provide more relevant information in response. For this reason, and pursuant to its authority to implement and interpret FDCPA section 809(a)(4), as well as its authority under Dodd-Frank Act section 1032(a), the Bureau proposes § 1006.34(c)(4)(i) to provide that consumer response information includes statements, situated next to prompts, that the consumer can use to dispute the validity of a debt and to specify a reason for that dispute. Proposed § 1006.34(c)(4)(i), which is designed to work in tandem with proposed § 1006.34(c)(3)(i), would provide that consumer response PO 00000 Frm 00074 Fmt 4701 Sfmt 4702 information includes the following four statements, listed in the following order, using the following phrasing or substantially similar phrasing,499 each next to a prompt: ‘‘I want to dispute the debt because I think:’’; ‘‘This is not my debt’’; ‘‘The amount is wrong’’; and ‘‘Other: (please describe on reverse or attach additional information).’’ The first three proposed dispute categories appear to capture the vast majority of consumer disputes about the validity of a debt. During the SBREFA process, small entity representatives suggested that including dispute prompts in the validation notice could increase dispute volume and frequency, which could cause debt collectors to incur more costs investigating and responding to disputes. Some small entity representatives particularly were concerned that the consumer response information might increase the number of generic disputes that lack enough detail for debt collectors to provide responsive information to consumers. Several small entity representatives also objected to a potential dispute prompt that would state, ‘‘You are not the right person to pay,’’ noting that this statement would not provide debt collectors enough information to respond effectively to the dispute and would require the debt collector to recontact the consumer, imposing costs on both debt collectors and consumers. The Small Business Review Panel Report recommended that the Bureau consider further its proposed consumer response information, including soliciting more specific disputes. In response to this feedback, the proposed rule omits the dispute prompt, ‘‘You are not the right person to pay.’’ However, the proposed rule retains the consumer response information concept. Proposed § 1006.34(c)(4)(i) may facilitate consumers’ ability to exercise their dispute right, which is an important FDCPA protection. In addition, proposed § 1006.34(c)(2), by requiring more information about the debt, may help consumers recognize debts that they owe, reducing the number of disputes arising from lack of consumer recognition and, thereby, limiting overall dispute volume. Further, any information that consumers provide in response to the free-form dispute prompt in proposed § 1006.34(c)(4)(i)(D) could help debt collectors better understand the nature of a consumer’s dispute and respond 499 To provide debt collectors with greater flexibility, the Bureau does not propose to require a debt collector to use the exact phrasing set forth in proposed § 1006.34(c)(4)(i). E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules more efficiently than if consumers had provided generic disputes. The Bureau requests comment on proposed § 1006.34(c)(4)(i), including on whether any dispute prompts should be added, revised, or removed. In addition, the Bureau requests comment on the potential risks, costs, and benefits of the dispute prompts for both consumers and industry, including on whether proposed § 1006.34(c)(4)(i) will impact dispute volumes or affect the proportion of specific disputes that debt collectors receive as compared to generic disputes. As discussed in the section-by-section analysis of proposed § 1006.38, the Bureau would interpret FDCPA section 809(b) to require a debt collector to honor disputes that a consumer provides via a medium of written electronic communication 500 accepted by the debt collector, such as a dispute portal accessed on or through a hyperlink in an electronic communication. The Bureau declines to propose requirements related to debt collector website communications, including the content or formatting of dispute information accessible via website or hyperlink.501 The Bureau requests comment on whether the Bureau should propose rules concerning website communications. In particular, the Bureau requests comment about the risks, costs, and benefits to consumers and industry related to prescribing requirements for the content and formatting of debt collector website communications. jbell on DSK3GLQ082PROD with PROPOSALS2 34(c)(4)(ii) Original-Creditor Information Prompt FDCPA section 809(a)(5) requires a debt collector to disclose to consumers their right under FDCPA section 809(b) to request the name and address of the original creditor, if different from the current creditor.502 As discussed in the 500 For ease of reference, the Bureau uses the phrase ‘‘written electronic communications’’ to refer to emails, text messages, and other electronic communications that are readable. The Bureau’s use of this phrase has no bearing on the Bureau’s interpretation of the terms ‘‘written’’ or ‘‘in writing’’ under any law or regulation, including the FDCPA or the E–SIGN Act. 501 While the Bureau does not propose rules specifically addressing debt collector website communications, such communications are subject to existing legal requirements, including those under the FDCPA and the Dodd-Frank Act. For example, debt collectors may be liable for website communications that violate the Dodd-Frank Act’s prohibition on unfair, deceptive, or abusive practices, or the overshadowing prohibition under FDCPA section 809(b). 502 Proposed § 1006.34(c)(2)(iv) also would require that the validation notice include the name of the creditor to whom the debt was owed on the itemization date, if the debt collector is collecting a consumer financial product or service debt, as defined in proposed § 1006.2(f). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 section-by-section analysis of proposed § 1006.34(c)(3)(ii), which would implement and interpret FDCPA section 809(a)(5), some consumers may not adequately understand their right to request original-creditor information or how to exercise it. Providing consumers with a prepared statement that they could use to request original-creditor information could help to address this concern. For this reason, and pursuant to its authority to interpret FDCPA section 809(a)(5), as well as its authority under Dodd-Frank Act section 1032(a), the Bureau proposes § 1006.34(c)(4)(ii) to provide that consumer response information includes the statement, ‘‘I want you to send me the name and address of the original creditor,’’ using that phrase or a substantially similar phrase, next to a prompt the consumer could use to request original-creditor information. Proposed § 1006.34(c)(4)(ii) is intended to work in tandem with proposed § 1006.34(c)(3)(ii). The Bureau requests comment on proposed § 1006.34(c)(4)(ii). 34(c)(4)(iii) Mailing Addresses FDCPA section 809(b) assumes that a consumer has the ability to write to a debt collector to exercise the consumer’s verification rights. Requiring a debt collector to include mailing addresses for the consumer and the debt collector, which would include the consumer’s and the debt collector’s names, along with the consumer response information described in proposed § 1006.34(c)(4)(i) and (ii), may facilitate consumers’ use of that address information to exercise their debt collection rights. For example, for mailed validation notices, a debt collector may choose to format the addresses to appear in a return envelope’s glassine window, which the Bureau understands is industry practice. Alternatively, the mailing address may be useful in the event the consumer loses the upper portion of the validation notice containing the debt collector’s contact information. In this scenario, the consumer also could review the mailing address in the consumer response information section to confirm that the consumer was the intended recipient of the validation notice. For these reasons, and pursuant to its authority to implement FDCPA section 809(a), as well as its authority under Dodd-Frank Act section 1032(a), the Bureau proposes § 1006.34(c)(4)(iii) to provide that consumer response information includes mailing addresses for the consumer and the debt collector. The Bureau requests comment on proposed § 1006.34(c)(4)(iii). The Bureau understands that some debt PO 00000 Frm 00075 Fmt 4701 Sfmt 4702 23347 collectors use letter vendors to mail validation notices and that, in some cases, the letter vendor’s mailing address may appear on validation notices in lieu of the debt collector’s mailing address. The Bureau requests comment on whether proposed § 1006.34(c)(4)(iii) would be consistent with current practices related to debt collectors’ use of letter vendors to mail validation notices. 34(c)(5) Special Rule for Certain Residential Mortgage Debt FDCPA section 809(a)(1) requires a debt collector to disclose to consumers the amount of the debt. As discussed in the section-by-section analysis of proposed § 1006.34(c)(2)(vii) through (ix), the Bureau interprets FDCPA section 809(a)(1) to require debt collectors to disclose three pieces of itemization-related information: The itemization date; the amount of the debt on the itemization date; and an itemization of the debt reflecting interest, fees, payments, and credits since the itemization date.503 The Bureau proposes to establish a special rule that would replace these disclosure requirements for debt collectors collecting certain residential mortgage debt. For certain residential mortgage debt subject to 12 CFR 1026.41, 12 CFR 1026.41(b) generally requires that a periodic statement be delivered or placed in the mail within a reasonably prompt time after the payment due date or the end of any courtesy period provided for the previous billing cycle. The Bureau believes that most residential mortgage debt is subject to this requirement, although exceptions exist.504 The Bureau understands that a consumer is provided with such a periodic statement every billing cycle, even when a loan is transferred between 503 Proposed § 1006.34(c)(2)(x) would require debt collectors also to disclose the current amount of the debt. 504 The periodic statement requirement pursuant to 12 CFR 1026.41(b) does not apply to open-end consumer credit transactions, such as a home equity line of credit. See 12 CFR 1026.41(a)(1). Pursuant to 12 CFR 1026.41(e), certain types of transactions are exempt from § 1026.41(b)’s periodic statement requirement, including reverse mortgages, timeshare plans, certain charged-off mortgage loans, mortgage loans with certain consumers in bankruptcy, and fixed-rate mortgage loans where a servicer provides the consumer with a coupon book for payment. Further, small servicers as defined by 12 CFR 1026.41(e)(4)(ii) are entirely exempt from the periodic statement requirement. Where the § 1026.41(b) periodic statement was not provided, a debt collector collecting debts related thereto would not be able to satisfy proposed § 1006.34(c)(2)(vii) through (ix) by providing a consumer, at the same time as the validation notice, a copy of the most recent periodic statement provided to the consumer under § 1026.41(b). E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 23348 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules servicers. Pursuant to Regulation Z, 12 CFR 1026.41(d)(3), such a periodic statement must include a past payment breakdown, which shows the total of all payments received since the last statement, including a breakdown showing the amount, if any, that was applied to principal, interest, escrow, fees, and charges, and the amount, if any, sent to any suspense or unapplied funds account. The Bureau believes that these periodic statement disclosures may be functionally equivalent to, and as useful for the consumer as, the information described in proposed § 1006.34(c)(2)(vii) through (ix). For example, 12 CFR 1026.41(d)(3) requires that the past payment breakdown reflect payments, interest, and other charges since the last periodic statement. This requirement is consistent with the proposed rule: Pursuant to proposed § 1006.34(b)(3)’s itemization date definition, a debt collector may use the date of the last periodic statement as the reference date for the itemizationrelated information required by proposed § 1006.34(c)(2)(vii) through (ix). Further, the periodic statement required by 12 CFR 1026.41(b) is tailored to disclose mortgage information effectively. For example, the periodic statement under 12 CFR 1026.41(d) specifically addresses disclosure of escrow and suspense account information. Proposed § 1006.34(c)(2)(vii) through (ix), which applies to debts more generally, is silent with respect to these mortgage-specific concepts. For these reasons, proposed § 1006.34(c)(5) would establish that, for debts subject to Regulation Z, 12 CFR 1026.41, a debt collector need not provide the validation information described in § 1006.34(c)(2)(vii) through (ix) if the debt collector provides the consumer, at the same time as the validation notice, a copy of the most recent periodic statement provided to the consumer under 12 CFR 1026.41(b), and refers to that periodic statement in the validation notice. Proposed comment 34(c)(5)–1 provides examples clarifying how debt collectors may comply with § 1006.34(c)(5). The Bureau proposes § 1006.34(c)(5) to implement and interpret the FDCPA section 809(a)(1) requirement that the validation notice include the amount of the debt, and pursuant to its FDCPA section 814(d) authority to prescribe rules with respect to the collection of debts by debt collectors. The Bureau also proposes this requirement under section 1032(a) of the Dodd-Frank Act to prescribe rules to ensure that the features of consumer financial products VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 and services are disclosed fully, accurately, and effectively. The Bureau proposes this requirement on the basis that the information otherwise required to be disclosed under § 1006.34(c)(2)(vii) through (ix) is a feature of debt collection and the alternative information that proposed § 1006.34(c)(5) would permit is equally effective and accurate for the collection of debts subject to 12 CFR 1026.41. For the reasons described above, the Bureau proposes § 1006.34(c)(5) to ensure that the debt, which is a feature of debt collection, is fully, accurately, and effectively disclosed in a manner that permits the consumer to understand the costs, benefits, and risks associated with debt collection. The Bureau requests comment on proposed § 1006.34(c)(5) and on comment 34(c)(5)–1. In particular, the Bureau requests comment on the application of proposed § 1006.34(c)(5) to mortgage debt for which consumers were provided coupon books. For instance, the Bureau believes that for mortgage debt for which consumers were provided coupon books, debt collectors could comply with proposed § 1006.34(c)(5) because servicers generally have a practice of providing periodic statements to delinquent consumers, even if coupon books were previously provided. The Bureau also requests comment on the extent to which creditors, assignees, and servicers for transaction types that are exempt from 12 CFR 1026.41(b)’s periodic statement requirement pursuant to § 1026.41(e) nevertheless provide periodic statements voluntarily and, if so, whether the Bureau should clarify how proposed § 1006.34(c)(5) would apply in those circumstances. The Bureau also requests comment on the application of proposed § 1006.34(c)(5) to servicers exempt from 12 CFR 1026.41(b)’s periodic statement requirement pursuant to § 1026.41(e), such as small servicers or servicers servicing mortgage loans that have been charged off, and servicers who provide modified periodic statements pursuant to 12 CFR 1026.41(f) where a consumer on the mortgage loan is a debtor in bankruptcy. Finally, the Bureau also requests comment on whether there are other debt types, such as student loan debt, for which the information described in proposed § 1006.34(c)(vii) through (ix) may duplicate existing disclosure requirements. PO 00000 Frm 00076 Fmt 4701 Sfmt 4702 34(d) Form of Validation Information 34(d)(1) In General 34(d)(1)(i) FDCPA section 809(a)’s required disclosures will be ineffective unless a debt collector discloses them in a manner that is readily understandable to consumers. For this reason, the Bureau proposes § 1006.34(d)(1) to require that the validation information described in § 1006.34(c) be conveyed in a clear and conspicuous manner. As discussed in the section-by-section analysis of § 1006.34(b)(1), the Bureau proposed to define the term clear and conspicuous consistent with the standards used in other consumer financial services laws and their implementing regulations. The clear and conspicuous standard would apply to written, electronic, and oral disclosures. The Bureau proposes § 1006.34(d)(1)(i) to implement and interpret FDCPA section 809(a), and pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors. The Bureau also proposes § 1006.34(d)(1)(i) pursuant to its authority under section 1032(a) of the Dodd-Frank Act to prescribe rules to ensure that the features of consumer financial products and services are disclosed fully, accurately, and effectively. The Bureau proposes this requirement on the basis that validation information is a feature of debt collection and this information must be readily understandable to be effectively and accurately disclosed. The Bureau requests comment on proposed § 1006.34(d)(1)(i). 34(d)(1)(ii) As discussed in the section-by-section analysis of proposed § 1006.34(d)(2), the Bureau proposes Model Form B–3 in appendix B as a model validation notice form that debt collectors could use to comply with the disclosure requirements of proposed § 1006.34(a)(1) and (d)(1). Model Form B–3 was developed over multiple rounds of consumer testing and through additional feedback and consideration, as described in part III.B above. The Bureau believes that this form effectively discloses the information described in proposed § 1006.34(c). For the same reasons and pursuant to the same authority discussed in the sectionby-section analysis of proposed § 1006.34(d)(1)(i), proposed § 1006.34(d)(1)(ii) would require that, if provided in a validation notice, the content, format, and placement of the information described in proposed § 1006.34(c) and the optional E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules disclosures permitted by proposed § 1006.34(d)(3) must be substantially similar to proposed Model Form B–3 in appendix B. Proposed comment 34(d)(1)(ii)–1 explains that a debt collector may make certain changes to the content, format, and placement of the validation information described in § 1006.34(c) as long as the resulting disclosures are substantially similar to Model Form B– 3 in appendix B of the regulation. Proposed comment 34(d)(1)(ii)–1 also provides an example of a change that debt collectors may make to the validation notice if the consumer is deceased. As described in the sectionby-section analyses of §§ 1006.2(e) and 1006.6(a)(4), the proposal includes interpretations of the term consumer designed to clarify communications between debt collectors and individuals attempting to resolve the debts of a deceased consumer, including provision of the validation notice to such individuals. Although the validation notice will contain the name of the deceased consumer, some persons who are authorized to act on behalf of the deceased consumer’s estate may be misled by the use of second person pronouns such as ‘‘you’’ in the validation notice. For example, the model validation notice states that ‘‘you owe’’ the debt collector. While nothing in the proposed rule would prohibit a debt collector from including a cover letter to explain the nature of the validation notice, proposed comment 34(d)(1)(ii)–1 also would clarify that a debt collector may modify inapplicable language in the validation notice that could suggest that the recipient of the notice is liable for the debt. For example, if a debt collector sends a validation notice to a person who is authorized to act on behalf of the deceased consumer’s estate, and if that person is not liable for the debt, the debt collector may use the deceased consumer’s name instead of ‘‘you.’’ In other contexts, such as mortgage servicing, the Bureau has allowed servicers to include an explanatory notice and acknowledgement form, add an affirmative disclosure, or adjust language in required notices to reduce the risk of confusion to successors in interest.505 The Bureau proposes a similar approach in § 1006.34 and comment 34(d)(1)(ii)–1. The Bureau requests comment on proposed comment 34(d)(1)(ii)–1, on the risk of confusion or deception caused by the second-person framing of the model validation notice in the deceasedconsumer context, and on options for 505 81 FR 72160, 72182 (Oct. 19, 2016). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 reducing any possible confusion or deception. 34(d)(2) Safe Harbor A model validation notice form that provides a safe harbor may benefit both consumers and debt collectors. A model validation notice form may effectively disclose validation information required by § 1006.34(a)(1) in a manner that permits consumers to understand the costs, benefits, and risks associated with debt collection. Further, a model form may afford debt collectors protection from liability that could arise if they developed and used their own forms. During the SBREFA process, small entity representatives asserted that a model form that provided protection from liability would promote efficiency and predictability for debt collectors by reducing legal risk.506 Because of these potential benefits, the Bureau has developed a model validation notice— Model Form B–3 in appendix B. Model Form B–3 was evaluated over multiple rounds of consumer testing, as described in part III.B above, as well as through additional feedback and consideration.507 Based on this testing, the Bureau believes that Model Form B– 3 effectively discloses the validation information required by § 1006.34(a)(1). Because of Model Form B–3’s effectiveness, and pursuant to its authority under section 1032(b) of the Dodd-Frank Act, the Bureau proposes § 1006.34(d)(2) to permit a debt collector to comply with § 1006.34(a)(1)(i) and (d)(1) by using Model Form B–3 in appendix B. Proposed comment 34(d)(2)–1 explains that, although the use of Model Form B–3 in appendix B is not required, a debt collector who uses the model form, including a debt collector who delivers the model form electronically, will be in compliance with the disclosure requirements of § 1006.34(a)(1)(i) and (d)(1) and the requirements of FDCPA section 809(a). Proposed comment 34(d)(2)–1 also 506 Small Business Review Panel Report, supra note 57, at 22; see also Johnson v. Revenue Mgmt. Corp., 169 F.3d 1057, 1059–60 (7th Cir. 1999) (holding that where a validation notice included demands for ‘‘prompt payment’’ and that the consumer call the debt collector ‘‘immediately,’’ such statements may confuse a consumer or overshadow their verification rights); Adams v. Law Offices of Stuckert & Yates, 926 F.Supp. 521, 527 (E.D. Pa. 1996) (holding that a validation notice threatening a lawsuit violated the FDCPA); Vaughn v. CSC Credit Servs., Inc. (No. 93–4151), 1995 WL 51402, at *3 (N.D. Ill. Feb. 3, 1995) (holding that a statement on a validation notice about a debt’s potential negative impact on consumer’s credit score violated FDCPA section 809(b) because it overshadowed the verification rights disclosures). 507 See generally FMG Cognitive Report, supra note 40; FMG Usability Report, supra note 41; FMG Summary Report, supra note 42. PO 00000 Frm 00077 Fmt 4701 Sfmt 4702 23349 explains that a debt collector who includes on Model Form B–3 the optional disclosures described in proposed § 1006.34(d)(3) continues to be in compliance as long as those disclosures are made consistent with the instructions in § 1006.34(d)(3). Further, proposed comment 34(d)(2)–1 explains that a debt collector may embed hyperlinks in Model Form B–3 if delivering the form electronically and continue to be in compliance as long as the hyperlinks are included consistent with § 1006.34(d)(4)(ii). The Bureau requests comment on proposed § 1006.34(d)(2) and on proposed comment 34(d)(2)–1. In particular, the Bureau requests comment on whether the Bureau should provide additional clarification about how to deliver Model Form B–3 electronically in a manner that affords protection from liability pursuant to proposed § 1006.34(d)(2). For example, the Bureau requests comment on whether to prescribe or define additional formatting requirements (e.g., type size) or delivery standards for validation notices delivered electronically. The Bureau also requests comment on the risks, costs, and benefits to consumers and industry of extending the protection from liability pursuant to proposed § 1006.34(d)(2) to validation notices delivered electronically. 34(d)(3) Optional Disclosures Proposed § 1006.34(d)(3) provides that a debt collector may include the optional information described in proposed § 1006.34(d)(3)(i) through (vi) if providing the validation information required by § 1006.34(a)(1). These optional disclosures may assist debt collectors and consumers by providing additional information about the debt and consumers’ rights with respect to debt collection in a manner that does not violate FDCPA section 809(b)’s overshadowing prohibition, a prohibition implemented by § 1006.38(b). Under the proposal, providing the disclosures in proposed § 1006.34(d)(3) would not be regarded as overshadowing or inconsistent with the disclosure about the consumer’s right to dispute the debt or request the name and address of the original creditor. The Bureau proposes § 1006.34(d)(3) to implement and interpret FDCPA section 809(a) and (b) and pursuant to its FDCPA section 814(d) authority to prescribe rules with respect to the collection of debts by debt collectors and pursuant to its authority under section 1032(a) of the Dodd-Frank Act to prescribe rules to ensure that the features of consumer financial products E:\FR\FM\21MYP2.SGM 21MYP2 23350 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules and services are disclosed fully, accurately, and effectively. 34(d)(3)(i) Telephone Contact Information Telephone communications may benefit both debt collectors and consumers by providing a low-cost and convenient communication method. Debt collectors routinely contact consumers by telephone and currently include their telephone numbers in validation notices. Also, some consumers may prefer to engage with debt collectors by telephone rather than by other communication methods.508 For these reasons, proposed § 1006.34(d)(3)(i) would permit a debt collector to include the debt collector’s telephone contact information, including telephone number and the times that the debt collector accepts consumer telephone calls, along with the validation information. The Bureau requests comment on proposed § 1006.34(d)(3)(i). 34(d)(3)(ii) Reference Code Many debt collectors currently include reference codes on validation notices for administrative purposes. Proposed § 1006.34(d)(3)(ii) would accommodate this practice by permitting a debt collector to include, along with the validation information, a number or code that the debt collector uses to identify the debt or the consumer. The Bureau requests comment on proposed § 1006.34(d)(3)(ii). 34(d)(3)(iii) Payment Disclosures jbell on DSK3GLQ082PROD with PROPOSALS2 Payment disclosures that provide a method to easily send payment to a debt collector may benefit both consumers and debt collectors. For consumers who recognize and choose to repay all or part of a debt, payment disclosures may make the transaction more efficient and convenient. For consumers who determine that they owe a debt but may not be ready to repay all of it at that time, payment disclosures may facilitate a discussion that can lead to repayment, settlement, or a payment plan.509 Consumer testing suggests that consumers believe that a payment option is an important disclosure that should appear in the validation 508 A Bureau survey found that 30 percent of consumers who had been contacted about a debt in the prior year would most prefer to be contacted about a debt in collection at a non-work telephone number, as compared to a work telephone number, postal mail, email, or in-person visits. See CFPB Debt Collection Consumer Survey, supra note 18, at 36–37. 509 FMG Focus Group Report, supra note 38, at 9. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 notice.510 The Bureau also received feedback from debt collectors requesting the ability to request payment from consumers when providing validation information. For example, during the SBREFA process, small entity representatives requested the ability to include payment options in the consumer response information that § 1006.34(c)(4) would require.511 Consumer advocates recommended that the Bureau prohibit debt collectors from including payment disclosures along with validation information. Consumer advocates expressed concerns that a consumer who desires to dispute a debt might misconstrue the disclosure to require the consumer to submit a payment in order to exercise the FDCPA dispute right. The Bureau’s proposal does not treat these concerns as persuasive. While some formulations of a payment disclosure could create a false sense of urgency or exaggerate the consequences of non-payment,512 the Bureau believes that payment disclosures can be designed to articulate payment requests in a neutral, nonthreatening manner. Moreover, the Bureau’s consumer testing indicates that consumers who encounter a payment disclosure on a validation notice understand that a payment is not required to dispute a debt.513 For these reasons, the Bureau proposes to allow debt collectors to include certain payment disclosures along with the validation information. Proposed § 1006.34(d)(3)(iii) would permit a debt collector to include certain payment disclosures in the validation notice. Proposed § 1006.34(d)(3)(iii) would require that these optional payment disclosures be no more prominent than any of the validation information described in proposed § 1006.34(c). Proposed § 1006.34(d)(3)(iii)(A) would allow the debt collector to include in the validation notice the statement ‘‘Contact us about your payment options,’’ using that phrase or a substantially similar phrase. Proposed § 1006.34(d)(3)(iii)(B) would allow the debt collector to include in the consumer response information section that would be required by proposed § 1006.34(c)(4) the statement, ‘‘I enclosed this amount,’’ using that phrase or a substantially similar phrase, payment instructions after that statement, and a prompt. The 510 FMG Cognitive Report, supra note 40, at 17– Bureau requests comment on proposed § 1006.34(d)(3)(iii), including on whether the payment disclosures should be permitted and, if so, whether the payment disclosures should be modified. 34(d)(3)(iv) Disclosures Required by Applicable Law Some States require specific disclosures to appear on the validation notice. The Small Business Review Panel Report recommended that the Bureau consider how to reconcile the Bureau’s model validation notice and such required State law disclosures.514 The Bureau also understands that some courts have prescribed additional validation notice disclosure requirements, or have fashioned optional disclosures that offer a safe harbor to debt collectors providing information required by the FDCPA. For example, several courts have crafted language that debt collectors may use to comply with FDCPA section 809(a)(1) by disclosing that the amount of a debt may vary because of accruing interest and fees.515 In response to these judicial opinions, industry commenters have requested that the Bureau address how debt collectors may disclose that the amount of a debt may vary because of accruing interest and fees. To enable debt collectors to comply both with § 1006.34(a)(1) and with other applicable disclosure requirements, the Bureau proposes § 1006.34(d)(3)(iv) to permit a debt collector to include, on the front of the validation notice, a statement that other disclosures required by applicable law appear on the reverse of the form and, on the reverse of the validation notice, any such legally required disclosures. Proposed comment 34(d)(3)(iv)–1 provides examples of disclosure requirements that proposed § 1006.34(d)(3)(iv) would cover, including disclosures required by State statutes or regulations and disclosures required by judicial opinions or orders. The Bureau requests comment on proposed § 1006.34(d)(3)(iv) and on comment 34(d)(3)(iv)–1. The Bureau requests comment on conflicts that might arise between the Bureau’s model validation notice and other disclosures required by applicable law. In particular, the Bureau requests comment on whether proposed § 1006.34(d)(3)(iv) would allow debt collectors to comply with applicable law, including on 19. 511 Small Business Review Panel Report, supra note 57, at 22–23. 512 FMG Focus Group Report, supra note 38, at 11–12. 513 FMG Usability Report, supra note 41, at 59– 61. PO 00000 Frm 00078 Fmt 4701 Sfmt 4702 514 Small Business Review Panel Report, supra note 57, at 34. 515 See, e.g., Avila v. Riexinger & Associates, LLC, 817 F.3d 72, 77 (2d Cir. 2016); Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, and Clark, LLC, 214 F.3d 872, 876 (7th Cir. 2000). E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules whether any disclosures required by applicable law must be included on the front of the validation notice. The Bureau also requests comment on whether proposed § 1006.34(d)(3)(iv) should cover a debt collector who includes on the reverse of the model form disclosures that are permitted, but not required, by applicable law. jbell on DSK3GLQ082PROD with PROPOSALS2 34(d)(3)(v) Information About Electronic Communications Despite the advent of new technologies, the bulk of debt collection communication continues to occur by telephone and mail. Promoting newer technologies may be beneficial both to consumers and debt collectors. During the SBREFA process, small entity representatives supported the Bureau’s proposal to clarify how debt collectors could use newer communication technologies, such as email and text messages, and some consumers may prefer electronic communications to traditional communication methods.516 Consistent with this feedback, the Small Business Review Panel Report recommended that the Bureau consider whether the debt collection rule should promote newer communication technologies, and, if so, establish guidelines for their appropriate use.517 For these reasons, proposed § 1006.34(d)(3)(v) would permit certain information about electronic communications to appear along with the validation information. First, proposed § 1006.34(d)(3)(v)(A) would permit debt collectors to provide the debt collector’s website and email address. Second, as discussed above, proposed § 1006.34(c)(3)(v) provides that, if a debt collector sends a validation notice electronically, the debt collector must include a statement explaining how a consumer can take the actions described in proposed § 1006.34(c)(4) electronically. Proposed § 1006.34(d)(3)(v)(B) would permit a debt collector to include the statement described in proposed § 1006.34(c)(3)(v) for validation notices not provided electronically. The Bureau requests comment on proposed § 1006.34(d)(3)(v). to debt collection. Consumers with limited English proficiency may benefit from translations of the validation notice in some circumstances, and Spanish speakers represent the secondlargest language group in the United States after English speakers.518 Spanish-speaking consumers with limited English proficiency may benefit from a Spanish-language disclosure informing them of their ability to request a Spanish-language translation, if a debt collector chooses to make such a translation available. Further, debt collectors may wish to provide validation information in Spanish, as doing so may facilitate their communications with consumers. For these reasons, proposed § 1006.34(d)(3)(vi) would allow debt collectors to include along with the validation information optional Spanish-language disclosures that consumers may use to request a Spanish-language validation notice. 34(d)(3)(vi) Spanish-Language Translation Disclosures Validation information includes important information about the debt and the consumer’s rights with respect 34(d)(3)(vi)(A) Proposed § 1006.34(d)(3)(vi)(A) would permit a debt collector to provide a statement in Spanish informing a consumer that the consumer can request a Spanish-language validation notice. Specifically, proposed § 1006.34(d)(3)(vi)(A) would allow the statement, ‘‘Po´ngase en contacto con nosotros para solicitar una copia de este formulario en espan˜ol,’’ using that phrase or a substantially similar phrase in Spanish. In English, this phrase means, ‘‘You may contact us to request a copy of this form in Spanish.’’ If providing this optional disclosure, a debt collector may include supplemental information in Spanish that specifies how a consumer may request a Spanish-language validation notice. Proposed comment 34(d)(3)(vi)(A)–1 explains that, for example, a debt collector may provide a statement in Spanish that a consumer can request a Spanish-language validation notice by telephone or email. The Bureau requests comment on proposed § 1006.34(d)(3)(vi)(A) and on comment 34(d)(3)(vi)(A)–1. The Bureau specifically requests comment on: (1) Debt collectors’ current collections activities conducted in Spanish, as well as other non-English languages, including whether debt collectors provide validation notices in nonEnglish languages; (2) any benefits, 516 Small Business Review Panel Report, supra note 57, at 16–17; CFPB Debt Collection Consumer Survey, supra note 18, at 37 (finding that email was the most preferred contact method for 11 percent of consumers contacted about a debt in collection). 517 Small Business Review Panel Report, supra note 57, at 38. 518 As of 2016, 40 million residents in the United States aged five and older spoke Spanish at home. See U.S. Census Bureau, Profile America for Facts for Features CB17–FF.17: Hispanic Heritage Month 2017, at 4 (Oct. 17, 2017), https://www.census.gov/ newsroom/facts-for-features/2017/hispanicheritage.html. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 PO 00000 Frm 00079 Fmt 4701 Sfmt 4702 23351 costs, or risks posed for consumers and industry by the disclosure described in proposed § 1006.34(d)(3)(vi)(A); (3) examples of supplemental Spanishlanguage instructions for requesting a translated validation notice that debt collectors may wish to provide pursuant to proposed § 1006.34(d)(3)(vi)(A); and (4) the benefits or risks this supplemental language disclosure may present, including whether such supplementary information would make the proposed § 1006.34(d)(3)(vi)(A) disclosure less effective. 34(d)(3)(vi)(B) Proposed § 1006.34(d)(3)(vi)(B) would permit debt collectors to provide a statement in Spanish in the consumer response information section that a consumer can use to request a Spanishlanguage validation notice. Proposed § 1006.34(d)(3)(vi)(B) would permit the consumer response information section required by § 1006.34(c)(4) to include the statement, ‘‘Quiero esta forma en espan˜ol,’’ using that phrase or a substantially similar phrase in Spanish. In English, this phrase means ‘‘I want this form in Spanish.’’ Proposed § 1006.34(d)(3)(vi)(B) would require this statement to be next to a prompt, which the consumer could use to request a Spanish-language validation notice. The Bureau requests comment on proposed § 1006.34(d)(3)(vi)(B). 34(d)(4) Validation Notices Delivered Electronically As discussed in the section-by-section analysis of proposed § 1006.42, promoting electronic communications may benefit consumers and debt collectors. Allowing debt collectors to make certain formatting modifications to validation notices delivered electronically may help consumers exercise their verification rights under FDCPA section 809. Certain formatting modifications also may facilitate a debt collector’s ability to process and understand a consumer’s response to a validation notice delivered electronically. Accordingly, the Bureau proposes § 1006.34(d)(4) to permit a debt collector to, at its option, format a validation notice delivered electronically in the manner described in proposed § 1006.34(d)(4)(i) and (ii).519 The Bureau proposes § 1006.34(d)(4) to implement and interpret FDCPA section 809(a) by establishing formatting requirements that facilitate the consumer’s right to dispute a debt and 519 As described in proposed § 1006.42(b)(4), the Bureau proposes additional formatting requirements applicable to validation notices delivered electronically. E:\FR\FM\21MYP2.SGM 21MYP2 23352 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules request original-creditor information, and pursuant to its FDCPA section 814(d) authority to prescribe rules with respect to the collection of debts by debt collectors. The Bureau also proposes these requirements under section 1032(a) of the Dodd-Frank Act to prescribe rules to ensure that the features of consumer financial products and services are disclosed fully, accurately, and effectively. The Bureau requests comment on proposed § 1006.34(d)(4). 34(d)(4)(i) Prompts Proposed § 1006.34(d)(4)(i) would permit a debt collector delivering a validation notice electronically pursuant to § 1006.42 to display any prompt required by § 1006.34(c)(4)(i) or (ii) or (d)(3)(iii)(B) or (vi)(B) as a fillable field. Allowing a debt collector to design a validation notice delivered electronically so that a consumer can take the actions described in proposed § 1006.34(c)(4) by clicking a prompt would benefit consumers and industry. The Bureau believes that this design modification would help consumers exercise their FDCPA verification rights. Further, the Bureau believes this design modification would improve consumer engagement and facilitate a debt collector’s ability to process and understand a consumer’s response to the validation notice. The Bureau requests comment on proposed § 1006.34(d)(4)(i). jbell on DSK3GLQ082PROD with PROPOSALS2 34(d)(4)(ii) Hyperlinks Proposed § 1006.34(d)(4)(ii) would permit a debt collector delivering a validation notice electronically to embed hyperlinks into the validation notice that, when clicked, connect consumers to the debt collector’s website or permit consumers to take the actions described in proposed § 1006.34(c)(4). This formatting modification may help consumers exercise their FDCPA verification rights when they are already engaging with the validation notice in an online setting. This modification also may improve consumer engagement and facilitate a debt collector’s ability to process and understand a consumer’s response to the validation notice. The Bureau requests comment on proposed § 1006.34(d)(4)(ii). 34(e) Translations Into Other Languages Consumers with limited English proficiency may benefit from translated disclosures, and some debt collectors may want to respond to the needs of consumers with limited English proficiency using translated disclosures, if doing so is consistent with the debt VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 collector’s individual debt collection practices and preferences. At the same time, some consumers who receive translated disclosures may also desire to receive English-language disclosures, either because they are fluent in English, or because they wish to share the disclosures with an Englishspeaking spouse or assistance provider. English-language disclosures may also allow consumers to confirm the accuracy of the translation. For these reasons, the Bureau proposes § 1006.34(e) to provide that a debt collector may send a consumer the validation notice completely and accurately translated into any language, if the debt collector also sends an English-language validation notice in the same communication that satisfies proposed § 1006.34(a)(1). If a debt collector already has provided a consumer an English-language validation notice that satisfies proposed § 1006.34(a)(1) and subsequently provides the consumer a validation notice translated into any other language, the debt collector need not provide an additional copy of the English-language notice. Proposed comment 34(e)–1 would clarify that the language of a validation notice obtained from the Bureau’s website is considered a complete and accurate translation, although debt collectors are permitted to use other validation notice translations so long as they are accurate and complete. Consumer advocacy groups have commented that debt collectors should be required to provide validation notices translated into other languages, in particular Spanish, at a consumer’s request. For example, some consumer advocacy groups suggested that debt collectors should be required to provide a Spanish-language translation on the reverse of every English-language validation notice.520 The Bureau declines to propose a mandatory requirement that debt collectors provide translated validation notices to consumers. Requiring debt collectors to provide a translation on a separate page with each validation notice could result in significant cost on a cumulative, industry-wide basis, especially for smaller debt collectors and for languages whose use is not prevalent in the United States. Proposed § 1006.34(e) may strike an appropriate balance by allowing a debt collector to provide translated validation notices if they are complete and accurate and doing so is consistent with the debt collector’s individual debt collection practices and preferences in a manner that does not impose undue burden. The Bureau requests comment on proposed § 1006.34(e) and on comment 34(e)–1. The Bureau also requests comment on whether debt collectors should be required to provide a validation notice translated into a nonEnglish language at a consumer’s request. The Bureau proposes § 1006.34(e) pursuant to its authority under section 1032(a) of the Dodd-Frank Act to prescribe rules to ensure that the features of consumer financial products and services are disclosed fully, accurately, and effectively. The Bureau proposes § 1006.34(e) to ensure that the features of debt collection are fully, accurately, and effectively disclosed. Section 1006.38 Disputes and Requests for Original-Creditor Information FDCPA section 809(b) requires debt collectors both to refrain from taking certain actions during the 30 days after the consumer receives the validation information or notice described in FDCPA section 809(a) (i.e., during the validation period) and to take certain actions if a consumer either disputes the debt in writing, or requests the name and address of the original creditor in writing, during the validation period.521 FDCPA section 809(c) states that a consumer’s failure to dispute a debt under FDCPA section 809(b) may not be construed by any court as an admission of liability.522 Proposed § 1006.38 would implement and interpret FDCPA section 809(b) and (c) as discussed below. Except as otherwise noted, the Bureau proposes § 1006.38 pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors. Proposed comment 38–1 would clarify the applicability of § 1006.38 in the decedent debt context. As described in the section-by-section analysis of § 1006.2(e), the Bureau proposes to interpret the term consumer in FDCPA section 803(3) to include deceased consumers.523 This interpretation would apply to FDCPA section 809(b), as implemented by § 1006.38, so that a deceased consumer (i.e., that consumer’s estate) would have the same rights under FDCPA section 809(b) as 521 15 U.S.C. 1692g(b). U.S.C. 1692g(c). 523 The Bureau proposes to define the term consumer to include ‘‘any natural person, whether living or deceased, obligated or allegedly obligated to pay any debt.’’ See the section-by-section analysis of proposed § 1006.2(e). 522 15 520 The Bureau raised such an alternative approach as a proposal under consideration in the Small Business Review Panel Outline. See Small Business Review Panel Outline, supra note 56, at appendix F. PO 00000 Frm 00080 Fmt 4701 Sfmt 4702 E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules any living consumer. Accordingly, proposed comment 38–1 would clarify that, if the debt collector knows or should know that the consumer is deceased, and if the debt collector has not previously sent the deceased consumer a written validation notice, then a person who is authorized to act on behalf of the deceased consumer’s estate 524 operates as the consumer for purposes of § 1006.38. Proposed comment 38–1 provides that, if such a person submits either a written request for original-creditor information or a written dispute to the debt collector during the validation period, then § 1006.38(c) or (d)(2)(i), respectively, would require the debt collector to respond to that request or dispute. In addition, just as with living consumers, the proposal would require a debt collector attempting to collect a debt from a deceased consumer’s estate to cease collection of the debt until, where appropriate, the debt collector has mailed the name and address of the original creditor or provided verification of the debt. Proposed comment 38–2 also applies generally to proposed § 1006.38. Proposed comment 38–2 notes that proposed § 1006.38 contains requirements related to a dispute or request for original-creditor information timely submitted in writing by the consumer. Proposed comment 38–2 lists three examples of forms of communication that the consumer can use for these purposes. The second example is a medium of electronic communication; the Bureau proposes this example in light of section 101 of the E-SIGN Act.525 The E-SIGN Act could affect whether a consumer satisfies the ‘‘in writing’’ requirement of FDCPA section 809(b) by submitting a dispute or request for original-creditor information electronically. Section 101(a)(1) of the E-SIGN Act generally provides that a record relating to a transaction in or affecting interstate or foreign commerce may not be denied legal effect, validity, or enforceability solely because it is in electronic form.526 However, section 101(b)(2) of the E-SIGN Act does not require any person to agree to use or accept electronic records or electronic signatures, other than a governmental agency with respect to a record other than a contract to which it is a party.527 Section 104(b)(1)(A) of the E-SIGN Act permits a Federal agency with 524 See the section-by-section analysis of proposed § 1006.6(a)(4) and comment 6(a)(4)–1. 525 15 U.S.C. 7001(a). 526 15 U.S.C. 7001(a)(1). 527 15 U.S.C. 7001(b)(2). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 rulemaking authority under a statute to interpret by regulation the application of E-SIGN Act section 101 to that statute.528 The Bureau proposes to interpret the applicability of the E-SIGN Act as it relates to FDCPA section 809(b)’s writing requirement for consumer disputes or requests for original-creditor information. Specifically, the Bureau would interpret FDCPA section 809(b)’s writing requirement as being satisfied when a consumer submits a dispute or request for original-creditor information using a medium of electronic communication through which a debt collector accepts electronic communications from consumers, such as email or a website portal.529 Thus, debt collectors would be required to give legal effect to consumer disputes or requests for original-creditor information submitted electronically only if a debt collector chooses to accept electronic communications from consumers. The Bureau proposes to codify this interpretation of the E-SIGN Act in comment 38–3. The Bureau requests comment on proposed comments 38–1 through 3. 38(a) Definitions 38(a)(1) Duplicative Dispute The Bureau proposes to define the term duplicative dispute in § 1006.38(a)(1). The Bureau proposes § 1006.38(a)(1) as an interpretation of FDCPA section 809(b) and to facilitate compliance with proposed § 1006.38(d)(2)(ii), which would establish an alternative to proposed § 1006.38(d)(2)(i) 530 applicable if a debt collector reasonably has determined that a dispute is a duplicative dispute. Proposed § 1006.38(a)(1) would define the term duplicative dispute to mean a dispute submitted by the consumer in writing within the validation period that satisfies two criteria. The first criterion is that the dispute is substantially the same as a dispute previously submitted by the consumer in writing within the validation period for which the debt collector already has satisfied the requirements of § 1006.38(d)(2)(i). The second criterion is that the dispute does U.S.C. 7004(b)(1)(A). interpretation is responsive to consumer advocates’ feedback recommending that, if a debt collector makes an electronic means of communication available to consumers, electronic communications received from consumers through that channel should satisfy FDCPA section 809(b). 530 Proposed § 1006.38(d)(2)(i) would implement the requirements in FDCPA section 809(b) regarding disputes and verification. See the section-by-section analysis of proposed § 1006.38(d)(2)(i). 23353 not include new and material supporting information. Proposed comment 38(a)(1)–1 would clarify that, for purposes of § 1006.38(a)(1), a later dispute can be substantially the same as an earlier dispute even if the later dispute does not repeat verbatim the language of the earlier dispute. Proposed comment 38(a)(1)–2 would clarify that, for purposes of § 1006.38(a)(1), information is new if the consumer did not provide the information when submitting an earlier dispute, and information is material if it is reasonably likely to change the verification the debt collector provided or would have provided in response to the earlier dispute. Proposed comment 38(a)(1)–2 also provides an example of new and material information. The Bureau requests comment on proposed § 1006.38(a)(1) and its related commentary. In particular, the Bureau requests comment on whether to specify criteria for determining whether one dispute is substantially similar to another dispute, and, if so, what those criteria should be. In addition, the Bureau requests comment on the estimated percentage of current repeat disputes that would qualify as duplicative disputes under the definition in proposed § 1006.38(a)(1), including whether and how that figure is likely to vary by debt type. 38(a)(2) Validation Period To facilitate compliance in responding to disputes or requests for original-creditor information, proposed § 1006.38(a)(2) provides that the term validation period as used in § 1006.38 has the same meaning given to it in § 1006.34(b)(5). 38(b) Overshadowing of Rights To Dispute or Request Original-Creditor Information FDCPA section 809(b) provides that, for 30 days after the consumer receives the validation information or notice described in FDCPA section 809(a), a debt collector must not engage in collection activities or communications that overshadow or are inconsistent with the disclosure of the consumer’s right to dispute the debt or request information about the original creditor.531 Proposed § 1006.38(b) 528 15 529 This PO 00000 Frm 00081 Fmt 4701 Sfmt 4702 531 15 U.S.C. 1692g(b). This language was added to the FDCPA by the Financial Services Regulatory Relief Act of 2006, Public Law 109–351, section 802(c), 120 Stat. 2006 (2006), after an FTC advisory opinion on the same subject. See Fed. Trade Comm’n, Advisory Opinion to American Collector’s Ass’n (Mar. 31, 2000) (opining that the 30-day period set forth in FDCPA section 809(a) ‘‘is a dispute period within which the consumer may E:\FR\FM\21MYP2.SGM Continued 21MYP2 23354 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules would implement this prohibition and generally restates the statute, with only minor changes for style and clarity. 38(c) Requests for Original-Creditor Information FDCPA section 809(b) provides that, if a consumer requests the name and address of the original creditor in writing within 30 days of receiving the validation information or notice described in FDCPA section 809(a), the debt collector must cease collection of the debt until the debt collector obtains and mails that information to the consumer.532 Proposed § 1006.38(c) would implement and interpret this requirement. In general, proposed § 1006.38(c) mirrors the statute, with minor changes for style and clarity. However, to accommodate various electronic media through which a debt collector could send original-creditor information under proposed § 1006.42, proposed § 1006.38(c) would interpret FDCPA section 809(b) to require debt collectors to ‘‘provide,’’ rather than to ‘‘mail,’’ original-creditor information to consumers in a manner consistent with the delivery provisions in proposed § 1006.42. As described above, the Bureau proposes this interpretation to harmonize FDCPA section 809(b)’s writing requirement with the E-SIGN Act. The Bureau requests comment on proposed § 1006.38(c) and on whether to clarify further how to interpret proposed §§ 1006.38(c) and 1006.42 together. 38(d) Disputes 38(d)(1) Failure To Dispute FDCPA section 809(c) provides that a consumer’s failure to dispute a debt may not be construed by any court as an admission of liability by the consumer.533 Proposed § 1006.38(d)(1) would implement FDCPA section 809(c) and generally restates the statute, with only minor changes for style. jbell on DSK3GLQ082PROD with PROPOSALS2 38(d)(2) Response to Disputes FDCPA section 809(b) provides that, if a consumer disputes a debt in writing within 30 days of receiving the validation information or notice described in section 809(a), the debt collector must cease collection of the debt, or any disputed portion of the debt, until the debt collector obtains verification of the debt or a copy of a judgment and mails it to the consumer.534 Proposed § 1006.38(d) would implement and interpret this requirement as follows. 38(d)(2)(i) Proposed § 1006.38(d)(2)(i) would implement FDCPA section 809(b)’s general requirements regarding disputes and verification. Proposed § 1006.38(d)(2)(i) generally mirrors the statute, with minor changes for style and clarity. However, to accommodate various electronic media through which a debt collector could send a copy of verification or a judgment under proposed § 1006.42, proposed § 1006.38(d)(2)(i) would interpret FDCPA section 809(b) to require debt collectors to ‘‘provide,’’ rather than to ‘‘mail,’’ such information to consumers in a manner consistent with the delivery provisions in proposed § 1006.42. As described above, the Bureau proposes this interpretation to harmonize FDCPA section 809(b)’s writing requirement with the E-SIGN Act. The Bureau requests comment on proposed § 1006.38(d)(2)(i) and on whether to clarify further how to interpret proposed §§ 1006.38(d)(2)(i) and 1006.42 together. The Bureau also requests comment on whether to clarify that a debt collector who ceases collection of a debt in response to a consumer’s written dispute may communicate with the consumer one additional time to inform the consumer that the debt collector is ceasing collection of the debt.535 38(d)(2)(ii) Proposed § 1006.38(d)(2)(ii) would establish an alternative way for debt collectors to respond to disputes that they reasonably conclude are duplicative disputes, as that term is defined in proposed § 1006.38(a)(1). Some members of the debt collection industry have described being overwhelmed by the number of repeat disputes they receive. In response to the Bureau’s ANPRM, some industry commenters estimated that between 10 and 20 percent of consumer disputes reiterate, without providing any new supporting information, earlier disputes to which debt collectors have already 534 15 insist that the collector verify the debt, and not a grace period within which collection efforts are prohibited’’ but that ‘‘[t]he collection agency must ensure, however, that its collection activity does not overshadow and is not inconsistent with the disclosure of the consumer’s right to dispute the debt specified by [s]ection 809(a).’’). 532 Id. 533 15 U.S.C. 1692g(c). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 U.S.C. 1692g(b). a clarification would be consistent with the FTC’s position in its October 5, 2007 advisory opinion regarding the same topic. See Fed. Trade Comm’n, Advisory Opinion to ACA International (Oct. 5, 2007), https://www.ftc.gov/sites/default/ files/documents/public_statements/debt-collectorinforming-consumer-who-has-disputed-debt-itscollection-efforts-have-ceased-would-not./ p064803fairdebt.pdf. 535 Such PO 00000 Frm 00082 Fmt 4701 Sfmt 4702 responded.536 An industry commenter also estimated that, for medical debts, the percentage of repeat disputes may be as high as 50 or 60 percent of all disputes. Members of the debt collection industry have also expressed uncertainty about how FDCPA section 809(b)—which, as discussed above, requires a debt collector who receives a written dispute within the validation period to cease collecting the debt, or any disputed portion of the debt, until it provides the consumer with a copy either of verification of the debt or of a judgment—applies to repeat disputes. This uncertainty may drive up costs for debt collectors and harm consumers. Some debt collectors, for example, may spend time and resources reinvestigating identical disputes and resending identical verification before continuing with collections. This may leave debt collectors with fewer resources to investigate and respond to non-repeat disputes. It may also impede the collection of legitimate debts.537 The challenges that repeat disputes can pose to industry and consumers are not unique to the debt collection market, and the Bureau has clarified the treatment of repeat disputes in other contexts. Under Regulation X, 12 CFR 1024.35(g)(1)(i), for example, a mortgage servicer is not required to comply with certain error resolution requirements when the asserted error is substantially the same as an error previously asserted by the borrower for which the servicer has previously complied with its obligations under the rule, unless the borrower provides new and material information to support the notice of error. Similarly, under Regulation V, 12 CFR 1022.43(f)(1)(ii), a furnisher of information to a consumer reporting 536 These figures appear to include both repeat disputes filed within the 30-day validation period and repeat disputes filed outside of the 30-day validation period. As noted in the section-bysection analysis of proposed § 1006.38(a)(1), the definition of duplicative disputes would include only disputes filed within the validation period. As also noted in that section-by-section analysis, the Bureau requests comment on the percentage of repeat disputes that would qualify as duplicative disputes under the proposed definition of duplicative dispute. 537 See, e.g., Hawkins-El v. First Am. Funding, LLC, 891 F. Supp. 2d 402, 410 (E.D.N.Y. 2012) (‘‘Plaintiff cannot forestall collection efforts by repeating the same unsubstantiated assertions and thereby contend that the debt is ‘disputed.’ If Plaintiff were permitted to do so, debtors would be able to prevent collection permanently by sending letters, regardless of their merit, stating that the debt is in dispute. Such a result is untenable, as it would make debts effectively uncollectable.’’); Derisme v. Hunt Leibert Jacobson P.C., 880 F. Supp. 2d 339, 370–71 (D. Conn. 2012) (‘‘To allow a consumer to [repeatedly dispute a debt and repeatedly receive verification] would lead to the illogical result that a consumer could avoid paying its debt by repeatedly disputing the debt.’’). E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules agency is not required to investigate a direct dispute if the dispute is substantially the same as a previous dispute with respect to which the furnisher has already satisfied the applicable reinvestigation requirements, unless the dispute includes certain information not previously provided to the furnisher. Just as the Bureau’s regulations outline a process for responding to repeat disputes in the mortgage servicing and credit reporting context, the Bureau proposes to outline a process pursuant to which debt collectors may respond to duplicative disputes in a less burdensome way. Consumers may submit repeat disputes for various reasons. Some may do so to avoid paying debts they owe or because they disagree with the outcome of the earlier dispute. Others may do so because they are unfamiliar with the dispute process. For example, some consumers who submit repeat disputes may not know that they can include supporting documentation with their disputes. Knowing if and why debt collectors might regard a dispute as duplicative may help consumers prepare clearer, more specific disputes. Those disputes, in turn, could improve the accuracy of the information in the debt collection system and help to ensure that debt collectors collect the right amounts from the right consumers. This could be achieved, for example, through a consumer notice requirement. Other Bureau rules that address repeat disputes contain consumer notice provisions. Under Regulation X, 12 CFR 1024.35(g)(2), for example, a mortgage servicer who determines that a notice of error is substantially the same as an error previously asserted by the borrower for which the servicer has previously complied with its error resolution obligations under the rule must notify the borrower of its determination and provide the basis for that determination. Similarly, under Regulation V, 12 CFR 1022.43(f)(2), a furnisher who determines that a direct dispute is substantially the same as a previous dispute for which the furnisher has already satisfied the applicable reinvestigation requirements must notify the consumer of its determination, provide the reasons for that determination, and identify any information required to investigate the disputed information. For these reasons, proposed § 1006.38(d)(2)(ii) would provide that, upon receipt of a duplicative dispute, as defined in § 1006.38(a)(1), a debt collector must cease collection of the debt, or any disputed portion of the debt, until the debt collector either: Notifies the consumer in writing or VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 electronically in a manner permitted by § 1006.42 that the dispute is duplicative, provides a brief statement of the reasons for the determination, and refers the consumer to the debt collector’s response to the earlier dispute; or satisfies § 1006.38(d)(2)(i). The Bureau proposes § 1006.38(d)(2)(ii) to clarify that debt collectors are not required to expend resources conducting repetitive dispute investigations unless there is a reasonable basis for re-opening a prior investigation because of new and material information. Proposed comment 38(d)(2)(ii)–1 explains that a debt collector complies with the requirement to provide a brief statement of the reasons for its determination that the dispute is duplicative if the notice states that the dispute is substantially the same as an earlier dispute submitted by the consumer and the consumer has not included any new and material information in support of the earlier dispute. Proposed comment 38(d)(2)(ii)– 1 also explains that a debt collector complies with the requirement to refer the consumer to the debt collector’s response to the earlier dispute if the notice states that the debt collector responded to the earlier dispute and provides the date of that response. The Bureau requests comment on proposed § 1006.38(d)(2)(ii) and proposed comment 38(d)(2)(ii)–1, including on whether any additional clarification is needed. In particular, the Bureau requests comment on how debt collectors currently handle repeat disputes and the costs to debt collectors of doing so, distinguishing, to the extent possible, between repeat disputes filed during the validation period and repeat disputes filed after the validation period. The Bureau also requests comment on whether, in responding to disputes that would qualify as duplicative disputes under the proposed rule, debt collectors expect to use the method in proposed § 1006.38(d)(2)(i) or the method in proposed § 1006.38(d)(2)(ii), as well as the expected costs and benefits of using each method. In addition, the Bureau requests comment on the risks to consumers, if any, posed by proposed § 1006.38(d)(2)(ii). The Bureau proposes § 1006.38(d)(2)(ii) to implement and interpret FDCPA section 809(b). In particular, proposed § 1006.38(d)(2)(ii) interprets what it means for a debt collector to ‘‘obtain[ ] verification of the debt or any copy of a judgment’’ and to provide a ‘‘copy of such verification or judgment’’ to the consumer when the debt collector reasonably determines that a dispute is a duplicative dispute. PO 00000 Frm 00083 Fmt 4701 Sfmt 4702 23355 In circumstances where a consumer submits a timely written dispute that is duplicative of an earlier dispute for which the debt collector already obtained and mailed to the consumer a copy of verification of the debt or a judgment, the Bureau interprets FDCPA section 809(b)’s requirement to provide a ‘‘copy of such verification or judgment’’ to the consumer to mean that a debt collector must provide the consumer either with another copy of the materials the debt collector provided in response to the earlier dispute, or with a notice explaining the reasons for the debt collector’s determination that the dispute is duplicative and referring the consumer to the materials the debt collector provided in response to the earlier dispute. The Bureau also proposes the notice requirement of proposed § 1006.38(d)(2)(ii) pursuant to its authority under Dodd-Frank section 1032(a). As discussed above, DoddFrank Act section 1032(a) provides that the Bureau ‘‘may prescribe rules to ensure that the features of any consumer financial product or service, both initially and over the term of the product or service, are fully, accurately, and effectively disclosed to consumers in a manner that permits consumers to understand the costs, benefits, and risks associated with the product or service, in light of the facts and circumstances.’’ The Bureau proposes § 1006.38(d)(2)(ii)’s notice requirement on the basis that a debt collector’s decision to treat a dispute as a duplicative dispute under proposed § 1006.38(d)(2)(ii) is a feature of debt collection. Knowing that a debt collector has determined that a dispute is a duplicative dispute, and the reasons for that determination, may help a consumer understand the costs, benefits, and risks associated with filing additional disputes and deciding whether to pay a debt. Section 1006.42 Disclosures Providing Required 42(a) Providing Required Disclosures 42(a)(1) In General The proposed rule would require debt collectors to provide certain disclosures to consumers. Proposed § 1006.42(a)(1) would require a debt collector who provides such required disclosures in writing or electronically to do so: (1) In a manner that is reasonably expected to provide actual notice to the consumer, and (2) in a form that the consumer may keep and access later. The first prong of proposed § 1006.42(a)(1) would not require a debt collector to ensure a consumer’s actual receipt of required E:\FR\FM\21MYP2.SGM 21MYP2 23356 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules disclosures; it would require instead a reasonable expectation of actual notice. The second prong would require a debt collector, when providing a required disclosure in writing or electronically, to provide it, for example, in a form that the consumer could print or, in the case of disclosures provided by hyperlink to a website, in a form that consumers could access for a reasonable period of time.538 Proposed comment 42–1 explains how a debt collector could comply with the general delivery standard in the decedent debt context. The proposed comment provides that, if a debt collector knows or should know that a consumer is deceased, a person who is authorized to act on behalf of the deceased consumer’s estate operates as the consumer for purposes of § 1006.42.539 Proposed comment 42(a)(1)–1 would clarify that a debt collector who provides a required disclosure in writing or electronically and who receives a notice that the disclosure was not delivered has not provided the disclosure in a manner that is reasonably expected to provide actual notice under § 1006.42(a)(1). Proposed § 1006.42(a)(1) would apply only if a debt collector provides required disclosures in writing or electronically; it would not apply if a debt collector provides required disclosures orally. Apart from disclosures that a communication is from a debt collector or is for a debt collection purpose—which proposed § 1006.42(a)(2) would exclude from the general delivery standard 540—the Bureau has not identified widespread instances of debt collectors providing required disclosures, such as the validation information, orally. In addition, the Bureau’s proposal would require debt collectors to include more information in validation notices than they may currently provide, which may further decrease the likelihood that debt collectors would deliver such disclosures orally. For these reasons, the Bureau’s proposal focuses on clarifying general delivery requirements only for required disclosures delivered electronically or in writing. The Bureau requests comment on this approach, jbell on DSK3GLQ082PROD with PROPOSALS2 538 See the section-by-section analysis of proposed § 1006.42(c)(2)(ii). For ease of reference, throughout the section-by-section analysis of proposed § 1006.42, the Bureau uses the shorthand term ‘‘retainability’’ to refer to the consumer’s ability to keep and access a disclosure later. 539 Proposed comment 42–1 is consistent with proposed comments 34(a)(1)–1 and 38–1, which also would clarify delivery standards in the decedent debt context. 540 See the section-by-section analysis of proposed § 1006.42(a)(2). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 including on whether the Bureau should address oral delivery of required disclosures and, if so, what standards should apply, including how an oral disclosure could be provided in a form that the consumer may keep and access later. The Bureau also requests comment on the frequency with which debt collectors provide required disclosures orally today and the frequency with which debt collectors would expect to provide disclosures orally under the proposed rule. Proposed § 1006.42(a)(1) also would not apply to any non-required debt collection communications, such as emails that contain only a request for payment. The Bureau requests comment on proposed § 1006.42(a)(1) and on proposed comments 42–1 and 42(a)(1)– 1, including on whether any additional clarification is needed as to this general standard and on its costs to debt collectors and benefits to consumers. In particular, the Bureau requests comment on the current practices of debt collectors upon learning that a consumer has not received a required disclosure—for example, because the disclosure has been returned as undeliverable—as well as the risks, costs, and benefits that these practices pose to consumers and industry. The Bureau also requests comment on whether a delivery method that does not satisfy proposed § 1006.42(a)(1)’s notice requirement should be permitted as long as the debt collector confirms that the consumer received actual notice. The Bureau proposes § 1006.42(a)(1) to implement and interpret FDCPA section 809(a) and (b) and pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors. Under FDCPA section 809(a), a debt collector must ‘‘send the consumer’’ a written validation notice unless the information is ‘‘contained in the initial communication’’ with the consumer, and under FDCPA section 809(b), a debt collector must ‘‘mail[ ] to the consumer’’ any original-creditor or verification information the debt collector provides. The Bureau proposes to require a form of delivery that is reasonably expected to provide actual notice on the basis that such a requirement is implicit in the concepts of ‘‘send[ing] the consumer a written notice,’’ information being ‘‘contained in’’ the initial communication, and ‘‘mail[ing]’’ information to the consumer.541 Similarly, the Bureau 541 There is support for this interpretation in court decisions. See, e.g., Lavallee v. Med-1 Solutions, LLC, No. 1:15–cv–01922–DML–WTL, 2017 WL 4340342, at *4 (S.D. Ind. Sept. 29, 2017) PO 00000 Frm 00084 Fmt 4701 Sfmt 4702 proposes to require a form of delivery that the consumer may keep and access later on the basis that such a requirement is also implicit in the concepts of ‘‘send[ing] the consumer a written notice,’’ information being ‘‘contained in’’ the initial communication, and ‘‘mail[ing]’’ information to the consumer— requirements traditionally satisfied through sending a paper document but that the Bureau is now adapting to electronic communications. The Bureau also proposes § 1006.42(a)(1) as an interpretation of FDCPA section 808’s prohibition on using unfair or unconscionable means to collect a debt. It may be unfair or unconscionable under FDCPA section 808 for a debt collector to deliver a disclosure using a method that is not reasonably expected to provide actual notice to the consumer or that does not allow the consumer to retain the disclosure and access it later. If debt collectors deliver disclosures in a manner that does not meet these standards, consumers may not receive required information or have it available for future reference, potentially leading them to take different actions with respect to debts than they otherwise would have. A debt collector’s decision to provide a required disclosure in a manner not reasonably expected to provide actual notice or in a form that the consumer cannot keep and access later is outside of a consumer’s control; therefore, a consumer cannot reasonably avoid the injury caused by a debt collector who provides a required disclosure in such a manner or form. In addition, as noted, providing required disclosures in a manner not reasonably expected to provide actual notice or in a form that the consumer cannot keep and access later could effectively thwart FDCPA section 809’s validation notice, original-creditor, and disputeverification provisions. Thus, whatever benefits debt collectors may receive from such conduct do not appear to be outweighed by the costs to consumers. 42(a)(2) Exceptions Although proposed § 1006.42(a)(1) generally requires that debt collectors (‘‘[I]f notice is not sent in a manner in which receipt should be presumed as a matter of logic and common experience, then it cannot be considered to have been ‘sent’.’’); Johnson v. Midland Credit Mgmt. Inc., No. 1:05 CV 1094, 2006 WL 2473004, at *12 (N.D. Ohio Aug. 24, 2006) (‘‘[W]hen a written notice is returned as undeliverable, it has not actually been sent to the consumer. Rather, it has been sent to an improper address for the consumer. . . . If the debt collector knows the validation notice was sent to the wrong address, the debt collector has not complied with the plain language of the statute.’’). E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules provide required disclosures in a manner reasonably expected to provide actual notice and in a form consumers can keep and access later, proposed § 1006.42(a)(2) identifies two circumstances in which a debt collector would not need not to comply with proposed § 1006.42(a)(1) in providing required disclosures. The first circumstance involves the disclosure required by proposed § 1006.6(e); the second circumstance involves the disclosure required by proposed § 1006.18(e). Proposed § 1006.6(e) would require a debt collector who communicates or attempts to communicate with a consumer electronically using a particular email address, telephone number for text messages, or other electronic-medium address to include in each such communication or attempt to communicate a clear and conspicuous statement describing how the consumer can opt out of further electronic communications or attempts to communicate to that address or telephone number. Proposed § 1006.18(e) would require a debt collector to disclose in its initial communication with a consumer that the debt collector is attempting to collect a debt and that any information obtained with be used for that purpose, and to disclose in each subsequent communication that the communication is from a debt collector. The disclosures that would be required by proposed §§ 1006.6(e) and 1006.18(e) would accompany all electronic debt collection communications. Thus, absent an exception for these provisions, proposed § 1006.42(a)(1) would apply to all electronic debt collection communications. This, in turn, would mean that all electronic debt collection communications effectively would have to meet the notice and retainability requirements of § 1006.42(a)(1)— including even relatively routine communications, such as ones that convey settlement offers, payment requests, scheduling messages, and other information not required by the FDCPA or Regulation F. The Bureau believes that requiring all such communications to be provided in a manner reasonably expected to provide actual notice and in a form consumers can keep and access later is likely to impose an unnecessary burden on debt collectors with little corresponding benefit to consumers. As discussed above, the Bureau proposes § 1006.42(a)(1) as an interpretation of certain terms in FDCPA section 809 and pursuant to FDCPA section 808. Because the disclosures in VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 proposed §§ 1006.6(e) and 1006.18(e) do not arise under FDCPA section 809, and because they may not implicate FDCPA section 808’s prohibition on using unfair or unconscionable means to collect or attempt to collect any debt, the Bureau proposes generally to except them from the requirements of § 1006.42(a)(1). For this reason, proposed § 1006.42(a)(2) provides that a debt collector need not comply with § 1006.42(a)(1) when providing the disclosure required by § 1006.6(e) or § 1006.18(e) in writing or electronically, unless the disclosure is included on a notice required by § 1006.34(a)(1)(i) or § 1006.38(c) or (d)(2), or in an electronic communication containing a hyperlink to such a notice. Any disclosure provided pursuant to proposed § 1006.6(e) or § 1006.18(e), however, would need to be provided clearly and conspicuously. This clear-andconspicuous requirement would apply even where proposed § 1006.42(a)(1) would not. The Bureau requests comment on proposed § 1006.42(a)(2), including whether the exceptions identified in proposed § 1006.42(a)(2) are underinclusive or overinclusive. 42(b) Requirements for Certain Disclosures Provided Electronically The FDCPA requires three disclosures to be provided in writing. As the Bureau proposes to implement them in Regulation F, these disclosures are: (1) The validation notice described in proposed § 1006.34(a)(1)(i)(B); (2) the original-creditor disclosure described in proposed § 1006.38(c); and (3) the validation-information disclosure described in proposed § 1006.38(d)(2).542 The Bureau interprets the FDCPA’s writing requirement to permit these disclosures to be provided electronically.543 If provided electronically, however, they are subject to the E-SIGN Act, the Federal statute that provides standards for when delivery of a disclosure by electronic record satisfies a requirement in a statute, regulation, or other rule of 542 For ease of reference, throughout the sectionby-section analysis of proposed § 1006.42, the Bureau refers to these three disclosures as the ‘‘required disclosures.’’ The disclosure required by FDCPA section 807(11) must be in writing only if the debt collector otherwise is communicating with the consumer in writing. As discussed in the section-by-section analysis of proposed § 1006.42(a)(2), the Bureau proposes to exclude FDCPA section 807(11) written disclosures from meeting the delivery requirements in proposed § 1006.42(a)(1) unless the disclosures are included on a notice required by §§ 1006.34(a)(1)(i) or 1006.38(c) or (d)(2), or in an electronic communication containing a hyperlink to such a notice. 543 See the section-by-section analyses of proposed §§ 1006.34 and 1006.38. PO 00000 Frm 00085 Fmt 4701 Sfmt 4702 23357 law that the disclosure be provided or made available to a consumer in writing.544 Proposed § 1006.42(b) lists the requirements that debt collectors would need to follow to satisfy proposed § 1006.42(a)(1) and, relatedly, the E-SIGN Act, when providing these disclosures electronically. As discussed below, each requirement described in proposed § 1006.42(b) addresses either the actual notice or retainability aspect of proposed § 1006.42(a), or both. Unless otherwise noted, the Bureau proposes § 1006.42(b) for the same reasons and pursuant to the same authority discussed in the section-bysection analysis of proposed § 1006.42(a)(1). The Bureau requests comment on proposed § 1006.42(b), including on the frequency with which debt collectors currently provide required disclosures electronically, and the proportion of such disclosures provided by email, text message, and other electronic means. To the extent debt collectors do not currently provide required disclosures electronically, the Bureau requests comment on why that is so. The Bureau also requests comment on whether to require that debt collectors who provide required disclosures electronically maintain reasonable written policies and procedures designed to ensure that debt collectors comply with the requirements of proposed § 1006.42(b).545 Several Bureau rules include similar policies-and-procedures requirements.546 Requiring such policies and procedures may facilitate compliance with proposed § 1006.42(b) by debt collectors who provide required disclosures electronically, and may promote effective and efficient enforcement and supervision by the Bureau and other Federal agencies. However, requiring such policies and 544 See 15 U.S.C. 7001–7006. a requirement could be based on the Bureau’s authority under Dodd-Frank Act sections 1022(b)(1) or 1024(b)(7) or both. 546 See, e.g., Regulation E, 12 CFR 1005.33(g) (requiring remittance transfer providers to ‘‘develop and maintain written policies and procedures that are designed to ensure compliance with the error resolution requirements applicable to remittance transfers under this section’’); Regulation X, 12 CFR 1024.38(a) (requiring mortgage servicers to ‘‘maintain policies and procedures that are reasonably designed to achieve’’ certain objectives); Regulation Z, 12 CFR 1026.36(j) (requiring depository institutions to ‘‘establish and maintain written policies and procedures reasonably designed to ensure and monitor the compliance of the depository institution, its employees, its subsidiaries, and its subsidiaries’ employees’’ with certain requirements of the rule); id. 1026.51 (requiring card issuers to ‘‘establish and maintain reasonable written policies and procedures to consider the consumer’s ability to make the required minimum payments under the terms of the account based on a consumer’s income or assets and a consumer’s current obligations’’). 545 Such E:\FR\FM\21MYP2.SGM 21MYP2 23358 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules procedures could impose costs on debt collectors, which, if passed on to creditors, could ultimately reduce consumers’ access to credit. The Bureau therefore requests comment on the expected costs and benefits of requiring debt collectors who provide required disclosures electronically to maintain reasonable written policies and procedures designed to comply with the requirements of proposed § 1006.42(b). jbell on DSK3GLQ082PROD with PROPOSALS2 42(b)(1) The proposed rule would provide debt collectors with a choice between two general options for providing the required disclosures electronically. The first option would be to comply with the E-SIGN Act after the consumer provides affirmative consent directly to the debt collector. The second option would be to comply with the alternative procedures described in proposed § 1006.42(c). As explained in this section-by-section analysis (discussing the proposed E-SIGN Act option) and the section-by-section analysis of proposed § 1006.42(c) (discussing the proposed alternative procedures), a debt collector who satisfies the requirements of either option has taken necessary but not sufficient actions to support a finding that the debt collector has provided the electronic disclosure in a manner that is reasonably expected to provide actual notice and in a form that the consumer may keep and access later.547 Regarding the E-SIGN Act option, ESIGN Act section 101(c) sets forth a detailed process for ensuring the consumer’s informed, affirmative consent before delivering disclosures electronically.548 Before a consumer may consent to electronic delivery, the consumer must receive a clear and conspicuous statement of: (1) The consumer’s right not to consent and to withdraw consent; (2) the scope of the consumer’s consent, including whether it applies only to the particular transaction which gave rise to the obligation to provide the disclosure or to identified disclosures that may be provided or made available during the course of the parties’ relationship; (3) the procedures for withdrawing consent; (4) how the consumer may obtain paper copies of electronic records; and (5) any hardware and software requirements for access to and retention of electronic records.549 The consumer must consent electronically, or confirm the 547 The debt collector still would need to satisfy the requirements in proposed § 1006.42(b)(2) through (4). 548 15 U.S.C. 7001(c). 549 Id. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 consumer’s consent electronically, in a manner that reasonably demonstrates that the consumer can access information in the electronic form that will be used to provide the information that is the subject of the consent.550 In light of these requirements, a debt collector who delivers required disclosures electronically in accordance with E-SIGN Act section 101(c) (and who satisfies § 1006.42(b)(2) through (4)) may reasonably expect to have provided the consumer with actual notice in a form that the consumer may keep and access later. The proposed rule would clarify that, to deliver disclosures electronically in accordance with E-SIGN Act section 101(c), a debt collector must obtain affirmative consent directly from the consumer. The Bureau proposes this requirement as an interpretation of ESIGN Act section 101(c), pursuant to its authority under E-SIGN Act section 104(b)(1)(A) to interpret the E-SIGN Act through regulations.551 E-SIGN Act section 101(c) permits electronic delivery of required disclosures if, among other things, the consumer ‘‘has affirmatively consented to such use and has not withdrawn such consent.’’ The E-SIGN Act does not state that, in the debt collection context, a debt collector may rely on E-SIGN Act consent provided by the consumer to the original creditor or person to whom the debt is owed. Rather, the E-SIGN Act generally limits the consumer’s consent to ‘‘records provided or made available during the course of the parties’ relationship’’ or ‘‘only to the particular transaction which gave rise to the obligation to provide the record.’’ 552 In the debt collection context, the Bureau interprets ‘‘the parties’ relationship’’ to exclude a debt collector with whom the creditor may eventually place the account, because the consumer and the debt collector 550 Id. Further, after providing consent, if a change in the hardware or software requirements needed to access or retain electronic records creates a material risk that the consumer will not be able to access or retain a subsequent electronic record that was the subject of the consent, the person providing the electronic record must provide the consumer with new disclosures and the consumer must provide new consent. Id. 551 See 15 U.S.C. 7004(b)(1). The Bureau’s proposed interpretation of E-SIGN Act section 101(c) is ‘‘with respect to’’ the FDCPA within the meaning of E-SIGN Act section 104(b). The proposed interpretation is therefore limited to disclosures required under Regulation F, which must be provided in the name of and on behalf of the FDCPA-covered debt collector. The Bureau does not propose to issue an interpretation applicable to disclosures required by other statutes or regulations, including where third parties may provide disclosures in the name of or on behalf of the creditor. 552 15 U.S.C. 7001(c)(1)(B)(ii). PO 00000 Frm 00086 Fmt 4701 Sfmt 4702 typically have no relationship at the time the consumer provides E-SIGN Act consent to the creditor. Indeed, the consumer likely does not know the identity of the debt collector the creditor may hire, and the creditor may not know either. In the debt collection context, the Bureau also interprets ‘‘only the particular transaction which gave rise to the obligation to provide the record’’ to exclude interactions between the consumer and the debt collector with whom the creditor may eventually place the account. The statute uses the word ‘‘only’’ before referring to ‘‘the particular transaction,’’ suggesting that the relevant transaction is limited and occurs within the confines of the ‘‘parties’ relationship.’’ Accordingly, the Bureau does not propose to interpret a consumer’s affirmative consent to receive electronic disclosures from a creditor under the E-SIGN Act as affirmative consent to receive electronic disclosures from a debt collector under the E-SIGN Act. Instead, the Bureau proposes to interpret E-SIGN Act section 101(c) to require that a consumer’s consent be given directly to the debt collector. The Bureau’s proposed interpretation is consistent with several FDCPA provisions pertaining to consumer consent for certain debt collection communications,553 as well as the ANPRM comments of several industry participants and consumer advocates. For these reasons, proposed § 1006.42(b)(1) would, except as provided in § 1006.42(c), require a debt collector to provide the required disclosures in accordance with section 101(c) of the E-SIGN Act after the consumer provides affirmative consent directly to the debt collector. The Bureau proposes to codify this interpretation of the E-SIGN Act in comment 42(b)(1)–1. The Bureau requests comment on proposed § 1006.42(b)(1) and on proposed comment 42(b)(1)–1, including on the extent to which debt collectors currently obtain E-SIGN Act consent directly from the consumer. If debt collectors currently do not obtain such consent, the Bureau requests comment on the reasons why not and on any specific circumstances in which debt collectors rely instead upon consent the consumer originally provided to the creditor under the E-SIGN Act. The Bureau also requests comment on whether to permit such reliance, or transfer of consent, in 553 See 15 U.S.C. 1692c(a) (permitting certain communications with ‘‘the prior consent of the consumer given directly to the debt collector’’); 15 U.S.C. 1692c(b) (same). E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules certain specific circumstances and, if so, what those circumstances should be. jbell on DSK3GLQ082PROD with PROPOSALS2 42(b)(2) Proposed § 1006.42(b)(2) provides that, to comply with § 1006.42(a)(1) when providing the required disclosures electronically, a debt collector also must identify the purpose of the communication. Proposed § 1006.42(b)(2) seeks to increase the likelihood that a consumer who receives an electronic debt collection disclosure can distinguish the communication from junk mail or ‘‘spam.’’ 554 Reports estimate that over 200 billion emails are sent and received worldwide each day 555 and that spam accounts for over half of all email traffic.556 Given the volume of information, including spam, transmitted by email, the likelihood that consumers will receive actual notice of emailed debt collection disclosures may depend, in part, on their ability to distinguish between the debt collector’s communication transmitting the disclosure and spam. According to one recent study, the two most important factors in a consumer’s decision to open an email are whether the consumer recognizes the sender and whether the email includes a relevant subject line.557 At the outset of collections, a consumer may not recognize the name of a debt collector who sends an email or text message. The subject line of an email, or the first line of a text message, may therefore be an especially important means of alerting consumers to important debt collection communications. To address the spam problem, many email providers and third parties have developed sophisticated filters to help consumers identify and segregate potential spam messages.558 There may be a risk that such filters will erroneously identify a legitimate debt collection 554 The term ‘‘spam’’ generally refers to unsolicited commercial email. See, e.g., 15 U.S.C. 7701(a)(2) (finding, in connection with CAN–SPAM Act of 2003, that ‘‘[t]he convenience and efficiency of electronic mail are threatened by the extremely rapid growth in the volume of unsolicited commercial electronic mail.’’). 555 Radicati Grp., Inc., Email Statistics Report, 2015–19, Executive Summary, at 3–4 (Mar. 2015), https://www.radicati.com/wp/wp-content/uploads/ 2015/02/Email-Statistics-Report-2015-2019Executive-Summary.pdf. 556 Symantec, internet Security Threat Report, at 24 (Apr. 2017), https://www.symantec.com/content/ dam/symantec/docs/reports/istr-22-2017-en.pdf. 557 Direct Mktg. Ass’n, Consumer Email Tracker 2017, at 18 (2017),https://dma.org.uk/uploads/ misc/5a1583ff3301a-consumer-email-trackingreport-2017-(2)_5a1583ff32f65.pdf. 558 See, e.g., Todd Jackson, How Our Spam Filter Works, Official Gmail Blog (Oct. 31, 2007), https:// gmail.googleblog.com/2007/10/how-our-spam-filterworks.html. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 communication as spam. Using a specific, informative subject line may decrease that risk.559 For these reasons, proposed § 1006.42(b)(2) would require a debt collector to identify the purpose of the communication by including, in the subject line of an email or in the first line of a text message transmitting the required disclosure, the name of the creditor to whom the debt currently is owed or allegedly is owed and one additional piece of information identifying the debt, other than the amount. Including limited but relevant information about the creditor and the debt in the subject line of an email, or in the first line of a text message, may improve a consumer’s ability to distinguish the communication from spam or junk, and therefore may increase the likelihood that the consumer will receive actual notice within the meaning of proposed § 1006.42(a)(1).560 Because the amount of the debt may change over time as interest and fees accrue, including the current amount of the debt in the subject line of an email or the first line of a text message, without further itemization, may not help the consumer recognize a debt that belongs to the consumer or that the communication pertains to debt collection. Proposed comment 42(b)(2)– 1 provides examples of information identifying the debt, other than the amount, that a debt collector could use to comply with proposed § 1006.42(b)(2). These include a truncated account number, the name of the original creditor, the name of any store brand associated with the debt, the date of sale of a product or service giving rise to the debt, the physical address of service, and the billing address on the account. The Bureau requests comment on proposed § 1006.42(b)(2) and on proposed comment 42(b)(2)–1. In particular, the Bureau requests comment on the risk that an email provider’s spam filter may prevent a debt collector’s email from reaching a consumer’s inbox, including on whether any particular words or phrases in the 559 See, e.g., IBM, Which keywords or characters can trigger spam filters?, IBM Knowledge Ctr., https://www.ibm.com/support/knowledgecenter/en/ SSWU4L/Email/imc_Email/List_of_KeywordsCharacters_Which_Can_Tr190.html (last visited May 6, 2019). 560 As explained in the section-by-section analysis of proposed § 1006.42(b)(1), (c)(1), and (e)(2), the email or text message can only be sent to an email address or telephone number that satisfies certain criteria. Those criteria are designed to ensure that the email address or telephone number is one the consumer actually used, thereby limiting privacy concerns. PO 00000 Frm 00087 Fmt 4701 Sfmt 4702 23359 subject line of an email are likely to cause a spam filter to identify a legitimate debt collection communication as spam and on whether debt collectors should be required to take any other steps to decrease the likelihood that an email will be filtered as spam. The Bureau also requests comment on whether any particular words or phrases in the subject line of an email or in the first line of a text message are likely to help consumers distinguish between spam and debt collection communications. In addition, the Bureau requests comment on the risks to consumers, if any, of including the name of the creditor to whom the debt is owed, a truncated account number, the date of sale of a product or service giving rise to the debt, the physical address of service, the billing address, or any other particular item of information in the subject line of an email or in the first line of a text message. The Bureau also requests comment on how consumers handle emails marked as spam, including on the frequency with which consumers review their spam folders to identify emails they should read, and the extent to which major email providers delete unread emails in spam folders. 42(b)(3) Proposed § 1006.42(b)(3) describes a third requirement that a debt collector would need to satisfy to comply with proposed § 1006.42(a)(1) when providing the required disclosures electronically. Just as a debt collector who sends a paper letter by postal mail may receive notice that the letter was undeliverable, a debt collector who sends an email or a text message may receive notice from a communications carrier that the email or text message was undeliverable. This notice often takes the form of an automated message. Proposed § 1006.42(b)(3) would require a debt collector to permit receipt of notifications of undeliverability from communications providers, monitor for any such notifications, and treat any such notifications as precluding a reasonable expectation of actual notice for that delivery attempt. The Bureau proposes this requirement because it appears unreasonable for a debt collector to expect that a consumer has actual notice of an electronic disclosure if that disclosure has been returned as undelivered. There is support for this interpretation in court decisions. For example, in a similar context, courts have held that a paper validation notice sent to the consumer by postal mail but returned to the debt collector as undeliverable was not actually sent to the consumer within the E:\FR\FM\21MYP2.SGM 21MYP2 23360 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules meaning of FDCPA section 809(a).561 The Bureau requests comment on proposed § 1006.42(b)(3), including on how a debt collector who attempts to deliver a required disclosure electronically may become aware that the disclosure has not been delivered. The Bureau also requests comment on whether debt collectors should be required to take any steps in addition to those described in proposed § 1006.42(b)(3). jbell on DSK3GLQ082PROD with PROPOSALS2 42(b)(4) Proposed § 1006.42(b)(4) describes an additional step that a debt collector must take to comply with proposed § 1006.42(a)(1). Proposed § 1006.42(b)(4) would apply only when a debt collector provides electronically the validation notice described in proposed § 1006.34(a)(1)(i)(B). Proposed § 1006.42(b)(4) seeks to ensure that debt collectors provide the validation notice in a format that is compatible with the range of commercially available electronic devices a consumer may use to view the disclosure. According to recent research, smartphone ownership has doubled since 2011, and today a larger share of consumers own a smartphone (77 percent) than a desktop or laptop computer (73 percent).562 In addition, roughly half of all consumers own a tablet computer.563 As a result, consumers may view disclosures on a variety of screen sizes. A disclosure that automatically adjusts to the size of the consumer’s screen is sometimes called a ‘‘responsive’’ disclosure. If a consumer views a disclosure using a device to which the disclosure is not responsive, the disclosure may appear in small text with truncated margins; in some cases, the disclosure may be difficult for the consumer to read and navigate. In addition, some research suggests that mobile-friendly design may improve consumer attention to digital information.564 Consistent with these 561 See, e.g., Johnson v. Midland Credit Mgmt. Inc., No. 1:05 CV 1094, 2006 WL 2473004, at *12– 13 (N.D. Ohio Aug. 24, 2006) (‘‘[W]hen a written notice is returned as undeliverable, it has not actually been sent to the consumer. Rather, it has been sent to an improper address for the consumer. . . . If the debt collector knows the validation notice was sent to the wrong address, the debt collector has not complied with the plain language of the statute.’’). 562 internet & Tech, Mobile Fact Sheet, Pew Res. Ctr. (Feb. 5, 2018), https://www.pewinternet.org/factsheet/mobile. 563 Id. 564 For example, a 2014 marketing study found that optimizing email messages to be read on a variety of devices boosted the rate at which consumers clicked on hyperlinks. See Lauren Smith, The Science of Email Clicks: The Impact of Responsive Design & Inbox Testing, Litmus (Dec. 8, VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 considerations, the Bureau’s 2016 final rule concerning prepaid accounts under Regulations E and Z (2016 Prepaid Final Rule) requires financial institutions to provide electronic disclosures required by that rule in a form that is responsive to different screen sizes.565 Given the prevalence of mobile technology, it may be unreasonable for a debt collector to expect that a consumer has actual notice of an electronic disclosure that does not adjust to the screen size of the consumer’s mobile device. On smaller screens, such a disclosure may be illegible if viewed in its entirety. As a result, some information may be lost to consumers. This may be especially true as to disclosures, such as the validation notice described in proposed § 1006.34(a)(1)(i)(B), with formatting elements meant to draw a consumer’s attention to particularly important information when the entirety of the disclosure is in view. For example, the validation notice’s presentation of information in a tabular format could be lost to consumers using mobile devices if the validation notice is not in a responsive format viewable on smaller screens. In addition, graphical representations of textual content generally cannot be accessed by assistive technology used by the blind and visually impaired, such as screen readers. Providing electronically-delivered disclosures in machine-readable text may help ensure that consumers who use screen readers can access the information. Thus, unless a debt collector knows that a consumer does not use a screen reader, it also may be unreasonable for a debt collector to expect that a consumer has actual notice of an electronic disclosure that is not machine readable. The Bureau’s 2016 Prepaid Final Rule requires financial institutions to provide electronic disclosures required by that rule using machine-readable text that is accessible on screen readers.566 To address concerns about readability on mobile devices and accessibility for persons with disabilities, proposed § 1006.42(b)(4) would require a debt collector who provides electronically the validation notice described in § 1006.34(a)(1)(i)(B) to do so in a responsive format that is reasonably expected to be accessible on a screen of any commercially available size and via commercially available screen 2014), https://litmus.com/blog/the-science-of-emailclicks-the-impact-of-responsive-design-inboxtesting. 565 12 CFR 1005.18(b)(6)(i)(B); comment 18(b)(6)(i)(B)–2. 566 12 CFR 1005.18(b)(6)(i)(B); comment 18(b)(6)(i)(B)–3. PO 00000 Frm 00088 Fmt 4701 Sfmt 4702 readers.567 Proposed § 1006.42(b)(4) would apply only to the validation notice described in proposed § 1006.34(a)(1)(i)(B). It would not apply to the original-creditor disclosure described in proposed § 1006.38(c) because that disclosure typically is brief and does not feature standardized information or formatting. It also would not apply to the verification disclosures described in proposed § 1006.38(d)(2). Those disclosures may include images of original paper documents, and it does not appear that commercially available file formats for delivering images electronically could comply with proposed § 1006.42(b)(4). It may therefore be impractical to require debt collectors to provide the verification disclosures in accordance with proposed § 1006.42(b)(4). Proposed comment 42(b)(4)–1 provides examples of how to satisfy proposed § 1006.42(b)(4). The comment explains that a debt collector provides the validation notice in a responsive format accessible on a screen of any commercially available size if, for example, the notice adjusts to different screen sizes by stacking elements in a manner that accommodates consumer viewing on smaller screens while still meeting the other applicable formatting requirements in proposed § 1006.34. It also explains that a debt collector provides the validation notice in a manner accessible via commercially available screen readers if, for example, the validation notice is machine readable. The Bureau requests comment on proposed § 1006.42(b)(4) and on proposed comment 42(b)(4)–1. In particular, the Bureau requests comment on the cost to debt collectors of developing and using a validation notice that is responsive to screen size and accessible via screen readers, including the one-time costs of designing such a disclosure and the ongoing costs of populating such a disclosure with information about individual debts. The Bureau also requests comment on how those costs might change if the Bureau provides debt collectors with source code for a version of the validation notice that would comply with proposed § 1006.42(b)(4). In addition, the Bureau requests comment on whether the original-creditor disclosure described in 567 In connection with this proposal, the Bureau intends to make available on its website the source code for a version of the validation notice that would comply with proposed § 1006.42(b)(4). Based on its own feasibility testing of a mail merge process, the Bureau believes that the burden on debt collectors of populating an email based on this source code with transaction data may be low. E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 proposed § 1006.38(c) and the validation-information disclosure described in proposed § 1006.38(d)(2) should be subject to proposed § 1006.42(b)(4). 42(c) Alternative Procedures for Providing Certain Disclosures Electronically Under proposed § 1006.42(b)(1), a debt collector who provides the required disclosures electronically must, except as provided in § 1006.42(c), comply with section 101(c) of the E-SIGN Act as interpreted by the Bureau in the proposed rule. Proposed § 1006.42(c) would allow for electronic delivery of the required disclosures outside of the E-SIGN Act’s consent process. The Bureau proposes this alternative because debt collectors and consumers may benefit from greater flexibility as to electronic disclosures. According to industry commenters to the Bureau’s ANPRM and to the small entity representatives who participated in the SBREFA process, it is often infeasible for debt collectors to send electronic disclosures for two reasons. First, debt collectors are concerned about violating FDCPA section 805(b)’s limitations on third-party communications when they engage in electronic communications with consumers, an issue the Bureau proposes to address in § 1006.6(d)(3).568 Second, the process for obtaining ESIGN Act consent is particularly cumbersome in the debt collection context, where consumers and debt collectors typically lack a pre-existing relationship. The process for obtaining consumer consent under the E-SIGN Act may impose a substantial burden on electronic commerce in the unique context of debt collection. Most communication between debt collectors and consumers continues to take place by telephone and postal mail, neither of which is well-suited to obtaining ESIGN Act consent. Section 101(c) of the E-SIGN Act requires that the consumer receive certain disclosures before consenting to electronic delivery. These disclosures may be more than 1,000 words long and, although a debt collector could provide them over the telephone, they could take a considerable amount of time to recite to the consumer. Moreover, on a telephone call, it may be challenging for a consumer to ‘‘reasonably demonstrate[ ]’’ the ability to ‘‘access information in the electronic form that will be used to provide the information that is the 568 See the section-by-section analysis of proposed § 1006.6(d)(3). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 subject of the consent,’’ as required by E-SIGN Act section 101(c)(1)(C)(ii).569 Similarly, although a debt collector could provide E-SIGN disclosures by postal mail, it is not clear how a consumer could, by postal mail, ‘‘reasonably demonstrate’’ the ability to access electronic information. Thus, even if a debt collector incorporates some elements of the ESIGN Act consent process into an initial telephone or postal mail communication, the debt collector likely still must rely on the consumer to take the further step of demonstrating the ability to access electronic information. A debt collector may be uncertain whether and when the consumer will take this further step. Such uncertainty may be particularly challenging in connection with delivering the validation notice. Under FDCPA section 809(a) and proposed § 1006.34(a)(1)(i)(B), the debt collector must send the validation notice within five days of the debt collector’s initial communication with the consumer, leaving little time for the debt collector to arrange an alternative delivery method if the consumer does not complete the E-SIGN Act consent process soon after receiving the initial communication. While a debt collector could, by introductory letter, ask the consumer to complete the entire E-SIGN Act consent process online, a consumer may be unlikely to respond quickly to such a request from a debt collector with whom the consumer lacks a prior relationship. Further, it may not be effective for debt collectors to adopt the practice that creditors often use of sending emails or text messages with hyperlinks directing consumers to websites requesting ESIGN Act consent. Even if the creditor previously identified the debt collector for the consumer,570 the debt collector would need to send the validation notice within five days of the initial communication, again leaving little time for the debt collector to arrange an alternate delivery method if the consumer does not consent to electronic delivery quickly.571 The Bureau is not aware of instances in which a debt collector has delivered a validation notice electronically pursuant to E-SIGN Act consent provided directly to the debt collector. Industry commenters to the Bureau’s 569 Id. 570 See the section-by-section analysis of proposed § 1006.6(d)(3). 571 As discussed in the section-by-section analysis of proposed § 1006.42(b)(1), the Bureau proposes to interpret the E-SIGN Act to require consent to be provided directly from the consumer to the debt collector. PO 00000 Frm 00089 Fmt 4701 Sfmt 4702 23361 ANPRM generally stated that debt collectors do not send validation notices electronically. Similarly, a consumer advocate commenter stated that a survey of its members did not find any evidence that debt collectors currently deliver validation notices electronically. However, the consumer advocate commenter also stated that, given the consent requirements of the E-SIGN Act and the timing requirements of the FDCPA, it is conceivable that electronic delivery of validation notices could occur under current law. More recently, the consumer advocate commenter noted that several debt collectors may be delivering validation notices electronically.572 However, it is unclear how widespread this practice is and whether it involves consumer consent provided directly to the debt collector.573 For these reasons, the Bureau proposes § 1006.42(c), which describes procedures a debt collector may use to provide the required disclosures electronically without the need to comply with section 101(c) of the ESIGN Act. As discussed below, proposed § 1006.42(c)(1) would require a debt collector to send an electronic communication to a particular email address or, in the case of a text message, a particular telephone number. Proposed § 1006.42(c)(2) would provide two methods from which debt collectors could choose for placing a required disclosure in such an electronic communication. A debt collector who follows the procedures described in proposed § 1006.42(c) would satisfy proposed § 1006.42(a)(1)’s requirement to provide the required disclosures in a manner that is reasonably expected to provide actual notice and in a form that the consumer may keep and access later, provided that the debt collector also satisfies proposed § 1006.42(b)(2) through (4). The Bureau proposes § 1006.42(c) pursuant to its authority, under section 104(d)(1) of the E-SIGN Act, to exempt a specified category or type of record from the requirements relating to 572 Similarly, an association of State regulators stated that many technologically sophisticated debt collectors provided disclosures electronically, but it did not provide further details. 573 Direct consent may be easier to obtain for required disclosures other than the validation notice. For example, in response to the ANPRM, one industry trade association reported that 20 percent of members that responded to a survey delivered verification materials by email and fax. However, this commenter did not identify the proportion sent by email, and it did not indicate whether these debt collectors obtained E-SIGN Act consent directly from the consumer before doing so. Another industry trade association commenting on the ANPRM stated that electronic delivery of verification materials occurs rarely. E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 23362 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules consent in section 101(c) of the E-SIGN Act if such exemption is necessary to eliminate a substantial burden on electronic commerce and will not increase the material risk of harm to consumers.574 The Bureau proposes the exemption on the basis that requiring debt collectors to comply with the consent requirements in section 101(c) E-SIGN Act may impose a substantial burden on electronic commerce by potentially reducing opportunities for consumers and debt collectors to communicate and resolve debts more quickly; for consumers to submit disputes more easily; and for consumers to make online payments in response to notices delivered electronically. Further, as discussed in part VI, the Bureau estimates that as many as 140 million validation notices are sent annually, almost all by postal mail. As also discussed in part VI, electronic delivery costs may be substantially lower than the costs of printing disclosures and delivering them by postal mail.575 Given the number of validation notices sent annually, and the unique challenges in the debt collection context of obtaining E-SIGN Act consent to receive them electronically, these printing and mailing costs also may impose a substantial burden on the debt collection industry, which may, in turn, result in increased cost and decreased availability of credit. The procedures described in proposed § 1006.42(c) are designed so as not to increase the material risk of harm to consumers. Consumers are exposed to a materially increased risk of harm when electronic delivery of the required disclosures by the alternative method would make consumers less likely to receive, identify, open, read, or understand the disclosures, or would increase the likelihood of an unintended third-party disclosure. Pursuant to its ESIGN Act exemption authority, the Bureau designed each component of proposed § 1006.42(c) to prevent an increase in these risks. For example, as discussed below, the procedures in proposed § 1006.42(c) are designed to help ensure that, among other things, the email address or telephone number to which a debt collector sends a required disclosure or a hyperlink to such a disclosure belongs to the consumer; the consumer is prepared to receive electronic disclosures at that email address or telephone number; the 574 15 U.S.C. 7004(d)(1). discussed in part VI, the Bureau estimates that it costs between $0.50 and $0.80 to send a validation notice by postal mail, whereas the marginal cost of sending a validation notice electronically is approximately zero. 575 As VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 consumer is prepared to view required disclosures electronically, including when provided on a website; and the consumer can retain electronic disclosures. The Bureau requests comment on proposed § 1006.42(c), including on whether the requirements relating to consent in section 101(c) of the E-SIGN Act—including as the Bureau proposes to interpret them—impose a substantial burden on electronic commerce in the debt collection context, and on whether proposed § 1006.42(c) is necessary and sufficient to eliminate those burdens. With respect to possible burdens on electronic commerce, the Bureau requests information on the costs of delivering required disclosures electronically, how those costs compare to delivering required disclosures on paper, and the broader impacts of increased electronic delivery in the debt collection context. The Bureau also requests comment on whether the procedures described in proposed § 1006.42(c) increase the material risk of harm to consumers and, if so, any adjustments that can be made to mitigate that risk. 42(c)(1) To help ensure that a consumer receives a required disclosure provided electronically when a debt collector uses the alternative procedures, proposed § 1006.42(c)(1) would require a debt collector to provide the disclosure by sending an electronic communication to an email address or, in the case of a text message, a telephone number that the creditor or a prior debt collector could have used to provide electronic disclosures related to that debt in accordance with section 101(c) of the E-SIGN Act. This may include, for example, an email address or telephone number covered by the consumer’s unwithdrawn E-SIGN Act consent provided directly to the creditor or a prior debt collector. The Bureau proposes to exercise its E-SIGN Act exemption authority to limit the email addresses and telephone numbers to which a debt collector may send required disclosures under proposed § 1006.42(c)(1) on the basis that, if a consumer has not provided unwithdrawn E-SIGN Act consent for a particular email address or telephone number to the creditor or a prior debt collector, a new debt collector should not presume that the consumer is able or prepared to receive electronic disclosures at that email address or telephone number. Proposed comment 42(c)(1)–1 would clarify that, if a consumer has opted out of debt collection communications to a PO 00000 Frm 00090 Fmt 4701 Sfmt 4702 particular email address or telephone number by, for example, following instructions provided pursuant to § 1006.6(e), then a debt collector cannot use that email address or telephone number to deliver disclosures under § 1006.42(c). This would be the case even if the consumer provided unwithdrawn E-SIGN Act consent allowing the creditor or an earlier debt collector to use that email address or telephone number. The Bureau requests comment on proposed § 1006.42(c)(1) and on proposed comment 42(c)(1)–1, including on the risks and benefits of allowing debt collectors to use an email address or telephone number with respect to which the consumer provided to the creditor or a prior debt collector unwithdrawn E-SIGN Act consent related to the debt. The Bureau also requests comment on how often creditors obtain E-SIGN Act consent from consumers and how often consumers withdraw any such consent. 42(c)(2) Proposed § 1006.42(c)(2) would provide two methods from which debt collectors could choose for placing a required disclosure in an electronic communication. The first method, described in proposed § 1006.42(c)(2)(i), would be to place the disclosure in the body of an email. The second method, described in proposed § 1006.42(c)(2)(ii), would be to place the disclosure on a secure website that is accessible by clicking on a hyperlink included within an electronic communication, provided certain other conditions are met. 42(c)(2)(i) Proposed § 1006.42(c)(2)(i) would allow a debt collector to place the disclosure in the body of an email sent to an email address described in § 1006.42(c)(1). Proposed comment 42(c)(2)(i)–1 would clarify that a debt collector places a disclosure in the body of an email if the disclosure’s content is viewable within the email itself. Some pre-proposal feedback suggested that creditors rarely provide required disclosures within the body of an email if those disclosures include transactionspecific information. This may be because email has not traditionally been viewed as a secure form of communication. It may also be because creditors prefer to provide required disclosures in a PDF or similar format. On the other hand, many creditors now send email alerts to consumers, and these alerts often include transactionspecific information. In addition, the use of technology that protects E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules consumer privacy by encrypting emails while in transit appears to be increasing.576 For these reasons, providing a disclosure in the body of an email may pose no more risk of thirdparty interception than delivery by mail.577 The Bureau requests comment on proposed § 1006.42(c)(2)(i) and on proposed comment 42(c)(2)(i)–1, including on the risks and benefits of allowing a debt collector to place a required disclosure in the body of an email without first providing the consumer with notice and an opportunity to opt out. In addition, the Bureau requests comment on whether creditors or debt collectors currently provide required disclosures bearing transaction-specific information in the body of emails and, if not, the reasons why not. The Bureau also requests comment on the prevalence of ‘‘intransit’’ encryption technology and whether that technology has reduced any concerns about the security of emails. The Bureau also requests comment on the prevalence of technology that would allow a consumer to save or print a text message. jbell on DSK3GLQ082PROD with PROPOSALS2 42(c)(2)(ii) Proposed § 1006.42(c)(2)(ii) provides that, in lieu of placing a disclosure in the body of an email, a debt collector who is delivering a required disclosure electronically pursuant to the alternative procedures may place the disclosure on a secure website that is accessible by clicking on a clear and conspicuous hyperlink included within an electronic communication sent to an email address or a telephone number described in § 1006.42(c)(1). However, this method would be available only if three additional conditions, described in proposed § 1006.42(c)(2)(ii)(A) through (C), are satisfied. First, proposed § 1006.42(c)(2)(ii)(A) would require that the disclosure be accessible on the website for a 576 For example, at least one major email provider reports that a growing number of email providers encrypt messages sent to and from their services using Transport Layer Security encryption, and that use of ‘‘in transit’’ encryption continues to increase. See Google, Email Encryption in Transit, Google Transparency Rep., https:// transparencyreport.google.com/safer-email/ overview (last visited May 6, 2019). 577 In pre-proposal feedback, several industry stakeholders and a small entity representative who participated in the SBREFA process requested that the Bureau clarify how to deliver required disclosures by text message. As described in the section-by-section analysis of proposed § 1006.42(c)(2)(ii), the Bureau’s proposal would, subject to certain conditions, permit a debt collector to use a text message to deliver a hyperlink to a disclosure placed on a secure website. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 reasonable period of time and be capable of being saved or printed. The Bureau proposes these requirements because a disclosure that is only briefly accessible, like a disclosure that cannot be saved or printed, may be unlikely to provide notice in a form the consumer can keep and access later. Second, proposed § 1006.42(c)(2)(ii)(B) would require that the consumer receive notice and an opportunity to opt out of hyperlinked delivery as described in proposed § 1006.42(d). Placing a required disclosure on a secure website and sending the consumer an electronic communication containing a hyperlink may be more convenient for some debt collectors than including the required disclosure in the body of an email. However, because debt collectors and consumers typically lack a pre-existing relationship, delivering a required disclosure by hyperlink without first alerting the consumer by separate means may not be reasonably expected to provide actual notice. Federal agencies have advised consumers against clicking on hyperlinks provided by unfamiliar senders.578 According to recent reports, some scams have used fake debt collection emails to lure consumers into clicking on hyperlinks.579 To address these risks, some consumer email services can be configured to block hyperlinks from unrecognized senders.580 Consumers may be likely to follow safe browsing habits and not click on a hyperlink in an initial communication from an unfamiliar debt collector.581 Therefore, it may be unreasonable for a debt collector to expect that a consumer has actual notice of an electronic disclosure delivered by hyperlink if the consumer does not 578 For example, the FTC advises consumers not to open links or attachments to emails they do not recognize, in order to prevent phishing and malware. See Fed. Trade Comm’n, Phishing (July 2017), https://www.consumer.ftc.gov/articles/0003phishing; Fed. Trade Comm’n, Malware (Nov. 2015), https://www.consumer.ftc.gov/articles/0011malware. The FDIC offers consumers similar guidance. See Fed. Deposit Ins. Comm’n, Beware of Malware: Think Before You Click, https:// www.fdic.gov/consumers/consumer/news/cnwin16/ malware.html (last updated Mar. 8, 2016). 579 See, e.g., Claer Barrett, Beware Fake Debt Collection Emails, Says Action Fraud, Fin. Times, Apr. 8, 2016, https://www.ft.com/content/43fdbb30fce4-11e5-b3f6-11d5706b613b. 580 See Microsoft Off. Support, Help Keep Spam and Junk Email Out of Your Inbox in Outlook.com, Microsoft, https://support.office.com/en-us/article/ help-keep-spam-and-junk-email-out-of-your-inboxin-outlook-com-a3ece97b-82f8-4a5e-9ac3e92fa6427ae4 (last visited May 6, 2019). 581 In comments to the Bureau’s ANPRM, a large debt collector agreed that consumers may view disclosures from unknown collectors with suspicion, such as when the consumer has not received advance information about the debt collector from a creditor. PO 00000 Frm 00091 Fmt 4701 Sfmt 4702 23363 expect to receive a hyperlinked disclosure from that particular debt collector. Proposed § 1006.42(d), discussed below, describes consumer notice-and-opt-out processes meant to ensure that, before a debt collector sends a required disclosure by hyperlink, the consumer expects to receive it and does not object to such receipt. By helping the consumer identify the sender in advance, a noticeand-opt-out process may also reduce the risk that the consumer will treat an email containing a hyperlink as spam. Third, proposed § 1006.42(c)(2)(ii)(C) would require that the consumer not have opted out during the opt-out period. The Bureau proposes this requirement because a debt collector may not reasonably expect that a consumer has actual notice of a hyperlinked disclosure if the consumer has opted out of receiving disclosures in that manner. The Bureau requests comment on proposed § 1006.42(c)(2)(ii), including on the risks and benefits of allowing a debt collector to place a required disclosure on a secure website accessible by hyperlink, particularly compared to placing a required disclosure in the body of an email. The Bureau also requests comment on whether to clarify further what it means for a hyperlink to be clear and conspicuous and, if so, what factors may be relevant to determining whether a hyperlink is clear and conspicuous. In addition, the Bureau requests comment on whether to clarify further what it means for a disclosure to remain available on a website for a reasonable time and, if so, the length of time that should qualify as reasonable. In addition, the Bureau requests comment on the prevalence of anti-virus software and other technologies that identify whether a hyperlink included in an email or text message is safe, and whether consumers using such technologies are likely click on hyperlinks from unrecognized debt collectors. The Bureau also requests comment on whether debt collectors who wish to provide required disclosures electronically would be more likely to do so in the body of an email under proposed § 1006.42(c)(2)(i) or on a secure website that is accessible by clicking on a hyperlinked included within an electronic communication under proposed § 1006.42(c)(2)(ii), and the reasons why. 42(d) Notice and Opportunity To Opt Out of Hyperlinked Delivery Proposed § 1006.42(d) describes two processes for providing consumers with notice and an opportunity to opt out of E:\FR\FM\21MYP2.SGM 21MYP2 23364 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 hyperlinked delivery of required disclosures, as required by proposed § 1006.42(c)(2)(ii)(B). A debt collector who wishes to place a required disclosure on a website that is accessible by clicking on a hyperlink included within an electronic communication would be required to choose between these notice-and-optout processes. One process, described in proposed § 1006.42(d)(1), would involve a communication between the debt collector and the consumer before the required disclosure is provided; the other process, described in proposed § 1006.42(d)(2), would involve a communication between the creditor and the consumer before the required disclosure is provided. Proposed comment 42(d)–1 would clarify that a debt collector’s or a creditor’s communication with a consumer pursuant to § 1006.42(d)(1) or (2), respectively, applies to all disclosures covered by § 1006.42(a) that the debt collector thereafter sends regarding that debt, unless the consumer later designates that email address or, in the case of text messages, that telephone number as unavailable for the debt collector’s use, such as by opting out pursuant to the instructions required by § 1006.6(e). The Bureau proposes § 1006.42(d) for the same reasons and pursuant to the same authority discussed in the section-by-section analysis of proposed § 1006.42(c). 42(d)(1) Communication by the Debt Collector Under proposed § 1006.42(d)(1), a debt collector must inform the consumer, in a communication with the consumer before providing the required disclosure, of the information in proposed § 1006.42(d)(1)(i) through (vi). Proposed § 1006.42(d)(1)(i) and (ii) would require the debt collector to inform the consumer of the name of the consumer who owes or allegedly owes the debt, and the name of the creditor to whom the debt currently is owed or allegedly owed. The Bureau proposes to require this information to help the consumer identify whether the debt belongs to the consumer. Proposed § 1006.42(d)(1)(iii) and (iv) would require the debt collector to inform the consumer of the email address or telephone number from which and to which the debt collector intends to send the electronic communication containing the hyperlink. The Bureau proposes to require this information to help the consumer ensure that an electronic communication containing the hyperlink is directed to an appropriate email address or telephone number, and to help the consumer VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 identify any such electronic communication once the communication reaches the consumer’s inbox. Finally, proposed § 1006.42(d)(1)(v) and (vi) would require the debt collector to inform the consumer of the consumer’s ability to opt out of hyperlinked delivery of disclosures and to provide instructions for doing so within a reasonable period of time. The Bureau proposes to require this information to enable the consumer to choose whether to opt out of hyperlinked electronic disclosures from the debt collector—a choice the consumer would not have had the opportunity to make when providing ESIGN Act consent originally to the creditor because the consumer likely would not have known the identity of any future debt collector.582 Proposed comment 42(d)(1)–1 would clarify that, for purposes of a debt collector’s communication with the consumer under § 1006.42(d)(1), the term ‘‘name of the consumer’’ has the same meaning as the term ‘‘consumer’s name’’ under § 1006.34(c)(2)(ii). The comment also includes a cross-reference to proposed comment 34(c)(2)(ii)–1, which explains that the consumer’s name is what the debt collector reasonably determines is the most complete version of the name about which the debt collector has knowledge, whether obtained from the creditor or another source. Proposed comment 42(d)(1)–2 would clarify that, if a debt collector’s communication with the consumer under § 1006.42(d)(1) applies to multiple debts, § 1006.42(d)(1)(i) and (ii) require the debt collector to identify the consumer and the creditor for each debt to which the communication applies.583 Proposed comment 42(d)(1)–3 would clarify how the requirement to communicate with the consumer before providing a hyperlinked disclosure works together with the requirement to provide the consumer a reasonable period within which to opt out. The comment explains that, in an oral communication with the consumer, such as a telephone or in-person conversation, the debt collector may require the consumer to make an opt-out 582 As discussed in the section-by-section analysis of proposed § 1006.42(c)(2)(ii), the rule would not permit a debt collector to deliver required disclosures by hyperlink to a consumer who opted out of such delivery. 583 As discussed in the section-by-section analysis of proposed § 1006.42(c)(1), proposed comment 42(c)(1)–1 would clarify that, if a consumer has opted out of communications by the debt collector to an email address or, in the case of text messages, a telephone number, then that email address or telephone number cannot be used to deliver disclosures under § 1006.42(c). PO 00000 Frm 00092 Fmt 4701 Sfmt 4702 decision during that same communication; however, a written or electronic communication that requires the consumer to make an opt-out decision within a period of five or fewer days does not satisfy proposed § 1006.42(d)(1). The Bureau proposes to require a debt collector to allow a consumer more than five days to make an opt-out decision in order to grant sufficient time for the consumer to see and respond to an opt-out notice provided in a written or electronic communication. Because no more than five days may elapse between an initial debt collection communication and the time the debt collector sends the validation notice under FDCPA section 809(a) as implemented by proposed § 1006.34(a)(1)(i)(B), a debt collector who wishes to obtain consumer consent to hyperlinked delivery in an initial communication must do so orally.584 Proposed comment 42(d)(1)–4 would clarify that an opt-out notice provided by a debt collector under § 1006.42(d)(1) may be combined with an opt-out notice provided by the debt collector under § 1006.6(d)(3)(i)(B)(1). The Bureau requests comment on proposed § 1006.42(d)(1) and its related commentary. In particular, the Bureau requests comment on whether, to limit the risk of third-party disclosure of the opt-out notice and to increase the likelihood that a consumer will receive actual notice of a required disclosure delivered by hyperlink, the rule should restrict the email addresses or telephone numbers to which a debt collector may send the opt-out notice that would be required by proposed § 1006.42(d)(1), such as by requiring that the opt-out notice be sent to an email address or telephone number other than the one to which the debt collector intends to send the hyperlink. The Bureau also requests comment on whether the information required to be provided under proposed § 1006.42(d)(1)(i) through (vi) is sufficient to allow a consumer to make an informed decision whether to opt out of receiving hyperlinked delivery of required disclosures. The Bureau also requests comment on whether to clarify further what it means to provide a reasonable opt-out period and, if so, how long an opt-out period should be to qualify as reasonable. In particular, the 584 Under proposed § 1006.6(e), the communication containing the hyperlink would need to include a clear and conspicuous statement describing one or more ways the consumer can opt out of further electronic communications or attempts to communicate by the debt collector to that address or telephone number. A consumer who no longer wished to receive hyperlinked delivery of required disclosures could revoke consent by following the opt-out instructions. E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 Bureau requests comment on whether the requirement to allow a consumer more than five days to make an opt-out decision in response to an opt-out notice delivered electronically, as described in proposed comment 42(d)(1)–3, should be imposed or should be shortened or lengthened. In addition, the Bureau requests comment on how a debt collector could obtain a consumer’s oral consent to hyperlinked delivery of required disclosures. 42(d)(2) Communication by the Creditor Instead of complying with the noticeand-opt-out process described in proposed § 1006.42(d)(1), which would rely on a communication between the debt collector and the consumer, a debt collector could choose to comply with the notice-and-opt-out process described in proposed § 1006.42(d)(2). The notice-and-opt-out process described in proposed § 1006.42(d)(2) would rely on a communication between the creditor and the consumer. Under proposed § 1006.42(d)(2), a debt collector must, no more than 30 days before the debt collector’s electronic communication containing the hyperlink to the disclosure, confirm that the creditor: (1) Communicated with the consumer using the email address or, in the case of a text message, the telephone number to which the debt collector intends to send the electronic communication, and (2) informed the consumer of the information in proposed § 1006.42(d)(2)(i) through (iv). The Bureau proposes to require the creditor to have communicated using the same email address or telephone number to which the debt collector intends to send the electronic communication containing the hyperlink to help ensure that the email address or telephone number is a valid one. The Bureau proposes the 30-day timing requirement to ensure that the creditor’s communication with the consumer occurs shortly before the debt collector’s delivery of the electronic communication containing the hyperlink to the consumer. Proposed § 1006.42(d)(2)(i) and (ii) provide that the creditor must have informed the consumer of the placement or sale of the debt to the debt collector, and of the name the debt collector uses when collecting debts. The Bureau proposes to require this information to help the consumer identify the debt collector and the debt collector’s relationship to the creditor and the account. Proposed § 1006.42(d)(2)(iii) provides that the creditor must have informed the consumer of the debt collector’s option to use the consumer’s email address or, in the case of a text VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 message, the consumer’s telephone number to provide any legally required debt collection disclosures in a manner that is consistent with Federal law. The Bureau proposes to require this information to help the consumer expect and recognize an electronic communication from the debt collector containing a hyperlink to a disclosure. Proposed § 1006.42(d)(2)(iv) provides that the creditor must have informed the consumer of the information described in § 1006.42(d)(1)(iii), (v), and (vi). The Bureau proposes to require this information for the reasons discussed in the section-by-section analysis of proposed § 1006.42(d)(1).585 Proposed comment 42(d)(2)–1 would clarify that a creditor’s communication with the consumer under § 1006.42(d)(2) may apply to multiple debts being placed with or sold to the same debt collector at the same time. Proposed comment 42(d)(2)–2 would clarify how the requirement to communicate with the consumer before providing a hyperlinked disclosure works together with the requirement to provide the consumer a reasonable period within which to opt out. The comment explains that, in an oral communication with the consumer, such as a telephone or inperson conversation, the creditor may require the consumer to make an opt-out decision during that same communication; however, a written or electronic communication that requires the consumer to make an opt-out decision within a period of five or fewer days does not satisfy proposed § 1006.42(d)(2). The Bureau proposes to require a creditor to allow a consumer more than five days to make an opt-out decision in order to grant sufficient time for the consumer to see and respond to an opt-out notice provided in a written or electronic communication. Proposed comment 42(d)(2)–3 would clarify that an opt-out notice provided by a creditor under § 1006.42(d)(2) may be combined with an opt-out notice provided by the creditor under § 1006.6(d)(3)(i)(B)(1). The Bureau requests comment on proposed § 1006.42(d)(2) and on proposed comment 42(d)(2)–1. In particular, the Bureau requests comment on whether the 30-day timing requirement should be lengthened or shortened. In addition, the Bureau requests comment on whether the 585 The process described in proposed § 1006.42(d)(2) for ensuring that consumers reasonably expect delivery of hyperlinked disclosures may generally align with some existing industry practices. For example, some creditors may already notify consumers when a debt is placed for collection or sold to a third party. The communications described in proposed § 1006.42(d)(2) could be included in such notices. PO 00000 Frm 00093 Fmt 4701 Sfmt 4702 23365 information that proposed § 1006.42(d)(2)(i) through (iv) would require is sufficient to allow a consumer to make an informed decision whether to opt out of receiving hyperlinked delivery of required disclosures. The Bureau also requests comment on how often creditors communicate with consumers regarding the placement or sale of a debt. The Bureau also requests comment on whether debt collectors who wish to provide required disclosures electronically pursuant to proposed § 1006.42(c)(2)(ii) would be more likely to choose the notice-andopt-out process described in proposed § 1006.42(d)(1) (communication by the debt collector) or the notice-and-opt-out process described in proposed § 1006.42(d)(2) (communication by the creditor), and the reasons why. 42(e) Safe Harbors Proposed § 1006.42(e) would establish two safe harbors, the first covering provision of disclosures by mail and the second covering provision of the validation notice within the body of an email that is a debt collector’s initial communication with the consumer. Conduct that falls within these safe harbors would satisfy proposed § 1006.42(a)(1)’s notice and retainability requirements. The Bureau proposes § 1006.42(e) to implement and interpret FDCPA sections 809(a) and (b) and pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors. Under FDCPA section 809(a), a debt collector must include certain information in the debt collector’s initial communication with the consumer or ‘‘send the consumer’’ a ‘‘written’’ notice (i.e., the validation notice) containing that information. Under FDCPA section 809(b), a debt collector must ‘‘mail[ ] to the consumer’’ any original-creditor or verification information it provides. As discussed in the section-by-section analysis of proposed § 1006.42(a)(1), a form of delivery that is not reasonably expected to provide actual notice may not satisfy FDCPA section 809(a)’s requirement to ‘‘send the consumer’’ a notice or FDCPA section 809(b)’s requirement to ‘‘mail[ ]’’ original-creditor and verification information to the consumer. In addition, a written or electronic notice that is not retainable may not satisfy FDCPA section 809’s writing requirement. Conversely, a debt collector may reasonably expect that conduct falling within the safe harbors described in proposed § 1006.42(e) will provide actual notice to the consumer in a retainable form. E:\FR\FM\21MYP2.SGM 21MYP2 23366 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 42(e)(1) Disclosures Provided by Mail Proposed § 1006.42(e)(1) would establish a safe harbor for delivery of disclosures by mail. Specifically, proposed § 1006.42(e)(1) provides that a debt collector satisfies § 1006.42(a)(1) if the debt collector mails a printed copy of a required disclosure to the consumer’s residential address, unless the debt collector receives notification from the entity or person responsible for delivery that the disclosure was not delivered. Although proposed § 1006.42(e)(1) mentions the consumer’s residential address, mailing a printed disclosure to another address, such as a consumer’s post office box, may be reasonably expected to provide actual notice in certain circumstances. The Bureau understands, however, that most debt collectors send paper validation notices to residential addresses and that, in general, it is reasonable to expect that sending a validation notice to a consumer’s residential address will provide actual notice. Accordingly, the safe harbor in proposed § 1006.42(e)(1) only covers validation notices sent to residential addresses. The safe harbor in proposed § 1006.42(e)(1) also would not apply if a debt collector receives notification that the disclosure was not delivered. This aspect of proposed § 1006.42(e)(1) is consistent with case law holding that a written notice returned as undeliverable has not actually been sent to the consumer within the meaning of the FDCPA.586 Proposed comment 42(e)(1)–1 would clarify that, for purposes of § 1006.42(e)(1), a disclosure is not mailed to a consumer’s residential address if the debt collector knows or should know at the time of mailing that the consumer does not currently reside at that location. The Bureau proposes this comment because, in such a circumstance, the debt collector likely lacks a reasonable expectation of actual notice. The Bureau requests comment on proposed § 1006.42(e)(1) and on proposed comment 42(e)(1)–1. 586 See, e.g., Johnson v. CFS II, Inc., No. 12–CV– 01091, 2013 WL 1809081, at *10 (N.D. Cal. Apr. 28, 2013) (‘‘[I]f a debtor rebuts the presumption of proper delivery by showing that notice was sent to an incorrect address or returned as undeliverable, the language and purpose of the FDCPA require further action by a debt collector.’’); Johnson v. Midland Credit Mgmt. Inc., No. 1:05 CV 1094, 2006 WL 2473004, at *12 (N.D. Ohio Aug. 24, 2006) (‘‘[W]hile the plain language of the statute does not require the debt collector to ensure actual receipt of the validation notice, the plain language does require the debt collector to send the validation notice to a valid and proper address where the consumer may actually receive it. If the debt collector knows the validation notice was sent to the wrong address, the debt collector has not complied with the plain language of the statute.’’). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 42(e)(2) Validation Notice Contained in the Initial Communication In pre-proposal feedback, industry stakeholders asked the Bureau to clarify how to deliver the validation notice electronically in a debt collector’s initial communication with the consumer. Proposed § 1006.42(e)(2) would provide a safe harbor to debt collectors who deliver a validation notice in the body of an email that is the debt collector’s initial communication with the consumer, provided certain other conditions are satisfied. The E-SIGN Act’s consumer consent provisions apply if a statute, regulation, or other rule of law requires that information relating to a transaction or transactions in or affecting interstate or foreign commerce be provided or made available to a consumer in writing.587 As discussed in the section-by-section analysis of proposed § 1006.34(a)(1), neither FDCPA section 809(a) nor proposed Regulation F prohibit a debt collector from providing the validation information described in proposed § 1006.34(c) orally or electronically in the debt collector’s initial communication with the consumer. Accordingly, the E-SIGN Act’s consumer consent provisions do not apply to the extent a debt collector provides the validation information in the body of an email that is the debt collector’s initial communication with the consumer.588 However, proposed § 1006.42(a)(1) would apply.589 Thus, a debt collector who provides the validation notice in the body of an email that is the debt collector’s initial communication with the consumer would need to do so in a manner reasonably expected to provide actual notice and in a form that the consumer may keep and access later. The processes described in proposed § 1006.42(b) may be reasonably expected to provide actual notice in a form that the consumer may keep and access later. Accordingly, a debt collector who provides the validation notice in the body of an email that is the debt collector’s initial communication with the consumer would satisfy § 1006.42(a)(1) by complying with § 1006.42(b). Proposed § 1006.42(b)(1) 587 15 U.S.C. 7001(c). the E-SIGN Act’s consumer consent provisions do apply to the extent a debt collector provides the validation information outside of the initial communication because, under FDCPA section 809(a), that information must be in writing if not contained in the initial communication. 589 This is because proposed § 1006.42(a)(1) would apply if a debt collector provides in writing or electronically a disclosure that is required by Regulation F. 588 Conversely, PO 00000 Frm 00094 Fmt 4701 Sfmt 4702 would, except as provided in § 1006.42(c), require a debt collector to provide the disclosure in accordance with the E-SIGN Act after the consumer provides affirmative consent directly to the debt collector. Proposed § 1006.42(c)(1), which describes one element of the alternative procedures, would require a debt collector to provide the disclosure by sending an electronic communication to an email address or, in the case of a text message, a telephone number that the creditor or a prior debt collector could have used to provide electronic disclosures in accordance with section 101(c) of the ESIGN Act. When it comes to providing the validation notice in the body of an email that is the initial communication with the consumer, however, it may be appropriate to expand the email addresses to which a debt collector may send the disclosure. In particular, because the E-SIGN Act does not apply to this form of delivery in the first place, it may not be necessary to limit the safe harbor to those email addresses for which a consumer has already provided E-SIGN Act consent to the creditor or a prior debt collector. Proposed § 1006.6(d)(3) identifies procedures for identifying email addresses to which debt collection communications can be sent. As described in the section-bysection analysis of proposed § 1006.6(d)(3), these proposed procedures are designed to ensure that a debt collector who uses a particular email address or telephone number selected through the procedures does not have a reason to anticipate that an unauthorized third-party disclosure may occur. One point of the procedures is to identify an email address or telephone number that the consumer who owes or allegedly owes the debt uses. Thus, if a debt collector includes the validation notice in the body of an email that is its initial communication with the consumer, sending the email to an email address selected through the procedures described in proposed § 1006.6(d)(3) may be reasonably likely to provide actual notice to the consumer. For these reasons, proposed § 1006.42(e)(2) provides that a debt collector who provides the validation notice described in § 1006.34(a)(1)(i)(A) within the body of an email that is the initial communication with the consumer satisfies § 1006.42(a)(1) if the debt collector satisfies the requirements of § 1006.42(b) for validation notices described in § 1006.34(a)(1)(i)(B).590 If 590 This means that, among other things, for a debt collector’s conduct to fall within the safe harbor that proposed § 1006.42(e)(2) would create, E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules such a debt collector follows the procedures described in proposed § 1006.42(c), the debt collector may, in lieu of sending the validation notice to an email address that the creditor or a prior debt collector could use for delivery of electronic disclosures in accordance with section 101(c) of the ESIGN Act (as described in § 1006.42(c)(1)), send the validation notice to an email address selected through the procedures described in proposed § 1006.6(d)(3). Proposed § 1006.42(e)(2) would create a safe harbor. It would not establish the only way a debt collector may deliver the validation notice in the body of an email that is the debt collector’s initial communication with the consumer. Nor would it provide a safe harbor for a debt collector delivering the validation notice as a hyperlink in an email or text message that is the debt collector’s initial communication with the consumer. Indeed, for the reasons discussed in the section-by-section analysis of proposed § 1006.42(c)(2)(ii), it may be unreasonable for a debt collector to expect that a consumer has actual notice of a validation notice delivered by hyperlink—no matter the email address or telephone number to which the electronic communication containing the hyperlink is sent—if the consumer does not expect to receive a hyperlinked disclosure from that particular debt collector. Proposed comment 42(e)(2)–1 would clarify that, if a consumer has opted out of debt collection communications to a particular email address or telephone number by, for example, following the instructions provided pursuant to § 1006.6(e), then a debt collector cannot use that email address or telephone number to deliver disclosures under § 1006.42(e)(2). The Bureau requests comment on proposed § 1006.42(e)(2) and on proposed comment 42(e)(2)–1. In particular, the Bureau requests comment on whether using an email address selected through the procedures described in proposed § 1006.6(d)(3) is reasonably likely to provide actual notice to the consumer. The Bureau also requests comment on whether a debt collector who wishes to provide the validation notice in the body of an email that is the debt collector’s initial communication with the consumer is more likely to send the validation notice to an email address described in proposed § 1006.42(c)(1) or to an email address selected through the procedures a debt collector would need to comply with the requirement proposed in § 1006.42(b)(4) to provide the validation notice in a responsive form. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 described in proposed § 1006.6(d)(3). In addition, the Bureau requests comment on whether a debt collector who wishes to provide a validation notice in the debt collector’s initial communication with the consumer is likely to use the safe harbor in proposed § 1006.42(d)(2) and, if not, the reasons why not. Subpart C—Reserved Subpart D—Miscellaneous Section 1006.100 Record Retention Proposed § 1006.100 would require a debt collector to retain evidence of compliance with Regulation F. The purpose of a record retention requirement would be to promote effective and efficient enforcement and supervision of Regulation F. Any retention period therefore must be long enough to ensure access to evidence that the debt collector performed the actions and made the disclosures required by the regulation. For ease of compliance, any retention period also should have easily determinable beginning and end dates. For these reasons, the Bureau proposes § 1006.100 to require a debt collector to retain evidence of compliance with Regulation F starting on the date that the debt collector begins collection activity on a debt and ending three years after: (1) The debt collector’s last communication or attempted communication in connection with the collection of the debt; or (2) the debt is settled, discharged, or transferred to the debt owner or to another debt collector. Requiring debt collectors to begin retaining evidence of compliance when collection activity begins should provide an easily determinable start date. In the Small Business Review Panel Outline, the Bureau described a proposal to determine the end of the retention obligation from a debt collector’s last communication or attempted communication with the consumer about a debt. Proposed § 1006.100 is not limited to communications or attempted communications with a consumer; a communication with any person may serve as the end date from which the retention period may be calculated. Proposed § 1006.100 also adds that the end of the retention period may be calculated from the time a debt is settled, discharged, or transferred to the debt owner or to another debt collector. This addition is intended to provide debt collectors with a more easily ascertainable date from which to measure their retention obligations, if such a date exists. The proposed threeyear retention period should promote PO 00000 Frm 00095 Fmt 4701 Sfmt 4702 23367 effective and efficient enforcement and supervision of Regulation F while not unduly burdening debt collectors; during the SBREFA process, nearly all small entity representatives stated that they already retain many records for at least three years. Proposed comment 100–1 would clarify that, under proposed § 1006.100, a debt collector must retain evidence that the debt collector performed the actions and made the disclosures required by Regulation F. Proposed comment 100–1 also provides examples of the evidence that a debt collector could retain to show that the debt collector complied with certain sections of the regulation. Proposed comment 100–2 would clarify that proposed § 1006.100 would not require debt collectors to retain paper copies of documents, provided the records are retained by a method that reproduces the records accurately. Proposed comment 100–3 would clarify that proposed § 1006.100 would not require debt collectors to record telephone calls, but that a debt collector who records such calls must retain the recordings if they are evidence of compliance with Regulation F. The Bureau requests comment on proposed § 1006.100 and on whether any additional clarification is needed. In particular, the Bureau requests comment on the length of the retention period, the date from which the retention obligation should be measured, and the types of records that should be maintained. The Bureau also requests comment on the burden proposed § 1006.100 would impose on debt collectors who may engage in initial attempts to collect a debt and then transition to monitoring the account without engaging in any collection communications but with the intent or option of restarting collection at a later date. The Bureau also requests comment on whether there are scenarios in which it is not possible to determine the last communication or attempted communication, such as when a person contacts the debt collector without outreach from the debt collector. The Bureau further requests comment on the merits of narrowing this prong to the debt collector’s last communication or attempted communication with the consumer in connection with the collection of the debt, instead of the debt collector’s last communication or attempted communication with any person. The Bureau requests comment on whether the two alternative proposed end dates of the retention period provide sufficient clarity on calculating the retention period. During the SBREFA process, some small entity representatives stated that E:\FR\FM\21MYP2.SGM 21MYP2 23368 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules they retain some information, such as telephone calls or notes, for less than three years, and they expressed concern about the potential cost of storing additional data. The Small Business Review Panel recommended that the Bureau seek more information to estimate the costs of record retention and request comment about whether the retention of some records, such as telephone calls, poses particularly high costs for any debt collectors. The Bureau requests comment on these topics, on debt collectors’ current record retention practices, and on the benefits to consumers of a record retention requirement that applies to all FDCPAcovered debt collectors. The Bureau proposes § 1006.100 pursuant to its authority under DoddFrank Act section 1022(b)(1), which, among other things, provides that the Bureau’s director may prescribe rules and issue orders and guidance as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of the Federal consumer financial laws and to prevent evasions thereof. The Bureau also proposes § 1006.100 pursuant to Dodd-Frank Act section 1024(b)(7)(A), which authorizes the Bureau to prescribe rules to facilitate supervision of persons identified as larger participants of a market for a consumer financial product or service as defined by rule in accordance with section 1024(a)(1)(B) of the Dodd-Frank Act; 591 and Dodd-Frank Act section 1024(b)(7)(B), which authorizes the Bureau to require a person described in Dodd-Frank Act section 1024(a)(1) to retain records for the purpose of facilitating supervision of such persons and assessing and detecting risks to consumers. For the reasons described above, the Bureau proposes § 1006.100 to facilitate supervision of, and to assess and detect risks to consumers posed by, debt collectors that are larger participants of the consumer debt collection market, as defined by rule, and to enable the Bureau to conduct enforcement investigations to identify and help prevent and deter the abusive, unfair, and deceptive debt collection practices identified in the regulation. jbell on DSK3GLQ082PROD with PROPOSALS2 Section 1006.104 Laws Relation to State FDCPA section 816 provides that the Act does not annul, alter, or affect, or exempt any person subject to the provisions of the Act from complying 591 12 CFR 1090.105 defines larger participants of the consumer debt collection market. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 with the laws of any State 592 with respect to debt collection practices, except to the extent that those laws are inconsistent with any provision of the Act, and then only to the extent of the inconsistency. FDCPA section 816 also provides that, for purposes of that section, a State law is not inconsistent with the Act if the protection such law affords any consumer is greater than the protection provided by the Act.593 The Bureau proposes § 1006.104 to implement FDCPA section 816 and pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors. Proposed § 1006.104 mirrors the statute, except that proposed § 1006.104 refers to both the provisions of the Act and the corresponding provisions of Regulation F. As discussed in the section-by-section analysis of proposed § 1006.34, some States and localities impose their own disclosure requirements on debt collectors. During the SBREFA process, several small entity representatives expressed concern about possible overlap or inconsistencies between State and local disclosure requirements and the Bureau’s proposed disclosure requirements. In its report, the Small Business Review Panel recommended that the Bureau continue to consider State law disclosures, particularly to determine whether there are any specific burdens or costs caused by overlap or conflict between the Bureau’s disclosures and State disclosures. The Panel also recommended that the Bureau continue to consider whether clarifications may be necessary in the event that Federal disclosures overlap with State law requirements.594 Consistent with the Small Business Review Panel’s recommendations, proposed comment 104–1 would clarify that a disclosure required by applicable State law that describes additional protections under State law does not contradict the requirements of the Act or the corresponding provisions of the regulation.595 The Bureau requests comment on proposed § 1006.104 and proposed comment 104–1, including on whether any additional clarification is needed. In 592 Proposed § 1006.2(l) would define State to mean ‘‘any State, territory, or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any political subdivision of any of the foregoing.’’ 593 15 U.S.C. 1692n. 594 Small Business Review Panel Report, supra note 57, at 34. 595 In response to the Small Business Review Panel’s recommendations on this issue, proposed § 1006.34(d)(3)(iv) permits a debt collector to include State law disclosures on the reverse of the validation notice. PO 00000 Frm 00096 Fmt 4701 Sfmt 4702 particular, consistent with the Small Business Review Panel’s recommendation, the Bureau requests comment on whether disclosures required by specific State or local laws are inconsistent with the Bureau’s proposed disclosures, and any specific burdens or costs caused by such overlap or conflict. Section 1006.108 Exemption for State Regulation and Appendix A Procedures for State Application for Exemption From the Provisions of the Act FDCPA section 817 provides that the Bureau shall by regulation exempt from the requirements of the Act any class of debt collection practices within any State if the Bureau determines that, under the law of that State, that class of debt collection practices is subject to requirements substantially similar to those imposed by the Act, and that there is adequate provision for enforcement.596 Sections 1006.1 through 1006.8 of current Regulation F implement FDCPA section 817 and set forth procedures and criteria whereby States may apply to the Bureau for exemption of debt collection practices within the applying State from the provisions of the Act.597 The Bureau proposes to retain these procedures and criteria, reorganized as § 1006.108 and appendix A and with the minor changes for clarity described below, to implement and interpret FDCPA section 817 and pursuant to its authority under FDCPA section 814(d) to prescribe rules with respect to the collection of debts by debt collectors. Consistent with existing § 1006.2, proposed § 1006.108(a) provides that any State may apply to the Bureau for a determination that, under the laws of that State, any class of debt collection practices within that State is subject to requirements that are substantially similar to, or provide greater protection for consumers than, those imposed under FDCPA sections 803 through 812, and that there is adequate provision for State enforcement of such requirements. Proposed § 1006.108(a) would clarify that, to be eligible for an exemption, the class of debt collection practices within that State also would need to be subject to requirements that are substantially similar to, or provide greater protection for consumers than, the provisions of Regulation F corresponding to FDCPA sections 803 through 812. Proposed § 1006.108(b) provides that the procedures and criteria whereby States may apply to the Bureau for exemption of a class of debt collection 596 15 597 12 E:\FR\FM\21MYP2.SGM U.S.C. 1692o. CFR part 1006. 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules practices within the applying State from the provisions of the Act and the corresponding provisions of Regulation F are set forth in appendix A to the regulation. Proposed appendix A, in turn, sets forth the procedures and criteria whereby States may apply to the Bureau for the exemption described in proposed § 1006.108. Proposed appendix A largely mirrors existing §§ 1006.1 through 1006.8, with certain organizational changes and other, minor changes for clarity and to more closely track the statute. The Bureau also proposes to amend the current notice system for acting on State requests for exemption to a proposed and final rule system. As with proposed § 1006.108(a), proposed appendix A would clarify that, to be eligible for an exemption, the class of debt collection practices within the applying State also would need to be subject to requirements that are substantially similar to, or provide greater protection for consumers than, the provisions of Regulation F corresponding to FDCPA sections 803 through 812. The Bureau also proposes to revise certain phrases in existing §§ 1006.1 through 1006.8 to ensure uniform terminology throughout appendix A. For example, proposed appendix A would use the phrase ‘‘more protective of consumers than’’ State law throughout, rather than variations such as ‘‘more extensive than’’ and ‘‘more favorable than’’ State law, which appear in certain places in existing §§ 1006.3 and 1006.4. Proposed appendix A would include several additional changes to existing Regulation F. First, to streamline appendix A, the Bureau proposes to include two new definitions in proposed paragraph I(b). The first, in proposed paragraph I(b)(1), would define ‘‘applicant State law’’ to mean the State law that, for a class of debt collection practices within that State, is claimed to contain requirements that are substantially similar to the requirements that relevant Federal law imposes on that class of debt collection practices, and that contains adequate provision for State enforcement. The second, in proposed paragraph I(b)(3), would define ‘‘relevant Federal law’’ to mean sections 803 through 812 of the Act (15 U.S.C. 1692a through 1692j) and the corresponding provisions of Regulation F. Accordingly, the proposed text of appendix A substitutes these terms throughout where appropriate. Second, proposed appendix A would strike existing § 1006.3(c) as redundant of proposed paragraph III(a) as revised. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 Third, proposed paragraph III(d) of appendix A would repeat existing § 1006.3(e) with certain clarifications. Existing § 1006.3(e) requires the applicant State to submit, among other supporting materials, information regarding the State’s fiscal arrangements for administrative enforcement and the number and qualifications of enforcement personnel, along with a description of State enforcement procedures. In assessing the adequacy of State enforcement, however, existing § 1006.4(b)—which is repeated in proposed paragraph IV(b) of appendix A—requires the Bureau to consider three general categories of information: necessary facilities, personnel, and funding. Because the criteria for evaluating the adequacy of State enforcement refers to these general categories of information, the Bureau proposes that paragraph III(d) of appendix A also refer to these general categories of information. Proposed paragraph III(d) of appendix A therefore would require the applicant State to submit information concerning the adequacy of enforcement, including information about necessary facilities, personnel, and funding. Proposed paragraph III(d) of appendix A also would clarify that examples of information relating to adequacy of enforcement that an applicant State must submit include the State’s fiscal arrangements for administrative State enforcement, the number and qualifications of enforcement personnel, and a description of the State’s enforcement procedures. Fourth, the Bureau proposes to clarify in proposed paragraph IV(a)(1)(i) of appendix A that the ‘‘substantially similar’’ standard in FDCPA section 817 applies to the Bureau’s consideration of all aspects of the State law for which the exemption is sought, including defined terms and rules of construction. Existing § 1006.4(a)(1)(i) states that defined terms and rules of construction must be ‘‘the same’’ as the FDCPA. The Bureau interprets FDCPA section 817’s substantial similarity standard also to apply to defined terms and rules of construction. That standard permits variation from FDCPA defined terms and rules of construction, as long as the State law definitions and rules of construction are substantially similar to or more protective of consumers than the FDCPA. Accordingly, proposed paragraph IV(a)(1)(iv) of appendix A uses the phrase ‘‘substantially similar’’ rather than ‘‘the same.’’ Fifth, proposed paragraph VI(b) of appendix A would repeat existing § 1006.6(b) with certain clarifications. Existing § 1006.6(b) requires a State that PO 00000 Frm 00097 Fmt 4701 Sfmt 4702 23369 has obtained an exemption to submit such reports to the Bureau as the Bureau may from time to time require. The Bureau proposes to clarify that this provision requires the State to submit to the Bureau, not later than two years after the date the exemption is granted, and every two years thereafter, a written report concerning the manner in which the State has enforced its law in the preceding two years and an update of the information required under proposed paragraph III(d) of appendix A. By requiring such information to be updated every two years, proposed appendix A would ensure that the Bureau is aware of changes that may affect the State’s capacity to enforce the laws that qualified the State for the exemption. The Bureau requests comment on proposed § 1006.108 and proposed appendix A, and on whether any additional clarification is needed. The Bureau also requests comment on whether proposed § 1006.108 should be clarified or broadened to allow for an exemption from provisions of Regulation F that are not based exclusively on FDCPA sections 803 through 812. Similarly, the Bureau requests comment on whether proposed § 1006.108 should be clarified or broadened to allow for an exemption from provisions of Regulation F that are based solely on the Bureau’s authority under the Dodd-Frank Act. The Bureau potentially could adopt such a process pursuant to its exemption authority under section 1022(b)(3)(A) of the DoddFrank Act. Further, current Regulation F includes the phrase ‘‘provide greater protection for consumers than,’’ which is a concept incorporated from FDCPA section 816. It also provides that ‘‘[a]fter an exemption is granted, the requirements of the applicable State law constitute the requirements of relevant Federal law, except to the extent such State law imposes requirements not imposed by the Act or this part.’’ The Bureau does not propose to change this language in proposed § 1006.108 or proposed appendix A, as the Bureau does not seek to make additional substantive changes to the requirements for State requests for exemption. The Bureau requests comment on the use of this language in proposed § 1006.108 and proposed appendix A. E:\FR\FM\21MYP2.SGM 21MYP2 23370 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules Appendix C to Part 1006—Issuance of Advisory Opinions 598 The Bureau proposes to add appendix C to Regulation F to publish a list of any advisory opinions that the Bureau issues pursuant to FDCPA section 813(e). Proposed appendix C would clarify that any act done or omitted in good faith in conformity with any advisory opinion issued by the Bureau, including those referenced in appendix C, provides the protection from liability for FDCPAbased violations afforded under FDCPA section 813(e). Proposed appendix C also includes instructions for requesting an advisory opinion. The Bureau requests comment on whether additional clarification regarding the effect of conformity with Bureau advisory opinions would be helpful. Supplement I to Part 1006—Official Interpretations The Bureau proposes to add Supplement I to Regulation F to publish official interpretations of the regulation (i.e., commentary). Proposed comment I–1 explains that the commentary is the Bureau’s vehicle for supplementing Regulation F and has been issued pursuant to the Bureau’s authority to prescribe rules under 15 U.S.C. 1692l(d) and in accordance with the notice-andcomment procedures for informal rulemaking under the Administrative Procedure Act. Proposed comment I–2 sets forth the procedure for requesting that an official interpretation be added to Supplement I, and proposed comment I–3 describes how the commentary is organized and numbered. Proposed commentary relating to specific sections of the regulation are addressed in the sectionby-section analyses of those sections, above. The Bureau requests comment on proposed comments I–1, –2, and –3, including on whether additional clarification regarding either the purpose or organization of Supplement I, or the procedure for requesting official interpretations, would be helpful. VI. Dodd-Frank Act Section 1022(b) Analysis jbell on DSK3GLQ082PROD with PROPOSALS2 A. Overview In developing the proposed rule, the Bureau has considered the proposal’s potential benefits, costs, and impacts.599 598 Proposed appendix A is discussed in the section-by-section analysis of proposed § 1006.108. Proposed appendix B is discussed in the sectionby-section analyses of proposed §§ 1006.26 and 1006.34. 599 Specifically, section 1022(b)(2)(A) of the Dodd-Frank Act (12 U.S.C. 5512(b)(2)(A)) requires the Bureau to consider the potential benefits and costs of the regulation to consumers and covered persons, including the potential reduction of access VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 The Bureau requests comment on the preliminary analysis presented below as well as submissions of additional data that could inform the Bureau’s analysis of the benefits, costs, and impacts. Debt collectors play a critical role in markets for consumer financial products and services. Credit markets function because lenders expect that borrowers will pay them back. In consumer credit markets, if borrowers fail to repay what they owe per the terms of their loan agreement, creditors often engage debt collectors to attempt to recover amounts owed, whether through the court system or through less formal demands for repayment. In general, third-party debt collection creates the potential for market failures. Consumers do not choose their debt collectors, and as a result debt collectors do not have the same incentives that creditors have to treat consumers fairly.600 Certain provisions of the FDCPA may help mitigate such market failures in debt collection, for example by prohibiting unfair, deceptive, or abusive debt collection practices by third-party debt collectors. Any restriction on debt collection may reduce repayment of debts, providing a benefit to some consumers who owe debts and an offsetting cost to creditors and debt collectors. A decrease in repayment will in turn lower the expected return to lending. This can lead lenders to increase interest rates and other borrowing costs and to restrict availability of credit, particularly to higher-risk borrowers.601 Because of by consumers to consumer financial products or services; the impact of the proposed rule on insured depository institutions and insured credit unions with $10 billion or less in total assets as described in section 1026 of the Dodd-Frank Act (12 U.S.C. 5516); and the impact on consumers in rural areas. 600 Consumers do choose their lenders, and in principle consumer loan contracts could specify which debt collector would be used or what debt collection practices would be in the event a loan is not repaid. Some economists have identified potential market failures that prevent loan contracts from including such terms even when they could make both borrowers and lenders better off. For example, terms related to debt collection may not be salient to consumers at the time a loan is made. Alternatively, if such terms are salient, a contract that provides for more lenient collection practices may lead to adverse selection, attracting a disproportionate share of borrowers who know they are more likely to default. See Thomas A. Durkin et al., Consumer Credit and the American Economy 521–525 (Oxford U. Press 2014) (discussing potential sources of market failure and potential problems with some of those arguments). 601 See id. (discussing theory and evidence on how restrictions on creditor remedies affect the supply of credit). Empirical evidence on the impact of State laws restricting debt collection is discussed in section G below. The provisions in this proposal could also affect consumer demand for credit, to the extent that consumers contemplate collection practices when making borrowing decisions. However, there is evidence suggesting that PO 00000 Frm 00098 Fmt 4701 Sfmt 4702 this, policies that increase protections for consumers with debts in collection involve a tradeoff between the benefits of protections for such consumers and the possibility of increased costs of credit and reduced availability of credit for all consumers. Whether there is a net benefit from such protections depends on whether consumers value the protections enough to outweigh any associated increase in the cost of credit or reduction in availability of credit. The proposal would further the FDCPA’s goals of eliminating abusive debt collection practices and ensuring that debt collectors who refrain from such practices are not competitively disadvantaged.602 However, as discussed below, it is not clear based on the information available to the Bureau at this time whether the net effect of the proposal’s different provisions would be to make it more costly or less costly for debt collectors to recover unpaid amounts, and therefore not clear whether the proposal would tend to increase or decrease the supply of credit. The proposed rule would benefit both consumers and debt collectors by increasing clarity and certainty about what the FDCPA prohibits and requires. When a law is unclear, it is more likely that parties will disagree about what the law requires, that legal disputes will arise, and that litigation will be required to resolve disputes. Since 2010, consumers have filed approximately 10,000 to 12,000 lawsuits under the FDCPA each year.603 The number of disputes settled without litigation has likely been much greater.604 Perhaps more important than the costs of resolving legal disputes are the steps that debt collectors take to prevent legal disputes from arising in the first place. This includes direct costs of legal compliance, such as auditing and legal advice, as well as indirect costs from avoiding collection practices that might be both effective and legal but that raise potential legal risks. In some cases, debt consumer demand for credit is generally not responsive to differences in creditor remedies. See James Barth et al., Benefits and Costs of Legal Restrictions on Personal Loan Markets, Journal of Law & Economics, 29(2) (1986). 601 See 15 U.S.C. 1692(e). 602 See id. 603 See WebRecon LLC, WebRecon Stats for Dec 2017 & Year in Review, https://webrecon.com/ webrecon-stats-for-dec-2017-year-in-review (last visited May 6, 2019). Greater clarity about legal requirements could reduce unintentional violations and could also reduce lawsuits because, when parties can better predict the outcome of a lawsuit, they may be more likely to settle claims out of court. 604 Some debt collectors have reported that they receive approximately 10 demand letters for each lawsuit filed. See Small Business Review Panel Outline, supra note 56, at 69 n.105. E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules collectors seeking to follow the law and avoid litigation have adopted practices that appear to be economically inefficient, with costs that exceed the benefits to consumers or even impose net costs on consumers.605 Several provisions of the proposed rule would likely change the way debt collectors communicate with consumers, and the potential impacts of these provisions are likely to interact with each other in ways that are difficult for the Bureau to predict. Most significant of these are the provisions related to frequency limits for telephone calls, limited-content messages, and electronic disclosures, although other provisions such as the proposed model validation notice might fall into this category as well. The communication provisions collectively are likely to reduce the number of telephone calls from debt collectors. Currently many, though by no means all, debt collectors communicate with consumers strictly through actual and attempted live telephone calls and postal mail, with no communication by voice message, email, text message, or other electronic media. It is possible that the net effect of the proposed provisions would be to make debt collection more effective: Debt collectors who currently communicate by live telephone calls in excess of the proposed limits could substitute for some of the excessive call volume by leaving voice messages and sending email, and consumers could respond to this change in communication channels by engaging with such debt collectors as much as or more than they currently do by telephone. If this occurs, consumers could benefit from a reduction in calls that may annoy, abuse, or harass them, as well as from resolving their outstanding debts in a more timely fashion. At the same time, debt collectors could benefit from reduced time spent making calls and from increased revenue. There is some reason to believe this may occur—as noted below, a substantial fraction of consumers prefers to communicate by email, and consumers may well be more likely to return a voice message than to answer their telephones in response to a call from an unknown number. Alternatively, the proposed provisions might make debt collection less effective: Debt collectors could comply with the frequency limits, reducing outbound calling, but end up not increasing contact with consumers 605 For example, as discussed further below, many debt collectors currently avoid leaving voice messages for consumers or communicating with consumers by email because sending voice messages or emails may create legal risks. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 by using voicemail and email as communication channels. This might occur if debt collectors still fear some legal risk from other channels, or if they find the new communication methods are not effective in reaching consumers. In this case, although the number of telephone calls would be reduced, it would come at the cost of making it more difficult for debt collectors to reach some consumers, reducing revenue and potentially imposing costs on both consumers and debt collectors from increased litigation to recover debts. The effect of the proposal on debt collectors would likely lie somewhere in between these two extremes, and the Bureau believes these effects will likely vary by debt collector and type of debt. If the proposed communication provisions were adopted in a final rule, some firms would likely adopt newer communication methods due to the reduced legal risk and find less need for telephone calls, while other firms would not do so or would not experience the same effect. Still other firms might be largely unaffected by the communication-related provisions in the proposal. As discussed below, some debt collectors currently place only one or two calls per week to any consumer, and such debt collectors are unlikely to change their calling practices and may not find it cost-effective to develop the information-technology infrastructure necessary to communicate by email or text message. Relatedly, the Bureau is aware of at least one mid-sized collection firm that primarily uses email for communication currently, and such firms also will be unlikely to alter their practices, although they may benefit from reduced litigation costs. In short, the proposed provisions related to communications would likely reduce the overall number of calls per consumer, while at the same time potentially reducing the number of calls required to reach each consumer. Although the Bureau believes it is likely that consumers would benefit directly from a reduction in calls that annoy, abuse, or harass them, the Bureau cannot predict the net effect of these provisions on debt collectors’ costs and revenues or the net change in indirect costs to consumers from potential credit reporting and litigation in the event debt collectors cannot reach them. Apart from the proposed communication provisions, other provisions of the proposal could make debt collection either more or less costly in ways that are difficult to predict. For example, the proposed validation notice requirements would provide consumers with more information than they PO 00000 Frm 00099 Fmt 4701 Sfmt 4702 23371 currently receive about debts, which could reduce costs to consumers and debt collectors from disputes that arise when consumers do not recognize the debt or understand the basis for the alleged amount due. At the same time, the proposal’s clearer explanation of dispute rights could make consumers more likely to dispute, which could provide benefits to consumers while increasing costs for debt collectors. Disputes are costly for debt collectors to process, so these proposed requirements could either increase or decrease debt collector and consumer costs depending on the net effect on dispute rates. In developing the proposed rule, the Bureau has consulted, or offered to consult with, the appropriate prudential regulators and other Federal agencies, including regarding consistency with any prudential, market, or systemic objectives administered by such agencies. B. Provisions To Be Analyzed The analysis below considers the potential benefits, costs, and impacts to consumers and covered persons of key provisions of the proposed rule (proposed provisions), which include: 1. Prohibited communications with consumers. 2. Frequency limits for telephone calls and telephone conversations. 3. Limited-content messages. 4. Time-barred debt: prohibiting suits and threats of suit. 5. Communication prior to furnishing information. 6. Prohibition on the sale or transfer of certain debts. 7. Notice for validation of debts. 8. Electronic disclosures and communications. In addition to the proposed provisions listed above, the Bureau proposes to codify several FDCPA provisions into the rule and to add certain clarifying commentary. C. Data Limitations and Quantification of Benefits, Costs, and Impacts The discussion in this part VI.C relies on publicly available information as well as information the Bureau has obtained. To better understand consumer experiences with debt collection, the Bureau developed its 2015 Debt Collection Consumer Survey, which provides the first comprehensive and nationally representative data on consumers’ experiences and preferences related to debt collection.606 The Bureau 606 The Bureau’s survey was conducted between December 2014 and March 2015. Consumers with and without debts in collection were asked to complete this survey in order to provide the Bureau E:\FR\FM\21MYP2.SGM Continued 21MYP2 23372 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 also relies on its consumer complaint data, its Consumer Credit Panel, the Credit Card Database,607 and other sources to understand potential benefits and costs to consumers of the proposed rule.608 To better understand potential effects of the proposed rule on industry, the Bureau has engaged in significant outreach to industry, including the Operations Survey.609 In July 2016, the Bureau consulted with small entities as part of the SBREFA process and obtained important information on the potential impacts of proposals that the Bureau was considering at the time, many of which are included in the proposed rule.610 The sources described above, together with other sources of information and the Bureau’s market knowledge, form the basis for the Bureau’s consideration of the likely impacts of the proposed rule. The Bureau makes every attempt to provide reasonable estimates of the potential benefits and costs to consumers and covered persons of this proposal. While the Debt Collection Consumer Survey provides representative data on consumer experiences with debt collection, the survey responses generally do not permit the Bureau to quantify, in dollar terms, how particular proposed provisions will affect consumers. With respect to industry impacts, much of the Bureau’s existing data come from qualitative input from debt collectors and other entities that operate in this market rather than representative sampling that would allow the Bureau to estimate total benefits and costs. General economic principles and the Bureau’s expertise in consumer financial markets, together with the data and findings that are available, provide insight into the potential benefits, costs, and impacts of the proposed rule. Where possible, the Bureau has made with data necessary to understand experience and demographics of consumers who have been contacted by debt collectors. Consumers were selected using the Bureau’s Consumer Credit Panel, a de-identified 1-in-48 sample of Americans with consumer reports at one of the nationwide CRAs. See CFPB Debt Collection Consumer Survey, supra note 18, at 7–10. 607 The Credit Card Database is a compilation of de-identified loan-level information from the credit card portfolios of large banks. See Bureau of Consumer Fin. Prot., Credit Card Agreement Database, https://www.consumerfinance.gov/creditcards/agreements/ (last visited May 6, 2019). 608 For more information about Bureau data sources, see Sources and Uses of Data at the Bureau of Consumer Financial Protection (Sept. 2018), https://www.consumerfinance.gov/data-research/ research-reports/sources-and-uses-data-bureauconsumer-financial-protection/. 609 See CFPB Debt Collection Operations Study, supra note 45. 610 See Small Business Review Panel Report, supra note 57. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 quantitative estimates based on these principles and the data available. Some benefits and costs, however, are not amenable to quantification, or are not quantifiable given the data available to the Bureau. The Bureau provides a qualitative discussion of those benefits, costs, and impacts. The Bureau requests additional data or studies that could help quantify the benefits and costs to consumers and covered persons of the proposed rule. D. Baseline for Analysis In evaluating the potential benefits, costs, and impacts of the proposal, the Bureau takes as a baseline the current legal framework governing debt collection. This includes the requirements of the FDCPA as currently interpreted by courts and law enforcement agencies, other Federal laws, and the rules and statutory requirements promulgated by the States. In the consideration of benefits and costs below, the Bureau discusses its understanding of practices in the debt collection market under this baseline and how those practices would change under the proposal. Until the creation of the Bureau, no Federal agency was given the authority to write substantive regulations implementing the FDCPA, meaning that many of the FDCPA’s requirements are subject to interpretations in court decisions that are not always consistent or fully authoritative, such as a single district court opinion on an issue. Debt collectors’ practices reflect their interpretations of the FDCPA and their decisions about how to balance effective collection practices against litigation risk. Many of the impacts of the proposed rule relative to the baseline would arise from changes that debt collectors would make in response to additional clarity about the most appropriate interpretation of what conduct is permissible and not permissible under the FDCPA’s provisions. E. Coverage of Proposal The proposed rule would apply to debt collectors as defined in the FDCPA. This definition encompasses a number of types of businesses, which can be generally categorized as: Collection agencies, which collect payments owed to their clients, often for a contingency fee; debt buyers, which purchase delinquent debt and attempt to collect it, either themselves or through agents, or who may have as their principal purpose the collection of consumer debt; collection law firms that either have as their principal purpose the collection of consumer debt or regularly PO 00000 Frm 00100 Fmt 4701 Sfmt 4702 collect consumer debt owed to others; and loan servicers when they acquire servicing of loans already in default. Although creditors that collect on debts they own generally would not be affected directly by the proposal, they may experience indirect effects. Creditors that hire or sell debts to FDCPA-covered debt collectors may experience higher costs if debt collectors’ costs increase and if those costs are passed on to creditors. As described below, the Bureau believes that many compliance costs on FDCPAcovered debt collectors will be one-time costs to come into compliance rather than ongoing costs to stay in compliance. To the extent compliance costs are incurred only once to adjust existing debt collectors’ systems and do not increase costs for new entrants, they are unlikely to be passed on to creditors. F. Potential Benefits and Costs to Consumers and Covered Persons The Bureau discusses the benefits and costs of the proposal to consumers and covered persons (generally FDCPAcovered debt collectors) in detail below.611 The Bureau believes that an important benefit of many of the proposed provisions to both consumers and covered persons—compared to the baseline of the FDCPA as currently interpreted by courts and law enforcement agencies—is an increase in clarity and precision of the law governing debt collection. Greater certainty about legal requirements can benefit both consumers and debt collectors, making it easier for consumers to understand and assert their rights and easier for firms to ensure they are in compliance. The Bureau discusses these benefits in more detail with respect to certain provisions below but believes that they generally apply, in varying degrees, to all of the proposed provisions discussed below. 1. Prohibited Communications With Consumers Proposed § 1006.6(b) generally would implement FDCPA section 805(a)’s prohibition on a debt collector communicating with a consumer at unusual or inconvenient times and places, with a consumer represented by an attorney, and at a consumer’s place of employment. This section would also expressly prohibit attempts to make 611 For purposes of the section 1022(b)(2) analysis, the Bureau considers any consequences that consumers perceive as harmful to be a cost to consumers. In considering whether consumers might perceive certain activities as harmful, the Bureau is not analyzing whether those activities would be unlawful under the FDCPA or the DoddFrank Act. E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 such communications, which debt collectors already must avoid given that a successful attempt would be an FDCPA violation. Proposed § 1006.14(h)(1) would interpret FDCPA section 806’s prohibition on a debt collector engaging in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt to prohibit debt collectors from communicating or attempting to communicate with consumers through a medium of communication if the consumer has requested that the debt collector not use that medium to communicate with the consumer. Debt collectors are already prohibited from communicating with consumers at a time or place that is known or should be known to be inconvenient to the consumer. The Bureau therefore expects that debt collectors already keep track of what consumers tell them about the times and places that they find inconvenient and avoid communicating or attempting to communicate with consumers at those times or places. Similarly, the proposed provisions regarding communication with attorneys and at the consumer’s place of employment track consumer debt collector practices that are already required to comply with the FDCPA. The Bureau understands that many debt collectors currently employ systems and business processes designed to limit communication attempts to consumers at inconvenient times and places and that many debt collectors also use these systems and processes to prevent communications with consumers through media that consumers have told them are inconvenient. The proposed provisions might benefit consumers and debt collectors by providing further clarity in the application of the requirements of FDCPA section 805(a) and 806, but the Bureau does not expect that the proposed provision would cause significant changes to debt collectors’ existing practices. 2. Frequency Limits for Telephone Calls and Telephone Conversations Proposed § 1006.14(b)(1) would prohibit a debt collector from, in connection with the collection of a debt, placing telephone calls or engaging in telephone conversations repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number. Proposed § 1006.14(b)(2) provides that, subject to certain exceptions set forth in proposed § 1006.14(b)(3), a debt collector violates proposed § 1006.14(b)(1) if the debt collector places a telephone call to a person in connection with the collection VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 of a particular debt either: (i) More than seven times within seven consecutive days, or (ii) within a period of seven consecutive days after having had a telephone conversation with the person in connection with the collection of such debt. Proposed § 1006.14(b)(4) would clarify the effect of complying with the frequency limits in § 1006.14(b)(2), stating that a debt collector who does not exceed the limits complies with § 1006.14(b)(1) and FDCPA section 806(5), and does not, based on the frequency of its telephone calls, violate § 1006.14(a), FDCPA section 806, or Dodd-Frank Act sections 1031 or 1036(a)(1)(B). Potential benefits to consumers. Calls debt collectors make with intent to annoy, abuse, or harass consumers are likely to cause them harm, and the Bureau has evidence, discussed below and in part V, that many consumers perceive harm from debt collectors’ repeated telephone calls.612 The proposed provision would limit this harm by capping the frequency of telephone calls and telephone conversations.613 FDCPA section 806 already prohibits conduct the natural consequence of which is to harass, oppress, or abuse any person. FDCPA section 806(5) also specifically prohibits repeated or continuous calling and telephone conversations with ‘‘intent to annoy, abuse, or harass any person at the called number.’’ These prohibitions have been interpreted differently by different courts, and while some debt collectors call consumers less frequently than the proposed frequency limits would permit, there are many debt collectors who place telephone calls to consumers or engage consumers in telephone conversations more frequently than the proposed frequency limits would permit. To quantify consumer benefits from the proposed provision, the Bureau would need information regarding both how much the provision would reduce the number of calls debt collectors place to consumers and the benefit (or harm) each consumer would receive as a result 612 The FDCPA’s standard of liability for excessive calling is not perceived harm by consumers, but rather depends on the debt collector’s intent or the ‘‘natural consequence’’ of the conduct. See FDCPA section 806(5) and 806, 15 U.S.C. 1692d(5) and 1692d. Nonetheless, section 1022(b)(2)(A) of the Dodd-Frank Act requires the Bureau to consider the potential benefits and costs of its regulation to consumers and covered persons, which may include potential benefits or costs that were not contemplated or intended by the FDCPA. 613 The proposed rule could have the ancillary effect of preventing some calls that are not intended to annoy, abuse, or harass consumers and could in fact prevent some calls that consumers would find beneficial, as discussed below under ‘‘Potential costs to consumers.’’ PO 00000 Frm 00101 Fmt 4701 Sfmt 4702 23373 of this reduction. Although the Bureau’s data do not permit it to reliably quantify either the reduction in call frequency or how much borrowers would value this reduction in dollar terms, the discussion below summarizes the data available to the Bureau on these two points. Data from the CFPB Debt Collection Consumer Survey indicate that debt collectors often may attempt to contact consumers more frequently than seven times per week. In the survey, 35 percent of consumers who had been contacted by a debt collector said the debt collector had contacted or attempted to contact them four or more times per week, including 14 percent who said the debt collector had contacted or attempted to contact them eight or more times per week.614 Another 29 percent said that the debt collector had attempted to contact them one to three times per week.615 The survey question did not ask respondents to distinguish between actual contacts and contact attempts, and consumers are likely not aware of all unsuccessful contact attempts. Still, the survey responses suggest that it is not uncommon for debt collectors to attempt to telephone consumers more than seven times per week, and the responses would be consistent with many debt collectors having live telephone conversations with consumers more frequently than the one time per week that generally would be permitted under the proposal.616 Based on this, it is reasonable to estimate that at least 6.9 million consumers 617 are called by debt collectors more than seven times in one week during a year. The CFPB Debt Collection Consumer Survey provides evidence that many consumers would benefit if they received fewer calls from debt collectors, although it does not provide 614 CFPB Debt Collection Consumer Survey, supra note 18, at 44 n.5. 615 Id. 616 Information from industry also confirms that debt collectors sometimes attempt to communicate more than seven times per week. See discussion under ‘‘Costs to covered persons’’ below. 617 This is calculated as 14 percent of an estimated 49 million consumers contacted by debt collectors each year. The Bureau estimates that about 32 percent of consumers with a credit file, or about 67 million, are contacted each year by a creditor or debt collector attempting to collect a debt. Of those, 23 percent were most recently contacted by a creditor, 63 percent by a debt collector, and 15 percent did not know whether the contact was from a creditor or debt collector. Based on this, the Bureau estimates that 73 percent of consumers were contacted by a debt collector, assuming that the share of consumers contacted by a debt collector is the same in this group as it is among consumers who did know whether the most recent contact was from a debt collector. See CFPB Debt Collection Consumer Survey, supra note 18, at 13, 40–41. E:\FR\FM\21MYP2.SGM 21MYP2 23374 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules evidence with which to estimate the dollar value of those benefits. Most respondents who had been contacted by a debt collector at least once per week said they had been contacted too often. As shown in Table 1, 95 percent of respondents who said debt collectors had contacted or attempted to contact them four or more times per week and 76 percent of those reporting contact or attempted contact one to three times per week said that they had been contacted too often by the debt collector, whereas 22 percent of those contacted less than once per week said they had been contacted too often. TABLE 1—CONSUMERS INDICATING THEY HAD BEEN CONTACTED TOO OFTEN, BY CONTACT FREQUENCY [Percent] Contact frequency Consumers who said they were contacted too often Less than once per week ..... One to three times per week Four or more times per week 22 76 95 jbell on DSK3GLQ082PROD with PROPOSALS2 The survey questions did not distinguish between contact attempts and contacts that result in a live communication. They also did not distinguish among different types of contact, and survey responses may have included contacts such as letters or emails that would not be included in the proposed limits.618 Nonetheless, the results indicate that a large majority of consumers who are contacted at least once per week believe they are being contacted too frequently. The Bureau’s consumer complaint data also indicate that consumers find frequent or repeated calls harmful. Communication tactics ranked third in debt collection complaints submitted to the Bureau during 2018, and the majority of complaints in this category—55 percent, or about 6,000 complaints during 2018—were about frequent or repeated telephone calls.619 Although the Bureau does not have evidence that could be used to estimate 618 The survey suggests that contact attempts from debt collectors other than by telephone or letter are relatively uncommon. Id. at 42, table 22. The Bureau understands that debt collectors seldom send letters more than once per week, so the survey responses suggest that a large majority of contact attempts are by telephone. 619 See 2018 FDCPA Annual Report, supra note 16, at 16–17, table 1. Also note that consumers can identify only one issue to categorize their complaints, so that the count does not include cases in which a consumer chooses a different issue (such as ‘‘I don’t owe the debt’’) but still express concern about call frequency. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 the monetary value consumers attach to a reduction in call frequency, there is indirect evidence of costs consumers are willing to bear to avoid unwanted calls. One leading service that offers to block inbound ‘‘robocalls’’ to a consumer’s cellular telephone charges $1.99 per month for the service and claims over 1,000,000 users. Such services are an imperfect analogy to the proposed frequency limits for at least two different reasons: First, they are intended to completely block calls rather than limit their frequency; and second, such services block telemarketing calls in addition to debt collection calls, while not blocking all debt collection calls. Given these differences, the price of this service does not provide a precise analog for the value to consumers of the proposed call frequency limits. Nonetheless, the example does provide evidence that many consumers are willing to pay prices in the range of $24 per year to avoid unwanted telephone calls.620 Some of the benefits from the proposed call frequency limits could be obtained if consumers used protections they already have under the FDCPA to help them avoid too-frequent debt collection calls. Debt collectors must cease most communications in response to a written request from the consumer to do so. Furthermore, because section 805(a)(1) of the FDCPA prohibits debt collectors from communicating about a debt at any time or place that the debt collector knows or should know is inconvenient to the consumer, debt collectors risk violating section 805(a)(1) if they do not take heed when consumers say they do not want to communicate at certain times or places. However, many consumers may not want to completely cease communication about a debt because, for example, debt collectors who cannot recover through such communications may initiate litigation to recover on the debt. Many consumers may also be unaware of their rights to limit whether 620 Another source of indirect evidence on the value to consumers of reduced call frequency is the Bureau’s consumer complaints. The Bureau received approximately 6,000 complaints about call frequency during 2018. See id. Based on the Bureau’s records, the average time for a consumer to file a complaint with the Bureau by telephone or through the web portal is approximately 15 minutes, although this varies over time and across complaint categories. Valuing consumers’ time using the average U.S. private sector wage of approximately $27 per hour suggests that some consumers are willing to give up approximately $6.75 worth of their time in hopes of reducing call frequency from one debt collector. See U.S. Dept. of Labor, Bureau of Lab. Stat., Economic News Release: Employment Situation, table B–3 (Feb. 1, 2019), https://www.bls.gov/news.release/ empsit.t19.htm. PO 00000 Frm 00102 Fmt 4701 Sfmt 4702 and how debt collectors communicate with them. For example, consumers who tell debt collectors to cease communication orally may not benefit because some debt collectors may not respond to consumers’ requests to limit communications unless they are made in writing. In the Debt Collection Consumer Survey, 42 percent of respondents who had been contacted about a debt in collection reported having requested that a creditor or debt collector stop contacting them.621 These respondents generally did not make the request in writing.622 Of these consumers, approximately 75 percent reported that the creditor or debt collector did not stop attempting to contact them.623 As discussed above, technological solutions are also increasingly available to consumers who want to avoid certain calls and may be used to screen out calls from some debt collectors. However, such solutions may be under-inclusive (in that they do not screen out calls from all debt collectors) or over-inclusive (in that a consumer may want to maintain some telephone contact with a debt collector rather than eliminating all calls from that debt collector). Potential costs to consumers. Consumers may benefit from communicating with debt collectors about their debts. For consumers being contacted about a debt they in fact owe, communicating with the debt collector may help consumers resolve the debt, which could help avoid further fees and interest, credit reporting harms, or lawsuits. For consumers being contacted about a debt they do not owe, communications from debt collectors may alert consumers to errors in their credit reports or that they are victims of identity theft. During the meeting of the Small Business Review Panel, some debt collectors said that frequency limits could extend the period needed to establish contact with a consumer, as further discussed below under ‘‘Potential costs to covered persons.’’ If the proposed frequency limits mean that debt collectors are less able to reach some consumers, or that communication with some consumers is delayed, those consumers may be harmed. To quantify any such harm, the Bureau would need data to estimate how the proposed frequency limits would affect whether and when debt collectors communicate with consumers as well as the harm consumers 621 CFPB Debt Collection Consumer Survey, supra note 18, at 35, table 17. 622 Of consumers who asked not to be contacted, 87 percent said they made the request by telephone or in person only. Id. at 34–35. 623 Id. E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules experience when they do not communicate with debt collectors. The Bureau discusses the available evidence on how the proposed frequency limits would affect whether debt collectors communicate with consumers below in its discussion of costs to covered persons. As discussed there, the data are limited, but evidence the Bureau does have suggests that the proposed limits might somewhat reduce the number of consumers reached by telephone within a few months after a debt collector starts attempting contact, but that the reduction is likely to be limited to a relatively small fraction of debts. The Bureau does not have representative data that can be used to quantify the harm consumers experience when they do not communicate with debt collectors, or when those communications are delayed. If consumers do not communicate with debt collectors about debts, they could suffer additional harm from debt collection in some cases, particularly if the debt collector or creditor initiates a lawsuit. A suit could lead to increased fees, legal costs, and the possibility of a judgment that could lead to garnishment of wages or other legal steps to recover the debt. To the extent that some debt collectors currently call less than the proposed frequency limits to avoid legal risks, such debt collectors could increase their calling frequency as a result of the proposal. This would result in costs to some consumers if they find the increase in call frequency harmful. Potential benefits to covered persons. As with several other provisions of the proposed rule, the proposed limits would reduce legal uncertainty about the interpretation of existing FDCPA language. Frequent telephone calls are a consistent source of consumer-initiated litigation and consumer complaints to Federal and State law enforcement agencies. By establishing a clear standard for call frequency, the proposed provision would make it easier for debt collectors to know what calling patterns are permitted and avoid the costs of litigation and threats of litigation. To the extent that some debt collectors currently call less than the proposed frequency limits to avoid legal risks, such debt collectors could increase their calling frequency, potentially increasing collection revenue. Some debt collectors might also benefit from a reduction in calls made by other debt collectors. The Bureau understands that many consumers have multiple debts being collected by VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 different debt collectors.624 In seeking payments from consumers, multiple debt collectors compete with each other for consumers’ attention, which can lead to a large aggregate number of debt collection calls, potentially overwhelming some consumers and making them less likely to answer calls or otherwise engage with debt collectors.625 This in turn could make it harder for each debt collector to recover outstanding debt.626 Thus, one potential benefit to debt collectors of the proposed call frequency limits is a lower frequency of telephone calls by other debt collectors, which could make consumers more likely to engage and repay. In addition, some debt collectors specialize in approaches to collection that do not rely on frequent call attempts, and these debt collectors may benefit from the proposed call frequency limits. In particular, debt collectors who focus on litigation and those who communicate with consumers primarily by means not covered by the proposed limits, such as letters and emails, may be more effective in communicating with consumers relative to debt collectors who are affected by the proposed limits. This, in turn, may increase their market share at the expense of debt collectors who are more dependent on frequent calls. Potential costs to covered persons. The proposed provision would impose at least two categories of costs on debt collectors. First, it would mean that debt collectors must track the frequency of outbound telephone calls, which would require many debt collectors to bear one-time costs to update their systems and train staff, and which would create ongoing costs for some debt collectors. Second, for some debt collectors, the proposed provision would require a reduction in the frequency with which they place telephone calls to consumers, which could make it harder to reach consumers and delay or reduce collections revenue. With respect to one-time implementation costs, many debt collectors would incur costs to revise their systems to incorporate the proposed call frequency limits. Such 624 The Bureau’s survey indicates that 72 percent of consumers with a debt in collection were contacted about two or more debts in collection, and 16 percent were contacted about five or more debts. Id. at 13, table 1. 625 For example, borrowers could simply ignore telephone calls or could adopt call screening or blocking technology. 626 In other words, debt collectors may face a ‘‘prisoner’s dilemma,’’ in which each debt collector has incentives to call more frequently even though debt collectors might collectively benefit from a mutual reduction in call frequency. PO 00000 Frm 00103 Fmt 4701 Sfmt 4702 23375 revisions could range from small updates to existing systems to the introduction of completely new systems and processes. The Bureau understands that larger debt collectors generally already implement system limits on call frequency to comply with client contractual requirements, debt collector internal policies, and State and local laws.627 Such debt collectors might need only to revise existing calling restrictions to ensure that existing systems comply with the caps. Larger collection agencies might also need to respond to client requests for additional reports and audit items to verify that they comply with the caps, which could require these agencies to make systems changes to alter the reports and data they produce for their clients to review. Smaller debt collectors and collection law firms are less likely to have existing systems that track or limit calling frequency, and may therefore face larger costs to establish systems to do so. However, many smaller debt collectors report that they generally attempt to reach each consumer by telephone only one or two times per week and generally do not speak to a consumer more than one time per week, which suggests that their practices are already within the proposed frequency limits.628 For such debt collectors, existing policies may be sufficient to ensure compliance with the proposed provision. With respect to ongoing costs of compliance, the Bureau expects that the proposed limit on call attempts in § 1006.14(b)(2)(i) could have an impact on some debt collectors’ ability to reach consumers, particularly when the debt collector has not yet established contact with a consumer. These impacts are discussed below. The Bureau’s understanding, based on feedback from small entity representatives and other industry outreach, is that the proposed limit of one telephone conversation per week in § 1006.14(b)(2)(ii) is unlikely to affect debt collectors’ ability to communicate with consumers in most cases.629 630 627 See CFPB Debt Collection Operations Study, supra note 45, at 28–29. 628 See id. at 29. 629 The impact might be greater if consumers could not consent to more frequent contact. For example, if a debt collector reached a consumer on the telephone and the consumer said it was not a good time to speak, then the proposal would permit the debt collector and consumer to agree to speak again at a specified time within less than one week. See the section-by-section analysis of proposed § 1006.14(b)(3)(ii). 630 Similarly, the Bureau expects that debt collectors would be largely unaffected by the proposal to apply the frequency limits to location contacts with third parties because the Bureau understands that while location calls may be made E:\FR\FM\21MYP2.SGM Continued 21MYP2 23376 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 The proposed limit of placing no more than seven telephone calls per week would cause many debt collectors to place telephone calls less frequently than they currently do. This decrease in telephone calls may impose ongoing costs on debt collectors by increasing the time it takes to establish contact with consumers. Most debt collectors rely heavily on telephone calls as a means of establishing contact with consumers. While debt collectors generally send letters in addition to calling,631 the Bureau understands that response rates to letters can be quite low. If contact with consumers is delayed, it will delay collection revenue and may reduce revenue if consumers who are reached later are less willing or able to repay the debt. In addition, if the debt collector is unable to reach the consumer using the permitted number of telephone calls during the period the owner of the debt permits the debt collector to attempt to collect the debt, then the call frequency limits might prevent a debt collector from reaching the consumer entirely.632 Some debt collectors do not place telephone calls frequently enough to be affected by the proposed caps. While the Bureau understands that some debt collectors regularly call consumers two to three times per day or more, others have told the Bureau that they seldom attempt to call more than once or twice per week. These differences may reflect different debt types and collection strategies. For example, smaller debt collectors frequently retain debts indefinitely, and they may face less pressure to reach consumers quickly than debt collectors who collect debts for a limited period. Debt collectors who focus on litigation may also place less emphasis on establishing telephone communication with consumers. Some debt collectors have indicated that frequent calling is especially important if the debt collector has multiple potential telephone numbers and does not know the best way to reach to several numbers, they do not generally involve frequently calling each number. 631 In the Bureau’s survey, 85 percent of respondents who had been contacted by a debt collector said that they had been contacted by telephone and 71 percent said that they had been contacted by letter. Respondents were asked to select all ways in which they had been contacted. CFPB Debt Collection Consumer Survey, supra note 18, at 29–30, table 14. 632 If the provision were to cause some debt collectors to lose revenue for this reason, the amounts not collected would generally be transferred to another party: Either to consumers (if the amounts were never collected) or to another debt collector (if the amounts were collected through further collection efforts, including through a lawsuit). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 the consumer.633 Additionally, some debt collectors specialize in attempting to collect debts for which the creditor has lost contact with the consumer, and frequent call attempts to establish contact with the consumer may be especially important for such debt collectors. For debt collectors who currently call consumers more frequently, the proposed frequency limits could affect when and if they establish communication with consumers. The Bureau does not have representative data that would permit it to quantify how the proposed limits on call frequency would impact how long it takes to establish contact or whether contact is established at all. However, the Bureau has analyzed microdata on outbound calling from one large collection agency (Calling Data) that helps illustrate the potential impact of the proposed limits. While the data from this agency may not be representative of the market as a whole, the results of the Bureau’s analysis of the data are generally consistent with summary information shared by other large collection agencies.634 The Calling Data show that, in the first eight weeks of collections, the overall frequency of call attempts to consumers who have not yet spoken with the debt collector declines slowly. Roughly 40 percent of consumers receive more than seven calls per week in the first four weeks, but this drops to 27 percent by week eight. Although the overall distribution of contact attempts changes slowly from week to week, the data show that over time some consumers get called more, while others get called less. Consumers with whom a ‘‘right-party contact’’ (RPC) has been established and who made no payment and consumers for whom RPC has not been achieved tend to receive the most collection calls. Consumers who have engaged but made a partial payment receive fewer calls. Moreover, the debt collector who provided the Calling Data engages in ‘‘call sloping,’’ meaning that it places fewer total calls each week that it works a portfolio of debts. The Calling Data show that, for the debts included in that data set, consumers who take longer to reach are not less likely to pay. Although the 633 See, e.g., Small Business Review Panel Report, supra note 57, at appendix A (letter from Venable). 634 The summary information was shared with Bureau staff during industry outreach meetings that are part of the Bureau’s routine market-monitoring efforts. Although most debt collectors are small firms, evidence suggests that a majority of debt collected is collected by collection agencies with 100 or more employees. See CFPB Debt Collection Operations Study, supra note 45, at 7. PO 00000 Frm 00104 Fmt 4701 Sfmt 4702 probability that each call results in an RPC declines with successive calls, the rate at which RPCs are translated into payments increases steadily through at least the first 50 calls. As a result, an RPC that is achieved in any of the first 50 calls is approximately equal in value to the debt collector as an RPC that is achieved with fewer calls, suggesting that call attempts remain important to debt collection even after many calls have been attempted. Summary data provided by some other large debt collectors indicate that the number of calls needed to reach consumers can vary considerably, but that the majority of debts would not be affected or would be affected very little by the proposed frequency limits. These data indicate that 50 percent or more of consumers who are ultimately reached by these debt collectors are reached within the first seven calls overall (not per week), though other debt collectors have indicated that it takes 15 to 21 calls to reach 50 percent of such consumers. These data also indicate that reaching 95 percent of consumers may take between 50 and 60 calls, meaning that 5 percent of consumers reached are contacted only after more than 50 or 60 communication attempts. There are limitations to using the data discussed above to make inferences about how limits on telephone calls may affect debt collectors’ ability to reach consumers. This is in part because establishing contact depends on factors other than the number of calls made (e.g., the time of day called) and in part because debt collectors subject to frequency limits might change their contact behavior in ways that permit them to reach a given number of consumers with fewer calls, as discussed further below. In addition, other aspects of the proposed rule, including the provision that would clarify the legal status of limited-content voice messages, could make it easier for debt collectors to reach consumers with a smaller number of calls. The data discussed above may not be representative, meaning that some debt collectors might need more or fewer calls to reach similar numbers of consumers. Overall, however, the available data suggest that the proposed limits would somewhat reduce the ability of debt collectors to reach consumers by telephone within a few months, but that the reduction is likely to be limited to a relatively small fraction of debts. This could affect primarily debt collectors who receive placements of debts for four to six months and do not engage in litigation. Such debt collectors could lose revenue if the limits prevent them from E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules establishing contact with consumers or if collections based on telephone calls become less effective and, as a result, creditors place more debts with debt collectors specializing in litigation. To illustrate potential effects of the provision on debt collector revenue, the Bureau used the Calling Data to simulate the effect of the proposed frequency limits under specific assumptions about how the call frequency limits affect collections. That is, the Bureau created a ‘‘but-for’’ version of the Calling Data in which calls that would not have been permitted under the proposed frequency limits were assumed to have been either delayed or eliminated, and compared RPCs and payments in this ‘‘but-for’’ data with the actual outcomes achieved by the debt collector. This is at best a rough approximation of the effects of the proposed provision, both because it relies heavily on the assumptions made and because it is based on the data of one particular debt collector, and may not be representative of other firms in the industry. The Bureau created two versions of its simulation analysis, one of which uses more conservative assumptions as to the impact of the proposed provision on successful contacts and collections. However, the Bureau believes that even the more conservative version of this analysis likely overstates the potential effects of the proposed frequency limits because it cannot reflect any changes the debt collector would make to its calling strategy in response to the frequency limits. That is, one would expect a rational collection firm to strategically choose which calls to eliminate or delay in response to the proposed frequency limits, while the Bureau’s analysis must to some extent select calls arbitrarily. In particular, at least for the debt collector who provided data to the Bureau, debts with multiple telephone numbers would be most likely to be affected by the frequency limits. The Bureau is not able to identify telephone type (such as mobile vs. landline, or work vs. home) in the data, but the debt collector would generally be able to do so. The Bureau would expect debt collectors in similar situations to omit calls to less promising telephone numbers, rather than call the same telephones and cease calling earlier in the process. In the first, more conservative version of the simulation (Version 1), the Bureau assumed that all calls in excess of the proposed frequency limit each week were simply shifted to the next week.635 The Bureau assumed that any successful RPCs that occur after the 25th simulated week would never occur under a frequency limit because in reality the debt collector was only contracted to collect on the debts in the data for up to 25 weeks. Version 1 implicitly assumes that the probability that a call results in an RPC does not depend on how much time has passed since collection began, only on the number of calls that have been made. In a second, more aggressive version of the simulation (Version 2), the Bureau assumed that any calls that would be above the proposed frequency limit are eliminated, rather than shifted forward. When a consumer’s first RPC would have occurred on a call that would not be permitted under the proposed frequency limit in a given week, the Bureau treats the data for that debt as censored as of that week.636 The Bureau made additional assumptions that were common to both versions of the simulation. For inbound calls, that is, calls from consumers to the debt collector, the Bureau assumed that the calls were not delayed or eliminated. Thus, the Bureau is implicitly assuming that inbound calls are prompted by letters from the debt 635 For example, if the debt collector called a particular consumer 10 times in the first week, eight times in the second week, and five times in the third week, in the Bureau’s simulation, the last three calls in the first week would become the first three calls in the second week. The second week would then have a total of 11 calls, and the last four calls would become the first four calls in the third week. The third week would then have eight calls, so the last call would become the first call of the fourth week, and so on. 636 That is, the Bureau assumes that it does not know when or whether that consumer would ever have a successful RPC, only that there was no RPC up until that week. The Bureau then calculates the percent of debts with an RPC by the 25th week of collections using the Kaplan-Meier product limit estimator for the survival function, a standard tool for measuring rates of an outcome when some observations are censored. It is necessary to assume that such consumers are censored because in reality after an initial RPC, the debt collector generally changes its calling behavior, particularly if it obtains a promise to pay. 637 The debt collector who provided the data does not leave voicemails, but it is possible that consumers eventually return a call in response to repeated missed calls on their telephones. 638 The change in payments is less than the change in RPCs both because some consumers pay without an RPC (and the Bureau assumed this did not change in the simulation) and because consumers in the data who had an earlier first RPC, and thus were less likely to be affected by the frequency limits, were also more likely to pay in full. 639 The Bureau does not observe in the data how many telephone numbers the consumer has, only how many the debt collector chooses to call. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 PO 00000 Frm 00105 Fmt 4701 Sfmt 4702 23377 collector or other external factors, rather than by a number of calls.637 The Bureau also made additional assumptions to simulate the effect on payments. The Calling Data indicate if the consumer ever paid and how much, but they do not always indicate when payment was received—the Bureau observes the timing of payments only if the consumer made a payment over the telephone. About one-half of all consumers in the data who make at least a partial payment do so without ever having an RPC. For the simulation, the Bureau assumed that, if the debt collector achieved at least one RPC in the simulation, then the amount of any payments made by the consumer is unchanged. If the consumer received an RPC in the original data but did not receive any RPC in the simulation, the Bureau assumed that any payments recorded in the original data did not occur for purposes of the simulation. Table 2 shows the results of the simulation analysis described above. Under Version 1, the proposed frequency limit would reduce first RPCs by 2.76 percent of the first RPCs and dollars collected by 1 percent.638 The average first RPC would be delayed by less than one week. These effects are not evenly distributed across consumers, however. In the simulation, the debt collector is much more likely to miss an RPC or payment when it calls multiple telephone numbers for a consumer.639 For consumers where the debt collector calls only one telephone number, hardly any miss an RPC in the simulation, and the average delay is almost zero. This is because the debt collector rarely calls a particular telephone more than seven times per week. In contrast, for consumers where the debt collector calls five or more telephone numbers, the simulation predicts that the frequency limit would eliminate more E:\FR\FM\21MYP2.SGM 21MYP2 23378 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules than 7 percent of RPCs and delay the remaining RPCs by almost two weeks. The assumptions of Version 2 suggest a more substantial effect on RPCs and collections, although the Bureau notes again that even Version 1 likely overstates the potential effect of the proposed provision. The simulation predicts that RPCs would decline by 15.7 percent, and dollars collected would decline by 7.7 percent. TABLE 2—RESULTS OF SIMULATION ANALYSIS Version Assumed effect of proposed call frequency limit Version 1 ......................................................... Version 2 ......................................................... Calls above limit roll to next week ................. Calls above limit eliminated ........................... jbell on DSK3GLQ082PROD with PROPOSALS2 Overall, the Bureau believes that the simulation analysis overstates the potential effect of the provision because it ignores any changes debt collectors would make to mitigate the effects of the call frequency limit. Nevertheless, certain assumptions that the Bureau makes for simplicity likely reduce the predicted impact of the provision. In particular, in Version 1 the Bureau assumes that a call with an RPC that is shifted later due to the proposed frequency limit will remain an RPC. This may not be true in practice. Empirically, the probability that a call results in an RPC declines over time— this is evident in the data examined by the Bureau and is consistent with input from industry stakeholders. If consumers are less likely to answer the telephone as time passes, irrespective of the number of calls debt collectors have made, the proposed frequency limit could reduce payments and revenue by a larger fraction than the simulation suggests (assuming no re-optimization by debt collectors).640 Debt collectors could take steps to reduce the number of calls necessary to establish contact and mitigate any lost 640 Another assumption that might reduce the predicted effect of the proposed frequency limits in both versions is the assumption that payment is tied to whether or not the first RPC occurs. For instance, in Version 1, the Bureau assumed that a consumer would not pay under the frequency limits only if the first RPC would have occurred after the 25th week in the simulation. Yet about a quarter of consumers in the data who eventually pay some portion of their debt had at least two RPCs. It may be that the subsequent RPCs were necessary for the payment to occur, but the Bureau’s analysis did not track whether subsequent RPCs occurred after the 25th week under the simulated frequency limits. The Bureau also notes there is an implicit assumption in both versions of the simulation that could lead to overstating the effect of the proposed frequency limits. The simulation assumes that, if all RPCs for a consumer were eliminated by the proposed frequency limits, then the consumer would never pay. Given that, as noted above, a substantial number of consumers in the original data pay despite having no RPCs, it is possible that some consumers whose RPCs were eliminated by the proposed frequency limits would nonetheless pay something eventually. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 revenue from the proposed frequency limit. As indicated, if multiple telephone numbers are available, debt collectors might reduce their calls to numbers that they can identify as being less likely to yield a successful contact. In addition, the Bureau understands that debt collectors can reduce the number of calls needed to establish an RPC by purchasing higher-quality contact information from data vendors. In addition and as discussed below, the Bureau’s proposed rule also includes provisions that could reduce the legal risks associated with other means of communication, such as voice messages or emails, which could enable debt collectors to reach consumers more effectively with fewer calls. This could mitigate the impact of call frequency limits and might mean that the net effect of the proposal would be to increase the likelihood that debt collectors are able to reach consumers. In addition, debt collectors who are unable to reach consumers as a result of frequency limits might still pursue such debts through litigation. To the extent that frequent call attempts play a more important role in collecting certain types of debt relative to others, some debt collectors might shift their business toward collecting those types for which frequent calls are less important. The Bureau requests data and other information about the benefits and costs of the proposed frequency limits for both consumers and debt collectors. In particular, the Bureau requests data and other information on current calling practices, how those practices are likely to be affected by the proposed frequency limits, and how those changes are likely to affect debt collectors’ ability to contact consumers. Alternative approaches to limiting the frequency of communications or communication attempts. The Bureau considered alternatives to the proposed frequency limits on debt collector telephone calls and telephone conversations. The potential benefits PO 00000 Frm 00106 Fmt 4701 Sfmt 4702 Percent change in RPCs within 25 weeks Average delay in remaining RPCs (weeks) ¥2.76 ¥15.7 0.85 0 Percent change in dollars collected within 25 weeks ¥1.04 ¥7.7 and costs of those alternatives to consumers and covered persons relative to the proposal are discussed briefly below. The Bureau considered proposing a broader version of proposed § 1006.14(b)(1)(i) that would have prohibited repeated or continuous attempts to contact a person by other media, such as by sending letters, emails, or text messages to a person in connection with the collection of a debt. Such an approach could provide additional benefits to consumers if they are harassed or abused by frequent communication from debt collectors who use such media. However, as discussed in part V, the Bureau is not aware of evidence demonstrating that debt collectors commonly harass consumers or others through repeated or continuous debt collection contacts by media other than telephone calls. The cost of sending letters is much higher than that of placing telephone calls, which likely discourages frequent communication by mail, and the Bureau has received few complaints about debt collectors sending excessive letters. The Bureau understands that few debt collectors currently communicate by email or text message, and stakeholders have suggested that such media may be inherently less harassing than telephone calls because, for example, recipients may have more ability to decide whether or when to engage with an email or a text message than with a debt collection telephone call. In addition, during the SBREFA process, some small entity representatives suggested that compliance with a rule that limited the frequency of communications by media other than telephone calls would be more costly than compliance with a rule that applied only to calls. These small entity representatives indicated that, while many existing debt collection systems already track the frequency of telephone calls, modifying systems to E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules 3. Limited-Content Messages Proposed § 1006.2(j) would define a limited-content message as a message for a consumer that includes all of the content described in § 1006.2(j)(1), that may include any of the content described in § 1006.2(j)(2), and that includes no other content. In particular, proposed § 1006.2(j)(1) provides that a limited-content message must include all of the following: The consumer’s name, a request that the consumer reply to the message, the name or names of one or more natural persons whom the consumer can contact to reply to the debt collector, a telephone number that the consumer can use to reply to the debt collector, and, if applicable, a disclosure explaining how the consumer can stop receiving messages through a particular medium.641 Proposed § 1006.2(j)(2) provides that a limitedcontent message also may include one or more of the following: A salutation, the date and time of the message, a generic statement that the message relates to an account, and suggested dates and times for the consumer to reply to the message. Proposed § 1006.2(b) and (d), which define the terms attempt to communicate and communication, respectively, provide that a limited-content message is an attempt to communicate but is not a communication. Potential benefits and costs to consumers. As discussed below under ‘‘potential benefits and costs to covered persons,’’ many debt collectors currently do not leave voice or text messages for consumers because of the risk of litigation. The Bureau expects that, by clarifying that ‘‘communication’’ for purposes of the FDCPA does not include the proposed limited-content message, the proposed rule would make debt collectors more likely to leave voice or text messages if they are unable to reach consumers by telephone. In general, an increased use of voice and text messages should make it more convenient for consumers to communicate with debt collectors because consumers will be better able to arrange a discussion at a time that is convenient for them rather than at a time when the debt collector happens to reach them. Related to this, some consumers express annoyance at receiving repeated calls from callers who do not leave messages. To the extent that debt collectors respond to the proposed rule by leaving messages when a consumer does not answer the telephone, the proposal might help address that problem. If more debt collectors are willing to leave messages, it may lead to an indirect benefit to consumers by reducing the number of unwanted call attempts without reducing the likelihood that consumers communicate with debt collectors. Although some debt collectors may leave frequent messages or continue to call frequently despite having left messages, an industry trade publication recommends a best practice of waiting three to seven days after leaving a message to give the consumer an opportunity to return the call.642 During the meeting of the Small Business Review Panel, small entity representatives indicated that limitedcontent messages would reduce the need for frequent calling.643 Thus, some consumers may experience reduced numbers of calls if more debt collectors leave messages and wait for a return call. Debt collectors cannot be certain that a voice message will be heard only by the consumer for whom it was left. Some consumers could be harmed by an increase in limited-content messages, either because they are harassed by frequent messages or because the messages increase the risk of third-party disclosure. Although the message itself would not convey any information about the debt, some third parties who hear the message may discover that the caller is a debt collector, either because they have familiarity with the type of generic messages that debt collectors leave or because they do further research, such as by researching the telephone number. On the other hand, the proposal might lead debt collectors who currently leave more detailed messages that risk revealing the purpose of the call to third parties to switch to messages that reveal no information about the debt. In such instances, the impact of the proposal may be to reduce the likelihood of third-party disclosures. Survey results indicate that consumers are concerned about third parties overhearing voice messages left by debt collectors, with nearly twothirds of consumers saying it is very important that others do not hear or see a message from a creditor or debt collector, as shown in Table 3 below. However, most respondents also said that they would prefer that a voice message from a debt collector indicate that the caller is attempting to collect a debt. Even among consumers who said it was ‘‘very important’’ that others not see or hear messages about debt collection, 63 percent said they preferred that the purpose of the call be included in a message from a creditor or debt collector attempting to collect the debt. This suggests that many consumers either do not expect third parties to overhear voice messages left for them or attach greater importance to knowing what the call is about than to the risk a third party will overhear the message. 641 As discussed below, proposed § 1006.6(e) would require a debt collector who communicates or attempts to communicate with a consumer electronically in connection with the collection of a debt using a particular email address, telephone number for text messages, or other electronic- medium address to include in such communication or attempt to communicate a clear and conspicuous statement describing one or more ways the consumer can opt out of further electronic communications or attempts to communicate by the debt collector to that address or telephone number. 642 insideARM, Operations Guide: Call Volume 10 (Nov. 14, 2014). 643 Small Business Review Panel Report, supra note 57, at 25. track communication by other media would be significantly more expensive. The Bureau also considered a proposal that would have limited the number of calls permitted to any particular telephone number (e.g., at most two calls to each of a consumer’s landline, mobile, and work telephone numbers). The Bureau considered such a limit either instead of or in addition to an overall limit on the frequency of telephone calls to one consumer. Such an alternative could potentially reduce the effect of frequency limits on debt collector calls if it permitted more total calls when a consumer has multiple telephone numbers. Such an approach could impose smaller costs on debt collectors in some cases by making it easier to contact consumers for whom debt collectors have multiple telephone numbers. At the same time, such an approach might provide smaller consumer benefits compared to the proposal by potentially permitting a high frequency of calls in some cases. Some consumers could receive (and some debt collectors could place) more telephone calls simply based on the number of telephone numbers that certain consumers happened to have (and that debt collectors happened to know about). Such an approach also could create incentives for debt collectors to, for example, place telephone calls to less convenient telephone numbers after exhausting their telephone calls to consumers’ preferred numbers. jbell on DSK3GLQ082PROD with PROPOSALS2 23379 VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 PO 00000 Frm 00107 Fmt 4701 Sfmt 4702 E:\FR\FM\21MYP2.SGM 21MYP2 23380 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules TABLE 3—PREFERENCES REGARDING OTHERS SEEING OR HEARING DEBT COLLECTOR MESSAGE [Percent] All consumers Importance of others not seeing or hearing a message Very important ......................................................................................................................................................... Somewhat important ................................................................................................................................................ Not at all important .................................................................................................................................................. jbell on DSK3GLQ082PROD with PROPOSALS2 Potential benefits and costs to covered persons. The Bureau understands that many debt collectors avoid leaving messages, or leave them only under limited circumstances, because of the legal risk associated with leaving a message. Currently, debt collectors leaving a voice message for a consumer either omit the disclosure stating that the call is from a debt collector (the socalled ‘‘mini-Miranda’’ warning) and risk being deemed in violation of FDCPA section 807(11) or include that disclosure and risk that the existence of a debt will be disclosed to a third party hearing the message and that they will be deemed in violation of FDCPA section 805(b). The proposed provision would reduce both direct and indirect costs to some debt collectors by interpreting the FDCPA not to require the mini-Miranda warning in a limitedcontent message, which would reduce legal risks associated with messages. Debt collectors may indirectly benefit from clarification of the type of messages that may be left because messages may make it easier to establish contact with consumers. Currently, many debt collectors limit or avoid leaving messages for fear of FDCPA liability.644 Leaving messages may be a more efficient way of reaching consumers than repeated call attempts without leaving messages. For example, consumers who do not answer calls from callers they do not recognize might return a message. If so, the proposed provision could permit debt collectors to reach such consumers with fewer contact attempts. The proposal may also reduce the direct costs of voicemail-related litigation, which can be large.645 While 644 In the Bureau’s Debt Collection Operations Study, 42 of 58 respondents reported sometimes leaving voice messages. Of those that do leave voice messages, many reported leaving them only under certain specific circumstances. CFPB Debt Collection Operations Study, supra note 45, at 29– 30. 645 There were at least 162 voicemail-related lawsuits filed in 2015 under section 805(b) of the FDCPA, which prohibits third-party disclosures; of these, 11 cases were class actions. In addition, at least 125 voicemail-related lawsuits were pursued under section 807(11), which prohibits communicating with a consumer without providing VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 the Bureau does not have data on the costs to debt collectors of defending such litigation, some debt collectors have suggested that resolving an individual lawsuit typically costs $5,000 to $10,000, and resolving a class action could cost much more. Moreover, debt collectors report that the large majority of threatened lawsuits are settled before a suit is filed, so the frequency of filed lawsuits substantially understates how often debt collectors bear costs from claimed FDCPA violations.646 The Bureau anticipates that the proposed clarification of the definition of communication would significantly reduce any legal risk to debt collectors of leaving voice messages that fit within the definition of limited-content message. The proposed provision would generally not require debt collectors to incur new costs because it would not require any debt collectors to change their policies regarding messages. However, in order to obtain benefits from the provision, debt collectors who plan to adopt the practice of leaving limited-content messages would incur one-time costs to develop policies and procedures to implement limitedcontent messages under the rule and to train employees on these policies and procedures. The Bureau requests data and other information about the benefits and costs to consumers and covered persons of the proposed limited-content messages. In particular, the Bureau requests information that is informative of how consumers would respond to limitedcontent messages, how the proposed limited-content messages would affect debt collectors’ ability to contact consumers, and the one-time and ongoing costs to debt collectors who plan to adopt the practice of leaving limited-content messages. the mini-Miranda disclosure; of these 49 cases were class actions. See Small Business Review Panel Outline, supra note 56, at 69 n.104 (citing data provided by WebRecon, LLC). 646 Some debt collectors have reported that they receive approximately 10 demand letters for every lawsuit filed and that FDCPA claims are typically settled for $1,000 to $3,000. See id. at 69 n.105. PO 00000 Frm 00108 Fmt 4701 Sfmt 4702 64 23 14 Consumers contacted about a debt in collection 65 24 10 4. Time-Barred Debt: Prohibiting Suits and Threats of Suit Proposed § 1006.26(b) would prohibit a debt collector from suing or threatening to sue on a debt that the debt collector knows or should know is time-barred. As discussed in part V, multiple courts have held that the FDCPA prohibits suits and threats of suit on time-barred debt. In light of this, the Bureau understands that most debt collectors do not knowingly sue or threaten to sue consumers to collect time-barred debts, and therefore the Bureau does not expect this provision of the proposed rule to have a significant effect on most consumers or debt collectors.647 To the extent that there are costs to covered persons or benefits to consumers from this provision, they will most likely come from reduced payments on time-barred debts, to the extent that some debt collectors currently use lawsuits or threats to sue on time-barred debts as a strategy to elicit payment.648 If it is currently true that (1) suing or threatening to sue on debts is an important means of collection for debts for which the statute of limitations is close to expiring, and (2) most debt collectors stop suing or threatening to sue once the statute of limitations for a debt expires, then one 647 For example, small entity representatives at the meeting of the Small Business Review Panel indicated that it was standard practice in the industry not to knowingly initiate lawsuits to collect time-barred debt. See Small Business Review Panel Report, supra note 57, at 35. Some industry groups have adopted policies requiring members to refrain from suing or threatening to sue on time-barred debts. See, e.g., Receivables Mgmt. Ass’n, Receivables Management Certification Program at 32 (Jan. 19, 2018), https:// rmassociation.org/wp-content/uploads/2018/02/ Certification-Policy-version-6.0-FINAL20180119.pdf. 648 As noted above in section V, although multiple courts have held and the FTC has stated that suing or threating to sue on time-barred debts violates the FDCPA, the Bureau’s enforcement experience has shown that some debt collectors may continue to sue or threaten to sue on timebarred debts. The proposal could reduce such activity by eliminating any legal uncertainty about whether such suits or threats of suit are permitted and potentially by strengthening enforcement of the prohibition. E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules would expect repayment rates to drop after the statute of limitations expires, and that drop might be made more significant by the proposed provision. Such a reduction in payments would benefit consumers who owe the debts while imposing costs on debt collectors and creditors and potentially increasing the cost of credit generally. The Bureau therefore attempted to indirectly measure the potential effect of the provision by examining the behavior of consumers who owe debts that either recently expired or are close to expiring under their state’s statutes of limitations. To do so, the Bureau used data from its Consumer Credit Panel (CCP), which contains information from one of the three nationwide CRAs. The Bureau used data from the CCP to attempt to estimate the current effect of State statutes of limitation on the propensity of consumers to pay old debts in collection. The CCP contains information on collections tradelines—records that were furnished to this nationwide CRA by third-party debt collectors or debt buyers. The Bureau analyzed these data to determine whether the probability of payment declines around the expiration of the statute of limitations in the consumer’s State. Specifically, the Bureau followed debts reported in the CCP from the time they were first reported on consumers’ credit records until they either showed some record of payment or disappeared from the credit records.649 In this analysis, the Bureau jbell on DSK3GLQ082PROD with PROPOSALS2 649 Debts in the CCP that are reported by multiple debt collectors, for instance if the debt is transferred or sold, are not explicitly linked. As in the Bureau’s prior quarterly Consumer Credit Trends report on collection of telecommunication debt, tradelines were linked based on the dollar amount and opening dates associated with the tradelines. Bureau of Consumer Fin. Prot., Quarterly Consumer Credit Trends: Telecommunication Debt Collection (Aug. 22, 2018), https://www.consumerfinance.gov/ data-research/research-reports/quarterly-consumercredit-trends-telecommunications-debt-collection/. For this analysis, a tradeline was considered to be a continuation of a previous debt if it had the same VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 assumed that the applicable statute of limitations is the one applicable to written contracts in the consumer’s State of residence and that the statute of limitations begins for a debt on the date that the debt first appears on the consumer’s credit report.650 The Bureau assumed this starting date because there was no other reasonable basis in the available data to assign the beginning of the statute of limitations. There is likely to be some inaccuracy in this assumption due to a variety of factors, including delays between the beginning of the period defined by the statute of limitations and the first report and cases in which the applicable statute of limitations is not the one in the consumer’s State. However, if the estimated expiration of the statute of limitations is at least approximately correct in most cases, then one would expect to observe whether the original balance and it was opened on or after the latest balance date for the previous tradeline. Debt collectors do not appear to consistently report payment information when furnishing information to the nationwide CRA. As such, for this analysis, the Bureau considered a debt to have had a payment made if in any month: (1) There is a positive payment amount; (2) there is a populated last payment date, or (3) the account is marked paid in full or settled. With regard to the timing of the first payment, the Bureau’s analysis used the earliest value of the last payment date for a debt, if populated, or the earliest balance data associated with a payment amount or paid-in-full flag, as appropriate. The method for determining whether a debt was ever paid is the same as is used in Charles Romeo and Ryan Sandler, The Effect of Debt Collection Laws on Access to Credit (Bureau of Consumer Fin. Prot., Office of Research Working Paper No. 2018–01, Feb. 12, 2018), https:// papers.ssrn.com/sol3/papers.cfm?abstract_ id=3124954. 650 The collections tradelines in the CCP are primarily medical debts, utility debts, and telecommunications debts, and it is the Bureau’s understanding that the statute of limitations for written contracts is the one that would generally apply for these types of debts. Relatively few collection tradelines relate to credit card debt; the Bureau understands that this is because credit card issuers prefer to furnish information to the nationwide CRAs regarding their customers’ accounts even when accounts have been charged off and placed with a debt collector. PO 00000 Frm 00109 Fmt 4701 Sfmt 4702 23381 expiration of the statute of limitations has an effect on the likelihood that a debt is reported to have been paid. The Bureau calculated the probability of payment occurring after a given number of days, conditional on no payment occurring before—in technical terms, the ‘‘hazard rate’’ for payments— for all collections tradelines in the CCP. The Bureau then calculated the average hazard rate based on the number of months before or after the estimated expiration of the applicable statute of limitations. This calculation is plotted in Figure 1, below.651 The figure shows that the probability of a collections tradeline showing evidence of payment declines steadily for at least one year leading up to the estimated expiration of the statute of limitations, and continues to decline at roughly the same rate afterwards.652 Thus, while the probability of payment declines over time, the reduced ability to pursue litigation does not seem to materially affect payments on collections tradelines. Combined with the Bureau’s understanding that debt collectors generally do not sue on time-barred debt, this suggests that the proposed provision would be unlikely to cause any further reduction in the rate of repayment on time-barred debt.653 651 The overall level of the hazard rate in the figure is quite low—on the order of two-tenths of 1 percent. This is to be expected given the monthly nature of the series—although around 10 percent of all collections tradelines eventually show some evidence of payment, the proportion that do so in any given month is quite low. 652 While Figure 1 is based on all collections tradelines, regardless of the type of original creditor, the pattern over time looks very similar if the calculation is done separately by type of original creditor. 653 Alternatively, this result would also be consistent with all debt collectors currently ignoring the statute of limitations and continuing to sue or threaten to sue on time-barred debt. However, as discussed above, the Bureau understands that most debt collectors avoid suits or threats of suits on time-barred debt. E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 Because the available data do not permit the Bureau to identify the expiration of the statute of limitations precisely, the analysis above may fail to identify some effects. The Bureau requests data and other evidence on how the expiration of the statute of limitations affects debt collection in the current market. 5. Communication Prior To Furnishing Information Proposed § 1006.30(a) would prohibit a debt collector from furnishing information to a CRA regarding a debt before communicating with the consumer about that debt, a requirement that a debt collector could satisfy by sending a validation notice prior to furnishing information. Potential benefits and costs to consumers. The proposal would help ensure that consumers learn about an alleged debt before a debt collector furnishes adverse information to a CRA. When consumers believe that the information is in error, they will have an opportunity to dispute the debt. When debt collectors furnish information about unpaid debts to CRAs, that information can appear on consumer credit reports, potentially limiting consumers’ ability to obtain credit, employment, or housing. If consumers are unaware that information about a possible unpaid debt is being furnished to a CRA, then they may not realize that their ability to obtain credit, employment or housing may be affected by the debt’s presence on their credit VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 reports. They may pay more for credit or lose out on employment or housing because they are unaware that their credit scores have been negatively affected or they may discover the adverse information only when they apply for credit, employment, or housing. To quantify the potential consumer benefits from the proposal, the Bureau would need to know: (1) How frequently consumers are unaware debt collectors had furnished information about their debts to credit bureaus but would become aware of it if the debt collectors communicated with consumers prior to furnishing data; and (2) the benefit to these consumers of becoming aware they had a debt in collections. In many cases, consumers would not be affected by the proposed provision because many debt collectors already send validation notices before furnishing information to CRAs. Many other consumers would not be affected because debt collectors do not furnish information to CRAs for some or all debts on which they are seeking to recover. The Bureau understands that most debt collectors mail validation notices to consumers shortly after they receive accounts for collections.654 A minority of debt collectors sometimes or always mail validation notices only after speaking with consumers (whether contact was initiated by the debt 654 See CFPB Debt Collection Operations Study, supra note 45, at 28. PO 00000 Frm 00110 Fmt 4701 Sfmt 4702 collector or the consumer).655 In addition, a number of debt collectors do not furnish information to CRAs, so again in these cases the proposed provision would not affect consumers. The Bureau does not have representative data to estimate how often consumers would be affected by the proposed provision, but the evidence suggests that a relatively small share of debt collectors furnish information to CRAs before providing a validation notice. If this occurs in 5 percent of cases, for example, it could result in approximately 7 million additional validation notices sent each year (assuming that no debt collectors would cease credit reporting in response to the proposed provision).656 Learning that a debt is in collections shortly after the collections process begins can help consumers prevent or mitigate harm from adverse information on their credit reports. It can be particularly important if the information 655 In the Bureau’s Operations Study, 53 of 58 respondents said that they send a validation notice shortly after debt placement, and of those that do not, three respondents that said that they furnish data to CRAs. CFPB Debt Collection Operations Study, supra note 45, at 28. During the meeting of the Small Business Review Panel, only one small entity representative described additional burdens it would face as a result of a requirement to communicate with consumers before furnishing information to credit bureaus. 656 This estimate assumes 140 million validation notices are sent each year, based on an estimated 49 million consumers contacted by debt collectors each year and an assumption that each receives notices about an average of approximately 2.8 notices during the year. E:\FR\FM\21MYP2.SGM 21MYP2 EP21MY19.000</GPH> 23382 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 about the debt is inaccurate because in those cases consumers who learn of the alleged debt can dispute the item under the FCRA. By informing consumers about the collection item before it is furnished to a CRA, the proposal would make it less likely that consumers learn about a collection item when they are in the process of applying for credit or other benefits, at which point they may feel pressure to resolve the item and may not have the opportunity to fully dispute the item. An FTC report addressed the prevalence of collections-related errors in credit reports.657 The FTC report analyzed data from a sample of 1,001 consumers and identified errors in the credit records of three nationwide CRAs. The report found collectionsrelated errors in 4.9 percent of credit reports, and credit reports with documented errors contained, on average, 1.8 errors per report. The Bureau’s Debt Collection Consumer Survey also suggests that debt collectors made collection errors, finding that 53 percent of consumers who said they had been contacted about one or more debts in collection said that these contacts included at least one debt the consumer thought was in error.658 Credit scores are based on a wide variety of information in consumer credit files. While many errors have only small effects on consumers’ credit scores,659 in some cases information in credit files about unpaid debts can have a reasonably large impact on credit scores. For example, analysis of telecommunications collection items in credit reports has shown that, while additional collection items have relatively small effects in some cases, it can have substantial effects for some consumers, with an average reduction in credit score of more than 41 points for super-prime consumers.660 In some circumstances, these changes could lead to higher interest rates for consumers or denial of credit, in particular for borrowers with otherwise high credit scores. Potential benefits and costs to covered persons. The proposal would affect the practices of debt collectors who sometimes furnish information about consumers’ debts to CRAs before the 657 Fed. Trade Comm’n, Report to Congress under Section 319 of the Fair and Accurate Credit Transactions Act of 2003, (2012). 658 CFPB Debt Collection Consumer Survey, supra note 18, at 24. 659 See Fed. Trade Comm’n, Report to Congress under Section 319 of the Fair and Accurate Credit Transactions Act of 2003, at 43 (2012). 660 See Brian Bucks et al., Collection of Telecommunication Debt, Bureau of Consumer Fin. Prot. (Aug. 2018). VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 debt collectors have communicated with consumers. The Bureau understands that most debt collectors mail validation notices to consumers shortly after they receive the accounts for collections and before they furnish data on those accounts, and so they already would be in compliance with the proposed requirement.661 Forty-five out of 58 debt collectors responding to the Bureau’s Operations Survey said that they furnish information to credit bureaus.662 Of these respondents, all but three said that they send a validation notice upon account placement, such that the proposed requirement would be satisfied. These debt collectors likely would need to review their policies to ensure that validation notices always are sent (or validation information is provided in an initial communication) prior to reporting on accounts, which the Bureau expects would involve a small one-time cost. Other debt collectors do not furnish information at all to CRAs and so would not be affected by the proposed requirement. Debt collectors who furnish information to CRAs but provide validation notices to consumers only after they have been in contact with consumers would need to change their practices and would face increased costs as a result of the proposal. Because these debt collectors are already required to provide validation notices to consumers (unless validation information is provided in an initial communication), the Bureau expects that they already have systems in place for sending notices and would not face one-time compliance costs greater than those of other debt collectors. However, debt collectors would face ongoing costs from sending validation notices to more consumers than they would otherwise, at an estimated cost of $0.50 to $0.80 per debt if sent by postal mail.663 To the extent debt collectors take advantage of opportunities to send validation notices electronically, an option the proposal elsewhere seeks to make more viable, the marginal cost of sending each notice is likely to be approximately zero. Alternatively, these debt collectors 661 In the Operations Survey, 53 of 58 respondents said that they send a validation notice shortly after debt placement. CFPB Debt Collection Operations Study, supra note 45, at 28. 662 Id. at 19. 663 See CFPB Debt Collection Operations Study, supra note 45, at 32–33. One small entity representative on the Bureau’s Small Business Review Panel indicated that, for about one-half of its accounts, it currently sends validation notices only after speaking with a consumer, and that, if it were required to send validation notices to all consumers, it would incur additional mailing costs of $0.63 per mailing for an estimated 400,000 accounts per year. PO 00000 Frm 00111 Fmt 4701 Sfmt 4702 23383 could cease furnishing information to CRAs, which could impact the effectiveness of their collection efforts.664 Because debt collectors could choose the less burdensome of these options, the additional costs of delivering notices represent an upper bound on the burden of the provision for debt collectors. The Bureau requests data and other information about the benefits and costs to consumers and covered persons of the proposed requirement. In particular, the Bureau requests information that would help the Bureau to estimate the number of consumers affected by the proposed provision, the benefits for these consumers, and the potential costs to covered persons of complying with the proposed provision. 6. Prohibition on the Sale or Transfer of Certain Debts Proposed § 1006.30(b)(1) would prohibit a debt collector from selling, transferring, or placing for collection a debt if the debt collector knows or should know that the debt was paid or settled, the debt was discharged in bankruptcy, or an identity theft report was filed with respect to the debt. Proposed § 1006.30(b)(2) would create several exceptions to this prohibition. The Bureau understands, based on its market knowledge and outreach to debt collectors, that debt collectors generally do not sell, transfer, or place for collections debts (other than in circumstances covered in the exceptions) if they have reason to believe the debts cannot be validly collected because they have been paid, they were settled in bankruptcy, or an identity theft report was filed with respect to them.665 Therefore, the Bureau expects the benefits and costs of this provision to be minimal. 7. Notice for Validation of Debts Proposed § 1006.34 would implement and interpret FDCPA section 809(a), (b), (d), and (e). Specifically, proposed § 1006.34(a) provides that, subject to certain exceptions, a debt collector must provide a consumer the validation information described in § 1006.34(c). Proposed § 1006.34(c) would implement FDCPA section 809(a)’s content 664 If debt collectors furnish information to CRAs less frequently this could make consumer reports less informative in general, which could have negative effects on the credit system by making it harder for creditors to assess credit risk. 665 With respect to debts subject to an identity theft report, FCRA section 615(f) already prohibits a debt collector from selling, transferring for consideration, or placing for collection debts if the debt collector has been notified by a consumer reporting agency that the debt resulted from identity theft. E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 23384 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules requirements and require that the validation notice include certain information about the debt and the consumer’s protections with respect to debt collection that debt collectors do not currently provide on validation notices. Proposed § 1006.34(d) would set forth general formatting requirements and permit debt collectors to comply with these requirements by using the proposed model validation notice in appendix B. Proposed § 1006.34(e) would permit, but not require, debt collectors to provide a consumer the validation notice translated into any language, if the debt collector also sends an English-language validation notice. Potential benefits and costs to consumers. The proposed validation information may benefit consumers in four ways. First, the disclosures would provide more information about the debt, which may help consumers determine whether the debt is theirs and whether the reported amount owed is accurate. Second, the notice would provide a plain-language disclosure of the consumer’s rights in debt collection, in particular the right to dispute, which should help consumers to know their rights and be able to exercise them. Third, the validation information would include consumer response information that should make it easier for consumers to take certain actions, including disputing a debt. Finally, the proposed model validation notice form is intended to provide information to consumers in a more appealing and easy-to-read format, making it more likely that consumers read and comprehend the information than with the validation notices currently in use. To quantify the benefit of providing more and clearer validation information, the Bureau would need to estimate the impact of this additional information on consumers’ ability to recognize their debts compared to what is currently provided on validation notices, as well as how consumers would respond to that additional information. Although the Bureau is not aware of data that would permit a full accounting of these benefits, below is a summary of information the Bureau is aware of that is relevant to some factors affecting these benefits. The Bureau understands that, in general, validation notices currently include little or no information about the debt beyond the information specifically listed in section 809(a) of the FDCPA (i.e., the current amount of the debt and the name of the current creditor). This information may not be sufficient for the consumer to recognize the debt, particularly if: (1) The amount VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 owed has changed over time due to interest, fees, payments, or credits; (2) the debt collector has changed since an original collection attempt; or (3) the creditor’s name is not one the consumer associates with the debt (as with some store-branded credit cards issued by third-party financial institutions). Consumers who do not recognize a debt because the information on a validation notice is insufficient may incur costs if they mistakenly dispute a debt they owe, pay a debt they do not owe, or ignore a debt on the assumption that the collection attempt is in error. Relative to current validation notices, the proposed validation information would include more specific details about the debt, such as the debt’s account number and an itemization of the debt. The Bureau believes this information would benefit consumers by making it easier for them to determine whether they owe a debt and, therefore, reducing the likelihood of incurring costs due to mistakes like those noted above. The consumer can also use the consumer response information to request the name and address of the original creditor, which may further help the consumer to recognize the debt. To fully evaluate the benefits to consumers of disclosing additional information, the Bureau would need representative data to estimate how often consumers would read and understand the additional information on the notice and the extent to which that information increases consumer recognition and understanding compared to a notice without it. For example, the Bureau could further quantify some of the consumer benefits of the notice if the Bureau were able to estimate: (1) How many consumers ignore notices out of a mistaken conclusion that the debt is not theirs; (2) how many consumers dispute correct debts, and subsequently, how much time the proposed validation notice would save by obviating later interactions that result from improper disputes; and (3) how many consumers fail to dispute or make payments on incorrect debts. The Bureau is not aware of a source of information on the number of consumers in these categories or the possible time savings that could result from the proposed validation information. As discussed in the section-by-section analysis in part V, the Bureau currently is conducting additional consumer testing of possible time-barred debt and revival disclosures. This testing may also provide additional evidence about the benefits of the proposed validation information to consumers. PO 00000 Frm 00112 Fmt 4701 Sfmt 4702 The Bureau’s Debt Collection Consumer Survey suggests that the proposed validation information would likely be helpful in recognizing a debt. Specifically, when asked how helpful various pieces of information would be in figuring out whether they owed a debt, consumers were most likely to indicate that the creditor name, type of debt, and an itemization of the amount owed (such as principal, interest, and fees) were especially valuable. These opinions were echoed in focus groups in which consumers noted that after a debt is sold it is more difficult to recognize, and that they wanted as much information as possible to help them recognize the debt as theirs (especially the account number, creditor, and amount due) with the exception of sensitive information like social security numbers.666 To quantify the benefits of the proposed provision requiring a clear and conspicuous disclosure of a consumer’s right to dispute a debt, the Bureau would need to estimate the number of consumers who fail to dispute debts that they do not owe because they are unaware of, or do not comprehend, their right to dispute. The Bureau cannot precisely quantify this benefit; however, the discussion below identifies several applicable considerations and estimates. The Bureau estimates that at least 49 million consumers are contacted by debt collectors each year.667 Twenty-eight percent of consumers who said they had been contacted about one or more debts in collection reported that the contacts included attempts to collect at least one debt that the consumers believed they did not owe.668 One-third of consumers who had been contacted said the amount the creditor or debt collector was trying to collect was wrong for at least one of these debts, and 16 percent said the contacts included at least one contact about a debt that was instead owed by a family member. Taken together, more than one-half of the consumers (53 percent) who said they had been contacted about one or more debts in collection reported that they thought at least one of the debts they 666 FMG Focus Group Report, supra note 38, at 15–16. 667 See CFPB Debt Collection Consumer Survey, supra note 18, at 13, 40–41. 668 The survey questions concerning consumer beliefs about errors in collections did not ask respondents to distinguish between debts owed to a debt collector and debts owed to a creditor. If consumers are more or less likely to believe there is an error for collection attempts by debt collectors, then this percentage and those below may over- or under-estimate the likelihood that a consumer believes a debt is in error when contacted by a debt collector. E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 were contacted about was in error. This suggests that there are many consumers who receive the validation notices in use today who might be likely to dispute based on their perception that either the debt is not theirs or is wrong. Among the 53 percent of consumers who cited one of the issues noted above, 42 percent reported that they disputed a collection in the prior year, and 11 percent of consumers who had not cited one of those issues indicated that they had disputed a debt. The fact that less than one-half of the consumers who questioned a debt about which the creditor or collector contacted them reported disputing a debt is consistent with the possibility that some consumers do not dispute in response to a collection effort because they are not aware of the option to dispute or do not understand the steps required to do so. The proposed clear and conspicuous statement of the dispute right could benefit consumers by making salient the possibility of dispute. The survey’s finding that only 42 percent of consumers who thought they experienced an error with a debt in collection disputed the error suggests consumers are uncertain about how to dispute a debt in collection or that they believe that disputes require too much time and effort relative to the expected benefit. The consumer response information could reduce these impediments to disputing debts that consumers believe are in error. Specifically, the consumer response information would provide a clear means of disputing a debt in a way that triggers the protections provided by the FDCPA and this proposed rule, if finalized. Furthermore, the convenience of the consumer response information could reduce barriers to responding by eliminating or reducing the burden of, for example, deciding what information is relevant and how to phrase the response.669 This could allow some consumers to save time and avoid other negative consequences, such as lower credit scores due to a debt they may not owe being listed as unpaid in their credit files. 669 A 2016 research report by the United Kingdom’s Financial Conduct Authority showed that, in a large randomized control trial, a tear off form (with a text or email reminder) led to more consumers switching from a current savings account to one with a better interest rate relative to getting only an informational text and/or email reminder and relative to an informational box with instructions on how to switch. Paul Adams et al., Attention, Search and Switching: Evidence on Mandated Disclosure from the Savings Market, (UK Fin. Conduct Authority, Occasional Paper No. 19 2016). https://www.fca.org.uk/publication/ occasional-papers/occasional-paper-19.pdf. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 Additionally, the consumer response information includes an option to request information about the original creditor. This additional information may help consumers in determining whether the debt is theirs. The Bureau has proposed a model validation notice. Several considerations went into the content and design of the model validation notice. First, consumers must have relevant and accurate information to make informed decisions on how to act with regard to the debt; therefore the Bureau conducted consumer testing to identify what pieces of information consumers considered to be important to help them identify whether a debt was theirs, whether the amount stated was correct, and how the amount the debt collector was attempting to collect has changed over time (e.g., due to fees, interest, and payments).670 However, there is some indication that consumers tend to not read certain types of standard-form disclosures.671 To try to avoid this result, the Bureau conducted consumer testing exploring how consumers interacted and engaged with the notice and the pieces of information contained therein.672 This helped the Bureau understand whether consumers were inclined to engage with the document in general, and which pieces of the validation notice received more or less consumer attention. The Bureau incorporated the findings from this consumer testing in its design of the proposed model validation notice form. To increase both engagement and comprehension of the validation information, the Bureau designed the proposed form to be visually engaging. The proposed form uses plain language wherever possible and conforms to recommendations the SEC set forth in their plain English handbook.673 To reduce the perceived complexity of the information, the proposed form uses a clear hierarchy of information through positioning in a columnar format, varying type-size, and bold-faced type 670 FMG Summary Report, supra note 42. e.g., Ian Ayres & Alan Schwartz, The NoReading Problem in Consumer Contract Law, 66 Stan. L. Rev. 545 (2014); Yannis Bakos et al., Does Anyone Read the Fine Print? Consumer Attention to Standard-Form Contracts, 43 J.Legal Studies 1, 1–35 (2014); George R. Milne & Mary J. Culnan, Strategies for Reducing Online Privacy Risks: Why Consumers Read (or Don’t Read) Online Privacy Notices, 18 J. Interactive Mktg. 3, 15–29 (2004); Jonathan A. Obar & Anne Oeldorf-Hirsch, The Biggest Lie on the internet: Ignoring the Privacy Policies and Terms of Service Policies of Social Networking Services, (York U., draft version, 2018), https://dx.doi.org/10.2139/ssrn.2757465. 672 FMG Cognitive Report, supra note 40. 673 See Sec. Exchange Comm’n, A Plain English Handbook (Aug. 1998), https://www.sec.gov/pdf/ handbook.pdf. 671 See, PO 00000 Frm 00113 Fmt 4701 Sfmt 4702 23385 for subsection headings. It uses shading to highlight the amount due and uses plain language rather than technical terms. Usability testing research using eye-tracking suggests that participants were able to locate relevant information on the proposed form, with most participants able to quickly locate their account number and the contact information of the creditor.674 The information presented in the proposed form is also concise, presenting consumers with a manageable amount of information about the debt and what they can do in response to the notice. This is important, as the perceived cost to a consumer of reading a disclosure increases with the amount of information provided.675 The Bureau expects consumers to experience few costs as a result of the proposed provision. Potential benefits to covered persons. The proposed provision would significantly reduce the litigation risk that debt collectors face when mailing validation notices. This would benefit debt collectors directly, by reducing litigation costs related to validation notices. It could also indirectly benefit debt collectors by adding information to validation notices that would be helpful to debt collectors and consumers but which debt collectors currently do not include for fear that it would increase litigation risk. The proposed validation information may also make consumers more likely to dispute, which could increase costs for debt collectors, as discussed under ‘‘Potential costs to covered persons’’ below. The Bureau understands that debt collectors currently face litigation risk associated with the validation notices they send, reflecting, in part, conflicting court decisions about what language is required and what language is permitted in the notices.676 The proposal would reduce this risk for debt collectors who use the proposed model form. The proposed validation information would include specific information about the debt intended to help consumers identify the debt and understand the amount the debt collector claims is owed. The Bureau’s qualitative consumer research and the 674 FMG Summary Report, supra note 42. idea that consumers may decrease their engagement with information when more information is provided is somewhat supported by research on ‘‘choice overload.’’ This work indicates that if choice sets are large, some people opt to make no choice at all. See, e.g., Sheena Iyengar et al., How Much Choice is Too Much? Contributions to 401(k) Retirement Plans, in Pension Design and Structure: New Lessons from Behavioral Finance, at 83 (Oxford U. Press 2004). 676 See Small Business Review Panel Report, supra note 57, at 22. 675 The E:\FR\FM\21MYP2.SGM 21MYP2 23386 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 Bureau’s complaint data suggest that the information currently included in validation notices is often not sufficient for consumers to identify a debt or whether the amount owed is correct.677 If consumers are better able to identify debts, they may be less likely to dispute or ignore a debt that they in fact owe, and at the same time may be better able to articulate the basis for a dispute of a debt that they do not owe. These effects could benefit debt collectors by reducing the costs associated with consumer disputes. Although it is possible that debt collectors could currently provide such information on validation notices, the Bureau understands that some debt collectors who would like to provide additional information do not do so largely due to the legal risks associated with including information in the validation notice beyond what is expressly listed in the FDCPA.678 The proposal would significantly reduce this legal risk. To quantify the benefits of this provision to covered persons, the Bureau would need data on how frequently consumers do not recognize the debt or amount owed identified in a validation notice, how many consumers would better recognize the debt given the proposed information, and how consumers would act on that information. While the Bureau is not aware of available data that would permit it to estimate these numbers, the Debt Collection Consumer Survey does provide some basis for thinking that the proposed validation information would be helpful to consumers. The proposed validation information could reduce debt collector costs associated with disputes by preventing some disputes from consumers who are more likely to recognize that they owe a debt and by making disputes that debt collectors receive clearer and easier to resolve. Debt collectors report that processing disputes is a costly activity, and that it can be especially difficult to process disputes if the consumer provides little or no detail about the basis for a dispute. Debt collectors surveyed by the Bureau indicated that most disputes took between five minutes and one hour of staff time to resolve, with 15 to 30 minutes being the most common amount of time.679 677 See supra notes 451–52 and accompanying text. 678 See Small Business Review Panel Report, supra note 57, at 22 (finding that small entities would benefit from a model notice that reduced litigation risk arising from conflicting court decisions about what information is permitted on a validation notice). 679 CFPB Debt Collection Operations Study, supra note 45, at 31. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 Respondents said that disputes took the longest amount of time to resolve if the basis of the dispute was unclear or if the consumer said the debt was not theirs.680 The Bureau does not have a basis to estimate how much the proposed validation information might affect dispute rates. As an illustration of potential cost savings if dispute rates fall, if the proposed information were to reduce the number of consumers who dispute by 1 percent of all validation notices sent, and assuming that there are 140 million validation notices sent per year,681 the overall number of annual disputes would fall by 1.4 million. Assuming an average time to process each dispute of 0.375 hours, the overall savings to industry would be estimated at 525,000 person-hours, or approximately 250 full-time equivalents. Assuming labor costs for debt collectors of $22 per hour,682 this would represent industry cost savings of about $11.5 million. The proposed validation information could also reduce the cost of processing disputes by making it easier for consumers who dispute to provide at least some information about the basis of their disputes. This could reduce the costs to covered persons of processing disputes by making it easier for debt collectors to investigate disputed debts in order to verify the debt. Potential costs to covered persons. Debt collectors already send validation notices to consumers to comply with the FDCPA, so the proposed validation information would generally affect the content of existing disclosures debt collectors are sending rather than require debt collectors to send entirely new disclosures. Nonetheless, debt collectors would incur certain costs to comply with the proposal. These include one-time compliance costs, the ongoing costs of obtaining the required validation information, and potentially ongoing costs of responding to a potential increase in the number of disputes. The proposed provision would require debt collectors to reformat their validation notices to accommodate the proposed validation information requirements. The Bureau expects that 680 Id. 681 The assumption of 140 million validation notices per year is based on an estimated 49 million consumers contacted by debt collectors each year and an assumption that each consumer receives an average of approximately 2.8 notices during the year. 682 This assumes an hourly wage of $15 and taxes, benefits, and incentives of $7 per hour. See CFPB Debt Collection Operations Study, supra note 45, at 17 (reporting estimated debt collector wages between $10 and $20 per hour plus incentives). PO 00000 Frm 00114 Fmt 4701 Sfmt 4702 any one-time costs to debt collectors of reformatting the validation notice would be relatively small, particularly for debt collectors who rely on vendors, because the Bureau expects that most vendors would provide an updated notice at no additional cost.683 The Bureau understands from its outreach that many covered persons currently use vendors to provide validation notices.684 Surveyed firms, and their vendors, told the Bureau that vendors do not typically charge an additional cost to modify an existing template (although this practice might not apply if the proposal required more extensive changes to validation notices than vendors typically make today).685 Debt collectors and vendors would bear costs to understand the requirements of the provision and to ensure that their systems generate notices that comply with the requirements, although these costs would be mitigated somewhat by the availability of a model form. The proposed validation information would require debt collectors to provide certain additional information about the debt, which would require that debt collectors receive and maintain certain data fields and incorporate them into the notices. The Bureau believes that the large majority of debt collectors already receive and maintain most data fields included in the proposed validation information. However, some respondents to the Debt Collection Operations Survey reported that they do not receive information from creditors about post-default interest, fees, payments, and credits.686 These debt collectors would have to update their systems to track these fields. The Bureau understands that such system updates would be likely to cost less than $1,000 for each debt collector.687 If debt collectors adjust their systems to produce notices including the new validation information, the Bureau would not expect there would be an increase in the ongoing costs of printing and sending validation notices. However, there could be ongoing costs related to the validation information requirements if the required data are not always available to debt collectors. The Bureau understands that some creditors do not currently track post-default charges and credits in a way that can be readily transferred to debt collectors. 683 See id. at 33. the Operations Study, over 85 percent of debt collectors surveyed by the Bureau reported using letter vendors. Id. at 32. 685 Id. at 33 686 In the Operations Study, 52 of 58 respondents reported receiving itemization of post-charge-off fees on at least some of their accounts. Id. at 23. 687 Id. at 26. 684 In E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 Under the proposal, debt collectors would be unable to send validation notices—and therefore unable to collect—if creditors do not provide this information.688 Some debt collectors might lose revenue as a result of not being able to collect debts if they do not obtain this information from creditors. The Bureau does not have representative data that would permit it to estimate how frequently this would occur. Other potential costs to debt collectors could arise if changes to the validation information affect how consumers respond, particularly whether they dispute the debt. As discussed above, because the proposed validation information would include more detail, consumers might be more likely to recognize the debt and less likely to mistakenly dispute debts that they owe. On the other hand, the new consumer response information would make it easier to dispute debts or request the name and address of the original creditor. Together with the additional information about consumers’ ability to dispute that would be provided, this could increase the number of consumers who dispute or request original-creditor information. The overall impact on dispute rates is unclear. The Bureau does not believe that any increases in dispute rates would be likely to substantially reduce collection revenue, but increased dispute rates would increase debt collector costs. With respect to collections revenue, the Bureau expects that, with some fairly limited exceptions, consumers who choose to pay a debt are generally those who recognize that they owe the debt and want to pay it, and that in most cases the proposed validation information would be unlikely to cause such consumers to dispute rather than pay.689 With respect to costs, the disclosures could lead consumers who do not recognize the debt or who believe there is a problem with the amount demanded to dispute the debt rather 688 For example, the Bureau understands that after New York State began requiring itemization of post-charge-off fees and credits, some creditors were at least initially unable to provide this information and therefore did not place New York accounts for collection. 689 While there is some evidence that consumers sometimes pay alleged debts even though they do not believe they owe them, such consumers may be motivated by factors, such as concerns about credit reporting, that are not addressed by the validation notice itself. See Jeff Sovern et al., Validation and Verification Vignettes: More Results from an Empirical Study of Consumer Understanding of Debt Collection Validation Notices, at 46–47 (St. John’s U., Working Paper No. 18–0016, 2018), https://papers.ssrn.com/sol3/papers.cfm?abstract_ id=3219171. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 than ignoring it. Responding to disputes is a costly activity for debt collectors, so an increase in dispute rates would increase these costs. As discussed above, covered persons surveyed by the Bureau indicated that most disputes took between five minutes and one hour of staff time to resolve, with 15 to 30 minutes being the most common amount of time.690 The Bureau requests additional information about the benefits and costs to consumers and covered persons of the proposed validation information requirements, including information on whether and to what extent consumers would benefit from the requirements in the proposal, the costs to covered persons of providing the information that the proposal would require, and the likely effects of the proposal on consumer dispute rates. Alternative proposals to require Spanish-language disclosures. The Bureau considered proposals that would require debt collectors to provide a Spanish-language translation of the validation information under certain circumstances, such as on the reverse side of any English-language validation notice or if requested by a consumer. Consumers with limited English proficiency may benefit from translations of the validation information, and Spanish speakers represent the second-largest language group in the United States after English speakers.691 Requiring Spanish-language disclosures would impose costs on some debt collectors. A requirement to send a Spanish-language disclosure on the back of each validation notice could increase mailing costs for all validation notices that are sent by mail, because it would require information that would otherwise be printed on the back of validation notices, such as Statemandated disclosures, to be provided on a separate page. A requirement to provide Spanish-language validation notices upon request could lead to a smaller increase in mailing costs but could require debt collectors to develop and maintain systems for tracking a 690 CFPB Debt Collection Operations Study, supra note 45, at 31. The discussion in ‘‘Benefits to covered persons’’ above provides an illustration of the potential impact on debt collectors of a change in dispute rates. Using the assumptions in that illustration, if the net impact of the proposal were to increase industrywide disputes by 1 million disputes per year, it could imply increased industry costs totaling around $8.25 million per year. 691 In 2013, 38.4 million residents in the United States aged five and older spoke Spanish at home. See U.S. Census Bureau, Facts for Features: Hispanic Heritage Month 2015 (Sept. 14, 2015), https://www.census.gov/newsroom/facts-forfeatures/2015/cb15-ff18.html. PO 00000 Frm 00115 Fmt 4701 Sfmt 4702 23387 consumer’s language preference and responding to that preference. The Bureau understands that some debt collectors currently send validation notices in Spanish to some consumers. To the extent sending such notices is already prevalent it would limit the consumer benefits of a proposal that required Spanish-language translations as well as the costs to debt collectors of such a proposal, although there would still be costs associated with ensuring that such disclosures were made as required by regulation. 8. Electronic Disclosures and Communications The proposed rule includes provisions that the Bureau expects would encourage debt collectors to communicate with consumers by email and text message more frequently than they currently do. With respect to the validation notice, which most debt collectors currently provide by postal mail, proposed § 1006.42 specifies methods that debt collectors would be able to use to send notices by email or by hyperlink to a secure website in a way that complies with the FDCPA’s validation notice requirements. With respect to any communications about a debt, proposed § 1006.6(d)(3) specifies procedures that debt collectors would be able to use to send an email or text message to a consumer about a debt without risking liability under the FDCPA for disclosure of the debt to a third party. Potential benefits and costs to consumers. Today, debt collectors generally communicate with consumers by letter and telephone. If the proposal were to lead debt collectors to increase their use of emails and text messages, the proposal would benefit consumers who prefer electronic communications to letters or telephone calls. Many consumers appear to prefer to receive certain disclosures about financial products by electronic means rather than postal mail. In 2016, of a sample of 203 million active general purpose credit card accounts, approximately 141 million accounts (69 percent of all accounts) were enrolled in online servicing, of which approximately 80 million (39 percent of all accounts) opted into delivery of periodic statements by electronic means only.692 Because consumers who 692 These estimates are based on data reported in Bureau of Consumer Fin. Prot., The Consumer Credit Card Market, at 164–66 (Dec. 2017), https:// files.consumerfinance.gov/f/documents/cfpb_ consumer-credit-card-market-report_2017.pdf. This rate has increased every year since at least 2013. These rates were lower for private label and retail E:\FR\FM\21MYP2.SGM Continued 21MYP2 23388 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 experience debt collection differ from consumers who do not,693 these estimates would be more accurate if the Bureau knew how many consumers who experience debt collection have opted into receiving electronic-only (paperless) disclosures from their creditors. It is not clear whether consumers who experience debt collection would be more or less digitally engaged with disclosures than their counterparts without debt collection experience.694 Other data from the Debt Collection Consumer Survey show that about 15 percent of consumers indicate that email is their most preferred method of being contacted about a debt in collection, with almost half of consumers indicating that a letter is their most preferred method, and about a quarter identifying a telephone as their most preferred method.695 The lower percentage for email may suggest that consumers are more likely to prefer electronic communications for periodic statements and similar disclosures than for debt collection communications. Taken together, the available data suggest that a minority of consumers— between 15 and 39 percent—would prefer electronic validation notices, while a majority—as many as 69 percent—might prefer to receive electronic communications (other than the validation notice) instead of or in addition to paper communications or telephone calls. As discussed above with respect to the proposal’s provisions regarding call frequency, most consumers experiencing debt collection report that debt collectors call too often. The proposed provisions regarding electronic communications may have the indirect effect of reducing call frequency. These provisions may cause debt collectors to substitute email or text for telephone calls, and email or text may provide an easier channel for consumers to ask debt collectors to call less often. The benefits to consumers of co-brand cards, suggesting that the product’s use case, acquisition channel, and consumer base composition may all affect both provider practices and consumer behavior. 693 See CFPB Debt Collection Consumer Survey, supra note 18, at 15–17. Consumers who have experienced debt collection tend to have lower incomes, be under age 62, and be non-white. 694 An FDIC survey that addressed access to banking services found that the share of respondents accessing bank accounts through online or mobile methods generally increased with income and was lower for respondents aged 65 or more. See 2017 FDIC National Survey of Unbanked and Underbanked Households at 27 & table 4.4 (Oct. 2018), https://www.fdic.gov/household survey/. 695 CFPB Debt Collection Consumer Survey, supra note 18, at 23. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 reduced call frequency generally are discussed above. While some consumers prefer not to receive electronic communications from debt collectors, the Bureau believes that the proposal’s opt-out provisions will reduce any harm to such consumers by making it relatively easy for consumers to stop attempts at electronic communication. The risk of third-party disclosure may be different for electronic debt collection communications than for letters or telephone calls, although the Bureau is not aware of evidence that would indicate whether such risk is higher or lower. Bureau data suggests that almost two-thirds of consumers consider it very important that third parties do not hear or see a message from a creditor or debt collector.696 To the extent that information in an electronic disclosure is less likely or more likely to be seen or heard by third parties than communications by mail or telephone, consumers receiving the validation notice electronically are likely to experience a benefit or a cost, respectively. Receiving disclosures electronically rather than in the mail may affect the likelihood that borrowers notice and read the disclosures, which could lead to benefits or costs for consumers if they become more or less likely to inadvertently ignore or miss important information. The Bureau does not have information about how frequently consumers currently read validation notices sent by mail or how often they would read disclosures if sent by email or by hyperlink to a secure website.697 The requirement that debt collectors provide certain details about the debt in the subject line of an email or the first line of a text message may lower the likelihood that a consumer would miss or ignore the email or text message from the debt collector transmitting the disclosure. The option of providing the disclosure on a secure website, while reducing further the risk of third-party 696 See CFPB Debt Collection Consumer Survey, supra note 18, at 38. 697 One debt collector who currently communicates with consumers by email reports that 60 percent of consumers open at least one email and 25 percent click a link to review their options. See Small Business Review Panel Report, supra note 57, at 7. As of 2015, about one tenth of all mass market credit card consumers accessed their online PDF periodic account statements in the final quarter of the year, which implies that fewer than one-half of consumers who receive only electronic statements viewed those statements. See Bureau of Consumer Fin. Prot., The Consumer Credit Card Market, at 134 figure 8 (Dec. 2015). However, the Bureau does not have data about the frequency with which consumers open or otherwise access paper periodic statements. In addition, notices of debts in collection may seem more serious or important than periodic statements, and may be more likely to be opened. PO 00000 Frm 00116 Fmt 4701 Sfmt 4702 disclosure, may also reduce the likelihood the consumer would read it because more effort is required to obtain the disclosure. Based on available information, the Bureau does not believe that consumer comprehension of an electronic notice will be different from a paper notice. The proposal includes requirements designed to make electronic disclosures no harder to read than paper notices, including requiring that the proposed electronic disclosure resize to fit the consumer’s screen. Some research suggests that shorter disclosures (e.g., one to two pages), such as the proposed notice, would result in similar levels of comprehension regardless of whether they are delivered on paper or electronically.698 In cases in which differences in performance exist between reading information on paper and electronically, the difference may be due to use of different reading strategies—people tend to scan and jump around more when reading electronic information than they do with paper.699 Studies of other readingbased tasks (surveys, ratings, and tests or quizzes) find no differences in performance between tasks completed on paper and electronically.700 Potential benefits and costs to covered persons. Debt collectors who send disclosures by email or hyperlink to a secure website rather than sending letters could benefit because they would no longer have to print and mail disclosures. The Bureau estimates that the marginal cost of mailing a validation notice is approximately $0.50 to $0.80, whereas the marginal cost of sending the same communication by email 698 Some recent studies find no differences in comprehension between information displayed on paper and information displayed on computers; many of these use relatively short texts. See, e.g., Robert Ball & Juan Pablo Hourcade, Rethinking Reading for Age from Paper and Computers, 27 Int’l J. Human-Computer Interaction 11 (2011). In contrast, many studies using longer texts find comprehension is higher for paper. See, e.g., Lauren Singer & Patricia Alexander, Reading Across Mediums: Effects of Reading Digital and Print Texts on Comprehension and Calibration, 85 J. Experimental Educ. 1 (2017) (finding better engagement when undergraduates read from paper); Anne Mangen et al., Reading Linear Texts on Paper Versus Computer Screen, 58 Int’l J. Educ. Res. 61– 68 (2013) (finding that a small sample of high school students had lower comprehension of electronic information relative to paper); Scott Althaus & David Tewksbury, Agenda Setting and the ‘‘New’’ News: Patterns of Issue Importance Among Readers of the Paper and Online Versions of the New York Times, 29 Comm. Res. 2 (2002) (randomly assigned participants to read the paper or digital version of the New York Times and found better memory for readers of the paper version). 699 Ziming Liu, Reading Behavior in the Digital Environment, 61 J. Documentation 6 (2005). 700 See Jan Noyes & Kate Garland, Computer- vs. Paper-based Tasks: Are They Equivalent?, 51 Ergonomics 9 (2008). E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 would be approximately zero. The Bureau estimates that approximately 140 million validation notices are mailed each year.701 Assuming, for example, that 40 percent of validation notices that are currently mailed were sent by email under the proposed rule (the approximate percentage of credit card customers electing paperless disclosures), and assuming average mailing costs of $0.65, this would suggest reduced costs to industry in the range of $36 million per year. To the extent that debt collectors were to provide validation notices by email more or less frequently than this under the proposal, the cost savings would be proportionately higher or lower. Debt collectors who use electronic communication may also benefit to the extent that some consumers are more likely to engage with debt collectors electronically than by telephone call or letter. During the SBREFA process, several small entity representatives said that communication by email or text message was preferred by some consumers and would be a more effective way to engage with them about their debts.702 One debt collector who currently uses email to contact consumers reports that its collection rates are greater than those of traditional debt collectors. While collection rates are likely to vary according to debt collector, type of debt, and related factors, clarifying the legality of electronic communications and disclosures would make it easier for debt collectors to test the efficacy of electronic communication and use it if they find it effective, potentially lowering costs and increasing the overall effectiveness of collections. The Bureau requests additional information about the benefits and costs to consumers and covered persons of the proposed requirements related to electronic disclosure and communication, including information on whether and to what extent consumers would benefit from the requirements in the proposal and the benefits and costs to covered persons of providing electronic communications as discussed in the proposal. G. Potential Reduction of Access by Consumers to Consumer Financial Products and Services This proposal contains a mix of provisions that would either restrict or 701 The assumption of 140 million validation notices per year is based on an estimated 49 million consumers contacted by debt collectors each year and an assumption that each receives an average of approximately 2.8 notices during the year. 702 See, e.g., Small Business Review Panel Report, supra note 57, at appendix A. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 encourage certain debt collection activities the net impact of which is uncertain. Economic theory indicates that it is possible for changes in debt collection rules, such as those contained in this proposal, to affect consumers’ access to credit. Theory says that creditors should decide to extend credit based on the discounted expected value of the revenue stream from that extension of credit. This entails considering the possibility that the consumer will ultimately default. Specifically, the discounted expected value of an extension of credit will be the discounted present value of the stream of interest payments under the terms of the credit agreement, multiplied by the probability that the consumer pays, plus the discounted expected value of the creditor’s recovery should the consumer default, times the probability of default. A profitmaximizing creditor will only extend credit to a given consumer if this expected value is positive.703 Anything that reduces the expected value of a creditor’s recovery in the event of default, in general, will lower the discounted expected value of the extension of credit as a whole. This, in turn, may make potential extensions of credit with a discounted expected only slightly above zero to become negative, such that a creditor will be less willing to extend credit. Likewise, anything that increases the expected value of a creditor’s recovery increases the discounted expected value of the credit extension, and may change the sign of the expected value of potential credit extensions that had negative expected values, such that a profit-maximizing creditor will be more willing to extend credit. There are a few ways that the proposal might increase or decrease the expected value of creditors’ recovery in the event of default, although theory alone gives no indication whether any of these actual effects on recovery would be large enough to have practical significance. The safe harbor for limitedcontent messages and affirming the legality of email use would tend to increase the expected value of recovery, 703 For purposes of this discussion, the Bureau ignores risk preferences and assumes that creditors are risk neutral. That is, while a risk-averse decision maker would prefer a certain payment of $100 to an uncertain investment with expected value of $100, the discussion in this section assumes creditors are indifferent between these options. Creditors may be risk averse to some degree, such that they would prefer the certain investment to the gamble, or even risk seeking, such that they prefer a gamble with the prospect of a higher return. The theoretical argument described here does not hinge on creditors’ risk preferences—the Bureau makes this assumption solely for ease of exposition. PO 00000 Frm 00117 Fmt 4701 Sfmt 4702 23389 while call frequency limits may reduce the expected value of recovery. First, to the extent that the proposal would raise costs for debt collectors, debt collectors in theory could pass these costs on to creditors, whether by charging higher contingency fees to creditors or by paying lower prices to creditors when buying debt.704 Second, the proposed rule may reduce the amount of expected recovery, either by making it less likely that consumers ultimately pay, or by reducing the amount that consumers pay in the event of a settlement. Finally, the proposed rule could increase the time it takes for debt collectors to recover. A rational creditor would discount future income more the further in the future it occurs, and so later payment of the same amount of money would reduce the discounted expected value of the payment. Alternatively, the proposed rule might lower costs for debt collectors, increase expected recovery, and decrease the time it takes for debt collectors to recover amounts owed.705 If the proposal were to reduce the expected value of extending credit, creditors might respond in three ways: (1) Increase their standards for lending, with an aim of reducing the probability of default; (2) reduce the amount of credit offered, thus reducing their losses in the event of a default; or (3) increase interest rates or other costs of credit such as fees, thus increasing their revenue from consumers who do not default. Which of these mechanisms any given creditor would pursue with respect to any given credit transaction would depend on the specifics of the particular credit market. The Bureau is aware of three empirical academic studies using modern data and methods that estimate the magnitude of the effect of debt collection restrictions on access to credit,706 one by a researcher affiliated 704 The degree of this pass-through depends on the relative degree of market power held by debt collectors and creditors. If creditors have more market power, debt collectors will have limited ability to demand higher fees or lower wholesale prices. Given that many comments on the Small Business Review Panel Outline indicated that debt collectors have little market power in their interactions with creditors, it is likely that there is little pass-through of additional costs. See, e.g., Small Business Review Panel Report, supra note 57, at 16–17. 705 Because creditors are generally not subject to the FDCPA, creditors could also respond to changes to debt collection rules by changing their decisions about whether to use third-party debt collectors or to collect debts themselves. The option to move debt collection activities ‘‘in house’’ could reduce any impact of the proposal on the costs of recovering unpaid debts. 706 In addition, earlier empirical research examined the relationship between restrictions on creditor remedies and the supply of credit. See E:\FR\FM\21MYP2.SGM Continued 21MYP2 23390 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 with the Federal Reserve Bank of Philadelphia (Fedaseyeu Study),707 another by researchers at the Federal Reserve Bank of New York (Fonseca Study),708 and a third by researchers at the Bureau (Romeo-Sandler Study).709 All three studies use changes in State or local debt collection laws and regulations to examine the effect of those laws on measures of credit access. The Fedaseyeu Study used aggregate data on new credit card accounts combined with credit union call report data to examine the effect of various State law changes between 1999 and 2012 on the number of new revolving lines of credit opened each year in each State. This study finds that an additional restriction on debt collectors decreases the number of new accounts by about two accounts per quarter per 1,000 consumers residing in a State. For comparison, the data used for the Fedaseyeu Study showed an average of 120 new accounts per quarter per 1,000 consumers. The Fedaseyeu Study finds no effect of debt collection laws on the average credit card interest rate.710 However, the Fedaseyeu Study has some important limitations, particularly regarding extrapolating its results to the effects of the proposed rule. Most importantly, it considers a wide variety of types of debt collection laws, including provisions with limited consumer protection aspects. Specifically, a majority of the debt collection law changes included in the Fedaseyeu Study largely involve changes to licensing fees, bonds, or levels of statutory penalties for violations, rather than prohibiting or requiring specific conduct, and each such change is given the same weight as a law governing conduct.711 Leaving Thomas A. Durkin et al, Consumer Credit and the American Economy 521–525 (Oxford U. Press 2014) (summarizing this empirical literature). 707 Viktar Fedaseyeu, Debt Collection Agencies and the Supply of Consumer Credit (Fed. Reserve Bank of Phila. Working Paper No. 15–23, 2015). 708 Julia Fonseca, Katherine Strair & Basit Zafar, Access to Credit and Financial Health: Evaluating the Impact of Debt Collection (Fed. Reserve Bank of N.Y. Staff Report No. 814, 2017). 709 Charles Romeo & Ryan Sandler, The Effect of Debt Collection Laws on Access to Credit (Bureau of Consumer Fin. Prot., Off. of Research, Working Paper No. 2018–01, 2018. 710 In addition to the results described here, the Fedaseyeu Study also examines the effect of debt collection laws on the number of debt collection firms per capita and a measure of the recovery rate from debt collection. The Bureau omits discussion of these results here because they are not directly relevant to the question of consumer access—the Bureau discusses potential effects on debt collection firms above. 711 Specifically, Fedaseyeu created an index of debt collection regulation, with one point added for a tightening in any one of six categories of regulation, including licensing requirements, VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 aside the question of whether monetary adjustments under State law are of a comparable magnitude to the proposed regulations under Federal law, the proposed rule focuses on conduct, rather than State licensing fees, bonds, or penalty amounts. As such, the results of the Fedaseyeu Study are less informative as to the effects of the proposed rule than they would be if the legal changes at issue were more comparable. The data analysis in the Fedaseyeu Study is also somewhat limited by the data that were available. The aggregate data used make it difficult to control for confounding factors, such as differences in credit scores between consumers. The Fonseca Study follows a similar design as the Fedaseyeu Study and examines the same set of State law changes, but it employs microdata from the Federal Reserve Bank of New York’s Consumer Credit Panel, a nationally representative sample of credit records from Equifax. The main results of the Fonseca Study focus on the initial loan amounts or limits for automobile loans, credit cards, and non-traditional finance loans.712 The study finds a moderate effect on automobile loan amounts, and a small effect on initial credit card limits. Like the Fedaseyeu Study, a major limitation of the Fonseca Study is its focus on licensing requirements, which are not directly comparable to the provisions in the proposal. That the Fonseca Study finds larger effects on automobile loans than credit cards also raises questions. Although third-party debt collectors are sometimes involved in collecting on automobile loans when the loan balance exceeds the value of the car, most delinquent automobile debt is resolved through repossession. The fact that the Fonseca Study nonetheless found a moderately large effect on automobile balances suggests that possibly the study’s methodology was not successful in isolating the causal effect of the debt collection laws, but instead was picking up other, unrelated, factors. The Romeo-Sandler Study uses microdata from two large administrative datasets: The Bureau’s Consumer Credit Panel (CCP) 713 and Credit Card bonding requirements, and the creation of a board to regulate third-party debt collectors. 712 The Fonseca Study defines non-traditional finance loans as ‘‘retail cards, personal loans and a residual loan category.’’ Like the Fedaseyeu Study, the Fonseca Study also examines the effect of the debt collection laws studied on the number of debt collectors present in each State; again, the Bureau omits discussion of those results in this section. 713 Although similar in nature, the Bureau’s CCP is not the same as the Federal Reserve Bank of New York’s Consumer Credit Panel, discussed above. PO 00000 Frm 00118 Fmt 4701 Sfmt 4702 Database (CCDB).714 This study focuses on four recent major changes in State or local laws and regulations that imposed additional conduct requirements on either debt buyers or on all debt collectors.715 By focusing on the effect of changes to laws that regulate debt collector conduct, the results of the Romeo-Sandler Study are arguably more applicable to understanding the effects of the proposal, although the specific changes to State or local laws studied differ considerably from the provisions of the proposed rule. The Romeo-Sandler Study assesses three main outcomes: The probability that a credit inquiry results in an open credit card account, the credit limit on newly opened credit card accounts, and initial interest rates on credit card accounts. As discussed above, creditors might limit any of these factors to adjust for the effects of a regulation such as the proposal. The Romeo-Sandler Study controls for individual consumers’ credit scores and census tract demographic information and flexibly adjusts for State-level trends over time that might otherwise bias the estimates of an analysis. As with the Fedaseyeu Study and Fonseca Study, the RomeoSandler Study found effects of debt collection laws that are in the direction predicted by theory (i.e., increased regulation increases the cost or decreases the availability of credit), but the effects are quite small in magnitude. Using the CCP, this study found that additional regulations on debt collectors’ conduct caused the success rate of a credit inquiry to decline by less than 0.02 percentage points off a base The Bureau’s CCP is an anonymized sample of credit records from one of the three nationwide CRAs, containing a 1-in-48 representative sample of all adults with a credit record. The data contain all credit accounts (trade lines) and hard inquiries on a consumer’s credit report, with a unique, anonymous identifier linking records belonging to the same consumer. This CCP does not contain any personally identifying information on individual consumers. 714 The CCDB is a monthly panel describing balances, payments, and interest rates on all credit card accounts issued by a set of major banks, representing roughly 90 percent of the credit card market. As with the CCP, accounts are identified by an anonymous identifier, and the CCDB does not contain any personally identifying information. 715 New laws were put into effect in North Carolina in October 2009 and California in January 2014; both of these laws focused exclusively on debt buyers. In addition, New York City, in April 2010, and New York State, in December 2014, introduced new debt collection restrictions through administrative regulations. These updated restrictions generally require debt collectors to take additional steps before collecting, including requiring additional documents to substantiate debts before collections can begin, requiring disclosures or additional documentation before lawsuits can be filed to enforce a debt, and requiring disclosures once the State’s statute of limitations has run out. E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 rate of about 43 percent. The study concludes that one can statistically reject that the effect was as large as 0.7 percentage points. The study provides some context for these effects by comparing them to the effect of changing consumers’ credit scores. The study found that each credit score point increases the probability of a successful credit inquiry for subprime borrowers by about 0.2 percentage points. Thus, the estimated effect of a debt collection law is equivalent to lowering consumers’ credit scores by less than one point.716 The Romeo-Sandler Study finds similarly small effects on credit limits, which are again equivalent to a very small change in credit score. The magnitude of the credit limit effect in the Romeo-Sandler Study is smaller than that found in the Fonseca Study. The Romeo-Sandler Study also analyzes the effect of debt collection laws on credit card interest rates using the CCDB. The study finds that initial interest rates increase slightly following a State or local debt collection law or regulation, but that this entirely takes the form of a reduced frequency of accounts with an introductory APR of 0 percent—the level of positive initial interest rates are essentially unchanged. The Romeo-Sandler Study is also able to shed light on potential areas of heterogeneity in the effects of State debt collection laws because of its access to rich microdata. The Romeo-Sandler Study explores the effects separately for consumers with high and low credit scores, and finds somewhat larger (although still small) effects on consumers with sub-prime credit scores. This is consistent with theory. Even within the sub-sample of consumers with sub-prime credit scores, the effect of the laws is equivalent to a three-point decrease in sub-prime borrowers’ credit scores. The studies discussed above provide evidence that regulation of debt collection can affect consumer access to credit in ways consistent with economic theory. However, these studies do not 716 The study notes, as a point of comparison, that this effect is considerably smaller than that of routine errors in credit reports. See Fed. Trade Comm’n, Report to Congress Under Section 319 of the Fair and Accurate Credit Transactions Act of 2003, at 43 (Dec. 2012), https://www.ftc.gov/sites/ default/files/documents/reports/section-319-fairand-accurate-credit-transactions-act-2003-fifthinterim-federal-trade-commission/ 130211factareport.pdf. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 speak directly to the likely effects of the proposed rule on consumer credit markets. The State or local laws analyzed in these studies implement a different set of consumer protections than those in the proposed rule. The proposed rule includes some provisions likely to increase debt collector costs, but it also includes other provisions, such as those related to limited-content messages and email and text messages, which could lower costs for some debt collectors. In addition, creditors and debt collectors might react differently to changes in State or local collection standards than the standards in the Bureau’s proposed rule, which could affect all U.S. consumers. For instance, a nationwide creditor might choose not to adjust its credit standards in response to a change in only one State’s debt collection laws, but might find it optimal to change its standards if similar laws applied nationwide or to a large share of its potential borrowers. H. Potential Specific Impacts of the Proposed Rule 1. Depository Institutions and Credit Unions With $10 Billion or Less in Total Assets, as Described in Section 1026 Depository institutions and credit unions are generally not debt collectors under the FDCPA and therefore would not be covered by the proposal. However, as noted above, creditors could experience indirect effects from the proposal to the extent they hire FDCPA-covered debt collectors or sell debt in default to such debt collectors. Such creditors could experience higher costs if debt collectors’ costs increase and if debt collectors are able to pass those costs on to creditors. The Bureau understands that many depository institutions and credit unions with $10 billion or less in total assets rely on FDCPA-covered debt collectors to collect unpaid amounts, but the Bureau does not have data indicating whether such institutions are more or less likely than other creditors to do so. The Bureau requests additional data and other information about potential benefits and costs of the proposal for these institutions. 2. Impact of the Proposed Provisions on Consumers in Rural Areas Consumers in rural areas may experience benefits from the proposed PO 00000 Frm 00119 Fmt 4701 Sfmt 4702 23391 rule that are different in certain respects from the benefits experienced by consumers in general. For example, consumers in rural areas may be more likely to borrow from small local banks and credit unions that may be less likely to outsource debt collection to FDCPAcovered debt collectors. Debts owed by consumers in rural areas may also be more likely to be collected by smaller debt collectors, which the Bureau understands are less likely to attempt debt collection calls more frequently than the proposed frequency caps would permit. The proposed frequency caps may therefore have less of an impact on consumers in rural areas. The Bureau will further consider the impact of the proposed rule on consumers in rural areas. The Bureau therefore asks interested parties to provide data, research results, and other factual information on the impact of the proposed rule on consumers in rural areas. I. Request for Information The Bureau will further consider the benefits, costs, and impacts of the proposed provisions and additional proposed modifications before finalizing the proposal. As noted above, there are a number of areas in which additional information would allow the Bureau to better estimate the benefits, costs, and impacts of this proposal and more fully inform the rulemaking. The Bureau asks interested parties to provide comment or data on various aspects of the proposed rule, as detailed in the section-by-section analysis. Information provided by interested parties regarding these and other aspects of the proposed rule may be considered in the analysis of the benefits, costs, and impacts of the final rule. The Bureau specifically requests precise cost or operational data that would permit it to better evaluate the potential impacts on consumers and covered persons, including impacts on collection rates, implementation costs and ongoing operational costs imposed by the proposed provisions. The Bureau also requests comment on the research referenced above, including its use of the Fedaseyeu Study, the Fonseca Study, and the Romeo-Sandler Study. E:\FR\FM\21MYP2.SGM 21MYP2 23392 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules VII. Regulatory Flexibility Analysis Under section 603(a) of the Regulatory Flexibility Act (RFA), an initial regulatory flexibility analysis (IRFA) ‘‘shall describe the impact of the proposed rule on small entities.’’ 717 Section 603(b) of the RFA sets forth the required elements of the IRFA. Section 603(b)(1) requires a description of the reasons agency action is being considered.718 Section 603(b)(2) requires a succinct statement of the objectives of, and the legal basis for, the proposed rule.719 Section 603(b)(3) requires a description of and, where feasible, an estimate of the number of small entities to which the proposed rule will apply.720 Section 603(b)(4) requires a description of the projected reporting, recordkeeping, and other compliance requirements of the proposed rule, including an estimate of the classes of small entities that will be subject to the requirement and the types of professional skills necessary for the preparation of the report or record.721 Section 603(b)(5) requires identifying, to the extent practicable, all relevant Federal rules which may duplicate, overlap, or conflict with the proposed rule.722 Section 603(c) requires a description of any significant alternatives to the proposed rule that accomplish the stated objectives of applicable statutes and that minimize any significant economic impact of the proposed rule on small entities.723 Finally, section 603(d)(1) requires a description of any projected increase in the cost of credit for small entities, a description of any significant alternatives to the proposed rule that accomplish the stated objectives of applicable statutes and that minimize any increase in the cost of credit for small entities (if such an increase in the cost of credit is projected), and a description of the advice and recommendations of representatives of small entities relating to the cost of credit issues.724 jbell on DSK3GLQ082PROD with PROPOSALS2 A. Description of the Reasons Why Agency Action Is Being Considered As noted in part I, the Bureau is issuing this proposed rule to implement and interpret the FDCPA, particularly with respect to debt collection communication, disclosure, and other related practices by FDCPA-covered 717 5 U.S.C. 603(a). U.S.C. 603(b)(1). 719 5 U.S.C. 603(b)(2). 720 5 U.S.C. 603(b)(3). 721 5 U.S.C. 603(b)(4). 722 5 U.S.C. 603(b)(5). 723 5 U.S.C. 603(c). 724 5 U.S.C. 603(d)(1). 718 5 VerDate Sep<11>2014 22:03 May 20, 2019 debt collectors, and to further the FDCPA’s goals of eliminating abusive debt collection practices and ensuring that debt collectors who refrain from abusive debt collection practices are not competitively disadvantaged.725 The FDCPA established certain consumer protections, but interpretive questions have arisen since its passage. Some questions, including those related to communication technologies that did not exist at the time the FDCPA was enacted (such as mobile telephones, emails, and text messages), have been the subject of inconsistent court decisions, resulting in legal uncertainty and additional cost for industry and consumers. The Bureau proposes to clarify how debt collectors may employ such technologies in compliance with the FDCPA and to address other communications- and disclosure-related practices that currently pose a risk of harm to consumers, legal uncertainty to industry, or both. The Bureau also proposes that FDCPA-covered debt collectors comply with certain additional disclosure-related and record retention requirements pursuant to the Bureau’s Dodd-Frank Act rulemaking authority; these proposed requirements are designed to enhance consumer understanding of the debt collection process and to promote effective and efficient enforcement and supervision of Regulation F. B. Statement of the Objectives of, and Legal Basis for, the Proposed Rule As discussed in part IV, the Bureau issues this proposal pursuant to its authority under the FDCPA and the Dodd-Frank Act. The objectives of the proposed rule are to answer certain interpretive questions that have arisen since the FDCPA’s passage and to further the FDCPA’s goals of eliminating abusive debt collection practices and to ensuring that debt collectors who refrain from abusive debt collection practices are not competitively disadvantaged.726 As the first Federal agency with authority under the FDCPA to prescribe substantive rules with respect to the collection of debts by debt collectors, the Bureau proposes to clarify by rule how debt collectors may appropriately employ newer communication technologies in compliance with the FDCPA and to address other communications-related practices that currently pose a risk of harm to consumers, legal uncertainty to industry, or both. The Bureau also proposes to clarify consumer disclosure requirements to provide clarity for both 725 See 726 See Jkt 247001 PO 00000 15 U.S.C. 1692(e). 15 U.S.C. 1692(e). Frm 00120 Fmt 4701 Sfmt 4702 consumers and industry participants. The Bureau intends that these clarifications will help to eliminate abusive debt collection practices and ensure that debt collectors who refrain from abusive debt collection practices are not competitively disadvantaged.727 As amended by the Dodd-Frank Act, FDCPA section 814(d) provides that the Bureau may ‘‘prescribe rules with respect to the collection of debts by debt collectors,’’ as that term is defined in the FDCPA.728 Section 1022(a) of the Dodd-Frank Act provides that ‘‘[t]he Bureau is authorized to exercise its authorities under Federal consumer financial law to administer, enforce, and otherwise implement the provisions of Federal consumer financial law.’’ 729 ‘‘Federal consumer financial law’’ includes title X of the Dodd-Frank Act and the FDCPA. The legal basis for the proposed rule is discussed in detail in the legal authority analysis in part IV and in the section-by-section analysis in part V. C. Description and, Where Feasible, Provision of an Estimate of the Number of Small Entities To Which the Proposed Rule Will Apply As discussed in the Small Business Review Panel Report, for the purposes of assessing the impacts of the proposed rule on small entities, ‘‘small entities’’ is defined in the RFA to include small businesses, small nonprofit organizations, and small government jurisdictions.730 A ‘‘small business’’ is determined by application of SBA regulations in reference to the North American Industry Classification System (NAICS) classifications and size standards.731 Under such standards, the Small Business Review Panel (Panel) identified four categories of small entities that may be subject to the proposed provisions: Collection agencies (NAICS 561440) with $15 million or less in annual receipts, debt buyers (NAICS 522298) with $38.5 million or less in annual revenues, collection law firms (NAICS 54110) with $11 million or less in annual receipts, and servicers who acquire accounts in default. These servicers include depository institutions (NAICS 522110, 522120, and 522130) with $550 million or less in annual receipts or non-depository institutions (NAICS 522390) with $20.5 million or less in annual receipts. The Panel did not meet 727 See id. U.S.C. 1692l(d). 729 12 U.S.C. 5512(a). 730 5 U.S.C. 601(6). 731 The current SBA size standards are found on SBA’s website, https://www.sba.gov/content/tablesmall-business-size-standards. 728 15 E:\FR\FM\21MYP2.SGM 21MYP2 23393 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules with small nonprofit organizations or small government jurisdictions.732 The following table provides the Bureau’s estimate of the number and types of entities that may be affected by the proposed provisions: TABLE 4—ESTIMATED NUMBER OF AFFECTED ENTITIES AND SMALL ENTITIES BY CATEGORY Category NAICS Small entity threshold Collection agencies .. Debt buyers .............. Collection law firms .. Loan servicers .......... 561440 ...................................................... 522298 ...................................................... 541110 ...................................................... 522110, 522120, and 522130 (depositories); 522390 (non-depositories. $15.0 million in annual receipts ................ $38.5 million in annual receipts ................ $11.0 million in annual receipts ................ $550 million in annual receipts for depository institutions; $20.5 million or less for non-depositories. Descriptions of the Four Categories Collection agencies. The Census Bureau defines ‘‘collection agencies’’ (NAICS code 561440) as ‘‘establishments primarily engaged in collecting payments for claims and remitting payments collected to their clients.’’ 733 In 2012, according to the Census Bureau, there were approximately 4,000 collection agencies with paid employees in the United States. Of these, the Bureau estimates that 3,800 collection agencies have $15.0 million or less in annual receipts and are therefore small entities.734 Census Bureau estimates indicate that in 2012 there were also more than 5,000 collection agencies without employees, all of which are presumably small entities. Debt buyers. Debt buyers purchase delinquent accounts and attempt to collect amounts owed, either themselves or through agents. The Bureau estimates that there are approximately 330 debt buyers in the United States, and that a substantial majority of these are small entities.735 Many debt buyers— particularly those that are small entities—also collect debt on behalf of other debt owners.736 jbell on DSK3GLQ082PROD with PROPOSALS2 Estimated total number of debt collectors within category 732 Small Business Review Panel Report, supra note 57, at 29. 733 As defined by the Census Bureau, collection agencies include entities that collect only commercial debt, and the proposals under consideration apply only to debt collectors of consumer debt. However, the Bureau understands that relatively few collection agencies collect only commercial debt. 734 The Census Bureau estimates average annual receipts of $95,000 per employee for collection agencies. Given this, the Bureau assumes that all firms with fewer than 100 employees and approximately one-half of the firms with 100 to 499 employees are small entities, which implies approximately 3,800 firms. 735 The Receivables Management Association, the largest trade group for this industry segment, states that it has approximately 300 debt buyer members VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 Collection law firms. The Bureau estimates that there are 1,000 law firms in the United States that either have as their principal purpose the collection of consumer debt or regularly collect consumer debt owed to others, so that the proposed rule would apply to them. The Bureau estimates that 95 percent of such law firms are small entities.737 Loan servicers. Loan servicers would be covered by the proposed rule if they acquire servicing of loans already in default.738 The Bureau believes that this is most likely to occur with regard to companies that service mortgage loans or student loans. The Bureau estimates that approximately 200 such mortgage servicers may be small entities and that few, if any, student loan servicers that would be covered by the proposed rule are small.739 9,000 330 1,000 700 Estimated number of small entity debt collectors 8,800 300 950 200 compliance requirements on small entities subject to the proposal. The proposed requirements and the costs associated with them are discussed below. D. Projected Reporting, Recordkeeping, and Other Compliance Requirements of the Proposed Rule, Including an Estimate of Classes of Small Entities That Will Be Subject to the Requirements and the Type of Professional Skills Necessary for the Preparation of the Report or Record The proposed rule would not impose new reporting requirements, but would impose new recordkeeping and 1. Recordkeeping Requirements Proposed § 1006.100 would require FDCPA-covered debt collectors to retain evidence of compliance with Regulation F starting on the date that the debt collector begins collection activity on a debt and ending three years after: (1) The debt collector’s last communication or attempted communication in connection with the collection of the debt; or (2) the debt is settled, discharged, or transferred to the debt owner or to another debt collector. The Bureau believes that most debt collectors are already maintaining records for three or more years for legal purposes and therefore would not incur significant costs as a result of the proposal’s record retention requirement. During the SBREFA process, nearly all small entity representatives stated that their current practices are already consistent with a three-year record retention requirement, and some said that they retain records for longer periods ranging from five to 10 years.740 Some participants said, however, that and believes that 90 percent of debt buyers are current members. 736 The Bureau understands that debt buyers are generally nondepositories that specialize in debt buying and, in some cases, debt collection. The Bureau expects that debt buyers that are not collection agencies would be classified by the Census Bureau under ‘‘all other nondepository credit intermediation’’ (NAICS Code 522298). 737 The primary trade association for collection attorneys, the National Creditors Bar Association (NARCA), states that it has approximately 600 law firm members, 95 percent of which are small entities. The Bureau estimates that approximately 60 percent of law firms that collect debt are NARCA members and that a similar fraction of non-member law firms are small entities. 738 The Bureau expects that loan servicers are generally classified under NAICS code 522390, ‘‘Other Activities Related to Credit Intermediation.’’ Some depository institutions (NAICS codes 522110, 522120, and 522130) also service loans for others and may be covered by the proposed rule. 739 Based on the December 2015 Call Report data as compiled by SNL Financial (with respect to insured depositories) and December 2015 data from the Nationwide Mortgage Licensing System and Registry (with respect to non-depositories), the Bureau estimates that there are approximately 9,000 small entities engaged in mortgage servicing, of which approximately 100 service more than 5,000 loans. See 81 FR 72160, 72363 (Oct. 19, 2016). The Bureau’s estimate is based on the assumption that all those servicing more than 5,000 loans may acquire servicing of loans when loans are in default and that at most 100 of those servicing 5,000 loans or fewer acquire servicing of loans when loans are in default. 740 Small Business Review Panel Report, supra note 57, at 28. PO 00000 Frm 00121 Fmt 4701 Sfmt 4702 E:\FR\FM\21MYP2.SGM 21MYP2 23394 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules they retain some information for a shorter period of time such as one year. Such small entities would incur additional costs for data storage and to update systems to reflect the longer storage period. jbell on DSK3GLQ082PROD with PROPOSALS2 2. Compliance Requirements The proposal contains a number of compliance requirements that would apply to FDCPA-covered debt collectors who are small entities. The anticipated costs of compliance for small entities of these requirements are discussed below. In evaluating the potential impacts of the proposal on small entities, the Bureau takes as a baseline conduct in the debt collection markets under the current legal framework governing debt collection. This includes debt collector practices as they currently exist, responding to the requirements of the FDCPA as currently interpreted and other Federal laws as well as State statutes and rules. This baseline represents the status quo from which the impacts of this proposal will be evaluated. The Bureau requests comment on the estimated impacts on small entities discussed below and solicits data and analysis that would supplement the quantitative estimates discussed below or provide quantitative estimates of benefits, costs, or impacts for which there are currently only qualitative discussions. The discussion here is confined to the direct costs to small entities of complying with the requirements of the proposed rule, if finalized. Other impacts, such as the impacts of call frequency limits on debt collectors’ ability to contact consumers, are discussed at length in part VI. The Bureau believes that, except where otherwise noted, the impacts discussed in part VI would apply to small entities. (a) Prohibited Communications With Consumers Proposed § 1006.6(b) generally would implement FDCPA section 805(a)’s prohibition on a debt collector communicating with a consumer at unusual or inconvenient times and places, with a consumer represented by an attorney, and at a consumer’s place of employment. This section would also expressly prohibit attempts to make such communications, which debt collectors already must avoid given that a successful attempt would be an FDCPA violation. Proposed § 1006.14(h)(1) would interpret FDCPA section 806’s prohibition on a debt collector engaging in any conduct the natural consequence of which is to harass, oppress, or abuse any person in VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 connection with the collection of a debt to prohibit debt collectors from communicating or attempting to communicate with consumers through a medium of communication if the consumer has requested that the debt collector not use that medium to communicate with the consumer. Debt collectors are already prohibited from communicating with consumers at a time or place that is known or should be known to be inconvenient to the consumer. The Bureau therefore believes that many debt collectors already keep track of what consumers tell them about the times and places that they find inconvenient and avoid communicating or attempting to communicate with consumers at these times or places. Similarly, the proposed provisions regarding communication with attorneys and at the consumer’s place of employment track debt collector practices that already comply with the FDCPA. The Bureau understands that many debt collectors currently employ systems and business processes designed to limit communication attempts to consumers at inconvenient times and places and that many debt collectors also use these systems and processes to prevent communications with consumers through media that consumers have told them are inconvenient. For these reasons, the Bureau does not expect that the proposed provisions would significantly impact small entities subject to the proposal. (b) Frequency Limits for Telephone Calls and Telephone Conversations Proposed § 1006.14(b)(1) would prohibit a debt collector from, in connection with the collection of a debt, placing telephone calls or engaging in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number. Proposed § 1006.14(b)(2) would provide that, subject to certain exceptions set forth in proposed § 1006.14(b)(3), a debt collector violates proposed § 1006.14(b)(1) if the debt collector places a telephone call to a person in connection with the collection of a particular debt either: (i) More than seven times within seven consecutive days; or (ii) within a period of seven consecutive days after having had a telephone conversation with the person in connection with the collection of such debt. Proposed § 1006.14(b)(4) would clarify the effect of complying with the frequency limits in § 1006.14(b)(2), stating that a debt collector who does not exceed the limits complies with § 1006.14(b)(1) and FDCPA section 806(5), and does not, PO 00000 Frm 00122 Fmt 4701 Sfmt 4702 based on the frequency of its telephone calls, violate § 1006.14(a), FDCPA section 806, or Dodd-Frank Act sections 1031 or 1036(a)(1)(B). The proposed provision would impose at least two categories of costs on small entities subject to the FDCPA. First, it would mean that debt collectors must track the frequency of outbound telephone calls, which would require many debt collectors to bear one-time costs to update their systems and train staff and create ongoing costs for some debt collectors. Second, for some debt collectors, the proposed provision would require a reduction in the frequency with which they place telephone calls to consumers, which could make it harder to reach consumers and delay or reduce collections revenue. With respect to one-time implementation costs, many debt collectors would incur costs to revise their systems to incorporate the proposed call frequency limits. Such revisions could range from small updates to existing systems to the introduction of completely new systems and processes. The Bureau understands that larger debt collectors (including those that are small entities) generally already implement system limits on call frequency to comply with client contractual requirements, debt collector internal policies, and State and local laws.741 Such debt collectors might need only to revise existing calling restrictions to ensure that existing systems comply with the limits. Larger debt collectors might also need to respond to client requests for additional reports and audit items to verify that they comply with the limits, which could require these agencies to make systems changes to alter the reports and data they produce for their clients to review. Smaller debt collectors and debt collection law firms are less likely to have existing systems that track or limit communication frequency, and may therefore face larger costs to establish systems to do so. However, many smaller debt collectors report that they generally attempt to reach each consumer by telephone only one or two times per week and generally do not speak to a consumer more than one time per week, which suggests that their practices are already within the proposed frequency limits.742 For such debt collectors, existing policies may be 741 Id. at 26. Debt Collection Operations Study, supra note 45, at 29. 742 CFPB E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules sufficient to ensure compliance with the proposed provision. (c) Time-Barred Debt: Prohibiting Suits and Threats of Suit Proposed § 1006.26(b) would prohibit a debt collector from suing or threatening to sue on a debt that the debt collector knows or should know is time-barred. As discussed in part V, courts have held that the FDCPA prohibits suits and threats of suit on time-barred debt. In light of this, the Bureau understands that most debt collectors do not knowingly sue or threaten to sue consumers to collect time-barred debts, and therefore the Bureau does not expect this provision of the proposed rule to have a significant effect on small entities.743 (d) Communication Prior To Furnishing Information Proposed § 1006.30(a) would prohibit a debt collector from furnishing information to a CRA regarding a debt before communicating with the consumer about that debt, a requirement that debt collectors could satisfy by sending a validation notice prior to furnishing information. The proposal would affect the practices of debt collectors who sometimes furnish information about consumers’ debts to CRAs before the debt collectors have communicated with consumers. The Bureau understands that most debt collectors mail validation notices to consumers shortly after they receive the accounts for collections and before they furnish data on those accounts, and so they already would be in compliance with the proposed requirement.744 Forty-five out of 58 debt collectors responding to the Debt Collection Operations Survey said that they furnish information to credit bureaus.745 In all but three of these cases, the respondents said that they send a validation notice upon account placement, such that the proposed jbell on DSK3GLQ082PROD with PROPOSALS2 743 For example, small entity representatives at the meeting of the Small Business Review Panel indicated that it was standard practice in the industry not to knowingly initiate lawsuits to collect time-barred debt. See Small Business Review Panel Report, supra note 57, at 35. Some industry groups have adopted policies requiring members to refrain from suing or threatening to sue on time-barred debts. See, e.g., Receivables Mgmt. Ass’n, Receivables Management Certification Program, at 32 (Jan. 19, 2018), https:// rmassociation.org/wp-content/uploads/2018/02/ Certification-Policy-version-6.0–FINAL20180119.pdf. 744 In the Operations Study, 53 of 58 respondents said that they send a validation notice shortly after account placement. CFPB Debt Collection Operations Study, supra note 45, at 28. 745 Id. at 19. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 requirement would be satisfied. These debt collectors would likely need to review their policies to ensure that validation notices are always sent (or validation information is provided in an initial communication) prior to reporting on the account, which the Bureau expects would involve a small one-time cost. Other debt collectors do not furnish information at all to CRAs and so would not be affected by the proposed requirement. Debt collectors who furnish information to CRAs but provide validation notices to consumers only after they have been in contact with consumers would need to change their practices and would face increased costs as a result of the proposal. Because these debt collectors are already required to provide validation notices to consumers once they communicate with those consumers (unless validation information is provided in an initial communication or the consumer pays the debt), the Bureau expects that they already have systems in place for sending notices and would not face onetime compliance costs greater than those of other debt collectors. However, debt collectors would face ongoing costs from sending validation notices to more consumers than they would otherwise, at an estimated cost of $0.50 to $0.80 per debt if sent by postal mail.746 To the extent debt collectors take advantage of opportunities to send validation notices electronically, an option the proposal elsewhere seeks to make more viable, the marginal cost of sending each notice is likely to be approximately zero. Alternatively, these debt collectors could cease furnishing information to CRAs, which could impact the effectiveness of their collection efforts.747 Because debt collectors could choose the less burdensome of these options, the additional costs of delivering notices represent an upper bound on the burden of the provision on small entities. (e) Prohibition on the Sale or Transfer of Certain Debts Proposed § 1006.30(b)(1) would prohibit a debt collector from selling, transferring, or placing for collection a 746 One small entity representative on the Bureau’s Small Business Review Panel indicated that, for about one-half of its debts, it sends validation notices only after speaking with a consumer and that, if it were required to send validation notices to all consumers, it would incur mailing costs of $0.63 per mailing for an estimated 400,000 accounts per year. 747 If debt collectors furnish to credit reporting agencies less frequently this could make consumer reports less informative in general, which could have negative effects on the credit system by making it harder for creditors to assess credit risk. PO 00000 Frm 00123 Fmt 4701 Sfmt 4702 23395 debt if the debt collector knows or should know that the debt was paid or settled, the debt was discharged in bankruptcy, or an identity theft report was filed with respect to the debt. Proposed § 1006.30(b)(2) would create several exceptions to this prohibition. The Bureau understands, based on its market knowledge and outreach to debt collectors, that debt collectors generally do not sell, transfer, or place for collections debts (other than in circumstances covered in the exceptions) if they have reason to believe the debts cannot be validly collected because they have been paid, they were settled in bankruptcy, or an identity theft report was filed with respect to them. Therefore, the Bureau does not expect this provision to create significant compliance costs for small entities. (f) Notice for Validation of Debts Proposed § 1006.34 would implement and interpret FDCPA section 809(a), (b), (d), and (e). Specifically, proposed § 1006.34(a) provides that, subject to certain exceptions, a debt collector must provide a consumer the validation information described in § 1006.34(c). Proposed § 1006.34(c) would implement FDCPA section 809(a)’s content requirements and require that the validation notice include certain information about the debt and the consumer’s protections with respect to debt collection that debt collectors do not currently provide on the validation notice. Proposed § 1006.34(d) would set forth general formatting requirements and permit debt collectors to comply with these requirements by using the proposed model validation notice in appendix B. Debt collectors already send validation notices to consumers to comply with the FDCPA, so the proposed validation information would generally affect the content of existing disclosures debt collectors are already sending rather than require debt collectors to send entirely new disclosures. Nonetheless, debt collectors would incur certain costs to comply with the proposal. These include onetime compliance costs, the ongoing costs of obtaining the required validation information, and potentially ongoing costs of responding to a potential increase in the number of disputes. The proposed provision would require debt collectors to reformat their validation notices to accommodate the proposed validation information requirements. The Bureau expects that any one-time costs to debt collectors of reformatting the validation notice would E:\FR\FM\21MYP2.SGM 21MYP2 23396 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 be relatively small, particularly for debt collectors who rely on vendors, because the Bureau expects that most vendors would provide an updated notice at no additional cost.748 The Bureau understands from its outreach that many debt collectors currently use vendors to provide validation notices.749 Surveyed firms, and their vendors, told the Bureau that vendors do not typically charge an additional cost to modify an existing template (although this practice might not apply if the proposal required more extensive changes to validation notices than vendors typically make today).750 Debt collectors and vendors would bear costs to understand the requirements of the proposed provision and to ensure that their systems generate notices that comply with the requirement, although these costs would be mitigated somewhat by the availability of a model form. The proposed validation information requires debt collectors to provide certain additional information about the debt, which would require that debt collectors receive and maintain certain data fields and incorporate them into the notices. The Bureau believes that the large majority of debt collectors already receive and maintain most data fields included in the proposed validation information. However, some respondents to the Operations Survey reported that they do not receive from creditors information on post-default interest, fees, payments, and credits.751 These debt collectors would have to update their systems to track these fields. The Bureau understands that such system updates would be likely to cost less than $1,000 for each debt collector.752 If debt collectors adjust their systems to produce notices including the new validation information, the Bureau would not expect there would be an increase in the ongoing costs of printing and sending validation notices. However, there could be ongoing costs related to the validation information requirements if the required data are not always available to debt collectors. The Bureau understands that some creditors do not currently track post-default charges and credits in a way that can be readily transferred to debt collectors. 748 See CFPB Debt Collection Operations Study, supra note 45, at 33. 749 In the Operations Survey, over 85 percent of debt collectors surveyed by the Bureau reported using letter vendors. Id. at 32. 750 Id. at 33. 751 In the Operations Survey, 52 of 58 respondents reported receiving itemization of postcharge-off fees on at least some of their accounts. Id. at table 8. 752 See id. at 26. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 Under the proposal, debt collectors would be unable to send validation notices—and therefore unable to collect—if creditors do not provide this information.753 Some debt collectors might lose revenue as a result of not being able to collect debts if they do not obtain this information from creditors. The Bureau does not have representative data that would permit it to estimate how frequently this would occur. (g) Electronic Disclosures and Communications The proposed rule includes provisions that the Bureau expects would encourage debt collectors to communicate with consumers by email and text message more frequently than they currently do. With respect to the validation notice, which most debt collectors currently provide by postal mail, proposed § 1006.42 specifies methods that debt collectors would be able to use to send notices by email or by hyperlink to a secure website in a way that complies with the FDCPA’s validation notice requirements. With respect to any communications about a debt, proposed § 1006.6(d)(3) specifies procedures that debt collectors would be able to use to send an email or text message to a consumer about a debt without risking liability under the FDCPA for disclosure of the debt to a third party. The Bureau understands that few debt collectors currently communicate with consumers using electronic means. For debt collectors who do communicate with consumers electronically, the proposal would require them to provide a method for opting out of such communications and, if providing required disclosures electronically, to provide certain information about the account in the subject line. The Bureau understands that these requirements are common features of services that provide the ability to send email to consumers. The Bureau therefore does not anticipate that these requirements would impose significant costs on small entities that choose to communicate with consumers using electronic means. E. Identification, to the Extent Practicable, of All Relevant Federal Rules That May Duplicate, Overlap, or Conflict With the Proposed Rule Certain other Federal laws and regulations include requirements that 753 For example, the Bureau understands that after New York began requiring itemization of postcharge-off fees and credits, some creditors were at least initially unable to provide this information and therefore did not place New York accounts for collection. PO 00000 Frm 00124 Fmt 4701 Sfmt 4702 apply to FDCPA-covered debt collectors, as described below. However, consistent with the findings of the Small Business Review Panel, the Bureau is not aware of any other Federal regulations that currently duplicate, overlap, or conflict with the proposed rule. For example, the Bureau’s Mortgage Rules under the Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) include communication requirements and policies and procedures applicable to mortgage servicers, some of whom may also be subject to the FDCPA. As a result, when the Bureau issued the 2016 Servicing Final Rule, the Bureau concurrently issued an FDCPA interpretive rule to clarify the interaction of the FDCPA and specified mortgage servicing rules in Regulations X and Z.754 The Fair Credit Reporting Act (FCRA) also includes certain provisions that apply to debt collectors, including a provision that prohibits any person from selling, transferring for consideration, or placing for collection a debt that the person has been notified resulted from identity theft.755 Some Federal laws implemented by other government agencies also include protections and requirements that may apply to debt collection activities. For example, the Telephone Consumer Protection Act (TCPA),756 which is implemented by the Federal Communications Commission (FCC), affects some debt collection activities by restricting the use of automatic telephone dialing systems and artificial or prerecorded voice messages.757 In addition, the Servicemembers Civil Relief Act (SCRA) 758 provides certain protections from civil actions against servicemembers in active duty. The SCRA restricts or limits actions against these personnel in a variety of areas related to financial management, including rental agreements, security deposits, evictions, credit card interest rates, judicial proceedings, and income tax payments.759 The Bureau requests comment on the intersection between the proposed rule and other Federal laws and regulations. The Bureau specifically requests 754 See the section-by-section analysis of proposed § 1006.6(a)(5). 755 15 U.S.C. 1681m(f). 756 47 U.S.C. 227. 757 See ACA Int’l v. Fed. Commc’ns Comm’n, 885 F.3d 687 (DC Cir. 2018). 758 50 U.S.C. 3901–4043. 759 The Bureau also recognizes that other Federal regulations, including those issued by the Department of Education, may relate to debt collection. The Bureau will consult again with other Federal agencies whose regulations may be related to this rulemaking prior to issuing a final rule. E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 comment on conflicts that may arise between the proposed rule and other Federal laws and regulations and methods to minimize such conflicts to the extent they exist. F. Description of Any Significant Alternatives to the Proposed Rule That Accomplish the Stated Objectives of the Applicable Statutes and Minimize Any Significant Economic Impact of the Proposed Rule on Small Entities Section 603(c) of the RFA requires the Bureau to describe in the IRFA any significant alternatives to the proposed rule that accomplish the stated objectives of applicable statutes and that minimize any significant economic impact of the proposed rule on small entities.760 In developing the proposed rule, the Bureau has considered alternative provisions and believes that none of the alternatives considered would be as effective at accomplishing the stated objectives of the FDCPA and the applicable provisions of title X of the Dodd-Frank Act while minimizing the impact of the proposed rule on small entities. In developing the proposal, the Bureau considered a number of alternatives, including those considered as part of the SBREFA process. Many of the alternatives considered would have resulted in greater costs to small entities than would the proposal. For example, the Bureau considered limiting the frequency of contacts or contact attempts by any media, rather than by telephone calls only, and the Bureau considered requiring debt collectors to provide validation notices in Spanish under certain circumstances. Because such alternatives would result in a greater economic impact on small entities than the proposal, they are not discussed here. The Bureau also considered alternatives that might have resulted in a smaller economic impact on small entities than the proposal. Certain of these alternatives are briefly described and their impacts relative to the proposed provisions are discussed below. Limitations on call frequency. The Bureau also considered a proposal that would have limited the number of calls permitted to any particular telephone number (e.g., at most two calls to each of a consumer’s landline, mobile, and work telephone numbers). The Bureau considered such a limit either instead of or in addition to an overall limit on the frequency of telephone calls to one consumer. Such an alternative could potentially reduce the effect on debt collector calls if it permitted more calls 760 5 U.S.C. 603(c). VerDate Sep<11>2014 22:03 May 20, 2019 when consumers have multiple telephone numbers. The Bureau decided to propose an aggregate approach because of concerns that a more prescriptive, per-telephone number approach could less effectively carry out the consumer protection purposes of the FDCPA—some consumers could receive (and some debt collectors could place) more telephone calls simply based on the number of telephone numbers that certain consumers happened to have (and that debt collectors happened to know about). Such an approach also could create incentives for debt collectors to, for example, place telephone calls to less convenient telephone numbers after exhausting their telephone calls to consumers’ preferred numbers. The Bureau also considered alternatives to the proposal’s bright-line limit on call frequency. One alternative would be a rebuttable presumption of a violation when debt collectors call more frequently than the proposed limits, paired with a rebuttable presumption of compliance when debt collectors call less frequently. The presumptions could be rebutted based on the facts and circumstances of a particular situation. Another alternative would be to provide only a safe harbor for telephone calls below the frequency limits, with no provision for telephone calls above the frequency limits. Such an approach would provide certainty to both debt collectors and consumers about a per se permissible level of calling, but it would leave open the question of how many telephone calls is too many under the FDCPA and the Dodd-Frank Act. The Bureau decided not to propose such an approach because it appears that it would not provide the clarity that debt collectors and consumers have sought, nor would it appear to provide the same degree of consumer protection as a per se prohibition against telephone calls in excess of a specified frequency. However, the proposal solicits comment on these and other alternatives. identified in consultation with the Chief Counsel through the SBREFA process concerning any projected impact and the proposed rule on the cost of credit for small entities. The Bureau sought to collect the advice and recommendations of the small entity representatives during the Small Business Review Panel meeting regarding the potential impact on the cost of business credit because, as small debt collectors with credit needs, the small entity representatives could provide valuable input on any such impact related to the proposed rule. The Bureau’s Small Business Review Panel Outline asked small entity representatives to comment on how proposed provisions will affect cost of credit to small entities. The Bureau believes that the proposed rule will have little impact on the cost of credit. However, it does recognize that consumer credit may become more expensive and less available as a result of some of these provisions, although the Romeo-Sandler Study indicates that the magnitude of the cost and availability of consumer credit from recent changes to State debt collection laws is small. Many small entities affected by the proposed rule use consumer credit as a source of credit and may, therefore, see costs rise if consumer credit availability decreases. The Bureau does not expect this to be a large effect and does not anticipate measurable impact.762 During the SBREFA process, several small entity representatives said that the proposals under consideration at that time could have an impact on the cost of credit for them and for their small business clients. Some small entity representatives said that they use lines of credit in their business and that regulations that raise their costs or reduce their revenue could mean they are unable to meet covenants in their loan agreements, causing lenders to reduce access to capital or increase their borrowing costs. G. Discussion of Impact on Cost of Credit for Small Entities Section 603(d) of the RFA requires the Bureau to consult with small entities regarding the potential impact of the proposed rule on the cost of credit for small entities and related matters.761 To satisfy these statutory requirements, the Bureau provided notification to the Chief Counsel for Advocacy of the Small Business Administration (Chief Counsel) that the Bureau would collect the advice and recommendations of the same small entity representatives VIII. Paperwork Reduction Act Under the Paperwork Reduction Act of 1995 (PRA),763 Federal agencies are generally required to seek approval from the Office of Management and Budget (OMB) for information collection requirements prior to implementation. Under the PRA, the Bureau may not conduct or sponsor, and, notwithstanding any other provision of law, a person is not required to respond 761 5 Jkt 247001 23397 PO 00000 U.S.C. 603(d). Frm 00125 Fmt 4701 Sfmt 4702 762 Charles Romeo & Ryan Sandler, The Effect of Debt Collection Laws on Access to Credit, (Bureau of Consumer Fin. Prot., Off. of Research, Working Paper No. 2018–01, 2018). 763 44 U.S.C. 3501 et seq. E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 23398 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules to, an information collection unless the information collection displays a valid control number assigned by OMB. As part of its continuing effort to reduce paperwork and respondent burden, the Bureau conducts a preclearance consultation program to provide the general public and Federal agencies with an opportunity to comment on the information collection requirements in accordance with the PRA. This helps ensure that the public understands the Bureau’s requirements or instructions, respondents can provide the requested data in the desired format, reporting burden (time and financial resources) is minimized, collection instruments are clearly understood, and the Bureau can properly assess the impact of collection requirements on respondents. The proposed rule would amend 12 CFR part 1006 (Regulation F), which implements the FDCPA. The Bureau’s OMB control number for Regulation F is 3170–0056. This proposed rule would revise the information collection requirements contained in Regulation F that OMB has approved under that OMB control number. Under the proposal, the Bureau would require nine information collection requirements in Regulation F: 1. State application for exemption (current § 1006.2, proposed § 1006.108). 2. Opt-out notice for electronic communications or attempts to communicate (proposed § 1006.6(e)). 3. Communication with consumers prior to furnishing information (proposed § 1006.30(a)). 4. Validation notices (proposed § 1006.34). 5. Responses to requests for originalcreditor information (proposed § 1006.38(c)). 6. Responses to disputes (proposed § 1006.38(d)(2)(ii)). 7. Subject-line information requirements when required disclosures are delivered electronically (proposed § 1006.42(b)(2)). 8. Notice and opt-out requirements for certain types of electronic delivery (proposed § 1006.42(c)(3)). 9. Record retention (proposed § 1006.100). The first collection, the State application for an exemption, is required to obtain a benefit and its respondents are exclusively State governments. The information collected under this collection regards State law, and so no issue of confidentiality arises. The remaining collections would be to provide protection for consumers and would be mandatory. Because the Bureau does not collect any information in these remaining collections, no issue VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 of confidentiality arises. The likely respondents would be for-profit businesses that are FDCPA-covered debt collectors, including contingency debt collection agencies, debt buyers, law firms, and loan servicers, or State governments in the case of applications under § 1006.2 (proposed § 1006.108). The collections of information contained in this proposed rule, and identified as such, have been submitted to OMB for review under section 3507(d) of the PRA. A complete description of the information collection requirements, including the burden estimate methods, is provided in the information collection request (ICR) that the Bureau has submitted to OMB under the requirements of the PRA. Please send your comments to the Office of Information and Regulatory Affairs, OMB, Attention: Desk Officer for the Bureau of Consumer Financial Protection. Send these comments by email to oira_submission@omb.eop.gov or by fax to 202–395–6974. If you wish to share your comments with the Bureau, please send a copy of these comments as described in the ADDRESSES section above. The ICR submitted to OMB requesting approval under the PRA for the information collection requirements contained herein is available at www.regulations.gov as well as on OMB’s public-facing docket at www.reginfo.gov. Title of Collection: Regulation F: Fair Debt Collection Practices Act. OMB Control Number: 3170–0056. Type of Review: Revision of a currently approved collection. Affected Public: Private Sector; State Governments. Estimated Number of Respondents: 12,027. Estimated Total Annual Burden Hours: 1,029,500. Comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the functions of the Bureau, including whether the information will have practical utility; (b) the accuracy of the Bureau’s estimate of the burden of the collection of information, including the validity of the methods and the assumptions used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Comments submitted in response to this proposal will be summarized and/or included in the request for OMB PO 00000 Frm 00126 Fmt 4701 Sfmt 4702 approval. All comments will become a matter of public record. If applicable, the notice of final rule will display the control number assigned by OMB to any information collection requirements proposed herein and adopted in the final rule. List of Subjects in 12 CFR Part 1006 Administrative practice and procedure, Consumer protection, Credit, Debt collection, Intergovernmental relations. Authority and Issuance For the reasons set forth above, the Bureau proposes to revise Regulation F, 12 CFR part 1006, to read as follows: ■ PART 1006—DEBT COLLECTION PRACTICES (REGULATION F) Sec. Subpart A—General 1006.1 Authority, purpose, and coverage. 1006.2 Definitions. Subpart B—Rules for FDCPA Debt Collectors 1006.6 Communications in connection with debt collection. 1006.10 Acquisition of location information. 1006.14 Harassing, oppressive, or abusive conduct. 1006.18 False, deceptive, or misleading representations or means. 1006.22 Unfair or unconscionable means. 1006.26 Collection of time-barred debts. 1006.30 Other prohibited practices. 1006.34 Notice for validation of debts. 1006.38 Disputes and requests for originalcreditor information. 1006.42 Providing required disclosures. Subpart C—[Reserved] Subpart D—Miscellaneous 1006. 100 Record retention. 1006.104 Relation to State laws. 1006.108 Exemption for State regulation. Appendix A to Part 1006—Procedures for State application for exemption From the provisions of the Act Appendix B to Part 1006—Model forms and clauses Appendix C to Part 1006—Issuance of advisory opinions Supplement I to Part 1006—Official interpretations Authority: 12 U.S.C. 5512, 5514(b), 5531, 5532; 15 U.S.C. 1692l(d), 1692o, 7004. Subpart A—General § 1006.1 Authority, purpose, and coverage. (a) Authority. This part, known as Regulation F, is issued by the Bureau of Consumer Financial Protection pursuant to sections 814(d) and 817 of the Fair Debt Collection Practices Act (FDCPA or Act), 15 U.S.C. 1692l(d), 1692o; title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd- E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules Frank Act), 12 U.S.C. 5481 et seq.; and paragraphs (b)(1) and (d)(1) of section 104 of the Electronic Signatures in Global and National Commerce Act (ESIGN Act), 15 U.S.C. 7004. (b) Purpose. This part carries out the purposes of the FDCPA, which include eliminating abusive debt collection practices by debt collectors, ensuring that debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and promoting consistent State action to protect consumers against debt collection abuses. This part also prescribes requirements to ensure that certain features of debt collection are disclosed fully, accurately, and effectively to consumers in a manner that permits consumers to understand the costs, benefits, and risks associated with debt collection, in light of the facts and circumstances. Finally, this part sets record retention requirements to enable the Bureau to administer and carry out the purposes of the FDCPA, the Dodd-Frank Act, and this part, as well as to prevent evasions thereof. The record retention requirements also will facilitate supervision of debt collectors and the assessment and detection of risks to consumers. (c) Coverage. (1) Except as provided in § 1006.108 and appendix A of this part regarding applications for State exemptions from the FDCPA, this part applies to debt collectors, as defined in § 1006.2(i), other than a person excluded from coverage by section 1029(a) of the Consumer Financial Protection Act of 2010, title X of the Dodd-Frank Act (12 U.S.C. 5519(a)). (2) Certain provisions of this part apply to debt collectors only when they are collecting consumer financial product or service debt as defined in § 1006.2(f). These provisions are §§ 1006.14(b)(1)(ii), 1006.34(c)(2)(iv) and (3)(iv), and 1006.30(b)(1)(ii). jbell on DSK3GLQ082PROD with PROPOSALS2 § 1006.2 Definitions. For purposes of this part, the following definitions apply: (a) Act or FDCPA means the Fair Debt Collection Practices Act (15 U.S.C. 1692 et seq.). (b) Attempt to communicate means any act to initiate a communication or other contact with any person through any medium, including by soliciting a response from such person. An attempt to communicate includes providing a limited-content message, as defined in paragraph (j) of this section. (c) Bureau means the Bureau of Consumer Financial Protection. (d) Communicate or communication means the conveying of information regarding a debt directly or indirectly to VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 any person through any medium. A debt collector does not convey information regarding a debt directly or indirectly to any person if the debt collector provides only a limited-content message, as defined in paragraph (j) of this section. (e) Consumer means any natural person, whether living or deceased, obligated or allegedly obligated to pay any debt. For purposes of §§ 1006.6 and 1006.14(h), the term consumer includes the persons described in § 1006.6(a). (f) Consumer financial product or service debt means any debt related to any consumer financial product or service, as that term is defined in section 1002(5) of the Dodd-Frank Act (12 U.S.C. 5481(5)). (g) Creditor means any person who offers or extends credit creating a debt or to whom a debt is owed. The term creditor does not, however, include any person to the extent that such person receives an assignment or transfer of a debt in default solely to facilitate collection of the debt for another. (h) Debt, except for the purpose of paragraph (f) of this section, means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services that are the subject of the transaction are primarily for personal, family, or household purposes, whether or not the obligation has been reduced to judgment. For the purpose of paragraph (f) of this section, debt means debt as that term is used in the Dodd-Frank Act. (i)(1) Debt collector means any person who uses any instrumentality of interstate commerce or mail in any business the principal purpose of which is the collection of debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due, or asserted to be owed or due, to another. Notwithstanding paragraph (h)(2)(vi) of this section, the term debt collector includes any creditor that, in the process of collecting its own debts, uses any name other than its own that would indicate that a third person is collecting or attempting to collect such debts. For the purpose of § 1006.22(e), the term also includes any person who uses any instrumentality of interstate commerce or mail in any business the principal purpose of which is the enforcement of security interests. (2) The term debt collector excludes: (i) Any officer or employee of a creditor while the officer or employee is collecting debts for the creditor in the creditor’s name; (ii) Any person while acting as a debt collector for another person if: (A) The person acting as a debt collector does so only for persons with PO 00000 Frm 00127 Fmt 4701 Sfmt 4702 23399 whom the person acting as a debt collector is related by common ownership or affiliated by corporate control; and (B) The principal business of the person acting as a debt collector is not the collection of debts; (iii) Any officer or employee of the United States or any State to the extent that collecting or attempting to collect any debt is in the performance of the officer’s or employee’s official duties; (iv) Any person while serving or attempting to serve legal process on any other person in connection with the judicial enforcement of any debt; (v) Any nonprofit organization that, at the request of consumers, performs bona fide consumer credit counseling and assists consumers in liquidating their debts by receiving payment from such consumers and distributing such amounts to creditors; (vi) Any person collecting or attempting to collect any debt owed or due, or asserted to be owed or due to another, to the extent such debt collection activity: (A) Is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement; (B) Concerns a debt that such person originated; (C) Concerns a debt that was not in default at the time such person obtained it; or (D) Concerns a debt that such person obtained as a secured party in a commercial credit transaction involving the creditor; and (vii) A private entity, to the extent such private entity is operating a bad check enforcement program that complies with section 818 of the Act. (j) Limited-content message means a message for a consumer that includes all of the content described in paragraph (j)(1) of this section, that may include any of the content described in paragraph (j)(2) of this section, and that includes no other content. (1) Required content. A limitedcontent message is a message for a consumer that includes all of the following: (i) The consumer’s name; (ii) A request that the consumer reply to the message; (iii) The name or names of one or more natural persons whom the consumer can contact to reply to the debt collector; (iv) A telephone number that the consumer can use to reply to the debt collector; and (v) If applicable, the disclosure required by § 1006.6(e). (2) Optional content. In addition to the content described in paragraph (j)(1) E:\FR\FM\21MYP2.SGM 21MYP2 23400 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules of this section, a limited-content message may include one or more of the following: (i) A salutation; (ii) The date and time of the message; (iii) A generic statement that the message relates to an account; and (iv) Suggested dates and times for the consumer to reply to the message. (k) Person includes natural persons, corporations, companies, associations, firms, partnerships, societies, and joint stock companies. (l) State means any State, territory, or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any political subdivision of any of the foregoing. Subpart B—Rules for FDCPA Debt Collectors jbell on DSK3GLQ082PROD with PROPOSALS2 § 1006.6 Communications in connection with debt collection. (a) Definition. For purposes of this section, the term consumer includes: (1) The consumer’s spouse; (2) The consumer’s parent, if the consumer is a minor; (3) The consumer’s legal guardian; (4) The executor or administrator of the consumer’s estate, if the consumer is deceased; and (5) A confirmed successor in interest, as defined in Regulation X, 12 CFR 1024.31, and Regulation Z, 12 CFR 1026.2(a)(27)(ii). (b) Communications with a consumer—in general. Except as provided in paragraph (b)(4) of this section, a debt collector must not communicate or attempt to communicate with a consumer in connection with the collection of any debt as prohibited by paragraphs (b)(1) through (3) of this section. (1) Prohibitions regarding unusual or inconvenient times or places. A debt collector must not communicate or attempt to communicate with a consumer in connection with the collection of any debt: (i) At any unusual time, or at a time that the debt collector knows or should know is inconvenient to the consumer. In the absence of the debt collector’s knowledge of circumstances to the contrary, a time before 8:00 a.m. and after 9:00 p.m. local time at the consumer’s location is inconvenient; or (ii) At any unusual place, or at a place that the debt collector knows or should know is inconvenient to the consumer. (2) Prohibitions regarding consumer represented by an attorney. A debt collector must not communicate or attempt to communicate with a consumer in connection with the VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 collection of any debt if the debt collector knows the consumer is represented by an attorney with respect to the debt and knows, or can readily ascertain, the attorney’s name and address, unless the attorney: (i) Fails to respond within a reasonable period of time to a communication from the debt collector; or (ii) Consents to the debt collector communicating directly with the consumer. (3) Prohibitions regarding consumer’s place of employment. A debt collector must not communicate or attempt to communicate with a consumer in connection with the collection of any debt at the consumer’s place of employment, if the debt collector knows or has reason to know that the consumer’s employer prohibits the consumer from receiving such communication. (4) Exceptions. The prohibitions in paragraphs (b)(1) through (3) of this section do not apply when a debt collector communicates or attempts to communicate with a consumer in connection with the collection of any debt with: (i) The prior consent of the consumer, given directly to the debt collector during a communication that does not violate paragraphs (b)(1) through (3) of this section; or (ii) The express permission of a court of competent jurisdiction. (c) Communications with a consumer—after refusal to pay or cease communication notice. (1) Prohibitions. Except as provided in paragraph (c)(2) of this section, a debt collector must not communicate or attempt to communicate further with a consumer with respect to a debt if the consumer notifies the debt collector in writing that: (i) The consumer refuses to pay the debt; or (ii) The consumer wants the debt collector to cease further communication with the consumer. (2) Exceptions. The prohibitions in paragraph (c)(1) of this section do not apply when a debt collector communicates or attempts to communicate further with a consumer with respect to the debt: (i) To advise the consumer that the debt collector’s further efforts are being terminated; (ii) To notify the consumer that the debt collector or creditor may invoke specified remedies that the debt collector or creditor ordinarily invokes; or (iii) Where applicable, to notify the consumer that the debt collector or PO 00000 Frm 00128 Fmt 4701 Sfmt 4702 creditor intends to invoke a specified remedy. (d) Communications with third parties. (1) Prohibitions. Except as provided in paragraph (d)(2) of this section, a debt collector must not communicate, in connection with the collection of any debt, with any person other than: (i) The consumer; (ii) The consumer’s attorney; (iii) A consumer reporting agency, if otherwise permitted by law; (iv) The creditor; (v) The creditor’s attorney; or (vi) The debt collector’s attorney. (2) Exceptions. The prohibition in paragraph (d)(1) of this section does not apply when a debt collector communicates, in connection with the collection of any debt, with a person: (i) For the purpose of acquiring location information, as provided in § 1006.10; (ii) With the prior consent of the consumer given directly to the debt collector; (iii) With the express permission of a court of competent jurisdiction; or (iv) As reasonably necessary to effectuate a postjudgment judicial remedy. (3) Reasonable procedures for email and text message communications. A debt collector maintains procedures that are reasonably adapted, for purposes of FDCPA section 813(c), to avoid a bona fide error in sending an email or text message communication that would result in a violation of paragraph (d)(1) of this section if the debt collector, when communicating with a consumer using an email address or, in the case of a text message, a telephone number, maintains procedures that include steps to reasonably confirm and document that: (i) The debt collector communicated with the consumer using: (A) An email address or, in the case of a text message, a telephone number that the consumer recently used to contact the debt collector for purposes other than opting out of electronic communications; (B) A non-work email address or, in the case of a text message, a non-work telephone number, if: (1) The creditor or the debt collector notified the consumer clearly and conspicuously, other than through the specific non-work email address or nonwork telephone number, that the debt collector might use that non-work email address or non-work telephone number for debt collection communications by email or text message, where the creditor or debt collector provided the notification no more than 30 days before E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules the debt collector’s first such communication, and the notification identified the legal name of the debt collector and the non-work email address or non-work telephone number the debt collector proposed to use, described one or more ways the consumer could opt out of such communications, and provided the consumer with a specified reasonable period in which to opt out before beginning such communications; and (2) The opt-out period specified in the notice described in paragraph (d)(3)(i)(B)(1) of this section has expired and the consumer has not opted out of receiving debt collection communications at the specific nonwork email address or non-work telephone number, as applicable; or (C) A non-work email address or, in the case of a text message, a non-work telephone number that the creditor or a prior debt collector obtained from the consumer to communicate about the debt if, before the debt was placed with the debt collector, the creditor or the prior debt collector recently sent communications about the debt to that non-work email address or non-work telephone number, and the consumer did not request the creditor or the prior debt collector to stop using that nonwork email address or non-work telephone number to communicate about the debt; and (ii) The debt collector took additional steps to prevent communications using an email address or telephone number that the debt collector knows has led to a disclosure prohibited by paragraph (d)(1) of this section. (e) Opt-out notice for electronic communications or attempts to communicate. A debt collector who communicates or attempts to communicate with a consumer electronically in connection with the collection of a debt using a specific email address, telephone number for text messages, or other electronicmedium address must include in such communication or attempt to communicate a clear and conspicuous statement describing one or more ways the consumer can opt out of further electronic communications or attempts to communicate by the debt collector to that address or telephone number. The debt collector may not require, directly or indirectly, that the consumer, in order to opt out, pay any fee to the debt collector or provide any information other than the email address, telephone number for text messages, or other electronic-medium address subject to the opt out. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 § 1006.10 Acquisition of location information. (a) Definition. The term location information means a consumer’s: (1) Place of abode and telephone number at such place; or (2) Place of employment. (b) Form and content of location communications. A debt collector communicating with a person other than the consumer for the purpose of acquiring location information must: (1) Identify himself or herself individually by name, state that he or she is confirming or correcting the consumer’s location information, and, only if expressly requested, identify his or her employer; (2) Not state that the consumer owes any debt; (3) Not communicate by postcard; (4) Not use any language or symbol on any envelope or in the contents of any communication by mail indicating that the debt collector is in the debt collection business or that the communication relates to the collection of a debt; and (5) After the debt collector knows the consumer is represented by an attorney with regard to the subject debt and has knowledge of, or can readily ascertain, such attorney’s name and address, not communicate with any person other than that attorney, unless the attorney fails to respond to the debt collector’s communication within a reasonable period of time. (c) Frequency of location communications. In addition to complying with the frequency limits in § 1006.14(b), a debt collector communicating with any person other than the consumer for the purpose of acquiring location information about the consumer must not communicate more than once with such person unless requested to do so by such person, or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information. § 1006.14 Harassing, oppressive, or abusive conduct. (a) In general. A debt collector must not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of any debt, including, but not limited to, the conduct described in paragraphs (b) through (h) of this section. (b) Repeated or continuous telephone calls or telephone conversations. (1) In general. (i) FDCPA prohibition. In connection with the collection of a debt, a debt collector must not place PO 00000 Frm 00129 Fmt 4701 Sfmt 4702 23401 telephone calls or engage any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number. (ii) Identification and prevention of Dodd-Frank Act unfair act or practice. With respect to a debt collector who is collecting a consumer financial product or service debt, as defined in § 1006.2(f), it is an unfair act or practice under section 1031 of the Dodd-Frank Act to place telephone calls or engage any person in telephone conversation repeatedly or continuously in connection with the collection of such debt, such that the natural consequence is to harass, oppress, or abuse any person at the called number. To prevent this unfair act or practice, such a debt collector must not exceed the frequency limits in paragraph (b)(2) of this section. (2) Frequency limits. Subject to paragraph (b)(3) of this section, a debt collector violates paragraphs (b)(1)(i) and (ii) of this section, as applicable, by placing a telephone call to a particular person in connection with the collection of a particular debt either: (i) More than seven times within seven consecutive days; or (ii) Within a period of seven consecutive days after having had a telephone conversation with the person in connection with the collection of such debt. The date of the telephone conversation is the first day of the seven-consecutive-day period. (3) Certain telephone calls excluded from the frequency limits. Telephone calls placed to a person do not count toward, and are permitted in excess of, the frequency limits in paragraph (b)(2) of this section if they are: (i) Made to respond to a request for information from such person; (ii) Made with such person’s prior consent given directly to the debt collector; (iii) Not connected to the dialed number; or (iv) With the persons described in § 1006.6(d)(1)(ii) through (vi). (4) Effect of complying with frequency limits. A debt collector who does not exceed the frequency limits in paragraph (b)(2) of this section complies with paragraph (b)(1) of this section and section 806(5) of the FDCPA (15 U.S.C. 1692d(5)), and does not, based on the frequency of its telephone calls, violate paragraph (a) of this section, section 806 of the FDCPA (15 U.S.C. 1692d), or sections 1031 or 1036(a)(1)(B) of the Dodd-Frank Act (12 U.S.C. 5531 or 5536(a)(1)(B)). (5) Definition. For purposes of this paragraph (b), particular debt means each of a consumer’s debts in collection. E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 23402 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules However, in the case of student loan debts, the term particular debt means all student loan debts that a consumer owes or allegedly owes that were serviced under a single account number at the time the debts were obtained by the debt collector. (c) Violence or other criminal means. In connection with the collection of a debt, a debt collector must not use or threaten to use violence or other criminal means to harm the physical person, reputation, or property of any person. (d) Obscene or profane language. In connection with the collection of a debt, a debt collector must not use obscene or profane language, or language the natural consequence of which is to abuse the hearer or reader. (e) Debtor’s list. In connection with the collection of a debt, a debt collector must not publish a list of consumers who allegedly refuse to pay debts, except to a consumer reporting agency or to persons meeting the requirements of sections 603(f) or 604(a)(3) of the Fair Credit Reporting Act (15 U.S.C. 1681a(f) or 1681b(a)(3)). (f) Coercive advertisements. In connection with the collection of a debt, a debt collector must not advertise for sale any debt to coerce payment of the debt. (g) Meaningful disclosure of identity. In connection with the collection of a debt, a debt collector must not place telephone calls without meaningfully disclosing the caller’s identity, except as provided in § 1006.10. (h) Prohibited communication media. (1) In general. In connection with the collection of any debt, a debt collector must not communicate or attempt to communicate with a consumer through a medium of communication if the consumer has requested that the debt collector not use that medium to communicate with the consumer. For purposes of this paragraph, the term ‘‘consumer’’ has the meaning given to it in § 1006.6(a). (2) Exceptions. Notwithstanding the prohibition in paragraph (h)(1) of this section: (i) If a consumer opts out in writing of receiving electronic communications from a debt collector, a debt collector may reply once to confirm the consumer’s request to opt out, provided that the reply contains no information other than a statement confirming the consumer’s request; or (ii) If a consumer initiates contact with a debt collector using an address or a telephone number that the consumer previously requested the debt collector not use, the debt collector may VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 respond once to that consumer-initiated communication. § 1006.18 False, deceptive, or misleading representations or means. (a) In general. A debt collector must not use any false, deceptive, or misleading representation or means in connection with the collection of any debt, including, but not limited to, the conduct described in paragraphs (b) through (d) of this section. (b) False, deceptive, or misleading representations. (1) A debt collector must not falsely represent or imply that: (i) The debt collector is vouched for, bonded by, or affiliated with the United States or any State, including through the use of any badge, uniform, or facsimile thereof. (ii) The debt collector operates or is employed by a consumer reporting agency, as defined by section 603(f) of the Fair Credit Reporting Act (15 U.S.C. 1681a(f)). (iii) Any individual is an attorney or that any communication is from an attorney. (iv) The consumer committed any crime or other conduct in order to disgrace the consumer. (v) A sale, referral, or other transfer of any interest in a debt causes or will cause the consumer to: (A) Lose any claim or defense to payment of the debt; or (B) Become subject to any practice prohibited by this part. (vi) Accounts have been turned over to innocent purchasers for value. (vii) Documents are legal process. (viii) Documents are not legal process forms or do not require action by the consumer. (2) A debt collector must not falsely represent: (i) The character, amount, or legal status of any debt. (ii) Any services rendered, or compensation that may be lawfully received, by any debt collector for the collection of a debt. (3) A debt collector must not represent or imply that nonpayment of any debt will result in the arrest or imprisonment of any person or the seizure, garnishment, attachment, or sale of any property or wages of any person unless such action is lawful and the debt collector or creditor intends to take such action. (c) False, deceptive, or misleading collection means. A debt collector must not: (1) Threaten to take any action that cannot legally be taken or that is not intended to be taken. (2) Communicate or threaten to communicate to any person credit PO 00000 Frm 00130 Fmt 4701 Sfmt 4702 information that the debt collector knows or should know is false, including the failure to communicate that a disputed debt is disputed. (3) Use or distribute any written communication that simulates or that the debt collector falsely represents to be a document authorized, issued, or approved by any court, official, or agency of the United States or any State, or that creates a false impression about its source, authorization, or approval. (4) Use any business, company, or organization name other than the true name of the debt collector’s business, company, or organization. (d) False representations or deceptive means. A debt collector must not use any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer. (e) Disclosures required. (1) Initial communications. A debt collector must disclose in its initial communication with a consumer that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose. If the debt collector’s initial communication with the consumer is oral, the debt collector must make the disclosure required by this paragraph again in its initial written communication with the consumer. (2) Subsequent communications. In each communication with the consumer subsequent to the communications described in paragraph (e)(1) of this section, the debt collector must disclose that the communication is from a debt collector. (3) Exception. Disclosures under paragraphs (e)(1) and (2) of this section are not required in a formal pleading made in connection with a legal action. (f) Assumed names. This section does not prohibit a debt collector’s employee from using an assumed name when communicating or attempting to communicate with a person, provided that the employee uses the assumed name consistently and that the employer can readily identify any employee using an assumed name. (g) Safe harbor for meaningful attorney involvement in debt collection litigation submissions. A debt collector that is a law firm or who is an attorney complies with § 1006.18 when submitting a pleading, written motion, or other paper submitted to the court during debt collection litigation if an attorney personally: (1) Drafts or reviews the pleading, written motion, or other paper; and (2) Reviews information supporting such pleading, written motion, or other paper and determines, to the best of the E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules attorney’s knowledge, information, and belief, that, as applicable: (i) The claims, defenses, and other legal contentions are warranted by existing law; (ii) The factual contentions have evidentiary support; and (iii) The denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or lack of information. jbell on DSK3GLQ082PROD with PROPOSALS2 § 1006.22 means. Unfair or unconscionable (a) In general. A debt collector must not use unfair or unconscionable means to collect or attempt to collect any debt, including, but not limited to, the conduct described in paragraphs (b) through (f) of this section. (b) Collection of unauthorized amounts. A debt collector must not collect any amount unless such amount is expressly authorized by the agreement creating the debt or permitted by law. For purposes of this paragraph, the term ‘‘any amount’’ includes any interest, fee, charge, or expense incidental to the principal obligation. (c) Postdated payment instruments. A debt collector must not: (1) Accept from any person a check or other payment instrument postdated by more than five days unless such person is notified in writing of the debt collector’s intent to deposit such check or instrument not more than ten, nor less than three, days (excluding legal public holidays, Saturdays, and Sundays) prior to such deposit. (2) Solicit any postdated check or other postdated payment instrument for the purpose of threatening or instituting criminal prosecution. (3) Deposit or threaten to deposit any postdated check or other postdated payment instrument prior to the date on such check or instrument. (d) Charges resulting from concealment of purpose. A debt collector must not cause charges to be made to any person for communications by concealment of the true purpose of the communication. Such charges include, but are not limited to, collect telephone calls and telegram fees. (e) Nonjudicial action regarding property. A debt collector must not take or threaten to take any nonjudicial action to effect dispossession or disablement of property if: (1) There is no present right to possession of the property claimed as collateral through an enforceable security interest; (2) There is no present intention to take possession of the property; or (3) The property is exempt by law from such dispossession or disablement. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 (f) Restrictions on use of certain media. A debt collector must not: (1) Communicate with a consumer regarding a debt by postcard. (2) Use any language or symbol, other than the debt collector’s address, on any envelope when communicating with a consumer by mail, except that a debt collector may use the debt collector’s business name on an envelope if such name does not indicate that the debt collector is in the debt collection business. (3) Communicate or attempt to communicate with a consumer using an email address that the debt collector knows or should know is provided to the consumer by the consumer’s employer, unless the debt collector has received directly from the consumer either prior consent to use that email address or an email from that email address. (4) Communicate or attempt to communicate with a consumer in connection with the collection of a debt by a social media platform that is viewable by a person other than the persons described in § 1006.6(d)(1)(i) through (vi). (g) Safe harbor for certain emails and text messages relating to the collection of a debt. A debt collector who communicates with a consumer using an email address or telephone number and following the procedures described in § 1006.6(d)(3) does not violate paragraph (a) of this section by revealing in the email or text message the debt collector’s name or other information indicating that the communication relates to the collection of a debt. § 1006.26 Collection of time-barred debts. (a) Definitions. For purposes of this section: (1) Statute of limitations means the period prescribed by applicable law for bringing a legal action against the consumer to collect a debt. (2) Time-barred debt means a debt for which the applicable statute of limitations has expired. (b) Suits and threats of suit prohibited. A debt collector must not bring or threaten to bring a legal action against a consumer to collect a debt that the debt collector knows or should know is a time-barred debt. (c) [Reserved] § 1006.30 Other prohibited practices. (a) Communication prior to furnishing information. A debt collector must not furnish to a consumer reporting agency, as defined in section 603(f) of the Fair Credit Reporting Act (15 U.S.C. 1681a(f)), information regarding a debt before communicating with the consumer about the debt. PO 00000 Frm 00131 Fmt 4701 Sfmt 4702 23403 (b) Prohibition on the sale, transfer, or placement of certain debts. (1) In general. (i) FDCPA prohibition. Except as provided in paragraph (b)(2) of this section, a debt collector must not sell, transfer, or place for collection a debt if the debt collector knows or should know that: (A) The debt has been paid or settled; (B) The debt has been discharged in bankruptcy; or (C) An identity theft report, as defined in section 603(q)(4) of the Fair Credit Reporting Act (15 U.S.C. 1681a(q)(4)), was filed with respect to the debt. (ii) Identification of Dodd-Frank Act unfair act or practice. With respect to a debt collector who is collecting a consumer financial product or service debt, as defined in § 1006.2(f), it is an unfair act or practice under section 1031 of the Dodd-Frank Act to sell, transfer, or place for collection a debt described in paragraph (b)(1)(i) of this section. (2) Exceptions. A debt collector may sell, transfer, or place for collection a debt described in paragraph (b)(1)(i) of this section if the debt collector: (i) Transfers the debt to the debt’s owner; (ii) Transfers the debt to a previous owner of the debt if transfer is authorized under the terms of the original contract between the debt collector and the previous owner; (iii) Securitizes the debt or pledges a portfolio of such debt as collateral in connection with a borrowing; or (iv) Transfers the debt as a result of a merger, acquisition, purchase and assumption transaction, or transfer of substantially all of the debt collector’s assets. (c) Multiple debts. If a consumer makes any single payment to a debt collector with respect to multiple debts owed by the consumer, the debt collector: (1) Must apply the payment in accordance with the directions given by the consumer, if any; and (2) Must not apply the payment to any debt that is disputed by the consumer. (d) Legal actions by debt collectors. (1) Action to enforce interest in real property. A debt collector who brings a legal action against a consumer to enforce an interest in real property securing the consumer’s debt must bring the action only in a judicial district or similar legal entity in which such real property is located. (2) Other legal actions. A debt collector who brings a legal action against a consumer other than to enforce an interest in real property securing the consumer’s debt must bring such action only in the judicial district or similar legal entity in which the consumer: E:\FR\FM\21MYP2.SGM 21MYP2 23404 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules (i) Signed the contract sued upon; or (ii) Resides at the commencement of the action. (3) Authorization of actions. Nothing in this part authorizes debt collectors to bring legal actions. (e) Furnishing certain deceptive forms. A debt collector must not design, compile, and furnish any form that the debt collector knows would be used to cause a consumer falsely to believe that a person other than the consumer’s creditor is participating in collecting or attempting to collect a debt that the consumer allegedly owes to the creditor. jbell on DSK3GLQ082PROD with PROPOSALS2 § 1006.34 Notice for validation of debts. (a)(1) Validation information required. Except as provided in paragraph (a)(2) of this section, a debt collector must provide a consumer with the validation information described in paragraph (c) of this section either: (i) By sending the consumer a validation notice in a manner permitted by § 1006.42: (A) In the initial communication, as defined in paragraph (b)(2) of this section; or (B) Within five days of that initial communication; or (ii) By providing the validation information orally in the initial communication. (2) Exception. A debt collector who otherwise would be required to send a validation notice pursuant to paragraph (a)(1)(i)(B) of this section is not required to do so if the consumer has paid the debt prior to the time that paragraph (a)(1)(i)(B) of this section would require the validation notice to be sent. (b) Definitions. For purposes of this section: (1) Clear and conspicuous means disclosures that are readily understandable. In the case of written and electronic disclosures, the location and type size also must be readily noticeable to consumers. In the case of oral disclosures, the disclosures also must be given at a volume and speed sufficient for the consumer to hear and comprehend them. (2) Initial communication means the first time that, in connection with the collection of a debt, a debt collector conveys information, directly or indirectly, regarding the debt to the consumer, other than a communication in the form of a formal pleading in a civil action, or any form or notice that does not relate to the collection of the debt and is expressly required by: (i) The Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.); (ii) Title V of the Gramm-Leach-Bliley Act (15 U.S.C. 6801 through 6827); or VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 (iii) Any provision of Federal or State law or regulation mandating notice of a data security breach or privacy risk. (3) Itemization date means any one of the following four reference dates for which a debt collector can ascertain the amount of the debt: (i) The last statement date, which is the date of the last periodic statement or written account statement or invoice provided to the consumer; (ii) The charge-off date, which is the date the debt was charged off; (iii) The last payment date, which is the date the last payment was applied to the debt; or (iv) The transaction date, which is the date of the transaction that gave rise to the debt. (4) Validation notice means a written or electronic notice that provides the validation information described in paragraph (c) of this section. (5) Validation period means the period starting on the date that a debt collector provides the validation information described in paragraph (c) of this section and ending 30 days after the consumer receives or is assumed to receive the validation information. For purposes of determining the end of the validation period, the debt collector may assume that a consumer receives the validation information on any date that is at least five days (excluding legal public holidays, Saturdays, and Sundays) after the debt collector provides it. (c) Validation information. (1) Debt collector communication disclosure. The statement required by § 1006.18(e). (2) Information about the debt. Except as provided in paragraph (c)(5) of this section: (i) The debt collector’s name and mailing address. (ii) The consumer’s name and mailing address. (iii) If the debt is a credit card debt, the merchant brand, if any, associated with the debt, to the extent available to the debt collector. (iv) If the debt collector is collecting consumer financial product or service debt as defined in § 1006.2(f), the name of the creditor to whom the debt was owed on the itemization date. (v) The account number, if any, associated with the debt on the itemization date, or a truncated version of that number. (vi) The name of the creditor to whom the debt currently is owed. (vii) The itemization date. (viii) The amount of the debt on the itemization date. (ix) An itemization of the current amount of the debt in a tabular format reflecting interest, fees, payments, and credits since the itemization date. PO 00000 Frm 00132 Fmt 4701 Sfmt 4702 (x) The current amount of the debt. (3) Information about consumer protections. (i) A statement that specifies what date the debt collector will consider the end date of the validation period and states that, if the consumer notifies the debt collector in writing before the end of the validation period that the debt, or any portion of the debt, is disputed, the debt collector must cease collection of the debt, or the disputed portion of the debt, until the debt collector sends the consumer either the verification of the debt or a copy of a judgment. (ii) A statement that specifies what date the debt collector will consider the end date of the validation period and states that, if the consumer requests in writing before the end of the validation period the name and address of the original creditor, the debt collector must cease collection of the debt until the debt collector sends the consumer the name and address of the original creditor, if different from the current creditor. (iii) A statement that specifies what date the debt collector will consider the end date of the validation period and states that, unless the consumer contacts the debt collector to dispute the validity of the debt, or any portion of the debt, before the end of the validation period, the debt collector will assume that the debt is valid. (iv) If the debt collector is collecting consumer financial product or service debt as defined in § 1006.2(f), a statement that informs the consumer that additional information regarding consumer protections in debt collection is available on the Bureau’s website at https://www.consumerfinance.gov. (v) A statement explaining how a consumer can take the actions described in paragraphs (c)(4) and (d)(3), as applicable, of this section electronically, if the debt collector sends a validation notice electronically. (vi) For a validation notice delivered in the body of an email pursuant to § 1006.42(b)(1) or (c)(2)(i), the opt-out statement required by § 1006.6(e). (4) Consumer response information. The following information, segregated from the validation information described in paragraphs (c)(1) through (3) of this section and from any optional information included pursuant to paragraphs (d)(3)(i), (ii), (iv), and (v) of this section, and, if provided in a validation notice, located at the bottom of the notice under the headings, ‘‘How do you want to respond?’’ and ‘‘Check all that apply:’’: (i) Dispute prompts. The following statements, listed in the following order, and using the following phrasing or E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules substantially similar phrasing, each next to a prompt: (A) ‘‘I want to dispute the debt because I think:;’’ (B) ‘‘This is not my debt;’’ (C) ‘‘The amount is wrong;’’ and (D) ‘‘Other (please describe on reverse or attach additional information).’’ (ii) Original-creditor information prompt. The statement, ‘‘I want you to send me the name and address of the original creditor,’’ using that phrase or a substantially similar phrase, next to a prompt. (iii) Mailing addresses. Mailing addresses for the consumer and the debt collector, which include the debt collector’s and the consumer’s names. (5) Special rule for certain residential mortgage debt. For residential mortgage debt subject to Regulation Z, 12 CFR 1026.41, a debt collector need not provide the validation information described in paragraphs (c)(2)(vii) through (ix) of this section if the debt collector: (i) Provides the consumer at the same time as the validation notice, a copy of the most recent periodic statement provided to the consumer under Regulation Z, 12 CFR 1026.41(b); and (ii) Refers to that periodic statement in the validation notice. (d) Form of validation information. (1) In general. (i) The validation information described in paragraph (c) of this section must be clear and conspicuous. (ii) If provided in a validation notice, the content, format, and placement of the validation information described in § 1006.34(c) and of the optional disclosures permitted by paragraph (d)(3) of this section must be substantially similar to Model Form B– 3 in appendix B of this part. (2) Safe harbor. A debt collector who uses Model Form B–3 in appendix B of this part complies with the requirements of paragraphs (a)(1)(i) and (d)(1) of this section. (3) Optional disclosures. A debt collector may, at its option, include any of the following information if providing the validation information required by paragraph (a)(1) of this section. (i) Telephone contact information. The debt collector’s telephone contact information, including telephone number and the times that the debt collector accepts consumer telephone calls. (ii) Reference code. A number or code that the debt collector uses to identify the debt or the consumer. (iii) Payment disclosures. (A) The statement, ‘‘Contact us about your payment options,’’ using that phrase or VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 a substantially similar phrase. The optional payment disclosure permitted by this paragraph must be no more prominent than any of the validation information described in paragraph (c) of this section; and (B) With the consumer response information described in paragraph (c)(4) of this section, the statement ‘‘I enclosed this amount,’’ using that phrase or a substantially similar phrase, payment instructions after that statement, and a prompt. The optional payment disclosure permitted by this paragraph must be no more prominent than the validation information described in paragraph (c) of this section. (iv) Disclosures required by applicable law. On the front of a validation notice, a statement that other disclosures required by applicable law appear on the reverse of the validation notice and, on the reverse of the validation notice, any such required disclosures. (v) Information about electronic communications. The following information: (A) The debt collector’s website and email address. (B) If validation information is not provided electronically, the statement described in paragraph (c)(3)(v) of this section explaining how a consumer can take the actions described in paragraphs (c)(4) and (d)(3) of this section electronically. (vi) Spanish-language translation disclosures. The following disclosures regarding a consumer’s ability to request a Spanish-language translation of a validation notice: (A) The statement, ‘‘Po´ngase en contacto con nosotros para solicitar una copia de este formulario en espan˜ol’’ (which means ‘‘Contact us to request a copy of the form in Spanish’’), using that phrase or a substantially similar phrase in Spanish. If providing this optional disclosure, a debt collector may include supplemental information in Spanish that specifies how a consumer may request a Spanish-language validation notice. (B) With the consumer response information described in paragraph (c)(4) of this section, the statement ‘‘Quiero esta forma en espan˜ol’’ (which means ‘‘I want this form in Spanish’’), using that phrase or a substantially similar phrase in Spanish, next to a prompt. (4) Validation notices delivered electronically. If a debt collector delivers a validation notice electronically pursuant to § 1006.42, a debt collector may, at its option, format the validation notice as follows: PO 00000 Frm 00133 Fmt 4701 Sfmt 4702 23405 (i) Prompts. Any prompt described in paragraphs (c)(4)(i) or (ii) or paragraphs (d)(3)(iii)(B) or (vi)(B) of this section may be displayed electronically as a fillable field. (ii) Hyperlinks. Hyperlinks may be embedded that, when clicked: (A) Connect consumers to the debt collector’s website; or (B) Permit consumers to respond to the dispute and original-creditor information prompts described in paragraphs (c)(4)(i) and (ii) of this section. (e) Translation into other languages. A debt collector may send the consumer a validation notice completely and accurately translated into any language if the debt collector also sends an English-language validation notice in the same communication that satisfies paragraph (a)(1) of this section. If a debt collector has already provided an English-language validation notice that satisfies paragraph (a)(1) of this section and subsequently provides the consumer a validation notice translated into any another language, the debt collector need not provide an additional copy of the English-language notice. § 1006.38 Disputes and requests for original-creditor information. (a) Definitions. For purposes of this section, the following definitions apply: (1) Duplicative dispute means a dispute submitted by the consumer in writing within the validation period that: (i) Is substantially the same as a dispute previously submitted by the consumer in writing within the validation period for which the debt collector already has satisfied the requirements of paragraph (d)(2)(i) of this section; and (ii) Does not include new and material information to support the dispute. (2) Validation period has the same meaning given to it in § 1006.34(b)(5). (b) Overshadowing of rights to dispute or request original-creditor information. During the validation period, a debt collector must not engage in any collection activities or communications that overshadow or are inconsistent with the disclosure of the consumer’s rights to dispute the debt and to request the name and address of the original creditor. (c) Requests for original-creditor information. Upon receipt of a request for the name and address of the original creditor submitted by the consumer in writing within the validation period, a debt collector must cease collection of the debt until the debt collector provides the name and address of the original creditor to the consumer in E:\FR\FM\21MYP2.SGM 21MYP2 23406 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules writing or electronically in a manner permitted by § 1006.42. (d) Disputes. (1) Failure to dispute. The failure of a consumer to dispute the validity of a debt does not constitute a legal admission of liability by the consumer. (2) Response to disputes. Upon receipt of a dispute submitted by the consumer in writing within the validation period, a debt collector must cease collection of the debt, or any disputed portion of the debt, until the debt collector: (i) Provides a copy either of verification of the debt or of a judgment to the consumer in writing or electronically in a manner permitted by § 1006.42; or (ii) In the case of a dispute that the debt collector reasonably determines is a duplicative dispute, either: (A) Notifies the consumer in writing or electronically in a manner permitted by § 1006.42 that the dispute is duplicative, provides a brief statement of the reasons for the determination, and refers the consumer to the debt collector’s response to the earlier dispute; or (B) Satisfies paragraph (d)(2)(i) of this section. jbell on DSK3GLQ082PROD with PROPOSALS2 § 1006.42 Providing required disclosures. (a) Providing required disclosures. (1) In general. A debt collector who provides disclosures required by this part in writing or electronically must do so in a manner that is reasonably expected to provide actual notice and in a form that the consumer may keep and access later. (2) Exceptions. A debt collector need not comply with paragraph (a)(1) of this section when providing the disclosure required by § 1006.6(e) or § 1006.18(e) in writing or electronically, unless the disclosure is included on a notice required by § 1006.34(a)(1)(i) or § 1006.38(c) or (d)(2), or in an electronic communication containing a hyperlink to such notice. (b) Requirements for certain disclosures provided electronically. To comply with paragraph (a) of this section, a debt collector who provides the validation notice described in § 1006.34(a)(1)(i)(B), or the disclosures described in § 1006.38(c) or (d)(2), electronically must: (1) Except as provided in paragraph (c) of this section, provide the disclosure in accordance with section 101(c) of the Electronic Signatures in Global and National Commerce Act (ESIGN Act) (15 U.S.C. 7001(c)) after the consumer provides affirmative consent directly to the debt collector; VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 (2) Identify the purpose of the communication by including, in the subject line of an email or in the first line of a text message transmitting the disclosure, the name of the creditor to whom the debt currently is owed or allegedly is owed and one additional piece of information identifying the debt, other than the amount; (3) Permit receipt of notifications of undeliverability from communications providers, monitor for any such notifications, and treat any such notifications as precluding a reasonable expectation of actual notice for that delivery attempt; and (4) When providing the validation notice described in § 1006.34(a)(1)(i)(B), provide the disclosure in a responsive format that is reasonably expected to be accessible on a screen of any commercially available size and via commercially available screen readers. (c) Alternative procedures for providing certain disclosures electronically. A debt collector who provides the validation notice described in § 1006.34(a)(1)(i)(B), or the disclosures described in § 1006.38(c) or (d)(2), electronically need not comply with paragraph (b)(1) of this section if the debt collector: (1) Provides the disclosure by sending an electronic communication to an email address or, in the case of a text message, a telephone number that the creditor or a prior debt collector could have used to provide electronic disclosures related to that debt in accordance with section 101(c) of the ESIGN Act; and (2) Places the disclosure either: (i) In the body of an email sent to an email address described in paragraph (c)(1) of this section; or (ii) On a secure website that is accessible by clicking on a clear and conspicuous hyperlink included within an electronic communication sent to an email address or a telephone number described in paragraph (c)(1) of this section, provided that: (A) The disclosure is accessible on the website for a reasonable period of time and can be saved or printed; (B) The consumer receives notice and an opportunity to opt out of hyperlinked delivery as described in paragraph (d) of this section; and (C) The consumer, during the opt-out period, has not opted out. (d) Notice and opportunity to opt out of hyperlinked delivery. For a consumer to receive notice and an opportunity to opt out of hyperlinked delivery as required by paragraph (c)(2)(ii)(B) of this section, the debt collector must, before providing the disclosure, either: PO 00000 Frm 00134 Fmt 4701 Sfmt 4702 (1) Communication by the debt collector. Inform the consumer, in a communication with the consumer, of: (i) The name of the consumer who owes or allegedly owes the debt; (ii) The name of the creditor to whom the debt currently is owed or allegedly owed; (iii) The email address or telephone number from which the debt collector intends to send the electronic communication containing the hyperlink to the disclosure; (iv) The email address or telephone number to which the debt collector intends to send the electronic communication containing the hyperlink to the disclosure; (v) The consumer’s ability to opt out of hyperlinked delivery of disclosures to such email address or telephone number; and (vi) Instructions for opting out, including a reasonable period within which to opt out; or (2) Communication by the creditor. Confirm that, no more than 30 days before the debt collector’s electronic communication containing the hyperlink to the disclosure, the creditor communicated with the consumer using the email address or, in the case of a text message, the telephone number to which the debt collector intends to send the electronic communication and informed the consumer of: (i) The placement or sale of the debt to the debt collector; (ii) The name the debt collector uses when collecting debts; (iii) The debt collector’s option to use the consumer’s email address or, in the case of a text message, the consumer’s telephone number to provide any legally required debt collection disclosures in a manner that is consistent with Federal law; and (iv) The information in paragraphs (d)(1)(iii), (v), and (vi) of this section. (e) Safe harbors. (1) Disclosures provided by mail. A debt collector satisfies paragraph (a) of this section if the debt collector mails a printed copy of a disclosure to the consumer’s residential address, unless the debt collector receives a notification from the entity or person responsible for delivery that the disclosure was not delivered. (2) Validation notice contained in the initial communication. A debt collector who provides the validation notice described in § 1006.34(a)(1)(i)(A) within the body of an email that is the initial communication with the consumer satisfies paragraph (a)(1) of this section if the debt collector satisfies the requirements of paragraph (b) of this section for validation notices described in § 1006.34(a)(1)(i)(B). If such a debt E:\FR\FM\21MYP2.SGM 21MYP2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules collector follows the procedures described in paragraph (c) of this section, the debt collector may, in lieu of sending the validation notice to an email address that the creditor or a prior debt collector could use for delivery of electronic disclosures in accordance with section 101(c) of the E-SIGN Act (as described in paragraph (c)(1) of this section), send the validation notice to an email address selected through the procedures described in § 1006.6(d)(3). Subpart C—[Reserved] Subpart D—Miscellaneous § 1006.100 Record retention. (a) A debt collector must retain evidence of compliance with this part starting on the date that the debt collector begins collection activity on a debt until three years after: (1) The debt collector’s last communication or attempted communication in connection with the collection of the debt; or (2) The debt is settled, discharged, or transferred to the debt owner or to another debt collector. § 1006.104 Relation to State laws. Neither the Act nor the corresponding provisions of this part annul, alter, affect, or exempt any person subject to the provisions of the Act or the corresponding provisions of this part from complying with the laws of any State with respect to debt collection practices, except to the extent that those laws are inconsistent with any provision of the Act or the corresponding provisions of this part, and then only to the extent of the inconsistency. For purposes of this section, a State law is not inconsistent with the Act or the corresponding provisions of this part if the protection such law affords any consumer is greater than the protection provided by the Act or the corresponding provisions of this part. jbell on DSK3GLQ082PROD with PROPOSALS2 § 1006.108 Exemption for State regulation. (a) Exemption for State regulation. Any State may apply to the Bureau for a determination that, under the laws of that State, any class of debt collection practices within that State is subject to requirements that are substantially similar to, or provide greater protection for consumers than, those imposed under sections 803 through 812 of the Act (15 U.S.C. 1692a through 1692j) and the corresponding provisions of this part, and that there is adequate provision for State enforcement of such requirements. (b) Procedures and criteria. The procedures and criteria whereby States VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 may apply to the Bureau for exemption of a class of debt collection practices within the applying State from the provisions of the Act and the corresponding provisions of this part as provided in section 817 of the Act (15 U.S.C. 1692o) are set forth in appendix A of this part. Appendix A to Part 1006—Procedures for State Application for Exemption from the Provisions of the Act I. Purpose and Definitions (a) This appendix establishes procedures and criteria whereby States may apply to the Bureau for exemption of a class of debt collection practices within the applying State from the provisions of the Act and the corresponding provisions of this part as provided in section 817 of the Act (15 U.S.C. 1692o). (b) For purposes of this appendix: (1) Applicant State law means the State law that, for a class of debt collection practices within that State, is claimed to contain requirements that are substantially similar to the requirements that relevant Federal law imposes on that class of debt collection practices, and that contains adequate provision for State enforcement. (2) Class of debt collection practices includes one or more such classes of debt collection practices referred to in paragraph I(b)(1) of this appendix. (3) Relevant Federal law means sections 803 through 812 of the Act (15 U.S.C. 1692a through 1692j) and the corresponding provisions of this part. (4) State law includes State statutes, any regulations that implement State statutes, and formal interpretations of State statutes or regulations by a court of competent jurisdiction or duly authorized State agency. II. Application Any State may apply to the Bureau pursuant to the terms of this appendix for a determination that the applicant State law contains requirements that, for a class of debt collection practices within that State, are substantially similar to, or provide greater protection for consumers than, the requirements that relevant Federal law imposes on that class of debt collection practices, and that contains adequate provision for State enforcement. The application must be in writing, addressed to the Assistant Director, Office of Regulations, Division of Research, Markets, and Regulations, Bureau of Consumer Financial Protection, 1700 G Street NW, Washington, DC 20552, signed by the Governor, Attorney General, or State official having primary enforcement responsibility under the State law that applies to the class of debt collection practices, and must be supported by the documents specified in this appendix. III. Supporting Documents The application must be accompanied by the following, which may be submitted in paper or electronic form: (a) A copy of the applicant State law. (b) A comparison of each provision of relevant Federal law with the corresponding PO 00000 Frm 00135 Fmt 4701 Sfmt 4702 23407 provisions of the applicant State law, together with reasons supporting the claim that the corresponding provisions of the applicant State law are substantially similar to, or provide greater protection to consumers than, the provisions of relevant Federal law and an explanation as to why any differences between the State statute or regulation and Federal law are not inconsistent with the provisions of relevant Federal law and do not result in a diminution in the protection otherwise afforded consumers; and a statement that no other State laws (including administrative or judicial interpretations) are related to, or would have an effect upon, the State law that is being considered by the Bureau in making its determination. (c) A comparison of the provisions of the State law that provide for enforcement with the provisions of section 814 of the Act (15 U.S.C. 1692l), together with reasons supporting the claim that the applicant State law provides for adequate administrative enforcement. (d) A statement identifying the office designated or to be designated to enforce the applicant State law. The statement must show how the office provides for adequate enforcement of the applicant State law, including by showing that the office has necessary facilities, personnel, and funding. The statement must include, for example, complete information regarding the fiscal arrangements for administrative enforcement (including the amount of funds available or to be provided), the number and qualifications of personnel engaged or to be engaged in enforcement, and a description of the procedures under which the applicant State law is to be enforced by the State. IV. Criteria for Determination The Bureau will consider the criteria set forth below, and any other relevant information, in determining whether applicant State law is substantially similar to, or provides greater protection to consumers than, relevant Federal law and whether there is adequate provision for enforcement of the applicant State law. In making that determination, the Bureau primarily will consider each provision of the applicant State law in comparison with each corresponding provision in relevant Federal law, and not the State law as a whole in comparison with the Act as a whole. (a)(1) In order for the applicant State law to be substantially similar to relevant Federal law, the applicant State law at least must provide that: (i) Definitions and rules of construction, as applicable, import a meaning and have an application that are substantially similar to, or more protective of consumers than, those prescribed by relevant Federal law. (ii) Debt collectors provide all of the applicable notices required by relevant Federal law, with the content and in the terminology, form, and time periods prescribed pursuant to relevant Federal law. The Bureau may determine whether additional notice requirements under the applicant State law affect a determination that the applicant State law is substantially similar to relevant Federal law. (iii) Debt collectors take all affirmative actions and abide by obligations substantially E:\FR\FM\21MYP2.SGM 21MYP2 23408 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules similar to, or more protective of consumers than, those prescribed by relevant Federal law under substantially similar or more protective conditions and within the substantially similar or more protective time periods as are prescribed under relevant Federal law; (iv) Debt collectors abide by prohibitions that are substantially similar to or more protective of consumers than those prescribed by relevant Federal law; (v) Consumers’ obligations or responsibilities are no more costly, lengthy, or burdensome than consumers’ corresponding obligations or responsibilities under relevant Federal law; and (vi) Consumers’ rights and protections are substantially similar to, or more protective of consumers than, those provided by relevant Federal law under conditions or within time periods that are substantially similar to, or more protective of consumers than, those prescribed by relevant Federal law. (2) In applying the criteria set forth in paragraph IV(a)(1) of this appendix, the Bureau will not consider adversely any additional requirements of State law that are not inconsistent with the purpose of the Act or the requirements imposed under relevant Federal law. (b) In determining whether provisions for enforcement of the applicant State law are adequate, consideration will be given to the extent to which, under the applicant State law, provision is made for administrative enforcement, including necessary facilities, personnel, and funding. V. Public Comment In connection with any application that has been filed in accordance with the requirements of parts II and III of this appendix and following initial review of the application, a proposed rule concerning the application for exemption will be published by the Bureau in the Federal Register, and a copy of such application will be made available for examination by interested persons during business hours at the Bureau of Consumer Financial Protection, 1700 G Street, NW, Washington, DC 20552. A comment period will be allowed from the date of such publication for interested parties to submit written comments to the Bureau regarding that application. jbell on DSK3GLQ082PROD with PROPOSALS2 VI. Exemption From Requirements If the Bureau determines on the basis of the information before it that, under the applicant State law, a class of debt collection practices is subject to requirements substantially similar to, or that provide greater protection to consumers than, those imposed under relevant Federal law and that there is adequate provision for State enforcement, the Bureau will exempt the VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 class of debt collection practices in that State from the requirements of relevant Federal law and section 814 of the Act in the following manner and subject to the following conditions: (a) A final rule granting the exemption will be published in the Federal Register, and the Bureau will furnish a copy of such rule to the State official who made application for such exemption, to each Federal authority responsible for administrative enforcement of the requirements of relevant Federal law, and to the Attorney General of the United States. Any exemption granted will be effective 90 days after the date of publication of such rule in the Federal Register. (b) Any State that receives an exemption must, through its appropriate official, take the following steps: (i) Inform the Assistant Director, Office of Regulations, Division of Research, Markets, and Regulations, Bureau of Consumer Financial Protection, 1700 G Street NW, Washington, DC 20552 in writing within 30 days of any change in the applicant State law. The report of any such change must contain copies of the full text of that change, together with statements setting forth the information and opinions regarding that change that are specified in paragraph III. (ii) Provide, not later than two years after the date the exemption is granted, and every two years thereafter, a report to the Bureau in writing concerning the manner in which the State has enforced the applicant State law in the preceding two years and an update of the information required under paragraph III(d) of this appendix. (c) The Bureau will inform any State that receives such an exemption, through its appropriate official, of any subsequent amendments of the Act or this part that might necessitate the amendment of State law for the exemption to continue. (d) After an exemption is granted, the requirements of the applicable State law constitute the requirements of relevant Federal law, except to the extent such State law imposes requirements not imposed by the Act or this part. VII. Adverse Determination (a) If, after publication of a proposed rule in the Federal Register as provided under part V of this appendix, the Bureau finds on the basis of the information before it that it cannot make a favorable determination in connection with the application, the Bureau will notify the appropriate State official of the facts upon which such findings are based and will afford that State authority a reasonable opportunity to submit additional materials that demonstrate the basis for granting an exemption. (b) If, after having afforded the State authority such opportunity to demonstrate PO 00000 Frm 00136 Fmt 4701 Sfmt 4702 the basis for granting an exemption, the Bureau finds on the basis of the information before it that it still cannot make a favorable determination in connection with the application, the Bureau will publish in the Federal Register a final rule containing its determination regarding the application and will furnish a copy of such rule to the State official who made application for such exemption. VIII. Revocation of Exemption (a) The Bureau reserves the right to revoke any exemption granted under the provisions of the Act or this part, if at any time it determines that the State law does not, in fact, impose requirements that are substantially similar to, or that provide greater protection to consumers than, relevant Federal law or that there is not, in fact, adequate provision for State enforcement. (b) Before revoking any such exemption, the Bureau will notify the State of the facts or conduct that, in the Bureau’s opinion, warrant such revocation, and will afford that State such opportunity as the Bureau deems appropriate in the circumstances to demonstrate continued eligibility for an exemption. (c) If, after having been afforded the opportunity to demonstrate or achieve compliance, the Bureau determines that the State has not done so, a proposed rule to revoke such exemption will be published in the Federal Register. A comment period will be allowed from the date of such publication for interested persons to submit written comments to the Bureau regarding the intention to revoke. (d) If such exemption is revoked, a final rule revoking the exemption will be published by the Bureau in the Federal Register, and a copy of such rule will be furnished to the State, to the Federal authorities responsible for enforcement of the requirements of the Act, and to the Attorney General of the United States. The revocation becomes effective, and the class of debt collection practices affected within that State become subject to the requirements of sections 803 through 812 of the Act and the corresponding provisions of this part, 90 days after the date of publication of the final rule in the Federal Register. Appendix B to Part 1006—Model Forms and Clauses B–1 [Reserved] B–2 [Reserved] B–3 Model Form for Validation Notice § 1006.34 BILLING CODE 4810–AM–P E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 BILLING CODE 4810–AM–C Appendix C to Part 1006—Issuance of Advisory Opinions 1. Advisory opinions. Any act done or omitted in good faith in conformity with any advisory opinion issued by the Bureau, including advisory opinions referenced in this appendix, provides the protection afforded under section 813(e) of the Act. The Bureau will amend this appendix VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 periodically to incorporate references to advisory opinions that the Bureau issues. 2. Requests for issuance of advisory opinions. A request for an advisory opinion should be in writing and addressed to the Associate Director, Research, Markets, and Regulations, Bureau of Consumer Financial Protection, 1700 G Street NW, Washington, DC 20552. The request should contain a complete statement of all relevant facts concerning the issue, including copies of all pertinent documents. Designated officials PO 00000 Frm 00137 Fmt 4701 Sfmt 4702 23409 will review and respond to requests for advisory opinions. 3. Bureau-issued advisory opinions. The Bureau has issued the following advisory opinions: a. Safe Harbors from Liability under the Fair Debt Collection Practices Act for Certain Actions Taken in Compliance with Mortgage Servicing Rules under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z), 81 FR 71977 (Oct. 19, 2016). E:\FR\FM\21MYP2.SGM 21MYP2 EP21MY19.001</GPH> Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules 23410 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules Supplement I to Part 1006—Official Interpretations jbell on DSK3GLQ082PROD with PROPOSALS2 Introduction 1. Official status. This commentary is the vehicle by which the Bureau of Consumer Financial Protection supplements Regulation F, 12 CFR part 1006, and has been issued under the Bureau’s authority to prescribe rules under 15 U.S.C. 1692l(d) in accordance with the notice-and-comment procedures for informal rulemaking under the Administrative Procedure Act. Unless specified otherwise, references in this commentary are to sections of Regulation F or the Fair Debt Collection Practices Act, 15 U.S.C. 1692 et seq. No commentary is expected to be issued other than by means of this Supplement I. 2. Procedure for requesting interpretations. Anyone may request that an official interpretation of the regulation be added to this commentary. A request for such an official interpretation must be in writing and addressed to the Associate Director, Research, Markets, and Regulations, Bureau of Consumer Financial Protection, 1700 G Street NW, Washington, DC 20552. The request must contain a complete statement of all relevant facts concerning the issue, including copies of all pertinent documents. Interpretations that are adopted will be incorporated in this commentary following publication in the Federal Register. 3. Comment designations. Each comment in the commentary is identified by a number and the regulatory section or paragraph that it interprets. The comments are designated with as much specificity as possible according to the particular regulatory provision addressed. For example, comments to § 1006.34(b)(3) are further divided by subparagraph, such as comment 34(b)(3)(i)–1 and comment 34(b)(3)(iv)–1. Comments that have more general application are designated, for example, as comments 38–1 and 38–2. This introduction may be cited as comments I–1, I–2, and I–3. Subpart A—General Section 1006.2—Definitions 2(b) Attempt to communicate. 1. Examples. Section 1006.2(b) defines an attempt to communicate as any act to initiate a communication or other contact with any person through any medium, including by soliciting a response from such person. An act to initiate a communication or other contact with a person is an attempt to communicate regardless of whether the attempt, if successful, would be a communication that conveys information regarding a debt directly or indirectly to any person. Attempts to communicate include, but are not limited to, the following: i. Placing a telephone call to a person, regardless of whether the debt collector speaks to any person at the called number; or ii. Transmitting a limited-content message, as defined in § 1006.2(j), to a consumer by voicemail or text message sent directly to the consumer or by an oral message left with a third party who answers the consumer’s home or mobile telephone number. 2(d) Communicate or communication. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 1. Any medium. Section 1006.2(d) provides, in relevant part, that a communication can occur through any medium. ‘‘Any medium’’ includes any oral, written, electronic, or other medium. For example, a communication may occur in person or by telephone, audio recording, paper document, mail, email, text message, social media, or other electronic media. 2(j) Limited-content message. 1. In general. Section 1006.2(j) provides that a limited-content message is a message for a consumer that includes all of the content described in § 1006.2(j)(1), that may include any of the content described in § 1006.2(j)(2), and that includes no other content. Any other message is not a limitedcontent message. If a message includes content other than the specific items described in § 1006.2(j)(1) and (2), and such other content directly or indirectly conveys any information about a debt, including but not limited to any information that indicates that the message relates to the collection of a debt, the message is a communication, as defined in § 1006.2(d). For example, a message that includes the consumer’s account number is not a limited-content message because it includes more than a generic statement that the message relates to an account. 2. Examples. i. The following example illustrates a limited-content message that includes only the content described in § 1006.6(j)(1): ‘‘This is Robin Smith calling for Sam Jones. Sam, please contact me at 1– 800–555–1212.’’ ii. The following example illustrates a limited-content message that includes the content described in both § 1006.6(j)(1) and (2): ‘‘Hi, this message is for Sam Jones. Sam, this is Robin Smith. I’m calling to discuss an account. It is 4:15 p.m. on Wednesday, September 1. You can reach me or, Jordan Johnson, at 1–800–555–1212 today until 6:00 p.m. eastern, or weekdays from 8:00 a.m. to 6:00 p.m. eastern.’’ 3. Message for a consumer. A debt collector may transmit a limited-content message to a consumer by, for example, leaving a voicemail at the consumer’s telephone number, sending a text message to the consumer’s mobile telephone number, or leaving a message orally with a third party who answers the consumer’s home or mobile telephone. Other provisions of this part may, in certain circumstances, restrict a debt collector from transmitting a limited-content message or otherwise attempting to communicate with a consumer. See §§ 1006.6(b) and (c) and 1006.22(f) and their related commentary for further guidance regarding when a debt collector is prohibited from attempting to communicate with a consumer. 4. Meaningful disclosure of identity. A debt collector who places a telephone call and leaves only a limited-content message for a consumer does not violate § 1006.14(g) with respect to that telephone call. Paragraph 2(j)(1)(iv). 1. Telephone number that the consumer can use to respond. Section 1006.2(j)(1)(iv) provides that a limited-content message includes a telephone number that the consumer can use to reply to the debt PO 00000 Frm 00138 Fmt 4701 Sfmt 4702 collector. A voicemail or text message that spells out, rather than enumerates numerically, a vanity telephone number is not a limited-content message. Subpart B—Rules for FDCPA Debt Collectors Section 1006.6—Communications in Connection With Debt Collection 6(a) Consumer. Paragraph 6(a)(1). 1. Spouse. Section 1006.6(a)(1) provides that, for purposes of § 1006.6, the term consumer includes a consumer’s spouse. The surviving spouse of a deceased consumer is a spouse as that term is used in § 1006.6(a)(1). Paragraph 6(a)(2). 1. Parent. Section 1006.6(a)(2) provides that, for purposes of § 1006.6, the term consumer includes a consumer’s parent, if the consumer is a minor. A parent of a deceased minor consumer is a parent as that term is used in § 1006.6(a)(2). Paragraph 6(a)(4). 1. Personal representative. Section 1006.6(a)(4) provides that, for purposes of § 1006.6, the term consumer includes the executor or administrator of the consumer’s estate, if the consumer is deceased. The terms executor or administrator include the personal representative of the consumer’s estate. A personal representative is any person who is authorized to act on behalf of the deceased consumer’s estate. Persons with such authority may include personal representatives under the informal probate and summary administration procedures of many States, persons appointed as universal successors, persons who sign declarations or affidavits to effectuate the transfer of estate assets, and persons who dispose of the deceased consumer’s assets extrajudicially. 6(b) Communications with a consumer—in general. 6(b)(1) Prohibitions regarding unusual or inconvenient times or places. 1. Designation of inconvenience. Section 1006.6(b)(1) prohibits a debt collector from, among other things, communicating or attempting to communicate with a consumer in connection with the collection of any debt at a time or place that the debt collector knows or should know is inconvenient to the consumer. The debt collector may know, or should know, that a time or place is inconvenient if the consumer uses the word ‘‘inconvenient’’ to notify the debt collector. In addition, depending on the facts and circumstances, the debt collector may know, or should know, that a time or place is inconvenient even if the consumer does not use the word ‘‘inconvenient’’ to notify the debt collector. Further, if the consumer initiates a communication with the debt collector at a time or from a place that the consumer previously designated as inconvenient, the debt collector may respond once to that consumer-initiated communication at that time or place. After that response, the debt collector must not communicate or attempt to communicate further with the consumer at that time or place until the consumer conveys that the time or place is no longer inconvenient. For example (unless an exception in § 1006.6(b)(4) applies): E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules i. Assume that a consumer tells a debt collector that the consumer ‘‘is busy’’ or ‘‘cannot talk’’ on weekdays from 3:00 p.m. to 5:00 p.m. Based on these facts, the debt collector knows or should know that, on weekdays, the time period between 3:00 p.m. and 5:00 p.m. is inconvenient to the consumer and, thereafter, the debt collector must not communicate or attempt to communicate with the consumer between those times. ii. Assume the same facts as in comment 6(b)(1)–1.i, except that, after the consumer tells the debt collector that the consumer ‘‘is busy’’ or ‘‘cannot talk’’ on weekdays from 3:00 p.m. to 5:00 p.m., the consumer initiates a communication with the debt collector at 4:30 p.m. on a weekday. Based on these facts, § 1006.6(b)(1)(i) does not prohibit the debt collector from responding once to the consumer. Unless the consumer otherwise informs the debt collector, however, § 1006.6(b)(1)(i) prohibits the debt collector from future communications or attempts to communicate with the consumer between 3:00 p.m. and 5:00 p.m. on weekdays. iii. Assume that a consumer tells a debt collector not to communicate with the consumer at school. Based on these facts, the debt collector knows or should know that communications to the consumer at school are inconvenient and, thereafter, the debt collector must not communicate or attempt to communicate with the consumer at that place. iv. Assume the same facts as in comment 6(b)(1)–1.iii, except that, after the consumer tells the debt collector not to communicate with the consumer at school, the consumer initiates a communication with the debt collector from school. Based on these facts, § 1006.6(b)(1)(ii) does not prohibit the debt collector from responding once to the consumer. Unless the consumer otherwise informs the debt collector, however, § 1006.6(b)(1)(ii) prohibits the debt collector from future communications or attempts to communicate with the consumer at school. Paragraph 6(b)(1)(i). 1. Time of electronic communication. Under § 1006.6(b)(1)(i), a debt collector is prohibited from communicating or attempting to communicate electronically, such as through email or text message, at a time the debt collector knows or should know is inconvenient to the consumer. For purposes of determining the time of an electronic communication under § 1006.6(b)(1)(i), an electronic communication occurs when the debt collector sends it, not, for example, when the consumer receives or views it. 2. Consumer’s location. Under § 1006.6(b)(1)(i), in the absence of the debt collector’s knowledge of circumstances to the contrary, an inconvenient time for communicating with a consumer is before 8:00 a.m. and after 9:00 p.m. local time at the consumer’s location. If a debt collector is unable to determine a consumer’s location, then, in the absence of knowledge of circumstances to the contrary, the debt collector complies with § 1006.6(b)(1)(i) if the debt collector communicates or attempts to communicate with the consumer at a time that would be convenient in all of the VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 locations at which the debt collector’s information indicates the consumer might be located. The following examples, which assume that the debt collector has no information about times the consumer considers inconvenient or other information about the consumer’s location, illustrate the rule. i. Assume that a debt collector’s information indicates that a consumer has a mobile telephone number with an area code associated with the Eastern time zone and a street address in the Pacific time zone. The convenient times to communicate with the consumer are after 11:00 a.m. Eastern time (8:00 a.m. Pacific time) and before 9:00 p.m. Eastern time (6:00 p.m. Pacific time). ii. Assume that a debt collector’s information indicates that a consumer has a mobile telephone number with an area code associated with the Eastern time zone and a landline telephone number with an area code associated with the Mountain time zone. The convenient times to communicate with the consumer are after 10:00 a.m. Eastern time (8:00 a.m. Mountain time) and before 9:00 p.m. Eastern time (7:00 p.m. Mountain time). 6(b)(3) Prohibitions regarding consumer’s place of employment. 1. Work email. Section 1006.6(b)(3) prohibits a debt collector from communicating or attempting to communicate with a consumer in connection with the collection of any debt at the consumer’s place of employment, if the debt collector knows or has reason to know that the consumer’s employer prohibits the consumer from receiving such communication. For special rules regarding a consumer’s work email, see § 1006.22(f)(3). 6(b)(4) Exceptions. Paragraph 6(b)(4)(i). 1. Prior consent—in general. Section 1006.6(b)(4)(i) provides, in part, that the prohibitions in § 1006.6(b)(1) on a debt collector communicating or attempting to communicate with a consumer in connection with the collection of any debt at a time or place that the debt collector knows or should know is inconvenient to the consumer do not apply if the debt collector communicates or attempts to communicate with the prior consent of the consumer. If the debt collector learns during a communication that the debt collector is communicating with a consumer at an inconvenient time or place, the debt collector may ask the consumer what time or place would be convenient. However, the debt collector cannot during that communication ask the consumer to consent to the continuation of the communication with the consumer at the inconvenient time or place. 2. Directly to the debt collector. Section 1006.6(b)(4)(i) requires the prior consent of the consumer to be given directly to the debt collector. For example, a debt collector cannot rely on the prior consent of the consumer given to the original creditor or to a previous debt collector. 6(c) Communications with a consumer— after refusal to pay or cease communication notice. 6(c)(1) Prohibitions. 1. Notification complete upon receipt. If, pursuant to § 1006.6(c)(1), a consumer PO 00000 Frm 00139 Fmt 4701 Sfmt 4702 23411 notifies a debt collector in writing or in electronic form using a medium of electronic communication through which a debt collector accepts electronic communications from consumers, that the consumer either refuses to pay a debt or wants the debt collector to cease further communication with the consumer, notification is complete upon the debt collector’s receipt of that information. 2. Interpretation of the E-SIGN Act. Comment 6(c)(1)–1 constitutes the Bureau’s interpretation of section 101 of the E-SIGN Act as applied to FDCPA section 805(c). Under this interpretation, section 101(a) of the E-SIGN Act enables a consumer to satisfy the requirement in FDCPA section 805(c) that the consumer’s notification of the debt collector be ‘‘in writing’’ through an electronic request. Further, section 101(b) of the E-SIGN Act is not contravened because the consumer may only satisfy the writing requirement using a medium of electronic communication through which a debt collect accepts electronic communications from consumers. 6(c)(2) Exceptions. 1. Written early intervention notice for mortgage servicers. The Bureau has interpreted the written early intervention notice required by 12 CFR 1024.39(d)(3) to fall within the exceptions to the cease communication provision in FDCPA section 805(c)(2) and (3). See 12 CFR 1024.39(d)(3), its commentary, and the Bureau’s 2016 FDCPA Interpretive Rule (81 FR 71977 (Oct. 19, 2016)). 6(d) Communications with third parties. 6(d)(1) Prohibitions. 1. Limited-content message. Section 1006.2(j) provides, in part, that a limitedcontent message is not a communication, as defined in § 1006.2(d). Because a limitedcontent message is not a communication, a debt collector does not violate § 1006.6(d)(1) if the debt collector leaves a limited-content message for a consumer with a third party who answers the consumer’s home or mobile telephone. Such a message is an attempt to communicate, as defined in § 1006.2(b), with the consumer. However, if, during the course of the interaction with the third party, the debt collector conveys content other than the specific items described in § 1006.2(j)(1) and (2), and such other content directly or indirectly conveys any information regarding a debt, the message is a communication, as defined in § 1006.2(d), subject to the prohibition on third-party communications in § 1006.6(d)(1). See § 1006.2(j) and its related commentary for further guidance concerning limited-content messages. 6(d)(2) Exceptions. 1. Prior consent. See the commentary to § 1006.6(b)(4)(i) for guidance concerning a consumer giving prior consent directly to a debt collector. 6(d)(3) Reasonable procedures for email and text message communications. Paragraph 6(d)(3)(i). 1. Non-work email address and telephone number. For purposes of § 1006.6(d)(3)(i)(B) and (C), an email address is a non-work email address unless the debt collector knows or should know that the email address is provided to the consumer by the consumer’s E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 23412 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules employer. For purposes of § 1006.6(d)(3)(i)(B) and (C), a telephone number is a non-work telephone number unless the debt collector knows or should know that the telephone number is provided to the consumer by the consumer’s employer. See § 1006.22(f)(3) and its related commentary for clarification regarding when a debt collector knows or should know that an email address is provided by a consumer’s employer. Paragraph 6(d)(3)(i)(B). Paragraph 6(d)(3)(i)(B)(1). 1. Format of notice. The opt-out notice described in § 1006.6(d)(3)(i)(B)(1) may be provided orally, in writing, or electronically. The notice must be provided clearly and conspicuously, as defined in § 1006.34(b)(1). If the notice is provided in writing or electronically, it must comply with the requirements of § 1006.42(a). 2. Reasonable period for consumer to opt out in an oral communication. If a creditor or a debt collector provides the opt-out notice described in § 1006.6(d)(3)(i)(B)(1) to the consumer in an oral communication, such as a telephone or in-person conversation, the creditor or the debt collector may require the consumer to make an opt-out decision during that same communication. 3. Combined notice concerning electronic communications and hyperlinked delivery of notices. A debt collector or a creditor may include the opt-out notice described in § 1006.6(d)(3)(i)(B)(1) in the same communication as the opt-out notice described in § 1006.42(d)(1) or (2), as applicable. Paragraph 6(d)(3)(i)(B)(2). 1. Expiration of opt-out period. Pursuant to § 1006.6(d)(3)(i)(B)(2), a debt collector may obtain a safe harbor from liability for making a disclosure that violates § 1006.6(d)(1) if, among other things, the debt collector communicates with a consumer using a specific non-work email address or non-work telephone number after the expiration of a specified opt-out period, if the consumer has not opted out. However, if the consumer requests after the expiration of the opt-out period that the debt collector not use the specific non-work email address or non-work telephone number, § 1006.14(h) prohibits the debt collector from communicating or attempting to communicate with the consumer using that email address or telephone number. Likewise, if the consumer requests after the expiration of the opt-out period that the debt collector not communicate with the consumer by email or text message, § 1006.14(h) prohibits the debt collector from communicating or attempting to communicate with the consumer by email or text message, including by using the specific non-work email address or non-work telephone number. See § 1006.14(h). 6(e) Opt-out notice for electronic communications or attempts to communicate. 1. In general. Section 1006.6(e) requires a debt collector who communicates or attempts to communicate with a consumer electronically in connection with the collection of a debt using a specific email address, telephone number for text messages, or other electronic-medium address to include in such communication or attempt to VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 communicate a clear and conspicuous statement describing one or more ways the consumer can opt out of further electronic communications or attempts to communicate by the debt collector to that address or telephone number. Clear and conspicuous has the same meaning as in § 1006.34(b)(1). The following examples illustrate the rule. i. Assume that a debt collector sends a text message to a consumer’s mobile telephone number. Pursuant to § 1006.6(e), the text message must contain a clear and conspicuous statement describing how the consumer can opt out of receiving further text messages from the debt collector to that telephone number. For example, a text message would comply with this requirement by including the following instruction: ‘‘Reply STOP to stop texts to this telephone number.’’ ii. Assume that a debt collector sends the consumer an email message. Pursuant to § 1006.6(e), the email message must contain a clear and conspicuous statement describing how the consumer can opt out of receiving further email messages from the debt collector to that email address. For example, an email would comply with this requirement by including instructions in a textual format in the email, in a type size no smaller than the other text in the email, explaining that the consumer may opt out of receiving further email communications from the debt collector to that email address by replying with the word ‘‘stop’’ in the subject line. Section 1006.10—Acquisition of Location Information 10(a) Definition. 1. Location information about deceased consumers. If a consumer obligated or allegedly obligated to pay any debt is deceased, location information includes the information described in § 1006.10(a) for a person who is authorized to act on behalf of the deceased consumer’s estate. 10(b) Form and content of location communications. Paragraph 10(b)(2). 1. Executors, administrators, or personal representatives of a deceased consumer’s estate. Section 1006.10(b)(2) prohibits a debt collector who is communicating with any person other than the consumer for the purpose of acquiring location information about the consumer from stating that the consumer owes any debt. If the consumer obligated or allegedly obligated to pay the debt is deceased and the debt collector is attempting to locate the person who is authorized to act on behalf of the deceased consumer’s estate, the debt collector does not violate § 1006.10(b)(2) by stating that the debt collector is seeking to identify and locate the person who is authorized to act on behalf of the deceased consumer’s estate. Section 1006.14—Harassing, Oppressive, or Abusive Conduct 14(b) Repeated or continuous telephone calls or telephone conversations. 14(b)(1) In general. 1. In general. Section 1006.14(b)(1)(i) provides that, in connection with the collection of a debt, a debt collector must not place telephone calls or engage any person in PO 00000 Frm 00140 Fmt 4701 Sfmt 4702 telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number. Section 1006.14(b)(1)(ii) provides that, with respect to a debt collector who is collecting a consumer financial product or service debt, as defined in § 1006.2(f), it is an unfair act or practice under section 1031 of the DoddFrank Act to place telephone calls or engage any person in telephone conversation repeatedly or continuously in connection with the collection of such debt, such that the natural consequence is to harass, oppress, or abuse any person at the called number. For purposes of § 1006.14(b)(1)(i) and (ii), placing a telephone call includes conveying a ringless voicemail but does not include sending an electronic message (e.g., a text message or an email) to a mobile telephone. 14(b)(2) Frequency limits. Paragraph 14(b)(2)(i). 1. Examples. Section 1006.14(b)(2)(i) provides that, subject to § 1006.14(b)(3), a debt collector must not place a telephone call to a particular person more than seven times within seven consecutive days in connection with the collection of a particular debt. The following examples illustrate the rule. i. On Wednesday, March 1, a debt collector first attempts to communicate with a consumer in connection with the collection of a debt by placing a telephone call and leaving a limited-content message on the consumer’s voicemail. Between Thursday and Sunday, the debt collector places six more telephone calls to the consumer, all of which go unanswered. As of Sunday, the debt collector has placed seven telephone calls to the consumer in connection with the collection of the credit card debt within the period of seven consecutive days that started on Wednesday, March 1. Subject to § 1006.14(b)(3), the debt collector may place another telephone call to the consumer in connection with collection of the debt on Wednesday, March 8 but not before that date. ii. On Tuesday, October 5, a debt collector first attempts to communicate with a particular third party for the purpose of obtaining location information about a consumer by placing a telephone call to that third party that goes unanswered. Subject to §§ 1006.10 and 1006.14(b)(3), the debt collector may place up to six more telephone calls to that third party for the purpose of obtaining location information about that consumer through Monday, October 11, unless the debt collector engages in a telephone conversation with the third party before that day. See § 1006.10(c) for further guidance concerning when a debt collector is prohibited from communicating with a person other than the consumer for the purpose of acquiring location information. 2. Misdirected telephone calls. Section 1006.14(b)(2)(i) limits the number of times a debt collector may place telephone calls to a particular person within seven consecutive days in connection with the collection of a particular debt. If, within a period of seven consecutive days, a debt collector attempts to communicate with a particular person by placing telephone calls to a particular telephone number, and the debt collector then learns that the telephone number is not that person’s number, the calls that the debt E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules collector made to that number are not considered to have been calls to that person during that seven-day period for purposes of § 1006.14(b)(2)(i). For example: i. Assume that a debt collector attempts to communicate with a consumer on Monday and Wednesday by placing one unanswered telephone call to a particular telephone number on each of those days. On Thursday, the debt collector learns that the telephone number belongs to someone else and that the consumer does not answer calls to that number. For purposes of § 1006.14(b)(2)(i), the debt collector has not yet placed any telephone calls to that consumer during that seven-day period. Paragraph 14(b)(2)(ii). 1. Examples. Section 1006.14(b)(2)(ii) provides that, subject to § 1006.14(b)(3), a debt collector must not place a telephone call to a particular person in connection with the collection of a particular debt within a period of seven consecutive days after having had a telephone conversation with the person in connection with the collection of such debt. Section 1006.14(b)(2)(ii) also states that the date of the telephone conversation is the first day of the seven-consecutive-day period. The following examples illustrate the rule. i. On Tuesday, April 11, a debt collector first attempts to communicate with a consumer in connection with the collection of a debt by placing a telephone call to the consumer that the consumer does not answer. On Friday, April 14, the debt collector again places a telephone call to the consumer and has a telephone conversation with the consumer in connection with the collection of the debt. Subject to § 1006.14(b)(3), the debt collector may not place a telephone call to the consumer in connection with the collection of that debt again until Friday, April 21. ii. On Thursday, August 13, a consumer initiates a telephone conversation with a debt collector regarding a debt. Subject to § 1006.14(b)(3), the debt collector may not place a telephone call to the consumer in connection with the collection of that debt again until Thursday, August 20. 14(b)(3) Certain telephone calls excluded from the frequency limits. Paragraph 14(b)(3)(i). 1. Responsive calls. Section 1006.14(b)(3)(i) provides that telephone calls placed to a person to respond to the person’s request for information do not count toward, and are permitted in excess of, the frequency limits in § 1006.14(b)(2). Once the debt collector provides a response to a person’s request for information, the exception in § 1006.14(b)(3)(i) does not apply to subsequent telephone calls placed by the debt collector to the person, unless the person makes another request. 2. Example. On Wednesday, October 4, a debt collector places a telephone call to a consumer. During the ensuing telephone conversation in connection with the collection of a debt, the consumer requests additional information about the debt that the debt collector does not have at the time of the call. While § 1006.14(b)(2) otherwise would prohibit the debt collector from placing a telephone call to the consumer again until Wednesday, October 11, VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 § 1006.14(b)(3)(i) provides that the debt collector may place telephone calls to respond to the consumer’s request for information before the following Wednesday. Assume further that the debt collector provides a response to the consumer’s request on Friday, October 6. Thereafter, the exception in § 1006.14(b)(3)(i) does not apply to subsequent telephone calls placed by the debt collector to the consumer, unless the consumer makes another request. Paragraph 14(b)(3)(ii). 1. Prior consent. See the commentary to § 1006.6(b)(4)(i) for guidance concerning a person giving prior consent directly to a debt collector. 2. Example. On Friday, April 5, a debt collector places a telephone call to a consumer. During the ensuing telephone conversation in connection with the collection of a debt, the consumer requests that the debt collector call back at a later time. While § 1006.14(b)(2) otherwise would prohibit the debt collector from placing a telephone call to the consumer again until Friday, April 12, § 1006.14(b)(3)(ii) provides that the debt collector may place telephone calls pursuant to the consumer’s prior consent before the following Friday. Assume further that the debt collector calls the consumer back on Monday, April 8, and that they have a telephone conversation on that date. Thereafter, the exception in § 1006.14(b)(3)(ii) does not apply to subsequent telephone calls placed by the debt collector to the consumer, unless the consumer again provides prior consent directly to the debt collector. Paragraph 14(b)(3)(iii). 1. Unconnected telephone calls. Section 1006.14(b)(3)(iii) provides that telephone calls placed to a person do not count toward, and are permitted in excess of, the frequency limits in § 1006.14(b)(2) if they do not connect to the dialed number. A debt collector’s telephone call does not connect to the dialed number if, for example, the debt collector receives a busy signal or an indication that the dialed number is not in service. Conversely, a debt collector’s telephone call connects to the dialed number if, for example, the call causes a telephone to ring at the dialed number but no one answers the call, or the call does not cause a telephone to ring but is connected to a voicemail or other recorded message. 2. Example. Section 1006.14(b)(3)(iii) provides that telephone calls placed to a person do not count toward, and are permitted in excess of, the frequency limits in § 1006.14(b)(2) if they do not connect to the dialed number. For example, on Thursday, February 2, a debt collector places a telephone call to a consumer about a credit card debt in response to which the debt collector receives a busy signal or an indication that the dialed number is not in service. That telephone call does not count toward the frequency limits in § 1006.14(b)(2). Subject to § 1006.14(b)(3), the debt collector may place seven more telephone calls to the consumer about that credit card debt through Wednesday, February 8, unless the debt collector engages in a telephone conversation with the consumer in connection with the collection of the debt before that day. PO 00000 Frm 00141 Fmt 4701 Sfmt 4702 23413 14(b)(5) Definition. 1. Particular debt. Section 1006.14(b)(2) limits the frequency with which a debt collector may place telephone calls to, or engage in telephone conversation with, a person in connection with the collection of a particular debt. Section 1006.14(b)(5) provides that, except in the case of student loan debt, the term particular debt means each of a consumer’s debts in collection. For student loan debt, § 1006.14(b)(5) provides that the term particular debt means all student loan debts that a consumer owes or allegedly owes that were serviced under a single account number at the time the debts were obtained by the debt collector. The following examples illustrate the rule. i. A debt collector is attempting to collect a medical debt and a credit card debt from the same consumer. Subject to § 1006.14(b)(3), the debt collector may, within a period of seven consecutive days, place seven unanswered telephone calls to the consumer in connection with the collection of the medical debt, and seven unanswered telephone calls to the consumer in connection with the collection of the credit card debt. ii. A debt collector is attempting to collect a medical debt and a credit card debt from the same consumer. On Monday, November 9, the debt collector engages in a telephone conversation with the consumer solely in connection with the collection of the medical debt, but the debt collector does not place any telephone calls to the consumer in connection with the collection of the credit card debt. Subject to § 1006.14(b)(3), the debt collector may not place a telephone call to the consumer in connection with the collection of the medical debt again until Monday, November 16. Subject to § 1006.14(b), however, the debt collector may place telephone calls to, and engage in a telephone conversation with, the consumer in connection with the collection of the credit card debt before Monday, November 16. iii. A debt collector is attempting to collect three student loan debts that were serviced under a single account number at the time that they were obtained by the debt collector and that are owed or allegedly owed by the same consumer. All three debts are treated as a single debt for purposes of § 1006.14(b)(2). Subject to § 1006.14(b)(3), the debt collector may place seven telephone calls within seven days to the consumer in connection with the collection of the debts. If, however, the debt collector engages the consumer in a telephone conversation in connection with the collection of any of the debts, the debt collector may not place a telephone call to the consumer again during the same sevenday period in connection with the collection of any of the debts. 14(h) Prohibited communication media. 14(h)(1) In general. 1. Communication media. Section 1006.14(h) prohibits a debt collector from communicating or attempting to communicate with a consumer in connection with the collection of any debt through a medium of communication if the consumer has requested that the debt collector not use that medium to communicate with the E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 23414 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules consumer. See comment 2(d)–1 for examples of communication media. 2. Specific address or telephone number. Within a medium of communication, a consumer may request that a debt collector not use a specific address or telephone number. For example, if a debt collector has two mobile telephone numbers on file for a consumer, the consumer may request that the debt collector not use either or both mobile telephone numbers. Section 1006.18—False, Deceptive, or Misleading Representations or Means 18(e) Disclosures required. 1. Communication. A limited-content message, as defined in § 1006.2(j), is not a communication, as that term is defined in § 1006.2(d). Thus, a debt collector who leaves a limited-content message for a consumer need not make the disclosures required by § 1006.18(e)(1) and (2). However, if a debt collector leaves a voicemail message for a consumer that includes content in addition to the content described in § 1006.2(j)(1) and (2) and which directly or indirectly conveys any information regarding a debt, the voicemail message is a communication, and the debt collector is required to make the § 1006.18(e) disclosures. See the commentary to § 1006.2(d) and (j) for additional clarification regarding the definitions of ‘‘communication’’ and ‘‘limited-content messages.’’ 18(e)(1) Initial communications. 1. Example. A debt collector must make the disclosure required by § 1006.18(e)(1) in the debt collector’s initial communication with a consumer, regardless of whether that communication is written or oral, and regardless of whether the debt collector or the consumer initiated the communication. For example, assume that a debt collector who has not previously communicated with a consumer attempts to communicate with the consumer by leaving a limited-content message, as defined in § 1006.2(j), in the consumer’s voicemail. After listening to the debt collector’s limited-content message, the consumer initiates a telephone call to, and communicates with, the debt collector. Pursuant to § 1006.18(e)(1), because the consumer-initiated call is the ‘‘initial communication’’ between the debt collector and the consumer, the debt collector must disclose to the consumer during that telephone call that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose. Section 1006.22—Unfair or Unconscionable Means 22(f) Restrictions on use of certain media. Paragraph 22(f)(3). 1. Consent to use employer-provided email address. Section 1006.22(f)(3) prohibits a debt collector from communicating or attempting to communicate with a consumer using an email address that the debt collector knows or should know is provided to the consumer by the consumer’s employer, unless the debt collector has received directly from the consumer either prior consent to use that email address or an email from that email address. The consumer could at any time, however, opt out of receiving VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 emails at that address using instructions provided by a debt collector pursuant to § 1006.6(e), or otherwise request not to receive emails at that address pursuant to § 1006.14(h). See the commentary to § 1006.6(b)(4)(i) for additional guidance concerning a consumer giving prior consent directly to a debt collector. 2. Receipt of email from employer-provided email address. Section 1006.22(f)(3) prohibits a debt collector from communicating or attempting to communicate with a consumer using an email address that the debt collector knows or should know is provided to the consumer by the consumer’s employer, unless the debt collector has received directly from the consumer either prior consent to use that email address or an email from that email address. A debt collector who receives an email directly from a consumer from an email address provided by the consumer’s employer may communicate or attempt to communicate with the consumer at that email address, even if the consumer’s email does not provide prior consent to the debt collector. For example, assume a debt collector has provided to a consumer a validation notice pursuant to § 1006.34 but has not otherwise communicated or attempted to communicate with the consumer. Assume further that the consumer subsequently sends an email directly to the debt collector from an email address that the debt collector knows or should know is provided to the consumer by the consumer’s employer; that the consumer’s email requests additional information about the debt but does not give prior consent to the debt collector’s use of that email address; and that the debt collector neither knows nor has reason to know that the consumer’s employer prohibits the consumer from receiving communications in connection with the collection of a debt. Section 1006.22(f)(3) permits the debt collector to communicate or attempt to communicate with the consumer using that email address. The consumer could, however, subsequently opt out or request not to receive messages at that email address pursuant to §§ 1006.6(e) or 1006.14(h). 3. Knowledge of employer-provided email address. For purposes of § 1006.22(f)(3), a debt collector knows or should know an email address is provided to the consumer by the consumer’s employer if, for example, the email address’s top-level domain name is one ordinarily associated with work email addresses (e.g., .gov or .mil), the email address’s domain name includes a corporate name that is not commonly associated with non-work email addresses (e.g., springsidemortgage.com), or the debt collector knows the identity of the consumer’s employer and the email address’s domain name includes the employer’s name or an abbreviation of the employer’s name (e.g., the debt collector knows that the consumer works at Example Mortgage Company and the email address is examplemortgagecompany.com or exmoc.com). In the absence of contrary information, a debt collector neither would know nor should know that an email address is provided to the consumer by the consumer’s employer if the email address’s PO 00000 Frm 00142 Fmt 4701 Sfmt 4702 domain name is one commonly associated with a provider of non-work email addresses. Paragraph 22(f)(4). 1. Social media. Section 1006.22(f)(4) prohibits a debt collector from communicating or attempting to communicate with a consumer in connection with the collection of a debt by a social media platform that is viewable by a person other than the persons described in § 1006.6(d)(1)(i) through (vi). For example, § 1006.22(f)(4) prohibits a debt collector from posting, in connection with the collection of a debt, any message, including a limitedcontent message, for a consumer on a social media web page if that web page is viewable by the general public or the consumer’s social media contacts. If a social media platform enables a debt collector to send a private message to the consumer that is not viewable by a person other than the persons described in § 1006.6(d)(1)(i) through (vi), however, § 1006.22(f)(4) does not prohibit a debt collector from communicating or attempting to communicate with a consumer in connection with the collection of a debt by sending such a private message to the consumer, including by sending a limitedcontent message, although §§ 1006.6(b) or 1006.14(h) nonetheless may prohibit the debt collector from sending such a private message if, for example, the consumer has requested that the debt collector not use that medium to communicate with the consumer. Section 1006.30—Other Prohibited Practices 30(a) Communication prior to furnishing information. 1. Communication. Section 1006.30(a) prohibits a debt collector from furnishing information to a consumer reporting agency about a debt before communicating with the consumer about that debt. Pursuant to § 1006.2(d), a debt collector has communicated with the consumer about the debt if the debt collector conveys information regarding a debt directly or indirectly to the consumer through any medium. Pursuant to § 1006.2(d), a debt collector has not communicated with the consumer about the debt if the debt collector attempts to communicate with the consumer but no communication occurs. For example, a debt collector communicates with the consumer if the debt collector provides a validation notice to the consumer; a debt collector does not communicate with the consumer by leaving a limited-content message for the consumer. For additional clarification on providing disclosures in a manner that is reasonably expected to provide actual notice to consumers, see § 1006.42. 30(b) Prohibition on the sale, transfer, or placement of certain debts. 30(b)(1) In general. 30(b)(1)(i) FDCPA prohibition. Paragraph 30(b)(1)(i)(C). 1. Identity theft report filed. Under § 1006.30(b)(1)(i)(C), a debt collector may not sell, transfer, or place for collection a debt if the debt collector knows or should know that an identity theft report was filed with respect to the debt. A debt collector knows or should know that an identity theft report was filed if, for example, the debt collector has received a copy of the identity theft report. 30(b)(2) Exceptions. E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules Paragraph 30(b)(2)(i). 1. In general. Under § 1006.30(b)(2)(i), a debt collector who is collecting a debt described in § 1006.30(b)(1)(i) may transfer the debt to the debt’s owner. However, unless another exception under § 1006.30(b)(2) applies, the debt collector may not transfer the debt or the right to collect the debt to another entity on behalf of the debt owner. Section 1006.34—Notice for Validation of Debts 34(a)(1) Validation information required. 1. Deceased consumers. Section 1006.34(a)(1) generally requires a debt collector to provide the validation information described in § 1006.34(c) either by sending the consumer a validation notice in a manner that satisfies § 1006.42(a), or by providing the information orally in the debt collector’s initial communication. If the debt collector knows or should know that the consumer is deceased, and if the debt collector has not previously provided the validation information to the deceased consumer, a person who is authorized to act on behalf of the deceased consumer’s estate operates as the consumer for purposes of § 1006.34(a)(1). In such circumstances, to comply with § 1006.34(a)(1), a debt collector must provide the validation information to an individual that the debt collector identifies by name who is authorized to act on behalf of the deceased consumer’s estate. 34(b) Definitions. 34(b)(3) Itemization date. 1. In general. Section 1006.34(b)(3) defines itemization date for purposes of § 1006.34. Section 1006.34(b)(3) states that the itemization date is any one of four potential references dates for which a debt collector can ascertain the amount of the debt. The four potential reference dates are the last statement date, the charge-off date, the last payment date, and the transaction date. A debt collector may select any of these dates as the itemization date to comply with § 1006.34. Once a debt collector uses a reference date for a specific debt in a communication with an individual consumer, the debt collector must use that reference date for that debt consistently when providing disclosures required by § 1006.34 to that consumer. For example, if a debt collector uses the last statement date to determine and disclose the account number associated with the debt pursuant to § 1006.34(c)(2)(v), the debt collector may not use the charge-off date to determine and disclose the amount of the debt pursuant to § 1006.34(c)(2)(viii). Paragraph 34(b)(3)(i). 1. Last statement date. Under § 1006.34(b)(3)(i), the last statement date is the date of the last periodic statement or written account statement or invoice provided to the consumer. For purposes of § 1006.34(b)(3)(i), a statement provided by a creditor or a third party acting on the creditor’s behalf, including a creditor’s service provider, may constitute the last statement provided to the consumer. Paragraph 34(b)(3)(iv). 1. Transaction date. Section 1006.34(b)(3)(iv) provides that the itemization date may be the date of the transaction that gave rise to the debt. The VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 transaction date is the date that a creditor provided, or made available, a good or service to a consumer. For example, the transaction date for a debt arising from a medical procedure may be the date the medical procedure was performed, and the transaction date for a consumer’s gym membership may be the date the membership contract was executed. In some cases, a debt collector may identify more than one potential transaction date. For example, a debt may have two transaction dates if a contract for a service is executed on one date and the service is performed on another date. If a debt has more than one transaction date, a debt collector may use any such date as the transaction date for purposes of § 1006.34(b)(3)(iv) but must use whichever transaction date it selects consistently, as described in comment 34(b)(3)–1. 34(b)(5) Validation period. 1. Updated validation period. Section 1006.34(b)(5) defines the validation period as the period starting on the date that a debt collector provides the validation information required by § 1006.34(a)(1) and ending 30 days after the consumer receives or is assumed to receive those disclosures. Section 1006.34(c)(3)(i) through (iii) requires statements that specify the end date of the validation period. If a debt collector sends a subsequent validation notice to a consumer because the consumer did not receive the original validation notice and the consumer has not otherwise received the validation information described in § 1006.34(c), the debt collector must calculate the end date of the validation period specified in the § 1006.34(c)(3) disclosures based on the date the consumer receives or is assumed to receive the subsequent validation notice. For example, assume a debt collector sends a consumer a validation notice on January 1, and that notice is returned as undeliverable. After obtaining accurate location information, the debt collector sends the consumer a subsequent validation notice on January 15. Pursuant to § 1006.34(b)(5), the end date of the validation period specified in the § 1006.34(c)(3) disclosures should be based on the date the consumer receives or is assumed to receive the validation notice sent on January 15. 34(c) Validation information. 34(c)(2) Information about the debt. Paragraph 34(c)(2)(ii). 1. Consumer’s name. Section 1006.34(c)(2)(ii) provides that validation information includes the consumer’s name and mailing address. The consumer’s name is what the debt collector reasonably determines is the most complete version of the name about which the debt collector has knowledge, whether obtained from the creditor or another source. It would be unreasonable for a debt collector to determine the consumer’s name is the most complete version of the consumer’s name if the debt collector has omitted name information in a manner that created a false, misleading, or confusing impression about the consumer’s identity. For example, if the creditor provides the consumer’s first name, middle name, last name, and name suffix to the debt collector, it would be unreasonable for the debt collector to not provide all of that information to the consumer. PO 00000 Frm 00143 Fmt 4701 Sfmt 4702 23415 Paragraph 34(c)(2)(iii). 1. Merchant brand. Section 1006.34(c)(2)(iii) provides that validation information includes the merchant brand, if any, associated with a credit card debt, to the extent that such information is available to the debt collector. For example, assume that a debt collector is attempting to collect a consumer’s credit card debt. The credit card was issued by ABC Bank and was co-branded XYZ Store, and this information is available to the debt collector. The debt collector must provide the ‘‘XYZ Store’’ merchant brand information to the consumer. Paragraph 34(c)(2)(v). 1. Account number truncation. Section 1006.34(c)(2)(v) provides that validation information includes the account number associated with the debt on the itemization date, or a truncated version of that number. If a debt collector uses a truncated account number, the account number must remain recognizable. For example, a debt collector may truncate a credit card account number so that only the last four digits appear on a validation notice. Paragraph 34(c)(2)(viii). 1. Amount of the debt on the itemization date. Section 1006.34(c)(2)(viii) provides that validation information includes the amount of the debt on the itemization date. The amount of the debt on the itemization date includes any fees, interest, or other charges owed as of that date. Paragraph 34(c)(2)(ix). 1. Itemization of the debt. Section 1006.34(c)(2)(ix) provides that validation information includes an itemization of the current amount of the debt in a tabular format reflecting interest, fees, payments, and credits since the itemization date. When providing a validation notice, a debt collector must include fields in the notice for all of these items even if none of the items have been assessed or applied to the debt since the itemization date. A debt collector may indicate that the value of a required field is ‘‘0’’ or ‘‘N/A,’’ or may state that no interest, fees, payments, or credits have been assessed or applied to the debt. Paragraph 34(c)(2)(x). 1. Current amount of the debt. Section 1006.34(c)(2)(x) provides that validation information includes the current amount of the debt (i.e., the amount as of when the validation information is provided). For residential mortgage debt subject to Regulation Z, 12 CFR 1026.41, a debt collector may comply with the requirement to provide the current amount of the debt by providing the consumer the total balance of the outstanding mortgage, including principal, interest, fees, and other charges. 34(c)(3) Information about consumer protections. Paragraph 34(c)(3)(v). 1. Electronic communication media. Section 1006.34(c)(3)(v) provides that validation information includes a statement explaining how a consumer can take the actions described in § 1006.34(c)(4) and (d)(3), as applicable, electronically, if the debt collector provides the validation notice electronically. A debt collector may provide the information described by § 1006.34(c)(3)(v) by including the E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 23416 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules statements, ‘‘We accept disputes electronically at,’’ using that phrase or a substantially similar phrase, followed by an email address or website portal that a consumer can use to take the action described in § 1006.34(c)(4)(i), and ‘‘We accept original creditor information requests electronically,’’ using that phrase or a substantially similar phrase, followed by an email address or website portal that a consumer can use to take the action described in § 1006.34(c)(4)(ii). If a debt collector accepts electronic communications from consumers through more than one medium, such as by email and through a website portal, the debt collector is only required to provide information regarding one of these media but may provide information on any additional media. Paragraph 34(c)(3)(vi). 1. In general. Section 1006.34(c)(3)(vi) provides that, for a validation notice delivered in the body of an email pursuant to § 1006.42(b)(1) or (c)(2)(i), validation information includes the opt-out statement required by § 1006.6(e). If a validation notice is delivered on a website pursuant to § 1006.42(c)(2)(ii), the validation notice need not contain the opt-out instructions because the consumer would have already received the opt-out instructions since those instructions are required for any email or text message that provides a hyperlink to the website where the notice is placed. Delivery of a validation notice that a debt collector previously provided pursuant to § 1006.42(b)(1) or (c)(2)(i) or (ii) is not rendered ineffective because a consumer opts out of future electronic communications. 34(c)(4) Consumer response information. 1. Prompts. If the validation information is provided in writing or electronically, a prompt described in § 1006.34(c)(4) may be formatted as a checkbox as in Model Form B– 3 in appendix B. 34(c)(5) Special rule for certain residential mortgage debt. 1. In general. Section 1006.34(c)(5) provides that, for debts subject to Regulation Z, 12 CFR 1026.41, a debt collector need not provide the validation information described in § 1006.34(c)(2)(vii) through (ix) if the debt collector provides the consumer at the same time as the validation notice a copy of the most recent periodic statement provided to the consumer under 12 CFR 1026.41(b), and the debt collector refers to that periodic statement in the validation notice. A debt collector may comply with the requirement to provide a copy of the most recent periodic statement and the validation notice at the same time by, for example, including both documents in the same mailing. A debt collector may comply with the requirement to refer to the periodic statement in the validation notice by, for example, including in the validation notice the statement, ‘‘See the enclosed periodic statement for an itemization of the debt,’’ situated next to the information about the current amount of the debt required by § 1006.34(c)(2)(x). For debt subject to § 1006.34(c)(5), a debt collector need not include the itemization table described in § 1006.34(c)(2)(ix). 34(d) Form of validation information. 34(d)(1) In general. VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 Paragraph 34(d)(1)(ii). 1. Permissible changes. A debt collector may make certain changes to the content, format, and placement of the validation information described in § 1006.34(c) as long as the resulting disclosures are substantially similar to Model Form B–3 in appendix B of this part. Acceptable changes include, for example: i. Modifications to remove language that could suggest liability for the debt if such language is not applicable. For example, if a debt collector sends a validation notice to a person who is authorized to act on behalf of the deceased consumer’s estate (see comment 34(a)(1)–1), and that person is not liable for the debt, the debt collector may use the name of the deceased consumer instead of ‘‘you.’’ 34(d)(2) Safe harbor. 1. Safe harbor provided by use of model form. Although the use of Model Form B–3 in appendix B of this part is not required, a debt collector who uses the model form, including a debt collector who delivers the model form electronically, complies with the disclosure requirements of § 1006.34(a)(1) and (d)(1). A debt collector who uses Model Form B–3 and includes the optional disclosures described in § 1006.34(d)(3) continues to be in compliance as long as those disclosures are made consistent with the instructions in § 1006.34(d)(3). A debt collector who uses Model Form B–3 also may embed hyperlinks if delivering the form electronically and continue to be in compliance as long as the hyperlinks are included consistent with § 1006.34(d)(4)(ii). 34(d)(3) Optional disclosures. 34(d)(3)(iv) Disclosures required by applicable law. 1. Section 1006.34(d)(3)(iv) permits a debt collector to include on the front of the validation notice a statement that other disclosures required by applicable law appear on the reverse of the validation notice and, on the reverse of the validation notice, any such required disclosures. Disclosures required by other applicable law may include, for example, disclosure requirements established by State statutes or regulations, as well as disclosures required by judicial decisions or orders. To comply with § 1006.34(d)(3)(iv), a debt collector may include in the validation notice a disclosure that is substantially similar to the language about other required disclosures that appears on Model Form B–3 in appendix B of this part and place any such required disclosures on the reverse of the validation notice, located above the consumer information section described in § 1006.34(c)(4). 34(d)(3)(vi) Spanish-language translation disclosures. Paragraph 34(d)(3)(vi)(A). 1. Customizing Spanish-language disclosure. Section 1006.34(d)(3)(vi)(A) permits a debt collector to include supplemental information in Spanish that specifies how a consumer may request a Spanish-language validation notice. For example, a debt collector may include a statement in Spanish that a consumer can request a Spanish-language validation notice by telephone or email, if the debt collector chooses to accept consumer requests through those communication media. PO 00000 Frm 00144 Fmt 4701 Sfmt 4702 34(e) Translation into other languages. 1. In general. Section 1006.34(e) permits a debt collector to satisfy § 1006.34(a)(1) by sending a consumer a validation notice accurately translated into any language, if the debt collector also sends an English-language validation notice in the same communication or has already provided an English-language validation notice. The language of a validation notice a debt collector obtains from the Bureau’s website is considered a complete and accurate translation, although debt collectors are permitted to use other validation notice translations so long as they are complete and accurate. Section 1006.38—Disputes and Requests for Original-Creditor Information 1. Deceased consumers. Section 1006.38 contains requirements related to disputes and requests for the name and address of the original creditor timely submitted in writing by the consumer. If the debt collector knows or should know that the consumer is deceased, and if the consumer has not previously disputed the debt or requested the name and address of the original creditor, a person who is authorized to act on behalf of the deceased consumer’s estate operates as the consumer for purposes of § 1006.38. In such circumstances, to comply with § 1006.38(c) or (d)(2), respectively, a debt collector must respond to a request for the name and address of the original creditor or to a dispute timely submitted in writing by a person who is authorized to act on behalf of the deceased consumer’s estate. 2. In writing. Section 1006.38 contains requirements related to a dispute or request for the name and address of the original creditor timely submitted in writing by the consumer. A consumer has disputed the debt or requested the name and address of the original creditor in writing for purposes of § 1006.38(c) or (d)(2) if the consumer, for example: i. Mails the written dispute or request to the debt collector; ii. Returns to the debt collector the consumer response form that § 1006.34(c)(4)(i) requires to appear on the validation notice and indicates on the form a dispute or request; iii. Provides the dispute or request to the debt collector using a medium of electronic communication through which a debt collector accepts electronic communications from consumers, such as an email address or a website portal; or iv. Delivers the written dispute or request in person or by courier to the debt collector. 3. Interpretation of the E-SIGN Act. Comment 38–2.ii constitutes the Bureau’s interpretation of section 101 of the E-SIGN Act as applied to section 809(b) of the FDCPA. Under this interpretation, section 101(a) of the E-SIGN Act enables a consumer to satisfy through an electronic request the requirement in section 809(b) of the FDCPA that the consumer’s notification of the debt collector be ‘‘in writing.’’ Further, section 101(b) of the E-SIGN Act is not contravened because the consumer may only use a medium of electronic communication through which a debt collector accepts electronic communications from consumers. 38(a) Definitions. E:\FR\FM\21MYP2.SGM 21MYP2 jbell on DSK3GLQ082PROD with PROPOSALS2 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules 38(a)(1) Duplicative dispute. 1. Substantially the same. Section 1006.38(a)(1) provides that a dispute is a duplicative dispute if, among other things, the dispute is substantially the same as a dispute previously submitted by the consumer in writing within the validation period for which the debt collector has already satisfied the requirements of § 1006.38(d)(2)(i). A later dispute can be substantially the same as an earlier dispute even if the later dispute does not repeat verbatim the language of the earlier dispute. 2. New and material information. Section § 1006.38(a)(1) provides that a dispute that is substantially the same as a dispute previously submitted by the consumer in writing within the validation period for which the debt collector has already satisfied the requirements of § 1006.38(d)(2)(i) is not a duplicative dispute if the consumer provides new and material information to support the dispute. Information is new if the consumer did not provide the information when submitting an earlier dispute. Information is material if it is reasonably likely to change the verification the debt collector provided or would have provided in response to the earlier dispute. The following example illustrates the rule: i. ABC debt collector is collecting a debt from a consumer and sends the consumer a validation notice. In response, the consumer submits a written dispute to ABC debt collector within the validation period asserting that the consumer does not owe the debt. The consumer does not include any information in support of the dispute. Pursuant to § 1006.38(d)(2)(i), ABC debt collector provides the consumer a copy of verification of the debt. The consumer then sends a cancelled check showing the consumer paid the debt. The cancelled check is new and material information. 38(d) Disputes. 38(d)(2) Response to disputes. Paragraph 38(d)(2)(ii). 1. Duplicative dispute notice. Section 1006.38(d)(2)(ii) provides that, in the case of a dispute that a debt collector reasonably determines is a duplicative dispute, the debt collector must cease collection of the debt, or any disputed portion of the debt, until the debt collector notifies the consumer that the dispute is duplicative or provides a copy either of verification of the debt or of a judgment to the consumer. If the debt collector notifies the consumer that the dispute is duplicative, § 1006.38(d)(2)(ii) requires that the notice provide a brief statement of the reasons for the debt collector’s determination that the dispute is duplicative and refer the consumer to the debt collector’s response to the earlier dispute. A debt collector complies with the requirement to provide a brief statement of the reasons for its determination if the notice states that the dispute is substantially the same as an earlier dispute submitted by the consumer and the consumer has not included any new and material information in support of the earlier dispute. A debt collector complies with the requirement to refer the consumer to the debt collector’s response to the earlier dispute if the notice states that the debt collector responded to the earlier VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 dispute and provides the date of that response. Section 1006.42—Providing Required Disclosures 1. Deceased consumers. Section 1006.42 contains requirements related to providing certain disclosures required by this part. If a debt collector knows or should know that a consumer is deceased, a person who is authorized to act on behalf of the deceased consumer’s estate operates as the consumer for purposes of § 1006.42. 42(a) Providing required disclosures. 42(a)(1) In general. 1. Notice of undeliverability. Under § 1006.42(a)(1), a debt collector who provides disclosures required by this part in writing or electronically must, among other things, do so in a manner that is reasonably expected to provide actual notice. A debt collector who provides a required disclosure in writing or electronically and who receives a notice that the disclosure was not delivered has not provided the disclosure in a manner that is reasonably expected to provide actual notice under § 1006.42(a)(1). See comment 34(b)(5)–1 for how to calculate the updated validation period when sending a subsequent validation notice. 42(b) Requirements for certain disclosures provided electronically. Paragraph 42(b)(1). 1. Interpretation of the E-SIGN Act. Section 1006.42(b)(1) constitutes the Bureau’s interpretation of section 101 of the E-SIGN Act as applied to section 809 of the FDCPA. Under this interpretation, section 101(c) of the E-SIGN Act enables a debt collector to satisfy the requirement in section 809(a) of the FDCPA that the debt collector’s notice be ‘‘written,’’ and to satisfy the requirement in section 809(b) of the FDCPA that the debt collector mail the consumer a copy of verification or a judgment, or the name and address of the original creditor, through an electronic notice if the consumer provides consent in accordance with the E-SIGN Act directly to the debt collector. Paragraph 42(b)(2). 1. Information identifying the debt. Under § 1006.42(b)(2), a debt collector who provides the validation notice described in § 1006.34(a)(1)(i)(B), or the disclosures described in § 1006.38(c) or (d)(2), electronically must, among other things, identify the purpose of the communication by including, in the subject line of an email or in the first line of a text message transmitting the disclosure, the name of the creditor to whom the debt currently is owed or allegedly is owed and one additional piece of information identifying the debt, other than the amount. The following are examples of an additional piece of information, other than amount, identifying a debt: a truncated account number; the name of the original creditor; the name of any store brand associated with the debt; the date of sale of a product or service giving rise to the debt; the physical address of service; and the billing mailing address on the account. Paragraph 42(b)(4). 1. Disclosures responsive to smaller screens. Under § 1006.42(b)(4), a debt collector who provides a validation notice electronically must provide the disclosure in PO 00000 Frm 00145 Fmt 4701 Sfmt 4702 23417 a responsive format that is reasonably expected to be accessible on a screen of any commercially available size and via commercially available screen readers. A debt collector provides the validation notice in a responsive format accessible on a screen of any commercially available size if, for example, the notice adjusts to different screen sizes by stacking elements in a manner that accommodates consumer viewing on smaller screens while still meeting the other applicable formatting requirements in § 1006.34. A debt collector provides the validation notice in a manner accessible via commercially available screen readers if, for example, the validation notice is machine readable. 42(c) Alternative procedures for providing certain disclosures electronically. Paragraph 42(c)(1). 1. Effect of consumer opt out. If a consumer has opted out of debt collection communications to a particular email address or telephone number by, for example, following instructions provided pursuant to § 1006.6(e), then a debt collector cannot use that email address or telephone number to deliver disclosures under § 1006.42(c). Paragraph 42(c)(2). Paragraph 42(c)(2)(i). 1. Body of an email. The alternative procedures in § 1006.42(c) permit a debt collector to place a disclosure in the body of an email. A debt collector places a disclosure in the body of an email if the disclosure’s content is viewable within the email itself. 42(d) Notice and opportunity to opt out of hyperlinked delivery. 1. Communication covering multiple disclosures. A debt collector’s or a creditor’s communication with a consumer pursuant to § 1006.42(d)(1) or (2), respectively, applies to all disclosures covered by § 1006.42(a) that the debt collector thereafter sends regarding that debt, unless the consumer later designates that email address or, in the case of text messages, that telephone number, as unavailable for the debt collector’s use, such as by opting out pursuant to the instructions required by § 1006.6(e). 42(d)(1) Communication by the debt collector. 1. Name of the consumer. For purposes of a debt collector’s communication with the consumer under § 1006.42(d)(1), the term ‘‘name of the consumer’’ has the same meaning as the term ‘‘consumer’s name’’ under § 1006.34(c)(2)(ii). See comment 34(c)(2)(ii)–1. 2. Debt collector communication covering multiple debts. If a debt collector’s communication with a consumer under § 1006.42(d)(1) applies to multiple debts, § 1006.42(d)(1)(i) and (ii) require the debt collector to identify the consumer and the creditor for each debt to which the communication applies. 3. Form of communication with consumer before hyperlinked delivery. A debt collector’s communication with the consumer under § 1006.42(d)(1) must inform the consumer of, among other things, the consumer’s ability to opt out of hyperlinked delivery of disclosures to an email address or, in the case of text messages, to a telephone number, and instructions for E:\FR\FM\21MYP2.SGM 21MYP2 23418 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS2 opting out, including a reasonable period within which to opt out. This communication must, among other things, take place before the debt collector provides the hyperlinked disclosure, and the debt collector must allow the consumer a reasonable period within which to opt out. In an oral communication with the consumer, such as a telephone or in-person conversation, the debt collector may require the consumer to make an opt-out decision during that same communication. However, a written or electronic communication that requires the consumer to make an opt-out decision within a period of five or fewer days does not meet these timing criteria. Therefore, when using hyperlinked delivery for the validation notice required by § 1006.34, an oral communication, such as a telephone conversation or in-person conversation, is necessary under § 1006.42(d)(1). 4. Combined notice concerning electronic communications and electronic delivery of disclosures. An opt-out notice provided by a debt collector under § 1006.42(d)(1) may be combined with an opt-out notice provided by the debt collector under § 1006.6(d)(3)(i)(B)(1). See comment 6(d)(3)(i)(B)(1)–3. 42(d)(2) Communication by the creditor. 1. Creditor communication covering multiple debts. A creditor’s communication with the consumer under § 1006.42(d)(2) may apply to multiple debts being placed with or sold to the same debt collector at the same time. 2. Form of communication with consumer before hyperlinked delivery. A creditor’s communication with the consumer under § 1006.42(d)(2) must inform the consumer of, among other things, the consumer’s ability to opt out of hyperlinked delivery of disclosures to an email address or, in the case of a text message, to a telephone number, and instructions for opting out, including a reasonable period within which to opt out. This communication must, among other things, take place no more than 30 days before the debt collector’s electronic VerDate Sep<11>2014 22:03 May 20, 2019 Jkt 247001 communication containing the hyperlink to the disclosure, and the creditor must allow the consumer a reasonable period within which to opt out. In an oral communication with the consumer, such as a telephone or inperson conversation, the creditor may require the consumer to make an opt-out decision during that same communication. However, a written or electronic communication that requires the consumer to make an opt-out decision within a period of five or fewer days does not meet these timing criteria. 3. Combined notice concerning electronic communications and electronic delivery of disclosures. An opt-out notice provided by a creditor under § 1006.42(d)(2) may be combined with an opt-out notice provided by the creditor under § 1006.6(d)(3)(i)(B)(1). See comment 6(d)(3)(i)(B)(1)–3. 42(e) Safe harbors. 42(e)(1) Disclosures provided by mail. 1. Consumer’s residential address. Section 1006.42(e)(1) provides that a debt collector satisfies § 1006.42(a) if the debt collector mails a printed copy of a disclosure to the consumer’s residential address, unless the debt collector receives a notification from the entity or person responsible for delivery that the disclosure was not delivered. For purposes of § 1006.42(e)(1), a disclosure is not mailed to the consumer’s residential address if the debt collector knows or should know at the time of mailing that the consumer does not currently reside at that location. 42(e)(2) Validation notice contained in the initial communication. 1. Effect of consumer opt out. If a consumer has opted out of debt collection communications to a particular email address by, for example, following the instructions provided pursuant to § 1006.6(e), then a debt collector cannot use that email address to deliver disclosures under § 1006.42(e)(2). Subpart C—[Reserved] Subpart D—Miscellaneous Section 1006.100—Record Retention 1. Evidence of required actions. Section 1006.100 requires a debt collector to retain PO 00000 Frm 00146 Fmt 4701 Sfmt 9990 evidence of compliance with this part. Thus, under § 1006.100, a debt collector must retain evidence that the debt collector performed the actions and made the disclosures required by this part. For example, a debt collector could retain: i. Telephone call logs as evidence that the debt collector complied with the frequency limits in § 1006.14; and ii. Copies or records of documents provided to the consumer as evidence that the debt collector provided the information required by §§ 1006.34 and 1006.38 and met the delivery requirements of § 1006.42. 2. Methods of retaining records. Retaining records that are evidence of compliance with this part does not require retaining actual paper copies of documents. The records may be retained by any method that reproduces the records accurately (including computer programs) and that ensures that the debt collector can easily access the records (including a contractual right to access records possessed by another entity). 3. Recorded telephone calls. Nothing in § 1006.100 requires a debt collector to record telephone calls. However, under § 1006.100, a debt collector who records telephone calls must retain the recordings if the recordings are evidence of compliance with this part. Section 1006.104—Relation to State Laws 1. State law disclosure requirements. A disclosure required by applicable State law that describes additional protections under State law does not contradict the requirements of the Act or the corresponding provisions of this part. Dated: May 6, 2019. Kathleen L. Kraninger, Director, Bureau of Consumer Financial Protection. [FR Doc. 2019–09665 Filed 5–20–19; 8:45 am] BILLING CODE 4810–AM–P E:\FR\FM\21MYP2.SGM 21MYP2

Agencies

BUREAU OF CONSUMER FINANCIAL PROTECTION

[Federal Register Volume 84, Number 98 (Tuesday, May 21, 2019)]
[Proposed Rules]
[Pages 23274-23418]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-09665]



[[Page 23273]]

Vol. 84

Tuesday,

No. 98

May 21, 2019

Part III





 Bureau of Consumer Financial Protection





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12 CFR Part 1006





 Debt Collection Practices (Regulation F); Proposed Rule

Federal Register / Vol. 84 , No. 98 / Tuesday, May 21, 2019 / 
Proposed Rules

[[Page 23274]]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1006

[Docket No. CFPB-2019-0022]
RIN 3170-AA41


Debt Collection Practices (Regulation F)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Proposed rule with request for public comment.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) proposes 
to amend Regulation F, 12 CFR part 1006, which implements the Fair Debt 
Collection Practices Act (FDCPA) and currently contains the procedures 
for State application for exemption from the provisions of the FDCPA. 
The Bureau's proposal would amend Regulation F to prescribe Federal 
rules governing the activities of debt collectors, as that term is 
defined in the FDCPA. The Bureau's proposal would, among other things, 
address communications in connection with debt collection; interpret 
and apply prohibitions on harassment or abuse, false or misleading 
representations, and unfair practices in debt collection; and clarify 
requirements for certain consumer-facing debt collection disclosures.

DATES: Comments must be received on or before August 19, 2019.

ADDRESSES: You may submit comments, identified by Docket No. CFPB-2019-
0022 or RIN 3170-AA41, by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: [email protected]. Include Docket 
No. CFPB-2019-0022 or RIN 3170-AA41 in the subject line of the email.
     Mail: Comment Intake--Debt Collection, Bureau of Consumer 
Financial Protection, 1700 G Street NW, Washington, DC 20552.
     Hand Delivery/Courier: Comment Intake--Debt Collection, 
Bureau of Consumer Financial Protection, 1700 G Street NW, Washington, 
DC 20552.
    Instructions: The Bureau encourages the early submission of 
comments. All submissions should include the agency name and docket 
number or Regulatory Information Number (RIN) for this rulemaking. 
Because paper mail in the Washington, DC area and at the Bureau is 
subject to delay, commenters are encouraged to submit comments 
electronically. In general, all comments received will be posted 
without change to https://www.regulations.gov. In addition, comments 
will be available for public inspection and copying at 1700 G Street 
NW, Washington, DC 20552, on official business days between the hours 
of 10:00 a.m. and 5:00 p.m. Eastern Time. You can make an appointment 
to inspect the documents by telephoning 202-435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Proprietary or sensitive personal information, such as account numbers, 
Social Security numbers, or names of other individuals, should not be 
included. Comments will not be edited to remove any identifying or 
contact information.

FOR FURTHER INFORMATION CONTACT: Adam Mayle, Counsel; or Dania Ayoubi, 
Owen Bonheimer, Seth Caffrey, David Hixson, David Jacobs, Courtney 
Jean, or Kristin McPartland, Senior Counsels, Office of Regulations, at 
202-435-7700. If you require this document in an alternative electronic 
format, please contact [email protected].

SUPPLEMENTARY INFORMATION: 

I. Summary of the Proposed Rule

    The Bureau proposes to amend Regulation F, which implements the 
Fair Debt Collection Practices Act (FDCPA),\1\ to prescribe Federal 
rules governing the activities of debt collectors, as that term is 
defined in the FDCPA (FDCPA-covered debt collectors). The proposal 
focuses on debt collection communications and disclosures and also 
addresses related practices by debt collectors. The Bureau also 
proposes that FDCPA-covered debt collectors comply with certain 
additional disclosure-related and record retention requirements 
pursuant to the Bureau's rulemaking authority under title X of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank 
Act).\2\
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    \1\ 15 U.S.C. 1692-1692p.
    \2\ Public Law 111-203, 124 Stat. 1376 (2010).
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    In 1977, Congress passed the FDCPA to eliminate abusive debt 
collection practices by debt collectors, to ensure that those debt 
collectors who refrain from using abusive debt collection practices are 
not competitively disadvantaged, and to promote consistent State action 
to protect consumers against debt collection abuses.\3\ The statute was 
a response to ``abundant evidence of the use of abusive, deceptive, and 
unfair debt collection practices by many debt collectors.'' \4\ 
According to Congress, these practices ``contribute to the number of 
personal bankruptcies, to marital instability, to the loss of jobs, and 
to invasions of individual privacy.'' \5\
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    \3\ 15 U.S.C. 1692(e).
    \4\ 15 U.S.C. 1692(a).
    \5\ Id.
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    The FDCPA established certain consumer protections, but 
interpretative questions have arisen since its passage. Some questions, 
including those related to communication technologies that did not 
exist at the time the FDCPA was passed (such as mobile telephones, 
email, and text messaging), have been the subject of inconsistent court 
decisions, resulting in legal uncertainty and additional cost for 
industry and risk for consumers. As the first Federal agency with 
authority under the FDCPA to prescribe substantive rules with respect 
to the collection of debts by debt collectors, the Bureau proposes to 
clarify how debt collectors may employ such newer communication 
technologies in compliance with the FDCPA and to address other 
communications-related practices that may pose a risk of harm to 
consumers and create legal uncertainty for industry. The Bureau also 
proposes to interpret the FDCPA's consumer disclosure requirements to 
clarify how industry participants can comply with the law and to assist 
consumers in making better-informed decisions about debts they owe or 
allegedly owe.\6\
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    \6\ Because this is a proposed rule, the Bureau's statements 
herein regarding proposed interpretations of the FDCPA or the Dodd-
Frank Act do not represent final Bureau interpretations. The Bureau 
is not, through its proposed interpretations, finding that conduct 
either violates or is permissible under the FDCPA or the Dodd-Frank 
Act.
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A. Coverage and Organization of the Proposed Rule

    The Bureau's proposed rule is based primarily on its authority to 
issue rules to implement the FDCPA. Consequently, the proposal 
generally would impose requirements on debt collectors, as that term is 
defined in the FDCPA. However, the Bureau proposes certain provisions 
of the regulation based on the Bureau's Dodd-Frank Act rulemaking 
authority. With respect to debt collection, the Bureau's authority 
under the Dodd-Frank Act generally may address the conduct of those who 
collect debt related to a consumer financial product or service, as 
that term is defined in the Dodd-Frank Act.\7\ Proposed rule

[[Page 23275]]

provisions that rely on the Bureau's Dodd-Frank Act rulemaking 
authority generally would not, therefore, require FDCPA-covered debt 
collectors to comply if they are not collecting debt related to a 
consumer financial product or service.\8\ Such FDCPA-covered debt 
collectors, however, would not violate the FDCPA by complying with any 
such provisions adopted in a final rule.
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    \7\ Covered persons under the Dodd-Frank Act include persons who 
are ``engage[d] in offering or providing a consumer financial 
product or service''; this generally includes persons who are 
``collecting debt related to any consumer financial product or 
service'' (e.g., debt related to the extension of consumer credit). 
See 12 U.S.C. 5481(5), (6), (15)(A)(i), (x).
    \8\ These provisions appear in proposed Sec. Sec.  
1006.14(b)(1)(ii) (repeated or continuous telephone calls or 
telephone conversations), 1006.30(b)(1)(ii) (prohibition on the 
sale, transfer, or placement of certain debts), and 
1006.34(c)(2)(iv) (certain information about the debt) and (3)(iv) 
(certain information about consumer protections). Note that proposed 
Sec. Sec.  1006.14(b)(1)(i) and 1006.30(b)(1)(i) would prohibit the 
same conduct by all FDCPA-covered debt collectors that proposed 
Sec. Sec.  1006.14(b)(1)(ii) and 1006.30(b)(1)(ii) would prohibit 
only for FDCPA-covered debt collectors collecting consumer financial 
product or service debt. Additionally, the record retention 
requirement in Sec.  1006.100 is proposed only pursuant to Dodd-
Frank Act rulemaking authority but would apply to all FDCPA-covered 
debt collectors.
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    The proposed rule restates the FDCPA's substantive provisions 
largely in the order that they appear in the statute, sometimes without 
further interpretation. Restating the statutory text of all of the 
substantive provisions may facilitate understanding and compliance by 
ensuring that stakeholders need to consult only the regulation to view 
all relevant definitions and substantive provisions. Where the Bureau 
proposes to restate statutory text without further interpretation, the 
relevant section-by-section analysis explains that the proposed rule 
restates the statutory language with only minor wording or 
organizational changes for clarity. Except where specifically stated, 
the Bureau does not intend to codify existing case law or judicial 
interpretations of the statute by restating the statutory text. The 
Bureau requests comment on the proposed approach of restating the 
substantive provisions of the FDCPA.
    The proposed rule has four subparts. Subpart A contains generally 
applicable provisions, such as definitions that would apply throughout 
the regulation. Subpart B contains proposed rules for FDCPA-covered 
debt collectors. Subpart C is reserved for any future debt collection 
rulemakings. Subpart D contains certain miscellaneous provisions.

B. Scope of the Proposed Rule

Communications Proposals
    Debt collection efforts often begin with attempts by a debt 
collector to reach a consumer. Communicating with a debt collector may 
benefit a consumer by helping the consumer to either resolve a debt the 
consumer owes, or identify and inform the debt collector if the debt is 
one that the consumer does not owe. However, debt collection 
communications also may constitute unfair practices, may contain false 
or misleading representations, or may be harassing or abusive either 
because of their content (for example, when debt collectors employ 
profanity) or because of the manner in which they are made (for 
example, when debt collectors place excessive telephone calls with the 
intent to harass or abuse).
    Communication technology has evolved significantly since the FDCPA 
was enacted in 1977. Today, consumers may prefer communicating with 
debt collectors using newer technologies, such as emails, text 
messages, or web portals, because these technologies may offer greater 
efficiency, convenience, and privacy. These technologies also may allow 
consumers to exert greater control over the timing, frequency, and 
duration of communications with debt collectors--for example, by 
choosing when, where, and how much time to spend responding to a debt 
collector's email. Debt collectors also may find that these 
technologies are a more effective and efficient means of communicating 
with consumers.
    To address concerns about debt collection communications and to 
clarify the application of the FDCPA to newer communication 
technologies, the Bureau proposes to:
     Define a new term related to debt collection 
communications: Limited-content message. This definition would identify 
what information a debt collector must and may include in a message 
left for consumers (with the inclusion of no other information 
permitted) for the message to be deemed not to be a communication under 
the FDCPA. This definition would permit a debt collector to leave a 
message for a consumer without communicating, as defined by the FDCPA, 
with a person other than the consumer.
     Clarify the times and places at which a debt collector may 
communicate with a consumer, including by clarifying that a consumer 
need not use specific words to assert that a time or place is 
inconvenient for debt collection communications.
     Clarify that a consumer may restrict the media through 
which a debt collector communicates by designating a particular medium, 
such as email, as one that cannot be used for debt collection 
communications.
     Clarify that, subject to certain exceptions, a debt 
collector is prohibited from placing a telephone call to a person more 
than seven times within a seven-day period or within seven days after 
engaging in a telephone conversation with the person.
     Clarify that newer communication technologies, such as 
emails and text messages, may be used in debt collection, with certain 
limitations to protect consumer privacy and to prevent harassment or 
abuse, false or misleading representations, or unfair practices. For 
example, the Bureau proposes to require that a debt collector's emails 
and text messages include instructions for a consumer to opt out of 
receiving further emails or text messages. The Bureau also proposes 
procedures that, when followed, would protect a debt collector from 
liability for unintentional violations of the prohibition against 
third-party disclosures when communicating with a consumer by email or 
text message.
Consumer Disclosure Proposals
    The FDCPA requires that a debt collector send a written notice to a 
consumer, within five days of the initial communication, containing 
certain information about the debt and actions the consumer may take in 
response, unless such information was provided in the initial 
communication or the consumer has paid the debt. To clarify the 
information that a debt collector must provide to a consumer at the 
outset of debt collection, including (if applicable) in a validation 
notice, the Bureau proposes:
     To specify that debt collectors must provide certain 
information about the debt and the consumer's rights with respect to 
the debt. The Bureau also proposes to require a debt collector to 
provide prompts that a consumer could use to dispute the debt, request 
information about the original creditor, or take certain other actions. 
The Bureau also proposes to permit a debt collector to include certain 
optional information.
     A model validation notice that a debt collector could use 
to comply with the FDCPA and the proposed rule's disclosure 
requirements.
     To clarify the steps a debt collector must take to provide 
the validation notice and other required disclosures electronically.
     A safe harbor if a debt collector complies with certain 
steps when delivering the validation notice within the body of an email 
that is the debt collector's initial communication with the consumer.
    The Bureau also proposes to prohibit a debt collector from suing or 
threatening to sue a consumer to collect a time-barred debt. The Bureau 
plans to test consumer disclosures related to time-barred debt and, 
after testing, will

[[Page 23276]]

assess whether a debt collector who collects a time-barred debt must 
disclose that the debt collector cannot sue to collect the debt because 
of its age. At a later date, the Bureau may release a report on such 
testing and issue a disclosure proposal related to the collection of 
time-barred debt. Stakeholders will have an opportunity to comment on 
such testing if the Bureau intends to use it to support disclosure 
requirements in a final rule.
Additional Proposals
    The Bureau proposes to address certain other consumer protection 
concerns in the debt collection market. For example, the Bureau 
proposes:
     To clarify that the personal representative of a deceased 
consumer's estate is a consumer for purposes of proposed Sec.  1006.6, 
which addresses communications in connection with debt collection. This 
clarification generally would allow a debt collector to discuss a debt 
with the personal representative of a deceased consumer's estate. The 
Bureau also proposes to clarify how a debt collector may locate the 
personal representative of a deceased consumer's estate. In addition, 
the proposed rule would interpret the requirement that a debt collector 
provide the validation notice to a ``consumer'' to require the notice 
be provided to the person acting on behalf of a deceased consumer's 
estate, i.e., the executor, administrator, or personal representative 
of a deceased consumer's estate, who would have the right to dispute 
the debt.
     To prohibit a debt collector from furnishing information 
about a debt to a consumer reporting agency before communicating with 
the consumer about the debt.
     To prohibit, with certain exceptions, the sale, transfer, 
or placement for collection of a debt if a debt collector knows or 
should know that the debt has been paid or settled or has been 
discharged in bankruptcy, or that an identity theft report has been 
filed with respect to the debt.
    The Bureau requests comment on all aspects of the proposed rule.

C. Effective Date

    The Bureau proposes that the effective date of the final rule would 
be one year after the final rule is published in the Federal Register. 
The Bureau requests comment on this proposed effective date.

II. Background

A. Debt Collection Market Background

    A consumer debt is commonly understood to be a consumer's 
obligation to pay money to another person or entity. Sometimes a debt 
arises out of a closed-end loan. At other times, a debt arises from a 
consumer's use of an open-end line of credit, most commonly a credit 
card. And in other cases, a debt arises from a consumer's purchase of 
goods or services with payment due thereafter. Often there is an 
agreed-upon payment schedule or date by which the consumer must repay 
the debt.
    For a variety of reasons, consumers sometimes are unable (or in 
some instances unwilling) to make payments when they are due. 
Collection efforts may directly recover some or all of the overdue 
amounts owed to debt owners and thereby may indirectly help to keep 
consumer credit available and more affordable to consumers.\9\ 
Collection activities also can lead to repayment plans or debt 
restructuring that may provide consumers with additional time to make 
payments or resolve their debts on more manageable terms.\10\
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    \9\ See Bureau of Consumer Fin. Prot., Fair Debt Collection 
Practices Act: CFPB Annual Report 2013, at 9 (Mar. 2013), https://www.consumerfinance.gov/data-research/research-reports/annual-report-on-the-fair-debt-collection-practices-act/ (hereinafter 2013 
FDCPA Annual Report).
    \10\ See id.
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    The debt collection industry includes creditors, third-party debt 
collectors (including debt collection law firms), debt buyers, and a 
wide variety of related service providers. Debt collection is estimated 
to be an $11.5 billion-dollar industry employing nearly 118,500 people 
across approximately 7,700 collection agencies in the United 
States.\11\
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    \11\ See Bureau of Consumer Fin. Prot., Fair Debt Collection 
Practices Act: CFPB Annual Report 2019, at 8 (Mar. 2019), https://files.consumerfinance.gov/f/documents/cfpb_fdcpa_annual-report-congress_03-2019.pdf (hereinafter 2019 FDCPA Annual Report).
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Creditors
    When an account becomes delinquent, initial collection efforts 
often are undertaken by the original creditor or its servicer. The 
FDCPA typically does not cover these first-party recovery efforts. If 
these first-party recovery efforts result in resolution of the debt, 
whether through payment in full or another arrangement, the consumer 
typically will not interact with a third-party debt collector.
Third-Party Debt Collectors
    If a consumer's payment obligations remain unmet, a creditor may 
send the account to a third-party debt collector to recover on the debt 
in the third-party debt collector's name. A creditor may choose to send 
an account to a third-party debt collector for several reasons, 
including because the third-party debt collector possesses capabilities 
and expertise that the creditor lacks. Third-party debt collectors 
usually are paid on a contingency basis, typically a percentage of 
recoveries; debt collectors contracting with creditors on a contingency 
basis generated a large majority of the industry's 2018 revenue.\12\ 
Contingency debt collectors compete with one another to secure business 
from creditors based on, among other factors, the debt collectors' 
effectiveness in obtaining recoveries.\13\
---------------------------------------------------------------------------

    \12\ Id. at 10.
    \13\ While third-party collection agencies have been increasing 
in size in recent years, third-party debt collection continues to 
include a significant number of smaller entities. See Robert M. 
Hunt, Understanding the Model: The Life Cycle of a Debt, at 15, Fed. 
Reserve Bank of Phila. (June 6, 2013), https://www.ftc.gov/sites/default/files/documents/public_events/life-debt-data-integrity-debt-collection/understandingthemodel.pdf.
---------------------------------------------------------------------------

Debt Buyers
    If contingency collections prove unsuccessful--or if a particular 
creditor prefers not to use such third-party debt collectors--a 
creditor may sell unpaid accounts to a debt buyer. In 2009, the Federal 
Trade Commission (FTC) called the advent and growth of debt buying 
``the most significant change in the debt collection business'' in 
recent years.\14\ Debt buyers purchase defaulted debt from creditors or 
other debt owners and thereby take title to the debt. Credit card debt 
comprises a large majority of the debt that debt buyers purchase.\15\ 
Debt buyers generated about one-third of debt collection revenue, or 
about $3.5 billion, in 2017.\16\ Creditors who sell their uncollected 
debt to debt buyers receive a certain up-front return, but these debts 
typically are sold at prices that are a fraction of their face value. 
Debt buyers typically price their offers for portfolios based upon 
their projections of the amount they will be able to collect. The debt 
buyer incurs the risk of recovering

[[Page 23277]]

less than the sum of the amount it paid to acquire the debt and its 
expenses to collect the debt.
---------------------------------------------------------------------------

    \14\ Fed. Trade Comm'n, The Structure and Practices of the Debt 
Buying Industry, at i (2013), https://www.ftc.gov/sites/default/files/documents/reports/structure-and-practices-debt-buying-industry/debtbuyingreport.pdf (hereinafter FTC Debt Buying Report).
    \15\ Id. at 7 (citing Credit Card Debt Sales in 2008, 921 Nilson 
Rep. 10 (Mar. 2009)).
    \16\ Bureau of Consumer Fin. Prot., Fair Debt Collection 
Practices Act: CFPB Annual Report 2018, at 10 (Mar. 2018), https://files.consumerfinance.gov/f/documents/cfpb_fdcpa_annual-report-congress_03-2018.pdf (hereinafter 2018 FDCPA Annual Report) (citing 
Edward Rivera, Debt Collection Agencies in the US, IBIS World (Dec. 
2017)). Although debt buyers represent about one-third of industry 
revenue, this overstates debt buyers' share of dollars collected, 
since debt buyer revenue includes all amounts recovered, whereas the 
revenue of contingency debt collectors includes only the share of 
recoveries retained by the debt collector. Id.
---------------------------------------------------------------------------

    Typically a debt buyer engages in debt collection, attempting to 
collect debts itself. However, a debt buyer also may use a third-party 
debt collector or a series of such debt collectors. If the debt buyer 
is unable to collect some of the debts it purchased, the debt buyer may 
sell the debt again to another debt buyer. Any single debt thus may be 
owned by multiple entities over its lifetime. The price paid for a debt 
generally will decline as the debt ages and passes from debt buyer to 
debt buyer, because the probability of payment decreases.\17\
---------------------------------------------------------------------------

    \17\ FTC Debt Buying Report, supra note 14, at 23-24.
---------------------------------------------------------------------------

Debt Collection Law Firms
    If debt collection attempts are unsuccessful, a debt owner may try 
to recover on a debt through litigation. Most debt collection 
litigation is filed in State courts. Debt owners often retain law firms 
and attorneys that specialize in debt collection and that are familiar 
with State and local rules. If a debt owner obtains a judgment in its 
favor, post-litigation efforts may include garnishment of wages or 
seizure of assets.

B. Debt Collection Methods

    The debt collection experience is a common one--approximately one 
in three consumers with a credit record reported having been contacted 
about a debt in collection in 2014.\18\ Of those, 27 percent reported 
having been contacted about a single debt over the prior year, 57 
percent reported having been contacted about two to four debts, and 16 
percent reported having been contacted about more than four debts.\19\
---------------------------------------------------------------------------

    \18\ Bureau of Consumer Fin. Prot., Consumer Experience with 
Debt Collection: Findings from CFPB's Survey of Consumer Views on 
Debt, at 5 (2017), https://files.consumerfinance.gov/f/documents/201701_cfpb_Debt-Collection-Survey-Report.pdf (hereinafter CFPB Debt 
Collection Consumer Survey). This figure includes consumers 
contacted only by creditors as well as those contacted by one or 
more debt collection firms. Id. at 13.
    \19\ Id. at 13.
---------------------------------------------------------------------------

    A creditor typically stops communicating with a consumer once 
responsibility for an account has moved to a third-party debt 
collector. Active debt collection efforts typically begin with the debt 
collector attempting to locate the consumer, usually by identifying a 
valid telephone number or mailing address, so that the debt collector 
can establish contact with the consumer. To obtain current contact 
information, a debt collector may look to information that transferred 
with the account file, public records, data sellers, or proprietary 
databases of contact information. A debt collector may also attempt to 
obtain location information for a consumer from third parties, such as 
family members who share a residence with the consumer or colleagues at 
the consumer's workplace.
    Once a debt collector has obtained contact information for a 
consumer, the debt collector typically will seek to communicate with 
the consumer to obtain payment on some or all of the debt. The debt 
collector may tailor the collection strategy depending on a variety of 
factors, including the size and age of the debt and the debt 
collector's assessment of the likelihood of obtaining money from the 
consumer. For example, rather than affirmatively locating and 
contacting consumers, some debt collectors collecting relatively small 
debts--such as many medical, utility, and telecommunications debts--
will report the debts to consumer reporting agencies (CRAs) and then 
wait for consumers to contact them after discovering the debts on their 
consumer reports.\20\ Other types of debt are subject to statutory or 
regulatory requirements that may affect how a debt collector tries to 
recover on them. For example, privacy protections may affect how a debt 
collector seeks to recover on a medical debt, and the availability of 
administrative wage garnishment and tax refund intercepts may affect 
how a debt collector seeks to recover on a Federal student loan.
---------------------------------------------------------------------------

    \20\ Bureau of Consumer Fin. Prot., Consumer Credit Reports: A 
Study of Medical and Non-Medical Collections, at 35-36 (2014), 
https://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-medical-collections.pdf (hereinafter CFPB 
Medical Debt Report).
---------------------------------------------------------------------------

    Changes in a consumer's situation may warrant a change in a debt 
collector's recovery strategy, such as when information purchased from 
CRAs or other third parties indicates that the consumer has started a 
new job. A debt owner also may ``warehouse'' a debt and cease 
collection efforts for a significant period. A new debt collector may 
later be tasked with resuming collection efforts because, for example, 
the debt owner has sold the account, detected a possible change in the 
consumer's financial situation, or wishes to make periodic attempts at 
some recovery. Each time a new debt collector obtains responsibility 
for collecting the debt, the consumer likely will be subject to 
communications or communication attempts from the new debt collector. 
For the consumer, this may mean contact from a series of different debt 
collectors over a number of years. During this time, the consumer may 
make payments to multiple debt collectors or may receive communication 
attempts from multiple debt collectors that may stop and restart at 
irregular intervals, until the debt is paid or settled in full or 
collection activity ceases for other reasons.

C. Consumer Protection Concerns

    Each year, consumers submit tens of thousands of complaints about 
debt collection to Federal regulators; \21\ many of those complaints 
relate to practices addressed in the proposed rule. Consumers also file 
thousands of private actions each year against debt collectors who 
allegedly have violated the FDCPA. Since the Bureau began operations in 
2011, it has brought numerous debt collection cases against third-party 
debt collectors, alleging both FDCPA violations and unfair, deceptive, 
or abusive debt collection acts or practices in violation of the Dodd-
Frank Act.\22\ In these cases, the Bureau has ordered civil penalties, 
monetary compensation for consumers, and other relief. In its 
supervisory work, the Bureau similarly has identified many FDCPA 
violations during examinations of debt collectors. Over the past 
decade, the FTC and State regulators also have brought numerous 
additional actions against debt collectors for violating Federal and 
State

[[Page 23278]]

debt collection and consumer protection laws.
---------------------------------------------------------------------------

    \21\ See, e.g., 2019 FDCPA Annual Report, supra note 11, at 15-
16; Fed. Trade Comm'n, 2018 Consumer Sentinel Network Databook, at 
4, 7 (Feb. 2019), https://www.ftc.gov/system/files/documents/reports/consumer-sentinel-network-data-book-2018/consumer_sentinel_network_data_book_2018_0.pdf; 2018 FDCPA Annual 
Report, supra note 16, at 14-15; Fed. Trade Comm'n, 2017 Consumer 
Sentinel Network Databook, at 3, 6 (Mar. 2018), https://www.ftc.gov/system/files/documents/reports/consumer-sentinel-network-data-book-2017/consumer_sentinel_data_book_2017.pdf; Bureau of Consumer Fin. 
Prot., 2017 Fair Debt Collection Practices Act: CFPB Annual Report 
2017, at 15-16 (Mar. 2017), https://files.consumerfinance.gov/f/documents/201703_cfpb_Fair-Debt-Collection-Practices-Act-Annual-Report.pdf (hereinafter 2017 FDCPA Annual Report); Fed. Trade 
Comm'n, Consumer Sentinel Network Data Book for January-December 
2016, at 3, 6 (Mar. 2017), https://www.ftc.gov/system/files/documents/reports/consumer-sentinel-network-data-book-january-december-2016/csn_cy-2016_data_book.pdf.
    \22\ See, e.g., Consent Order, In re Encore Capital Grp., 2015-
CFPB-0022 (Sept. 9, 2015), https://files.consumerfinance.gov/f/201509_cfpb_consent-order-encore-capital-group.pdf; Consent Order, 
In re Portfolio Recovery Assocs., LLC, 2015-CFPB-0023 (Sept. 9, 
2015), https://files.consumerfinance.gov/f/201509_cfpb_consent-order-portfolio-recovery-associates-llc.pdf; Complaint, Consumer Fin. 
Prot. Bureau v. Nat'l Corrective Grp., Inc., 1:15-cv-00899-RDB (D. 
Md. Mar. 30, 2015), https://files.consumerfinance.gov/f/201503_cfpb_complaint-national-corrective-group.pdf.
---------------------------------------------------------------------------

 D. FDCPA and Dodd-Frank Act Protections for Consumers

    Federal and State governments historically have sought to protect 
consumers from harmful debt collection practices. From 1938 to 1977, 
the Federal government primarily protected consumers through FTC 
enforcement actions against debt collectors who engaged in unfair or 
deceptive acts or practices in violation of section 5 of the FTC 
Act.\23\ When Congress enacted the FDCPA in 1977, it found that 
``[e]xisting laws and procedures for redressing . . . injuries [were] 
inadequate to protect consumers.'' \24\ Congress found that ``[t]here 
[was] abundant evidence of the use of abusive, deceptive, and unfair 
debt collection practices by many debt collectors,'' and that these 
practices ``contribute to the number of personal bankruptcies, to 
marital instability, to the loss of jobs, and to invasions of 
individual privacy.'' \25\
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 45.
    \24\ 15 U.S.C. 1692(b).
    \25\ 15 U.S.C. 1692(a).
---------------------------------------------------------------------------

    The FDCPA was enacted, in part, ``to eliminate abusive debt 
collection practices by debt collectors, [and] to insure that those 
debt collectors who refrain from using abusive debt collection 
practices are not competitively disadvantaged.'' \26\ Among other 
things, the FDCPA: (1) Prohibits debt collectors from engaging in 
harassment or abuse, making false or misleading representations, and 
engaging in unfair practices in debt collection; (2) restricts debt 
collectors' communications with consumers and others; and (3) requires 
debt collectors to provide consumers with disclosures concerning the 
debts they owe or allegedly owe.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 1692(e).
---------------------------------------------------------------------------

    Until the creation of the Bureau, no Federal agency was authorized 
to issue regulations to implement the substantive provisions of the 
FDCPA. Courts have issued opinions providing differing interpretations 
of various FDCPA provisions, and there is considerable uncertainty with 
respect to how the FDCPA applies to communication technologies that did 
not exist in 1977. Further, to reduce legal risk, debt collectors 
typically use the language of the statute in making required 
disclosures, even though that language can be difficult for consumers 
to understand.
    The Dodd-Frank Act amended the FDCPA to provide the Bureau with 
authority to ``prescribe rules with respect to the collection of debts 
by debt collectors.'' \27\ Section 1031 of the Dodd-Frank Act also 
authorizes the Bureau, among other things, to prescribe rules 
applicable to a covered person or service provider identifying as 
unlawful unfair, deceptive, or abusive acts or practices in connection 
with any transaction with a consumer for a consumer financial product 
or service, or the offering of a consumer financial product or 
service.\28\ Section 1031(b) provides that rules under section 1031 may 
include requirements for the purpose of preventing such unfair, 
deceptive, or abusive acts or practices.\29\ Covered persons under the 
Dodd-Frank Act include persons who are ``engage[d] in offering or 
providing a consumer financial product or service''; \30\ this 
generally includes persons who are ``collecting debt related to any 
consumer financial product or service'' (e.g., debt related to the 
extension of consumer credit).\31\ Covered persons under the Dodd-Frank 
Act thus include many FDCPA-covered debt collectors, as well as many 
creditors and their servicers, who are collecting debt related to a 
consumer financial product or service.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 1692l(d).
    \28\ Dodd-Frank Act section 1031(b), 12 U.S.C. 5531(b).
    \29\ Id.
    \30\ 12 U.S.C. 5481(6).
    \31\ 12 U.S.C. 5481(5), (15)(A)(i), (x).
---------------------------------------------------------------------------

III. The Rulemaking Process

    The Bureau has conducted a wide range of outreach on the scope and 
substance of this proposed rule, including by holding field 
hearings,\32\ hosting two joint roundtables with the FTC,\33\ and 
issuing an Advance Notice of Proposed Rulemaking (ANPRM) in November 
2013.\34\ The Bureau has conducted several rounds of qualitative 
testing of prototype debt collection disclosure forms and has conducted 
formal and informal surveys over the past several years to obtain a 
more comprehensive and systematic understanding of debt collection 
practices. The Bureau also convened a Small Business Review Panel in 
August 2016 to obtain feedback from small debt collectors. Since the 
Bureau began studying this market, the Bureau has met on many occasions 
with various stakeholders, including consumer advocacy groups, debt 
collection trade associations, industry participants, academics with 
expertise in debt collection, Federal prudential regulators, and other 
Federal and State consumer protection regulators. The Bureau also 
received a number of comments specific to the debt collection 
rulemaking in response to its Request for Information Regarding the 
Bureau's Adopted Regulations and New Rulemaking Authorities \35\ and 
its Request for Information Regarding the Bureau's Inherited 
Regulations and Inherited Rulemaking Authorities,\36\ and the Bureau 
has considered these comments in developing the proposed rule. In 
addition, the Bureau has engaged in general outreach, speaking at 
consumer advocacy group and industry events and visiting consumer 
organizations and industry stakeholders. The Bureau has provided other 
regulators with information about the proposed rule, has sought their 
input, and has received feedback that has helped the Bureau to prepare 
this proposed rule.
---------------------------------------------------------------------------

    \32\ See Bureau of Consumer Fin. Prot., Field Hearing on Debt 
Collection in Seattle, WA (Oct. 24, 2012), https://www.consumerfinance.gov/about-us/events/archive-past-events/field-hearing-on-deft-collection-from-seattle-washington/; Bureau of 
Consumer Fin. Prot., Field Hearing on Debt Collection in Portland, 
ME (July 10, 2013), https://www.consumerfinance.gov/about-us/events/archive-past-events/field-hearing-debt-collection-portland-me/; 
Bureau of Consumer Fin. Prot., Field Hearing on Debt Collection in 
Sacramento, CA (July 28, 2016), https://www.consumerfinance.gov/about-us/events/archive-past-events/field-hearing-debt-collection-sacramento-calif/.
    \33\ Fed. Trade Comm'n & Bureau of Consumer Fin. Prot., Debt 
Collection and the Latino Community: An FTC-CFPB Roundtable (Oct. 
23, 2014), https://www.ftc.gov/news-events/events-calendar/2014/10/debt-collection-latino-community-roundtable; Fed. Trade Comm'n & 
Bureau of Consumer Fin. Prot., Roundtable on Data Integrity in Debt 
Collection: Life of a Debt (July 6, 2013), https://www.ftc.gov/system/files/documents/public_events/71120/life-debt-roundtable-transcript.pdf.
    \34\ 78 FR 67848 (Nov. 12, 2013).
    \35\ 83 FR 12286 (Mar. 21, 2018).
    \36\ 83 FR 12881 (Mar. 26, 2018).
---------------------------------------------------------------------------

A. 2013 Advance Notice of Proposed Rulemaking

    The Bureau issued an ANPRM regarding debt collection in November of 
2013. The ANPRM sought information about both first- and third-party 
debt collection practices, including: Debt collectors' communication 
and calling practices; the use of disclosures, such as time-barred debt 
disclosures, in debt collection; the quantity and quality of 
information in the debt collection system; credit reporting by debt 
collectors; the prevalence and use of litigation by debt collectors, 
including by debt collection attorneys; and record retention, 
monitoring, and compliance issues.
    The Bureau received more than 23,000 comments in response to the 
ANPRM, with approximately 379 non-form comments submitted. These non-
form comments were provided by consumers, consumer advocacy groups,

[[Page 23279]]

industry participants and trade associations, legal groups including 
law school clinics, State Attorneys General, and other stakeholders. 
The Bureau also worked with Cornell University's Regulation Room, which 
interacted with consumers to obtain their input and submitted a 
consolidated comment representing views from a multitude of consumers. 
Comments on the ANPRM related to both first- and third-party collection 
efforts. Commenters provided significant feedback regarding debt 
collector communication practices and interactions with consumers, 
consumer disclosures, and the use of newer communication technologies. 
Specific comments are discussed in more detail in part V where 
relevant.

B. Consumer Testing

    The Bureau contracted with a third-party vendor, Fors Marsh Group 
(FMG), to assist with developing, and to conduct qualitative consumer 
testing of, two potential consumer-facing debt collection model 
disclosure forms: The validation notice and the statement of consumer 
rights. The Bureau sought insight into consumers' existing 
understanding of debt collection protections and how consumers would 
interact with the forms if they were adopted in a final rule. Specific 
findings from the consumer testing are discussed in more detail in part 
V where relevant.\37\
---------------------------------------------------------------------------

    \37\ While the Bureau tested a statement of consumer rights 
disclosure, this proposal would not require debt collectors to 
provide such a disclosure to consumers. Instead, the Bureau proposes 
to require certain debt collectors to provide on the validation 
notice a statement referring consumers to a Bureau-provided website 
that would describe certain consumer protections in debt collection. 
See the section-by-section analysis of proposed Sec.  
1006.34(c)(3)(iv). Because the Bureau does not propose to require 
debt collectors to provide consumers with a statement of consumer 
rights disclosure, the Bureau does not summarize testing related to 
that disclosure in this proposal.
---------------------------------------------------------------------------

Validation Notice Testing
    Focus groups. FMG facilitated five focus groups in July 2014 to 
assess consumers' thoughts about debt collectors and debt collection, 
to evaluate their perceptions of disclosures provided by debt 
collectors, and to measure their understanding of consumers' rights in 
debt collection. Two focus groups, one consisting of participants who 
had been contacted by a debt collector within the previous two years 
and one consisting of participants without such experience, were held 
in Arlington, Virginia, on July 16, 2014. Three focus groups, two 
consisting of participants with debt collection experience and one 
consisting of participants without debt collection experience, were 
held in New Orleans, Louisiana, on July 29, 2014. In conjunction with 
the release of this proposal, the Bureau is making available a report 
prepared by FMG regarding the focus group testing (FMG Focus Group 
Report).\38\
---------------------------------------------------------------------------

    \38\ See generally Fors Marsh Grp., Debt Collection Focus Groups 
(Aug. 2014), https://files.consumerfinance.gov/f/documents/cfpb_debt-collection_fmg-focus-group-report.pdf (hereinafter FMG 
Focus Group Report). The focus group testing was conducted in 
accordance with OMB control number 3170-0022, Generic Information 
Collection Plan for the Development and/or Testing of Model Forms, 
Disclosures, Tools, and Other Similar Related Materials.
---------------------------------------------------------------------------

    Cognitive Testing. FMG also conducted 30 one-on-one interviews of 
consumers to assess their perceptions, preferences, and understanding 
of different validation notices and to evaluate how each of the notices 
might affect consumer behavior. The interviews took place at three 
locations: Arlington, Virginia, on September 23 and 24, 2014; 
Minneapolis, Minnesota, on October 9 through 11, 2014; and Las Vegas, 
Nevada, on October 23 and 24, 2014. At each location, FMG interviewed 
10 participants, seven of whom had debt collection experience and three 
of whom did not.
    FMG tested three validation notices at each location. The first 
form was modeled closely on validation notices commonly used by debt 
collectors. The form included the disclosures specifically required by 
FDCPA section 809(a), and the language on the form generally mirrored 
the statutory language. The second form provided the same information 
as the first form, but in plainer language. The third form used the 
same language as the second form, along with additional information, 
including consumer protection information, chain-of-title information 
describing the history of the debt, and, for two of the testing 
locations, information about time-barred debts.
    FMG asked the participants to define, locate, and explain the 
meaning of specific elements on each form. Participants responded to 
three surveys, each with three Likert-scale questions.\39\ Participants 
were asked to compare the first and second forms side-by-side and were 
asked targeted questions about what they would do after reading 
individual elements of each notice. In conjunction with the release of 
this proposal, the Bureau is making available a report prepared by FMG 
regarding the cognitive testing (FMG Cognitive Report).\40\
---------------------------------------------------------------------------

    \39\ A Likert-scale is a commonly used research scale that asks 
respondents to specify their level of agreement or disagreement with 
a series of statements.
    \40\ See generally Fors Marsh Grp., Debt Collection Cognitive 
Interviews (n.d.), https://files.consumerfinance.gov/f/documents/cfpb_debt-collection_fmg-cognitive-report.pdf (hereinafter FMG 
Cognitive Report). The cognitive testing was conducted in accordance 
with OMB control number 3170-0022, Generic Information Collection 
Plan for the Development and/or Testing of Model Forms, Disclosures, 
Tools, and Other Similar Related Materials.
---------------------------------------------------------------------------

    Usability Testing. FMG also conducted 30 additional one-on-one 
interviews of consumers to assess their perceptions, preferences, and 
understanding of different model validation notices and to evaluate 
what influence, if any, these forms could have on their behavior. FMG 
interviewed 23 consumers who had been contacted by a debt collector 
within the previous two years and seven without such experience. The 
interviews took place at three locations: Arlington, Virginia, on March 
31 and April 1, 2015; Minneapolis, Minnesota, on April 14 and 15, 2015; 
and Las Vegas, Nevada, on April 28 and 29, 2015. During the interviews, 
researchers asked participants comprehension questions to determine 
their understanding of the forms and debriefing questions to establish 
their reactions to and perceptions of the forms. Researchers also 
engaged consumers in testing activities to assess their interactions 
with the forms. In conjunction with the release of this proposal, the 
Bureau is making available a report prepared by FMG regarding the 
usability testing (FMG Usability Report).\41\ The Bureau also is making 
available a report prepared by FMG summarizing the focus group testing, 
cognitive testing, and usability testing (FMG Summary Report).\42\
---------------------------------------------------------------------------

    \41\ See generally Fors Marsh Grp., Debt Collection User 
Experience Study (Feb. 2016), https://files.consumerfinance.gov/f/documents/cfpb_debt-collection_fmg-usability-report.pdf (hereinafter 
FMG Usability Report). Like the other testing, the usability testing 
was conducted in accordance with OMB control number 3170-0022, 
Generic Information Collection Plan for the Development and/or 
Testing of Model Forms, Disclosures, Tools, and Other Similar 
Related Materials.
    \42\ See generally Fors Marsh Grp., Debt Collection Validation 
Notice Research: Summary of Focus Groups, Cognitive Interviews, and 
User Experience Testing (Feb. 2016), https://files.consumerfinance.gov/f/documents/cfpb_debt-collection_fmg-summary-report.pdf (hereinafter FMG Summary Report).
---------------------------------------------------------------------------

Quantitative Testing
    The Bureau plans to conduct a web survey of 8,000 individuals 
possessing a broad range of demographic characteristics. The survey 
will explore consumer comprehension and decision-making in response to 
sample debt collection disclosures relating to time-

[[Page 23280]]

barred debts. The Bureau will use the information it gathers to help 
assess how the Bureau may improve the clarity and effectiveness of debt 
collection disclosures, among other things. On February 4, 2019, in 
accordance with the Paperwork Reduction Act of 1995,\43\ the Bureau 
proposed an information collection that described the web survey and 
was open for public comment for 30 days.\44\ The comment period closed 
on March 6, 2019. This request is pending under OMB review and can be 
viewed on OMB's electronic docket at https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=201902-3170-001 (see ICR Reference Number 201902-
3170-001). Stakeholders will have an opportunity to comment on a report 
describing the web survey results if the Bureau proposes to use those 
results to support disclosure requirements in a final rule.
---------------------------------------------------------------------------

    \43\ 44 U.S.C. 3501 et seq.
    \44\ See Agency Information Collection Activities: Submission 
for OMB Review; Comment Request, 84 FR 1430 (Feb. 4, 2019).
---------------------------------------------------------------------------

C. Study of Debt Collection Market Operations

    To better understand the operational costs of debt collection 
firms, including law firms, the Bureau surveyed debt collection firms 
and vendors and published a report based on that study in July 2016 
(CFPB Debt Collection Operations Study or Operations Study).\45\ The 
answers to the survey questions aided the Bureau's understanding of the 
compliance costs to debt collectors if the proposal were finalized. As 
a qualitative study, the survey's results are not necessarily 
representative of the debt collection industry as a whole, but they 
provide a broad understanding of how a range of different types of debt 
collectors operate.
---------------------------------------------------------------------------

    \45\ See generally Bureau of Consumer Fin. Prot., Study of 
Third-Party Debt Collection Operations (July 2016), https://www.consumerfinance.gov/documents/755/20160727_cfpb_Third_Party_Debt_Collection_Operations_Study.pdf 
(hereinafter CFPB Debt Collection Operations Study).
---------------------------------------------------------------------------

    The Operations Study focused on understanding how debt collection 
firms obtain information about delinquent consumer accounts and attempt 
to collect on those accounts.\46\ Between July and September 2015, the 
Bureau sent a written survey to debt collection firms. The survey 
focused on current practices and included questions about employees, 
types of debt collected, clients, vendors, software, policies and 
procedures for consumer interaction, disputes, furnishing data to CRAs, 
litigation, and compliance. Between August and October 2015, the Bureau 
conducted telephone interviews with a subset of survey respondents. The 
interviews included several specific questions about the types of 
voicemails debt collectors leave and what share of lawsuits filed 
against consumers end with entry of default judgment, as well as some 
open-ended questions about the costs associated with making changes to 
collection management systems to address changes in State regulations. 
From July to October 2015, the Bureau conducted telephone interviews 
with debt collection vendors. A particular focus of these interviews 
was collection management systems, including programming and consulting 
services provided to system users. The Bureau also asked vendors about 
print mail services, predictive dialers, voice analytics, payment 
processing, and data services.
---------------------------------------------------------------------------

    \46\ Most respondents collected debt on behalf of clients, 
rather than buying debt and collecting on their own behalf. 
Respondents that bought some debt reported that the majority of 
accounts they collected were for clients. As a result, the 
Operations Study did not provide distinct information on debt buyers 
and their operations as compared to third-party debt collectors.
---------------------------------------------------------------------------

    Although the Bureau constructed the survey sample to ensure 
representation of debt collection firms of various sizes, the survey 
was not intended to be nationally representative. Nonetheless, the 
survey findings generally have informed the Bureau's understanding of 
the operations and operating costs of various types of debt collection 
firms. Part VI discusses the Bureau's findings from the study in 
greater detail.

D. Survey of Consumer Experiences With Debt Collection

    The Bureau conducted a survey of consumers' experiences with debt 
collection, approved under OMB control number 3170-0047, Debt 
Collection Survey from the Consumer Credit Panel, and published a 
report of the findings in January 2017 (CFPB Debt Collection Consumer 
Survey or Consumer Survey).\47\ Distributed to consumers in December 
2014, the survey asked consumers about their experiences with creditors 
and debt collectors over the prior year, including disputes and 
lawsuits, and how they prefer to communicate with a creditor or debt 
collector. The survey also asked for information on each consumer's 
demographic characteristics, general financial situation, and credit-
market experiences. The survey sample was selected from the Bureau's 
Consumer Credit Panel, which consists of a nationally representative, 
de-identified set of credit records maintained by one of the three 
nationwide CRAs, and responses were weighted to provide nationally 
representative results. The Consumer Survey, which included survey 
participants' self-reported responses, provided a more comprehensive 
picture of consumers' experiences and preferences related to debt 
collection than was previously available.\48\ The Bureau considered 
survey responses when developing the proposal.
---------------------------------------------------------------------------

    \47\ See generally CFPB Debt Collection Consumer Survey, supra 
note 18.
    \48\ Id. at 4.
---------------------------------------------------------------------------

    The Consumer Survey describes in detail several key findings 
relating to the prevalence of debt collection, the extent to which 
consumers dispute debts, and the extent to which creditors or debt 
collectors pursue the collection of debts through lawsuits. About one-
third of consumers with a credit file at one of the three nationwide 
CRAs reported being contacted by a creditor or debt collector about a 
debt in the prior year, and most of those consumers reported being 
contacted about two or more debts.\49\ More than one-half of the 
consumers who had been contacted about a debt in collection indicated 
that at least one of the debts about which they had been contacted was 
not theirs or was for the wrong amount. Roughly one-quarter of the 
consumers who had been contacted about a debt in collection reported 
having disputed a debt with their creditor or debt collector in the 
past year.\50\ About one-in-seven consumers (about 15 percent) who had 
been contacted about a debt in collection reported having been sued by 
a creditor or debt collector in the preceding year.\51\
---------------------------------------------------------------------------

    \49\ Id. at 13.
    \50\ Id. at 24-25.
    \51\ Id. at 27.
---------------------------------------------------------------------------

    The Consumer Survey also describes in detail several key findings 
related to the frequency with which consumers are contacted about debts 
in collection, how often consumers ask debt collectors to stop 
contacting them, how consumers prefer to be contacted by debt 
collectors, and the frequency with which consumers report negative 
experiences with debt collectors. More than one-third of consumers (37 
percent) contacted about a debt in collection indicated that the 
creditor or debt collector that most recently had contacted them tried 
to reach them at least four times per week. Seventeen percent reported 
that the creditor or debt collector tried to reach them at least eight 
times per week. Close to two-thirds of consumers (63 percent) said

[[Page 23281]]

they were contacted too often by the most recent creditor or debt 
collector.\52\
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    \52\ Id. at 30-31. As discussed further in the Consumer Survey, 
consumers' estimates of the frequency of contacts may be subject to 
uncertainty because the survey does not purport to distinguish in 
its questions or analysis between various factual scenarios.
---------------------------------------------------------------------------

    Consumers contacted at the same frequency by creditors and debt 
collectors were more likely to characterize contact by a debt collector 
as occurring ``too often'' than when a creditor engaged in the same 
frequency of contact. In addition, 42 percent of consumers who reported 
they had been contacted about a debt in collection said they had asked 
at least one creditor or debt collector to stop contacting them in the 
prior year, but only one in four consumers who made this request 
reported that the contact stopped. Consumers contacted by debt 
collectors were more likely than those contacted by creditors to report 
negative experiences, such as being treated impolitely or being 
threatened.\53\
---------------------------------------------------------------------------

    \53\ Id. at 34-35, 45-46.
---------------------------------------------------------------------------

    Almost one-half of the consumers (including those who did not 
report having been contacted by a creditor or debt collector about a 
debt in collection in the prior year) said they would most prefer debt 
collectors to contact them by letter. When asked the way they would 
least like debt collectors to contact them, consumers most commonly 
indicated in-person contacts (20 percent of consumers). Nearly two-
thirds of consumers said it was ``very important'' that others not see 
or hear a message from a creditor or debt collector. At the same time, 
most consumers also preferred that a creditor or debt collector include 
their name and the purpose of the call (i.e., debt collection) in a 
voicemail or answering-machine message.\54\
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    \54\ Id. at 36-38.
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E. Small Business Review Panel

    In August 2016, the Bureau convened a Small Business Review Panel 
(Small Business Review Panel or Panel) with the Chief Counsel for 
Advocacy of the Small Business Administration (SBA) and the 
Administrator of the Office of Information and Regulatory Affairs with 
the Office of Management and Budget (OMB).\55\ As part of this process, 
the Bureau prepared an outline of proposals under consideration and the 
alternatives considered (Small Business Review Panel Outline or 
Outline),\56\ which the Bureau posted on its website for review by the 
small entity representatives participating in the Panel process and by 
the general public.
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    \55\ The Small Business Regulatory Enforcement Fairness Act of 
1996 (SBREFA), as amended by section 1100G(a) of the Dodd-Frank Act, 
requires the Bureau to convene a Small Business Review Panel before 
proposing a rule that may have a substantial economic impact on a 
significant number of small entities. See Public Law 104-121, tit. 
II, 110 Stat. 847, 857 (1996) (as amended by Pub. L. 110-28, section 
8302 (2007)).
    \56\ Bureau of Consumer Fin. Prot., Small Business Review Panel 
for Debt Collector and Debt Buyer Rulemaking: Outline of Proposals 
Under Consideration and Alternatives Considered (July 2016), https://files.consumerfinance.gov/f/documents/20160727_cfpb_Outline_of_proposals.pdf (hereinafter Small Business 
Review Panel Outline). The Bureau also gathered feedback on the 
Small Business Review Panel Outline from other stakeholders, members 
of the public, and the Bureau's Consumer Advisory Board and 
Community Bank Advisory Council.
---------------------------------------------------------------------------

    The Panel participated in initial teleconferences with small groups 
of the small entity representatives to introduce the Outline and 
supporting materials and to obtain feedback. The Panel then conducted a 
full-day outreach meeting with the small entity representatives in 
August 2016 in Washington, DC. The Panel gathered information from the 
small entity representatives and made findings and recommendations 
regarding the potential compliance costs and other impacts of the 
proposals under consideration on those entities. Those findings and 
recommendations are set forth in the Small Business Review Panel 
Report, which is part of the administrative record in this rulemaking 
and is available to the public.\57\ The Bureau has considered these 
findings and recommendations in preparing this proposal and addresses 
many of them in greater detail in part V.\58\
---------------------------------------------------------------------------

    \57\ Bureau of Consumer Fin. Prot., U.S. Small Bus. Admin., & 
Office of Mgmt. & Budget, Final Report of the Small Business Review 
Panel on the CFPB's Proposals Under Consideration for the Debt 
Collector and Debt Buying Rulemaking (Oct. 2016), https://files.consumerfinance.gov/f/documents/cfpb_debt-collector-debt-buyer_SBREFA-report.pdf (hereinafter Small Business Review Panel 
Report).
    \58\ Certain proposals under consideration in the Small Business 
Review Panel Outline and discussed in the Small Business Review 
Panel Report are not included in this proposed rule and therefore 
are not discussed in part V. For example, because this proposed rule 
would apply only to FDCPA-covered debt collectors, the Bureau does 
not include a discussion of proposals under consideration that would 
have imposed information transfer requirements on first-party 
creditors who generally are not FDCPA-covered debt collectors.
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IV. Legal Authority

    The Bureau issues this proposal pursuant to its authority under the 
FDCPA and the Dodd-Frank Act. As amended by the Dodd-Frank Act, FDCPA 
section 814(d) provides that the Bureau ``may prescribe rules with 
respect to the collection of debts by debt collectors,'' as defined in 
the FDCPA.\59\ Section 1022(a) of the Dodd-Frank Act provides that 
``[t]he Bureau is authorized to exercise its authorities under Federal 
consumer financial law to administer, enforce, and otherwise implement 
the provisions of Federal consumer financial law.'' \60\ Section 
1022(b)(1) of the Dodd-Frank Act provides that the Director may 
prescribe rules and issue orders and guidance, as may be necessary or 
appropriate to enable the Bureau to administer and carry out the 
purposes and objectives of the Federal consumer financial laws, and to 
prevent evasions thereof.\61\ ``Federal consumer financial law'' 
includes title X of the Dodd-Frank Act and the FDCPA.\62\
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    \59\ 15 U.S.C. 1692l(d). As noted, the Bureau is the first 
Federal agency with authority to prescribe substantive debt 
collection rules under the FDCPA. Prior to the Dodd-Frank Act's 
grant of authority to the Bureau, the FTC published various 
materials providing guidance on the FDCPA. The FTC's materials have 
informed the Bureau's rulemaking and, if relevant to particular 
proposed provisions, are discussed in part V.
    \60\ 12 U.S.C. 5512(a).
    \61\ 12 U.S.C. 5512(b)(1).
    \62\ 12 U.S.C. 5481(12)(H), (14).
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    These and other authorities are discussed in greater detail in 
parts IV.A through E below. Part IV.A discusses how the Bureau proposes 
to interpret its authority under sections 806 through 808 of the FDCPA. 
Parts IV.B through E discuss the Bureau's relevant authorities under 
the Dodd-Frank Act and the Electronic Signatures in Global and National 
Commerce Act (E-SIGN Act).

A. FDCPA Sections 806 Through 808

    As discussed in part V, the Bureau proposes several provisions, in 
whole or in part, pursuant to its authority to interpret FDCPA sections 
806, 807, and 808, which set forth general prohibitions on, and 
requirements relating to, debt collectors' conduct and are accompanied 
by non-exhaustive lists of examples of unlawful conduct. This section 
provides an overview of how the Bureau proposes to interpret FDCPA 
sections 806 through 808.
    FDCPA section 806 generally prohibits a debt collector from 
``engag[ing] in any conduct the natural consequence of which is to 
harass, oppress, or abuse any person in connection with the collection 
of a debt.'' \63\ Then, ``[w]ithout limiting the general application of 
the foregoing,'' it lists six examples of conduct that violate that 
section.\64\ Similarly, FDCPA section 807 generally prohibits a debt 
collector from ``us[ing] any false, deceptive, or misleading 
representation or means in connection with the collection of any 
debt.'' \65\ Then,

[[Page 23282]]

``[w]ithout limiting the general application of the foregoing,'' 
section 807 lists 16 examples of conduct that violate that section.\66\ 
Finally, FDCPA section 808 prohibits a debt collector from ``us[ing] 
unfair or unconscionable means to collect or attempt to collect any 
debt.'' \67\ Then, ``[w]ithout limiting the general application of the 
foregoing,'' FDCPA section 808 lists eight examples of conduct that 
violate that section.\68\ The Bureau interprets FDCPA sections 806 
through 808 in light of: (1) The FDCPA's language and purpose; (2) the 
general types of conduct prohibited by those sections and, where 
relevant, the specific examples enumerated in those sections; and (3) 
judicial precedent.\69\
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    \63\ 15 U.S.C. 1692d.
    \64\ Id. at 1692d(1)-(6).
    \65\ 15 U.S.C. 1692e.
    \66\ Id. at 1692e(1)-(16).
    \67\ 15 U.S.C. 1692f.
    \68\ Id. at 1692f(1)-(8).
    \69\ Where the Bureau proposes requirements pursuant only to its 
authority to implement and interpret sections 806 through 808 of the 
FDCPA, the Bureau does not take a position on whether such practices 
also would constitute an unfair, deceptive, or abusive act or 
practice under section 1031 of the Dodd-Frank Act. Where the Bureau 
proposes an intervention both pursuant to its authority to implement 
and interpret FDCPA sections 806 through 808 and pursuant to its 
authority to identify and prevent unfair acts or practices under 
Dodd-Frank Act section 1031, the section-by-section analysis 
explains why the Bureau proposes to identify the act or practice as 
unfair under the Dodd-Frank Act.
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Interpreting General Provisions in Light of Specific Prohibitions or 
Requirements
    By their plain terms, FDCPA sections 806 through 808 make clear 
that their examples of prohibited conduct do not ``limit[ ] the general 
application'' of those sections' general prohibitions. The FDCPA's 
legislative history is consistent with this understanding,\70\ as are 
opinions by courts that have addressed this issue.\71\ Accordingly, the 
Bureau may prohibit conduct that the specific examples in FDCPA 
sections 806 through 808 do not address if the conduct violates the 
general prohibitions.
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    \70\ See, e.g., S. Rept. No. 95-382, 95th Cong., 1st Sess. 2, at 
4 (1977), reprinted in 1977 U.S.C.C.A.N. 1695, 1698 (hereinafter S. 
Rept. No. 382) (``[T]his bill prohibits in general terms any 
harassing, unfair, or deceptive collection practice. This will 
enable the courts, where appropriate, to proscribe other improper 
conduct which is not specifically addressed.''). Courts have also 
cited legislative history in noting that, ``in passing the FDCPA, 
Congress identified abusive collection attempts as primary 
motivations for the Act's passage.'' Hart v. FCI Lender Servs, Inc., 
797 F.3d 219, 226 (2d Cir. 2015).
    \71\ See, e.g., Stratton v. Portfolio Recovery Assocs., LLC, 770 
F.3d 443, 450 (6th Cir. 2014) (``[T]he listed examples of illegal 
acts are just that--examples.'').
---------------------------------------------------------------------------

    The Bureau proposes to use the specific examples in FDCPA sections 
806 through 808 to inform its interpretation of those sections' general 
prohibitions. Accordingly, the proposal would interpret the general 
provisions of FDCPA sections 806 through 808 to prohibit or require 
certain conduct that is similar to the types of conduct prohibited or 
required by the specific examples. For example, the proposal would 
interpret the general provisions in FDCPA sections 806 through 808 as 
protecting consumer privacy in debt collection in ways similar to the 
specific restrictions in: (1) FDCPA section 806(3), which prohibits, 
with certain exceptions, the publication of a list of consumers who 
allegedly refuse to pay debts; \72\ (2) FDCPA section 808(7), which 
prohibits communicating with a consumer regarding a debt by postcard; 
and FDCPA section 808(8), which prohibits the use of certain language 
and symbols on envelopes.\73\ The interpretative approach of looking to 
specific provisions to inform general provisions is consistent with 
judicial precedent indicating that the general prohibitions in the 
FDCPA should be interpreted ``in light of [their] associates.'' \74\ 
For example, courts have held that violating a consumer's privacy 
interest through public exposure of a debt violates the FDCPA, noting 
that violating a consumer's privacy is a type of conduct prohibited by 
several specific examples.\75\ In this way, the Bureau uses the 
specific examples in FDCPA sections 806 through 808 to inform its 
understanding of the general provisions, consistent with the statute's 
use of the phrase ``without limiting the general application of the 
foregoing'' to introduce the specific examples.\76\
---------------------------------------------------------------------------

    \72\ 15 U.S.C. 1692d(3).
    \73\ 15 U.S.C. 1692f(7)-(8).
    \74\ Currier v. First Resolution Inv. Corp., 762 F.3d 529, 534 
(6th Cir. 2014) (citing Limited, Inc. v. C.I.R., 286 F.3d 324, 332 
(6th Cir. 2002)).
    \75\ See id. at 535.
    \76\ 15 U.S.C. 1692d-1692f.
---------------------------------------------------------------------------

Judicial Precedent
    The Bureau interprets the general prohibitions in FDCPA sections 
806 through 808 in light of the significant body of existing court 
decisions interpreting those provisions, which provides instructive 
examples of collection practices that are not addressed by the specific 
prohibitions in those sections but that nonetheless run afoul of the 
FDCPA's general prohibitions in sections 806 through 808.\77\ For 
example, courts have held that a debt collector could violate FDCPA 
section 808 by using coercive tactics such as citing speculative legal 
consequences to pressure the consumer to engage with the debt 
collector.\78\ Additionally, courts have held that a debt collector 
could violate FDCPA sections 806 through 808 by taking certain actions 
to collect a debt that a consumer does not actually owe or that is not 
actually delinquent.\79\ Similarly, a debt collector could violate 
FDCPA section 807 by, for example, giving ``a false impression of the 
character of the debt,'' \80\ such as by failing to disclose that an 
amount collected includes fees,\81\ or by failing to disclose that the 
applicable statute of limitations has expired.\82\
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    \77\ This interpretive approach is consistent with courts' 
reasoning that these general prohibitions should be interpreted in 
light of conduct that courts have already found violate them. See, 
e.g., Todd v. Collecto, Inc., 731 F.3d 734, 739 (7th Cir. 2013). 
While judicial precedent informs the Bureau's interpretation of the 
general prohibitions in FDCPA sections 806 through 808, the Bureau 
does not propose to adopt specific judicial interpretations through 
its restatement of the general prohibitions except where noted in 
the proposal.
    \78\ See, e.g., Hosseinzadeh v. M.R.S. Assocs., Inc., 387 F. 
Supp. 2d 1104, 1117 (C.D. Cal. 2005) (denying debt collector's 
motion for summary judgment on section 808 claim where debt 
collector used false name and implied that consumer ``would have 
legal problems'' if consumer did not return debt collector's 
telephone call).
    \79\ See, e.g., Fox v. Citicorp Credit Servs., Inc., 15 F.3d 
1507, 1517 (9th Cir. 1994) (reversing grant of summary judgment to 
debt collector in part because ``a jury could rationally find'' that 
filing writ of garnishment was unfair or unconscionable under 
section 808 when debt was not delinquent); Ferrell v. Midland 
Funding, LLC, No. 2:15-cv-00126-JHE, 2015 WL 2450615, at *3-4 (N.D. 
Ala. May 22, 2015) (denying debt collector's motion to dismiss 
section 806 claim where debt collector allegedly initiated 
collection lawsuit even though it knew plaintiff did not owe debt); 
Pittman v. J.J. Mac Intyre Co. of Nev., Inc., 969 F. Supp. 609, 612-
13 (D. Nev. 1997) (denying debt collector's motion to dismiss claims 
under sections 807 and 808 where debt collector allegedly attempted 
to collect fully satisfied debt).
    \80\ Fields v. Wilber Law Firm, P.C., 383 F.3d 562, 565-66 (7th 
Cir. 2004) (reversing dismissal of plaintiff's claims brought under 
sections 807 and 808 because dunning letter that failed to 
communicate that total amount due included attorneys' fees ``could 
conceivably mislead an unsophisticated consumer'').
    \81\ Id.
    \82\ See, e.g., Pantoja v. Portfolio Recovery Assocs., 852 F.3d 
679, 686-87 (7th Cir. 2017).
---------------------------------------------------------------------------

    Several courts have applied an objective standard of an 
``unsophisticated'' or ``least sophisticated'' consumer to FDCPA 
sections 807 \83\ and 808 \84\ and an

[[Page 23283]]

objective, vulnerable consumer standard to FDCPA section 806.\85\ In 
determining whether particular acts violate FDCPA sections 806 through 
808, the Bureau interprets those sections to incorporate ``an objective 
standard'' that is designed to protect consumers who are ``of below-
average sophistication or intelligence'' or who are ``especially 
vulnerable to fraudulent schemes.'' \86\
---------------------------------------------------------------------------

    \83\ See, e.g., Hartman v. Great Seneca Fin. Corp., 569 F.3d 
606, 613 (6th Cir. 2009) (applying least sophisticated consumer 
standard to section 807 claim); Bentley v. Great Lakes Collection 
Bureau, 6 F.3d 60, 62 (2d. Cir. 1993) (same); Swanson v. S. Or. 
Credit Serv., Inc., 869 F.2d 1222, 1227 (9th Cir. 1988) (same).
    \84\ See, e.g., Crawford v. LVNV Funding, LLC, 758 F.3d 1254, 
1258 (11th Cir. 2014) (``[W]e have adopted a `least-sophisticated 
consumer standard to evaluate whether a debt collector's conduct is 
`deceptive,' `misleading,' `unconscionable,' or `unfair' under the 
statute.''); LeBlanc v. Unifund CCR Partners, 601 F.3d 1185, 1200-01 
(11th Cir. 2010) (applying least sophisticated consumer standard to 
section 808 claim); Turner v. J.V.D.B. & Assocs., Inc., 330 F.3d 
991, 997 (7th Cir. 2003) (applying unsophisticated consumer standard 
to section 808 claim). Circuit courts have also held, for example, 
that the least sophisticated consumer standard applies to a 
consumer's understanding of a validation notice required under FDCPA 
section 809 and threats to take legal action under FDCPA section 
807(5). See Swanson, 869 F.2d at 1225-27; Wilson, 225 F.3d 350, 353 
(3d Cir. 2000).
    \85\ For example, in Jeter v. Credit Bureau, Inc., 760 F.2d 
1168, 1179 (11th Cir. 1985), the court applied a standard analogous 
to the ``least sophisticated consumer'' to an FDCPA section 806 
claim, holding that claims under section 806 ``should be viewed from 
the perspective of a consumer whose circumstances makes him 
relatively more susceptible to harassment, oppression, or abuse.''
    \86\ See Brief for the United States as Amicus Curiae Supporting 
Respondents, Sheriff v. Gillie, 136 S. Ct. 1594 (2016) (No. 15-338), 
2016 WL 836755, at * 29 (quoting Gammon v. GC Servs. Ltd. P'ship, 27 
F.3d 1254, 1257 (7th Cir. 1994) and Clomon v. Jackson, 988 F.2d 
1314, 1319 (2d Cir. 1993)).
---------------------------------------------------------------------------

    Courts have reasoned, and the Bureau agrees, that ``[w]hether a 
consumer is more or less likely to be harassed, oppressed, or abused by 
certain debt collection practices does not relate solely to the 
consumer's relative sophistication'' and may be affected by other 
circumstances, such as the consumer's financial and legal 
resources.\87\ Courts have further reasoned that section 807's 
prohibition on false, deceptive, or misleading representations 
incorporates an objective, ``unsophisticated'' consumer standard.\88\ 
This standard ``protects the consumer who is uninformed, naive, or 
trusting, yet it admits an objective element of reasonableness.'' \89\ 
The Bureau agrees with the reasoning of courts that have applied this 
standard or a ``least sophisticated consumer'' standard.\90\ The Bureau 
proposes to use the term ``unsophisticated'' consumer to describe the 
standard it will apply in this proposal when assessing the effect of 
conduct on consumers.
---------------------------------------------------------------------------

    \87\ Jeter, 760 F.2d at 1179 (``[R]ather, such susceptibility 
might be affected by other circumstances of the consumer or by the 
relationship between the consumer and the debt collection agency. 
For example, a very intelligent and sophisticated consumer might 
well be susceptible to harassment, oppression, or abuse because he 
is poor (i.e., has limited access to the legal system), is on 
probation, or is otherwise at the mercy of a power relationship.'').
    \88\ See Brief for the United States as Amicus Curiae Supporting 
Respondents, supra note 86, at *10, 27-30.
    \89\ Gammon, 27 F.3d at 1257.
    \90\ See, e.g., Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d 
Cir. 2008) (``We use the `least sophisticated debtor' standard in 
order to effectuate the basic purpose of the FDCPA: To protect all 
consumers, the gullible as well as the shrewd'') (internal quotation 
marks and citation omitted); Clomon, 988 F.2d at 1319 (``To serve 
the purposes of the consumer-protection laws, courts have attempted 
to articulate a standard for evaluating deceptiveness that does not 
rely on assumptions about the `average' or `normal' consumer. This 
effort is grounded, quite sensibly, in the assumption that consumers 
of below-average sophistication or intelligence are especially 
vulnerable to fraudulent schemes. The least-sophisticated-consumer 
standard protects these consumers in a variety of ways.'').
---------------------------------------------------------------------------

FDCPA's Purposes
    FDCPA section 802 establishes that the purpose of the statute is to 
eliminate abusive debt collection practices by debt collectors, to 
ensure that debt collectors who refrain from using abusive debt 
collection practices are not competitively disadvantaged, and to 
promote consistent State action to protect consumers against debt 
collection abuses.\91\ In particular, FDCPA section 802 delineates 
certain specific harms that the general and specific prohibitions in 
sections 806 through 808 were designed to alleviate. Section 802 
states: ``[T]he use of abusive, deceptive, and unfair debt collection 
practices by many debt collectors . . . contribute[s] to the number of 
personal bankruptcies, to marital instability, to the loss of jobs, and 
to invasions of individual privacy.'' \92\
---------------------------------------------------------------------------

    \91\ 15 U.S.C. 1692(e).
    \92\ 15 U.S.C. 1692(a).
---------------------------------------------------------------------------

B. Dodd-Frank Act Section 1031

Section 1031(b)
    Section 1031(b) of the Dodd-Frank Act provides the Bureau with 
authority to prescribe rules to identify and prevent unfair, deceptive, 
or abusive acts or practices. Specifically, Dodd-Frank Act section 
1031(b) authorizes the Bureau to prescribe rules applicable to a 
covered person or service provider identifying as unlawful unfair, 
deceptive, or abusive acts or practices in connection with any 
transaction with a consumer for a consumer financial product or 
service, or the offering of a consumer financial product or 
service.\93\ Section 1031(b) of the Dodd-Frank Act further provides 
that ``[r]ules under this section may include requirements for the 
purpose of preventing such acts or practices'' \94\ (sometimes referred 
to as prevention authority). The Bureau proposes certain provisions 
based on its authority under Dodd-Frank Act section 1031(b).
---------------------------------------------------------------------------

    \93\ 12 U.S.C. 5531(b).
    \94\ Id.
---------------------------------------------------------------------------

    Section 1031(b) of the Dodd-Frank Act is similar to the FTC Act 
provisions relating to unfair and deceptive acts or practices.\95\ 
Given these similarities, where the Bureau relies on Dodd-Frank Act 
section 1031(b) authority to support particular provisions, the Bureau 
is guided, in part, by case law and Federal agency rulemakings 
addressing unfair and deceptive acts or practices under the FTC Act. 
For example, case law establishes that, under the FTC Act, the FTC may 
impose requirements to prevent acts or practices that the FTC 
identifies as unfair or deceptive so long as the preventive 
requirements have a reasonable relation to the identified acts or 
practices.\96\ Where the Bureau relies on Dodd Frank Act section 
1031(b) prevention authority to support particular proposals, the 
Bureau explains how the preventive requirements have a reasonable 
relation to the identified unfair, deceptive, or abusive acts or 
practices.
---------------------------------------------------------------------------

    \95\ 15 U.S.C. 45.
    \96\ See Jacob Siegel Co. v. Fed. Trade Comm'n, 327 U.S. 608, 
612-13 (1946) (``The Commission is the expert body to determine what 
remedy is necessary to eliminate the unfair or deceptive trade 
practices which have been disclosed. It has wide latitude for 
judgment and the courts will not interfere except where the remedy 
selected has no reasonable relation to the unlawful practices found 
to exist.'').
---------------------------------------------------------------------------

Section 1031(c)
    Section 1031(c)(1) of the Dodd-Frank Act provides that the Bureau 
shall have no authority under section 1031 to declare an act or 
practice in connection with a transaction with a consumer for a 
consumer financial product or service, or the offering of a consumer 
financial product or service, to be unlawful on the grounds that such 
act or practice is unfair, unless the Bureau ``has a reasonable basis'' 
to conclude that: (A) The act or practice causes or is likely to cause 
substantial injury to consumers which is not reasonably avoidable by 
consumers; and (B) such substantial injury is not outweighed by 
countervailing benefits to consumers or to competition.\97\ Section 
1031(c)(2) of the Dodd-Frank Act provides that, in determining whether 
an act or practice is unfair, the Bureau may consider established 
public policies as evidence to be considered with all other evidence. 
Public policy considerations may not serve as a primary basis for such 
a determination.\98\ The Bureau proposes certain interventions based in 
part on its authority under Dodd-Frank Act section 1031(c).
---------------------------------------------------------------------------

    \97\ 12 U.S.C. 5531(c)(1).
    \98\ 12 U.S.C. 5531(c)(2).
---------------------------------------------------------------------------

    The unfairness standard under Dodd-Frank Act section 1031(c)--
requiring primary consideration of the three elements (substantial 
injury, not reasonably avoidable by consumers, and

[[Page 23284]]

countervailing benefits to consumers or to competition) and permitting 
secondary consideration of public policy--is similar to the unfairness 
standard under the FTC Act.\99\ Section 5(n) of the FTC Act was amended 
in 1994 to incorporate the principles set forth in the FTC's 
``Commission Statement of Policy on the Scope of Unfairness 
Jurisdiction,'' \100\ issued on December 17, 1980. The FTC Act 
unfairness standard, the FTC Policy Statement on Unfairness, 
rulemakings by the FTC and other Federal agencies,\101\ and related 
cases \102\ inform the scope and meaning of the Bureau's authority 
under Dodd-Frank Act section 1031(b) to issue rules that identify and 
prevent acts or practices that the Bureau determines are unfair 
pursuant to Dodd-Frank Act section 1031(c).
---------------------------------------------------------------------------

    \99\ Section 5(n) of the FTC Act, as amended in 1994, provides 
that, ``The [FTC] shall have no authority . . . to declare unlawful 
an act or practice on the grounds that such act or practice is 
unfair unless the act or practice causes or is likely to cause 
substantial injury to consumers which is not reasonably avoidable by 
consumers themselves and not outweighed by countervailing benefits 
to consumers or to competition. In determining whether an act or 
practice is unfair, the [FTC] may consider established public 
policies as evidence to be considered with all other evidence. Such 
public policy considerations may not serve as a primary basis for 
such determination.'' 15 U.S.C. 45(n).
    \100\ Letter from the FTC to Hon. Wendell Ford and Hon. John 
Danforth, Committee on Commerce, Science & Transportation, United 
States Senate, Commission Statement of Policy on the Scope of 
Consumer Unfairness Jurisdiction (Dec. 17, 1980), reprinted in Int'l 
Harvester Co., 104 F.T.C. 949, 1070-76 (1984), https://www.ftc.gov/sites/default/files/documents/commission_decision_volumes/volume-104/ftc_volume_decision_104__july_-_december_1984pages949_-_1088.pdf 
(hereinafter FTC Policy Statement on Unfairness); see also S. Rept. 
103-130, at 12-13 (1993), reprinted in 1994 U.S.C.C.A.N. 1776 
(legislative history to FTC Act amendments indicating congressional 
intent to codify the principles of the FTC Policy Statement on 
Unfairness).
    \101\ In addition to the FTC's rulemakings under unfairness 
authority, certain Federal prudential regulators have prescribed 
rules prohibiting unfair practices under section 18(f)(1) of the FTC 
Act and, in doing so, they applied the statutory elements consistent 
with the standards articulated by the FTC. See 74 FR 5498, 5502 
(Jan. 29, 2009) (background discussion of legal authority for 
interagency Subprime Credit Card Practices rule). The Board, FDIC, 
and the OCC also previously issued guidance generally adopting these 
standards for purposes of enforcing the FTC Act's prohibition on 
unfair and deceptive acts or practices. See id.
    \102\ See, e.g., Consumer Fin. Prot. Bureau v. NDG Fin. Corp., 
No. 15-cv-52110 CM, 2016 WL 7188792 (S.D.N.Y. Dec. 2, 2016); 
Consumer Fin. Prot. Bureau v. Universal Debt & Payment Sols., LLC, 
No. 1:15-CV-00-859 RWS, 2015 WL 11439178 (N.D. Ga. Sept. 1, 2015); 
Consumer Fin. Prot. Bureau v. ITT Educ. Servs., Inc., 219 F. Supp. 
3d 878 (S.D. Ind. 2015).
---------------------------------------------------------------------------

    Substantial injury. The first element for a determination of 
unfairness under Dodd-Frank Act section 1031(c)(1) is that the act or 
practice causes or is likely to cause substantial injury to consumers. 
As discussed above, the FTC Act unfairness standard, the FTC Policy 
Statement on Unfairness, rulemakings by the FTC and other Federal 
agencies, and related cases inform the meaning of the elements of the 
unfairness standard under Dodd-Frank Act section 1031(c)(1). The FTC 
noted in its Policy Statement on Unfairness that substantial injury 
ordinarily involves monetary harm.\103\ The Policy Statement stated 
that trivial or speculative harms are not cognizable under the test for 
substantial injury.\104\ The FTC also noted that an injury is 
``sufficiently substantial'' if it consists of a small amount of harm 
to a large number of individuals or raises a significant risk of 
harm.\105\ The FTC has found that substantial injury also may involve a 
large amount of harm experienced by a small number of individuals.\106\ 
As described in the FTC Policy Statement, emotional effects from an act 
or practice might be a basis for a finding of unfairness in an extreme 
case in which tangible injury from the act or practice could be clearly 
demonstrated,\107\ and the D.C. Circuit has upheld an FTC conclusion 
that the demonstrated effects on consumers from threats to seize 
household possessions were sufficient to form part of the substantial 
injury along with financial harm.\108\ The Bureau has stated that 
emotional impact and other more subjective types of harm ``will not 
ordinarily amount to substantial injury'' but that, in certain 
circumstances, ``emotional impacts may amount to or contribute to 
substantial injury.'' \109\
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    \103\ See FTC Policy Statement on Unfairness, supra note 100, at 
1073.
    \104\ Id.
    \105\ Id. at 1073 n.12.
    \106\ Int'l Harvester Co., 104 F.T.C. 949, 1064 (1984).
    \107\ FTC Policy Statement on Unfairness, supra note 100, at 
1073 n.16 (``In an extreme case, however, where tangible injury 
could be clearly demonstrated, emotional effects might possibly be 
considered as the basis for a finding of unfairness'').
    \108\ See Am. Fin. Servs. Assoc. v. FTC, 767 F.2d 957, 973-74 
n.20 (D.C. Cir. 1985) (``the Commission found that `the threat to 
seize household possessions causes `great emotional suffering, 
humiliation, anxiety, and deep feelings of guilt, and this distress 
can lead to physical breakdowns or illness, disruption of the 
family, and undue strain on family relationships' '') (internal 
citations omitted).
    \109\ Bureau of Consumer Fin. Prot., CFPB Supervision and 
Examination Process, at UDAAP 2 (Apr. 2019), https://files.consumerfinance.gov/f/documents/cfpb_supervision-and-examination-manual.pdf.
---------------------------------------------------------------------------

    Not reasonably avoidable. The second element for a determination of 
unfairness under Dodd-Frank Act section 1031(c)(1) is that the 
substantial injury is not reasonably avoidable by consumers. As 
discussed above, the FTC Act unfairness standard, the FTC Policy 
Statement on Unfairness, rulemakings by the FTC and other Federal 
agencies, and related case law inform the meaning of the elements of 
the unfairness standard under Dodd-Frank Act section 1031(c)(1). The 
FTC stated that knowing the steps for avoiding injury is not enough for 
the injury to be reasonably avoidable; rather, the consumer must also 
understand and appreciate the necessity of taking those steps.\110\ As 
the FTC explained in its Policy Statement on Unfairness, most 
unfairness matters are brought to ``halt some form of seller behavior 
that unreasonably creates or takes advantage of an obstacle to the free 
exercise of consumer decisionmaking.'' \111\ The D.C. Circuit has noted 
that, if such behavior exists, there is a ``market failure'' and the 
agency ``may be required to take corrective action.'' \112\ Assessing 
whether an injury is reasonably avoidable also requires taking into 
account the costs of making a choice other than the one made and the 
availability of alternatives in the marketplace.\113\
---------------------------------------------------------------------------

    \110\ See Int'l Harvester, 104 F.T.C. at 1066.
    \111\ FTC Policy Statement on Unfairness, supra note 100, at 
1074.
    \112\ Am. Fin. Servs. Assoc., 767 F.2d at 976.
    \113\ See FTC Policy Statement on Unfairness, supra note 100, at 
1074 n.19 (``In some senses any injury can be avoided--for example, 
by hiring independent experts to test all products in advance, or by 
private legal actions for damages--but these courses may be too 
expensive to be practicable for individual consumers to pursue.''); 
Am. Fin. Servs. Assoc., 767 F.2d at 976-77 (reasoning that, because 
of factors such as substantial similarity of contracts offered by 
creditors, ``consumers have little ability or incentive to shop for 
a better contract'').
---------------------------------------------------------------------------

    Countervailing benefits to consumers or competition. The third 
element for a determination of unfairness under Dodd-Frank Act section 
1031(c)(1) is that the act or practice's countervailing benefits to 
consumers or to competition do not outweigh the substantial consumer 
injury. As discussed above, the FTC Act unfairness standard, the FTC 
Policy Statement on Unfairness, rulemakings by the FTC and other 
Federal agencies, and related cases inform the meaning of the elements 
of the unfairness standard under Dodd-Frank Act section 1031(c)(1). In 
applying the FTC Act's unfairness standard, the FTC has stated that it 
generally is important to consider both the costs of imposing a remedy 
and any benefits that consumers receive as a result of the act or 
practice. Authorities addressing the FTC Act's unfairness standard 
indicate that the countervailing benefits test does not require a 
precise quantitative analysis of benefits and costs, as such an 
analysis may be unnecessary or, in some cases,

[[Page 23285]]

impossible; rather, the agency is expected to gather and consider 
reasonably available evidence.\114\
---------------------------------------------------------------------------

    \114\ Pa. Funeral Dirs. Ass'n v. FTC, 41 F.3d 81, 91 (3d Cir. 
1994) (upholding FTC's amendments to the Funeral Industry Practices 
Rule and noting that ``much of a cost-benefit analysis requires 
predictions and speculation''); Int'l Harvester, 104 F.T.C. at 1065 
n.59 (``In making these calculations we do not strive for an 
unrealistic degree of precision. . . . We assess the matter in a 
more general way, giving consumers the benefit of the doubt in close 
issues. . . . What is important . . . is that we retain an overall 
sense of the relationship between costs and benefits. We would not 
want to impose compliance costs of millions of dollars in order to 
prevent a bruised elbow.''); see also S. Rept. 103-130, at 13 (1994) 
(noting that, ``[i]n determining whether a substantial consumer 
injury is outweighed by the countervailing benefits of a practice, 
the Committee does not intend that the FTC quantify the detrimental 
and beneficial effects of the practice in every case. In many 
instances, such a numerical benefit-cost analysis would be 
unnecessary; in other cases, it may be impossible. This section 
would require, however, that the FTC carefully evaluate the benefits 
and costs of each exercise of its unfairness authority, gathering 
and considering reasonably available evidence.'').
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    Public policy. As noted above, Dodd-Frank Act section 1031(c)(2) 
provides that, in determining whether an act or practice is unfair, the 
Bureau may consider established public policies as evidence to be 
considered with all other evidence. Public policy considerations, 
however, may not serve as a primary basis for such a 
determination.\115\
---------------------------------------------------------------------------

    \115\ 12 U.S.C. 5531(c)(2).
---------------------------------------------------------------------------

C. Dodd-Frank Act Section 1032

    The Bureau proposes certain provisions based in part on its 
authority under Dodd-Frank Act section 1032. Dodd-Frank Act section 
1032(a) provides that the Bureau may prescribe rules to ensure that the 
features of any consumer financial product or service, ``both initially 
and over the term of the product or service,'' are ``fully, accurately, 
and effectively disclosed to consumers in a manner that permits 
consumers to understand the costs, benefits, and risks associated with 
the product or service, in light of the facts and circumstances.'' 
\116\ Under Dodd-Frank Act section 1032(a), the Bureau is empowered to 
prescribe rules regarding the disclosure of the ``features'' of 
consumer financial products and services generally. Accordingly, the 
Bureau may prescribe rules containing disclosure requirements even if 
other Federal consumer financial laws do not specifically require 
disclosure of such features.
---------------------------------------------------------------------------

    \116\ 12 U.S.C. 5532(a).
---------------------------------------------------------------------------

    Dodd-Frank Act section 1032(b)(1) provides that ``any final rule 
prescribed by the Bureau under this section requiring disclosures may 
include a model form that may be used at the option of the covered 
person for provision of the required disclosures.'' \117\ Dodd-Frank 
Act section 1032(b)(2) provides that such a model form ``shall contain 
a clear and conspicuous disclosure that at a minimum--(A) uses plain 
language comprehensible to consumers; (B) contains a clear format and 
design, such as an easily readable type font; and (C) succinctly 
explains the information that must be communicated to the consumer.'' 
\118\ Dodd-Frank Act section 1032(b)(3) provides that any such model 
form ``shall be validated through consumer testing.''; \119\
---------------------------------------------------------------------------

    \117\ 12 U.S.C. 5532(b)(1).
    \118\ 12 U.S.C. 5532(b)(2).
    \119\ 12 U.S.C. 5532(b)(3).
---------------------------------------------------------------------------

    Dodd-Frank Act section 1032(c) provides that, in prescribing rules 
pursuant to Dodd-Frank Act section 1032, the Bureau ``shall consider 
available evidence about consumer awareness, understanding of, and 
responses to disclosures or communications about the risks, costs, and 
benefits of consumer financial products or services.'' \120\ Dodd-Frank 
Act section 1032(d) provides that ``[a]ny covered person that uses a 
model form included with a rule issued under this section shall be 
deemed to be in compliance with the disclosure requirements of this 
section with respect to such model form.'' \121\
---------------------------------------------------------------------------

    \120\ 12 U.S.C. 5532(c).
    \121\ 12 U.S.C. 5532(d).
---------------------------------------------------------------------------

D. Other Authorities Under the Dodd-Frank Act

    The Bureau proposes certain interventions based in part on its 
authority under Dodd-Frank Act sections 1022 and 1024. Section 
1022(b)(1) of the Dodd-Frank Act provides that the Bureau's Director 
``may prescribe rules and issue orders and guidance, as may be 
necessary or appropriate to enable the Bureau to administer and carry 
out the purposes and objectives of the Federal consumer financial laws, 
and to prevent evasions thereof.'' \122\ ``Federal consumer financial 
laws'' include the FDCPA and title X of the Dodd-Frank Act.\123\
---------------------------------------------------------------------------

    \122\ 12 U.S.C. 5512(b)(1).
    \123\ 12 U.S.C. 5481(14).
---------------------------------------------------------------------------

    Section 1022(b)(2) of the Dodd-Frank Act prescribes certain 
standards for rulemaking that the Bureau must follow in exercising its 
authority under Dodd-Frank Act section 1022(b)(1).\124\ See part VI for 
a discussion of the Bureau's standards for rulemaking under Dodd-Frank 
Act section 1022(b)(2).
---------------------------------------------------------------------------

    \124\ 12 U.S.C. 5512(b)(2).
---------------------------------------------------------------------------

    Proposed Sec.  1006.100 concerning the retention of records would 
be based in part on the Bureau's authority under Dodd-Frank Act section 
1024(b)(7)(A) and (B) \125\ as applied to debt collectors who are 
nondepository covered persons that the Bureau supervises under Dodd-
Frank Act section 1024(a).\126\ The section-by-section analysis of 
proposed Sec.  1006.100 contains an additional description of the 
authorities on which the Bureau relies for proposed Sec.  1006.100.
---------------------------------------------------------------------------

    \125\ Dodd-Frank Act section 1024(b)(7)(A) authorizes the Bureau 
to prescribe rules to facilitate supervision of persons identified 
as larger participants of a market for a consumer financial product 
or service as defined by rule in accordance with section 
1024(a)(1)(B) of the Dodd-Frank Act, and Dodd-Frank Act section 
1024(b)(7)(B) authorizes the Bureau to require a person described in 
Dodd-Frank Act section 1024(a)(1) to retain records for the purpose 
of facilitating supervision of such persons and assessing and 
detecting risks to consumers.
    \126\ 12 U.S.C. 5514(b)(7)(A)-(B).
---------------------------------------------------------------------------

E. The E-SIGN Act

    The E-SIGN Act provides standards for determining if delivery of a 
disclosure by electronic record satisfies a requirement in a statute, 
regulation, or other rule of law that the disclosure be provided or 
made available to a consumer in writing. The E-SIGN Act sets forth 
criteria under which Federal regulatory agencies may exempt a specified 
category or type of record from the consent requirements for electronic 
disclosures in the E-SIGN Act.\127\ For the reasons set forth in part 
V, proposed Sec.  1006.42(c) and (d) would exempt electronic delivery 
of certain required notices from the consent requirements of the E-SIGN 
Act. Pursuant to E-SIGN Act section 104(b)(1), which permits the Bureau 
to interpret the E-SIGN Act through the issuance of regulations, 
proposed comments 6(c)(1)-1 and -2 provide an interpretation of the E-
SIGN Act as applied to a debt collector responding to a consumer's 
notification that the consumer refuses to pay the debt or wants the 
debt collector to cease communication; proposed comments 38-2 and -3 
provide an interpretation of the E-SIGN Act as applied to a debt 
collector responding to a consumer dispute or request for original-
creditor information; and proposed Sec.  1006.42(b)(1) and proposed 
comment 42(b)(1)-1 provide an interpretation of the E-SIGN Act as 
applied to certain disclosures that the regulation would require debt 
collectors to provide.
---------------------------------------------------------------------------

    \127\ 15 U.S.C. 7004(d)(1).

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[[Page 23286]]

V. Section-by-Section Analysis

Subpart A--General

Section 1006.1 Authority, Purpose, and Coverage
1(a) Authority
    FDCPA section 817 provides that the Bureau shall by regulation 
exempt from the requirements of the FDCPA any class of debt collection 
practices within any State if the Bureau determines that certain 
conditions have been met.\128\ Before the Bureau's creation, FDCPA 
section 817 provided the same authority to the FTC, and the FTC issued 
a rule to describe procedures for a State to apply for such an 
exemption.\129\ After the Dodd-Frank Act granted the Bureau FDCPA 
rulewriting authority, the Bureau restated the FTC's existing rule 
regarding State exemptions without substantive change as the Bureau's 
Regulation F, 12 CFR part 1006.\130\ Existing Sec.  1006.1(a) thus 
states that the purpose of Regulation F is to establish procedures and 
criteria for States to apply to the Bureau for an exemption as provided 
in FDCPA section 817.
---------------------------------------------------------------------------

    \128\ 15 U.S.C. 1692o.
    \129\ See 16 CFR part 901.
    \130\ 76 FR 78121 (Dec. 16, 2011).
---------------------------------------------------------------------------

    Consistent with the Bureau's proposal to revise part 1006 to 
regulate the debt collection activities of FDCPA-covered debt 
collectors, the Bureau proposes to revise existing Sec.  1006.1(a) to 
set forth the Bureau's authority to issue such rules. Proposed Sec.  
1006.1(a) provides that part 1006 is known as Regulation F and is 
issued by the Bureau pursuant to sections 814(d) and 817 of the 
FDCPA,\131\ title X of the Dodd-Frank Act,\132\ and section 104(b)(1) 
and (d)(1) of the E-SIGN Act.\133\ The Bureau proposes to move the 
remainder of existing Sec.  1006.1(a), regarding State-law exemptions 
from the FDCPA, to paragraph I(a) of appendix A of the regulation.\134\
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    \131\ 15 U.S.C. 1692l(d), 1692o.
    \132\ 12 U.S.C. 5481 et seq.
    \133\ 15 U.S.C. 7004(b)(1), 7004(d)(1).
    \134\ See the section-by-section analysis of proposed Sec.  
1006.108 and appendix A.
---------------------------------------------------------------------------

1(b) Purpose
    Existing Sec.  1006.1(b) defines terms relevant to the procedures 
and criteria for States to apply to the Bureau for an exemption as 
provided in FDCPA section 817. Consistent with the Bureau's proposal to 
revise part 1006 to regulate the debt collection activities of FDCPA-
covered debt collectors, the Bureau proposes to revise Sec.  1006.1(b) 
to identify the purposes of part 1006. The Bureau proposes to move the 
definitions in existing Sec.  1006.1(b) to paragraph 1(b) of appendix A 
of the regulation.\135\
---------------------------------------------------------------------------

    \135\ See id.
---------------------------------------------------------------------------

    Consistent with FDCPA section 802, proposed Sec.  1006.1(b) 
explains that part 1006 carries out the purposes of the FDCPA, which 
include eliminating abusive debt collection practices by debt 
collectors, ensuring that debt collectors who refrain from using 
abusive debt collection practices are not competitively disadvantaged, 
and promoting consistent State action to protect consumers against debt 
collection abuses. Consistent with Dodd-Frank Act section 1032, 
proposed Sec.  1006.1(b) further explains that part 1006 also 
prescribes requirements to ensure that certain features of debt 
collection are fully, accurately, and effectively disclosed to 
consumers in a manner that permits consumers to understand the costs, 
benefits, and risks associated with debt collection, in light of the 
facts and circumstances. Finally, consistent with Dodd-Frank Act 
sections 1022(b)(1) and 1024(b)(7), proposed Sec.  1006.1(b) explains 
that part 1006 sets forth record retention requirements to enable the 
Bureau to administer and carry out the purposes of the FDCPA and the 
Dodd-Frank Act and to prevent evasions thereof, and to facilitate 
supervision of debt collectors and the assessment and detection of 
risks to consumers.
1(c) Coverage
    The Bureau proposes to add Sec.  1006.1(c) to address coverage 
under the proposed rule, which, with the exception of proposed Sec.  
1006.108 and appendix A, would apply to FDCPA-covered debt 
collectors.\136\ Proposed Sec.  1006.1(c)(1) thus provides that, except 
as provided in Sec.  1006.108 and appendix A regarding applications for 
State exemptions from the FDCPA, proposed part 1006 applies to debt 
collectors as defined in proposed Sec.  1006.2(i), i.e., debt 
collectors covered by the FDCPA.\137\
---------------------------------------------------------------------------

    \136\ Proposed Sec.  1006.108 and appendix A would apply to 
States.
    \137\ Section 812 of the FDCPA addresses the furnishing of 
deceptive forms and applies to any person, not just to debt 
collectors. Proposed 1006.30(e) would prohibit FDCPA-covered debt 
collectors from furnishing deceptive forms. Other persons would 
continue to be prohibited from furnishing deceptive forms under 
FDCPA section 812.
---------------------------------------------------------------------------

    Proposed Sec.  1006.1(c)(1) also would implement FDCPA section 
814(d), which provides, in part, that the Bureau may not prescribe 
rules under the FDCPA with respect to motor vehicle dealers as 
described in section 1029(a) of the Dodd-Frank Act.\138\ Proposed Sec.  
1006.1(c)(1) would clarify that Regulation F would not apply to a 
person excluded from coverage by section 1029(a) of the Dodd-Frank 
Act.\139\
---------------------------------------------------------------------------

    \138\ 12 U.S.C. 5519(a).
    \139\ This proposed exclusion would apply only to Regulation F. 
Any motor vehicle dealers who are FDCPA-covered debt collectors 
would still need to comply with the FDCPA.
---------------------------------------------------------------------------

    The Bureau proposes certain provisions of the proposed rule only 
under sections 1031 or 1032 of the Dodd-Frank Act. Dodd-Frank Act 
section 1031 grants the Bureau authority to write regulations 
applicable to covered persons and service providers to identify and 
prevent unfair, deceptive, or abusive acts or practices in connection 
with a transaction with a consumer for, or the offering of, a consumer 
financial product or service.\140\ Dodd-Frank Act section 1032 grants 
the Bureau authority to ensure that the features of any consumer 
financial product or service are fully, accurately, and effectively 
disclosed to consumers.\141\ Under the Dodd-Frank Act, collecting a 
debt related to any consumer financial product or service generally is, 
itself, a consumer financial product or service.\142\ Of primary 
relevance here, a consumer financial product or service includes the 
extension of consumer credit.\143\ Provisions proposed only under Dodd-
Frank Act sections 1031 or 1032, if adopted, therefore would apply to 
FDCPA-covered debt collectors only to the extent that such debt 
collectors were collecting a debt related to an extension of consumer 
credit or another consumer financial product or service.\144\ This 
would include, for example, FDCPA-covered debt collectors collecting 
debts related to consumer mortgage loans or credit cards.
---------------------------------------------------------------------------

    \140\ 12 U.S.C. 5531(b).
    \141\ 12 U.S.C. 5532.
    \142\ It is a financial product or service and is a consumer 
financial product or service if, for example, it is delivered 
offered, or provided in connection with a consumer financial product 
or service. See 12 U.S.C. 5481(5)(B), 5481(15)(A)(x).
    \143\ 12 U.S.C. 5481(15)(A)(i). The Dodd-Frank Act defines 
credit to mean the right granted by a person to a consumer to defer 
payment of a debt, incur debt and defer its payment, or purchase 
property or services and defer payment for such purchase. 12 U.S.C. 
5481(7).
    \144\ 12 U.S.C. 5481(5).
---------------------------------------------------------------------------

    Proposed Sec.  1006.1(c)(2) would clarify that certain provisions 
in proposed Regulation F apply to FDCPA-covered debt collectors only 
when they are collecting consumer financial product or service debt, as 
defined in Sec.  1006.2(f).\145\ Proposed Sec.  1006.1(c)(2) specifies 
that these provisions are Sec. Sec.  1006.14(b)(1)(ii), 
1006.30(b)(1)(ii),

[[Page 23287]]

and 1006.34(c)(2)(iv) and (3)(iv). The Bureau requests comment on all 
aspects of proposed Sec.  1006.1(c), including on whether additional 
clarification would be helpful.
---------------------------------------------------------------------------

    \145\ See the section-by-section analysis of proposed Sec.  
1006.2(f).
---------------------------------------------------------------------------

Section 1006.2 Definitions
    FDCPA section 803 defines terms used throughout the statute.\146\ 
Proposed Sec.  1006.2 would repurpose existing Sec.  1006.2 to 
implement and interpret FDCPA section 803 and define additional terms 
that would be used in the regulation.\147\ The Bureau proposes to move 
existing Sec.  1006.2, which describes how a State may apply for an 
exemption from the FDCPA, to paragraph II of appendix A of the 
regulation.\148\
---------------------------------------------------------------------------

    \146\ 15 U.S.C. 1692a.
    \147\ FDCPA section 803(7) defines the term ``location 
information.'' 15 U.S.C. 1692a(7). The Bureau proposes to define 
that term in Sec.  1006.10, rather than in Sec.  1006.2. See the 
section-by-section analysis of proposed Sec.  1006.10(a).
    \148\ See the section-by-section analysis of proposed Sec.  
1006.108 and appendix A.
---------------------------------------------------------------------------

    Paragraphs (c), (g), and (l) of proposed Sec.  1006.2 would 
implement the FDCPA section 803 definitions of Bureau, creditor, and 
State, respectively. These paragraphs generally restate the statute, 
with only minor wording and organizational changes for clarity, and 
thus are not addressed further in the section-by-section analysis 
below. Proposed Sec.  1006.2(a) and (b), (d) through (f), and (h) 
through (k) would define other terms that would be used in the 
regulation, as described below. The Bureau proposes Sec.  1006.2 to 
implement and interpret FDCPA section 803, pursuant to its authority 
under FDCPA section 814(d) to prescribe rules with respect to the 
collection of debts by debt collectors. In addition to the specific 
comment requests noted below, the Bureau generally requests comment on 
whether additional clarification is needed for any of the proposed 
definitions and on whether additional definitions would be helpful. For 
example, the proposal uses the term ``day'' to refer to any day, 
including weekends and public holidays. The Bureau requests comment on 
whether adding a defined term such as ``calendar day'' and using it in 
the final rule would be helpful.
2(a) Act or FDCPA
    Proposed Sec.  1006.2(a) provides that the terms Act and FDCPA mean 
the Fair Debt Collection Practices Act.
2(b) Attempt To Communicate
    Several of the proposed rule's requirements would apply not only to 
communications as defined in Sec.  1006.2(d) but also to communication 
attempts. For example, proposed Sec.  1006.6(b) and (c) would, among 
other things, prohibit a debt collector from communicating or 
attempting to communicate with a consumer at times or places that the 
debt collector knows or should know are inconvenient to the consumer or 
after a consumer notifies the debt collector in writing that the 
consumer wishes the debt collector to cease further communication with 
the consumer. In addition, proposed Sec.  1006.22(f)(3) and (4) would 
generally prohibit a debt collector from communicating or attempting to 
communicate with a consumer using an email address that the debt 
collector knows or should know is maintained by the consumer's employer 
or by a social media platform that is viewable by a person other than 
the consumer.
    To facilitate compliance with the proposed provisions that apply to 
attempts to communicate, proposed Sec.  1006.2(b) would define an 
attempt to communicate as any act to initiate a communication or other 
contact with any person through any medium, including by soliciting a 
response from such person. Proposed Sec.  1006.2(b) further states that 
an attempt to communicate includes providing a limited-content message, 
as defined in Sec.  1006.2(j). The Bureau proposes this definition of 
attempt to communicate on the basis that any outreach by a debt 
collector to a consumer--whether by a telephone call, text message, 
email, or otherwise--is designed to bring about a communication either 
immediately (e.g., a consumer answers a debt collector's telephone call 
and they engage in a conversation about the debt) or at a later point 
in time (e.g., in response to a missed telephone call or a limited-
content message from a debt collector, a consumer calls or texts the 
debt collector and they engage in a conversation about the debt).
    As proposed, an attempt to communicate covers a broader range of 
activity than a communication. As discussed in the section-by-section 
analysis of proposed Sec.  1006.2(d), the proposed rule would define a 
communication, consistent with FDCPA section 803(2), as the conveying 
of information regarding a debt directly or indirectly to any person 
through any medium. The proposed definition of communication further 
states that a debt collector does not convey information regarding a 
debt directly or indirectly to any person if the debt collector 
provides only a limited-content message, as defined in proposed Sec.  
1006.2(j). The proposed definition of attempt to communicate, in 
contrast, does not require the conveying of information regarding a 
debt. As the examples in proposed comment 2(b)-1 illustrate, an attempt 
to communicate includes leaving a limited-content message for a 
consumer or placing a telephone call to a person, regardless of whether 
the debt collector speaks to any person or leaves any message at the 
dialed number. Proposed comment 2(b)-1 also would clarify that an act 
to initiate a communication or other contact with a person is an 
attempt to communicate regardless of whether the attempt, if 
successful, would be a communication that conveys information regarding 
a debt directly or indirectly to any person.
    Although the proposed definition of attempt to communicate covers a 
broader range of conduct than the proposed definition of communication, 
in many circumstances the same conduct may give rise to both an attempt 
to communicate and a communication. For example, a debt collector who 
places a telephone call to a consumer and speaks to the consumer about 
the debt has both attempted to communicate with the consumer (by 
initiating the call and speaking to the consumer) and communicated with 
the consumer (by conveying information about the debt). Sometimes, 
however, an attempt to communicate may not give rise to a 
communication. For example, a debt collector who places an unanswered 
telephone call to a consumer and chooses not to leave a message has 
attempted to communicate with the consumer but has not communicated 
with the consumer. The Bureau requests comment on proposed Sec.  
1006.2(b) and on proposed comment 2(b)-1.
2(d) Communicate or Communication
    FDCPA section 803(2) defines the term communication to mean the 
conveying of information regarding a debt directly or indirectly to any 
person through any medium.\149\ Proposed Sec.  1006.2(d) would 
implement and interpret this definition.
---------------------------------------------------------------------------

    \149\ 15 U.S.C. 1692a(2).
---------------------------------------------------------------------------

    Proposed Sec.  1006.2(d) first restates the statutory definition of 
communication, with only minor changes for clarity. Proposed Sec.  
1006.2(d) also would interpret FDCPA section 803(2) to provide that a 
debt collector does not convey information regarding a debt directly or 
indirectly to any person--and therefore does not communicate with any 
person--if the debt collector provides only a limited-content message, 
as defined in proposed Sec.  1006.2(j). The section-by-section analysis 
of proposed Sec.  1006.2(j)

[[Page 23288]]

regarding limited-content messages explains and requests comment both 
on the proposed content of limited-content messages and on the Bureau's 
proposal to interpret the term communication in Sec.  1006.2(d) as 
excluding such messages.
    Proposed comment 2(d)-1 notes that a communication can occur 
through ``any medium'' and explains that ``any medium'' includes any 
oral, written, electronic, or other medium. The proposed comment states 
that a communication may occur, for example, in person or by telephone, 
audio recording, paper document, mail, email, text message, social 
media, or other electronic media. The Bureau proposes comment 2(d)-1 in 
part to clarify that debt collectors may communicate with consumers 
through newer communication media, such as electronic media. The Bureau 
elsewhere proposes provisions to clarify how debt collectors may use 
those media to communicate with consumers. The Bureau requests comment 
on proposed Sec.  1006.2(d) and on proposed comment 2(d)-1 and on 
whether additional clarification about the definition of communication 
would be useful.
2(e) Consumer
    FDCPA section 803(3) defines a consumer as any natural person 
obligated or allegedly obligated to pay any debt.\150\ Proposed Sec.  
1006.2(e) would implement this definition, interpret it to include a 
deceased natural person who is obligated or allegedly obligated to pay 
a debt, and cross-reference the special definition of consumer for 
certain communications in connection with the collection of a debt set 
forth in proposed Sec.  1006.6(a).
---------------------------------------------------------------------------

    \150\ 15 U.S.C. 1692a(3).
---------------------------------------------------------------------------

    As summarized in part I.B, the Bureau proposes to address several 
consumer protection concerns and ambiguities in statutory language 
related to the collection of debts owed by deceased consumers, also 
known as decedent debt. One such issue is that the FDCPA does not 
specify whether a consumer, as defined in section 803(3), includes a 
deceased consumer (or whether a natural person, as that term is used in 
section 803(3), includes a deceased natural person). Because the 
definition of consumer in FDCPA section 803(3) is silent with respect 
to deceased consumers, debt collectors may be uncertain, when 
collecting a deceased consumer's debts, how to comply with FDCPA 
provisions that refer to a debt collector's obligations to a consumer.
    For example, certain important FDCPA disclosure requirements, such 
as a debt collector's obligation to provide a validation notice and to 
respond to disputes and requests for original-creditor information, 
refer only to a debt collector's obligations to consumers.\151\ In the 
absence of guidance, debt collectors may be uncertain who, if anyone, 
should receive the validation notice and have the right to dispute the 
debt if the consumer obligated or allegedly obligated to pay the debt 
is deceased. Without a validation notice and an opportunity to dispute 
the debt, individuals trying to resolve debts in a deceased consumer's 
estate may experience difficulty because they lack information needed 
to determine whether they are being asked to pay the right debt, in the 
right amount, to the right debt collector, and to assert dispute 
rights. To address that concern, the Bureau proposes to clarify in the 
commentary to Sec. Sec.  1006.34(a)(1) and 1006.38 that a person who is 
authorized to act on behalf of the deceased consumer's estate, such as 
the executor, administrator, or personal representative, operates as 
the consumer for purposes of proposed Sec. Sec.  1006.34(a)(1) and 
1006.38.\152\
---------------------------------------------------------------------------

    \151\ See 15 U.S.C. 1692g(a)-(b).
    \152\ See proposed comments 34(a)(1)-1, 34(d)(1)(ii)-2, and 38-
1.
---------------------------------------------------------------------------

    Consistent with those proposed clarifications, the Bureau proposes 
in Sec.  1006.2(e) to interpret the definition of consumer in FDCPA 
section 803(3) to mean any natural person, whether living or deceased, 
who is obligated or allegedly obligated to pay any debt. The proposed 
interpretation should clarify the meaning of the term consumer in the 
decedent debt context and appears to be consistent with a modern trend 
in the law that favors recognizing, as a default, the continued 
existence of a natural person after death.\153\ Further, the Bureau 
notes that debt collectors often collect or attempt to collect debts 
from deceased consumers (i.e., from their estates), which presents many 
of the same consumer-protection concerns as collecting or attempting to 
collect debts from living consumers.
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    \153\ See, e.g., Cal. Civ. Proc. Code sec. 377.20(a) (2018) 
(``Except as otherwise provided by statute, a cause of action for or 
against a person is not lost by reason of the person's death, but 
survives subject to the applicable limitations period.''). Federal 
law often provides an unclear answer about whether claims survive 
the death of a natural person. Rule 25(a) of the Federal Rules of 
Civil Procedure allows substitution ``[i]f a party dies and the 
claim is not extinguished,'' but Federal statutes often do not 
address whether claims extinguish upon the death of a plaintiff or 
defendant and, in these cases, Federal common law generally permits 
survival of claims where they are merely remedial in nature and not 
penal. See Ex parte Schreiber, 110 U.S. 76, 80 (1884). Most 
authority suggests that claims brought under other portions of the 
Consumer Credit Protection Act (CCPA), of which the FDCPA is 
subchapter V, likely are remedial rather than penal in nature. See, 
e.g., Murphy v. Household Fin. Corp., 560 F.2d 206, 210 (6th Cir. 
1977) (holding, in a widely adopted test, that double damages under 
Truth in Lending Act (TILA), subchapter I of the CCPA, are remedial 
rather than penal); In re Wood, 643 F.2d 188, 192 (5th Cir. 1980) 
(following Murphy to conclude that trustee of debtor's estate had 
standing to bring claims under TILA). On the other hand, some 
courts, for example, follow the tradition of the common law and 
treat a ``natural person'' as ceasing to exist at the point of 
death. See, e.g., Williamson v. Treasurer, 814 A.2d 1153, 1164 (N.J. 
Super. Ct. App. Div. 2003) (``We would not describe the body or 
remains of a deceased person as still a human being or a natural 
person.'' (interpreting the New Jersey Right to Know law and citing 
Natural person, Black's Law Dictionary (7th ed. 1999))). In light of 
the conflicting traditions and the FDCPA's silence, it appears 
appropriate to regard the statutory term ``consumer'' as ambiguous 
as to whether it includes or excludes a deceased consumer.
---------------------------------------------------------------------------

    In addition to proposing to clarify the meaning of the term 
consumer in the decedent debt context, the Bureau proposes in Sec.  
1006.2(e) to cross-reference the special definition of consumer for 
certain communications in connection with the collection of a debt in 
proposed Sec.  1006.6(a). As described in the section-by-section 
analysis of proposed Sec.  1006.6, FDCPA section 805(d) identifies 
certain persons in addition to the section 803(3) consumer as persons 
with whom a debt collector may communicate in connection with the 
collection of any debt without violating FDCPA section 805(b)'s 
prohibition on third-party disclosures.\154\ The Bureau proposes to 
implement FDCPA section 805(d) in Sec.  1006.6(a) and to cross-
reference the Sec.  1006.6(a) definition in proposed Sec.  1006.14(h). 
As discussed below, proposed Sec.  1006.14(h) would prohibit a debt 
collector from communicating or attempting to communicate with a 
consumer through a medium of communication if the consumer has 
requested that the debt collector not use that medium to communicate 
with the consumer. Accordingly, proposed Sec.  1006.2(e) provides that, 
for purposes of proposed Sec. Sec.  1006.6 and 1006.14(h), the term 
consumer has the meaning given to it in proposed Sec.  1006.6(a). For 
further discussion, see the section-by-section analysis of proposed 
Sec.  1006.6(a). The Bureau requests comment on the definition of 
consumer in proposed Sec.  1006.2(e), including on whether the 
definition should include deceased consumers.
---------------------------------------------------------------------------

    \154\ 15 U.S.C. 1692c(d).
---------------------------------------------------------------------------

2(f) Consumer Financial Product or Service Debt
    As discussed in the section-by-section analysis of proposed Sec.  
1006.1(c), certain proposed provisions would apply to debt collectors 
only if they are collecting a debt related to a consumer

[[Page 23289]]

financial product or service, as that term is defined in section 
1002(5) of the Dodd-Frank Act.\155\ Debt related to a consumer 
financial product or service would include, for example, debts related 
to consumer mortgage loans or credit cards. For ease of reference, 
proposed Sec.  1006.2(f) would define the term consumer financial 
product or service debt to mean a debt related to a consumer financial 
product or service, as consumer financial product or service is defined 
in section 1002(5) of the Dodd-Frank Act.
---------------------------------------------------------------------------

    \155\ 12 U.S.C. 5481(5). See the section-by-section analysis of 
proposed Sec.  1006.1(c).
---------------------------------------------------------------------------

2(h) Debt
    FDCPA section 803(5) defines the term debt for purposes of the 
FDCPA. Proposed Sec.  1006.2(h) would implement FDCPA section 803(5) 
and generally restates the statute. Proposed Sec.  1006.2(h) also would 
clarify that, for purposes of Sec.  1006.2(f), the term debt means debt 
as that term is used in the Dodd-Frank Act. The Bureau proposes this 
clarification to ensure that, when determining whether a debt is a debt 
related to a consumer financial product or service for purposes of 
Sec.  1006.2(f), debt collectors and other stakeholders refer to the 
Dodd-Frank Act rather than the FDCPA's definition of debt.
2(i) Debt Collector
    FDCPA section 803(6) defines the term debt collector for purposes 
of the FDCPA. The introductory language of FDCPA section 803(6) 
generally provides that a debt collector is any person: (1) Who uses 
any instrumentality of interstate commerce or the mails in any business 
the principal purpose of which is the collection of any debts (i.e., 
the ``principal purpose'' prong), or (2) who regularly collects, or 
attempts to collect, directly or indirectly, debts owed or due or 
asserted to be owed or due to another (i.e., the ``regularly collects'' 
prong).\156\ FDCPA section 803(6) also sets forth several exclusions 
from the general definition.\157\ Proposed Sec.  1006.2(i) would 
implement FDCPA section 803(6)'s definition of debt collector and 
generally restates the statute, with only minor wording and 
organizational changes for clarity \158\ and to specify that the term 
excludes private entities that operate certain bad check enforcement 
programs that comply with FDCPA section 818.\159\
---------------------------------------------------------------------------

    \156\ 15 U.S.C. 1692a(6).
    \157\ Id.
    \158\ For example, to avoid obsolete language, proposed Sec.  
1006.2(i) uses the term ``mail'' instead of ``the mails.''
    \159\ 15 U.S.C. 1692p.
---------------------------------------------------------------------------

    The Supreme Court recently has interpreted FDCPA section 803(6). In 
Henson v. Santander Consumer USA Inc., the Court held that a company 
may collect defaulted debts that it has purchased from another without 
being an FDCPA-covered debt collector.\160\ In so holding, the Court 
decided only whether, by using its own name to collect debts that it 
had purchased, Santander met the ``regularly collects'' prong of the 
introductory language in FDCPA section 803(6). The Court expressly 
declined to address two other ways that a debt buyer like Santander 
might qualify as a debt collector under FDCPA section 803(6): (1) By 
meeting the ``regularly collects'' prong by regularly collecting or 
attempting to collect debts owned by others, in addition to collecting 
debts that it purchased and owned; or (2) by meeting the ``principal 
purpose'' prong of the definition.\161\ The Court held that Santander 
was not a debt collector within the meaning of the ``regularly 
collects'' prong because Santander was collecting debts that it 
purchased and owned, not collecting debts owed to another.\162\
---------------------------------------------------------------------------

    \160\ Henson v. Santander Consumer USA, Inc., 137 S. Ct. 1718 
(2017). In addition to Henson, the Supreme Court also recently 
interpreted FDCPA section 803(6) to hold that a business engaged in 
no more than nonjudicial foreclosure proceedings is not an FDCPA-
covered debt collector, except for the limited purpose of FDCPA 
section 808(6). See Obduskey v. McCarthy & Holthus LLP, 139 S. Ct. 
1029 (2019).
    \161\ Henson, 137 S. Ct. at 1721. The Court had not identified 
these questions as being presented when it granted certiorari. Id.
    \162\ Id. at 1721-22.
---------------------------------------------------------------------------

    Proposed Sec.  1006.2(i) generally would restate FDCPA section 
803(6)'s definition of debt collector. Consistent with the Court's 
holding in Henson, the proposed definition thus could include a debt 
buyer collecting debts that it purchased and owned, if the debt buyer 
either met the ``principal purpose'' prong of the definition or 
regularly collected or attempted to collect debts owned by others, in 
addition to collecting debts that it purchased and owned.\163\
---------------------------------------------------------------------------

    \163\ See, e.g., Barbato v. Greystone Alliance, LLC, 916 F.3d 
260 (3d Cir. 2019) (holding that a debt buyer whose principal 
purpose was debt collection was an FDCPA-covered debt collector even 
though the debt buyer outsourced its collection activities to third 
parties).
---------------------------------------------------------------------------

2(j) Limited-Content Message
    FDCPA section 803(2) defines the term communication to mean the 
conveying of information regarding a debt directly or indirectly to any 
person through any medium.\164\ As discussed, proposed Sec.  1006.2(d) 
would implement and interpret that definition, including by specifying 
that a debt collector does not engage in an FDCPA communication if the 
debt collector provides only a limited-content message.\165\ Proposed 
Sec.  1006.2(j) would further interpret FDCPA section 803(2) by 
defining the content that a limited-content message would be required 
and permitted to include. For the reasons discussed below, under the 
Bureau's interpretation of the term communication, a limited-content 
message would not convey information about a debt directly or 
indirectly to any person, and, as a result, a debt collector could 
provide such a message for a consumer without communicating with any 
person for the purposes of the FDCPA or Regulation F.
---------------------------------------------------------------------------

    \164\ 15 U.S.C. 1692a(2).
    \165\ See the section-by-section analysis of proposed Sec.  
1006.2(d).
---------------------------------------------------------------------------

    The definition of communication is central to the FDCPA's 
protections, many of which regulate a debt collector's communications 
with a consumer or other person. For example, FDCPA section 805 \166\ 
restricts when and where a debt collector may communicate with a 
consumer, FDCPA sections 806 through 808 \167\ contain requirements 
concerning the form and content of a debt collector's communications 
with a consumer or other person, and FDCPA section 804 \168\ imposes 
requirements on a debt collector communicating with any person other 
than the consumer for the purpose of acquiring location information 
about the consumer.
---------------------------------------------------------------------------

    \166\ 15 U.S.C. 1692c.
    \167\ 15 U.S.C. 1692d-1692f.
    \168\ 15 U.S.C. 1692b.
---------------------------------------------------------------------------

    Uncertainty about what constitutes a communication, however, has 
led to questions about how debt collectors can leave voicemails or 
other messages for consumers while complying with certain FDCPA 
provisions. Most significantly, if a voicemail or other message is a 
communication with a consumer, FDCPA section 807(11) requires that the 
debt collector identify itself as a debt collector or inform the 
consumer that the debt collector is attempting to collect a debt and 
that any information obtained will be used for that purpose.\169\ A 
debt collector who leaves a message with such disclosures, however, 
risks violating FDCPA section 805(b)'s prohibition against revealing 
debts to third parties if the disclosures are seen or heard by a third 
party.\170\ Uncertainty about what constitutes a communication may 
result in debt collectors repeatedly calling consumers

[[Page 23290]]

and hanging up rather than risking liability by leaving messages.
---------------------------------------------------------------------------

    \169\ 15 U.S.C. 1692e(11). See also the section-by-section 
analysis of proposed Sec.  1006.18(e).
    \170\ 15 U.S.C. 1692c(b). See also the section-by-section 
analysis of proposed Sec.  1006.6(d).
---------------------------------------------------------------------------

    Courts interpreting the FDCPA's definition of communication and the 
intersection of FDCPA sections 805(b) and 807(11) have reached 
conflicting results. Some courts hold that a message asking for a 
return call from a consumer is a communication and that a debt 
collector who leaves such a message violates FDCPA section 805(b)'s 
prohibition on communicating with third parties if the message is heard 
by a person other than the consumer.\171\ These courts also hold that, 
because the message is a communication with the consumer, it must 
include a statement pursuant to FDCPA section 807(11) that the caller 
is attempting to collect a debt, which further increases the likelihood 
that a third party hearing the message would know that the message 
relates to debt collection.\172\ Conversely, other courts hold that a 
message limited to certain content--such as the debt collector's name, 
a statement that the caller is a debt collector, and a call-back 
number--is not a communication and thus does not, itself, constitute a 
prohibited third-party disclosure under FDCPA section 805(b) or require 
an FDCPA section 807(11) disclosure.\173\
---------------------------------------------------------------------------

    \171\ See, e.g., Cordes v. Frederick J. Hanna & Assocs., P.C., 
789 F. Supp. 2d 1173, 1177 (D. Minn. 2011) (holding that debt 
collector violated FDCPA section 805(b) by leaving voicemail 
messages that disclosed that the caller was a debt collector); 
Marisco v. NCO Fin. Sys., Inc., 946 F. Supp. 2d 287, 289, 291-96 
(E.D.N.Y. 2013) (holding that consumer stated a claim for a 
violation of FDCPA 805(b) where debt collector's voicemail message 
was overheard by a third party and stated, in part, ``This is an 
important message from NCO Financial Systems, Inc. The law requires 
that we notify that this is a debt collection company. This is an 
attempt to collect a debt and any information obtained will be used 
for that purpose. This is an attempt to collect a debt.''); Fed. 
Trade Comm'n v. Check Enforcement, No. CIV.A. 03-2115 (JWB), 2005 WL 
1677480, at *8 (D.N.J. July 18, 2005) (``[T]he record indicates that 
defendants left messages on home answering machines, which were 
overheard by family members and other third parties, to obtain 
payments from alleged indebted consumers. Thus, defendants have . . 
. engaged in prohibited communications with third parties in 
violation of Section 805 of the FDCPA.''), aff'd sub nom. Fed. Trade 
Comm'n v. Check Investors, Inc., 502 F.3d 159 (3d Cir. 2007); see 
also Foti v. NCO Fin. Sys., Inc., 424 F. Supp. 2d 643, 655-56 
(S.D.N.Y. 2006) (``Defendant's voicemail message, while devoid of 
any specific information about any particular debt, clearly provided 
some information, even if indirectly, to the intended recipient of 
the message. Specifically, the message advised the debtor that the 
matter required immediate attention, and provided a specific number 
to call to discuss the matter. Given that the obvious purpose of the 
message was to provide the debtor with enough information to entice 
a return call, it is difficult to imagine how the voicemail message 
is not a communication under the FDCPA.'').
    \172\ Foti, 424 F. Supp. 2d at 657-58 (``[A] narrow reading of 
the term `communication' to exclude instances such as the present 
case where no specific information about a debt is explicitly 
conveyed could create a significant loophole in the FDCPA, allowing 
debtors to circumvent the Sec.  1692e(11) disclosure requirement, 
and other provisions of the FDCPA that have a threshold 
`communication' requirement, merely by not conveying specific 
information about the debt . . . . Such a reading is inconsistent 
with Congress's intent to protect consumers from `serious and 
widespread' debt collection abuses.''); Hosseinzadeh v. M.R.S. 
Assocs., Inc., 387 F. Supp. 2d 1104, 1116 (C.D. Cal. 2005) 
(``Because it appears that defendant's messages are `communications' 
subjecting defendant to the provisions of Sec.  1692e(11), it also 
appears that defendant has violated Sec.  1692e(11) because the 
messages do not convey the information required by Sec.  1692e(11), 
in particular, that the messages were from a debt collector.'').
    \173\ See, e.g., Zortman v. J.C. Christensen & Assocs., Inc., 
870 F. Supp. 2d 694, 701, 707-08 (D. Minn. 2012) (holding that debt 
collector did not violate FDCPA section 805(b) by leaving a 
voicemail message that stated, ``We have an important message from 
J.C. Christensen & Associates. This is a call from a debt collector. 
Please call 866-319-8619.''); Zweigenhaft v. Receivables Performance 
Mgmt., LLC, No. 14 CV 01074 RJD JMA, 2014 WL 6085912, at *1 
(E.D.N.Y. Nov. 13, 2014) (similar); Biggs v. Credit Collections, 
Inc., No. CIV-07-0053-F, 2007 WL 4034997, at *4 (W.D. Okla. Nov. 15, 
2007) (``Words matter--in this instance, the words of the voice 
mails and the words of the statutory definition of a 
`communication.' The transcript of the voice mail messages 
demonstrates that the voice mails `convey[ed]' no `information 
regarding a debt.' No amount of liberal construction can broaden the 
statutory language to encompass the words recorded in these voice 
mails.''); see also Consent Order at ] IV.A., Fed. Trade Comm'n v. 
Expert Global Solutions, Inc., No. 3:13-cv-02611-M (N.D. Tex. July 
16, 2013), https://www.ftc.gov/sites/default/files/documents/cases/2013/07/130709ncoorder.pdf (enjoining defendant debt collector from 
leaving recorded messages in which defendant states both the 
debtor's name and that the caller is a debt collector, unless the 
recipient's voicemail greeting identifies only the debtor's first 
and last name or defendant has already spoken with the debtor at the 
called number).
---------------------------------------------------------------------------

    Many debt collectors state that they err on the side of caution and 
make repeated telephone calls instead of leaving messages on a 
consumer's voicemail or with a third party who answers a consumer's 
telephone, or sending text messages.\174\ Such repeated telephone calls 
may frustrate many consumers. Indeed, consumers often complain to the 
Bureau about the number of collection calls they receive and, to a 
lesser degree, about debt collectors' reluctance to leave 
voicemails.\175\ In comments to the Bureau's ANPRM and in feedback 
during the SBREFA process, many debt collectors stated that they would 
place fewer telephone calls if they were confident that leaving 
voicemails or other messages for consumers would not expose them to 
risk of liability under the FDCPA.\176\ The FTC and the U.S. Government 
Accountability Office also have previously noted the need to clarify 
the law regarding debt collectors' ability to leave voicemails for 
consumers.\177\
---------------------------------------------------------------------------

    \174\ See, e.g., Small Business Review Panel Report, supra note 
57, at 25-26.
    \175\ See the section-by-section analysis of proposed Sec.  
1006.14(b)(2).
    \176\ See Bureau of Consumer Fin. Prot., Advanced Notice of 
Proposed Rulemaking, Debt Collection (Regulation F), 78 FR 67848, 
67867 (Nov. 12, 2013) (noting that debt collectors believe that 
recent case law presents a dilemma in which a debt collector's 
voicemail for a consumer may not be able to comply with both FDCPA 
sections 805(b) and 807(11)); Fed. Trade Comm'n, Collecting Consumer 
Debts: The Challenges of Change, at 36 n.228 (Feb. 2009), https://www.ftc.gov/sites/default/files/documents/reports/collecting-consumer-debts-challenges-change-federal-trade-commission-workshop-report/dcwr.pdf (hereinafter FTC Modernization Report) (summarizing 
industry members' comments that conflicting case law on debt 
collectors' ability to communicate by newer forms of technology 
deters debt collectors from using such technologies, including 
leaving voicemails); id. at 47-49 (noting industry commenters' 
concerns about their ability to leave voicemails that comply with 
the FDCPA and recommending that the law regarding voicemails be 
clarified).
    \177\ See FTC Modernization Report, supra note 176, at 49-50; 
U.S. Gov't Accountability. Off., GAO-09-748, Credit Cards: Fair Debt 
Collection Practices Act Could Better Reflect the Evolving Debt 
Collection Marketplace and Use of Technology, at 47-48, 52 (Sept. 
2009), https://www.gao.gov/assets/300/295588.pdf.
---------------------------------------------------------------------------

    To address uncertainty about what constitutes an FDCPA 
communication and to reduce the need for debt collectors to rely on 
repeated telephone calls without leaving messages to establish contact 
with consumers, the Bureau proposes Sec.  1006.2(j) to interpret FDCPA 
section 803(2) and define a message whose content would not ``convey[ ] 
information regarding a debt directly or indirectly to any person.'' 
Specifically, proposed Sec.  1006.2(j) would provide that a limited-
content message means a message for a consumer that includes all of the 
content described in Sec.  1006.2(j)(1), and that may include any of 
the content described in Sec.  1006.2(j)(2), but does not include other 
content. As discussed in the section-by-section analysis of proposed 
Sec.  1006.2(b) and (d), a limited-content message would not be a 
communication, as defined in Sec.  1006.2(d), but would be an attempt 
to communicate, as defined in Sec.  1006.2(b).
    Under the proposal, a debt collector who leaves a limited-content 
message for a consumer would not have communicated with the consumer or 
any other person through that message. In turn, because FDCPA sections 
805(b) and 807(11) both apply only to communications as defined by the 
FDCPA, the requirements described in those sections would not apply to 
the limited-content message. Accordingly, a limited-content message 
would not be required to include a disclosure pursuant to FDCPA section 
807(11) (as implemented by proposed Sec.  1006.18(e)), and a debt 
collector would not risk violating FDCPA section 805(b) (as

[[Page 23291]]

implemented by proposed Sec.  1006.6(d)) if someone other than the 
consumer heard or received the message.
    The proposal would define a limited-content message as, in part, a 
message ``for a consumer.'' As a result, any message left for a person 
other than a consumer would not be a limited-content message. FDCPA 
section 807(11)'s requirement that a debt collector disclose that the 
purpose of a communication is to collect a debt and that any 
information obtained will be used for that purpose applies only when a 
debt collector is communicating ``with the consumer.'' Concerns about 
the intersection of FDCPA sections 805(b) and 807(11) are thus not as 
relevant when a debt collector contacts a person other than a consumer. 
In addition, because debt collectors generally are prohibited from 
communicating with a person other than the consumer, they generally 
have no need to contact third parties, and, when such communications 
are permitted for obtaining location information about a consumer, 
FDCPA section 804 already provides a comprehensive disclosure regime. 
Therefore, it may not be necessary to specify the content of a message 
that does not constitute a communication if left by a debt collector 
for a person other than the consumer.
    The proposal would enable a debt collector to transmit a limited-
content message by voicemail, by text message, or orally. Debt 
collectors may be most likely to use these methods to send limited-
content messages, and these methods may be most likely to generate a 
response from a consumer. The proposal would not enable a debt 
collector to transmit a limited-content message by email because, as 
discussed below, email messages typically require additional 
information (e.g., a sender's email address) that may in some 
circumstances convey information about a debt, and consumers may be 
unlikely to read or respond to an email containing solely the 
information included in a limited-content message (e.g., consumers may 
disregard such an email as spam or a security risk). In addition, other 
aspects of the proposed rule (e.g., the procedures described in 
proposed Sec.  1006.6(d)(3) for emails and text messages) may encourage 
debt collectors to send debt collection communications to consumers by 
email. Accordingly, a rule that would enable debt collectors to send 
limited-content messages by email might not sufficiently protect 
consumers' privacy interests or be of significant benefit to debt 
collectors.
    Proposed comment 2(j)-1 explains that any message other than a 
message that includes the content specified in Sec.  1006.2(j) is not a 
limited-content message. The comment further explains that, if a 
message includes any other content and such other content directly or 
indirectly conveys any information about a debt, including but not 
limited to any information that indicates that the message relates to 
the collection of a debt, the message would be a communication, as 
defined in proposed Sec.  1006.2(d). Proposed comment 2(j)-2 provides 
examples of limited-content messages.
    Proposed comment 2(j)-3 provides examples of ways in which a debt 
collector could transmit a limited-content message to a consumer, such 
as by leaving a voicemail at the consumer's telephone number, sending a 
text message to the consumer's mobile telephone number, or leaving a 
message orally with a third party who answers the consumer's home or 
mobile telephone number. Proposed comment 2(j)-3 notes, however, that 
leaving a limited-content message would be subject to other FDCPA 
provisions, including the prohibitions on harassing or abusive conduct 
and unfair or unconscionable practices in FDCPA sections 806 and 808, 
respectively.\178\ As the section-by-section analyses of proposed 
Sec. Sec.  1006.2(b) and (d), 1006.6(b) and (c), 1006.14(h), and 
1006.22(f)(3) and (4) explain in more detail, consumers may be harassed 
or otherwise injured not only by communications, but also by attempts 
to communicate, including when a debt collector conveys limited-content 
messages. Accordingly, those sections propose certain restrictions on 
when and how a debt collector may attempt to communicate with a person, 
including by leaving a limited-content message.
---------------------------------------------------------------------------

    \178\ 15 U.S.C. 1692d, 1692f.
---------------------------------------------------------------------------

    Proposed comment 2(j)-4 would clarify that a debt collector who 
places a telephone call and leaves only a limited-content message for a 
consumer does not, with respect to that telephone call, violate FDCPA 
section 806(6)'s prohibition on the placement of telephone calls 
without meaningful disclosure of the caller's identity. Under the 
proposed interpretation, the content described in proposed Sec.  
1006.2(j)(1) would meaningfully disclose the caller's identity. The 
proposed interpretation would be limited to the narrow circumstance of 
a debt collector providing only a limited-content message to a 
consumer. As described below, proposed Sec.  1006.2(j)(1) would require 
a limited-content message to include the name of a natural person whom 
the consumer could contact as well as a telephone number that the 
consumer could use to reply to the debt collector; a limited-content 
message could not contain any content that is not described in proposed 
Sec.  1006.2(j)(1) or (2), and debt collectors would be prohibited from 
including false or misleading statements about the caller's identity or 
the purpose of the call. As a result, the message should not mislead a 
consumer about the identity of the caller and the consumer could use 
the contact information to call a particular employee of a debt 
collector. Upon receiving such a call and engaging in a communication, 
the debt collector would be required by FDCPA section 807(11) to 
disclose to the consumer that the communication is from a debt 
collector. This sequence of events--a limited-content message followed 
by a communication in which the debt collector provides the FDCPA 
section 807(11) disclosures--may benefit consumers more than the status 
quo, under which many debt collectors place repeated telephone calls 
without leaving any message or any contact information that the 
consumer can use to reply to the debt collector.
    The interpretation in proposed comment 2(j)-4 would apply only when 
a debt collector places a telephone call and leaves only a limited-
content message for a consumer. It would not extend to any other 
message a debt collector leaves for a consumer or other person, as such 
messages might not include all of the content that must be included in 
a limited-content message, might include content that is not described 
in proposed Sec.  1006.2(j)(1) or (2) and that conveys a misleading 
impression about the caller's identity or purpose of the call, or might 
constitute a communication that is subject to FDCPA section 807(11) or 
that otherwise would need to include different disclosures about the 
caller's identity and purpose in order to satisfy FDCPA section 806(6). 
Similarly, the rationale in proposed comment 2(j)-4 would not extend to 
a telephone call that is a live conversation with the consumer because, 
again, the content of such a conversation would be different than the 
content of a limited-content message.
    The Bureau requests comment on whether the proposal to define a 
limited-content message that a debt collector could leave for a 
consumer without risking a violation of FDCPA sections 805(b) or 
807(11) will enable debt collectors to establish contact with consumers 
while reducing the number of telephone calls that consumers receive. 
The Bureau further requests comment on the costs and benefits of

[[Page 23292]]

permitting debt collectors to leave limited-content messages for 
consumers, including on whether those costs and benefits differ 
depending on whether a debt collector leaves a limited-content message: 
(1) In a voicemail message on a home, mobile, or work telephone; (2) in 
a live conversation with a third party who answers the consumer's home, 
mobile, or work telephone number; or (3) by text message. The Bureau 
requests comment on whether there are other communication media, such 
as email, by which debt collectors should be permitted to leave 
limited-content messages, including in particular on the advantages and 
disadvantages of the proposed approach, which would not permit debt 
collectors to send limited-content messages by email. In addition, the 
Bureau requests comment on whether a debt collector should be permitted 
to leave limited-content messages with third parties only in certain 
circumstances (e.g., if a third party answers the consumer's telephone 
number) and whether a debt collector should be able to include 
additional content in a limited-content message if leaving it with a 
third party (e.g., a request that the third party take a message).
    The Bureau also requests comment on the proposed commentary. In 
particular, the Bureau requests comment on whether proposed comment 
2(j)-4 properly interprets the requirement to ``meaningful[ly] disclose 
the caller's identity'' as satisfied when a debt collector places a 
telephone call and leaves only a limited-content message, and on 
whether there are other disclosures that would satisfy the meaningful 
disclosure requirement of FDCPA section 806(6) without causing the 
message to become a communication (i.e., without conveying information 
about a debt directly or indirectly to any person).
    During the SBREFA process, small entity representatives 
overwhelmingly supported a rule clarifying how and when a debt 
collector may leave a voicemail or other message for a consumer.\179\ 
They predicted that a rule defining a limited-content message that is 
not a communication under the FDCPA would reduce the number and 
frequency of collection calls as well as facilitate communications 
between debt collectors and consumers. The Small Business Review Panel 
Report recommended that the Bureau request comment on the costs and 
benefits of any limited-content message proposal, including on the 
costs and benefits of providing limited-content messages by media other 
than telephone, and of any proposal that would require debt collectors 
to include a toll-free callback telephone number in a limited-content 
message (as the proposal then under consideration would have).\180\ 
Proposed Sec.  1006.2(j) and the requests for comment in this section 
are consistent with the feedback received during the SBREFA process, 
which supported a definition of limited-content message, and the Panel 
Report's recommendations.
---------------------------------------------------------------------------

    \179\ Small Business Review Panel Report, supra note 57, at 36.
    \180\ Id.
---------------------------------------------------------------------------

2(j)(1) Required Content
    Proposed Sec.  1006.2(j)(1) would require that limited-content 
messages include certain content to ensure that they facilitate contact 
between debt collectors and consumers. In particular, proposed Sec.  
1006.2(j)(1) provides that a limited-content message must include all 
of the following: The consumer's name, a request that the consumer 
reply to the message, the name or names of one or more natural persons 
whom the consumer can contact to reply to the debt collector,\181\ a 
telephone number that the consumer can use to reply to the debt 
collector,\182\ and, if delivered electronically, a disclosure 
explaining how the consumer can stop receiving messages through that 
medium.\183\ The consumer's name and a request that the consumer reply 
to the message may help to ensure that the correct person receives the 
message and is prompted to respond. Including in the message a 
telephone number that the consumer can use to reply to the message, as 
well as the name of at least one person the consumer can speak to, 
should enable the consumer to reply to the message and interact with a 
debt collector's employee who has access to information about the debt 
in collection. In the case of a limited-content message sent by text 
message, a disclosure explaining how the consumer can stop receiving 
such messages may help prevent harassment, as further explained in the 
section-by-section analysis of proposed Sec.  1006.6(e). In addition, 
the Bureau understands that the content required by Sec.  1006.2(j)(1) 
often is included in a voicemail or other message for a person in a 
wide variety of non-debt collection circumstances, so a third party 
hearing or observing the message may not infer from its content that 
the consumer owes a debt. Under this proposed interpretation, none of 
the items in the limited-content message themselves individually or 
collectively convey that the consumer owes a debt or other information 
regarding a debt.
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    \181\ Proposed Sec.  1006.18(f) would clarify that a debt 
collector's employee does not violate Sec.  1006.18 by using an 
assumed name when communicating or attempting to communicate with a 
person, provided that the employee uses the assumed name 
consistently and that the employer can readily identify any employee 
who is using an assumed name. See the section-by-section analysis of 
proposed Sec.  1006.18(f).
    \182\ The proposal under consideration during the SBREFA process 
would have required the telephone number to be toll-free to the 
consumer (e.g., a 1-800 number). See Small Business Review Panel 
Outline, supra note 56, at 24. In light of feedback from some small 
entity representatives regarding the potential costs of maintaining 
a 1-800 number for the sole purpose of being able to transmit 
limited-content messages, the proposed rule would not require a 
toll-free telephone number.
    \183\ Proposed Sec.  1006.6(e) would require a debt collector 
who communicates or attempts to communicate with a consumer 
electronically in connection with the collection of a debt using, 
among other things, a telephone number for text messages or other 
electronic-medium address, to include in such communication or 
attempt to communicate a clear and conspicuous statement describing 
one or more ways the consumer can opt out of further electronic 
communications or attempts to communicate by the debt collector to 
that address or telephone number. See the section-by-section 
analysis of proposed Sec.  1006.6(e).
---------------------------------------------------------------------------

    Proposed comment 2(j)(1)(iv)-1 notes that a limited-content message 
must include a telephone number that the consumer can use to reply to 
the debt collector. The proposed comment explains that a voicemail or a 
text message that spells out, rather than enumerates numerically, a 
vanity telephone number is not a limited-content message. Spelling out 
a vanity telephone number could, in some circumstances, convey 
information about a debt or otherwise disclose that the message is from 
a debt collector. The Bureau considered permitting such telephone 
numbers to be included in limited-content messages on the condition 
that they do not convey information about a debt, but such a condition 
would require a case-by-case analysis to determine if a particular 
vanity number conveyed information about a debt. As a result, 
permitting the inclusion of a vanity number in any or all circumstances 
could undermine the certainty that the limited-content message 
definition is designed to provide and could increase the risk that a 
third party hearing or observing the message could infer that it 
relates to debt collection. Similarly, the sender's email address 
could, in some circumstances, convey information about a debt. In part 
for that reason, proposed Sec.  1002.2(j) would not permit a limited-
content message to include a sender's email address and, consequently, 
would effectively prohibit sending a limited-content message by email. 
As discussed, debt collectors also may have less of a need to send a 
limited-content message by email because proposed Sec.  1006.6(d)(3) 
would clarify the procedures that a debt

[[Page 23293]]

collector could maintain to avoid incurring liability for a prohibited 
third-party communication by email, thereby reducing the risk to debt 
collectors of sending debt collection communications to consumers by 
email.
2(j)(2) Optional Content
    Proposed Sec.  1006.2(j)(2) would permit a debt collector to 
include in a limited-content message certain content that may help 
prompt a consumer to reply but that, unlike the content described in 
proposed Sec.  1006.2(j)(1), may not be necessary to enable the 
consumer to reply to the message or to prevent harassment. In 
particular, proposed Sec.  1006.2(j)(2) provides that a limited-content 
message also may include one or more of the following: A salutation, 
the date and time of the message, a generic statement that the message 
relates to an account, and suggested dates and times for the consumer 
to reply to the message. The proposed interpretation would hold that 
none of these items, individually or collectively, conveys that the 
consumer owes a debt or other information regarding a debt.
    The Bureau requests comment on all aspects of proposed Sec.  
1006.2(j), including on the proposed interpretation that none of the 
content described in proposed Sec.  1006.2(j)(1) and (2) conveys 
information regarding a debt. The Bureau also requests comment on 
whether the proposal to allow a limited-content message to include a 
generic statement that the message relates to an ``account'' raises a 
risk that the message would convey information about a debt to a third 
party hearing or observing the message, and whether there is an 
alternative statement that would better minimize such risk. For 
example, the Bureau considered proposing permitting a limited-content 
message to state that the message relates to a ``personal,'' 
``business,'' ``confidential,'' ``private,'' ``important,'' or ``time-
sensitive'' matter, but each of these might, in at least certain 
contexts, be misleading or confusing to a consumer. The Bureau further 
requests comment on whether there is sufficient information required or 
permitted in the limited-content message to prompt consumers to make a 
return call or text to the included telephone number and, if not, what 
additional information could be included in the message that would not 
cause the message to constitute a communication. The Bureau also 
requests comment on whether including a sender or recipient email 
address or a vanity telephone number in a limited-content message could 
convey information about a debt to a third party hearing or observing 
the message and reduce the utility of a bright-line definition. 
Finally, the Bureau requests comment on the media by which debt 
collectors anticipate that they would send limited-content messages and 
on whether additional clarification is necessary regarding sending 
limited-content messages by media other than telephone.
2(k) Person
    Proposed Sec.  1006.2(k) would define the term person to have the 
meaning set forth in 1 U.S.C. 1, which provides that, ``in determining 
the meaning of any Act of Congress, unless the context indicates 
otherwise,'' the term person includes ``corporations, companies, 
associations, firms, partnerships, societies, and joint stock 
companies, as well as individuals.'' \184\ The FDCPA does not define 
the term person, and the context does not appear to indicate that a 
meaning other than the meaning in 1 U.S.C. 1 should apply. The term 
person is used throughout the FDCPA and the proposed regulation. The 
Bureau proposes to define this term to facilitate compliance, with only 
minor wording changes from the statute.
---------------------------------------------------------------------------

    \184\ See 1 U.S.C. 1.
---------------------------------------------------------------------------

Subpart B--Rules for FDCPA Debt Collectors \185\
---------------------------------------------------------------------------

    \185\ Consistent with its proposal to amend Regulation F to 
prescribe Federal rules governing the activities of debt collectors, 
the Bureau proposes to move existing Sec. Sec.  1006.3 through 
1006.8 regarding applications for State exemptions from the FDCPA to 
appendix A of the regulation. See the section-by-section analysis of 
proposed Sec.  1006.108 and appendix A.
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Section 1006.6 Communications in Connection With Debt Collection
    FDCPA section 805 generally limits how debt collectors may 
communicate with consumers and third parties when collecting 
debts.\186\ Proposed Sec.  1006.6 would implement and interpret FDCPA 
section 805; it also would interpret FDCPA sections 806 and 808 to 
provide certain additional protections regarding debt collection 
communications.
---------------------------------------------------------------------------

    \186\ 15 U.S.C. 1692c.
---------------------------------------------------------------------------

6(a) Definition
    FDCPA section 805(d) provides that, for purposes of section 805, 
the term consumer includes certain individuals other than the person 
obligated or allegedly obligated to pay the debt. Accordingly, the 
protections in FDCPA section 805 apply to these individuals and the 
person obligated or allegedly obligated to pay the debt. Also, debt 
collectors may communicate with these individuals in connection with 
the collection of any debt without violating the FDCPA's prohibition on 
third-party disclosures.\187\ For example, under FDCPA section 805(d), 
a debt collector may communicate not only with the consumer who owes or 
allegedly owes the debt, but also with the consumer's spouse, parent 
(if the consumer is a minor), guardian, executor, or 
administrator,\188\ even though debt collectors generally are 
prohibited from communicating in connection with the collection of a 
debt with third parties.\189\ A debt collector may communicate with 
third parties to seek location information about consumers, but the 
debt collector may not state that the consumer owes any debt.\190\
---------------------------------------------------------------------------

    \187\ 15 U.S.C. 1692c(d).
    \188\ Id.
    \189\ See 15 U.S.C. 1692c(b).
    \190\ See 15 U.S.C. 1692b. For additional discussion of these 
provisions, see the section-by-section analyses of proposed 
Sec. Sec.  1006.6(d) and 1006.10(c).
---------------------------------------------------------------------------

    Proposed Sec.  1006.6(a) would implement and interpret FDCPA 
section 805(d) and would define consumer for purposes of proposed 
Sec. Sec.  1006.6 and 1006.14(h). Consistent with proposed Sec.  
1006.2(e), which, as described above, would interpret consumer to 
include deceased persons, proposed comments 6(a)(1)-1 and 6(a)(2)-1 
would clarify that surviving spouses and parents of deceased minor 
consumers, respectively, are consumers for purposes of proposed Sec.  
1006.6. Except for these clarifications, and except for the 
interpretations discussed in the section-by-section analysis of 
proposed Sec.  1006.6(a)(4) and (5), proposed Sec.  1006.6(a) generally 
mirrors the statute. The section-by-section analysis below therefore 
addresses only proposed Sec.  1006.6(a)(4) and (5).
6(a)(4)
    Proposed Sec.  1006.6(a)(4) would implement FDCPA section 805(d)'s 
definition of the term consumer as related to executors and 
administrators. Proposed Sec.  1006.6(a)(4) generally restates the 
statute and its commentary also interprets FDCPA section 805(d) to 
include the personal representative of the deceased consumer's estate.
    As discussed above, FDCPA section 805 generally limits the 
individuals with whom a debt collector may discuss the debt to those 
individuals identified as consumers in FDCPA section 805(d). If the 
consumer who owes or allegedly owes the debt is deceased, the 
consumer's family members may find that debt collectors are reluctant 
to communicate with the individuals attempting to resolve any 
outstanding debts of the decedent unless they are among the individuals 
identified in FDCPA section 805(d) with whom a debt collector may 
generally discuss the

[[Page 23294]]

debt, i.e., individuals with the title of executor or administrator 
under State law. This reluctance may delay the prompt resolution of 
estates.
    The Bureau understands that most States currently provide 
procedures for resolving estates that are faster and less expensive 
than the formal probate process that may have been more common when 
Congress enacted the FDCPA more than 40 years ago. Under these 
expedited State procedures, an individual with the authority to pay the 
decedent's debts out of the assets of the estate may lack the 
particular title of executor or administrator under State law. The 
Bureau proposes to interpret the terms executor and administrator as 
used in the FDCPA to include personal representatives, which is defined 
in proposed comment 6(a)(4)-1 as any person who is authorized to act on 
behalf of the deceased consumer's estate. These terms are not defined 
in the FDCPA, and the FDCPA does not indicate that they are limited to 
persons who formally have the title of executor or administrator under 
State law. Rather, it is ambiguous whether the terms executor and 
administrator include personal representatives of a consumer's estate, 
as these persons serve the functions of executors or administrators but 
do not formally have that title. Accordingly, the Bureau proposes to 
interpret executor and administrator in a manner that is flexible 
enough to recognize the evolution in estate resolution processes over 
time, including the use of a personal representative to be the executor 
or administrator of the decedent's estate.\191\
---------------------------------------------------------------------------

    \191\ Additionally, the word ``includes'' in FDCPA section 
805(d) indicates that section 805(d) is an exemplary, rather than an 
exhaustive, list of the categories of individuals who are consumers 
for purposes of FDCPA section 805. See 15 U.S.C. 1692c(d).
---------------------------------------------------------------------------

    The ability to resolve the debts of estates outside of the formal 
probate process through informal processes may benefit consumers. If a 
debt collector does not communicate with an estate because no executor 
or administrator exists, the debt collector might force the estate into 
probate, which could substantially burden the resources of the estate 
and the deceased consumer's heirs or beneficiaries. These burdens may 
be particularly acute for small estates and for individuals of limited 
means. Probate also adds costs and delays for debt collectors. In its 
Policy Statement on Decedent Debt, the FTC voiced similar concerns 
about unnecessarily pushing estates into probate. In light of such 
concerns, the FTC indicated that the agency would take no enforcement 
action against debt collectors who communicated about a decedent's 
debts with an individual who has the authority to pay the debts out of 
the assets of the deceased consumer's estate.\192\
---------------------------------------------------------------------------

    \192\ Statement of Policy Regarding Communications in Connection 
with the Collection of Decedents' Debts, 76 FR 44915, 44919 (July 
27, 2011) (hereinafter FTC Policy Statement on Decedent Debt).
---------------------------------------------------------------------------

    For these reasons, and pursuant to its authority under FDCPA 
section 814(d) to prescribe rules with respect to the collection of 
debts by debt collectors, the Bureau proposes Sec.  1006.6(a)(4). The 
Bureau requests comment on proposed Sec.  1006.6(a)(4).
    Proposed comment 6(a)(4)-1 would clarify that the terms executor or 
administrator include the personal representative of the consumer's 
estate, and that a personal representative of the consumer's estate is 
any person who is authorized to act on behalf of the deceased 
consumer's estate. The proposed comment explains that persons with such 
authority may include personal representatives under the informal 
probate and summary administration procedures of many States, persons 
appointed as universal successors, persons who sign declarations or 
affidavits to effectuate the transfer of estate assets, and persons who 
dispose of the deceased consumer's assets extrajudicially.
    The term personal representative in comment 6(a)(4)-1 includes the 
same individuals as those recognized by the FTC's Policy Statement on 
Decedent Debt.\193\ As the FTC has noted, some of the terms used to 
describe these individuals come from the Uniform Probate Code.\194\ 
However, proposed comment 6(a)(4)-1 adapts the general description of 
the term personal representative from Regulation Z, 12 CFR 1026.11(c), 
comment 11(c)-1 (persons ``authorized to act on behalf of the estate'') 
rather than the general description found in the FTC's Policy Statement 
(persons with the ``authority to pay the decedent's debts from the 
assets of the decedent's estate.''). The Bureau believes that this 
change is non-substantive. The description of the term personal 
representative also reflects the language that a debt collector may use 
to acquire location information about the executor, administrator, or 
personal representative of the deceased consumer's estate, as explained 
in proposed comment 10(b)(2)-1.\195\ The Bureau requests comment on the 
scope of the definition of personal representative in proposed comment 
6(a)(4)-1 and on any ambiguity in the illustrative descriptions of 
personal representatives. The Bureau specifically requests comment on 
experiences under the FTC's Policy Statement on Decedent Debt.
---------------------------------------------------------------------------

    \193\ Id.
    \194\ Statement of Policy Regarding Communications in Connection 
with Collection of a Decedent Debt, 75 FR 62389, 62391-92 (Oct. 8, 
2010) (describing the processes of informal probate and 
administration and universal succession).
    \195\ See the section-by-section analysis of proposed Sec.  
1006.10(b).
---------------------------------------------------------------------------

    In its Small Business Review Panel Outline, the Bureau stated that 
it was considering limiting the definition of personal representative 
to individuals recognized under State probate or estate laws.\196\ 
However, the Bureau received feedback from industry indicating that 
many State laws define personal representative to mean an executor or 
administrator. In these States, the definition of personal 
representative under consideration in the Small Business Review Panel 
Outline would have restricted communication to formally appointed 
executors or administrators, which would not have alleviated the harms 
the Bureau intended to address. Proposed comment 6(a)(4)-1, which 
provides that a personal representative is any person who is authorized 
to act on behalf of the deceased consumer's estate, is designed to 
address this post-SBREFA feedback.
---------------------------------------------------------------------------

    \196\ Small Business Review Panel Outline, supra note 56, at 32-
33.
---------------------------------------------------------------------------

6(a)(5)
    Proposed Sec.  1006.6(a)(5) would interpret FDCPA section 805(d)'s 
definition of the term consumer to include confirmed successors in 
interest. Under Regulations X and Z, a successor in interest is a 
person to whom a borrower transfers an ownership interest either in a 
property securing a mortgage loan subject to subpart C of Regulation X, 
or in a dwelling securing a closed-end consumer credit transaction 
under Regulation Z, provided that the transfer is: (1) A transfer by 
devise, descent, or operation of law on the death of a joint tenant or 
tenant by the entirety; (2) a transfer to a relative resulting from the 
death of a borrower; (3) a transfer where the spouse or children of the 
borrower become an owner of the property; (4) a transfer resulting from 
a decree of a dissolution of marriage, legal separation agreement, or 
from an incidental property settlement agreement, by which the spouse 
of the borrower becomes an owner of the property; or (5) a transfer 
into an inter vivos trust in which the borrower is and remains a 
beneficiary and which does not relate to

[[Page 23295]]

a transfer of rights of occupancy in the property.\197\ A confirmed 
successor in interest, in turn, means a successor in interest once a 
servicer has confirmed the successor in interest's identity and 
ownership interest in the relevant property type.\198\
---------------------------------------------------------------------------

    \197\ 12 CFR 1024.31; 1026.2(a)(27)(i).
    \198\ 12 CFR 1024.31; 1026.2(a)(27)(ii).
---------------------------------------------------------------------------

    As the Bureau explained in its Amendments to the 2013 Mortgage 
Rules under the Real Estate Settlement Procedures Act (Regulation X) 
and the Truth in Lending Act (Regulation Z) (2016 Servicing Final Rule) 
\199\ and its concurrently issued FDCPA interpretive rule (2016 FDCPA 
Interpretive Rule),\200\ the word ``includes'' in FDCPA section 805(d) 
indicates that section 805(d) is an exemplary, rather than an 
exhaustive, list of the categories of individuals who are consumers for 
purposes of FDCPA section 805. The Bureau explained that FDCPA section 
805 recognizes the importance of permitting debt collectors to 
communicate with a narrow category of persons other than the individual 
who owes or allegedly owes the debt who, by virtue of their 
relationship to that individual, may need to communicate with the debt 
collector in connection with the collection of the debt. The Bureau 
further explained that, given their relationship to the individual who 
owes or allegedly owes the debt, confirmed successors in interest are--
like the narrow categories of persons enumerated in FDCPA section 
805(d)--the type of individuals with whom a debt collector needs to 
communicate about the debt. The Bureau therefore interpreted the term 
consumer for purposes of FDCPA section 805 to include a confirmed 
successor in interest as that term is defined in Regulation X, 12 CFR 
1024.31, and Regulation Z, 12 CFR 1026.2(a)(27)(ii).\201\
---------------------------------------------------------------------------

    \199\ 81 FR 72160 (Oct. 19, 2016).
    \200\ 81 FR 71977 (Oct. 19, 2016).
    \201\ Id. at 71979; 81 FR 72160, 72181 (Oct. 19, 2016).
---------------------------------------------------------------------------

    Consistent with that interpretation, and pursuant to its authority 
under FDCPA section 814(d) to write rules with respect to the 
collection of debts by debt collectors, the Bureau proposes to 
interpret FDCPA section 805(d) in Sec.  1006.6(a)(5) to provide that a 
confirmed successor in interest, as defined in Regulations X and Z, is 
a consumer for purposes of proposed Sec.  1006.6. The Bureau requests 
comment on proposed Sec.  1006.6(a)(5), including on the benefits and 
risks of communications about debts between debt collectors and 
confirmed successors in interest.
6(b) Communications With a Consumer--In General
    FDCPA section 805(a) restricts how a debt collector may communicate 
with a consumer in connection with the collection of any debt and 
provides certain exceptions to these prohibitions.\202\ The Bureau 
generally proposes Sec.  1006.6(b) to implement and interpret FDCPA 
section 805(a) to specify circumstances in which a debt collector is 
prohibited from communicating with a consumer in connection with the 
collection of any debt. In addition, the Bureau proposes Sec.  
1006.6(b) to interpret FDCPA sections 806 and 808 to prohibit a debt 
collector from attempting to communicate with a consumer if FDCPA 
section 805(a) would prohibit the debt collector from communicating 
with the consumer. The Bureau proposes Sec.  1006.6(b) pursuant to its 
authority under FDCPA section 814(d) to prescribe rules with respect to 
the collection of debts by debt collectors.
---------------------------------------------------------------------------

    \202\ 15 U.S.C. 1692c(a). Specifically, FDCPA section 805(a)(1) 
prohibits certain communications at unusual or inconvenient times 
and places, section 805(a)(2) prohibits certain communications with 
a consumer represented by an attorney, and section 805(a)(3) 
prohibits certain communications at a consumer's place of 
employment.
---------------------------------------------------------------------------

Attempts To Communicate
    The Bureau proposes to clarify in proposed Sec.  1006.6(b) that a 
debt collector is prohibited from attempting to communicate with a 
consumer in the same circumstances in which FDCPA section 805(a) 
prohibits the debt collector from communicating with the consumer. As 
discussed, proposed Sec.  1006.2(b) would define an attempt to 
communicate to mean any attempt by a debt collector to initiate contact 
with any person, including by soliciting a response from such person, 
regardless of whether the attempt, if successful, would be a 
communication as defined in proposed Sec.  1006.2(d). For example, a 
debt collector who places a telephone call to the consumer that goes 
unanswered has attempted to communicate with the consumer. The phrase 
attempt to communicate thus appears throughout proposed Sec.  
1006.6(b)(1) through (4).
    The Bureau proposes to limit attempts to communicate in Sec.  
1006.6(b) based on interpretations of FDCPA sections 806 and 808. FDCPA 
section 806 prohibits a debt collector from engaging in any conduct the 
natural consequence of which is to harass, oppress, or abuse any person 
in connection with the collection of a debt.\203\ FDCPA section 806(5) 
provides that causing a telephone to ring repeatedly or continuously 
with intent to annoy, abuse, or harass any person at the called number 
is an example of conduct the natural consequence of which is to harass, 
oppress, or abuse. FDCPA section 806(5) thus recognizes that telephone 
calls may have the natural consequence of harassment, oppression, or 
abuse even if no conversation ensues. A consumer who hears a telephone 
ringing at an inconvenient time or place but who does not answer it may 
experience the natural consequence of harassment from the telephone 
ringing in much the same way as a consumer who answers and speaks to 
the debt collector on the telephone. For this reason, the Bureau 
proposes to interpret FDCPA section 806 as prohibiting a debt collector 
from attempting to communicate at times when and places where a 
communication would be prohibited as inconvenient.
---------------------------------------------------------------------------

    \203\ 15 U.S.C. 1692d.
---------------------------------------------------------------------------

    FDCPA section 808 prohibits a debt collector from using unfair or 
unconscionable means to collect or attempt to collect any debt.\204\ A 
debt collector who places a telephone call without the intent to speak 
to any person who answers the telephone (thus avoiding a communication 
for purposes of FDCPA section 805) may be causing injury to persons at 
the called number without any legitimate purpose, and thus may be 
engaging in a prohibited unfair or unconscionable act under FDCPA 
section 808. Additionally, section 808 targets practices that pressure 
a consumer to pay debts the consumer might not otherwise have paid. A 
debt collector's attempts to communicate at a time when or a place 
where a communication would be prohibited could pressure the consumer 
to pay the debt to avoid further intrusions on the consumer's privacy, 
and the Bureau interprets such conduct as unfair or unconscionable 
under FDCPA section 808. The Bureau requests comment on its proposed 
interpretations regarding attempts to communicate.
---------------------------------------------------------------------------

    \204\ 15 U.S.C. 1692f.
---------------------------------------------------------------------------

6(b)(1) Prohibitions Regarding Unusual or Inconvenient Times or Places
    FDCPA section 805(a)(1) prohibits a debt collector from, among 
other things, communicating with a consumer in connection with the 
collection of any debt at times or places that the debt collector knows 
or should know are inconvenient to the consumer, subject to certain 
exceptions. As discussed in the section-by-section analysis below, 
proposed Sec.  1006.6(b)(1)(i) and (ii)

[[Page 23296]]

generally would implement and interpret FDCPA section 805(a)(1).
    Proposed comment 6(b)(1)-1 provides general interpretations and 
illustrations of the time and place restrictions in proposed Sec.  
1006.6(b)(1). Proposed comment 6(b)(1)-1 illustrates how a debt 
collector knows or should know that a time or place is inconvenient to 
a consumer. The proposed comment explains that a debt collector may 
know, or should know, that a time or place is inconvenient to a 
consumer if the consumer uses the word ``inconvenient'' to notify the 
debt collector. The proposed comment also explains that, even if the 
consumer does not use the word ``inconvenient'' to notify the debt 
collector, the debt collector nevertheless may know, or should know, 
based on the facts and circumstances, that a time or place is 
inconvenient. The Bureau proposes this interpretation because FDCPA 
section 805(a)(1) refers to what is ``inconvenient to the consumer,'' 
without specifying that a consumer must designate communications as 
inconvenient using the word ``inconvenient.'' The Bureau's proposed 
interpretation also is consistent with some case law holding that a 
consumer need not use the precise language of the statute to invoke the 
protections of FDCPA section 805.\205\
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    \205\ See, e.g., Horkey v. J.V.D.B. & Assocs., Inc., 333 F.3d 
769, 773 (7th Cir. 2003).
---------------------------------------------------------------------------

    Proposed comment 6(b)(1)-1 would further clarify that, if the 
consumer initiates a communication with the debt collector at a time or 
from a place that the consumer previously designated as inconvenient, 
the debt collector may respond once to that consumer-initiated 
communication at that time or place. Because the consumer initiated the 
communication, the debt collector neither knows nor should know that 
responding to that specific communication is inconvenient to the 
consumer. The debt collector is permitted to respond once. After that 
response, the debt collector must not communicate or attempt to 
communicate further with the consumer at that time or place until the 
consumer conveys that the time or place is no longer inconvenient. 
Proposed comment 6(b)(1)-1 also provides four specific examples of when 
a debt collector knows or should know that the time or place of a 
communication is inconvenient to a consumer.
    The Bureau requests comment on proposed Sec.  1006.6(b)(1) and on 
comment 6(b)(1)-1, including on whether other general clarifications 
regarding inconvenient times or places would be useful or whether other 
examples and illustrations would be instructive. The Bureau 
specifically requests comment on whether additional clarification is 
needed regarding the delivery of legally required communications at a 
time or place that a debt collector knows or should know is 
inconvenient to a particular consumer. The Bureau requests comment on 
whether to require a debt collector to ask a consumer at the outset of 
all debt collection communications whether the time or place is 
convenient to the consumer. The Bureau also requests comment on what 
effect a consumer-initiated communication should have on the times and 
places that a debt collector knows or should know are inconvenient to 
the consumer.
6(b)(1)(i)
    FDCPA section 805(a)(1) provides, in relevant part, that a debt 
collector may not communicate with a consumer in connection with the 
collection of any debt at any unusual time, or at a time that the debt 
collector knows or should know is inconvenient to the consumer.\206\ 
FDCPA section 805(a)(1) specifies that, in the absence of knowledge of 
circumstances to the contrary, a debt collector shall assume that the 
convenient time for communicating with a consumer is after 8:00 a.m. 
and before 9:00 p.m., local time at the consumer's location.
---------------------------------------------------------------------------

    \206\ 15 U.S.C. 1692c(a)(1).
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    Proposed Sec.  1006.6(b)(1)(i) would implement and interpret FDCPA 
section 805(a)(1)'s prohibitions regarding unusual or inconvenient 
times.\207\ The Bureau interprets the language in FDCPA section 
805(a)(1) that a debt collector shall assume that the convenient time 
for communicating with a consumer is after 8:00 a.m. and before 9:00 
p.m. to mean that a time before 8:00 a.m. and after 9:00 p.m. local 
time at the consumer's location is inconvenient, unless the debt 
collector has knowledge of circumstances to the contrary. The Bureau 
requests comment on proposed Sec.  1006.6(b)(1)(i).\208\
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    \207\ As discussed in the section-by-section analysis of 
proposed Sec.  1006.6(b), proposed Sec.  1006.6(b)(1)(i) also would 
interpret FDCPA sections 806 and 808 to prohibit a debt collector 
from attempting to communicate with a consumer at a time when FDCPA 
section 805(a)(1) would prohibit the debt collector from 
communicating with the consumer.
    \208\ In the Small Business Review Panel Outline, the Bureau 
described a proposal under consideration to define the 30-day period 
after the death of a consumer as an inconvenient time for 
communicating about the deceased consumer's debt with surviving 
spouses or parents (in the case of deceased minor consumers) or 
persons acting as executors, administrators, or personal 
representatives of a deceased consumer's estate. See Small Business 
Review Panel Outline, supra note 56, at 33. The proposed rule does 
not include such a waiting period. The Bureau requests evidence of 
specific consumer harm and benefits from debt collection 
communications occurring within 30 days after a consumer's death.
---------------------------------------------------------------------------

    Proposed comment 6(b)(1)(i)-1 would clarify that, for purposes of 
determining the time of an electronic communication under Sec.  
1006.6(b)(1)(i), an electronic communication occurs when the debt 
collector sends it, not, for example, when the consumer receives or 
views it. Ambiguity exists about whether, for purposes of FDCPA section 
805(a)(1), an electronic communication occurs at the time of sending or 
at the time of receipt or viewing. A rule that clarifies that an 
electronic communication occurs when the debt collector sends it makes 
it possible for a debt collector to comply. A debt collector can 
control the time at which it chooses to send communications, whereas it 
often would be impossible for a debt collector to determine when a 
consumer receives or views an electronic communication. Accordingly, 
under proposed Sec.  1006.6(b)(1)(i), a debt collector would be 
prohibited from sending an electronic communication at a time that the 
debt collector knows or should know is inconvenient to the consumer. 
The Bureau requests comment on proposed comment 6(b)(1)(i)-1.
    Proposed comment 6(b)(1)(i)-2 would provide a safe harbor and 
illustrate how a debt collector could comply with proposed Sec.  
1006.6(b)(1)(i) and FDCPA section 805(a)(1) if the debt collector has 
conflicting or ambiguous information regarding a consumer's location, 
such as telephone numbers with area codes located in different time 
zones or a telephone number with an area code and a physical address 
that are inconsistent. Proposed comment 6(b)(1)(i)-2 would clarify 
that, if a debt collector is unable to determine a consumer's location, 
then, in the absence of knowledge of circumstances to the contrary, the 
debt collector would comply with the prohibition in Sec.  
1006.6(b)(1)(i) on communicating at inconvenient times if the debt 
collector communicated or attempted to communicate with the consumer at 
a time that would be convenient in all of the locations at which the 
debt collector's information indicated the consumer might be located. A 
debt collector with such conflicting information may know or should 
know that it is inconvenient to contact a consumer at a time outside of 
the presumptively convenient times (8:00 a.m. to 9:00 p.m.) in any of 
the time zones in which the consumer might be located. As indicated by 
some industry

[[Page 23297]]

commenters in response to the Bureau's ANPRM, some debt collectors 
already have adopted this proposed approach for determining the 
convenient times to contact a consumer if the debt collector has 
conflicting location information for the consumer. Proposed comment 
6(b)(1)(i)-2 also provides two examples of how a debt collector could 
comply with proposed Sec.  1006.6(b)(1)(i). The Bureau requests comment 
on proposed comment 6(b)(1)(i)-2.
6(b)(1)(ii)
    FDCPA section 805(a)(1) provides, in relevant part, that a debt 
collector may not communicate with a consumer in connection with the 
collection of any debt at any unusual place, or at a place that the 
debt collector knows or should know is inconvenient to the 
consumer.\209\ Proposed Sec.  1006.6(b)(1)(ii) would implement this 
prohibition and generally restates the statute, with only minor changes 
for clarity.^{210 211}
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    \209\ 15 U.S.C. 1692c(a)(1).
    \210\ As discussed in the section-by-section analysis of 
proposed Sec.  1006.6(b), proposed Sec.  1006.6(b)(1)(ii) also would 
interpret FDCPA sections 806 and 808 to prohibit a debt collector 
from attempting to communicate with a consumer at a place at which 
FDCPA section 805(a)(1) would prohibit the debt collector from 
communicating with the consumer.
    \211\ In the Small Business Review Panel Outline, the Bureau 
described a proposal under consideration to designate four 
categories of places as presumptively inconvenient. See Small 
Business Review Panel Outline, supra note 56, at 29-30. In response 
to feedback received during the SBREFA process, the Bureau does not 
propose that intervention at this time.
---------------------------------------------------------------------------

6(b)(2) Prohibitions Regarding Consumer Represented by an Attorney
FDCPA section 805(a)(2) prohibits a debt collector from communicating 
with a consumer in connection with the collection of any debt if the 
debt collector knows the consumer is represented by an attorney with 
respect to the debt and has knowledge of, or can readily ascertain, the 
attorney's name and address, unless the attorney fails to respond 
within a reasonable period of time to a communication from the debt 
collector or unless the attorney consents to direct communication with 
the consumer.\212\ Proposed Sec.  1006.6(b)(2) would implement this 
prohibition and generally restates the statute.\213\ The Bureau 
requests comment on proposed Sec.  1006.6(b)(2), including whether 
additional clarification regarding this prohibition would be useful.
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    \212\ 15 U.S.C. 1692c(a)(2).
    \213\ As discussed in the section-by-section analysis of 
proposed Sec.  1006.6(b), proposed Sec.  1006.6(b)(2) also would 
interpret FDCPA sections 806 and 808 to prohibit a debt collector 
from attempting to communicate with a consumer who is represented by 
an attorney if FDCPA section 805(a)(2) would prohibit the debt 
collector from communicating with that consumer.
---------------------------------------------------------------------------

    6(b)(3) Prohibitions Regarding Consumer's Place of Employment
    FDCPA section 805(a)(3) prohibits a debt collector from 
communicating with a consumer in connection with the collection of any 
debt at the consumer's place of employment if the debt collector knows 
or has reason to know that the consumer's employer prohibits the 
consumer from receiving such communication.\214\ Proposed Sec.  
1006.6(b)(3) would implement this prohibition and generally restates 
the statute.\215\
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    \214\ 15 U.S.C. 1692c(a)(3).
    \215\ As discussed in the section-by-section analysis of 
proposed Sec.  1006.6(b), proposed Sec.  1006.6(b)(3) also would 
interpret FDCPA sections 806 and 808 to prohibit a debt collector 
from attempting to communicate with a consumer at the consumer's 
place of employment if FDCPA section 805(a)(3) would prohibit the 
debt collector from communicating with the consumer there.
---------------------------------------------------------------------------

    Even under circumstances where proposed Sec.  1006.6(b)(3) may not 
apply because the debt collector does not know or have reason to know 
that a consumer's employer prohibits the consumer from receiving 
communications in connection with the collection of a debt at the 
consumer's place of employment, proposed Sec.  1006.22(f)(3), discussed 
below, would prohibit the debt collector from communicating or 
attempting to communicate with the consumer using an email address that 
the debt collector knows or should know is provided to the consumer by 
the consumer's employer, unless an exception under proposed Sec.  
1006.22(f)(3) applies (i.e., the debt collector has received directly 
from the consumer either prior consent to use that email address or an 
email from that email address).\216\ Proposed comment 6(b)(3)-1 cross-
references the employer-provided email rule described in proposed Sec.  
1006.22(f)(3).
---------------------------------------------------------------------------

    \216\ For additional discussion of proposed work email 
restrictions, see the section-by-section analysis of proposed Sec.  
1006.22(f)(3).
---------------------------------------------------------------------------

    The Bureau requests comment on proposed Sec.  1006.6(b)(3). The 
Bureau also requests comment on whether additional clarification would 
be useful with respect to a debt collector's communications or attempts 
to communicate with a consumer while at work, for example, on a 
consumer's non-work mobile telephone or portable electronic device.
6(b)(4) Exceptions
    FDCPA section 805(a) provides certain exceptions to its limitations 
on a debt collector's communications with a consumer. Proposed Sec.  
1006.6(b)(4) would implement and interpret the exceptions in FDCPA 
section 805(a).
6(b)(4)(i)
    Proposed Sec.  1006.6(b)(4)(i) would implement the text in FDCPA 
section 805(a) that, in relevant part, sets forth the exception for the 
prior consent of the consumer given directly to the debt 
collector.\217\ Proposed Sec.  1006.6(b)(4)(i) generally mirrors the 
statute, except that proposed Sec.  1006.6(b)(4)(i) would interpret 
FDCPA section 805(a) to require that the consumer's prior consent must 
be given during a communication that would not violate proposed Sec.  
1006.6(b)(1) through (3), i.e., the prohibitions on communications with 
a consumer at unusual or inconvenient times or places, communications 
with a consumer represented by an attorney, and communications at the 
consumer's place of employment. For example, ordinarily a debt 
collector could not place a telephone call to a consumer at midnight 
and obtain the consumer's prior consent for future debt collection 
communications. The Bureau interprets a consumer's prior consent to be 
consent obtained in the absence of conduct that would compromise or 
eliminate a consumer's ability to freely choose whether to consent. A 
communication that would violate proposed Sec.  1006.6(b)(1) through 
(3) (e.g., consent obtained from a represented consumer where the 
consumer's attorney is not present) is likely to compromise or 
eliminate a consumer's ability to freely choose whether to consent. By 
addressing only prior consent purported to be obtained during a 
communication that would violate proposed Sec.  1006.6(b)(1) through 
(3), the Bureau does not intend to suggest that prior consent obtained 
in other unlawful ways would comply with FDCPA section 805(a).
---------------------------------------------------------------------------

    \217\ 15 U.S.C. 1692c(a).
---------------------------------------------------------------------------

    Proposed comments 6(b)(4)(i)-1 and -2 would clarify the meaning of 
prior consent.\218\ Proposed comment 6(b)(4)(i)-1 explains that, if a 
debt collector learns during a communication that the debt collector is 
communicating with a consumer at an inconvenient time or place, the 
debt collector cannot during that communication ask the consumer to 
consent to the continuation of that debt collection communication. The 
Bureau proposes this comment because consent that satisfies proposed 
Sec.  1006.6(b)(4)(i) must be ``prior'' and therefore given in advance 
of a communication that otherwise would violate proposed Sec.  
1006.6(b)(1) through

[[Page 23298]]

(3). Additionally, permitting a debt collector to ask a consumer to 
consent to a communication once the debt collector knows the 
communication is occurring at an inconvenient time or place would 
undermine the very protection guaranteed to the consumer under FDCPA 
section 805(a)(1). Although proposed comment 6(b)(4)(i)-1 would clarify 
that the debt collector would be prohibited from asking the consumer to 
consent to the continuation of the communication at the inconvenient 
time or place, the comment also would clarify that a debt collector may 
ask the consumer what time or place would be convenient.
---------------------------------------------------------------------------

    \218\ The interpretations and illustrations of prior consent 
discussed here also apply to proposed Sec. Sec.  1006.14(b) and 
1006.22(f), as discussed in the corresponding section-by-section 
analyses below.
---------------------------------------------------------------------------

    Proposed comment 6(b)(4)(i)-2 restates the rule that the prior 
consent of the consumer must be given directly to the debt collector 
and explains that a debt collector cannot rely on the prior consent of 
the consumer given to the original creditor or to a previous debt 
collector. The Bureau proposes this interpretation because prior 
consent given to the original creditor or to a previous debt collector 
is not given ``directly'' to the debt collector, as the FDCPA expressly 
requires.\219\ The Bureau requests comment on proposed Sec.  
1006.6(b)(4)(i) and its related commentary, including on whether 
additional clarification regarding a consumer's prior consent for the 
purposes of these rule provisions would be instructive. Additionally, 
because the definition of consumer for purposes of proposed Sec.  
1006.6 includes the individuals listed in proposed Sec.  1006.6(a)(1) 
through (5) (e.g., the consumer's spouse), the Bureau requests comment 
on whether additional clarification is needed regarding which 
``consumer'' may give prior consent pursuant to proposed Sec.  
1006.6(b)(4)(i).
---------------------------------------------------------------------------

    \219\ This proposal is also consistent with the FDCPA's 
legislative history. See H. Rept. No. 95-131, at 5 (1977) (``The 
committee intends that in section [805] the `prior consent' be 
meaningful, i.e., that any prior consent by a consumer is to be a 
voluntary consent and shall be expressed by the consumer directly to 
the debt collector. Consequently, the committee intends that any 
term in a contract which requires a consumer to consent in advance 
to debt collection communication would not constitute `prior 
consent' by such consumer.'').
---------------------------------------------------------------------------

6(b)(4)(ii)
    Proposed Sec.  1006.6(b)(4)(ii) would implement the text in FDCPA 
section 805(a) that, in relevant part, sets forth the exception for the 
express permission of a court of competent jurisdiction.\220\ Proposed 
Sec.  1006.6(b)(4)(ii) generally restates the statute, with only minor 
changes for clarity.
---------------------------------------------------------------------------

    \220\ 15 U.S.C. 1692c(a).
---------------------------------------------------------------------------

6(c) Communications With a Consumer--After Refusal To Pay or Cease 
Communication Notice
    FDCPA section 805(c) provides that, subject to certain exceptions, 
if a consumer notifies a debt collector in writing that the consumer 
refuses to pay a debt or that the consumer wishes the debt collector to 
cease further communication with the consumer, the debt collector shall 
not communicate further with the consumer with respect to such debt 
(the ``cease communication provision'').\221\ The Bureau proposes Sec.  
1006.6(c) to implement and interpret FDCPA section 805(c) and pursuant 
to the Bureau's authority under FDCPA section 814(d) to prescribe rules 
with respect to the collection of debts by debt collectors.
---------------------------------------------------------------------------

    \221\ 15 U.S.C. 1692c(c).
---------------------------------------------------------------------------

6(c)(1) Prohibitions
    Proposed Sec.  1006.6(c)(1) would implement FDCPA section 805(c)'s 
cease communication provision and generally restates the statute, with 
only minor changes for clarity. Specifically, proposed Sec.  
1006.6(c)(1) would provide that, except as provided in proposed Sec.  
1006.6(c)(2), a debt collector must not communicate or attempt to 
communicate further with a consumer with respect to a debt if the 
consumer notifies the debt collector in writing that: (i) The consumer 
refuses to pay the debt; or (ii) the consumer wants the debt collector 
to cease further communication with the consumer.\222\
---------------------------------------------------------------------------

    \222\ For the same reasons that proposed Sec.  1006.6(b) would 
prohibit debt collectors from attempting to communicate with 
consumers if FDCPA section 805(a) would prohibit communications with 
consumers, proposed Sec.  1006.6(c) would interpret FDCPA sections 
806 and 808 to prohibit a debt collector from attempting to 
communicate with a consumer if FDCPA section 805(c) would prohibit 
the debt collector from communicating with the consumer.
---------------------------------------------------------------------------

    The Bureau proposes to interpret the applicability of the E-SIGN 
Act to a consumer electronically notifying a debt collector that the 
consumer wants the debt collector to cease further communication.\223\ 
Specifically, the Bureau proposes to interpret FDCPA section 805(c)'s 
writing requirement as being satisfied if a consumer notifies a debt 
collector using a medium of electronic communication through which a 
debt collector accepts electronic communications from consumers, such 
as email or a website portal. Thus, a debt collector would be required 
to give legal effect to a consumer's notification submitted 
electronically only if the debt collector generally chose to accept 
electronic communications from consumers. The Bureau proposes to codify 
this interpretation of the E-SIGN Act in proposed comment 6(c)(1)-2.
---------------------------------------------------------------------------

    \223\ Section 104(b)(1)(A) of the E-SIGN Act provides authority 
for a Federal regulatory agency with rulemaking authority under a 
statute to interpret section 101 of the E-SIGN Act with respect to 
that statute by regulation. 15 U.S.C. 7004(b)(1)(A).
---------------------------------------------------------------------------

    Proposed comment 6(c)(1)-1 would implement FDCPA section 805(c)'s 
provision that, if such notice is made by mail, a consumer's 
notification is complete upon receipt by the debt collector.\224\ 
Proposed comment 6(c)(1)-1 would apply this standard to all written or 
electronic forms of a consumer's notification. The Bureau notes that 
FDCPA section 805(c) does not state that only mail notifications are 
complete upon receipt, but rather leaves vague when other forms of 
notification are complete. The Bureau proposes to clarify this 
ambiguity by providing that written or electronic forms of notification 
are complete upon receipt. The Bureau proposes this clarification on 
the basis that, regardless of the medium, before a debt collector has 
received a notification, it may not be reasonable to consider the debt 
collector to have been notified. On the other hand, once the debt 
collector has received a notification, the debt collector can 
reasonably be considered to have been notified.
---------------------------------------------------------------------------

    \224\ 15 U.S.C. 1692c(c).
---------------------------------------------------------------------------

    The Bureau requests comment on proposed Sec.  1006.6(c)(1) and on 
proposed comment 6(c)(1)-1, including on: Whether additional 
clarification is needed with respect to a consumer's notification 
pursuant to proposed Sec.  1006.6(c)(1) being complete upon receipt by 
the debt collector; whether a debt collector should be afforded a 
certain period of time to update its systems to reflect the consumer's 
request even after the notification is received, and, if so, how long; 
and whether receipt works differently for different written and 
electronic communication media. Additionally, because the definition of 
consumer for purposes of proposed Sec.  1006.6 includes the individuals 
listed in proposed Sec.  1006.6(a)(1) through (5) (e.g., the consumer's 
spouse), the Bureau requests comment on whether additional 
clarification is needed regarding which ``consumer'' may notify the 
debt collector pursuant to proposed Sec.  1006.6(c)(1).
6(c)(2) Exceptions
    FDCPA section 805(c) provides exceptions to the cease communication 
provision. The exceptions allow a debt collector to communicate with a

[[Page 23299]]

consumer even after a consumer has notified a debt collector pursuant 
to FDCPA section 805(c)'s cease communication provision: (1) To advise 
the consumer that the debt collector's further efforts are being 
terminated; (2) to notify the consumer that the debt collector or 
creditor may invoke specified remedies which are ordinarily invoked by 
such debt collector or creditor; or (3) where applicable, to notify the 
consumer that the debt collector or creditor intends to invoke a 
specified remedy.\225\ Proposed Sec.  1006.6(c)(2) would implement 
these exceptions and generally restates the statute, with only minor 
changes for clarity.
---------------------------------------------------------------------------

    \225\ 15 U.S.C. 1692c(c)(1)-(3).
---------------------------------------------------------------------------

    In the 2016 Servicing Final Rule \226\ and the concurrently issued 
2016 FDCPA Interpretive Rule,\227\ the Bureau interpreted the written 
early intervention notice required in Regulation X, 12 CFR 
1024.39(d)(3), to fall within the exceptions to the cease communication 
provision in FDCPA section 805(c)(2) and (3). As the Bureau explained 
in the 2016 Servicing Final Rule, the Bureau concluded that, because 
failure to provide the written early intervention notice required by 
Regulation X, 12 CFR 1024.39(d)(3), is closely linked to the ability of 
a mortgage servicer (who also is a debt collector subject to the FDCPA 
with respect to a mortgage loan) to invoke its specified remedy of 
foreclosure, the notice falls within the exceptions in FDCPA sections 
805(c)(2) and (3).\228\ For a further discussion of the requirement in 
Regulation X, see the 2016 Servicing Final Rule's section-by-section 
analysis discussion of 12 CFR 1024.39(d)(3).\229\ The Bureau proposes 
comment 6(c)(2)-1 to incorporate by reference this interpretation, 
which applies to a mortgage servicer who also is a debt collector 
subject to the FDCPA with respect to a mortgage loan.
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    \226\ 81 FR 72160 (Oct. 19, 2016).
    \227\ 81 FR 71977 (Oct. 19, 2016).
    \228\ 81 FR 72160, 72232 (Oct. 19, 2016).
    \229\ Id. at 72233-38.
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6(d) Communications With Third Parties
    FDCPA section 805(b) prohibits a debt collector from communicating, 
in connection with the collection of any debt, with any person other 
than the consumer or certain other persons.\230\ FDCPA section 805(b) 
also identifies certain exceptions to this prohibition. Proposed Sec.  
1006.6(d)(1) would implement FDCPA section 805(b)'s general prohibition 
against communicating with third parties, and proposed Sec.  
1006.6(d)(2) would implement the exceptions. Proposed Sec.  
1006.6(d)(3) would specify, for purposes of FDCPA section 813(c), 
procedures that are reasonably adapted to avoid an error in sending an 
email or text message that would result in a violation of FDCPA section 
805(b). The Bureau proposes Sec.  1006.6(d) pursuant to its authority 
under FDCPA section 814(d) to write rules with respect to the 
collection of debts by debt collectors.
---------------------------------------------------------------------------

    \230\ 15 U.S.C. 1692c(b). Specifically, FDCPA section 805(b) 
prohibits communicating with any person other than the consumer, the 
consumer's attorney, a consumer reporting agency if otherwise 
permitted by law, the creditor, the creditor's attorney, or the debt 
collector's attorney.
---------------------------------------------------------------------------

6(d)(1) Prohibitions
    With limited exceptions, FDCPA section 805(b) prohibits a debt 
collector from communicating, in connection with the collection of any 
debt, with any person other than the consumer (as defined in FDCPA 
section 805(d)) or certain other persons. Proposed Sec.  1006.6(d)(1) 
would implement FDCPA section 805(b) and generally restates the 
statute, with minor wording and organizational changes for clarity. 
Proposed comment 6(d)(1)-1 explains that, because a limited-content 
message is not a communication, a debt collector does not violate Sec.  
1006.6(d)(1) if the debt collector leaves a limited-content message for 
a consumer orally with a third party who answers the consumer's home or 
mobile telephone.\231\ The comment explains that the message would be 
an attempt to communicate with the consumer (as defined in proposed 
Sec.  1006.2(b)). It further explains, however, that if, during the 
course of the interaction with the third party, the debt collector 
conveys content other than the specific limited-content-message items 
described in proposed Sec.  1006.2(j)(1) and (2), and such other 
content directly or indirectly conveys any information regarding a 
debt, the message is a communication, subject to the prohibition on 
third-party communications in proposed Sec.  1006.6(d)(1). The Bureau 
requests comment on proposed Sec.  1006.6(d)(1) and on whether 
additional clarification would be useful.
---------------------------------------------------------------------------

    \231\ The Bureau separately requests comment in the section-by-
section analysis of proposed Sec.  1006.2(j) defining limited-
content messages on whether to permit a debt collector to leave 
limited-content messages with third parties.
---------------------------------------------------------------------------

6(d)(2) Exceptions
    FDCPA section 805(b) specifies exceptions to the general 
prohibition against a debt collector communicating with third parties, 
including that a debt collector may engage in an otherwise prohibited 
communication with the prior consent of the consumer given directly to 
the debt collector. Proposed Sec.  1006.6(d)(2) would implement the 
exceptions in FDCPA section 805(b) and generally restates the statute, 
with minor wording and organizational changes for clarity. Proposed 
comment 6(d)(2)-1 refers to the commentary to proposed Sec.  
1006.6(b)(4)(i) for guidance concerning a consumer giving prior consent 
directly to a debt collector. Additionally, because the definition of 
consumer for purposes of proposed Sec.  1006.6 includes those 
individuals listed in proposed Sec.  1006.6(a)(1) through (5) (e.g., 
the consumer's spouse), the Bureau requests comment on whether 
additional clarification is needed regarding which consumer under 
proposed Sec.  1006.6(a) may give prior consent pursuant to proposed 
Sec.  1006.6(d).
6(d)(3) Reasonable Procedures for Email and Text Message Communications
    FDCPA section 813(c) provides that a debt collector may not be held 
liable in any action brought under the FDCPA if the debt collector 
shows by a preponderance of evidence that the violation was not 
intentional, that it resulted from a bona fide error, and that it 
occurred even though the debt collector maintained procedures 
reasonably adapted to avoid the error.\232\ Proposed Sec.  1006.6(d)(3) 
identifies procedures that a debt collector may use to obtain a safe 
harbor from civil liability for unintentionally violating the third-
party disclosure prohibition in proposed Sec.  1006.6(d)(1) and, by 
extension, FDCPA section 805(b), as a result of a bona fide error 
resulting from a communication by email or text message.
---------------------------------------------------------------------------

    \232\ 15 U.S.C. 1692k(c).
---------------------------------------------------------------------------

    FDCPA section 805(b) generally prohibits a debt collector from 
communicating with any person other than the consumer unless the 
consumer provides consent directly to the debt collector. FDCPA section 
803(2), in turn, defines the term communication to include the 
conveying of information regarding a debt directly or indirectly to any 
person.\233\ In the context of oral communications, courts have found 
that, if a debt collector leaves a voice message that is overheard by a 
third party, the debt collector may violate FDCPA section 805(b) by 
indirectly conveying information regarding a debt to a person other 
than the consumer.\234\
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    \233\ See the section-by-section analysis of proposed Sec.  
1006.2(d).
    \234\ See the section-by-section analysis of proposed Sec.  
1006.2(j).

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[[Page 23300]]

    While nothing in the FDCPA prohibits debt collectors from 
communicating using newer communication media such as email and text 
messages, the case law regarding communications has given rise to 
uncertainty about how FDCPA section 805(b) applies to such media, 
because of the potential for inadvertent disclosure of communications 
to third parties. In pre-proposal feedback, several industry 
stakeholders asserted that this uncertainty, particularly about 
liability for third-party disclosures, discourages the use of 
electronic communications in debt collection.\235\ Consistent with this 
feedback, the Bureau's Consumer Survey found that only 8 percent of 
consumers contacted by a debt collector were contacted by email--even 
though email is widely available and less expensive than other forms of 
communication, and 15 percent of surveyed consumers said that email was 
their most preferred method of being contacted about a debt in 
collection.\236\ In pre-proposal feedback, industry participants 
expressed interest in communicating with consumers using electronic 
technologies. They therefore requested that the Bureau clarify how 
FDCPA section 805(b) applies to the inadvertent disclosure of an 
electronic communication to a third party not authorized to receive 
it.\237\
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    \235\ An industry trade association commenting on the Bureau's 
ANPRM surveyed its members and found that only 15 percent of 
respondents communicated electronically with consumers, primarily 
because of concerns about liability. A later study by a consulting 
firm, released in 2017, reported that about one-third of debt 
collectors communicate with consumers by email. Ernst & Young, The 
Impact of Third-Party Debt Collection on the US National and State 
Economies in 2016: Prepared for ACA Int'l, at 5 (Nov. 2017), https://www.acainternational.org/assets/ernst-young/ey-2017-aca-state-of-the-industry-report-final-5.pdf; see also Gov't Accountability Off., 
No. GAO-09-748, Fair Debt Collection Practices Act Could Better 
Reflect the Evolving Debt Collection Marketplace and Use of 
Technology, at 48 (Sept. 2009), https://www.gao.gov/assets/300/295588.pdf (``Debt collection agencies have been reluctant to use 
email and faxes to communicate with debtors because of the risk that 
someone other than the debtor may read the transmission, which could 
violate FDCPA's prohibition on disclosure to third parties.'').
    \236\ See CFPB Debt Collection Consumer Survey, supra note 18, 
at 37, 42.
    \237\ For example, one industry trade association suggested that 
the Bureau establish a presumption against liability when debt 
collectors use consumer-provided email addresses and telephone 
numbers. In addition, a Federal regulator recently recommended that 
the Bureau ``codify that reasonable digital communications, 
especially when they reflect a consumer's preferred method, are 
appropriate for use in debt collection.'' U.S. Dept. of Treasury, A 
Financial System that Creates Economic Opportunities: Nonbank 
Financials, FinTech, and Innovation, at 21 (July 2018), https://home.treasury.gov/news/press-releases/sm447.
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    In light of this feedback and evidence suggesting that some 
consumers may prefer debt collectors to communicate by newer media, the 
Bureau proposes to identify procedures that debt collectors may use to 
reduce the risk of liability from communicating with consumers by email 
or text message. Pursuant to its authority to implement and interpret 
FDCPA sections 805(b) and 813(c), the Bureau proposes Sec.  
1006.6(d)(3) to specify when a debt collector maintains procedures that 
are reasonably adapted, for purposes of FDCPA section 813(c), to avoid 
a bona fide error in sending an email or text message communication 
that would result in a violation of Sec.  1006.6(d)(1). A debt 
collector would maintain such procedures if, when communicating with a 
consumer using an email address or, in the case of a text message, a 
telephone number, the debt collector's procedures include steps to 
reasonably confirm and document that the debt collector: (1) Has 
obtained and used the email address or telephone number in accordance 
with one of the three methods specified in Sec.  1006.6(d)(3)(i); and 
(2) has taken the additional steps specified in Sec.  1006.6(d)(3)(ii).
    The procedures in proposed Sec.  1006.6(d)(3) are designed to 
ensure that a debt collector who uses a specific email address or 
telephone number to communicate with a consumer by email or text 
message does not have a reason to anticipate that an unauthorized 
third-party disclosure may occur. The FTC staff and some courts have 
found that debt collectors do not violate the prohibition on third-
party disclosures unless they have reason to anticipate that the 
disclosure may be heard or read by third parties.\238\ Designing the 
procedures around the reason-to-anticipate standard is consistent with 
these principles. A debt collector who follows the procedures in 
proposed Sec.  1006.6(d)(3) may not have reason to anticipate that a 
disclosure may be heard or read by a third party.
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    \238\ See, e.g., Statements of General Policy or Interpretation: 
Staff Commentary on the FDCPA, 53 FR 50097, 50104 (Dec. 13, 1988) 
(``A debt collector does not violate [FDCPA section 805(b)] when an 
eavesdropper overhears a conversation with the consumer, unless the 
debt collector has reason to anticipate the conversation will be 
overheard.''); Peak v. Prof'l Credit Serv., No. 6:14-cv-01856-AA, 
2015 WL 7862774, at *5-6 (D. Or. Dec. 2, 2015); Berg v. Merchants 
Ass'n Collection Div., Inc., 586 F. Supp. 2d 1336, 1342, 1345 (S.D. 
Fla 2008); Chlanda v. Wymard, No. C-3-93-321, 1995 WL 17917574, at 
*2 (S.D. Ohio Sept. 5, 1995).
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    Proposed Sec.  1006.6(d)(3) would not fully eliminate a debt 
collector's risk of liability for third-party disclosures. To be 
protected from civil liability under FDCPA 813(c), a debt collector 
would need to show, by a preponderance of the evidence, that the debt 
collector's disclosure to the third party was unintentional and that 
the debt collector, in fact, maintained the specified procedures. As 
proposed, this would require a debt collector to show that the 
procedures included steps to reasonably confirm and document that the 
debt collector acted in accordance with proposed Sec.  1006.6(d)(3)(i) 
and (ii). For example, procedures that permitted a debt collector to 
use obviously incorrect email addresses merely because the addresses 
were obtained consistent with one of the three methods would not 
satisfy proposed Sec.  1006.6(d)(3)'s reasonableness requirement.\239\
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    \239\ In addition, a debt collector who communicates with a 
consumer consistent with proposed Sec.  1006.6(d)(3) would not be 
protected from liability for violations unrelated to third-party 
disclosures (e.g., for failure to include the opt-out notice that 
proposed Sec.  1006.6(e) would require).
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    The procedures in proposed Sec.  1006.6(d)(3) address email and 
text message communications only. At this time, the Bureau does not 
propose procedures related to the use of less-developed and less-
widespread forms of electronic communication because consumers do not 
appear accustomed to using such technologies in their financial lives. 
The Bureau may revisit this conclusion if consumer use of these 
technologies changes. The Bureau also does not propose procedures 
related to the use of voicemails. The limited-content message described 
in proposed Sec.  1006.2(j) is designed to enable debt collectors to 
leave voicemails for consumers without risking third-party disclosures.
    Proposed Sec.  1006.6(d)(3) does not identify the only 
circumstances in which a debt collector may communicate with a consumer 
by email or text message, nor does it identify the only procedures that 
may be reasonably adapted to avoid a violation of proposed Sec.  
1006.6(d)(1) and FDCPA section 805(b). Thus, a debt collector would not 
necessarily violate proposed Sec.  1006.6(d)(1) or FDCPA section 805(b) 
if the debt collector communicated with a consumer by email or text 
message without following the procedures in proposed Sec.  
1006.6(d)(3). Depending on the facts, a debt collector could show by a 
preponderance of the evidence that any third-party disclosures were 
unintentional and that the debt collector employed procedures 
reasonably adapted to avoid them.
    The Bureau requests comment on proposed Sec.  1006.6(d)(3). In 
particular, the Bureau requests comment on the risk of third-party 
disclosure and resulting consumer harm posed by debt collection 
communications that take place by email or text message. The

[[Page 23301]]

Bureau is especially interested in any data or other information 
bearing on the harm associated with such disclosure. The Bureau also 
requests comment on whether the procedures identified in proposed Sec.  
1006.6(d)(3) are likely to increase debt collectors' use of emails and 
text messages to communicate with consumers. The Bureau also requests 
comment on whether additional clarification is needed about the 
requirement that a debt collector's procedures include steps to 
reasonably confirm and document that the debt collector acted in 
accordance with proposed Sec.  1006.6(d)(3)(i) and (ii). In addition, 
the Bureau requests comment on whether to clarify the meaning of the 
term email in proposed Sec.  1006.6(d)(3), such as by specifying that 
it includes direct messaging technology in mobile applications or on 
social media platforms.
6(d)(3)(i) Method of Obtaining and Using an Email Address or Telephone 
Number
    Proposed Sec.  1006.6(d)(3)(i) describes three methods of obtaining 
and using an email address or, in the case of a text message, a 
telephone number. As discussed below, a debt collector whose policies 
and procedures include steps to reasonably confirm and document 
compliance with proposed Sec.  1006.6(d)(3)(i) would be entitled to a 
safe harbor from liability for an unintentional third-party disclosure 
resulting from use of one of the three methods, assuming the debt 
collector's procedures also include steps to reasonably confirm and 
document compliance with proposed Sec.  1006.6(d)(3)(ii).
6(d)(3)(i)(A)
    A debt collector who communicates with a consumer electronically 
using an email address or telephone number that the consumer recently 
used to contact the debt collector electronically may not have reason 
to anticipate that the communication may be read by third parties with 
whom the debt collector is not otherwise permitted to communicate about 
the debt. This is because, the Bureau believes, a consumer generally is 
better positioned than a debt collector to determine whether third 
parties have access to a specific email address or telephone number, 
and a consumer's decision to communicate electronically using a 
specific email address or telephone number may suggest that the 
consumer has assessed the risk of third-party disclosure to be low. For 
this reason, proposed Sec.  1006.6(d)(3)(i)(A) provides that a debt 
collector could obtain \240\ a safe harbor from liability for an 
unintentional third-party disclosure if the debt collector maintained 
procedures to reasonably confirm and document that the debt collector 
communicated with the consumer using an email address or, in the case 
of a text message, a telephone number that the consumer recently used 
to contact the debt collector for purposes other than opting out of 
electronic communications.\241\
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    \240\ To be entitled to a safe harbor, the debt collector's 
procedures also would need to comply with proposed Sec.  
1006.6(d)(3)(ii).
    \241\ As discussed in the section-by-section analysis of 
proposed Sec.  1006.14(h)(2), if a consumer opts out of receiving 
electronic communications from a debt collector, the debt collector 
would be permitted to reply once to confirm the consumer's request 
to opt out, provided that the reply contains no information other 
than a statement confirming the consumer's request. Proposed Sec.  
1006.6(d)(3)(i)(A)'s safe harbor would not be available to a debt 
collector who sends the reply to an email address or, in the case of 
a text message, a telephone number that the consumer used only for 
purposes of opting out of electronic communications.
---------------------------------------------------------------------------

    Proposed Sec.  1006.6(d)(3)(i)(A) would apply to any email address 
or, in the case of a text message, any telephone number--including any 
work email address or any work telephone number--the consumer used to 
contact the debt collector for purposes other than opting out of 
electronic communications. As discussed in the section-by-section 
analysis of proposed Sec.  1006.22(f)(3), the proposed rule generally 
would prohibit a debt collector from attempting to communicate with a 
consumer using an email address that the debt collector knows or should 
know is maintained by the consumer's employer. Work emails appear to 
present a heightened risk of third-party disclosure because many 
employers have a legal right to read messages sent or received by 
employees on work email accounts, and some employers exercise that 
right. Text messages sent to a work telephone number appear to present 
a heightened risk of third-party disclosure for the same reason. 
However, some consumers may be in a position to assess the risk that an 
employer will read their work emails or work text messages based on, 
among other things, their knowledge of work policies and practices, so 
it may be reasonable for a debt collector to presume that a consumer 
who initiates an electronic communication with a debt collector using a 
work email address or work telephone number has assessed that risk to 
be low.
    In addition, proposed Sec.  1006.6(d)(3)(i)(A) would apply only if 
the consumer recently used the email address or telephone number to 
contact the debt collector. Telephone numbers frequently are 
disconnected and reassigned from one person to another. In fact, 
according to a recent Federal Communications Commission (FCC) notice of 
proposed rulemaking, nearly 35 million telephone numbers are 
disconnected and made available for reassignment each year.\242\ Given 
the frequency with which telephone numbers are reassigned, it may be 
reasonable for a debt collector to anticipate that sending a text 
message to a telephone number that the consumer has not recently used 
could result in the disclosure of sensitive information to third 
parties--namely, persons to whom the consumer's telephone number has 
been reassigned. Because a telephone number the consumer recently used 
may be less likely to have been reassigned than a telephone number the 
consumer used in the more distant past, proposed Sec.  
1006.6(d)(3)(i)(A)'s recency requirement may limit the third-party 
disclosure risk posed by the reassignment of telephone numbers. 
Although email addresses do not appear to carry as great a risk of 
reassignment as telephone numbers,\243\ for consistency and ease of 
administration of the regulation, the Bureau nevertheless proposes to 
apply the same recency requirement to email addresses.
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    \242\ Advanced Methods to Target and Eliminate Unlawful 
Robocalls, 83 FR 17631, 17632 (Apr. 23, 2018) (``Consumers 
disconnect their old numbers and change to new telephone numbers for 
a variety of reasons, including switching wireless providers without 
porting numbers and getting new wireline telephone numbers when they 
move.'').
    \243\ Although email addresses can be reassigned, the Bureau has 
not identified evidence suggesting that reassignment happens 
frequently. For example, one of the largest email providers states 
it does not reassign email addresses. See Delete Your Gmail Service, 
Google Account Help, https://support.google.com/accounts/answer/61177?co=GENIE.Platform%3DDesktop&hl=en (last visited May 6, 2019). 
One industry report suggests that a majority of consumers have never 
deactivated an email account. Direct Marketing Ass'n, Consumer Email 
Tracker 2017, at 6 (2017), https://dma.org.uk/uploads/misc/5a1583ff3301a-consumer-email-tracking-report-2017-
(2)_5a1583ff32f65.pdf.
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    The Bureau requests comment on proposed Sec.  1006.6(d)(3)(i)(A). 
In particular, the Bureau requests comment on what, if anything, a 
consumer's decision to contact a debt collector using a work email 
address or, in the case of a text message, a work telephone number may 
suggest about the consumer's assessment of the risk of third-party 
disclosure. The Bureau also requests comment on what, if anything, a 
consumer's decision to contact a debt collector using a non-work email 
address or, in the case of a text message, a non-work telephone number 
may suggest about the consumer's

[[Page 23302]]

assessment of the risk of third-party disclosure. In addition, the 
Bureau requests comment on the third-party disclosure risks to 
consumers posed by the practice of reassigning telephone numbers. The 
Bureau also requests comment on whether the recency requirement in 
proposed Sec.  1006.6(d)(3)(i)(A) adequately addresses those risks, 
and, if not, on how the Bureau could address them in a final rule. In 
addition, the Bureau requests comment on whether to apply the recency 
requirement to emails. The proposed rule does not define when a 
consumer's contact would qualify as recent. The Bureau therefore also 
requests comment on whether and how to define recent in the context of 
proposed Sec.  1006.6(d)(3)(i)(A), including on whether contact by the 
consumer in the past year should qualify as recent.
6(d)(3)(i)(B)
    A debt collector may not have reason to anticipate that an 
electronic communication to a consumer's non-work email address or non-
work telephone number may be read by third parties with whom the debt 
collector is not otherwise permitted to communicate about the debt if 
the consumer has received notice and a reasonable opportunity to opt 
out of such communications, but the consumer has not done so. This is 
because, the Bureau believes, a consumer's failure to opt out in these 
circumstances may suggest that the consumer has assessed the risk of 
such a disclosure to be low. For this reason, proposed Sec.  
1006.6(d)(3)(i)(B) provides that a debt collector could obtain \244\ a 
safe harbor from liability for an unintentional third-party disclosure 
if the debt collector maintained procedures to reasonably confirm and 
document that: (1) The debt collector communicated with the consumer 
using a non-work email address or, in the case of a text message, a 
non-work telephone number, after the creditor or the debt collector 
provided the consumer with notice that the debt collector might use 
that non-work email address or non-work telephone number for debt 
collection communications and a reasonable opportunity to opt out; and 
(2) the consumer did not opt out.
---------------------------------------------------------------------------

    \244\ To be entitled to a safe harbor, the debt collector's 
procedures also would need to comply with proposed Sec.  
1006.6(d)(3)(ii).
---------------------------------------------------------------------------

    Proposed Sec.  1006.6(d)(3)(i)(B) would apply only to non-work 
email addresses and non-work telephone numbers; it would not apply to 
work email addresses or work telephone numbers. A notice-and-opt-out 
process may not be reasonably designed to prevent employers from 
reading electronic debt collection communications sent to work email 
addresses and work telephone numbers. Unlike a consumer's affirmative 
decision to contact a debt collector using a work email address or, in 
the case of a text message, a work telephone number, as described in 
proposed Sec.  1006.6(d)(3)(i)(A), a consumer's failure to opt out of 
the debt collector's use of a work email address or a work telephone 
number may not indicate that the consumer has assessed the risk of 
third-party disclosure to be low. Instead, it may reflect an 
unwillingness to engage with a debt collector in any manner--even to 
opt out of further communications--using a work email address or a work 
telephone number.
    Proposed comment 6(d)(3)(i)-1 would clarify that an email address 
qualifies as a non-work email address unless the debt collector knows 
or should know that the email address is provided to the consumer by 
the consumer's employer. The proposed comment also refers to Sec.  
1006.22(f)(3) and its related commentary for further clarification 
regarding whether a debt collector knows or should know that an email 
address is provided by a consumer's employer. The proposed comment also 
would clarify that a telephone number qualifies as a non-work telephone 
number unless the debt collector knows or should know that the 
telephone number is provided to the consumer by the consumer's 
employer.
    The Bureau requests comment on proposed Sec.  1006.6(d)(3)(i)(B) 
and on comment 6(d)(3)(i)-1. In particular, the Bureau requests comment 
on what, if anything, a consumer's failure to opt out of a debt 
collector's use of a non-work email address or, in the case of a text 
message, a non-work telephone number may suggest about the consumer's 
assessment of the risk of third-party disclosure. The Bureau also 
requests comment on what, if anything, a consumer's failure to opt out 
of a debt collector's use of a work email address or, in the case of a 
text message, a work telephone number may suggest about the consumer's 
assessment of the risk of third-party disclosure.
6(d)(3)(i)(B)(1)
    Proposed Sec.  1006.6(d)(3)(i)(B)(1) describes three requirements 
that a debt collector using the notice-and-opt-out approach would need 
to confirm and document had been satisfied. First, the creditor or the 
debt collector would need to notify the consumer clearly and 
conspicuously that the debt collector might use a specific non-work 
email address or a specific non-work telephone number for debt 
collection communications by email or text message. The creditor or the 
debt collector may provide the notice orally, in writing, or 
electronically, but, if provided electronically, the notice could not 
be sent to the specific non-work email address or non-work telephone 
number the debt collector seeks to use for future communications. This 
limitation may help avoid a third-party disclosure through the notice 
itself, which could occur if the opt-out notice were sent to the email 
address or telephone number identified in the notice.
    Second, the creditor or the debt collector would need to provide 
the notice no more than 30 days before the debt collector engages in 
debt collection communications by email or text message. This timing 
component is meant to ensure that the consumer has made a decision 
about whether to opt out, including based on the risk of third-party 
disclosure, at a time reasonably contemporaneous with the proposed 
electronic communications.
    Third, the notice would need to identify the legal name of the debt 
collector and the non-work email address or non-work telephone number 
the debt collector proposes to use, describe one or more ways the 
consumer could opt out of such communications, and provide the consumer 
with a specified reasonable period during which to opt out before the 
debt collector would begin such communications. The content of the 
notice is meant to ensure that the notice includes enough information 
for the consumer to make an adequately informed decision about whether 
to opt out and, should the consumer elect not to opt out, to prepare to 
receive any electronic communications.\245\
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    \245\ As explained below, the Bureau proposes comment 
6(d)(3)(i)(B)(1)-2 to clarify that, when an opt-out notice is 
provided orally, the creditor or the debt collector may require the 
consumer to make an opt-out decision during that same communication. 
As also noted below, the Bureau does not propose to specify what 
would qualify as a reasonable opt-out period when an opt-out notice 
is provided in writing or electronically; however, the Bureau 
requests comment on this issue.
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    Although the procedures described in proposed Sec.  
1006.6(d)(3)(i)(B) include steps to reasonably confirm and document 
that the creditor or the debt collector provided the opt-out notice 
described in proposed Sec.  1006.6(d)(3)(i)(B)(1), they do not include 
a requirement to provide the notice itself in writing. Proposed comment 
6(d)(3)(i)(B)(1)-1 would clarify that the opt-out notice described in 
Sec.  1006.6(d)(3)(i)(B)(1) may be provided orally, in writing, or

[[Page 23303]]

electronically. The proposed comment also would clarify that the opt-
out notice must be provided clearly and conspicuously, as defined in 
Sec.  1006.34(b)(1), and that, if the opt-out notice is provided in 
writing or electronically, it must comply with the requirements of 
Sec.  1006.42(a) for providing required disclosures.\246\ The Bureau 
proposes comment 6(d)(3)(i)(B)(1)-1 to provide consumers, debt 
collectors, and creditors with the flexibility to satisfy the proposed 
notice-and-opt-out requirements orally or electronically, which may be 
more convenient or efficient in some circumstances.
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    \246\ As discussed in the section-by-section analysis of 
proposed Sec.  1006.42(a)(1), that section would apply when debt 
collectors provide certain required disclosures in writing or 
electronically; it would not apply when debt collectors provide 
those disclosures orally.
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    Proposed comment 6(d)(3)(i)(B)(1)-2 would clarify how to provide 
the opt-out notice described in proposed Sec.  1006.6(d)(3)(i)(B)(1) to 
the consumer in an oral communication, such as in a telephone or in-
person conversation. The comment explains that, if a creditor or a debt 
collector provides the opt-out notice orally, the creditor or the debt 
collector may require the consumer to make an opt-out decision during 
that same communication. Proposed comment 6(d)(3)(i)(B)(1)-2 appears 
consistent with industry practice in other markets for consumer 
financial products and services, where consumers may commonly make 
decisions about their communication preferences at one time, often at 
origination.
    Proposed comment 6(d)(3)(i)(B)(1)-3 would clarify that a debt 
collector or a creditor may provide the opt-out notice together with 
other notices required under the rule. As discussed in the section-by-
section analysis of proposed Sec.  1006.42(c)(2)(ii) and (d), the 
proposed rule would permit a debt collector to deliver required 
disclosures by hyperlink if, among other things, the debt collector or 
a creditor first provided the consumer with notice and an opportunity 
to opt out. Because it may be more convenient and cost effective for 
consumers, debt collectors, and creditors if consumers can make their 
various communication preferences known at the same time, proposed 
comment 6(d)(3)(i)(B)(1)-3 would clarify that a debt collector or a 
creditor may include the opt-out notice described in Sec.  
1006.6(d)(3)(i)(B)(1) in the same communication as the opt-out notice 
described in Sec.  1006.42(d)(1) or (2), as applicable.
    The Bureau requests comment on proposed Sec.  1006.6(d)(3)(i)(B)(1) 
and its related commentary. In particular, the Bureau requests comment 
on whether to limit further the email addresses or telephone numbers to 
which a creditor or a debt collector may send the opt-out notice that 
would be required by proposed Sec.  1006.6(d)(3)(i)(B)(1) and, if so, 
what those limitations should be. The Bureau also requests comment on 
proposed Sec.  1006.6(d)(3)(i)(B)(1)'s requirement to provide the 
notification no more than 30 days before the debt collector's first 
communication pursuant to proposed Sec.  1006.6(d)(3)(i)(B), including 
on whether the period should be shortened or lengthened. The Bureau 
also requests comment on whether to clarify, for purposes of proposed 
Sec.  1006.6(d)(3)(i)(B)(1), what constitutes a reasonable period 
within which to opt out when an opt-out notice is not provided through 
a telephone conversation. In addition, the Bureau requests comment on 
whether, in other consumer financial products and services markets, 
consumers commonly make decisions about their communication preferences 
during a single telephone call. The Bureau also requests comment on the 
benefits and risks of allowing debt collectors and creditors to include 
the opt-out notice described in proposed Sec.  1006.6(d)(3)(i)(B)(1) in 
the same communication as the opt-out notice described in proposed 
Sec.  1006.42(d)(1) or (2), as applicable.
6(d)(3)(i)(B)(2)
    As discussed above, proposed Sec.  1006.6(d)(3)(i)(B)(1) describes 
requirements that a debt collector using the notice-and-opt-out 
approach would need to confirm and document had been satisfied. One 
such requirement is to provide the consumer with a reasonable period 
during which to opt out of receiving debt collection communications by 
email or text message to the non-work email address or non-work 
telephone number identified in the opt-out notice. The consumer's 
failure to opt out in these circumstances may suggest that the consumer 
has assessed the risk of third-party disclosure to be low.\247\ For 
this reason, proposed Sec.  1006.6(d)(3)(i)(B)(2) provides that, if the 
opt-out period specified in the notice has expired and the consumer has 
not opted out, the debt collector may use the specific non-work email 
address or non-work telephone number to send debt collection 
communications by email or text message.
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    \247\ By contrast, as explained in the section-by-section 
analysis of proposed Sec.  1006.6(d)(3)(i)(B), a consumer's failure 
to opt out of a debt collector's use of a work email address or, in 
the case of a text message, a work telephone number may not indicate 
that the consumer has assessed the risk of third-party disclosure to 
be low. When it comes to a debt collector's use of a non-work email 
address or non-work telephone number, a consumer likely possesses 
the information necessary to assess the risk of unwanted third-party 
disclosure. With respect to work email addresses and telephone 
numbers, however, a consumer who receives a debt collection 
communication may not wish to engage with a debt collector in any 
manner--even to opt out of further communications--using a work 
email address or telephone number.
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    Proposed comment 6(d)(3)(i)(B)(2)-1 would clarify how proposed 
Sec.  1006.6(d)(3)(i)(B)(2) would work with proposed Sec.  1006.14(h), 
which would prohibit a debt collector from communicating or attempting 
to communicate with a consumer through a medium of communication if the 
consumer has requested that the debt collector not use that medium to 
communicate with the consumer.\248\ Proposed comment 6(d)(3)(i)(B)(2)-1 
provides that, if a consumer requests after the expiration of the opt-
out period set forth in the Sec.  1006.6(d)(3)(i)(B)(1) opt-out notice 
that a debt collector not use the non-work email address or non-work 
telephone number specified in that notice, Sec.  1006.14(h) would 
prohibit the debt collector from communicating or attempting to 
communicate with the consumer using that email address or telephone 
number. Likewise, if the consumer requests after the expiration of the 
opt-out period that the debt collector not communicate with the 
consumer by email or text message, Sec.  1006.14(h) prohibits the debt 
collector from communicating or attempting to communicate with the 
consumer by email or text message, including by using the non-work 
email address or non-work telephone number specified in the Sec.  
1006.6(d)(3)(i)(B)(1) opt-out notice. The Bureau requests comment on 
proposed Sec.  1006.6(d)(3)(i)(B)(2) and its related commentary.
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    \248\ See the section-by-section analysis of proposed Sec.  
1006.14(h).
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6(d)(3)(i)(C)
    A debt collector who communicates with a consumer electronically 
using the consumer's non-work email address or non-work telephone 
number recently used by the creditor or a prior debt collector may not 
have reason to anticipate that the communication may be read by third 
parties with whom the debt collector is not otherwise permitted to 
communicate about the debt. The Bureau has not identified data 
suggesting that creditors communicate with consumers at non-work email 
addresses or non-work telephone numbers that are generally accessible 
to

[[Page 23304]]

such individuals. Further, the Bureau believes that a consumer's 
decision to communicate with a creditor or a prior debt collector using 
a non-work email address or non-work telephone number may suggest that 
the consumer has assessed the risk of third-party disclosure to be low.
    For these reasons, proposed Sec.  1006.6(d)(3)(i)(C) provides that 
a debt collector could obtain \249\ a safe harbor from liability for an 
unintentional third-party disclosure if the debt collector maintained 
procedures to reasonably confirm and document that: (1) The debt 
collector communicated with the consumer using a non-work email address 
or, in the case of a text message, a non-work telephone number that the 
creditor or a prior debt collector obtained from the consumer to 
communicate about the debt; (2) before the debt was placed with the 
debt collector, the creditor or the prior debt collector recently sent 
communications about the debt to the non-work email address or non-work 
telephone number; and (3) the consumer did not request the creditor or 
the prior debt collector to stop using the non-work email address or 
non-work telephone number to communicate about the debt.
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    \249\ To be entitled to a safe harbor, the debt collector's 
procedures also would need to comply with proposed Sec.  
1006.6(d)(3)(ii).
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    Proposed Sec.  1006.6(d)(3)(i)(C) would apply only to non-work 
email addresses and non-work telephone numbers. As noted above, some 
employers monitor work email addresses, and some employers may also 
monitor text messages sent to and from work telephone numbers. A 
consumer might agree to receive electronic communications from a 
creditor to a work email address or work telephone number without 
regard to the risk that an employer might monitor or read those 
communications because a consumer may not consider communications from 
a creditor to be as sensitive as communications from a debt collector. 
In other words, consumer consent to a creditor's use of a work email 
address or, in the case of a text message, a work telephone number 
might not mean that the risk of third-party disclosure is low. 
Therefore, procedures that permit a debt collector to communicate using 
a work email address or work telephone number merely because the 
creditor communicated using that email address or telephone number 
might not prevent unintentional disclosures of debt collection 
communications to employers.\250\ Nor does the Bureau propose that a 
prior debt collector's use of a consumer's work email address or work 
telephone number would be sufficient to justify a later debt 
collector's use of that email address or telephone number. Even if a 
consumer had indicated to a prior debt collector that the risk of 
monitoring by an employer was low, an employer's monitoring policies 
and practices can change and debt collectors may differ in their 
approach to communications with consumers.
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    \250\ The special sensitivity of debt collection communications 
is reflected in the law: The FDCPA regulates a debt collector's 
communications at the consumer's place of employment, while consumer 
credit origination and servicing laws, such as the Truth in Lending 
Act, generally do not. See 15 U.S.C. 1692c(a)(3).
---------------------------------------------------------------------------

    Proposed Sec.  1006.6(d)(3)(i)(C) would apply only if the creditor 
or a prior debt collector recently used the non-work email address or 
non-work telephone number to send communications about the debt. The 
Bureau proposes this recency requirement for the same reasons that it 
proposes the recency requirement in Sec.  1006.6(d)(3)(i)(A).\251\
---------------------------------------------------------------------------

    \251\ See the section-by-section analysis of proposed Sec.  
1006.6(d)(3)(i)(A).
---------------------------------------------------------------------------

    The Bureau requests comment on proposed Sec.  1006.6(d)(3)(i)(C), 
including on how often creditors communicate with consumers using non-
work email addresses and, in the case of text messages, non-work 
telephone numbers. The Bureau also requests comment on what, if 
anything, a consumer's decision to communicate with a creditor or a 
prior debt collector using a non-work email address or non-work 
telephone number may suggest about the consumer's assessment of the 
risk of third-party disclosure. In addition, the Bureau requests 
comment on the third-party disclosure risks to consumers posed by the 
practice of reassigning telephone numbers. The Bureau also requests 
comment on whether the recency requirement in proposed Sec.  
1006.6(d)(3)(i)(C) adequately addresses these risks, and, if not, on 
how the Bureau could address them in a final rule. In addition, the 
Bureau requests comment on whether to apply the recency requirement to 
email addresses. The proposed rule does not define when a creditor's or 
a prior debt collector's communication about the debt would qualify as 
recent. The Bureau therefore also requests comment on whether and how 
to define recent in the context of proposed Sec.  1006.6(d)(3)(i)(C), 
including on whether a communication by the creditor or a prior debt 
collector in the past year should qualify as recent.
6(d)(3)(ii) Additional Requirements
    To fall within the safe harbor from liability that proposed Sec.  
1006.6(d)(3) would establish for unintentional violations of proposed 
Sec.  1006.6(d)(1) and FDCPA section 805(b), a debt collector's 
procedures would not only need to include steps to reasonably confirm 
and document that the debt collector obtained and used an email address 
or, in the case of a text message, a telephone number consistent with 
one of the three methods identified in proposed Sec.  1006.6(d)(3)(i), 
but the procedures also would need to comply with proposed Sec.  
1006.6(d)(3)(ii). Proposed Sec.  1006.6(d)(3)(ii) would require a debt 
collector to take steps to prevent communications using an email 
address or telephone number that the debt collector knows has led to a 
disclosure prohibited by Sec.  1006.6(d)(1).\252\
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    \252\ As noted above, even if a debt collector selects an email 
address or telephone number in accordance with the procedures in 
proposed Sec.  1006.6(d)(3), the debt collector would not be 
permitted to communicate or attempt to communicate with a consumer 
using that email address or telephone number if doing so would 
violate another provision of the proposed rule, such as the opt-out-
notice requirements of proposed Sec.  1006.6(e).
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    The Bureau proposes Sec.  1006.6(d)(3)(ii) on the basis that a debt 
collector whose procedures are not designed to prevent recurrence of a 
known violation may intend to convey information related to the debt or 
its collection to a third party. The Bureau requests comment on 
proposed Sec.  1006.6(d)(3)(ii), including on whether the procedures 
described in proposed Sec.  1006.6(d)(3)(ii) are reasonably adapted to 
avoid a violation of the prohibition on third-party disclosures in 
proposed Sec.  1006.6(d)(1) and FDCPA section 805(b).
6(e) Opt-Out Notice for Electronic Communications or Attempts To 
Communicate
    The Bureau's proposal includes several provisions designed to 
facilitate debt collectors' use of electronic communication media, such 
as emails and text messages, when collecting debts. Some consumers, 
however, may not wish to receive electronic debt collection 
communications because, for example, they receive too many such 
communications or because such communications force them to incur 
charges.\253\ To address this concern, proposed Sec.  1006.6(e) would 
require debt

[[Page 23305]]

collectors to notify consumers how to opt out of receiving electronic 
debt collection communications or communication attempts directed at a 
specific email address, telephone number for text messages, or other 
electronic-medium address.
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    \253\ CFPB Debt Collection Consumer Survey, supra note 18, at 
36-37 (noting that almost one-half of consumers said they would most 
prefer to be reached by written letter and that the second most 
common preference for contact was through some kind of telephone 
other than a work telephone).
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    The Bureau generally believes that the use of electronic media for 
debt collection communications can further the interests of both 
consumers and debt collectors. But electronic communications also pose 
potential consumer harms. One potential harm relates to consumer 
harassment. The FDCPA recognizes this harm in section 806, which 
prohibits conduct the natural consequence of which is to harass, 
oppress, or abuse any person in connection with the collection of a 
debt. Because communicating with consumers electronically is 
essentially costless, debt collectors may have little economic 
incentive to limit the number of such communications. As discussed in 
the section-by-section analysis of proposed Sec.  1006.14(b), however, 
repeated or continuous debt collection communications may have the 
natural consequence of harassing, oppressing, or abusing the recipient. 
In part for this reason, the proposed rule would establish bright-line 
rules limiting the frequency with which a debt collector may place 
telephone calls in connection with the collection of a debt. However, 
the frequency limits in the proposed rule would not apply to emails or 
text messages.\254\
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    \254\ See the section-by-section analysis of proposed Sec.  
1006.14(b). Proposed Sec.  1006.14(b)(2) provides that, subject to 
Sec.  1006.14(b)(3), a debt collector violates Sec.  1006.14(b)(1) 
by placing a telephone call to a particular person in connection 
with the collection of a particular debt either: (i) More than seven 
times within seven consecutive days, or (ii) within a period of 
seven consecutive days after having had a telephone conversation 
with the person in connection with the collection of such debt, with 
the date of the telephone conversation being the first day of the 
seven-consecutive-day period.
---------------------------------------------------------------------------

    Another potential consumer harm relates to communication costs. The 
FDCPA recognizes this harm in section 808(5), which prohibits debt 
collectors from causing charges to be made to any person for 
communications by concealment of the true purpose of the communication 
and specifies that such charges include, but are not limited to, 
collect telephone calls. Although many consumers have unlimited text 
messaging plans, some do not.\255\ Consumers without unlimited text 
messaging plans may incur a charge each time they receive a text 
message, or each time they receive a text message that exceeds a 
specified limit.\256\ For these consumers, receiving a text message 
from a debt collector may be similar to accepting a collect call from a 
debt collector.
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    \255\ According to one 2015 estimate, approximately 10 percent 
of U.S. mobile telephone numbers are not enrolled in an unlimited 
text plan. See Josh Zagorsky, Almost 90% of Americans Have Unlimited 
Texting, Instant Census Blog (Dec. 8, 2015), https://instantcensus.com/blog/almost-90-of-americans-have-unlimited-texting.
    \256\ The FCC has found, for example, that unwanted calls and 
text messages can create substantial costs for consumers when 
aggregated across many contacts. See, e.g., In re Rules & 
Regulations Implementing the Tel. Consumer Prot. Act of 1991, 30 
F.C.C.Rcd. 7961, 8021 (2015) (``In addition to the invasion of 
consumer privacy for all wireless consumers, the record confirms 
that some are charged for incoming calls and messages. These costs 
can be substantial when they result from the large numbers of voice 
calls and texts autodialers can generate.''), set aside in part by 
ACA Int'l v. Fed. Commc'ns Comm'n, 885 F.3d 687 (D.C. Cir. 2018).
---------------------------------------------------------------------------

    One way to help consumers address potentially harassing or costly 
electronic communications or communication attempts is to provide them 
with a convenient way to opt out of such communications. In pre-
proposal feedback, a debt collector and several consumer advocates 
supported an opt-out requirement. An opt-out requirement also would be 
consistent with several established public policies protecting 
consumers who receive electronic communications.\257\
---------------------------------------------------------------------------

    \257\ For example, with respect to emails, the Controlling the 
Assault of Non-Solicited Pornography and Marketing (CAN-SPAM) Act 
reflects a public policy in favor of providing consumers with a 
specific mechanism to opt out of certain email messages. See 15 
U.S.C. 7704(a)(3) (requiring that commercial emails include a 
functioning return email address or other internet-based mechanism, 
clearly and conspicuously displayed, for the recipient to request 
not to receive future email messages from the sender at the address 
where the message was received); Fed. Trade Comm'n, CAN-SPAM Act: A 
Compliance Guide for Business (Sept. 2009), https://www.ftc.gov/tips-advice/business-center/guidance/can-spam-act-compliance-guide-business (explaining that messages covered by the CAN-SPAM Act 
``must include a clear and conspicuous explanation of how the 
recipient can opt out of getting email from [the sender] in the 
future''). In addition, the FTC's regulations implementing the CAN-
SPAM Act prohibit charging a fee or imposing other requirements on 
recipients who wish to opt out of certain email communications. 16 
CFR 316.5; see also Definitions & Implementation Under the CAN-SPAM 
Act, 73 FR 29654, 29675 (May 21, 2008) (concluding that, to 
implement an unsubscribe function, requests for personal information 
are unnecessary).
---------------------------------------------------------------------------

    For these reasons, proposed Sec.  1006.6(e) would require a debt 
collector who communicates or attempts to communicate with a consumer 
electronically in connection with the collection of a debt using a 
specific email address, telephone number for text messages, or other 
electronic-medium address to include in each such communication or 
attempt to communicate a clear and conspicuous statement describing one 
or more ways the consumer can opt out of further electronic 
communications or attempts to communicate by the debt collector to that 
address or telephone number. Proposed Sec.  1006.6(e) also would 
prohibit a debt collector from requiring, directly or indirectly, that 
the consumer, in order to opt out, pay any fee or provide any 
information other than the email address, telephone number for text 
messages, or other electronic-medium address subject to the opt-out. 
The Bureau proposes to require debt collectors to provide consumers 
with opt-out instructions to help ensure that a consumer who receives 
written electronic communications from a debt collector can, with 
minimal effort and cost, stop the debt collector from sending further 
written electronic communications or communication attempts directed at 
a specific address or telephone number.\258\ Proposed comment 6(e)-1 
would clarify that clear and conspicuous under Sec.  1006(e) has the 
same meaning as in Sec.  1006.34(b)(1) regarding validation notices and 
provides examples illustrating the proposed rule.
---------------------------------------------------------------------------

    \258\ For ease of reference, throughout the section-by-section 
analysis of proposed Sec.  1006.6(e), the Bureau uses the phrase 
``written electronic communications'' to refer to emails, text 
messages, and other electronic communications that are readable. The 
Bureau's use of this phrase has no bearing on the Bureau's 
interpretation of the terms ``written'' or ``in writing'' under any 
law or regulation, including the FDCPA or the E-SIGN Act.
---------------------------------------------------------------------------

    Proposed Sec.  1006.6(e) seeks to address a group of concerns that 
are unique to written electronic communications and attempts to 
communicate. With respect to concerns about harassment from excessive 
communications of other types, consumers likely know how to request 
debt collectors to stop placing unwanted telephone calls, and proposed 
Sec.  1006.14(h) would require debt collectors to honor such requests. 
In addition, the frequency limitations in proposed Sec.  1006.14(b)(2) 
would apply to telephone calls. Moreover, debt collectors are unlikely 
to communicate by mail repeatedly because of the cost.\259\ With 
respect to concerns about costs, consumers generally do not incur costs 
when they receive written letters, whereas some consumers do incur 
costs when they receive text messages. Accordingly, proposed Sec.  
1006.6(e) would not apply to non-electronic communications and attempts 
to

[[Page 23306]]

communicate with a consumer, such as letters. Nor would it apply to 
telephone calls.
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    \259\ See, e.g., 15 U.S.C. 7701(a)(1) (noting Congressional 
finding, in connection with CAN-SPAM Act, that the ``low cost'' of 
email makes it ``extremely convenient and efficient''); Arthur 
Middleton Hughes, Why Email Marketing is King, Harv. Bus. Rev. (Aug. 
21, 2012), https://hbr.org/2012/08/why-email-marketing-is-king 
(``Direct mail costs more than $600 per thousand pieces. With email, 
there are almost no costs at all.'').
---------------------------------------------------------------------------

    While emails and text messages are common forms of written 
electronic communications today, technology likely will evolve to 
introduce newer forms of written electronic communications. Proposed 
Sec.  1006.6(e) would apply to all written electronic communications, 
regardless of whether they are specified in the rule and regardless of 
whether they exist now or come to exist in the future. For example, 
direct messaging communications on social media and communications in 
an application on a private website, mobile telephone, or computer, 
would be covered by proposed Sec.  1006.6(e).
    In its Small Business Review Panel Outline, the Bureau described a 
proposal under consideration to require debt collectors, absent 
consumer consent, to use free-to-end-user (FTEU) text messages so that 
the debt collector, rather than the consumer, would incur any charge 
for the message.\260\ On balance, however, requiring FTEU technology 
may be too restrictive. FTEU technology may only be supported by 
certain wireless platforms, and industry standards may only permit its 
use with affirmative consumer consent.\261\ Requiring debt collectors 
to use FTEU technology could therefore disadvantage some consumers by 
preventing them from receiving text messages, even when text messages 
are an equal or preferred medium of communication.
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    \260\ Small Business Review Panel Outline, supra note 56, at 
appendix H at 1.
    \261\ According to one industry website, FTEU is supported by 
six carriers (AT&T, Boost, Sprint, T-Mobile, Verizon Wireless, and 
Virgin Mobile). iVision Mobile, Free to End User (FTEU), https://www.ivisionmobile.com/text-messaging-software/free-to-end-user-fteu.asp (last visited May 6, 2019); Mobile Mkt'g Ass'n, U.S. 
Consumer Best Practices for Messaging: Version 7.0, at 43 (Oct. 16, 
2012), https://www.mmaglobal.com/files/bestpractices.pdf (describing 
FTEU ``Cross Carrier Guidelines'' as providing that ``[c]ontent 
providers must obtain opt-in approval from subscribers before 
sending them any SMS or MMS messages or other content from a short 
code'').
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    The Bureau requests comment on proposed Sec.  1006.6(e) and its 
related commentary, including on the costs to debt collectors and 
benefits to consumers. In addition, the Bureau requests comment on the 
potential consumer harms posed by written electronic communications, 
including the proportion of consumers in debt collection that do not 
maintain unlimited text messaging plans and the cost to such consumers 
of receiving text messages. The Bureau also requests comment on whether 
consumers are likely to find it harassing, oppressive, or abusive to 
receive written electronic communications, such as emails and text 
messages, without having a simple mechanism to make them stop, and the 
costs consumers incur when trying to unsubscribe from written 
electronic communications that do not contain an unsubscribe option. In 
addition, the Bureau requests comment on whether to identify a non-
exclusive list of words or phrases that express an opt-out instruction. 
In pre-proposal outreach, for example, one consumer advocate urged that 
debt collectors be required to honor standard phrases, such as 
``stop,'' ``unsubscribe,'' ``end,'' ``quit,'' and ``cancel.'' The 
Bureau also requests comment on whether to specify the period within 
which a debt collector must process a consumer's request to opt out 
pursuant to proposed Sec.  1006.6(e), and, if so, what that period 
should be.
    The Bureau proposes Sec.  1006.6(e) as an interpretation of FDCPA 
section 806 pursuant to its authority under FDCPA section 814(d) to 
prescribe rules with respect to the collection of debts by debt 
collectors. FDCPA section 806 prohibits conduct the natural consequence 
of which is to harass, oppress, or abuse any person in connection with 
the collection of a debt. It is essentially costless for debt 
collectors to send written electronic communications, such as emails 
and text messages, to consumers. Debt collectors may therefore have 
little economic incentive to limit the number of such communications. 
Individual consumers may find it harassing, oppressive, or abusive to 
receive written electronic communications, such as emails and text 
messages, without having a simple mechanism to make them stop. The 
Bureau proposes Sec.  1006.6(e) to provide consumers with a way to stop 
written electronic communications that they find harassing, oppressive, 
or abusive.
    The Bureau also proposes Sec.  1006.6(e) as an interpretation of 
FDCPA section 808 pursuant to its authority under FDCPA section 814(d) 
to prescribe rules with respect to the collection of debts by debt 
collectors. FDCPA section 808 prohibits the use of unfair or 
unconscionable means to collect or attempt to collect any debt. It may 
be unfair or unconscionable for a debt collector to send a consumer a 
written electronic communication, such as an email or text message, 
without providing an unsubscribe option. Because written electronic 
communications, such as emails and text messages, are essentially 
costless for debt collectors, failing to provide consumers with an 
unsubscribe option may lead to excessive written electronic 
communications. In the absence of a convenient unsubscribe option, a 
consumer who wishes to unsubscribe from written electronic 
communications may incur time and cost doing so. The process may 
require the consumer to write an unsubscribe request, search for and 
identify the debt collector (an entity with whom the consumer may not 
be familiar), obtain contact information for the debt collector, and 
follow up with the debt collector if necessary. On balance, these costs 
to consumers do not appear to outweigh the benefit to debt collectors 
of omitting an unsubscribe option from written electronic 
communications. Further, FDCPA section 808(5) specifically prohibits 
debt collectors from causing charges to be incurred through the 
concealment of the true purpose of a communication, and it specifies 
that such charges include collect telephone calls. A debt collector who 
sends a text message to a consumer who lacks an unlimited text 
messaging plan may--similar to a debt collector who places a collect 
call to a consumer while concealing the purpose of the call--cause the 
consumer to incur communications charges that the consumer does not 
wish to incur. The Bureau proposes Sec.  1006.6(e) to limit written 
electronic communications that cause consumers to incur such charges.
    The Bureau also proposes Sec.  1006.6(e) pursuant to its authority 
under section 1032(a) of the Dodd-Frank Act to prescribe rules to 
ensure that the features of any consumer financial product or service 
are fully, accurately, and effectively disclosed to consumers in a 
manner that permits consumers to understand the costs, benefits, and 
risks associated with the product or service, in light of the facts and 
circumstances. A consumer's ability to opt out of written electronic 
communications from a debt collector is a feature of debt collection, 
and the opt-out instructions required by proposed Sec.  1006.6(e) 
disclose that feature to consumers.
Section 1006.10 Acquisition of Location Information
    FDCPA section 804 imposes certain requirements and limitations on a 
debt collector who communicates with any person other than the consumer 
for the purpose of acquiring location information about the 
consumer.\262\ FDCPA section 803(7) defines the term location 
information.\263\ The Bureau understands that there may be some 
uncertainty regarding aspects of these provisions, such as how to 
determine whether a debt collector who has acquired some information 
about a

[[Page 23307]]

consumer's whereabouts no longer has the purpose of acquiring location 
information when communicating with a person other than the consumer. 
Such uncertainty may relate at least in part to broader issues 
regarding the information debt collectors receive from creditors. The 
Bureau will continue to consider these and other issues related to 
location information communications to identify areas that pose a risk 
of consumer harm or require clarification.
---------------------------------------------------------------------------

    \262\ 15 U.S.C. 1692c.
    \263\ 15 U.S.C. 1692a(7).
---------------------------------------------------------------------------

    Accordingly, proposed Sec.  1006.10 would implement FDCPA sections 
803(7) and 804 and generally mirrors the statute, with minor wording 
and organizational changes for clarity.\264\ Proposed 1006.10(c), 
however, would clarify that a debt collector who is subject to the 
frequency restrictions in FDCPA section 804 also must comply with the 
frequency restrictions in proposed 1006.14(b)--that is, the proposal's 
limits on telephone calls also apply to location calls. The Bureau 
proposes Sec.  1006.10 pursuant to its authority under FDCPA section 
814(d) to prescribe rules with respect to the collection of debts by 
debt collectors.
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    \264\ For example, while no change in meaning is intended, the 
proposal substitutes the phrase ``by mail'' for the phrase 
``effected by the mails or telegram'' in FDCPA section 804(5) to 
avoid obsolete language.
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    The Bureau also proposes two comments clarifying what is location 
information in the decedent debt context. Proposed comment 10(a)-1 
would clarify the definition of location information in the decedent 
debt context by providing that, if a consumer obligated or allegedly 
obligated to pay any debt is deceased, location information includes 
the information described in proposed Sec.  1006.10(a) for a person who 
is authorized to act on behalf of the deceased consumer's estate. The 
Bureau proposes this comment on the basis that, as discussed in the 
section-by-section analysis of proposed Sec.  1006.2(e) (definition of 
consumer), the term consumer under the FDCPA includes deceased 
consumers. A debt collector may obtain location information for such 
consumers by obtaining location information for the person with the 
authority to act on behalf of the deceased consumer's estate. Proposed 
comment 10(a)-1 would enable debt collectors who are trying to collect 
a deceased consumer's debts to locate a person with the authority to 
act on behalf of the deceased consumer's estate, thereby facilitating 
the prompt resolution of estates.
    Proposed comment 10(b)(2)-1 would interpret FDCPA section 804(2) in 
the decedent debt context. Proposed comment 10(b)(2)-1 explains that, 
if the consumer obligated or allegedly obligated to pay the debt is 
deceased, and the debt collector is attempting to locate a person with 
the authority to act on behalf of the deceased consumer's estate, the 
debt collector does not violate Sec.  1006.10(b)(2) by stating that the 
debt collector is seeking to identify and locate a person who is 
authorized to act on behalf of the deceased consumer's estate.
    In its Policy Statement on Decedent Debt, the FTC stated that it 
would refrain from taking enforcement action under FDCPA section 804(2) 
against debt collectors who state that they are seeking to locate a 
person ``with the authority to pay any outstanding bills of the 
decedent out of the decedent's estate.'' \265\ FDCPA section 804(2) 
prohibits debt collectors communicating with third parties from stating 
that the consumer owes any debt. The FTC believed that, unlike the word 
``debts,'' a reference to ``outstanding bills'' would be unlikely to 
reveal information about whether the deceased consumer was delinquent 
on those bills because nearly all consumers leave some bills at the 
time of their death.\266\ The Bureau is concerned that even references 
to ``outstanding bills'' may convey that the consumer owes a debt 
because the definition of ``debt'' in FDCPA section 803(5) broadly 
includes ``any obligation or alleged obligation of a consumer to pay 
money arising out of a transaction . . . primarily for personal, 
family, or household purposes.'' Accordingly, the Bureau proposes to 
limit debt collectors to asking for information about a person 
authorized to act on behalf of the deceased consumer's estate. However, 
the FTC's phrase ``with the authority to pay any outstanding bills of 
the decedent out of the decedent's estate'' may be more understandable 
than the Bureau's proposed phrase ``who is authorized to act on behalf 
of the deceased consumer's estate.'' The Bureau requests comment on 
proposed comment 10(b)(2)-1, including on any experiences with the 
language contained in the FTC's Policy Statement on Decedent Debt and 
on whether the rule should follow the FTC's approach.
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    \265\ FTC Policy Statement on Decedent Debt, supra note 192, at 
44918-23.
    \266\ Id. at 44921 n.56.
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Section 1006.14 Harassing, Oppressive, or Abusive Conduct
    FDCPA section 806 prohibits a debt collector from engaging in any 
conduct the natural consequence of which is to harass, oppress, or 
abuse any person in connection with the collection of a debt.\267\ It 
lists six non-exhaustive examples of such prohibited conduct. Proposed 
Sec.  1006.14 would implement and interpret FDCPA section 806. Except 
with respect to proposed Sec.  1006.14(b) and (h), proposed Sec.  
1006.14 generally restates the statute, with only minor wording and 
organizational changes for clarity. Paragraph (a) and paragraphs (c) 
through (g) of proposed Sec.  1006.14 are not addressed further in the 
section-by-section analysis below.\268\
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    \267\ 15 U.S.C. 1692d.
    \268\ Proposed Sec.  1006.14(a) would implement FDCPA section 
806's general prohibition against conduct the natural consequence of 
which is to harass, oppress, or abuse any person in connection with 
the collection of a debt. Proposed Sec.  1006.14(c) through (g) 
would implement FDCPA section 806(1) through (4) and (6) (15 U.S.C. 
1692d(1)-(4), (6)).
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14(b) Repeated or Continuous Telephone Calls or Telephone Conversations
    FDCPA section 806 generally prohibits a debt collector from 
engaging in any conduct the natural consequence of which is to harass, 
oppress, or abuse any person in connection with the collection of a 
debt. FDCPA section 806(5) describes one example of conduct prohibited 
by section 806: Causing a telephone to ring or engaging any person in 
telephone conversation repeatedly or continuously with intent to annoy, 
abuse, or harass any person at the called number.\269\ Proposed Sec.  
1006.14(b)(1) through (5) would implement and interpret FDCPA section 
806(5)--and, by extension, FDCPA section 806 \270\--by restating the 
language of section 806(5), with one clarification, and by proposing 
numerical limits on the frequency with which a debt collector may place 
telephone calls to a person. The proposed frequency limits include 
certain exceptions and would establish whether a debt collector has 
violated or has complied with FDCPA section 806(5).
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    \269\ 15 U.S.C. 1692d(5).
    \270\ Because the conduct described in FDCPA section 806(5) 
merely illustrates conduct that section 806 prohibits, proposed 
Sec.  1006.14(b)(1) through (5) necessarily implements and 
interprets both FDCPA section 806 and 806(5). For efficiency, the 
section-by-section analysis of proposed Sec.  1006.14(b)(1) through 
(5) focuses primarily on interpreting the language of FDCPA section 
806(5).
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    For debt collectors collecting a consumer financial product or 
service debt, as defined in proposed Sec.  1006.2(f), proposed Sec.  
1006.14(b)(1) through (5) also would identify an unfair act or practice 
under section 1031(b) of the Dodd-Frank Act and would prescribe 
requirements for the purpose of preventing covered persons from 
engaging in that unfair act or

[[Page 23308]]

practice.\271\ Although FDCPA section 806 and 806(5) and section 
1031(b) of the Dodd-Frank Act define the conduct they proscribe 
differently, in the interest of brevity, the discussion below generally 
uses the catchalls ``harass'' and ``harassment'' to refer to the 
conduct addressed by proposed Sec.  1006.14(b)(1) through (5).
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    \271\ Dodd-Frank Act section 1031 applies to covered persons and 
service providers. Debt collectors collecting consumer financial 
product or service debt are covered persons. 12 U.S.C. 5481(5), (6), 
(15)(A)(x).
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    The Bureau proposes Sec.  1006.14(b)(1) through (5) pursuant to its 
authority under FDCPA section 814(d) to prescribe rules with respect to 
the collection of debts by debt collectors, as well as its authority 
under section 1031(b) of the Dodd-Frank Act to prescribe rules to 
identify and prevent unfair acts or practices in connection with the 
collection of a consumer financial product or service debt, as that 
term is defined in proposed Sec.  1006.2(f).
14(b)(1) In General
14(b)(1)(i) FDCPA Prohibition
    FDCPA section 806(5) prohibits a debt collector from ``causing a 
telephone to ring or engaging any person in telephone conversation 
repeatedly or continuously with intent to annoy, abuse, or harass any 
person at the called number.'' Since the FDCPA's 1977 enactment, 
telephone-calling technology has evolved, and changes in technology may 
create uncertainty about whether a debt collector has ``caus[ed] a 
telephone to ring.'' It now is common to place a telephone call and be 
connected to the dialed number without ever causing a traditional, 
audible ring. For example, many telephones afford users the option to 
have their telephones ring in the form of vibrating, visual, or 
customized audio alerts. In addition, many callers, including many debt 
collectors, now can bypass a person's opportunity to answer the 
telephone by connecting directly to the person's voicemail. As a 
result, debt collectors can place telephone calls or leave voicemail 
messages for a person without ever causing a traditional, audible ring. 
Such telephone calls, if made repeatedly and continuously, nonetheless 
may be intended to harass or may have the effect of harassing a person 
in ways that the FDCPA prohibits. For that reason, even if a debt 
collector's telephone call may not cause a traditional ring, the 
Bureau's proposal treats the call as within the scope of FDCPA section 
806(5), or in any event within the scope of FDCPA section 806, if the 
call is connected to the dialed number. Accordingly, the Bureau 
proposes to interpret the prohibitions in FDCPA section 806 and 806(5) 
as applying when a debt collector ``places'' a telephone call.\272\
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    \272\ As explained in the section-by-section analysis of 
proposed Sec.  1006.14(b)(3)(iii), the proposed rule also provides 
that a debt collector's telephone calls that are unable to connect 
to the dialed number do not count toward, and are permitted in 
excess of, the frequency limits in proposed Sec.  1006.14(b)(2).
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    For these reasons, and pursuant to its authority under FDCPA 
section 814(d) to prescribe rules with respect to the collection of 
debts by debt collectors, as well as pursuant to its authority to 
implement and interpret FDCPA section 806 and 806(5), the Bureau 
proposes to provide in Sec.  1006.14(b)(1)(i) that, in connection with 
the collection of a debt, a debt collector must not place telephone 
calls or engage any person in telephone conversation repeatedly or 
continuously with intent to annoy, abuse, or harass any person at the 
called number.
    The Bureau proposes comment 14(b)(1)-1 to clarify that placing a 
telephone call includes placing a telephone call that results in a 
ringless voicemail (or ``voicemail drop'') but does not include sending 
an electronic message (e.g., a text message or an email) to a mobile 
telephone.\273\ The Bureau proposes this clarification because, given 
the specific language of FDCPA section 806(5), the Bureau believes that 
Congress may have intended for this provision to apply to 
communications that present the opportunity for the parties to engage 
in a live telephone conversation or that result in an audio message. In 
addition, as discussed in the section-by-section analysis of proposed 
Sec.  1006.14(b)(2), the Bureau understands that few debt collectors 
contact consumers using such electronic messages and, as a result, that 
debt collectors have not been sending electronic messages to consumers 
repeatedly or continuously with intent to harass them or to cause 
substantial injury. The Bureau requests comment on proposed Sec.  
1006.14(b)(1)(i) and on comment 14(b)(1)-1.
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    \273\ Proposed comment 14(b)(1)-1 also would clarify that the 
same interpretation of ``placing a telephone call'' applies with 
respect to proposed Sec.  1006.14(b)(1)(ii).
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    The Bureau also requests comment on whether to interpret FDCPA 
section 806 and 806(5) as prohibiting debt collectors from using 
communication media other than telephone calls frequently and 
repeatedly with intent to annoy, abuse, or harass any person in 
connection with the collection of any debt. For example, the Bureau 
considered proposing a broader version of proposed Sec.  
1006.14(b)(1)(i) that would have prohibited repeated or continuous 
attempts to contact a person by other media, such as by sending 
letters, emails, or text messages. Under such an approach, contacts by 
such other media also could be subject to a bright-line frequency 
limit, similar to the structure for telephone calls in proposed Sec.  
1006.14(b)(2). The Bureau does not propose subjecting communication 
media other than telephone calls to the prohibitions on repeated or 
continuous contacts (or to bright-line limits on the number of 
permissible contacts per week) primarily because the Bureau is not 
aware of evidence demonstrating that debt collectors commonly harass 
consumers or others through repeated or continuous debt collection 
contacts by media other than telephone calls.
    As to mail, the Bureau has received few complaints about debt 
collectors sending excessive letters; in fact, available evidence 
suggests that a significant percentage of consumers prefer to 
communicate with debt collectors by mail.\274\ In addition, in feedback 
to the Bureau after publication of the Small Business Review Panel 
Outline, industry stakeholders and consumer advocates agreed that there 
currently is not evidence of a need to regulate the frequency with 
which debt collectors communicate with consumers or others by mail. The 
cost of sending mail--currently about $0.50 to $0.80 cents to print and 
mail a letter, as noted in part VI--is significantly greater than the 
cost of making telephone calls and may deter debt collectors from 
sending excessive communications by mail.\275\
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    \274\ Forty-two percent of respondents to the Bureau's Debt 
Collection Consumer Survey who had been contacted about a debt in 
the prior year identified mail as their preferred medium of 
communication for debt collection. See CFPB Debt Collection Consumer 
Survey, supra note 18, at 37.
    \275\ The Bureau notes that the Commonwealth of Massachusetts's 
debt collection regulations, which include communication frequency 
limits for debt collectors and creditors, exclude postal mail from 
those limits. See 209 Code. Mass. Regs 18.14(1)(d); 940 Code Mass. 
Regs. 7.04(1)(f) (frequency limits apply to telephone calls and text 
messages).
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    As to email and text messages, debt collectors generally have not 
yet begun communicating with consumers using these or other newer 
communication media.\276\ The Bureau thus is unaware of evidence, 
including from consumer complaints or feedback from industry 
stakeholders or consumer advocates, demonstrating that debt collectors 
commonly use such media to contact consumers repeatedly or continuously 
with intent to harass or with the effect of harassing them. Indeed, 
both industry

[[Page 23309]]

stakeholders and consumer advocates have suggested that such media may 
be inherently less harassing than telephone calls because, for example, 
recipients may have more freedom to decide when to engage with an email 
or a text message than with a debt collection telephone call.\277\ 
Although the Bureau currently is unaware of sufficient evidence of 
consumer injury that would suggest a need for restricting the frequency 
of email and text message communications, the Bureau recognizes that 
the use of such media, if abused, could harass consumers in some of the 
same ways as repeated or continuous telephone calls or telephone 
conversations.\278\ The Bureau notes that proposed Sec.  1006.14(a)--
which generally prohibits any conduct the natural consequence of which 
is to harass, oppress, or abuse any person in connection with the 
collection of any debt--would apply to harassment through media other 
than telephone calls and could provide sufficient protection to 
consumers. The Bureau requests comment on the proposed approach, 
including on whether the frequency limits should apply to communication 
media other than telephone calls and, if so, to which media.\279\
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    \276\ See generally the section-by-section analysis of proposed 
Sec.  1006.6(d)(3).
    \277\ As with mail, the Bureau notes that Massachusetts's debt 
collection regulations do not limit the frequency of a debt 
collector's email communications. See supra note 275.
    \278\ Cf. Clements v. HSBC Auto Fin., Inc., Civ. A. No. 5:09-cv-
0086, 2011 WL 2976558, at *5 (S.D. W. Va. July 21, 2011) (``That 
Plaintiffs were not at home all of the time and, therefore, could 
not have heard each one of the calls is of little moment. They had 
notice of every missed call through Caller ID. . . . Missed calls 
communicate more than a phone number. They can, depending on volume 
and frequency, communicate urgency and panic.'').
    \279\ The Bureau notes in particular that the FCC has 
interpreted a statutory reference to ``mak[ing] any call'' as 
encompassing the sending of text messages. See In re Rules & 
Regulations Implementing the Tel. Consumer Prot. Act of 1991, 18 FCC 
Rcd. 14,014, 14,115 ] 165 (2003).
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    During the SBREFA process, the Bureau's proposal under 
consideration to establish numerical limits on the frequency with which 
debt collectors communicate and attempt to communicate with consumers 
and others would have applied to all forms of communication media, not 
just to telephone calls. Several small entity representatives suggested 
that, in their experience, consumers increasingly prefer communicating 
by email, and that excluding email from any frequency limits would 
encourage debt collectors to use email instead of potentially more 
harassing communication strategies, such as placing repeated telephone 
calls. One small entity representative advised that using email to 
contact consumers allowed it to greatly reduce its number of outbound 
telephone calls, resulting in fewer consumer complaints and enabling it 
to monitor communications for compliance with the FDCPA more easily. In 
addition, small entity representatives suggested that written 
correspondence (e.g., mailed letters) should be excluded from any 
frequency limits. The Small Business Review Panel therefore recommended 
that the Bureau consider whether the frequency limits should apply 
equally to all communication channels.\280\ Limiting proposed Sec.  
1006.14(b)(1)(i) and (2) to a prohibition against repeated and 
continuous telephone calls should address small entity representatives' 
concerns about a frequency limit that would apply to all types of 
communication media.
---------------------------------------------------------------------------

    \280\ Small Business Review Panel Report, supra note 57, at 37.
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14(b)(1)(ii) Identification and Prevention of Dodd-Frank Act Unfair Act 
or Practice
    The Bureau proposes Sec.  1006.14(b)(1)(ii) to identify that a debt 
collector who is engaged in the collection of a consumer financial 
product or service debt, as that term is defined in proposed Sec.  
1006.2(f), engages in an unfair act or practice by placing telephone 
calls or engaging any person in telephone conversation repeatedly or 
continuously, such that the natural consequence is to harass, oppress, 
or abuse any person at the called number. The Bureau proposes Sec.  
1006.14(b)(1)(ii) on the basis that such conduct by debt collectors is 
an unfair act or practice as described in Dodd-Frank Act section 
1031(c) because, as discussed in the section-by-section analysis of 
proposed Sec.  1006.14(b)(2) below,\281\ the conduct causes or is 
likely to cause substantial injury to consumers that consumers cannot 
reasonably avoid and that is not outweighed by countervailing benefits 
to consumers or to competition.\282\ The Bureau also proposes Sec.  
1006.14(b)(1)(ii) to provide requirements to prevent such an unfair act 
or practice; specifically, under the proposal, a debt collector engaged 
in the collection of a consumer financial product or service debt must 
not exceed the calling frequency limits proposed in Sec.  
1006.14(b)(2). The Bureau proposes Sec.  1006.14(b)(1)(ii) pursuant to 
its authority under section 1031(b) of the Dodd-Frank Act to prescribe 
rules to identify and prevent unfair acts or practices in connection 
with the collection of a consumer financial product or service debt, as 
that term is defined in proposed Sec.  1006.2(f).
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    \281\ Section 1006.14(b)(2) proposes bright-line frequency 
limits that would determine whether a debt collector has violated 
Sec.  1006.14(b)(1).
    \282\ Section 1031(c) of the Dodd-Frank Act defines unfairness 
without regard to a covered person's or service provider's intent. 
For FDCPA-covered debt collectors who are collecting a consumer 
financial produce or service debt, the Bureau's proposal therefore 
identifies the unfair act or practice as repeated or continuous 
telephone calls that have the natural consequence of harassment, 
oppression, or abuse, without regard to the debt collector's intent.
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14(b)(2) Frequency Limits
    Proposed Sec.  1006.14(b)(2) sets forth bright-line frequency 
limits for debt collection telephone calls. This section-by-section 
analysis discusses the Bureau's proposal to establish bright-line 
frequency limits generally; the section-by-section analysis of proposed 
Sec.  1006.14(b)(2)(i) and (ii) addresses the specific numerical 
frequency limits that the Bureau proposes.
    As noted, FDCPA section 806 prohibits a broad range of debt 
collection communication practices that harm consumers and others, and 
section 806(5) in particular prohibits debt collectors from making 
telephone calls or engaging a person in telephone conversation 
repeatedly or continuously with intent to annoy, abuse, or harass. 
Section 806(5) does not identify a specific number of telephone calls 
or telephone conversations within any particular timeframe that would 
violate the statute. In the years since the FDCPA was enacted, courts 
interpreting FDCPA section 806(5) have not developed a consensus or 
bright-line rule regarding call frequency.\283\ While several States 
and localities have imposed numerical limits on debt collection 
contacts, the limits vary, and the large majority of jurisdictions have 
not established any numerical limits.\284\
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    \283\ See, e.g., Turner v. Prof'l Recovery Servs., Inc., 956 F. 
Supp. 2d 573, 578 (D.N.J. 2013) (noting the lack of consensus or 
bright-line rule); Neu v. Genpact Servs., LLC, No. 11-CV-2246 W KSC, 
2013 WL 1773822, at *4 (S.D. Cal. Apr. 25, 2013) (same); Hicks v. 
Am.'s Recovery Sols., LLC, 816 F. Supp. 2d 509, 515 (N.D. Ohio 2011) 
(same).
    \284\ For example, the Commonwealth of Massachusetts and City of 
New York generally limit debt collectors to initiating two 
communications per week with a consumer. See 209 Code. Mass. Regs 
18.14(1)(d) (limiting contacts by debt collectors); 940 Code Mass. 
Regs. 7.04(1)(f) (limiting contacts by creditors engaged in debt 
collection); N.Y.C. Admin. Code 5-77(b)(1)(iv) (limiting contacts by 
debt collectors). The State of Washington generally limits debt 
collectors to three total communications and one workplace 
communication per week with a consumer. See Wash. Rev. Code 
19.16.250(13)(a), (b). The States of New Hampshire and Oregon limit 
the frequency of workplace communications. See N.H. Rev. Stat. Ann. 
358-C:3(I)(c); Or. Rev. Stat. 646.639(2)(g).
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    Also in the years since the FDCPA was enacted, technological 
developments have intensified the

[[Page 23310]]

consumer-protection concerns underlying FDCPA section 806(5). In 1977, 
placing a telephone call was typically a manual process that required a 
caller to dial a telephone number one digit at a time. Since then, the 
development of ``predictive dialers'' has enabled callers, such as debt 
collectors, to load a large number of telephone numbers into a program 
that automatically dials the numbers and, if the call is answered, 
connects the call to a debt collector. Predictive dialers have 
substantially reduced the cost to debt collectors of placing telephone 
calls and have enabled debt collectors to place many more calls at a 
very low cost.\285\
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    \285\ See In re Rules & Regulations Implementing the Tel. 
Consumer Prot. Act of 1991, 30 F.C.C. Rcd. 7961, 8021 (2015) 
(``Autodialers can quickly dial thousands of numbers, a function 
that costs large numbers of wireless consumers money and 
aggravation.''), set aside in part by ACA Int'l v. Fed. Commc'ns 
Comm'n, 885 F.3d 687 (D.C. Cir. 2018).
---------------------------------------------------------------------------

    In light of these developments, and in the absence of a bright-line 
rule about how many telephone calls is too many, numerous problems with 
call frequency persist. Frequent telephone calls are a consistent 
source of consumer-initiated litigation and consumer complaints to 
Federal and State regulators. Consumers' lawsuits allege injuries such 
as feeling harassed, stressed, intimidated, or threatened, and 
sometimes allege adverse impacts on employment.\286\ In addition, from 
2011 through 2018, the Bureau and the FTC received over 100,000 
complaints about repeated debt collection telephone calls.\287\ Some 
consumers submit narrative descriptions along with their complaints to 
the Bureau, providing a window into their experiences with repeated 
telephone calls. Some consumers describe being called multiple times 
per day, every day of the week, for weeks or months at a time.\288\ 
Some consumers report that repeated calls make them feel upset, 
stressed, intimidated, hounded, or weary, or that such calls interfere 
with their health or sleep or--when debt collection voicemails fill 
their inboxes--their ability to receive other important messages.\289\
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    \286\ See, e.g., Meadows v. Franklin Collection Serv., Inc., 414 
F. App'x 230, 233-34 (11th Cir. 2011) (reversing district court's 
dismissal of consumer's FDCPA section 806(5) claim where 
``[plaintiff] testified that [the debt collector's] phone calls 
eventually made her feel harassed, stressed, upset, aggravated, 
inconvenienced, frustrated, shaken up, intimidated, and threatened 
on occasion. And, several times the calls woke her up from sleep and 
caused her difficulty sleeping.''); Roots v. Am. Marine Liquidators, 
Inc., No. 0:12-CV-00602-JFA, 2012 WL 3136462, at *1-2 (D.S.C. Aug. 
1, 2012) (awarding damages to consumer where, among other things, 
``[p]laintiff testified that after his manager learned that 
Plaintiff was getting repeated collection calls at work, they 
treated him differently which caused him to seek out other 
employment. Plaintiff took a new job in April, 2012, which resulted 
in a pay reduction of $2.00 per hour for a period of 52 weeks. He 
works 40 hours each week, for a total loss of income in the amount 
of $ 4,160.'').
    \287\ See 2019 FDCPA Annual Report, supra note 11, at 15-17; 
2018 FDCPA Annual Report, supra note 16, at 14-16; 2017 FDCPA Annual 
Report, supra note 21, at 15-17; Bureau of Consumer Fin. Prot., Fair 
Debt Collection Practices Act: CFPB Annual Report 2016, at 18-19 
(Mar. 2016), https://files.consumerfinance.gov/f/201603_cfpb-fair-debt-collection-practices-act.pdf; Bureau of Consumer Fin. Prot., 
Fair Debt Collection Practices Act: CFPB Annual Report 2015, at 12-
14 (Mar. 2015), https://files.consumerfinance.gov/f/201503_cfpb-fair-debt-collection-practices-act.pdf; Bureau of Consumer Fin. 
Prot., Fair Debt Collection Practices Act: CFPB Annual Report 2014, 
at 11-13, 19 (Mar. 2014), https://files.consumerfinance.gov/f/201403_cfpb_fair-debt-collection-practices-act.pdf; 2013 FDCPA 
Annual Report, supra note 9, at 17; Bureau of Consumer Fin. Prot., 
Fair Debt Collection Practices Act: CFPB Annual Report 2012, at 8 
(Mar. 2012), https://files.consumerfinance.gov/f/201203_cfpb_FDCPA_annual_report.pdf. This total reflects complaints 
about all persons collecting debt, including creditors and other 
first-party collectors in addition to debt collectors covered by the 
FDCPA. For complaints submitted to the Bureau, complaint data 
reflects the number of complaints that consumers self-identified as 
being primarily about frequent or repeated debt collection 
communications (consumers must choose only one topic when filing 
their complaints). The Bureau has not attempted to identify the 
specific number of communications-related consumer complaints that 
it has received because many complaints that consumers self-identify 
as being primarily about a different issue also may include concerns 
about a debt collector's communication practices.
    \288\ See generally Bureau of Consumer Fin. Prot., Consumer 
Complaints, https://data.consumerfinance.gov/dataset/Consumer-Complaints/s6ew-h6mp (last visited May 6, 2019).
    \289\ Id.
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    When Congress conferred FDCPA rulemaking authority on the Bureau 
through the Dodd-Frank Act in 2010, it relied, in part, on consumers' 
experiences with repeated or continuous debt collection telephone calls 
to observe that case-by-case enforcement of the FDCPA had not ended the 
consumer harms that the statute was designed to address. In a 2010 
report prepared in connection with the Restoring American Financial 
Stability Act of 2010 (the Senate's predecessor bill to the Dodd-Frank 
Act), the Senate Committee on Banking, Housing, and Urban Affairs cited 
consumer complaints to the FTC about, among other things, debt 
collectors ``bombarding [them] with continuous calls'' to conclude that 
abusive debt collection practices had continued to proliferate since 
the FDCPA's passage.\290\ In connection with that finding, among 
others, Congress granted the Bureau the authority to prescribe rules 
with respect to the activities of FDCPA-covered debt collectors, as 
well as to issue regulations to prevent and prohibit persons covered 
under the Dodd-Frank Act from engaging in unfair, deceptive, or abusive 
acts or practices.\291\
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    \290\ S. Rept. 111-176, at 19 (2010).
    \291\ 15 U.S.C. 1692l; Dodd-Frank Act sections 1031(b), 1032; 12 
U.S.C. 5531(b), 5532 (2010).
---------------------------------------------------------------------------

    Consumers' experiences with, and complaints about, repeated or 
continuous debt collection telephone calls do not necessarily establish 
that the conduct in each instance would have violated FDCPA section 
806(5). They do, however, suggest a widespread consumer protection 
problem that has persisted for 40 years notwithstanding the FDCPA's 
existing prohibitions and case-by-case enforcement by the FTC and the 
Bureau as well as private FDCPA actions.\292\ To address this 
persistent harm, the Bureau proposes Sec.  1006.14(b)(2) to establish 
bright-line rules for determining whether a debt collector has violated 
FDCPA section 806(5) (and, in turn, FDCPA section 806), as implemented 
and interpreted in proposed Sec.  1006.14(b)(1).
---------------------------------------------------------------------------

    \292\ See, e.g., Complaint at ]] 63, 124-28, Fed. Trade Comm'n & 
Consumer Fin. Prot. Bureau v. Green Tree Servicing LLC, No. 0:15-cv-
02064 (D. Minn. Apr. 21, 2015), https://www.ftc.gov/enforcement/cases-proceedings/112-3008/green-tree-servicing-llc (alleging that 
defendant violated FDCPA section 806(5) by, among other things, 
having frequently called consumers between seven and 20 times per 
day, every day, week after week); Complaint at ]] 20-22, 41, Fed. 
Trade Comm'n v. K.I.P., LLC, No. 1:15-cv-02985 (N.D. Ill. Apr. 6, 
2015), https://www.ftc.gov/enforcement/cases-proceedings/152-3048/kip-llc-payday-loan-recovery-group (alleging that defendant violated 
FDCPA section 806(5) by, among other things, ``call[ing] consumer 
multiple times per day or night . . . over an extended period of 
time''); Complaint at ]] 22, 50-53, Fed. Trade Comm'n v. Expert 
Glob. Sols, Inc., No. 3-13 CV 2611-M (N.D. Tex. July 8, 2013), 
https://www.ftc.gov/enforcement/cases-proceedings/1023201/expert-global-solutions-inc-nco-group-inc (alleging that defendants 
violated FDCPA section 806(5) by, among other things, ``call[ing] 
multiple times per day or frequently over an extended period of time 
[including,] for example, calling some persons three or more time 
per day''); Complaint at ]] 80, 97(b), Fed Trade Comm'n v. Jefferson 
Capital Sys., LLC, No. 1:08-cv-1976 BBM (N.D. Ga. June 10, 2008), 
https://www.ftc.gov/enforcement/cases-proceedings/062-3212/compucredit-corporation-jefferson-capital-systems-llc (alleging that 
defendant violated FDCPA section 806(5) by, among other things, 
``[calling] individual consumers in excess of twenty times per day, 
in some cases, at intervals of only twenty to thirty minutes'').
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    Proposed Sec.  1006.14(b)(2) provides that, subject to Sec.  
1006.14(b)(3), a debt collector violates proposed Sec.  1006.14(b)(1) 
by placing a telephone call to a particular person in connection with 
the collection of a particular debt either: (i) More than seven times 
within seven consecutive days, or (ii) within a period of seven 
consecutive days after having had a telephone conversation with the 
person in connection with the collection of such debt, with the date of

[[Page 23311]]

the telephone conversation being the first day of the seven-
consecutive-day period.\293\ As discussed in the section-by-section 
analysis of proposed Sec.  1006.14(b)(2)(i) and (ii), which addresses 
the specific frequency limits that the Bureau proposes, the Bureau 
proposes Sec.  1006.14(b)(2) pursuant to its authority under FDCPA 
section 814(d) to prescribe rules with respect to the collection of 
debts by debt collectors, its authority to implement and interpret 
FDCPA section 806 and 806(5), and its authority under Dodd-Frank Act 
section 1031(b) to prescribe rules to prevent Bureau-identified unfair 
acts or practices in connection with any transaction with a consumer 
for a consumer financial product or service.
---------------------------------------------------------------------------

    \293\ Because proposed Sec.  1006.14(b)(1)(ii) provides that a 
debt collector engaged in the collection of a consumer financial 
product or service debt must not exceed the calling frequency limits 
proposed in Sec.  1006.14(b)(2), such a debt collector who exceeds 
the frequency limits also would violate proposed Sec.  
1006.14(b)(1)(ii). Separately, proposed Sec.  1006.14(b)(4) provides 
a parallel bright-line rule that debt collectors who place telephone 
calls or engage in telephone conversations at or below the levels in 
Sec.  1006.14(b)(2) do not, based on their calling frequency, 
violate the FDCPA, the Dodd-Frank Act, or Sec.  1006.14(b)(1).
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    Proposed Sec.  1006.14(b)(2) would apply not only to debt 
collection calls placed to consumers who owe or are alleged to owe 
debt, but to any person (with certain exceptions described below). 
Congress recognized the potential harm from debt collectors placing 
repeated or continuous telephone calls to persons other than consumers 
when it enacted FDCPA section 806(5), which protects ``any person'' 
from repeated or continuous telephone calls or conversations made with 
intent to annoy, abuse, or harass. Likewise, Dodd-Frank Act section 
1031 applies to acts or practices ``in connection with a transaction 
with a consumer for a consumer financial product or service'' (or ``the 
offering of a consumer financial product or service''), provided that 
``the act or practice causes or is likely to cause substantial injury 
to consumers'' and meets the other criteria for unfairness. Like the 
language of FDCPA section 806(5), the language of Dodd-Frank Act 
section 1031 suggests that an act or practice may be unfair to 
consumers generally, presumably even if the injury is to a consumer who 
is not a party to the transaction creating the debt, so long as the 
injury is ``in connection with'' a transaction with a consumer for a 
consumer financial product or service. The frequency limits in proposed 
Sec.  1006.14(b)(2) thus would apply to any person (with certain 
exceptions described below), not only to the consumer who is alleged to 
owe the debt.\294\
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    \294\ While proposed Sec.  1006.14(b)(2) would apply to ``any 
person,'' the Bureau uses the term ``consumer'' throughout this 
section-by-section analysis as a shorthand to refer both to 
consumers, as defined by the FDCPA, and others who may be contacted 
by debt collectors.
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    The Bureau requests comment on the proposal to establish a bright-
line rule to determine when a debt collector's calling frequency has 
violated FDCPA section 806(5) and the prohibition in proposed Sec.  
1006.14(b)(1)(i), as well as to prevent an unfair act or practice under 
Dodd-Frank Act section 1031(b). As discussed, under such a bright-line 
rule, a debt collector who exceeds the frequency limits would per se 
violate FDCPA section 806(5) and the prohibitions in proposed Sec.  
1006.14(b)(1), while a debt collector who stays within the frequency 
limits would per se comply with those provisions. In lieu of a bright-
line rule, it would be possible, for example, to have a rebuttable-
presumption rule. Under a rebuttable presumption, a debt collector who 
exceeded the frequency limits presumptively would violate FDCPA section 
806(5) and the prohibitions in proposed Sec.  1006.14(b)(1), but the 
debt collector would have the opportunity to rebut that presumption.
    As discussed further in the section-by-section analysis of proposed 
Sec.  1006.14(b)(4) below, the Bureau does not propose a rebuttable 
presumption because the benefits of a rebuttable presumption approach 
are unclear. It appears that most, if not all, of the circumstances 
that might require a debt collector to exceed the frequency limits 
could be addressed by specific exceptions to a bright-line rule.\295\ 
It thus appears that a well-defined, bright-line rule with specific 
exceptions could provide needed flexibility without sacrificing the 
clarity of a bright-line rule. A bright-line rule may also promote 
predictability and reduce the risk and uncertainty of litigation. The 
Bureau requests comment on this aspect of the proposal and on whether, 
if a rebuttable presumption approach were adopted, the Bureau should 
retain any of the exceptions described in proposed Sec.  1006.14(b)(3).
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    \295\ See the section-by-section analysis of proposed Sec.  
1006.14(b)(3) for a discussion of the Bureau's proposed exceptions.
---------------------------------------------------------------------------

    During the SBREFA process, the Bureau's proposal under 
consideration would have applied to any of a debt collector's 
communications or attempts to communicate. The Bureau's Small Business 
Review Panel Outline noted that a bright-line rule could provide 
exceptions for certain types of contacts, but the Outline did not 
identify any particular exceptions that were under consideration.\296\ 
Small entity representatives suggested that contacts initiated by 
consumers should not count toward the frequency limits, and the Small 
Business Review Panel Report recommended that the Bureau consider 
whether consumer-initiated contacts should be excluded.\297\ Proposed 
Sec.  1006.14(b)(2) would count only telephone calls that a debt 
collector ``places'' to a person toward the frequency limits, which may 
help to address small entity representatives' concerns about consumer-
initiated contacts.
---------------------------------------------------------------------------

    \296\ Small Business Review Panel Outline, supra note 56, at 25.
    \297\ See Small Business Review Panel Report, supra note 57, at 
37.
---------------------------------------------------------------------------

14(b)(2)(i)
    Proposed Sec.  1006.14(b)(2)(i) provides that, subject to the 
exceptions in Sec.  1006.14(b)(3), a debt collector violates Sec.  
1006.14(b)(1)(i) by placing a telephone call to a person more than 
seven times within seven consecutive days in connection with the 
collection of a particular debt. Under this bright-line rule, and 
subject to the exceptions in proposed Sec.  1006.14(b)(3), a debt 
collector who places more than seven telephone calls to any person 
within seven consecutive days about a debt would per se violate FDCPA 
section 806 and 806(5) and the prohibitions in proposed Sec.  
1006.14(b)(1).\298\
---------------------------------------------------------------------------

    \298\ Because proposed Sec.  1006.14(b)(1)(ii) provides that a 
debt collector engaged in the collection of a consumer financial 
product or service debt must not exceed the frequency limits 
proposed in Sec.  1006.14(b)(2), such a debt collector who places 
more than seven telephone calls within seven consecutive days also 
would violate Sec.  1006.14(b)(1)(ii). Separately, under the 
proposal, a debt collector who placed seven or fewer telephone calls 
within a period of seven consecutive days would per se not have 
placed telephone calls repeatedly or continuously to the person at 
the called number. See the section-by-section analysis of proposed 
Sec.  1006.14(b)(4).
---------------------------------------------------------------------------

    The Bureau's proposed frequency limits take into account a number 
of competing considerations. One consideration is that, for many--
perhaps most--people, even a small number of debt collection telephone 
calls may have the natural consequence of causing them to experience 
harassment, oppression, or abuse, and therefore, assuming a debt 
collector is aware of this effect, the debt collector's placement of 
even a small number of such calls may indicate that the debt collector 
has the requisite intent to annoy, abuse, or harass. In the Bureau's 
Debt Collection Consumer Survey, nearly 90 percent of respondents who

[[Page 23312]]

said they were contacted more than three times per week indicated that 
they were contacted too often; 74 percent of respondents who said they 
were contacted one to three times per week indicated that that they 
were contacted too often; and 22 percent of respondents who said that 
they were contacted less than once per week indicated that even this 
level of contact was too often.\299\ The effect on a consumer of a 
single debt collector placing repeated or continuous telephone calls is 
amplified by the fact that, according to the Bureau's research, almost 
75 percent of consumers with at least one debt in collection have 
multiple debts in collection, such that many consumers may receive 
calls from multiple debt collectors each week.\300\ Debt collectors who 
are aware that many consumers have multiple debts in collections and 
that these consumers are already receiving telephone calls from other 
debt collectors may be placing additional calls with intent to annoy, 
abuse, or harass those consumers.
---------------------------------------------------------------------------

    \299\ See CFPB Debt Collection Consumer Survey, supra note 18, 
at 31. Consumers were asked ``How often did this creditor or debt 
collector usually try to reach you each week, including times they 
did not reach you?'' Response options included: Less than once per 
week; one to three times per week; four to seven times per week; 
eight to 14 times per week; 15 to 21 times per week; and more than 
21 times per week. A separate question asked consumers whether the 
debt collector had contacted them too often. Survey respondents had 
the option of indicating that they were not sure whether contacts 
had come from a debt collector, creditor, or another source. The 
data reflects responses given by any respondent who reported being 
contacted about a debt in collection. Limitations on the survey data 
include that respondents were not asked to distinguish between 
contact attempts and actual contacts and were not asked to specify 
whether they already had spoken with the debt collector who was 
trying to contact them. Id. at 30-31.
    \300\ Id. at 13, table 1.
---------------------------------------------------------------------------

    At the same time, debt collectors have a legitimate interest in 
reaching consumers. The FDCPA's purposes include ``eliminat[ing] 
abusive debt collection practices by debt collectors'' and ensuring 
that debt collectors who refrain from such practices ``are not 
competitively disadvantaged.'' \301\ The FDCPA does not contemplate 
that the elimination of abusive practices entails the elimination of 
``the effective collection of debts.'' \302\ Communicating with 
consumers is central to debt collectors' ability to recover amounts 
owed to creditors. Debt collectors typically must make multiple 
attempts before establishing what in industry parlance is referred to 
as ``right-party contact''--that is, before they actually speak to a 
consumer. Too greatly restricting the ability of debt collectors and 
consumers to communicate with one another could prevent debt collectors 
from establishing right-party contact and resolving debts, even when 
doing so is in the interests of both consumers and debt collectors. For 
example, during the SBREFA process, small entity representatives 
reported that consumers who do not communicate with a debt collector 
may have negative information furnished to consumer reporting agencies 
or may face additional fees or a collection lawsuit, which can entail 
the financial or opportunity cost of the lawsuit or subject a consumer 
to wage garnishment. And as much as some consumers might prefer to 
avoid speaking to debt collectors, many consumers benefit from 
communications that enable them to promptly resolve a debt through 
partial or full payment or an acknowledgement that the consumer does 
not owe some or all of the alleged debt.
---------------------------------------------------------------------------

    \301\ 15 U.S.C. 1692(e) (emphasis added).
    \302\ 15 U.S.C. 1692(c).
---------------------------------------------------------------------------

    The Bureau also has considered whether debt collectors' reliance on 
making repeated telephone calls to establish contact with consumers 
could be reduced by other aspects of the proposed rule that are 
designed to address legal ambiguities regarding how and when debt 
collectors may communicate with consumers. For example, as discussed 
above, debt collectors who leave voicemails for consumers currently 
face a dilemma about whether to risk liability under FDCPA sections 
806(6) and 807(11) by omitting disclosures required under those 
sections, or risk liability under FDCPA section 805(b) by including the 
disclosures and potentially disclosing a debt to a third party who 
might overhear the message. Proposed Sec.  1006.2(j) seeks to address 
that dilemma by defining a limited-content message that debt collectors 
may leave for consumers without violating FDCPA sections 805(b), 
806(6), or 807(11). Permitting such messages should ensure that debt 
collectors can leave voicemails with a return call number for a 
consumer to use at the consumer's convenience, which may help reduce 
the need for debt collectors to place repeated telephone calls to 
contact consumers.\303\
---------------------------------------------------------------------------

    \303\ See the section-by-section analysis of proposed Sec.  
1006.2(j) for a full discussion of the proposed limited-content 
message.
---------------------------------------------------------------------------

    Another legal ambiguity regarding how and when debt collectors may 
communicate with consumers is that the FDCPA does not address how debt 
collectors may use electronic communication media such as emails or 
text messages to communicate. The Bureau's proposals in Sec. Sec.  
1006.6(d)(3) and 1006.42 are designed to clarify that ambiguity so that 
debt collectors may communicate electronically with consumers who 
prefer to communicate that way. Further, for the reasons discussed in 
the section-by-section analysis of proposed Sec.  1006.14(b)(1), the 
Bureau does not propose subjecting email, text messages, or other 
electronic communications to the proposed frequency limits.
    Taking all of these factors into account, the Bureau proposes to 
draw the line at which a debt collector places telephone calls 
repeatedly or continuously with intent to annoy, abuse, or harass any 
person at the called number (and the line at which such calls have the 
natural consequence of harassing, oppressing, or abusing any person) 
\304\ at seven telephone calls in a seven-day period about a particular 
debt. The proposal would allow debt collectors to call up to seven 
times per week across multiple telephone numbers (e.g., a home 
landline, mobile, and work), and to leave a limited-content message 
each time. It also would not limit how many mailed letters, emails, and 
text messages debt collectors could send. At the same time, by making 
clear that debt collectors cannot call consumers more than seven times 
each week about a particular debt in collection, the proposal would 
protect consumers and others from being harmed by debt collectors 
making repeated or continuous telephone calls with intent to annoy, 
abuse, or harass.
---------------------------------------------------------------------------

    \304\ Litt v. Portfolio Recovery Assocs. LLC, 146 F. Supp. 3d 
857, 873 (E.D. Mich. 2015) (``[W]hile the general proscription of 
Sec.  1692d does not use the word `intent,' such a requirement is 
inferred from the necessity to establish that the natural tendency 
of the conduct is to embarrass, upset or frighten a debtor. If the 
natural tendency of certain conduct is to embarrass, upset or 
frighten, then one who engages in such conduct can be presumed to 
have intended the natural consequences of his act.''); see also 
United States v. Falstaff Brewing Corp., 410 U.S. 526, 570 n.22 
(1973) (Marshall, J., concurring in result) (``[P]erhaps the oldest 
rule of evidence--that a man is presumed to intend the natural and 
probable consequences of his acts--is based on the common law's 
preference for objectively measurable data over subjective 
statements of opinion and intent.'').
---------------------------------------------------------------------------

    For the reasons discussed above, the Bureau proposes Sec.  
1006.14(b)(2)(i) to provide that, subject to proposed Sec.  
1006.14(b)(3), a debt collector violates proposed Sec.  
1006.14(b)(1)(i) by placing more than seven telephone calls within 
seven consecutive days to a particular person in connection with the 
collection of a particular debt. Proposed comment 14(b)(2)(i)-1 
provides illustrative examples of the proposed rule.\305\
---------------------------------------------------------------------------

    \305\ The examples would clarify how the proposed rule would 
apply to calls to consumers or to third parties. The Bureau 
understands that debt collectors may make location calls to several 
numbers, but that location calls do not generally involve frequently 
calling each number. Therefore the Bureau does not expect that debt 
collectors would be affected by the proposed limits as they apply to 
location calls made to third parties.

---------------------------------------------------------------------------

[[Page 23313]]

    Proposed comment 14(b)(2)(i)-2 would clarify how to determine the 
number of telephone calls a debt collector has placed if the debt 
collector learns that the telephone number that the debt collector 
previously used to call a person is not, in fact, that person's number. 
The comment would clarify that telephone calls placed to the wrong 
number are not counted towards the frequency limit in proposed Sec.  
1006.14(b)(2)(i) with respect to the person the debt collector is 
trying to contact. The Bureau proposes this clarification because a 
person is unlikely to be harassed by debt collection calls that are 
placed to a number that belongs to someone else.
    The Bureau requests comment on several aspects of proposed Sec.  
1006.14(b)(2)(i). First, the Bureau requests comment on the proposal to 
set the frequency limit at seven telephone calls to a particular 
consumer within seven consecutive days regarding a particular debt, 
including on the harms to consumers that may be prevented by this limit 
and on how such a limit may impact debt collectors. Some stakeholders 
may take the position that this proposed line should be adjusted upward 
or downward to account for certain concerns. Debt collectors and other 
industry stakeholders have advised the Bureau that, today, they often 
need to make more telephone calls than would be allowed under the 
proposal in order to establish right-party contact; they have expressed 
concern that a too-restrictive limit may hamper their ability to reach 
consumers and collect debts. Consumer advocates have suggested that a 
lower call limit is necessary to prevent harassment in part because 
consumers with multiple debts in collection could receive multiple 
calls about each debt each week; under the proposed limits, for 
example, a consumer with four or five debts in collection could receive 
up to two or three dozen telephone calls each week.\306\ Some consumer 
advocates therefore have recommended that the Bureau prohibit a debt 
collector from placing, for example, more than three telephone calls 
per week to any one consumer, regardless of how many debts the debt 
collector is trying to recover from that consumer.
---------------------------------------------------------------------------

    \306\ The proposed frequency limits generally would apply per 
debt in collection (see proposed Sec.  1006.14(b)(5)), and the 
Bureau's research shows that a majority of consumers who have at 
least one debt in collection have multiple debts in collection. For 
example, 57 percent of consumers with at least one debt in 
collection reported having between two and four debts in collection. 
See CFPB Debt Collection Consumer Survey, supra note 18, at 13, 
table 1. Overall, the Bureau's research shows that almost 75 percent 
of consumers with at least one debt in collection have multiple 
debts in collection. See id.; see also CFPB Medical Debt Report, 
supra note 20, at 20 (reporting that most consumers with one 
tradeline have multiple tradelines).
---------------------------------------------------------------------------

    The Bureau encourages commenters who believe the Bureau should set 
a higher or lower limit to provide data supporting any recommended 
numbers, such as data regarding the frequency of calls that debt 
collectors currently make and how that frequency relates to the time 
needed to establish right-party contact and payments received from 
consumers. The Bureau also encourages commenters to provide data 
demonstrating the marginal impact on consumers and debt collectors, as 
well as on competition and the cost of credit, of adjusting the weekly 
limit on telephone calls from the proposed seven calls per week to a 
different number. To the extent that a commenter recommends a higher 
limit on telephone calls to permit debt collectors to recover more 
payments from consumers, the Bureau encourages the commenter to submit 
data quantifying the benefits such increased recovery would have on 
competition or consumers, such as by lowering the cost of credit. The 
Bureau also requests data regarding the financial, emotional, or other 
impact on consumers of calls from debt collectors at varying levels of 
frequency. In addition, the Bureau requests comment on whether debt 
collectors currently are able to, or under the proposed rule would 
expect to be able to, establish right-party contact through voicemails 
or electronic media, such that debt collectors may have less of a need 
to place repeated telephone calls to consumers.
    Second, the Bureau requests comment on the proposal to measure the 
frequency of telephone calls on a per-week basis. This framework could 
result in debt collectors placing, for example, seven telephone calls 
about one debt to a consumer in one day. The Bureau considered 
combining a seven-day frequency limit with a per-day frequency limit 
that would have prohibited, for example, more than one telephone call 
to a consumer per debt per day, up to a limit of seven telephone calls 
per consumer per debt every seven days. The Bureau does not propose a 
combined daily and weekly limit because, while such an approach would 
eliminate multiple telephone calls about a single debt on any given 
day, it might not provide flexibility for unforeseen situations or the 
need to attempt to contact some consumers at different telephone 
numbers and at different times of the day. It also is not clear that 
many debt collectors would respond to the proposed weekly limit on 
telephone calls by placing all of their permitted calls in rapid 
succession, thus foregoing the opportunity to call the consumer at a 
different time of day or on a different day of the week for the 
following seven days. Further, a rule with both daily and weekly 
frequency limits would sacrifice the ease of implementing and 
monitoring one frequency limit. The Bureau requests comment on its 
approach and on the merits of limiting telephone calls based on a 
different time period (e.g., by day, by month, or through a combination 
of time periods).
    Third, the Bureau requests comment on the proposal to apply 
frequency limits on a per-debt, rather than on a per-consumer, 
basis.\307\ As proposed, Sec.  1006.14(b)(2)(i) could permit, for 
example, a debt collector who is attempting to collect two debts from 
the same consumer to place up to 14 telephone calls in one week to that 
consumer without violating the FDCPA, the Dodd-Frank Act, or Regulation 
F based on the frequency of its calling. The Bureau requests comment on 
this aspect of the proposal, which also is discussed further in the 
section-by-section analysis of proposed Sec.  1006.14(b)(5).
---------------------------------------------------------------------------

    \307\ As discussed in the section-by-section analysis of 
proposed Sec.  1006.14(b)(5), with respect to student loan debts, 
all debts that a consumer owes or allegedly owes that were serviced 
under a single account number at the time the debts were obtained by 
the debt collector would be treated as a single debt for purposes of 
the frequency limits.
---------------------------------------------------------------------------

    Fourth, the Bureau requests comment on the proposal to count 
telephone calls placed about a particular debt to different telephone 
numbers associated with the same consumer together for purposes of 
determining whether a debt collector has exceeded the limit in proposed 
Sec.  1006.14(b)(2)(i) (i.e., an aggregate approach). The Bureau 
considered a proposal that would have limited the number of calls 
permitted to any particular telephone number (e.g., at most two calls 
to each of a consumer's landline, mobile, and work telephone numbers). 
The Bureau considered such a limit either instead of or in addition to 
an overall limit on the frequency of telephone calls to one consumer. 
The Bureau instead proposes an aggregate approach because of concerns 
that a more prescriptive, per-telephone number approach could produce 
undesirable results--for example, some consumers could receive (and 
some debt collectors could place) more telephone calls simply based on 
the number of telephone numbers that certain consumers happened to have 
(and that

[[Page 23314]]

debt collectors happened to know about). Such an approach also could 
incentivize debt collectors to place telephone calls to less convenient 
telephone numbers after exhausting their telephone calls to consumers' 
preferred numbers. The Bureau requests comment on the merits of an 
aggregate versus a per-telephone number limit.
    Finally, the Bureau requests comment on proposed comment 
14(b)(2)(i)-2. In particular, the Bureau requests comment on whether 
the Bureau should provide additional clarification about how a debt 
collector determines that a telephone number is not associated with a 
particular person, or whether, for purposes of the proposed frequency 
limits, there is an alternative way to treat telephone calls 
inadvertently made to the wrong person.
    The Bureau's Small Business Review Panel Outline described a 
proposal under consideration that would have limited a debt collector's 
weekly contact attempts with consumers by any communication medium. 
Before a debt collector confirmed contact with a consumer, the proposal 
under consideration would have imposed weekly limits of (i) three 
contact attempts per unique communication medium and (ii) six total 
contact attempts. After confirming contact with the consumer, a debt 
collector would have been subject to weekly limits of (i) two contact 
attempts per unique communication medium and (ii) three total contact 
attempts.\308\ Many small entity representatives expressed a strong 
preference for bright-line, simplified rules. Many also stated that the 
proposal under consideration would inhibit communications between debt 
collectors and consumers and extend the time necessary to reach 
consumers. In particular, small entity representatives stated that they 
regularly attempt to contact consumers more than seven times per week 
when trying to establish right-party contact. Small entity 
representatives suggested several exceptions to the proposal under 
consideration, including telephone calls about which a consumer was 
unaware because, for example, the telephone number called was not, in 
fact, associated with that consumer.\309\ In its report, the Small 
Business Review Panel recommended, among other things, that the Bureau 
consider whether the frequency limits should apply equally to all 
communication media (e.g., telephone, postal mail, email, text 
messages, and other newer communication media).\310\
---------------------------------------------------------------------------

    \308\ The proposals under consideration described in the Small 
Business Review Panel Outline would have applied the same limits for 
contact attempts to individuals other than the consumer, except that 
all third-party contact attempts would have been prohibited after 
the debt collector had successfully contacted the consumer, on the 
theory that the debt collector at that point would have had no 
reason to continue to engage in third-party outreach. The Bureau's 
proposal does not include the aspect of the Small Business Review 
Panel Outline that would have prohibited third-party contact 
attempts after the debt collector had successfully contacted the 
consumer. Proposed Sec.  1006.10, which would implement FDCPA 
section 804's general prohibition against communicating more than 
once with a person to obtain location information, may provide 
sufficient protection regarding the making of location information 
communications when location information has already been obtained.
    \309\ See Small Business Review Panel Report, supra note 57, at 
36-37.
    \310\ Id. at 37.
---------------------------------------------------------------------------

    The Bureau considered the small entity representatives' feedback in 
developing the proposed frequency limits and believes that proposed 
Sec.  1006.14(b)(2)(i) responds to many of the small entity 
representatives' concerns. In particular, proposed Sec.  
1006.14(b)(2)(i) would permit a debt collector to place seven telephone 
calls to a consumer in a seven-day period regarding a particular debt, 
without a different numerical limit on the number of calls the debt 
collector could make during a seven-day period after having established 
initial contact with the consumer. The proposal thus avoids potential 
ambiguities regarding when a debt collector has confirmed or lost 
contact with a consumer and may represent the type of bright-line, 
simplified approach that small entity representatives sought. The 
proposal would not limit debt collectors to sending a particular number 
of letters, emails, and text messages, and proposed comment 
14(b)(2)(i)-2 would clarify that a telephone call to a number that the 
debt collector later determines is not associated with the consumer 
does not count toward the frequency limit. As discussed in the section-
by-section analysis of proposed Sec.  1006.14(b)(3), the Bureau 
proposes several other exceptions to the frequency limits in response 
to small entity representatives' feedback.
    As noted above, the Bureau proposes Sec.  1006.14(b)(2)(i) and its 
related commentary pursuant to its authority under FDCPA section 814(d) 
to prescribe rules with respect to the collection of debts by debt 
collectors, and as an interpretation of FDCPA section 806(5), because a 
debt collector who places more than seven telephone calls to a 
particular person about a particular debt within seven consecutive days 
may have the intent to annoy, abuse, or harass the person.\311\ Some 
debt collectors may, in fact, place more than seven telephone calls to 
a person each week precisely because they believe that additional 
telephone calls may cause sufficient harassment or annoyance to 
pressure the person to respond or make a payment that the person 
otherwise would not have made.
---------------------------------------------------------------------------

    \311\ Calls in excess of this limit may have the natural 
consequence of harassing, oppressing, or abusing a person at the 
called number, and, as noted above, the Bureau assumes that debt 
collectors intend the natural consequences of their actions.
---------------------------------------------------------------------------

    With respect to a debt collector who is collecting a consumer 
financial product or service debt, as defined in proposed Sec.  
1006.2(f), the Bureau also proposes Sec.  1006.14(b)(2)(i) pursuant to 
its authority under section 1031(b) of the Dodd-Frank Act to prescribe 
rules applicable to a covered person or service provider that identify, 
and that may include requirements to prevent, unfair acts or practices 
in connection with any transaction with a consumer for a consumer 
financial product or service. To identify an act or practice as unfair 
under the Dodd-Frank Act, the Bureau must have a reasonable basis to 
conclude that: (1) The act or practice causes or is likely to cause 
substantial injury to consumers, which consumers cannot reasonably 
avoid; and (2) such substantial injury is not outweighed by 
countervailing benefits to consumers or to competition.\312\
---------------------------------------------------------------------------

    \312\ Dodd-Frank Act section 1031(c), 12 U.S.C. 5531(c).
---------------------------------------------------------------------------

    The Bureau proposes Sec.  1006.14(b)(2)(i) to prevent \313\ the 
unfair act or practice, identified in proposed Sec.  1006.14(b)(1)(ii), 
of placing, in connection with the collection of a consumer financial 
product or service debt, telephone calls to any person repeatedly or 
continuously such that the natural consequence is to harass, oppress, 
or abuse any person at the called number. The Bureau proposes to set 
the frequency limit at seven telephone calls within seven consecutive 
days about a particular debt because such a limit appears to bear a 
reasonable relationship to preventing the unfair practice.\314\
---------------------------------------------------------------------------

    \313\ The Bureau has not determined in connection with this 
proposal whether telephone calls in excess of the limit in proposed 
Sec.  1006.14(b)(2)(i) by creditors and others generally not covered 
by the FDCPA would constitute an unfair act or practice under 
section 1031(c) of the Dodd-Frank Act if engaged in by those 
persons, rather than by an FDCPA-covered debt collector. The 
Bureau's proposal does not address, for example, whether consumers 
could reasonably avoid harm from creditor contacts or whether 
frequent creditor contacts provide greater benefits to consumers or 
competition.
    \314\ Dodd-Frank Act section 1031(c). Some courts have held that 
the consumer stated a claim under FDCPA section 806(5) where the 
debt collector called, on average, more than seven times per week. 
See, e.g., U.S. v. Cent. Adjustment Bureau, Inc., 667 F. Supp. 370, 
376, 394 (N.D. Tex. 1986), aff'd as modified, 823 F.2d 880 (5th Cir. 
1987) (per curiam) (holding that debt collector violated FDCPA 
section 806(5) by, among other things, placing successive telephone 
calls in a single day and calling at least one consumer four-to-five 
times in a single day); Schwartz-Earp v. Advanced Call Ctr. Techs., 
LLC, No. 15-CV-01582-MEJ, 2016 WL 899149, at *4 (N.D. Cal. Mar. 9, 
2016) (denying debt collector's summary judgment motion where the 
debt collector called the consumer ``multiple times a day, with as 
many as five calls in a day,'' and remarking that ``the volume and 
pattern of calls alone is sufficient to raise a genuine dispute of 
material fact''); Neu v. Genpact Servs., LLC, No. 11-CV-2246 W KSC, 
2013 WL 1773822, at *4 (S.D. Cal. Apr. 25, 2013) (holding that 150 
telephone calls in 51 days raised a triable issue of fact as to the 
debt collector's intent to harass and observing that ``[a] 
reasonable trier of fact could find that [calling the consumer six 
times in one day] alone, apart from the sheer volume of calls placed 
by [the debt collector], is sufficient to find that [the debt 
collector] had the `intent to annoy, abuse or harass' ''); Forrest 
v. Genpact Servs., LLC, 962 F. Supp. 2d 734, 737 (M.D. Pa. 2013) 
(holding that consumer stated a claim under FDCPA section 806(5) by 
alleging that debt collector called the consumer 225 times within 54 
days); Bassett v. I.C. Sys., Inc., 715 F. Supp. 2d 803, 810 (N.D. 
Ill. 2010) (denying debt collector's summary judgment motion where 
debt collector called the consumer 31 times in 12 days).

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[[Page 23315]]

    Consumers may suffer or be likely to suffer substantial injury from 
repeated or continuous debt collection telephone calls. Consumers have 
alleged in complaints lodged with the FTC and the Bureau, and in 
litigation, that such telephone calls can cause them, among other 
things, to suffer great emotional distress and anxiety, and that such 
calls can interfere with their health or sleep.\315\ Consumers may pay 
debts that they otherwise might not have paid simply to stop the 
telephone calls. For example, consumers may pay debts that they do not 
owe or to which they have legal defenses; pay debts using funds that 
are exempt from collection; or pay the particular debt being collected 
instead of other debts or expenses that the consumer otherwise would 
prioritize, such as a secured or nondischargable debt or expenses for 
food, shelter, clothing, or medical treatment. A debt collector's 
telephone calls also may cause some consumers to incur charges on their 
mobile telephones.\316\ Although the charge for an individual call may 
be minimal, the FCC has found that ``[t]hese costs can be substantial'' 
when aggregated across all consumers,\317\ which is consistent with the 
FTC's and the Bureau's approach of aggregating all injuries (including 
small injuries) caused by a practice to determine whether the practice 
is unfair.\318\
---------------------------------------------------------------------------

    \315\ See supra notes 286 and 287.
    \316\ See the section-by-section analysis of proposed Sec.  
1006.6(e).
    \317\ Fed. Comms. Comm'n, In re Rules & Regulations Implementing 
the Tel. Consumer Prot. Act of 1991, 30 FCC Rcd. 7961, 8020 ] 118 
(2015) (``In addition to the invasion of consumer privacy for all 
wireless consumers, the record confirms that some are charged for 
incoming calls and messages. These costs can be substantial when 
they result from the large numbers of voice calls and texts 
autodialers can generate.'').
    \318\ Fed. Trade. Comm'n v. Pantron I Corp., 33 F.3d 1088, 1102-
03 (9th Cir. 1994) (``Both the Commission and the courts have 
recognized that consumer injury is substantial when it is the 
aggregate of many small individual injuries.'') (citing Orkin 
Exterminating Co. v. Fed. Trade. Comm'n, 849 F.2d 1354, 1365 (11th 
Cir. 1988)); FTC Policy Statement on Unfairness, supra note 100, at 
1073 n.12 (``An injury may be sufficiently substantial . . . if it 
does a small harm to a large number of people, or if it raises a 
significant risk of concrete harm.''); Bureau of Consumer Fin. 
Prot., CFPB Examination Procedures, Unfair, Deceptive, or Abusive 
Acts or Practices, at 2 (Oct. 2012), https://www.consumerfinance.gov/documents/4576/102012_cfpb_unfair-deceptive-abusive-acts-practices-udaaps_procedures.pdf (``An act or practice 
that causes a small amount of harm to a large number of people may 
be deemed to cause substantial injury.'').
---------------------------------------------------------------------------

    Consumers may not be reasonably able to avoid the substantial 
injuries that could stem from frequent or repeated debt collection 
telephone calls. Many consumers carry their mobile telephones at all 
times to coordinate essential tasks or to be available in case of 
emergency.\319\ Consumers also may share their mobile or landline 
telephones with family members. For these consumers, disengaging from 
all telephone calls to avoid debt collectors may not be an option. 
Moreover, courts have held that the ringing or vibrating alert caused 
by a debt collector's calls can contribute to harassment by conveying a 
sense of urgency to the consumer,\320\ which can overwhelm some 
consumers, especially those with multiple debts in collection.
---------------------------------------------------------------------------

    \319\ See, e.g., Fed. Comms. Comm'n, In re Rules & Regulations 
Implementing the Tel. Consumer Prot. Act of 1991, 30 FCC Rcd. 7961, 
7996 ] 61 (2015) at 7996 ] 61 (``Indeed, some consumers may find 
unwanted intrusions by phone more offensive than home mailings 
because they can cost them money and because, for many, their phone 
is with them at almost all times.'').
    \320\ See, e.g., Clements v. HSBC Auto Fin., Inc., Civ. A. No. 
5:09-cv-0086, 2011 WL 2976558, at *5 (S.D. W. Va. July 21, 2011) 
(noting that ``[m]issed calls communicate more than a phone number'' 
and ``can, depending on volume and frequency, communicate urgency 
and panic,'' but nevertheless finding that, based on the facts of 
the case, plaintiffs had suffered minimal emotional harm); Bassett 
v. I.C. Sys., Inc., 715 F. Supp. 2d 803, 807-810 (N.D. Ill. 2010) 
(denying debt collector's summary judgment motion where debt 
collector placed 31 telephone calls to a consumer's blocked 
telephone and explaining that, although the consumer's telephone did 
not ring, the consumer could still have been harassed because the 
telephone displayed the incoming calls).
---------------------------------------------------------------------------

    FDCPA section 805(c) provides, in part, that a debt collector 
generally shall not communicate further with a consumer with respect to 
a debt if the consumer notifies the debt collector in writing that the 
consumer wishes the debt collector to cease further communication.\321\ 
Section 805(c), however, may be insufficient to permit consumers to 
reasonably avoid injuries from repeated or continuous telephone calls. 
First, many consumers may invoke the cease communication right only 
after they are harassed. Second, some consumers, even if they are aware 
of their rights, may not invoke them because ceasing communication 
entirely could make it more difficult to resolve the debt and, in turn, 
subject the consumer to other injuries. In particular, an unresolved 
debt could cause the consumer to incur additional fees, interest, 
adverse credit reporting, or, in the case of secured debts, loss of a 
home, automobile, or other property. Numerous debt collectors also have 
reported that a consumer who ceases communications is more likely to be 
sued and subjected to wage garnishment because the debt collector has 
no other way to recover on the debt.\322\ Accordingly, a consumer who 
is aware of these potential outcomes, even if only in the abstract, or 
who wishes to resolve the debt in the future, may be reluctant to 
invoke the cease communication right to prevent harassment. Moreover, 
it may not be reasonable to expect a consumer to avoid harassment by 
invoking the cease communication right if doing so makes it more likely 
that the debt collector will sue the consumer to recover on the debt. 
Third, only a consumer as defined in FDCPA sections 803(3) and 805(d) 
may invoke the cease communication right, leaving other persons unable 
to invoke this remedy.
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    \321\ 15 U.S.C. 1692c(c). Proposed Sec.  1006.6(c) would 
implement FDCPA section 805(c).
    \322\ As noted earlier in this section-by-section analysis, the 
Bureau has received feedback from small entity representatives and 
other industry stakeholders that overly restrictive frequency limits 
could result in some of these same consumer harms, and the Bureau 
requests comment on the proposed frequency limits for that reason.
---------------------------------------------------------------------------

    The Bureau proposes Sec.  1006.14(b)(2)(i) because the injuries 
described above appear not to be outweighed by the countervailing 
benefits to consumers or to competition of more frequent telephone 
calls from FDCPA-covered debt collectors. If the proposed limit on 
telephone calls adversely affects debt collectors' ability to collect 
debts, the reduction in recoveries and corresponding increases in 
losses could result in an increase in the cost of credit. However, as 
discussed above and more fully in part VI, debt collectors may not need 
to make repeated or continuous telephone calls to collect debts 
effectively, and debt collectors may face diminishing returns as they 
increase the frequency of their calling. Further, the Bureau has sought

[[Page 23316]]

to mitigate concerns about increasing the cost of credit by limiting 
only the number of telephone calls placed per seven days, not the total 
number of telephone calls placed throughout the course of collections, 
thus permitting debt collectors to continue making as many telephone 
calls as needed, albeit over a longer period. Further, even if 
preventing harassing or oppressive contacts did have some marginal 
effect on collections success, the injuries caused by such contacts do 
not appear to be outweighed by countervailing benefits to consumers or 
to competition.
    For similar reasons, the FTC and the Bureau previously have alleged 
through enforcement actions that repeated or continuous telephone calls 
or telephone conversations can constitute an unfair act or practice in 
violation of section 5 of the FTC Act and section 1031 of the Dodd-
Frank Act.\323\ For example, the FTC has alleged that a party engaged 
in an unfair act or practice under section 5 by making repeated or 
continuous telephone calls with intent to harass or abuse either 
consumers who owed debts or third parties, explaining that these calls 
can cause substantial injuries by, among other things, affecting the 
consumer's reputation, impairing the consumer's relationship with 
family, friends, and co-workers, and inducing the payment of disputed 
debts.\324\ Similarly, the Bureau has alleged that a party engaged in 
unfair acts or practices under section 1031 by making an excessive 
number of telephone calls to consumers and by calling third parties 
repeatedly even after being informed that the calls were to the wrong 
person.\325\
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    \323\ Complaint at ]] 56-58, Fed. Trade Comm'n v. Citigroup 
Inc., No. 1:01-CV-00606 JTC (N.D. Ga. Mar. 6, 2001), https://www.ftc.gov/sites/default/files/documents/cases/2001/03/citigroupcmp.pdf(alleging that defendant engaged in an unfair act or 
practice under section 5 of the FTC Act by ``making repeated and 
continuous telephone calls to consumers with intent to annoy, abuse, 
or harass any person at the called number''); Consent Order at ]] 5, 
6, 19, In re Avco Fin. Servs., 104 F.T.C. 485, 1984 WL 565343, at 
*2-3 (1984) (settling FTC's allegations that defendant engaged in an 
unfair act or practice under section 5 of the FTC Act by ``[m]aking 
repeated or continuous telephone calls to debtors or third parties 
with intent to harass or abuse persons at the called number,'' and 
explaining that these ``acts and practices * * * had and now [have] 
the capacity and tendency to cause substantial injury to debtors or 
third parties who are contacted by [defendant] by, among other 
things, adversely affecting the debtor's reputation, interfering 
with the debtor's or third party's employment relations including, 
but not limited to, causing warnings by employers of possible 
discharge, impairing the debtor's relations with friends, relatives, 
neighbors, and co-workers, and inducing the payment of disputed 
debts.''); Consent Order at ]] 12, 19-23, In re Ace Cash Express, 
No. 2014-CFPB-0008 (July 10, 2014), https://files.consumerfinance.gov/f/201407_cfpb_consent-order_ace-cash-express.pdf (settling Bureau's allegations that defendant engaged in 
unfair acts or practices under section 1031 of the Dodd-Frank Act 
by, among other things, ``[m]aking an excessive number of calls to 
consumers' home, work, and cell phone numbers'' and ``[c]ontinuing 
to call consumers with no relation to the debt after being told that 
[defendant] had the wrong person''); see also Consent Order, In re 
DriveTime Auto. Grp., Inc., 2014-CFPB-0017 (Nov. 19, 2014), https://files.consumerfinance.gov/f/201411_cfpb_consent-order_drivetime.pdf 
(settling Bureau's allegations that defendant engaged in unfair acts 
or practices under section 1031 of the Dodd-Frank Act ``by failing: 
(A) To prevent account servicing and collection calls to consumers' 
workplaces after consumers asked [defendant] to stop such calls; (B) 
to prevent calls to consumers' third-party references after the 
references or consumers asked [defendant] to stop calling them; and 
(C) to prevent calls to people at wrong numbers after they have 
asked [defendant] to stop calling'').
    \324\ Avco Fin. Servs., 104 F.T.C. 485, 1984 WL 565343, at *2-3.
    \325\ Ace Cash Express, No. 2014-CFPB-0008.
---------------------------------------------------------------------------

    Section 1031(c)(2) of the Dodd-Frank Act allows the Bureau to 
``consider established public policies as evidence to be considered 
with all other evidence'' in determining whether an act or practice is 
unfair, as long as the public policy considerations are not the primary 
basis of the determination.\326\ Established public policy appears to 
support the Bureau's proposed finding that it is an unfair act or 
practice for a debt collector who is collecting a consumer financial 
product or service debt to place telephone calls repeatedly or 
continuously such that the natural consequence is to harass, oppress, 
or abuse any person at the called number. Several consumer financial 
statutes and regulations, as well as industry standards,\327\ require 
or recommend that debt collectors or others who are engaged in 
marketing or collections limit the frequency of their telephone calls 
to consumers. These include several State and local laws that limit the 
number of times a debt collector or creditor may call a consumer each 
week,\328\ as well as the Telemarketing and Consumer Fraud and Abuse 
Prevention Act, the Telephone Consumer Protection Act, and related FTC 
and FCC rulemakings that establish the Do Not Call Registry, limit the 
use of autodialers, and impose requirements related to Caller ID.\329\ 
In short, Congress, State and local legislatures, and other agencies 
have found that consumers are harmed by repeated telephone calls. These 
established policies support a finding that it is an unfair act or 
practice for a debt collector who is collecting a consumer financial 
product or service debt to place telephone calls to a person repeatedly 
or continuously such that the natural consequence is to harass, 
oppress, or abuse any person at the called number, and they evince 
public policy that supports the Bureau's proposed frequency limits. The 
Bureau gives weight to this policy and bases its proposed finding that 
the identified act or practice is unfair in part on this body of public 
policy.
---------------------------------------------------------------------------

    \326\ 12 U.S.C. 5531(c)(2).
    \327\ Many creditors and debt collectors have found it 
advantageous to adopt voluntary daily or weekly limits on telephone 
calls that they or their service provider make in connection with 
collecting debts. See, e.g., Bureau of Consumer Fin. Prot., The 
Consumer Credit Card Market, at 313-14 (Dec. 2017), https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2017.pdf. See also infra part VI.B.2.
    \328\ See supra note 284.
    \329\ 15 U.S.C. 6101 et seq.; 47 U.S.C. 227; 16 CFR part 310; 47 
CFR 64.1200 et seq.; 47 CFR 64.1600 et seq.
---------------------------------------------------------------------------

14(b)(2)(ii)
    Proposed Sec.  1006.14(b)(2)(ii) would provide that, subject to the 
exceptions in proposed Sec.  1006.14(b)(3), a debt collector must not 
place a telephone call to a person in connection with the collection of 
a particular debt after already having had a telephone conversation 
with that person in connection with the collection of such debt within 
a period of seven consecutive days ending on the date of the call. 
Proposed comment 14(b)(2)(ii)-1 provides examples of the proposed rule.
    In developing this proposal, the Bureau has considered both the 
legitimate interests of consumers and debt collectors in resolving 
debts and the potentially harmful effects on consumers of repeated or 
continuous telephone calls after a telephone conversation. A debt 
collector who already has engaged in a telephone conversation with a 
consumer about a debt may have less of a need to place additional 
telephone calls to that consumer about that debt within the next seven 
days than a debt collector who has yet to reach a consumer. As a 
result, the debt collector who has already conversed with a consumer 
may be more likely than the debt collector who has not conversed with a 
consumer to intend to annoy, abuse, or harass the consumer by placing 
additional telephone calls within one week after a telephone 
conversation. At the same time, a consumer who has spoken to a debt 
collector about a debt by telephone may be more likely than a consumer 
who has not spoken to a debt collector about a debt by telephone to 
experience annoyance, abuse, or harassment if the debt collector places 
additional, unwanted telephone calls to the consumer about that debt 
again within the next seven days.
    A consumer may experience, and a debt collector may intend to 
cause, such

[[Page 23317]]

annoyance, abuse, or harassment from a second telephone conversation 
within one week even if the consumer, rather than the debt collector, 
initiated the first telephone conversation. Therefore, under the 
proposal, if a consumer initiated a telephone conversation with the 
debt collector, that telephone conversation generally would count as 
the debt collector's one permissible telephone conversation for the 
next week. In some instances, a consumer might request additional 
information when speaking with a debt collector and would not view a 
follow-up telephone call from the debt collector as harassing. For that 
reason, proposed Sec.  1006.14(b)(3)(i), discussed below, would create 
an exception for telephone calls that are made to respond to a request 
for information from the consumer. Similarly, proposed Sec.  
1006.14(b)(3)(ii), also discussed below, would create an exception 
under which a consumer who wishes to speak to a debt collector more 
than once in one week could consent, in the first telephone 
conversation or by other media, to additional telephone calls from the 
debt collector.
    The Bureau requests comment on proposed Sec.  1006.14(b)(2)(ii). 
The Bureau considered, but does not propose, a frequency limit that 
would have limited only the total number of telephone calls that a debt 
collector could place to a person about a debt during a defined time 
period, regardless of whether the debt collector had engaged in a 
telephone conversation with that person about that debt during the 
relevant time period. The Bureau requests comment on the merits of such 
an alternative approach.
    The Bureau proposes Sec.  1006.14(b)(2)(ii) and its commentary 
pursuant to its authority under FDCPA section 814(d) to prescribe rules 
with respect to the collection of debts by debt collectors and its 
authority to interpret FDCPA section 806(5). The Bureau proposes Sec.  
1006.14(b)(2)(ii) on the basis that, unless an exception (such as 
consent) applies, once a debt collector and a consumer engage in a 
telephone conversation regarding a particular debt, a debt collector 
who places additional calls to that person about that debt within the 
following seven days may intend to annoy, abuse, or harass the 
person.\330\
---------------------------------------------------------------------------

    \330\ Unless an exception applies, a person who receives such a 
telephone call after already having spoken to the debt collector 
within the previous seven days may naturally feel harassed, 
oppressed, or abused, and, as noted above, the Bureau assumes that 
debt collectors intend the natural consequences of their actions.
---------------------------------------------------------------------------

    With respect to a debt collector who is collecting a consumer 
financial product or service debt, as defined in proposed Sec.  
1006.2(f), the Bureau also proposes Sec.  1006.14(b)(2)(ii) pursuant to 
its authority under section 1031(b) of the Dodd-Frank Act to prescribe 
rules identifying and preventing unfair acts or practices.\331\ 
Specifically, the Bureau proposes Sec.  1006.14(b)(2)(ii) to prevent 
the unfair act or practice described in proposed Sec.  
1006.14(b)(1)(ii).\332\ For the reasons discussed in the section-by-
section analysis of proposed Sec.  1006.14(b)(2)(i), and based on the 
evidence currently available to the Bureau, the Bureau believes that, 
if a debt collector places a telephone call to a particular person 
about a particular debt after already having spoken to that person 
about that debt within the previous seven days, the person naturally 
may feel harassed by the subsequent telephone call. For the reasons 
discussed in the section-by-section analysis of proposed Sec.  
1006.14(b)(2)(i), the debt collector's conduct may cause or be likely 
to cause the person to suffer substantial injury that is not reasonably 
avoidable and is not outweighed by countervailing benefits to consumers 
or to competition.\333\ The Bureau thus proposes Sec.  
1006.14(b)(2)(ii) to establish a frequency limit that would prevent 
debt collectors from engaging in this unfair act or practice and, as 
detailed above, the Bureau proposes a limit of one telephone 
conversation per seven days on the theory that such a limit bears a 
reasonable relationship to preventing the unfair practice.
---------------------------------------------------------------------------

    \331\ The Bureau has not determined in connection with this 
proposal whether telephone calls in excess of the limit in proposed 
Sec.  1006.14(b)(2)(ii) by creditors and others not covered by the 
FDCPA would constitute an unfair act or practice under Dodd-Frank 
Act 1031(c) if engaged in by those persons, rather than by an FDCPA-
covered debt collector.
    \332\ As with Sec.  1006.14(b)(2)(i), proposed Sec.  
1006.14(b)(2)(ii) would apply when a debt collector places a 
telephone call to ``a person.''
    \333\ 12 U.S.C. 5531(c).
---------------------------------------------------------------------------

14(b)(3) Certain Telephone Calls Excluded From the Frequency Limits
    Proposed Sec.  1006.14(b)(3) describes four types of telephone 
calls that would not count toward, and that would be permitted in 
excess of, the frequency limits in proposed Sec.  1006.14(b)(2). These 
are telephone calls that are: (i) Made to respond to a request for 
information from the person whom the debt collector is calling; (ii) 
made with such person's consent given directly to the debt collector; 
(iii) unable to connect to the dialed number; or (iv) placed to a 
person described in proposed Sec.  1006.6(d)(1)(ii) through (vi). As 
discussed in the section-by-section analysis of proposed Sec.  
1006.14(b)(3)(i) through (iv) below, the Bureau proposes these 
exclusions pursuant to its authority under FDCPA section 814(d) to 
prescribe rules for the collection of debts by debt collectors and to 
implement and interpret FDCPA section 806(5). The Bureau proposes to 
exclude these telephone calls from counting toward the proposed 
frequency limits because they are unlikely to be harassing to 
consumers, and debt collectors are unlikely to place such calls with 
intent to annoy, abuse, or harass a person. The Bureau further proposes 
to exclude these telephone calls from counting toward the proposed 
frequency limits because they are unlikely to contribute to substantial 
injury that a person cannot reasonably avoid and that is not outweighed 
by countervailing benefits to consumers or competition. The Bureau 
requests comment on proposed Sec.  1006.14(b)(3) and its related 
commentary, including on whether any other types of telephone calls 
should be excluded from the frequency limits.
    During the SBREFA process, the Bureau's proposal under 
consideration noted that a bright-line frequency limit could except 
certain types of contacts, but it did not identify any specific 
exceptions. Many small entity representatives suggested exceptions, 
including for: (1) Contacts that respond to a consumer's request or 
question; (2) contact attempts that leave no ``footprint,'' such that 
the consumer is unaware of the telephone call or other contact attempt; 
(3) contacts with a consumer's attorney; and (4) contacts that are 
legally required. The Small Business Review Panel Report recommended 
that the Bureau consider incorporating such exceptions into the 
proposal.\334\ The Panel Report also specifically recommended that the 
Bureau consider whether the frequency limits should be modified for 
communications that occur after a law firm files a complaint, on the 
grounds that one conversation per week might not be sufficient in 
various litigation situations. Proposed Sec.  1006.14(b)(3) takes into 
account the small entity representatives' suggestions and the 
recommendations in the Panel Report. The Bureau does not propose an

[[Page 23318]]

exception for legally required communications because the Bureau 
understands that very few legally required communications must be 
delivered by telephone and that, with respect to the few such 
communications that must be delivered telephonically, it appears 
unlikely that a debt collector would need to place more than seven 
telephone calls to a consumer within a period of seven consecutive days 
to deliver the required communication.
---------------------------------------------------------------------------

    \334\ See Small Business Review Panel Report, supra note 57, at 
36. Other suggested exceptions in the Small Business Review Panel 
Report--including for contacts initiated by the consumer, contacts 
that occur through written correspondence (e.g., letters), and 
misdirected contact attempts--are addressed elsewhere in the 
section-by-section analysis of proposed Sec.  1006.14(b).
---------------------------------------------------------------------------

14(b)(3)(i)
    Proposed Sec.  1006.14(b)(3)(i) would exclude from the frequency 
limits telephone calls that a debt collector places to a person to 
respond to a request for information from that person. The Bureau 
proposes this exclusion because the Bureau believes that, if a person 
is speaking to a debt collector and asks for information that the debt 
collector does not have at the time of the telephone conversation, the 
person likely would expect (and not be harassed by) a return telephone 
call (or calls) from the debt collector providing the requested 
information; nor would the debt collector place the return telephone 
call with intent to annoy, abuse, or harass the person. Proposed 
comment 14(b)(3)(i)-1 would clarify that, once a debt collector 
provides a response to a person's request for information, the 
exception in proposed Sec.  1006.14(b)(3)(i) would not apply to 
subsequent telephone calls placed by the debt collector to the person, 
unless the person makes another request. Proposed comment 14(b)(3)(i)-2 
provides an example of the rule.\335\
---------------------------------------------------------------------------

    \335\ Some State and local laws exclude responsive 
communications from their frequency limits. For example, 
Massachusetts' creditor-collection law provides that ``a creditor 
shall not be deemed to have initiated a communication with a debtor 
if the communication by the creditor is in response to a request 
made by the debtor for said communication''). 940 Code Mass. Regs. 
7.04(1)(f). See also 9 Wash. Rev. Code 19.16.250(13)(a) (debt 
collector may exceed the weekly contact limit when ``responding to a 
communication from the debtor or spouse''); N.Y.C. Admin. Code 5-
77(b)(1)(iv) (weekly contact limit does not include ``any 
communication between a consumer and the debt collector which is in 
response to an oral or written communication from the consumer'').
---------------------------------------------------------------------------

    The Bureau requests comment on the proposal to exclude from the 
frequency limits the placement of telephone calls that are made to 
respond to a request for information. The Bureau specifically requests 
comment on whether there should be any separate limit on the number of 
telephone calls a debt collector could place under the exception. As 
proposed, Sec.  1006.14(b)(3)(i) would permit a debt collector who 
engages in a telephone conversation with a consumer to place an 
unlimited number of unanswered telephone calls to the consumer during 
the next seven days in an effort to provide the requested information. 
As proposed, Sec.  1006.14(b)(3)(i) also would permit the debt 
collector to continue to exceed the frequency limits until the debt 
collector reached the consumer to respond to the request. A debt 
collector responding to a person's request for information may not need 
to place repeated or continuous telephone calls to reach the consumer, 
however, because such a debt collector is likely to have reliable 
contact information and the consumer presumably will be expecting the 
debt collector's telephone call. The Bureau requests comment on this 
approach and on alternatives to it. The Bureau also requests comment on 
whether additional clarification is needed on how to determine whether 
a debt collector makes a particular telephone call in response to a 
request for information, as opposed to for some other purpose, or on 
how to determine whether the debt collector has responded to a request 
for information, such that the exclusion no longer applies.
14(b)(3)(ii)
    Proposed Sec.  1006.14(b)(3)(ii) would exclude from the proposed 
frequency limits telephone calls that a debt collector places to a 
person with the person's prior consent given directly to the debt 
collector. The Bureau proposes to exclude such telephone calls from the 
frequency limits because the Bureau believes that a person can 
determine when additional telephone calls from, or telephone 
conversations with, a debt collector would not be harassing, and that a 
debt collector who has a person's consent to additional telephone calls 
would not be likely to place such calls with intent to annoy, abuse, or 
harass the person. The Bureau also believes that proposed Sec.  
1006.14(b)(3)(ii) may address small entity representatives' concerns 
about the frequency limits precluding necessary conversations in 
various litigation contexts because it would enable a person to consent 
to additional telephone calls if, for example, the parties were 
negotiating a settlement or resolving a discovery dispute.
    Proposed comment 14(b)(3)(ii)-1 refers to the commentary to 
proposed Sec.  1006.6(b)(4)(i) for guidance concerning a person giving 
prior consent directly to a debt collector. Proposed comment 
14(b)(3)(ii)-2 provides an example of the rule. The Bureau requests 
comment on proposed Sec.  1006.14(b)(3)(ii) and its related commentary, 
including on whether there should be a separate limit on the number of 
telephone calls that a debt collector could place under the proposed 
exception or whether there should be any other type of limitation or 
condition on the proposed exception.
14(b)(3)(iii)
    Proposed Sec.  1006.14(b)(3)(iii) would exclude from the frequency 
limits telephone calls that a debt collector places to a person but 
that are unable to connect to the dialed number (e.g., that result in a 
busy signal or are placed to an out-of-service number). The Bureau 
proposes this exclusion because a person is unlikely to know about, let 
alone be harassed by, a debt collector's telephone call in response to 
which the debt collector receives a busy signal or a message indicating 
that the dialed number is not in service. Similarly, it appears that a 
debt collector who places several calls to a person in response to 
which the debt collector receives a busy signal or out-of-service 
notification is likely to place additional telephone calls to the 
person in an effort to contact the person and not with the intent to 
annoy, abuse, or harass the person.\336\ The proposed exclusion also 
responds to feedback from small entity representatives suggesting that, 
for example, a telephone call met with a busy signal should not count 
toward the frequency limit.\337\ Proposed comment 14(b)(3)(iii)-1 and -
2 provide examples of telephone calls that are able and unable to 
connect to the dialed number. The Bureau requests comment on proposed 
Sec.  1006.14(b)(3)(iii), including on whether the Bureau should 
include any other specific examples in commentary.
---------------------------------------------------------------------------

    \336\ The Bureau's approach in proposed Sec.  1006.14(b)(3)(iii) 
is informed, in part, by State and local laws that exclude 
undeliverable contact attempts from their frequency limits. See 
Commonwealth of Mass., Off. of the Att'y Gen., Guidance with Respect 
to Debt Collection Regulations (2013), https://www.mass.gov/files/documents/2016/08/xc/debt-collection-guidance-2013.pdf 
(``unsuccessful attempts . . . to reach a debtor via telephone'' do 
not count toward the frequency limit in 940 Code Mass. Regs. 
7.04(1)(f) ``if the creditor is truly unable to reach the debtor or 
to leave a message for the debtor); N.Y.C. Admin. Code 5-
77(b)(1)(iv) (weekly contact limit does not include ``returned 
unopened mail'').
    \337\ See Small Business Review Panel Report, supra note 57, at 
37.
---------------------------------------------------------------------------

14(b)(3)(iv)
    Proposed Sec.  1006.14(b)(3)(iv) would exclude from the frequency 
limits telephone calls that a debt collector places to the persons 
described in proposed Sec.  1006.6(d)(1)(ii) through (vi). Proposed 
Sec.  1006.6(d)(1)(ii) through (vi) would implement, in part, FDCPA 
section 805(b)'s exception from the general prohibition on 
communicating

[[Page 23319]]

about a debt with a person other than the consumer; it would permit a 
debt collector to communicate with a consumer's attorney, a consumer 
reporting agency, a creditor, a creditor's attorney, or a debt 
collector's attorney. Proposed Sec.  1006.14(b)(3)(iv) would exclude 
from the frequency limits telephone calls placed to such persons on the 
basis that these persons are unlikely to be harassed by frequent and 
repeated telephone calls from a debt collector and that a debt 
collector is unlikely to place calls to such persons with intent to 
annoy, abuse, or harass them. Unlike most consumers, each of these 
persons has professional training and experience in, and is likely 
engaging in, the debt collection process in a professional capacity. 
Moreover, the Bureau is not aware of evidence that such persons receive 
an excessive number of telephone calls from debt collectors.
    The Bureau also proposes to exclude telephone calls to such persons 
from the frequency limits because debt collectors may have non-
harassing reasons for calling these persons more often than proposed 
Sec.  1006.14(b)(2) would permit. For example, during litigation, a 
debt collector may need to speak frequently with its own attorneys, as 
well as with the creditor's or the consumer's attorneys; the Bureau's 
proposal would not limit such contacts. The Bureau requests comment on 
proposed Sec.  1006.14(b)(3)(iv), including on whether telephone calls 
that a debt collector places to certain other persons also should be 
excluded from the frequency limits and, if so, which categories of 
persons should be excluded.
14(b)(4) Effect of Complying With Frequency Limits
    Proposed Sec.  1006.14(b)(4) would clarify the effect of complying 
with the frequency limits in Sec.  1006.14(b)(2). Under proposed Sec.  
1006.14(b)(4), a debt collector who complies with (i.e., does not 
exceed) the frequency limits in Sec.  1006.14(b)(2) would per se comply 
with Sec.  1006.14(b)(1). Proposed Sec.  1006.14(b)(4) also would 
clarify that a debt collector who complies with Sec.  1006.14(b)(2) 
does not violate either: (1) FDCPA section 806's general prohibition as 
it applies to placing telephone calls or engaging any person in 
telephone conversation repeatedly or continuously such that the natural 
consequence is to harass, oppress, or abuse the person; or (2) FDCPA 
section 806(5)'s specific prohibition against causing a telephone to 
ring or engaging any person in telephone conversation repeatedly or 
continuously with intent to annoy, abuse, or harass the person. Based 
on the evidence currently available to the Bureau, the Bureau believes 
that a debt collector who places seven or fewer telephone calls to, and 
engages in one telephone conversation with, a particular consumer about 
a particular debt within a period of seven consecutive days, including 
the additional telephone calls permitted under proposed Sec.  
1006.14(b)(3), may not have the natural consequence of harassing, 
oppressing or abusing a person; that a debt collector who places such 
calls or engages in such conversations does not intend to annoy, abuse, 
or harass the person; and that such a frequency of telephone calls and 
conversations would not be repeated or continuous as those terms are 
used in FDCPA section 806(5).
    Proposed Sec.  1006.14(b)(4) also would clarify the consequence 
under the Dodd-Frank Act of complying with the frequency limits. 
Proposed Sec.  1006.14(b)(4) provides that a debt collector who 
complies with Sec.  1006.14(b)(2) does not violate Dodd-Frank Act 
sections 1031(c) or 1036(a)(1)(B) by engaging in the unfair act or 
practice of, in connection with the collection of a consumer financial 
product or service debt, placing telephone calls or engaging any person 
in telephone conversation repeatedly or continuously such that the 
natural consequence is to harass, oppress, or abuse the person. The 
Bureau proposes Sec.  1006.14(b)(4) on the basis that telephone calls 
that do not exceed the frequency limits in Sec.  1006.14(b)(2) do not 
cause substantial injury and that any possible injury is outweighed by 
the benefits to consumers or to competition. Under this interpretation, 
telephone calls at or below the frequency limits are unlikely to harass 
consumers and, in turn, are unlikely to cause substantial injury. 
Further, under this interpretation, debt collection provides 
substantial benefits to the consumer credit marketplace, and debt 
collectors may need to make telephone calls up to the frequency limits 
to collect debts effectively. Given these premises, any injury that 
might result from telephone calls at or below the frequency limits 
would be outweighed by the benefits to consumers or to competition.
    The Bureau further believes that clarifying the effect of complying 
with proposed Sec.  1006.14(b)(2), and creating a bright-line rule for 
compliance with it, could benefit both consumers and debt collectors. 
For debt collectors, the clarification should provide greater legal 
certainty and, in turn, should reduce the costs of litigation and 
threats of litigation about repeated or continuous contacts under FDCPA 
section 806 and 806(5). Consistent with this view, during the SBREFA 
process, small entity representatives expressed a preference for a 
bright-line approach. For consumers, a bright-line rule could make it 
easier to identify violations of the FDCPA. Providing a bright-line 
rule for determining compliance with the FDCPA and the Dodd-Frank Act 
therefore may be appropriate to advance the objectives of the FDCPA and 
title X of the Dodd-Frank Act.
    Proposed Sec.  1006.14(b)(4) would not provide a debt collector 
with protection from liability as to any other provision of the 
proposed rule, the FDCPA, or the Dodd-Frank Act. For example, proposed 
Sec.  1006.14(b)(4) would not protect a debt collector from liability 
for using obscene language or false representations in connection with 
collection of a debt, in violation of FDCPA sections 806 or 807 (as 
proposed to be implemented by Sec. Sec.  1006.14 and 1006.18). 
Similarly, proposed Sec.  1006.14(b)(4) would not protect a debt 
collector from liability for communicating with a consumer in violation 
of FDCPA section 805(a) or (c) (as proposed to be implemented by Sec.  
1006.6(b)(1) and (c)). Nor would proposed Sec.  1006.14(b)(4) protect a 
debt collector from liability under the Dodd-Frank Act for engaging in 
other unfair, deceptive, or abusive acts or practices.
    The Bureau requests comment on all aspects of proposed Sec.  
1006.14(b)(4). The Bureau specifically requests comment on whether 
proposed Sec.  1006.14(b)(4) adequately addresses concerns about debt 
collectors making telephone calls in rapid succession and, if not, what 
approach would address such calling behavior without imposing undue or 
unnecessary costs on debt collectors. For example, under the Bureau's 
proposed approach, a debt collector would not violate Sec.  
1006.14(b)(1) by placing seven or fewer telephone calls in rapid 
succession, so long as the debt collector did not exceed seven 
telephone calls or one telephone conversation with the same person 
about the same debt during a period of seven consecutive days.
    The Bureau also requests comment on whether, instead of a bright-
line rule, the Bureau should adopt a rebuttable presumption of 
compliance and of a violation. Under a rebuttable presumption approach, 
a debt collector who places telephone calls at or below the frequency 
limits presumptively would comply with Sec.  1006.14(b)(1). Likewise, a 
debt collector who exceeds the frequency limits presumptively would 
violate Sec.  1006.14(b)(1). These presumptions could be rebutted based 
on the facts and circumstances of a

[[Page 23320]]

particular situation. For example, a consumer could rebut the 
presumption of compliance for a debt collector who stayed below the 
frequency limits by showing that the debt collector knew or should have 
known that telephone calls, even below the frequency limits, would have 
the natural consequence of harassing, oppressing, or abusing the 
consumer. Similarly, a debt collector who exceeded the frequency limits 
could rebut the presumption of a violation by showing that, under the 
circumstances, additional calls above the limits would not have the 
natural consequence of harassing, oppressing, or abusing the consumer.
    Finally, the Bureau requests comment on the alternative of adopting 
only a rebuttable presumption of a violation or only a rebuttable 
presumption of compliance. For example, one alternative would be to 
provide a safe harbor only for telephone calls below the frequency 
limits, with no provision for telephone calls above the frequency 
limits. Such an approach would provide certainty to both debt 
collectors and consumers about a per se permissible level of calling, 
but it would leave open the question of how many telephone calls is too 
many under the FDCPA and the Dodd-Frank Act. The Bureau does not 
propose such an approach because it appears that it would not provide 
the clarity that debt collectors and consumers have sought; nor does it 
appear to provide the same degree of consumer protection as a per se 
prohibition against telephone calls in excess of a specified frequency. 
Another alternative that the Bureau considered is a safe harbor for 
telephone calls below the limits paired with a rebuttable presumption 
of a violation for telephone calls above the limits. (The Bureau also 
considered the opposite: A rebuttable presumption of compliance for 
telephone calls below the limits paired with a per se prohibition 
against telephone calls in excess of the limits). The Bureau requests 
comment on the merits of these alternative approaches and others that 
the Bureau may not have considered.
14(b)(5) Definition
    Proposed Sec.  1006.14(b)(5) generally would define the term 
particular debt, as that term is used in proposed Sec.  1006.14(b)(2), 
to mean each of a consumer's debts in collection. With respect to 
student loan debts, however, the term particular debt would mean all 
debts that a consumer owes or allegedly owes that were serviced under a 
single account number at the time the debts were obtained by the debt 
collector. Proposed Sec.  1006.14(b)(5) would clarify how the frequency 
limits in Sec.  1006.14(b)(2) would apply when a consumer has multiple 
debts being collected by the same debt collector at the same time.\338\
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    \338\ This clarification may be necessary because most consumers 
with at least one debt in collection have multiple debts in 
collection. See CFPB Debt Collection Consumer Survey, supra note 18, 
at 13, table 1; see also CFPB Medical Debt Report, supra note 20, at 
20 (reporting that most consumers with one collections tradeline 
have multiple collections tradelines).
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    In some cases, when a consumer has multiple debts in collection, 
either from one creditor or from multiple creditors, a single debt 
collector will attempt to collect some or all of them. Debt collectors 
in this situation typically make distinct efforts to collect each debt 
rather than, for example, asking the consumer about all of the debts 
during a single telephone call. One reason for this segregation is that 
larger debt collectors often collect multiple debts owed by the same 
consumer to different creditors, and each creditor may require its debt 
collectors to keep information about its debts separate from 
information about other creditors' debts. A creditor may require this 
so that it can ensure that debt collectors are complying with the 
creditor's specific debt collection guidelines. Consequently, some 
larger debt collectors may have groups of employees dedicated to 
collecting only a particular creditor's debts.
    In addition, some debt collectors segregate debts because they have 
employees who specialize in collecting different types of debts. In 
other cases, such as with medical debts, privacy concerns or State or 
Federal laws may require a debt collector to segregate information 
about a particular debt from information about a consumer's other 
debts. A consumer's debts also may enter collection at different points 
in time and thus be at different stages of the collections process, 
such that the different debts may be eligible for different types of 
settlement offers. Debt collectors report that, in many cases, their 
systems are not structured to consolidate information about different 
debts owed by the same consumer. Finally, debt collectors may not find 
it productive to discuss multiple debts on a single telephone call 
because consumers may not be able or prepared to discuss more than one 
debt during the telephone call or may find it overwhelming, confusing, 
or simply too time consuming to discuss multiple debts, with different 
related terms and offers, during a single telephone call.
    The Bureau considered proposing a limit on the number of times a 
debt collector could place telephone calls to any one person within 
seven days (i.e., a per-person limit), regardless of how many debts the 
debt collector was attempting to collect from that person. Creditors, 
however, could sidestep a per-person limit by placing debts with debt 
collectors who collect for only one or a limited number of creditors, 
or by assigning only a single debt to any one debt collector. 
Alternatively, if one debt collector were collecting multiple debts for 
multiple creditors, a per-person limit could incentivize the debt 
collector to discuss all of those debts with the consumer in the single 
permissible telephone conversation each week. This could result in 
consumers receiving an overwhelming amount of information about, for 
example, different settlement or payment structures for different 
creditors. This also could complicate debt collection conversations if, 
for example, consumers wanted to dispute one or some, but not all, of 
the debts. Alternatively, a per-person limit could encourage debt 
collectors to sequence collection of a consumer's debts, thereby 
prolonging the collections process for some debts. For these reasons, 
and pursuant to its authority under FDCPA section 814(d) to prescribe 
rules for the collection of debt by debt collectors, the Bureau 
proposes Sec.  1006.14(b)(5) to define the term particular debt, as 
used in proposed Sec.  1006.14(b)(2), generally to mean each of a 
consumer's debts in collection.
    The concerns outlined above may not apply to the collection of 
multiple student loan debts that were serviced under a single account 
number at the time the debts were obtained by the debt collector. In 
these situations, the debt collector and consumer appear to interact as 
if there were only a single debt. This would be consistent with how the 
loans were likely serviced before entering collection, as multiple 
student loan debts are often serviced under a single account number and 
billed on a single, combined account statement, with a single total 
amount due and requiring a single payment from the consumer. For this 
reason, in the case of student loan debts, the Bureau proposes to 
define the term particular debt to mean all such debts that a consumer 
owes or allegedly owes that were serviced under a single account number 
at the time the debts were obtained by the debt collector. Under 
proposed Sec.  1006.14(b)(5), the frequency limits in proposed Sec.  
1006.14(b)(2) would apply to all such debts collectively. Proposed 
comment 14(b)(5)-1 provides illustrative examples.

[[Page 23321]]

    The Bureau requests comment on the proposed definition of 
particular debt. The Bureau specifically requests comment on the 
proposal to apply the frequency limits in proposed Sec.  1006.14(b)(2) 
generally on a per-debt, as opposed to per-person, basis. The Bureau 
requests comment on whether, if the proposed per-debt approach is 
adopted, additional clarification is needed about how to count 
telephone calls when a debt collector places one telephone call to a 
consumer to discuss more than one particular debt. In particular, the 
Bureau requests comment on whether the rule should clarify how the 
frequency limits apply when a debt collector places an unanswered 
telephone call to a consumer to discuss two of the consumer's debts 
(e.g., a credit card debt and a medical debt), or when a debt collector 
who is collecting two such debts leaves the consumer only a general 
message that does not refer specifically to either debt (e.g., ``Please 
remember to pay what you owe''). The Bureau similarly requests comment 
on whether clarification is needed for the situation in which a debt 
collector has a telephone conversation with a consumer about more than 
one debt but does not specifically refer to either debt, and on whether 
the proposal appropriately counts the single conversation as having 
been about all of the debts for purposes of the frequency limits.
    Finally, the Bureau requests comment on: (1) The proposal to 
aggregate certain student loan debts for purposes of Sec.  
1006.14(b)(2), including whether some student loan debts serviced under 
the same account number should be counted separately; and (2) whether 
any types of debts other than student loans should be aggregated, such 
that multiple debts that were serviced under a single account number at 
the time the debts were obtained by the debt collector (or met other 
specified conditions) would be treated as a single debt for purposes of 
the frequency limits. Under such an approach, for example, multiple 
medical debts could be aggregated for purposes of Sec.  1006.14(b)(2) 
if they met certain conditions, such as being serviced under the same 
account number at the time the debt collector obtained them. The Bureau 
requests comment on such an approach, including on the possible 
difficulties of aggregating accounts other than student loan accounts 
given the different facts that could apply to each debt.
14(h) Prohibited Communication Media ³³⁹
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    \339\ As noted above, proposed Sec.  1006.14(c) through (g) 
generally mirror the statute, with minor wording and organizational 
changes for clarity, and are not discussed further in this section-
by-section analysis.
---------------------------------------------------------------------------

14(h)(1) In General
    Proposed Sec.  1006.14(h)(1) would prohibit a debt collector from 
communicating or attempting to communicate with a consumer through a 
medium of communication if the consumer has requested that the debt 
collector not use that medium to communicate with the consumer. 
Pursuant to its authority under FDCPA section 814(d) to write rules 
with respect to the collection of debts by debt collectors, the Bureau 
proposes Sec.  1006.14(h)(1) as an interpretation of FDCPA section 806, 
which, as discussed in part IV, prohibits a debt collector from 
engaging in any conduct the natural consequence of which is to harass, 
oppress, or abuse any person in connection with the collection of a 
debt.
    Since the enactment of the FDCPA, the possible media through which 
communications generally are conducted has expanded beyond telephone, 
mail, and in-person conversations to include various mobile and 
portable technologies that were not contemplated in 1977. For example, 
with the advent of the mobile telephone, a consumer may receive a 
telephone call at any time or place. As the CFPB Debt Collection 
Consumer Survey indicated, consumers have varied but strong preferences 
about the media that debt collectors use to communicate with them.\340\
---------------------------------------------------------------------------

    \340\ See CFPB Debt Collection Consumer Survey, supra note 18, 
at 36-37.
---------------------------------------------------------------------------

    Once a consumer has requested that a debt collector not use a 
specific medium of communication to communicate with the consumer, the 
Bureau believes that the natural consequence of further communications 
or attempts to communicate from the debt collector to the consumer 
using that same medium likely is harassment, oppression, or abuse of 
the consumer. Consistent with this interpretation, the Bureau 
understands that some debt collectors currently refrain from 
communicating with a consumer through a medium that the consumer has 
requested that the debt collector not use to communicate with the 
consumer, including, for example, specific telephone numbers that the 
consumer has asked the debt collector not to call.
    For these reasons, the Bureau proposes Sec.  1006.14(h)(1) to 
provide that, in connection with the collection of any debt, a debt 
collector must not communicate or attempt to communicate with a 
consumer through a medium of communication if the consumer has 
requested that the debt collector not use that medium to communicate 
with the consumer. The Bureau also proposes commentary to Sec.  
1006.14(h)(1). Proposed comment 14(h)(1)-1 refers to comment 2(d)-1 for 
examples of communication media. Proposed comment 14(h)(1)-2 would 
clarify that, within a medium of communication, a consumer may request 
that a debt collector not use a specific address or telephone number 
and provides an example. The Bureau proposes this comment on the 
grounds that a specific address or telephone number may be considered a 
medium, and that contacting a consumer through a specific address or 
telephone number that the consumer has requested the debt collector not 
use may be just as harassing as contacting the consumer through a 
medium of communication that the consumer has requested the debt 
collector not use. The Bureau requests comment on proposed Sec.  
1006.14(h)(1) and its related commentary.
    As discussed above, pursuant to its authority under FDCPA section 
814(d) to write rules with respect to the collection of debts by debt 
collectors, the Bureau proposes Sec.  1006.14(h)(1) as an 
interpretation of FDCPA section 806, on the basis that once a consumer 
has requested that a debt collector not use a specific medium of 
communication to communicate with the consumer, a debt collector who 
nevertheless continues to communicate or attempt to communicate with 
the consumer using that medium is engaging in conduct the natural 
consequence of which is to harass, oppress, or abuse. The Bureau 
believes that proposed Sec.  1006.14(h)(1) is consistent with this 
statutory language and the purpose of the FDCPA. As FDCPA section 
802(e) explains, in relevant part, the purpose of the Act is to 
eliminate abusive debt collection practices by debt collectors.\341\ 
The Bureau interprets FDCPA section 806's general prohibition on 
engaging in conduct the natural consequence of which is to harass, 
oppress, or abuse in light of this purpose specified in the FDCPA, as 
well as in light of similar conduct specifically prohibited by the 
FDCPA.
---------------------------------------------------------------------------

    \341\ 15 U.S.C. 1692(e).
---------------------------------------------------------------------------

14(h)(2) Exceptions
    Proposed Sec.  1006.14(h)(2) provides two exceptions to the general 
prohibition in proposed Sec.  1006.14(h)(1). Proposed

[[Page 23322]]

Sec.  1006.14(h)(2)(i) provides that, notwithstanding the prohibition 
in Sec.  1006.14(h)(1), if a consumer opts out in writing of receiving 
electronic communications from a debt collector, a debt collector may 
reply once to confirm the consumer's request to opt out, provided that 
the reply contains no information other than a statement confirming the 
consumer's request. Proposed Sec.  1006.14(h)(2)(ii) provides that, if 
a consumer initiates contact with a debt collector using an address or 
a telephone number that the consumer previously requested the debt 
collector not use, the debt collector may respond once to that 
consumer-initiated communication. The Bureau proposes Sec.  
1006.14(h)(2) because a single communication from a debt collector of 
the types described likely would not have the natural consequence of 
harassing, oppressing, or abusing the consumer within the meaning of 
FDCPA section 806.\342\ The Bureau requests comment on the exceptions 
in proposed Sec.  1006.14(h)(2).
---------------------------------------------------------------------------

    \342\ Proposed Sec.  1006.14(h)(2) also is consistent with the 
regulations implementing the CAN-SPAM Act, which permit senders to 
send a reply electronic message. See 16 CFR 316.5.
---------------------------------------------------------------------------

    As discussed above, a consumer may request that a debt collector 
not communicate with the consumer using a specific medium of 
communication. However, there may be circumstances in which applicable 
law requires the debt collector to communicate with the consumer only 
through that specific medium and does not offer an alternative medium 
for compliance (e.g., by permitting a debt collector to electronically 
provide a notice that otherwise would be mailed). The Bureau requests 
comment on whether there are specific laws that require communication 
with the consumer through one specific medium, and if so, whether 
additional clarification is needed regarding the delivery of legally 
required communications through a specific medium of communication 
required by applicable law if the consumer has generally requested that 
the debt collector not use that medium to communicate with the 
consumer.
Section 1006.18 False, Deceptive, or Misleading Representations or 
Means
    FDCPA section 807 generally prohibits a debt collector from using 
any false, deceptive, or misleading representations or means in 
connection with the collection of any debt. The section lists 16 non-
exhaustive examples of such prohibited conduct.\343\ Proposed Sec.  
1006.18 would implement FDCPA section 807. Except for certain 
organizational changes and interpretations in Sec.  1006.18(e) through 
(g), which are discussed below, proposed Sec.  1006.18 generally 
restates the statute with only minor wording changes for clarity. The 
Bureau proposes Sec.  1006.18 pursuant to its authority under FDCPA 
section 814(d) to prescribe rules with respect to the collection of 
debts by debt collectors.
---------------------------------------------------------------------------

    \343\ 15 U.S.C. 1692e.
---------------------------------------------------------------------------

    The Bureau proposes to organize Sec.  1006.18 by grouping the 16 
non-exhaustive examples of prohibited false or misleading 
representations in FDCPA section 807 into categories of related 
conduct, as follows. Proposed Sec.  1006.18(a) would implement the 
general prohibition in FDCPA section 807 by prohibiting a debt 
collector from using any false, deceptive, or misleading representation 
or means in connection with the collection of any debt. Proposed Sec.  
1006.18(b) restates FDCPA section 807's examples of false, deceptive, 
or misleading representations.\344\ Proposed Sec.  1006.18(c) restates 
FDCPA section 807's examples of false, deceptive, or misleading 
collection means.\345\ Proposed Sec.  1006.18(d) restates the catch-all 
prohibition against false representations or deceptive means as 
described in FDCPA section 807(10). Proposed Sec.  1006.18(e) addresses 
the disclosures required under FDCPA section 807(11). Finally, proposed 
Sec.  1006.18(f) addresses the use of assumed names by debt collectors' 
employees, and proposed Sec.  1006.18(g) addresses misrepresentations 
of meaningful attorney involvement in debt collection litigation.
---------------------------------------------------------------------------

    \344\ Proposed Sec.  1006.18(b)(1)(i) through (viii) would 
implement, respectively, paragraphs (1), (16), (3), (7), (6), (12), 
(13), and (15) of FDCPA section 807, and proposed Sec.  
1006.18(b)(2) would implement FDCPA section 807(2). Restating the 
statutory language is not intended to suggest any particular 
interpretation of that language. For example, the omission of the 
words ``or imply'' from the introductory language to Sec.  
1006.18(b)(2) consistent with the statutory language in FDCPA 
section 807(2) is not intended to suggest that the Bureau would not 
regard implied false representations as violations of FDCPA section 
807 or 807(2) or proposed Sec.  1006.18(b)(2).
    \345\ Proposed Sec.  1006.18(c)(1) through (4) would implement, 
respectively, paragraphs (5), (8), (9), and (14) of FDCPA section 
807.
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18(e) Disclosures Required
    FDCPA section 807(11) requires debt collectors to disclose in their 
initial communications with consumers that they are attempting to 
collect a debt and that any information obtained will be used for that 
purpose, and to disclose in their subsequent communications with 
consumers that the communication is from a debt collector, except in a 
formal pleading made in connection with a legal action.\346\ Proposed 
Sec.  1006.18(e) would implement FDCPA section 807(11).
---------------------------------------------------------------------------

    \346\ 15 U.S.C. 1692e(11).
---------------------------------------------------------------------------

    Proposed comment 18(e)(1)-1 describes the circumstances in which 
debt collectors would be required to provide disclosures in initial 
communications under proposed Sec.  1008.18(e)(1). Proposed comment 
18(e)(1)-1 specifies that a debt collector must provide the disclosures 
in the debt collector's initial communication with the consumer, 
regardless of whether that initial communication is written or oral, 
and regardless of whether the debt collector or the consumer initiated 
the communication. Proposed comment 18(e)(1)-1 also provides an example 
of the rule regarding required disclosures during initial 
communications.
    Proposed comment 18(e)-1 provides general commentary to explain how 
the disclosure requirements in proposed Sec.  1006.18(e) interact with 
the proposed rule's limited-content message, a message that is not a 
communication under proposed Sec.  1006.2(d). Proposed comment 18(e)-1 
would clarify that, because a limited-content message is not a 
communication, a debt collector who leaves only a limited-content 
message for a consumer does not need to provide the disclosures 
required under proposed Sec.  1008.18(e)(1) and (2). For a more 
detailed discussion of the terms communication and limited-content 
message, see the section-by-section analysis of proposed Sec.  
1006.2(d) and (j), respectively.
    The Bureau requests comment on all aspects of proposed Sec.  
1006.18 and on whether additional clarification would be useful. In 
particular, the Bureau requests comment on whether additional 
clarification regarding false or misleading representations would be 
helpful in the decedent debt context, or whether to require any 
affirmative disclosures when debt collectors communicate in connection 
with the collection of a debt owed by a deceased consumer. As discussed 
in the section-by-section analysis of proposed Sec. Sec.  1006.2(e) and 
1006.6(a)(4), this proposal would define the term consumer to clarify 
with whom debt collectors may communicate when attempting to resolve 
the debts of a deceased consumer. In its Policy Statement on Decedent 
Debt, the FTC expressed concern that, even absent explicit 
misrepresentations, a debt collector might violate FDCPA section 807 by 
communicating with such individuals in a manner that conveys the 
misleading impression that the individual is personally liable for the

[[Page 23323]]

deceased consumer's debts, or that the debt collector could seek assets 
outside of the deceased consumer's estate to satisfy the consumer's 
debt. The FTC's Policy Statement suggested two possible disclosures 
that debt collectors generally could use to avoid deceiving such 
individuals about their liability for the decedent's debts.\347\ The 
FTC also noted that the information that would need to be disclosed to 
avoid deception would depend on the circumstances.
---------------------------------------------------------------------------

    \347\ FTC Policy Statement on Decedent Debt, supra note 192, at 
44922. The FTC's suggested disclosures were: ``(1) That the 
collector is seeking payment from the assets in the decedent's 
estate; and (2) [that] the individual could not be required to use 
the individual's assets or assets the individual owned jointly with 
the decedent to pay the decedent's debt.'' Id.
---------------------------------------------------------------------------

    While the Bureau believes that the FTC's suggested disclosures 
generally would be sufficient to avoid deception in many circumstances, 
proposed Sec.  1006.18 would not require such disclosures. Since the 
FTC issued its Policy Statement in 2011, neither the FTC nor the Bureau 
has brought any cases against debt collectors for making deceptive 
claims in the decedent debt context, including any such claims 
concerning the liability of other individuals for the decedent's debts. 
Proposed Sec.  1006.18's general prohibition against false, deceptive, 
or misleading representations, however, would apply to express or 
implied misrepresentations that a personal representative is liable for 
the deceased consumer's debts. The Bureau requests comment on whether 
the general prohibition against false, deceptive, or misleading 
representations in proposed Sec.  1006.18 is sufficient to protect 
individuals who communicate with debt collectors about a deceased 
consumer's debts, or whether affirmative disclosures in the decedent 
debt context are needed.
18(f) Use of Assumed Names
    Debt collectors commonly instruct or permit their employees to use 
assumed names when interacting with consumers, including by telephone. 
They do so for a variety of reasons. For example, some employees may 
have names that are difficult for some consumers to spell or pronounce. 
These employees may find that assuming a simpler name facilitates 
communications with consumers. Other employees may have privacy or 
safety concerns about revealing their true name and employer to a 
potentially large number of consumers.
    From a consumer's perspective, it may not be relevant whether 
employees use true names or assumed names, provided that the name used 
does not mislead the consumer about the debt at issue and who is 
attempting to collect it. For example, the FTC previously issued 
guidance stating that a debt collector's employee does not violate the 
FDCPA by using an assumed name if the employee uses the assumed name 
consistently and the debt collector can readily ascertain the 
employee's identity.\348\ An employee's consistent use of that name is 
not likely to affect the decisions a consumer makes about the debt. 
Further, a debt collector's ability to readily ascertain the employee's 
identity would enable the debt collector to monitor and address the 
conduct of such employee. Therefore, an approach similar to the FTC's 
prior guidance may be appropriate for the use of assumed names.
---------------------------------------------------------------------------

    \348\ Fed. Trade Comm'n, Staff Commentary on the Fair Debt 
Collection Practices Act, 53 FR 50097, 50105 (Dec. 13, 1988) (``1. 
Aliases. A debt collector employee's use of an alias that permits 
identification of the debt collector (i.e., where he uses the alias 
consistently, and his true identity can be ascertained by the 
employer) constitutes a ``meaningful disclosure of the caller's 
identity.''); see also id. at 50103 (``An individual debt collector 
may use an alias if it is used consistently and if it does not 
interfere with another party's ability to identify him (e.g., the 
true identity can be ascertained by the employer).'').
---------------------------------------------------------------------------

    For these reasons, proposed Sec.  1006.18(f) provides that nothing 
in Sec.  1006.18 prohibits a debt collector's employee from using an 
assumed name when communicating or attempting to communicate with a 
person, provided that the employee uses the assumed name consistently 
and that the employer can readily identify the employee even if the 
employee is using the assumed name. The Bureau requests comment on 
proposed Sec.  1006.18(f), including on the use of assumed names by 
debt collectors' employees in general, as well as on whether and how 
employers can readily identify their employees who are using assumed 
names.
    The Bureau proposes Sec.  1006.18(f) pursuant to its authority 
under FDCPA section 814(d) to prescribe rules with respect to the 
collection of debts by debt collectors. Specifically, the Bureau 
interprets FDCPA section 807's prohibition on false or misleading 
representations, and 806(6)'s prohibition on placing telephone calls 
without ``meaningful disclosure of the caller's identity,'' to allow a 
debt collector's employee to disclose an assumed name as long as the 
employee uses the name consistently and the debt collector can readily 
ascertain that employee's true identity.
18(g) Safe Harbor for Meaningful Attorney Involvement in Debt 
Collection Litigation Submissions
    FDCPA section 807 contains certain provisions designed to protect 
consumers from false, deceptive, or misleading representations made by, 
or means employed by, attorneys in debt collection litigation. FDCPA 
section 807(3) prohibits the false representation or implication that 
any individual is an attorney or that any communication is from an 
attorney. In addition, debt collection communications sent under an 
attorney's name may violate FDCPA section 807(10) if the attorney was 
not meaningfully involved in the preparation of the communication.\349\ 
The meaningful attorney involvement case law has been applied in the 
specific context of debt collection litigation submissions.\350\
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    \349\ See, e.g., Clomon v. Jackson, 988 F.2d 1314, 1320 (2d Cir. 
1993); Nielsen v. Dickerson, 307 F.3d 623, 635 (7th Cir. 2002). 
Courts have found violations of other subsections of FDCPA section 
807 for similar conduct. See e.g., Avila v. Rubin, 84 F.3d 222, 229 
(7th Cir. 1996); Lesher v. Law Offices of Mitchell N. Kay, PC, 650 
F.3d 993, 1002 (3d Cir. 2011).
    \350\ See Miller v. Upton, Cohen & Slamowitz, 687 F.Supp.2d 86, 
100 (applying meaningful involvement liability to, among other 
actions, filing of complaint in court); Bock v. Pressler & Pressler, 
30 F.Supp.3d 283, 303 (D.N.J. 2014) (``The claimed misrepresentation 
here does not relate to the ultimate veracity of the numbered 
factual allegations of the complaint; it concerns the veracity of 
the implied representation that an attorney was meaningfully 
involved in the preparation of the complaint. If, in fact, the 
attorney who signed the complaint is not involved and familiar with 
the case against the debtor, then the debtor has been unfairly 
misled and deceived within the meaning of the FDCPA. . . .''), 
reaff'd on remand, 254 F.Supp.3d 724, 729 (D.N.J. 2017).
---------------------------------------------------------------------------

    It may be particularly important for consumers, attorneys, and law 
firms engaged in such litigation to be protected by a clear 
articulation of what meaningful attorney involvement in debt collection 
litigation submissions means under FDCPA section 807, as would be 
implemented by proposed Sec.  1006.18. A clear articulation of 
meaningful attorney involvement also may be useful to avoid confusion 
and unnecessary conflicts between State standards and Federal standards 
under the FDCPA and any implementing regulations.
    To provide clarity for law firms and attorneys submitting 
pleadings, written motions, or other papers to courts in debt 
collection litigation, proposed section Sec.  1006.18(g) provides a 
safe harbor for attorneys and law firms against claims that they 
violated Sec.  1006.18 due to the lack of meaningful attorney 
involvement in debt collection litigation materials signed by the 
attorney and submitted to the court,

[[Page 23324]]

provided that they meet the requirements in proposed Sec.  1006.18(g). 
Proposed Sec.  1006.18(g) provides that an attorney has been 
meaningfully involved in the preparation of debt collection litigation 
submissions if the attorney: (1) Drafts or reviews the pleading, 
written motion, or other paper; and (2) personally reviews information 
supporting the submission and determines, to the best of the attorney's 
knowledge, information, and belief, that, as applicable: The claims, 
defenses, and other legal contentions are warranted by existing law; 
the factual contentions have evidentiary support; and the denials of 
factual contentions are warranted on the evidence or, if specifically 
so identified, are reasonably based on belief or lack of information.
    The factors in proposed Sec.  1008.18(g) are similar to some of the 
nationally recognized standards for attorneys making submissions in 
civil litigation.\351\ Because most FDCPA claims are considered by 
Federal courts, and Federal court rules are adopted and apply 
nationwide, Federal Rule of Civil Procedure 11(b)(2) through (4) as 
currently adopted may provide an appropriate guide for judging whether 
a submission to the court has complied with Sec.  1006.18(g). Indeed, 
courts that have applied the meaningful attorney involvement doctrine 
to litigation submissions have considered that standard.\352\ 
Accordingly, the safe harbor in proposed Sec.  1006.18(g) restates 
certain provisions of Federal Rule of Civil Procedure Rule 11(b). An 
attorney or law firm who establishes compliance with the factors set 
forth in proposed Sec.  1006.18(g), including when a court in debt 
collection litigation determines that the debt collector has complied 
with a court rule that is substantially similar to the standard in 
Sec.  1006.18(g), will have complied with FDCPA section 807 regarding 
the attorney's meaningful involvement in submissions made in debt 
collection litigation. The Bureau requests comment on whether the safe 
harbor proposed for meaningful attorney involvement in debt collection 
litigation submissions provides sufficient clarity for consumers, 
attorneys, and law firms.
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    \351\ The factors in proposed Sec.  1008.18(g) omit the 
following two aspects of Federal Rule of Civil Procedure 11(b)(2) 
through (4): First, that the claims, defenses, or other legal 
contentions are a non-frivolous argument for extending, modifying, 
or reversing existing law or for establishing new law; and second, 
that the factual contentions are likely to have evidentiary support 
after a reasonable opportunity for further investigation or 
discovery. This safe harbor is proposed in part to set clearer 
standards for routine debt collection litigation cases, in which 
there is unlikely to be an argument to extend, modify, or reverse 
existing law or to establish new law. The Bureau also understands 
that most factual contentions pled in debt collection litigation 
should be supported by evidence in the creditor's or debt 
collector's possession, thereby negating the need for further 
investigation or discovery. Moreover, proposed Sec.  1006.18(g) 
would provide a safe harbor; thus, meeting one of these omitted 
aspects may permit an attorney to establish meaningful attorney 
involvement even if doing so would not entitle the attorney to the 
safe harbor that proposed Sec.  1006.18(g) would establish.
    \352\ See, e.g., Bock v. Pressler & Pressler, 2017 WL 4711472 at 
*7 n.5 (discussing initial decision at 30 F.Supp.3d 283, 299-302); 
Miller, 687 F.Supp.2d at 101 (analogizing to Rule 11).
---------------------------------------------------------------------------

Section 1006.22 Unfair or Unconscionable Means
    FDCPA section 808 prohibits a debt collector from using any unfair 
or unconscionable means to collect or attempt to collect any debt and 
lists eight non-exhaustive examples of such prohibited conduct.\353\ 
The Bureau proposes Sec.  1006.22 to implement and interpret FDCPA 
section 808 and pursuant to its authority under FDCPA section 814(d) to 
write rules with respect to the collection of debts by debt collectors.
---------------------------------------------------------------------------

    \353\ 15 U.S.C. 1692f.
---------------------------------------------------------------------------

    Proposed Sec.  1006.22(a) would implement FDCPA section 808's 
general prohibition against unfair debt collection practices, and 
proposed Sec.  1006.22(b) through (f)(2) would implement the prohibited 
conduct examples in FDCPA section 808.\354\ These proposed paragraphs 
generally mirror the statute, with minor wording and organizational 
changes for clarity. The following section-by-section analysis thus 
discusses only proposed Sec.  1006.22(f)(3) and (4) and (g).
---------------------------------------------------------------------------

    \354\ Specifically, proposed Sec.  1006.22(b) would implement 
FDCPA section 808(1); proposed Sec.  1006.22(c) would implement 
FDCPA section 808(2) through (4); proposed Sec.  1006.22(d) would 
implement FDCPA section 808(5); proposed Sec.  1006.22(e) would 
implement FDCPA section 808(6); proposed Sec.  1006.22(f)(1) would 
implement FDCPA section 808(7); and proposed Sec.  1006.22(f)(2) 
would implement FDCPA section 808(8).
---------------------------------------------------------------------------

22(f) Restrictions on Use of Certain Media
    Proposed Sec.  1006.22(f)(3) and (4) would restrict a debt 
collector's use of two specific types of electronic media: Work email 
accounts and public-facing social media. As to electronic media more 
generally, the Bureau plans to monitor their evolution and use by debt 
collectors, as well as any trends in FDCPA section 808 litigation 
concerning such media, to identify issues that pose a risk of consumer 
harm or require clarification as part of any future rulemakings.
22(f)(3)
    Proposed Sec.  1006.22(f)(3) would prohibit a debt collector from 
communicating or attempting to communicate with a consumer using an 
email address that the debt collector knows or should know is provided 
to the consumer by the consumer's employer, unless the debt collector 
has received directly from the consumer either prior consent to use 
that email address or an email from that email address.
    The FDCPA contains both general and specific prohibitions intended 
to protect consumers from the harms that workplace collections 
communications can cause. For example, absent obtaining the consumer's 
prior consent, a debt collector who discloses a debt to a consumer's 
employer generally would violate FDCPA section 805(b)'s prohibition on 
communicating with a third party about a debt.\355\ A debt collector 
also could violate FDCPA section 805(a)(3) by communicating with the 
consumer at the consumer's place of employment if the debt collector 
knows or has reason to know that the consumer's employer prohibits the 
consumer from receiving such communications.\356\
---------------------------------------------------------------------------

    \355\ 15 U.S.C. 1692c(b).
    \356\ 15 U.S.C. 1692c(a)(3).
---------------------------------------------------------------------------

    Debt collectors and consumers may have questions about how the 
FDCPA's protections against third-party disclosures apply to workplace 
contacts by newer means of communication, such as email. Debt 
collectors should be aware that many employers have a legal right to 
read, and in fact frequently do read, messages sent or received by 
employees on their work email accounts.\357\ Workplace emails therefore 
present a particularly high risk of third-party disclosure through an 
employer reading an email sent by a debt collector to a consumer's work 
account. In addition, Congress and the courts have recognized that an 
employer learning that an employee has a debt in collection may cause 
the consumer to suffer significant harms, including loss

[[Page 23325]]

of employment.\358\ The Bureau proposes Sec.  1006.22(f)(3) on the 
ground that a debt collector who sends a communication to a consumer's 
work email account violates the FDCPA if the debt collector knows or 
can reasonably anticipate that a communication sent to a consumer's 
work email account might be opened and read by someone other than the 
consumer. There is support for this interpretation in court decisions 
holding that a debt collector who sends a letter to a consumer's place 
of employment violates the FDCPA if the debt collector ``knew or could 
reasonably anticipate that [such] a letter . . . might be opened and 
read by someone other than the debtor as it made its way to [the 
consumer].'' \359\
---------------------------------------------------------------------------

    \357\ See, e.g., Am. Mgmt. Ass'n & ePolicy Inst., Electronic 
Monitoring and Surveillance 2007 Survey (2008), https://www.amanet.org/training/articles/2007-electronic-monitoring-and-surveillance-survey-41.aspx (reporting that a survey of employers 
conducted in 2007 found that, among other things, 43 percent of 
employers monitored their employees' email accounts and 66 percent 
of employers monitored their employees' internet connection, with 45 
percent of employers tracking the content, keystrokes, and time 
spent at the keyboard); Bingham v. Baycare Health Sys., No. 8:14-CV-
73-T-23JSS, 2016 WL 3917513, at *4 (M.D. Fla. July 20, 2016) 
(collecting cases and concluding that ``the majority of courts have 
found that an employee has no reasonable expectation of privacy in 
workplace emails when the employer's policy limits personal use or 
otherwise restricts employees' use of its system and notifies 
employees of its policy'').
    \358\ S. Rept. No. 382, supra note 70, at 1699 (``[A] debt 
collector may not contact third persons such as a consumer's 
friends, neighbors, relatives, or employer. Such contacts are not 
legitimate collection practices and result in serious invasions of 
privacy, as well as the loss of jobs.''); id. at 1696 (``Collection 
abuse takes many forms, including . . . disclosing a consumer's 
personal affairs to friends, neighbors, or an employer.''); 122 
Cong. Rec. H730707 (daily ed. July 19, 1976) (remarks of Rep. 
Annunzio on H. Rept. 13720) (Clearinghouse No. 31,059U) 
(``Communication with a consumer at work or with his employer may 
work a tremendous hardship for a consumer because such calls can 
embarrass a consumer and can result in his losing a deserved 
promotion'' and ``[i]f a consumer loses his job, he is in a worse, 
not better, position to pay the debt.''); Am. Fin. Servs. Ass'n v. 
Fed. Trade Comm'n, 767 F.2d 957, 974 (D.C. Cir. 1985) (upholding 
provision in the FTC's Credit Practices Rule that prohibited certain 
wage assignments because, among other things, the rulemaking record 
showed that ``employers tend to view the consumer's failure to repay 
the debt as a sign of irresponsibility. As a consequence many lose 
their jobs after wage assignments are filed. Even if the consumer 
retains the job, promotions, raises, and job assignments may be 
adversely affected.'') (citing Credit Practices Rule, 49 FR 7740, 
7758 (1984) (codified at 16 CFR 444)); Fed. Trade Comm'n v. 
LoanPointe, LLC, No. 2:10-CV-225DAK, 2011 WL 4348304, at *6-8 (D. 
Utah Sept. 16, 2011) (holding that ``Defendants' practice of 
disclosing debts and the amount of the debts to consumers' 
employers'' violated the FDCPA and ``qualifies as an unfair practice 
under the FTC Act''), aff'd, 525 F. App'x 696 (10th Cir. 2013). The 
State of New York prohibits a debt collector from corresponding with 
a consumer by email unless, among other things, the consumer 
voluntarily provided the email address to the debt collector and has 
affirmed that the email is not ``furnished or owned by the 
consumer's employer.'' 23 N.Y. Comp. Codes R. & Regs. tit. 23, sec. 
1.6(a) (2018).
    \359\ Evon v. Law Offices of Sidney Mickell, 688 F.3d 1015, 
1025-26 (9th Cir. 2012) (holding that a letter addressed ``in care 
of [consumer's] employer'' and delivered to her at work, 
``manifestly constitutes a violation [of the FDCPA because the debt 
collector] knew or could reasonably anticipate that a letter sent to 
a class member's employer might be opened and read by someone other 
than the debtor as it made its way to him/her. This is exactly what 
happened to [the consumer], causing her stress and embarrassment, 
precisely what the Act is designed to prevent.''); see also Fed. 
Trade Comm'n, Staff Commentary on the Fair Debt Collection Practices 
Act, 53 FR 50097-02, 50104 (Dec. 13, 1988) (``Accessibility by third 
party. A debt collector may not send a written message that is 
easily accessible to third parties. For example, he may not use a 
computerized billing statement that can be seen on the envelope 
itself. A debt collector may use an `in care of' letter only if the 
consumer lives at, or accepts mail at, the other party's 
address.'').
---------------------------------------------------------------------------

    As suggested by numerous consumer advocacy groups and a consortium 
of State attorneys general in comments to the Bureau's ANPRM, requiring 
a debt collector to obtain a consumer's consent, or to have received an 
email from the consumer, before sending emails to the consumer's work 
account could protect the consumer's privacy interest in avoiding the 
disclosure of the debt to the consumer's employer. This privacy 
interest is implicated by both communications and attempts to 
communicate. A debt collector's initial, unsolicited email that does 
not convey information regarding a debt nonetheless may induce a 
recipient such as a consumer or an employer to inquire about the 
purpose of the debt collector's message. The debt collector's attempt 
to communicate thus may lead to the disclosure of the debt to a third 
party before the consumer has had a meaningful opportunity to provide 
prior consent. A consumer who chooses to use a work email account to 
contact a debt collector, or who provides prior consent for the debt 
collector to use such an email account to contact the consumer, 
presumably has made a determination that the benefits of communicating 
with a debt collector about a debt using a work email account outweigh 
the potential risks, and a debt collector who receives such an email or 
prior consent from the consumer may not reasonably anticipate that its 
emails to the consumer would be read by the consumer's employer. 
Accordingly, after a consumer uses the work email account to contact 
the debt collector or provides prior consent, it would not appear to be 
an unfair or unconscionable practice under FDCPA section 808 for a debt 
collector to communicate or attempt to communicate with the consumer 
using an email address that the debt collector knows or should know is 
provided by the consumer's employer.
    For all of these reasons, pursuant to its authority to implement 
and interpret FDCPA section 808 and its authority under FDCPA section 
814(d) to write rules with respect to the collection of debts by debt 
collectors, the Bureau proposes Sec.  1006.22(f)(3) to prohibit a debt 
collector from communicating or attempting to communicate with a 
consumer using an email address that the debt collector knows or should 
know is provided to the consumer by the consumer's employer, unless the 
debt collector has received directly from the consumer either prior 
consent to use that email address or an email from that email address.
    Proposed comment 22(f)(3)-1 notes that, even after providing prior 
consent directly to a debt collector, a consumer could opt out of 
receiving emails at a work email address at any time using instructions 
provided by a debt collector pursuant to proposed Sec.  1006.6(e), or 
otherwise request not to receive emails at that address pursuant to 
proposed Sec.  1006.14(h). Proposed comment 22(f)(3)-1 also refers to 
the commentary to proposed Sec.  1006.6(b)(4)(i) for additional 
guidance on prior consent.
    Proposed comment 22(f)(3)-2 would clarify that a debt collector who 
receives an email directly from a consumer from an email address 
provided by the consumer's employer may communicate or attempt to 
communicate with the consumer at that email address, even if the 
consumer's email does not provide prior consent to the debt collector. 
Proposed comment 22(f)(3)-2 also provides an example of such a 
situation.
    Proposed comment 22(f)(3)-3 provides examples of email addresses 
that a debt collector knows or should know are provided to the consumer 
by the consumer's employer. Proposed comment 22(f)(3)-3 also states 
that, in the absence of contrary information, a debt collector neither 
would know nor should know that an email address is provided to the 
consumer by the consumer's employer if the email address's domain name 
is one commonly associated with a provider of non-work email addresses. 
Examples of domain names that are commonly associated with a provider 
of non-work email addresses would include gmail.com, yahoo.com, 
hotmail.com, aol.com, or msn.com, among others.\360\
---------------------------------------------------------------------------

    \360\ See, e.g., Email-Verify.My.Addr.com, List of Most Popular 
Email Domains (By Number of Live Emails), https://email-verify.my-addr.com/list-of-most-popular-email-domains.php (last visited May 6, 
2019) (listing the most popular email domain names, ranked by number 
of live emails).
---------------------------------------------------------------------------

    During the SBREFA process, small entity representatives sought 
guidance on how they would know whether an email address is provided to 
a consumer by an employer and also suggested that a consumer's consent 
to use a work email should transfer from the creditor to the debt 
collector.\361\ Proposed comment 22(f)(3)-3, which addresses when a 
debt collector knows or should

[[Page 23326]]

know that an email address is provided by a consumer's employer, is 
designed to provide such guidance. In addition, proposed Sec.  
1006.22(f)(3) would not apply a strict liability standard, so a debt 
collector would not violate the rule if the debt collector neither knew 
nor should have known that the debt collector used a consumer's work 
email address. The Bureau does not propose, however, that a consumer's 
prior consent to receive email on the consumer's work account from a 
creditor would transfer to a debt collector. A consumer may enter into 
a transaction with, and consent to receiving emails on their work 
account from, a creditor based on the characteristics of that 
particular creditor; in contrast, consumers generally have no ability 
to choose which debt collector attempts to collect their debt.
---------------------------------------------------------------------------

    \361\ These comments were similar to ANPRM comments submitted by 
several industry members, who noted that debt collectors may not be 
able to determine accurately whether an email address is provided by 
an employer because, among other things, the domain name may not 
signify that it is a work email or the consumer may consolidate 
multiple email accounts.
---------------------------------------------------------------------------

    One small entity representative recommended that emails to a 
consumer's work address be presumptively prohibited only if the debt 
collector knows or should know that the employer prohibits such contact 
(i.e., applying the FDCPA section 805(a)(3) framework to work email 
accounts).\362\ As discussed above, workplace email communications 
present a particularly high risk of third-party disclosure because many 
employers have a legal right to read messages sent or received by 
employees on their work email accounts. For this reason, the 
prohibition in proposed Sec.  1006.22(f)(3) does not apply the FDCPA 
section 805(a)(3) framework. Rather, to protect consumers from loss of 
employment and risk of embarrassment, the Bureau proposes to require 
that a debt collector obtain prior consent to use that email address 
directly from the consumer, or have received an email sent from the 
consumer's work email account, before using the consumer's work email 
account.
---------------------------------------------------------------------------

    \362\ See the section-by-section analysis of proposed Sec.  
1006.6(b)(3).
---------------------------------------------------------------------------

    The Bureau requests comment on all aspects of proposed Sec.  
1006.22(f)(3). In particular, the Bureau requests comment on whether 
FDCPA section 805(a)(3)'s framework should apply to emails to a 
consumer's work account, so that such emails are presumptively 
prohibited only when a debt collector knows or should know that a 
consumer's employer prohibits the consumer from receiving such 
communications. The Bureau also requests comment on whether more 
clarification is necessary regarding when a debt collector knows or 
should know that the debt collector is communicating using a consumer's 
work email address and, if so, what circumstances should indicate to a 
debt collector that an email address is provided by a consumer's 
employer. The Bureau further requests comment on the scope of proposed 
Sec.  1006.22(f)(3). As proposed, it would apply only to email contacts 
with the person obligated or allegedly obligated to pay a debt (i.e., a 
person defined as a consumer under proposed Sec.  1006.2(e)). The 
Bureau requests comment on whether it should be broadened to apply to 
email contacts with a consumer as defined in proposed Sec.  1006.6(a).
22(f)(4)
    Proposed Sec.  1006.22(f)(4) provides that a debt collector must 
not communicate or attempt to communicate with a consumer in connection 
with the collection of a debt by a social media platform that is 
viewable by a person other than the consumer or other person described 
in proposed Sec.  1006.6(d)(1)(i) through (vi).
    The FDCPA contains numerous provisions that guard against the 
disclosure of the consumer's financial affairs to individual third 
parties or the broader public.\363\ For example, FDCPA section 805(b) 
generally prohibits communicating with third parties in connection with 
the collection of a debt; FDCPA section 806(3) prohibits publishing 
public ``shame lists'' of consumers who allegedly refuse to pay their 
debts; \364\ and FDCPA section 808(7) and (8) prohibits communicating 
with a consumer regarding a debt by postcard or using most language or 
symbols on the outside of an envelope. The Bureau believes that 
communications or attempts to communicate by social media platforms 
that are viewable by a person other than a person with whom a debt 
collector may communicate under FDCPA section 805(b) similarly risk 
exposing a consumer's affairs to the public. For example, a debt 
collector's message to a consumer posted on a public-facing social 
media page may be viewed by many of the consumer's social or 
professional contacts, who may interpret a widely distributed message 
asking that the consumer return a call as an indication that the 
consumer is delinquent on an obligation. Accordingly, a debt collector 
may engage in an unfair or unconscionable act by, in connection with 
the collection of a debt, communicating or attempting to communicate 
with a consumer by publicly viewable social media platform.
---------------------------------------------------------------------------

    \363\ Invasion of individual privacy appears to have been one of 
the primary harms that Congress sought to eliminate through the 
FDCPA. FDCPA section 802(a), (e); 15 U.S.C. 1692(a), (e); S. Rept. 
No. 382, supra note 70, at 1699 (``[A] debt collector may not 
contact third persons such as a consumer's friends, neighbors, 
relatives, or employer. Such contacts are not legitimate collection 
practices and result in serious invasions of privacy, as well as the 
loss of jobs.''); id. at 1696 (``Collection abuse takes many forms, 
including . . . disclosing a consumer's personal affairs to friends, 
neighbors, or an employer.''); see also Douglass v. Convergent 
Outsourcing, 765 F.3d 299, 303 (3d Cir. 2014) (describing ``the 
invasion of privacy'' as ``a core concern animating the FDCPA'').
    \364\ S. Rept. No. 382, supra note 70, at 1696.
---------------------------------------------------------------------------

    Such conduct also may have the natural consequence of harassing, 
oppressing, or abusing the consumer. Although some social media 
contacts, such as a limited-content message, may not convey information 
regarding a debt directly or indirectly to any person, given the many 
other ways a debt collector could attempt to communicate with a 
consumer that are not viewable by a potentially wide array of the 
consumer's social or professional colleagues--such as by telephone, 
text message, postal mail, email, or private message through the same 
social media platform--a debt collector may have no legitimate purpose 
in contacting a consumer by publicly viewable social media. As a 
result, such conduct may serve only to harass, oppress, or abuse.
    For these reasons, and pursuant to its authority under FDCPA 
section 814(d) and to interpret FDCPA sections 806 and 808, proposed 
Sec.  1006.22(f)(4) provides that a debt collector must not communicate 
or attempt to communicate with a consumer in connection with the 
collection of a debt by a social media platform that is viewable by a 
person other than a person described in proposed Sec.  1006.6(d)(1)(i) 
through (vi). Proposed comment 22(f)(4)-1 provides examples 
illustrating the proposed rule.
    The Bureau requests comment on all aspects of proposed Sec.  
1006.22(f)(4), including on whether debt collectors anticipate that 
they will use social media platforms to contact consumers. The Bureau 
also requests comment on whether debt collectors have any non-harassing 
purpose for attempting to communicate with consumers using public-
facing social media platforms and, if so, whether proposed Sec.  
1006.22(f)(4) should have an exception for attempts to communicate such 
as limited-content messages. The Bureau further requests comment on the 
scope of proposed Sec.  1006.22(f)(4). As proposed, it would apply only 
to social media contacts with the person obligated or allegedly 
obligated to pay a debt (i.e., a person defined as a consumer under 
proposed Sec.  1006.2(e)). The Bureau requests comment on

[[Page 23327]]

whether it should be broadened to apply to social media contacts with 
any person described as a consumer in proposed Sec.  1006.6(a).
22(g) Safe Harbor for Certain Emails and Text Messages Relating to the 
Collection of a Debt
    FDCPA section 808 contains certain provisions designed to protect 
consumer privacy. As noted, FDCPA section 808(7) prohibits a debt 
collector from communicating with a consumer regarding a debt by 
postcard, and FDCPA section 808(8) generally prohibits a debt collector 
from using any language or symbol, other than the debt collector's 
address, on any envelope when communicating with a consumer by postal 
mail. As courts have recognized, these provisions aim to protect 
consumer privacy by limiting public disclosure of a consumer's 
debts.\365\ The examples in FDCPA section 808(7) and (8) apply to 
postal mail practices. In pre-proposal feedback, industry groups noted 
that uncertainty about how similar prohibitions might be applied to 
emails and text messages discourages the use of those technologies to 
communicate with consumers.
---------------------------------------------------------------------------

    \365\ See, e.g., Douglass v. Convergent Outsourcing, 765 F.3d 
299, 302 (3d Cir. 2014) (``Section 1692f evinces Congress's intent 
to screen from public view information pertinent to the debt 
collection.'').
---------------------------------------------------------------------------

    To mitigate such uncertainty while also protecting consumer 
privacy, proposed Sec.  1006.22(g) provides that a debt collector who 
communicates with a consumer using an email address, or telephone 
number for text messages, and follows the procedures described in 
proposed Sec.  1006.6(d)(3) does not violate Sec.  1006.22(a) by 
revealing in the email or text message the debt collector's name or 
other information indicating that the communication relates to the 
collection of a debt. The procedures in proposed Sec.  1006.6(d)(3) are 
designed to ensure that a debt collector who uses a particular email 
address or telephone number to communicate with a consumer by email or 
text message does not have a reason to anticipate that an unauthorized 
third-party disclosure may occur. If the proposed procedures work as 
designed, there would not be a reason to anticipate that a third party 
would see the debt collector's name or other debt-collection-related 
information included in a communication sent to such an email address 
or telephone number. Some pre-proposal feedback raised the possibility 
that a third party could read an electronic communication on, for 
example, the consumer's mobile telephone by looking over the consumer's 
shoulder. However, this feedback did not include any actual evidence of 
the prevalence of such behavior. Moreover, consumers generally should 
be able to manage over-the-shoulder risk by choosing where and when to 
read electronic communications and how to configure their devices.
    Proposed Sec.  1006.22(g) would provide a safe harbor only as to 
claims that a debt collector violated Sec.  1006.22 by revealing in the 
email or text message the debt collector's name or other information 
indicating that the communication relates to the collection of a debt. 
The proposed provision would not provide a safe harbor as to claims 
that a debt collector's email or text message violated the FDCPA or 
Regulation F in other ways. The Bureau requests comment on proposed 
Sec.  1006.22(g).
    In the Small Business Review Panel Outline, the Bureau described a 
proposal under consideration to prohibit a debt collector from sending 
an email message to a consumer if the ``from'' or ``subject'' lines 
contained information revealing that the email was about a debt.\366\ 
The Bureau's concern was that such information could reveal to others 
that the communication related to a debt.\367\ The Bureau does not 
propose this restriction described in the Small Business Review Panel 
Outline. In pre-proposal feedback, debt collectors suggested that the 
restriction would make electronic communication generally more 
difficult. Some industry participants predicted that, if debt 
collectors were required to exclude from an email's ``from'' or 
``subject'' lines all information suggestive of debt collection, 
consumers would be less likely to understand the email's purpose and 
more likely to treat the email like spam and delete or ignore it. This 
is consistent with research suggesting that the most important factors 
in whether a consumer will open an email are whether they recognize the 
sender and the content of the subject line.\368\ Proposed Sec.  
1006.6(d)(3), which, as noted above, describes procedures for obtaining 
and using an email address or a telephone number that is unlikely to 
lead to a third-party disclosure, may be a more effective initial step 
to minimize the risk of third-party disclosure.
---------------------------------------------------------------------------

    \366\ Small Business Review Panel Outline, supra note 56, at 
appendix H.
    \367\ Id.
    \368\ Direct Marketing Ass'n, Consumer Email Tracker 2017, at 18 
(2017), https://dma.org.uk/uploads/misc/5a1583ff3301a-consumer-email-tracking-report-2017-(2)_5a1583ff32f65.pdf.
---------------------------------------------------------------------------

Section 1006.26 Collection of Time-Barred Debts
    Proposed Sec.  1006.26 contains interventions related to the 
collection of time-barred debts. Proposed Sec.  1006.26(a) would define 
several terms, and proposed Sec.  1006.26(b) would prohibit debt 
collectors from suing or threatening to sue consumers to collect time-
barred debts. The Bureau proposes Sec.  1006.26 pursuant to its 
authority under FDCPA section 814(d) to prescribe rules with respect to 
the collection of debts by debt collectors.
26(a) Definitions
    Proposed Sec.  1006.26(a) would define several terms used in Sec.  
1006.26 but not defined in the FDCPA. These definitions would 
facilitate compliance with proposed Sec.  1006.26(b), which would 
interpret FDCPA section 807 to prohibit debt collectors from suing and 
threatening to sue consumers to collect time-barred debts.
26(a)(1) Statute of Limitations
    Proposed Sec.  1006.26(a)(2), discussed below, would define the 
term time-barred debt to mean a debt for which the applicable statute 
of limitations has expired. Proposed Sec.  1006.26(a)(1), in turn, 
would define the term statute of limitations to mean the period 
prescribed by applicable law for bringing a legal action against the 
consumer to collect a debt.
    Statutes of limitations typically are established by State law and 
provide time limits for bringing suit on legal claims.\369\ They 
reflect a public policy determination that it is unjust to subject 
defendants to suit after a specified period.\370\ For debt collection 
claims, the length of the applicable statute of limitations often 
varies by State and, within each State, by debt type.\371\ Most 
statutes of limitations applicable to debt collection claims are 
between three and six years, although some are as long as 15 
years.\372\
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    \369\ Federal law sometimes establishes the statute of 
limitations. For example, legal actions to recover certain 
telecommunications debt are subject to a statute of limitations set 
by Federal law. See 47 U.S.C. 415(a).
    \370\ See, e.g., United States v. Kubrick, 444 U.S. 111, 117 
(1979) (``Statutes of limitations . . . represent a pervasive 
legislative judgment that it is unjust to fail to put the adversary 
on notice to defend within a specified period of time and that the 
right to be free of stale claims in time comes to prevail over the 
right to prosecute them.'' (internal citation and quotation marks 
omitted)).
    \371\ See Fed. Trade Comm'n, Repairing a Broken System: 
Protecting Consumers in Debt Collection Litigation and Arbitration, 
at 24 (July 2010) (hereinafter FTC Litigation Report).
    \372\ See FTC Debt Buying Report, supra note 14, at 42.

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[[Page 23328]]

    Debt collectors generally are familiar with the concept of statutes 
of limitations, and the proposed definition generally should be 
consistent with debt collectors' understanding of the term. The Bureau 
requests comment on the proposed definition and whether any additional 
clarification is needed.
26(a)(2) Time-Barred Debt
    Proposed Sec.  1006.26(a)(2) would define the term time-barred debt 
to mean a debt for which the applicable statute of limitations has 
expired. Debt collectors generally are familiar with the concept of 
time-barred debt, and the definition of time-barred debt in proposed 
Sec.  1006.26(a)(2) is consistent with debt collectors' understanding 
of the term.
    Many debt collectors already determine whether the statute of 
limitations applicable to a debt has expired. Some do so to comply with 
State and local disclosure laws that require them to inform consumers 
when debts are time barred.\373\ Others do so to assess whether they 
can sue to collect the debt, which may affect their collection 
strategy. The information that debt buyers generally receive when 
bidding on and purchasing debts, and the information that other debt 
collectors generally receive at placement, should allow them to 
determine whether the applicable statute of limitations has 
expired.\374\ The Bureau requests comment on the proposed definition 
and on whether any additional clarification is needed.
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    \373\ See, e.g., Cal. Civ. Code Sec.  1788.52(d)(3); Conn. Gen. 
Stat. Sec.  36a-805(a)(14); Mass. Code Regs., tit. 940, Sec.  
7.07(24); N.M. Code. R. Sec.  12.2.12.9(A); N.Y. Comp. Codes R. & 
Regs., tit. 23, Sec.  1.3; New York City, N.Y., Rules, tit. 6, Sec.  
2-191(a); W. Va. Code Sec.  46a-2-128(f).
    \374\ See FTC Debt Buying Report, supra note 14, at 49 (``The 
data the Commission received from debt buyers suggests that debt 
buyers usually are likely to know or be able to determine whether 
the debts on which they are collecting are beyond the statute of 
limitations.''); CFPB Debt Collection Operations Study, supra note 
45, at 23 (noting that the majority of respondents reported always 
or often receiving, among other things, debt balance at charge off, 
account agreement documentation, and billing statements).
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26(b) Suits and Threats of Suit Prohibited
    Under the laws of most States, expiration of the applicable statute 
of limitations, if raised by the consumer as an affirmative defense, 
precludes the debt collector from recovering on the debt using judicial 
processes, but it does not extinguish the debt itself.\375\ In other 
words, in most States, a debt collector may use non-litigation means to 
collect a time-barred debt, as long as those means do not violate the 
FDCPA or other laws. If a debt collector does sue to collect a time-
barred debt and the consumer proves the expiration of the statute of 
limitations as an affirmative defense, the court will dismiss the suit. 
Multiple courts have held that suits and threats of suit on time-barred 
debt violate the FDCPA, reasoning that such practices violate FDCPA 
section 807's prohibition on false or misleading representations, FDCPA 
section 808's prohibition on unfair practices, or both.\376\ The FTC 
has also concluded that the FDCPA bars actual and threatened suits on 
time-barred debt.\377\ In addition, at least one industry group 
requires its members to refrain from suing or threatening to sue on 
time-barred debts.\378\ Nevertheless, the Bureau's enforcement 
experience suggests that some debt collectors may continue to sue or 
threaten to sue on time-barred debts.\379\
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    \375\ In Mississippi and Wisconsin, debts are extinguished when 
the applicable statute of limitations expires. See Miss. Code Ann. 
Sec.  15-1-3 (``The completion of the period of limitation 
prescribed to bar any action, shall defeat and extinguish the right 
as well as the remedy.''); Wis. Stat. Ann. Sec.  893.05 (``When the 
period within which an action may be commenced on a Wisconsin cause 
of action has expired, the right is extinguished as well as the 
remedy.'').
    \376\ See, e.g., Pantoja v. Portfolio Recovery Assocs., LLC, 852 
F.3d 679, 683-84 (7th Cir. 2017); McMahon v. LVNV Funding, LLC, 744 
F.3d 1010, 1020 (7th Cir. 2014); Phillips v. Asset Acceptance, LLC, 
736 F.3d 1076, 1079 (7th Cir. 2013); Huertas v. Galaxy Asset Mgmt., 
641 F.3d 28, 33 (3d Cir. 2011); Goins v. JBC & Assocs., P.C., 352 F. 
Supp. 2d 262, 273 (D. Conn. 2005); Kimber v. Fed. Fin. Corp., 668 F. 
Supp. 1480, 1487-89 (M.D. Ala. 1987).
    \377\ FTC Litigation Report, supra note 371, at 23.
    \378\ Receivables Mgmt. Ass'n Int'l, Receivables Management 
Certification Program, at 32 (Jan. 2018), https://rmassociation.org/wp-content/uploads/2018/02/Certification-Policy-version-6.0-FINAL-20180119.pdf (``A Certified Company shall not knowingly bring or 
imply that it has the ability to bring a lawsuit on a debt that is 
beyond the applicable statute of limitations, even if state law 
revives the limitations period when a payment is received after the 
expiration of the statute.''); see also David E. Reid, Out-of-
Statute Debt: What is a Smart, Balanced, and Responsible Approach, 
at 8 (Receivables Mgmt. Ass'n Int'l, White Paper, 2015), https://rmassociation.org/wp-content/uploads/2017/04/RMA_Whitepaper_OOS.pdf 
(``Although, as noted, the statute of limitations is an affirmative 
defense that, in almost all states, must be raised by the defendant 
or it is waived, it is improper to knowingly file OSD [i.e., out-of-
statute debt] suits and wait to see if the defense is pled.'').
    \379\ Consent Order at ]] 65-69, In re Encore Capital Group, 
Inc., No. 2015-CFPB-0022 (Sept. 9, 2015), https://files.consumerfinance.gov/f/201509_cfpb_consent-order-encore-capital-group.pdf; Consent Order at ]] 56-59, In re Portfolio 
Recovery Assocs. LLC, No. 2015-CFPB-0023 (Sept. 9, 2015), https://files.consumerfinance.gov/f/201509_cfpb_consent-order-portfolio-recovery-associates-llc.pdf.
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    A debt collector who sues or threatens to sue a consumer on a time-
barred debt may explicitly or implicitly misrepresent to the consumer 
that the debt is legally enforceable, and that misrepresentation likely 
is material to consumers because it may affect their conduct with 
regard to the collection of that debt, including, for example, whether 
to pay it.\380\ In response to the Bureau's ANPRM, some consumer 
advocacy groups and State Attorneys General observed that consumers are 
often uncertain about their rights concerning time-barred debt. The 
Bureau's consumer testing to date is consistent with those 
observations.\381\ In addition, as courts have recognized, the passage 
of time ``dulls the consumer's memory of the circumstances and validity 
of the debt'' and ``heightens the probability that [the consumer] will 
no longer have personal records detailing the status of the debt.'' 
\382\ Consumers sued or threatened with suit on a time-barred debt may 
not recognize that the debt is time barred, that time-barred debts are 
unenforceable in court, or that generally they must raise the 
expiration of the statute of limitations as an affirmative defense.
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    \380\ See, e.g., Kimber, 668 F. Supp. at 1489 (``By threatening 
to sue Kimber on her alleged debt . . . FFC implicit[ly] represented 
that it could recover in a lawsuit, when in fact it cannot properly 
do so.'').
    \381\ See FMG Focus Group Report, supra note 38, at 9-10; FMG 
Cognitive Report, supra note 40, at 36-37; FMG Summary Report, supra 
note 42, at 35-36; see also FTC Litigation Report, supra note 371, 
at iii, 26.
    \382\ Phillips, 736 F.3d at 1079 (quoting Kimber, 668 F. Supp. 
at 1487).
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    Suits and threats of suit on time-barred debts can harm consumers 
in multiple ways. A debt collector's threat to sue on a time-barred 
debt may prompt some consumers to pay or prioritize that debt over 
others in the mistaken belief that doing so is necessary to forestall 
litigation. Similarly, suits on time-barred debts may lead to judgments 
against consumers on claims for which those consumers had meritorious 
defenses, including, but not limited to, a statute-of-limitations 
defense. Such judgments may be especially likely given that few 
consumers sued for allegedly unpaid debts--whether time-barred or not--
actually defend themselves in court, and those who do often are 
unrepresented. As a result, the vast majority of judgments on unpaid 
debts, including on time-barred debts, are default judgments, entered 
solely on the representations contained in the debt collector's 
complaint.\383\
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    \383\ See FTC Debt Buying Report, supra note 14, at 45 
(observing that ``90 percent or more of consumers sued in [debt 
collection actions] do not appear in court to defend,'' which 
``creates a risk that consumer will be subject to a default judgment 
on a time-barred debt''); Peter A. Holland, The One Hundred Billion 
Dollar Problem in Small Claims Court: Robo-Signing and Lack of Proof 
in Debt Buyer Cases, 6 J. Bus. & Tech. L. 259, 265 (2011) (``In the 
majority of debt buyer cases, the courts grant the debt buyer a 
default judgment because the consumer has failed to appear for 
trial. . . . Debtors who do receive notice usually appear without 
legal representation.''); CFPB Debt Collection Operations Study, 
supra note 45, at 18 (observing that respondents reported obtaining 
default judgments in 60 to 90 percent of their filed suits); cf. 
Kimber, 668 F. Supp. at 1487 (``Because few unsophisticated 
consumers would be aware that a statute of limitations could be used 
to defend against lawsuits based on stale debts, such consumers 
would unwittingly acquiesce to such lawsuits. And, even if the 
consumer realizes that she can use time as a defense, she will more 
than likely still give in rather than fight the lawsuit because she 
must still expend energy and resources and subject herself to the 
embarrassment of going into court to present the defense; this is 
particularly true in light of the costs of attorneys today.'').

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[[Page 23329]]

    According to the small entity representatives who participated in 
the SBREFA process, debt collectors generally do not sue on debt they 
know to be time barred. Similarly, a trade association representing 
debt buyers has reported that, in a poll of its members, not one 
responded that they knowingly or intentionally file lawsuits after the 
applicable statute of limitations has expired.\384\ During the SBREFA 
process, however, several small entity representatives stated that 
determining whether the statute of limitations has expired can be 
complex. The determination may involve analyzing which statute of 
limitations applies, when the statute of limitations began to run, and 
whether the statute of limitations has been tolled or reset. The Bureau 
believes that, in many cases, a debt collector will know, or can 
readily determine, whether the statute of limitations has expired. In 
some instances, however, a debt collector may be genuinely uncertain 
even after undertaking a reasonable investigation; this could occur, 
for example, when the case law in a State is unclear as to which 
statute of limitations applies to a particular type of debt.
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    \384\ See David E. Reid, Out-of-Statute Debt: What is a Smart, 
Balanced, and Responsible Approach, at 8, (Receivables Mgmt. Ass'n 
Int'l, White Paper, 2015), https://rmassociation.org/wp-content/uploads/2017/04/RMA_Whitepaper_OOS.pdf.
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    For these reasons, the Bureau proposes to interpret FDCPA section 
807 to provide that a debt collector must not bring or threaten to 
bring a legal action against a consumer to collect a debt that the debt 
collector knows or should know is a time-barred debt. FDCPA section 807 
generally prohibits debt collectors from using ``any false, deceptive, 
or misleading representation or means in connection with the collection 
of any debt,'' and FDCPA section 807(2)(A) specifically prohibits 
falsely representing ``the character, amount, or legal status of any 
debt.'' The Bureau interprets FDCPA section 807 and 807(2)(A) to 
prohibit debt collectors from suing or threatening to sue consumers on 
debts they know or should know are time-barred debts because such suits 
and threats of suit explicitly or implicitly misrepresent, and may 
cause consumers to believe, that the debts are legally enforceable. In 
addition, threats to sue consumers on time-barred debts are similar to 
threats to take actions that cannot legally be taken, which FDCPA 
section 807(5) specifically prohibits, because both involve the threat 
of action to which the consumer has a complete legal defense. The 
Bureau's proposed interpretation of FDCPA section 807 is generally 
consistent with well-established case law holding that lawsuits and 
threats of lawsuits on time-barred debt violate FDCPA section 807.\385\ 
The proposed rule may provide debt collectors with greater certainty as 
to what the law prohibits while also protecting consumers and enabling 
them to prove legal violations without having to litigate in each case 
whether lawsuits and threats of lawsuits on time-barred debt violate 
the FDCPA.
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    \385\ See, e.g., Pantoja, 852 F.3d at 683; McMahon, 744 F.3d at 
1020; Phillips, 736 F.3d at 1079; Kimber, 668 F. Supp. at 1488-89.
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    The Bureau requests comment on proposed Sec.  1006.26(b) and on 
whether any additional clarification is needed. In particular, the 
prohibitions in proposed Sec.  1006.26(b) would apply only if the debt 
collector knows or should know that the applicable statute of 
limitations has expired. It sometimes may be difficult, however, to 
determine whether a ``know or should have known'' standard has been 
met. Such uncertainty could increase litigation costs and make 
enforcement of proposed Sec.  1006.26(b) more difficult. In part to 
address this concern, the Small Business Review Panel Outline described 
an alternative strict-liability standard pursuant to which a debt 
collector would be liable for suing or threatening to sue on a time-
barred debt even if the debt collector neither knew nor should have 
known that the debt was time barred.\386\ The Bureau specifically 
requests comment on using a ``knows or should know'' standard in 
proposed Sec.  1006.26(b) and on the merits of using a strict liability 
standard instead.
---------------------------------------------------------------------------

    \386\ Small Business Review Panel Outline, supra note 56, at 20.
---------------------------------------------------------------------------

26(c) Reserved
    The Bureau is likely to propose that debt collectors must provide 
disclosures to consumers when collecting time-barred debts. The Bureau 
currently is completing its evaluation of whether consumers take away 
from non-litigation collection efforts that they can or may be sued on 
a debt and, if so, whether that take-away changes depending on the age 
of the debt. In many States, a consumer's partial payment on a time-
barred debt or acknowledgment of a time-barred debt in writing restarts 
the statute of limitations period and ``revives'' the debt collector's 
right to sue for the full amount. The Bureau is also completing its 
evaluation of how a time-barred debt disclosure might affect consumers' 
understanding of whether debts can be revived. The disclosures under 
consideration include a disclosure that would inform a consumer that, 
because of the age of the debt, the debt collector cannot sue to 
recover it. They also include, where applicable, a disclosure that 
would inform a consumer that the right to sue on a time-barred debt can 
be revived in certain circumstances. The Small Business Review Panel 
Outline discussed certain such disclosures, and the Bureau has received 
feedback from stakeholders about both the need for, and the content of, 
such disclosures.\387\
---------------------------------------------------------------------------

    \387\ Id. at 20-21.
---------------------------------------------------------------------------

    The Bureau plans to conduct additional consumer testing of possible 
time-barred debt and revival disclosures, and expects this additional 
testing to further inform the Bureau's evaluation of any time-barred 
debt disclosures. At a later date, the Bureau intends to issue a report 
on such testing and any disclosure proposals related to the collection 
of time-barred debt. Stakeholders will have an opportunity to comment 
on such testing if the Bureau intends to use it to support disclosure 
requirements in a final rule. The Bureau reserves Sec.  1006.26(c) and 
appendix B of the regulation for any such proposals.
Section 1006.30 Other Prohibited Practices
    Proposed Sec.  1006.30 contains several measures designed to 
protect consumers from certain harmful debt collection practices. 
Specifically, proposed Sec.  1006.30(a) would regulate debt collectors' 
furnishing practices under certain circumstances; proposed Sec.  
1006.30(b) would limit the transfer of certain debts; and proposed 
Sec.  1006.30(c), (d), and (e) would generally restate statutory 
provisions regarding allocation of payments, venue, and the furnishing 
of certain deceptive forms, respectively.
30(a) Communication Prior to Furnishing Information
    Debt collectors may actively attempt to collect debts about which 
they furnish information to consumer reporting agencies by, for 
example,

[[Page 23330]]

calling or writing to consumers. However, some debt collectors engage 
in ``passive'' collections by furnishing information to consumer 
reporting agencies for inclusion in consumer reports without first 
communicating with consumers.\388\ Debt collectors may attempt to 
collect debts passively where the expected return from that technique 
exceeds the cost of attempting to collect the debt by communicating 
with consumers.\389\
---------------------------------------------------------------------------

    \388\ See CFPB Medical Debt Report, supra note 20, at 36.
    \389\ See id.
---------------------------------------------------------------------------

    A consumer may suffer harm if a debt collector furnishes 
information to a consumer reporting agency without first communicating 
with the consumer. If debt collectors do not communicate with consumers 
prior to furnishing, consumers are likely to be unaware that they have 
a debt in collection unless they obtain and review their consumer 
report. In turn, many consumers may not obtain and review their 
consumer reports until they apply for credit, housing, employment, or 
another product or service provided by an entity that reviews consumer 
reports during the application process. At that point, consumers may 
face pressure to pay debts that they otherwise would dispute, including 
debts that they do not owe,\390\ in an effort to remove the debts from 
their consumer reports and more quickly obtain a mortgage or job or 
desired product or service. Consumers unaware of the debt before a 
financial institution, landlord, employer, or other similar person 
makes a decision also may face the denial of an application, a higher 
interest rate, or other negative consequences.\391\ If the debt 
collector had instead communicated with the consumer prior to 
furnishing by, for example, sending the consumer a validation notice, 
then the consumer would have been more likely to have information about 
the debt and to have the opportunity to resolve the debt with the debt 
collector by either paying or disputing it.
---------------------------------------------------------------------------

    \390\ In some cases, the information furnished to consumer 
reporting agencies may be inaccurate. See id. at 51 (``Significant 
questions exist as to the accuracy of collections tradeline 
reporting.'').
    \391\ Such consumers generally would receive adverse action 
notices alerting them to the negative item on their consumer report, 
but these notices would occur too late to prevent the initial harm 
from passive collection practices. See 15 U.S.C. 1681m(a). Consumers 
who obtained credit from financial institutions also generally would 
have received notices that the financial institutions furnish 
negative information to nationwide consumer reporting agencies. See 
15 U.S.C. 1681s-2(a)(7).
---------------------------------------------------------------------------

    These consumer harms could be avoided if debt collectors 
communicated with consumers before furnishing information about debts 
in collection. The Bureau thus proposes Sec.  1006.30(a), which 
provides that a debt collector must not furnish to a consumer reporting 
agency, as defined in section 603(f) of the Fair Credit Reporting Act 
(FCRA),\392\ information regarding a debt before communicating with the 
consumer about the debt. Taken together with proposed Sec.  1006.34--
which generally would require debt collectors to provide consumers 
important information about debts at the outset of collection, 
including consumers' options for resolving them--proposed Sec.  
1006.30(a) should reduce the harms that result from consumers being 
unaware of or uninformed about their debts in collection.
---------------------------------------------------------------------------

    \392\ 15 U.S.C. 1681a(f).
---------------------------------------------------------------------------

    During the SBREFA process, small entity representatives expressed 
concern over the potential burden to a debt collector of documenting, 
such as by using certified mail, that a consumer received a 
communication. The Small Business Review Panel recommended that the 
Bureau consider clarifying the type of communication that would be 
sufficient to satisfy the requirement, including clarifying that debt 
collectors do not need to send the validation notice by certified mail.
    Proposed comment 30(a)-1 is designed to address the Panel's 
recommendation. Proposed comment 30(a)-1 would clarify that a debt 
collector would satisfy proposed Sec.  1006.30(a)'s requirement to 
communicate if the debt collector conveyed information regarding a debt 
directly or indirectly to the consumer through any medium, but a debt 
collector would not satisfy the communication requirement if the debt 
collector attempted to communicate with the consumer but no 
communication occurred. For example, a debt collector communicates with 
the consumer if the debt collector provides a validation notice to the 
consumer, but a debt collector does not communicate with the consumer 
by leaving a limited-content message for the consumer. Proposed comment 
30(a)-1 also would clarify that a debt collector may refer to proposed 
Sec.  1006.42 for more information on how to provide disclosures in a 
manner that is reasonably expected to provide actual notice to 
consumers. The Bureau requests comment on proposed Sec.  1006.30(a) and 
its related commentary.
    The Bureau proposes Sec.  1006.30(a) pursuant to its authority 
under FDCPA section 814(d) to prescribe rules with respect to the 
collection of debts by debt collectors; its authority to interpret 
FDCPA section 806 regarding harassment, oppression, or abuse in 
connection with the collection of a debt; and its authority to 
interpret FDCPA section 808 regarding unfair or unconscionable means to 
collect or attempt to collect any debt. As discussed in part IV, a debt 
collector violates FDCPA section 806 if the debt collector engages in 
conduct that has the natural consequence of harassing, oppressing, or 
abusing any person in connection with the collection of a debt. A debt 
collector violates FDCPA section 808 if the debt collector uses unfair 
or unconscionable means to collect or attempt to collect any debt.
    Courts have interpreted FDCPA sections 806 and 808 to prohibit 
certain coercive collection methods that may cause consumers to pay 
debts not actually owed.\393\ Passive collection practices are similar 
to these other types of prohibited conduct because, as discussed above, 
they exert significant pressure in circumstances that undermine the 
ability of consumers to decide whether to pay debts, sometimes 
resulting in them paying debts they do not owe or would have otherwise 
disputed. The Bureau thus proposes Sec.  1006.30(a) to prohibit a debt 
collector from furnishing information about a debt to consumer 
reporting agencies prior to communicating with the consumer about that 
debt, on the basis that subjecting a consumer to pressure by furnishing 
information to a consumer reporting agency without first providing 
notice to the consumer constitutes conduct that may have the natural 
consequence of harassment, oppression, or abuse in violation of FDCPA 
section 806, and that is an unfair or unconscionable means to collect 
or attempt to collect a debt under FDCPA section 808.
---------------------------------------------------------------------------

    \393\ See, e.g., Fox v. Citicorp Credit Servs., Inc., 15 F.3d 
1507, 1517 (9th Cir. 1994) (reversing grant of summary judgment to 
debt collector in part because ``a jury could rationally find'' that 
filing writ of garnishment was unfair or unconscionable under 
section 808 when debt was not delinquent); Ferrell v. Midland 
Funding, LLC, No. 2:15-cv-00126-JHE, 2015 WL 2450615, at *3-4 (N.D. 
Ala. May 22, 2015) (denying debt collector's motion to dismiss 
section 806 claim where debt collector allegedly initiated 
collection lawsuit even though it knew plaintiff did not owe debt); 
Pittman v. J.J. Mac Intyre Co. of Nev., Inc., 969 F. Supp. 609, 612-
13 (D. Nev. 1997) (denying debt collector's motion to dismiss claims 
under sections 807 and 808 where debt collector allegedly attempted 
to collect fully satisfied debt).
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30(b) Prohibition on the Sale, Transfer, or Placement of Certain Debts
30(b)(1) In General
    The sale, transfer, and placement for collection of debts that have 
been paid or settled or discharged in bankruptcy,

[[Page 23331]]

or that are subject to an identity theft report creates risk of 
consumer harm. If a debt is paid or settled, or discharged in 
bankruptcy, the debt is either extinguished or uncollectible. If a debt 
is listed on an identity theft report, the debt likely resulted from 
fraud, in which case the consumer may not have a legal obligation to 
repay it. Identity theft frequently results in fraudulent use of credit 
and often is discovered only after unauthorized account activity has 
occurred.\394\
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    \394\ In 2014, approximately 86 percent of identity theft 
victims reported that their most recent incident involved 
unauthorized charges on an existing credit card or bank account. 
More than 60 percent of victims learned of the identity theft when 
either a financial institution notified them of suspicious activity 
in an account or the victim noticed fraudulent charges on an account 
statement. Erika Harrell, Bureau of Justice Stats., Victims of 
Identity Theft, 2014, at 2, 5, U.S. Dep't of Justice, (revised Nov. 
13, 2017), https://www.bjs.gov/content/pub/pdf/vit14.pdf.
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    Because debts that have been paid or settled or discharged in 
bankruptcy are either extinguished or uncollectible, and because 
consumers likely do not owe debts that are subject to an identity theft 
report, debt collectors seeking to collect such debts almost inevitably 
will make an express or implied false claim that consumers owe the 
debts. For example, in response to the ANPRM, consumer advocates noted 
that debt collectors who sue consumers to recover debts that were paid 
or settled with previous creditors may rely on an incomplete account 
history that does not reflect a consumer's prior payment or settlement. 
The FDCPA in many places reflects a concern with debt collectors 
collecting or attempting to collect debts that consumers likely do not 
owe.\395\
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    \395\ See, e.g., 15 U.S.C. 1692f(1) (prohibiting ``[t]he 
collection of any amount (including any interest, fee, charge, or 
expense incidental to the principal obligation) unless such amount 
is expressly authorized by the agreement creating the debt or 
permitted by law''); see also Jacobson v. Healthcare Fin. Servs., 
Inc., 516 F.3d 85, 89 (2d Cir. 2008) (quoting S. Rept. No. 382, 
supra note 70, at 4); Fox v. Citicorp Credit Servs., Inc., 15 F.3d 
1507, 1517 (9th Cir. 1994) (reversing grant of summary judgment to 
debt collector in part because ``a jury could rationally find'' that 
filing writ of garnishment was unfair or unconscionable under 
section 808 when debt was not delinquent); Ferrell v. Midland 
Funding, LLC, No. 2:15-cv-00126-JHE, 2015 WL 2450615, at *3-4 (N.D. 
Ala. May 22, 2015) (denying debt collector's motion to dismiss 
section 806 claim where debt collector allegedly initiated 
collection lawsuit even though it knew plaintiff did not owe debt); 
Pittman v. J.J. Mac Intyre Co. of Nev., Inc., 969 F. Supp. 609, 612-
13 (D. Nev. 1997) (denying debt collector's motion to dismiss claims 
under sections 807 and 808 where debt collector allegedly attempted 
to collect fully satisfied debt).
---------------------------------------------------------------------------

    When the FDCPA became law in 1977, debt sales and related transfers 
were not common. In subsequent years, debt sales and transfers have 
become more frequent.\396\ The general growth in debt sales and 
transfers may have increased the likelihood that a debt that has been 
paid, settled, or discharged in bankruptcy may be transferred or 
sold.\397\ Moreover, identity theft, which has emerged as a major 
consumer protection concern, may increase the number of debts that are 
created if consumers' identities are stolen and their personal 
information misused.\398\
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    \396\ In 2009, the FTC stated that the ``most significant change 
in the debt collection business in recent years has been the advent 
and growth of debt buying.'' FTC Modernization Report, supra note 
176, at 4.
    \397\ See, e.g., Bureau of Consumer Fin. Prot., Supervisory 
Highlights, Issue No. 12, at 6-7 (Summer 2016), https://www.consumerfinance.gov/data-research/research-reports/supervisory-highlights-issue-no-12-summer-2016/ (discussing examinations finding 
that debt sellers failed to code accounts to reflect that they were 
in bankruptcy, the product of fraud, or settled in full).
    \398\ See generally Kristin Finklea, Identity Theft: Trends and 
Issues, Cong. Research Serv., RL40599 (2014), https://fas.org/sgp/crs/misc/R40599.pdf.
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    Other Federal regulators have raised similar concerns about the 
risk of consumer harm from the sale, transfer, and placement of these 
categories of debt. The FTC has considerable expertise with respect to 
the debt buying industry \399\ and has identified a risk of consumer 
harm if a debt collector purchases and seeks to collect discharged 
debt.\400\ The Office of the Comptroller of the Currency (OCC) has 
advised its supervised institutions that certain categories of debt--
including settled debts, debts belonging to borrowers seeking 
bankruptcy protection, and debts incurred as a result of fraudulent 
activity--are not appropriate for sale because of the reputational risk 
and the threat of legal liability related to the unlawful tactics 
employed to collect these debts.\401\
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    \399\ See generally, e.g., FTC Debt Buying Report, supra note 
14.
    \400\ FTC Modernization Report, supra note 176, at 64-65.
    \401\ See Off. of the Comptroller of the Currency, Bulletin 
2014-37, Description: Risk Management Guidance (Aug. 4, 2014), 
https://www.occ.gov/news-issuances/bulletins/2014/bulletin-2014-37.html.
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    Segments of the debt collection industry also appear to recognize 
the risks of transferring these categories of debt. Some debt 
collectors have adopted policies to identify and exclude certain debts 
from sale or transfer. For example, a trade association representing 
debt buyers administers a certification program that prohibits the sale 
of debts that have been settled in full, paid in full, or are the 
result of identity theft or fraud.\402\
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    \402\ See Receivables Mgmt. Ass'n Int'l, Receivables Management 
Certification Program, Certification Governance Document, at 43 
(2018), https://rmassociation.org/wp-content/uploads/2018/02/Certification-Policy-version-6.0-FINAL-20180119.pdf. A large debt 
buyer also indicated in preproposal feedback that it has adopted 
policies to exclude certain debts from debt sales transactions.
---------------------------------------------------------------------------

    For these reasons, proposed Sec.  1006.30(b)(1)(i) generally would 
prohibit a debt collector from selling, transferring, or placing for 
collection a debt if the debt collector knows or should know that the 
debt has been paid or settled, discharged in bankruptcy, or that an 
identity theft report has been filed with respect to the debt.\403\ The 
Bureau understands that debt collectors may be required to sell or 
transfer such debts for non-debt collection purposes and proposes 
certain exceptions in Sec.  1006.30(b)(2) to accommodate those 
situations. Proposed comment 30(b)(1)(i)(C)-1 provides an example 
clarifying that a debt collector knows or should know that an identity 
theft report was filed with respect to a debt if, for example, the debt 
collector has received a copy of the identity theft report.
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    \403\ Proposed Sec.  1006.30(b) would define ``identity theft 
report'' as defined in the FCRA, 15 U.S.C. 1681a(q)(4).
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    The Bureau proposes Sec.  1006.30(b)(1)(i) pursuant to its 
authority under FDCPA section 814(d) to prescribe rules with respect to 
the collection of debts by debt collectors, and pursuant to its 
authority to interpret FDCPA section 808 regarding unfair or 
unconscionable debt collection practices. The Bureau proposes to 
prohibit the sale, transfer, or placement of such debts as unfair under 
FDCPA section 808 on the basis that, because consumers do not owe or 
cannot be subject to collections on alleged debts that have been paid 
or settled or discharged in bankruptcy, and likely do not owe alleged 
debts that are subject to identity theft reports, the sale, transfer, 
or placement of such debts is unfair or unconscionable. Further, the 
sale, transfer or placement of such debts is unfair under section 1031 
of the Dodd-Frank Act because it is likely to cause substantial injury 
to consumers that is not reasonably avoidable by consumers where the 
substantial injury is not outweighed by countervailing benefits to 
consumers or to competition. Prohibiting the sale, transfer, or 
placement of such debts is reasonably designed to prevent this unfair 
practice.
    With respect to a debt collector who is collecting a consumer 
financial product or service debt, as defined in proposed Sec.  
1006.2(f), the Bureau also proposes Sec.  1006.30(b)(1)(i) pursuant to 
its authority under section 1031(b) of the Dodd-Frank Act to prescribe 
rules to identify and prevent the commission of unfair acts or 
practices by Dodd-Frank Act covered persons, and the Bureau

[[Page 23332]]

proposes Sec.  1006.30(b)(1)(ii) to identify this unfair act or 
practice.\404\ As discussed in part IV.B, to declare an act or practice 
unfair under Dodd-Frank Act section 1031(b), the Bureau must have a 
reasonable basis to conclude that: (1) The act or practice causes or is 
likely to cause substantial injury to consumers which is not reasonably 
avoidable by consumers; and (2) such substantial injury is not 
outweighed by countervailing benefits to consumers or to competition. 
Selling, transferring, or placing for collection debts described in 
proposed Sec.  1006.30(b)(1)(i) likely causes substantial injury to 
consumers because the collection of such debts likely results in 
deceptive claims of indebtedness and the unfair collection of amounts 
not owed.\405\ Consumers cannot reasonably avoid this harm because they 
have no control over debt sales, transfers, or placements or collection 
activity arising subsequent to those sales, transfers or placements. 
The collection of debts that are either not owed or likely not owed 
does not benefit consumers or competition.
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    \404\ See part IV.B for a discussion of the Bureau's framework 
for interpreting Dodd-Frank Act section 1031(b).
    \405\ Cf. Fed. Trade Comm'n v. Neovi, Inc., 604 F.3d 1150, 1157 
(9th Cir. 2010) (holding that the defendant engaged in an unfair 
practice by creating a website that fraudsters predictably used to 
injure consumers).
---------------------------------------------------------------------------

    The Bureau requests comment on all aspects of proposed Sec.  
1006.30(b)(1). In particular, the Bureau requests comment on whether 
additional categories of debt, such as debt currently subject to 
litigation and debt lacking clear evidence of ownership, should be 
included in any prohibition adopted in a final rule. The Bureau also 
requests comment on how frequently consumers identify a specific debt 
when filing an identity theft report, and on how frequently debt 
collectors learn that an identity theft report was filed in error and 
proceed to sell or transfer the debt. The Bureau also requests comment 
on any potential disruptions that proposed Sec.  1006.30(b)(1)(i) would 
cause for secured debts, such as by preventing servicing transfers or 
foreclosure activity related to mortgage loans. Finally, the Bureau 
requests comment on whether any of the currently proposed categories of 
debts should be clarified and, if so, how; and on whether additional 
clarification is needed regarding the proposed ``know or should know'' 
standard.
30(b)(2) Exceptions
    Allowing the sale, transfer, or placement of the debts described in 
proposed Sec.  1006.30(b)(1)(i) for certain bona fide business purposes 
other than debt collection may not create a significant risk of 
deceptive or unfair collections activity. Proposed Sec.  1006.30(b)(2) 
sets forth four narrow exceptions to proposed Sec.  1006.30(b)(1) to 
accommodate such circumstances.
    Proposed Sec.  1006.30(b)(2)(i) would allow a debt collector to 
transfer a debt described in proposed Sec.  1006.30(b)(1)(i) to the 
debt's owner. This exception would permit a third-party debt collector 
who identifies such a debt among its collection accounts to return that 
debt to the debt's owner. Allowing a debt collector to return a debt to 
the debt's owner likely would not raise the risk of deceptive or unfair 
collections activity. Debts frequently are returned to a debt's owner 
after unsuccessful collections efforts.\406\ Moreover, unlike a debt 
collector, whose overriding economic incentive is to secure a debt's 
repayment, certain debt owners may have other priorities that make it 
less likely that the owner will place the debt with another debt 
collector or try to collect the debt itself.\407\ For creditors in 
particular, these moderating factors include general reputational 
concerns and a desire to preserve the specific customer relationship. 
Proposed comment 30(b)(2)(i)-1 would clarify that a debt collector may 
not engage in an otherwise prohibited transfer with any other entity on 
behalf of a debt's owner unless another exception applies.
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    \406\ CFPB Debt Collection Operations Study, supra note 45, at 
13.
    \407\ When passing the FDCPA, Congress determined that creditors 
``generally are restrained by their desire to protect their good 
will when collecting past due accounts,'' unlike debt collectors. S. 
Rept. No. 382, supra note 70, at 2.
---------------------------------------------------------------------------

    The Bureau proposes three additional exceptions that parallel the 
exceptions in the FCRA to the prohibition on the sale, transfer, or 
placement of debt caused by identity theft.\408\ Section 615(f) of the 
FCRA prohibits a person from selling, transferring for consideration, 
or placing for collection a debt after being notified that a consumer 
reporting agency identified that debt as having resulted from identity 
theft.\409\ Because proposed Sec.  1006.30(b)(1) also would prohibit 
the sale, transfer, or placement of debts subject to an identity theft 
report, the Bureau proposes to adopt the exceptions under FCRA section 
615(f)(3) regarding the repurchase, securitization, or transfer of a 
debt as the result of a merger or acquisition, since these exceptions 
would appear to be equally relevant and provide some consistency 
between proposed Regulation F and the FCRA's existing identity theft 
requirements. Further, the FCRA's exceptions may provide debt 
collectors with sufficient flexibility to transfer debts for bona fide 
non-debt collection business purposes.
---------------------------------------------------------------------------

    \408\ See 15 U.S.C. 1681m(f)(3).
    \409\ See 15 U.S.C. 1681m(f).
---------------------------------------------------------------------------

    Proposed Sec.  1006.30(b)(2)(ii) would allow a debt collector to 
transfer a debt described in proposed Sec.  1006.30(b)(1)(i) to a 
previous owner if transfer is authorized by contract. Creditors may 
include provisions in debt sales contracts that authorize repurchase or 
transfer when certain issues, such as consumer disputes or identity 
theft, surface.\410\ Such agreements may benefit debt collectors by 
removing non-performing debts from collection portfolios, which allows 
debt collectors to focus their efforts on accounts with higher recovery 
rates. These agreements also may benefit consumers because interactions 
with creditors may be less adversarial and offer speedier and fuller 
resolution than interactions with debt collectors.\411\ The Bureau 
proposes Sec.  1006.30(b)(2)(ii) to avoid impeding these agreements in 
debt sales contracts.
---------------------------------------------------------------------------

    \410\ Creditors may include such repurchase provisions in debt 
sales agreements based on compliance and reputational concerns. For 
national banks and Federal savings associations in particular, 
regulatory guidance may incentivize this practice. See, e.g., Off. 
of the Comptroller of the Currency, Bulletin 2014-37, Description: 
Risk Management Guidance (Aug. 4, 2014), https://www.occ.gov/news-issuances/bulletins/2014/bulletin-2014-37.html.
    \411\ See CFPB Debt Collection Consumer Survey, supra note 18, 
at 46-47 (``Consumers reported more favorable experiences with 
creditors than debt collectors along many of the dimensions 
surveyed. About three-quarters (77 percent) of consumers who 
reported being contacted by a creditor, for example, said that the 
creditor provided accurate information compared with 49 percent of 
consumers contacted by a debt collector. Consumers contacted by 
creditors similarly were more likely to say that the creditor 
provided options to pay the debt, addressed their questions, and was 
polite. Finally, those contacted by creditors were less likely than 
those contacted by debt collectors to agree with less-favorable 
characterization of interactions such as reporting that the creditor 
threatened them.'').
---------------------------------------------------------------------------

    Proposed Sec.  1006.30(b)(2)(iii) would permit a debt collector to 
securitize a debt described in proposed Sec.  1006.30(b)(1)(i), or to 
pledge a portfolio of such debt as collateral in connection with a 
borrowing. The Bureau understands that, if a debt collector securitizes 
or pledges a portfolio of debt, the debt collector may be unable to 
exclude the debts described in proposed Sec.  1006.30(b)(1)(i) from the 
portfolio. The Bureau proposes Sec.  1006.30(b)(2)(iii) to allow a debt 
collector to securitize or pledge portfolios in connection with its own 
commercial borrowing without violating Regulation F.
    Proposed Sec.  1006.30(b)(2)(iv) would allow a debt collector to 
transfer a debt

[[Page 23333]]

described in proposed Sec.  1006.30(b)(1)(i) as a result of a merger, 
acquisition, purchase and assumption transaction, or transfer of 
substantially all of the debt collector's assets. Transfers in these 
circumstances are not likely to raise the risk of unlawful collections 
activities because the transfers are for a bona fide non-debt 
collection business purpose. Further, excluding the categories of debt 
in proposed Sec.  1006.30(b)(1)(i) from a business acquisition may be 
impracticable.
    The Bureau requests comment on proposed Sec.  1006.30(b)(2), 
including on whether additional exceptions are necessary to allow for 
transfers of debts for non-debt collection business purposes, and on 
whether the proposed exceptions should be more narrowly tailored or 
clarified. The Bureau also requests comment on the costs and benefits 
to consumers of allowing debts to be transferred under the proposed 
exceptions.
30(c) Multiple Debts
    FDCPA section 810 provides that, if any consumer owes multiple 
debts and makes any single payment to any debt collector with respect 
to such debts, that debt collector must not apply the consumer's 
payment to any debt which is disputed by the consumer and must apply 
the payment in accordance with the consumer's directions, if any.\412\ 
Pursuant to its authority under FDCPA section 814(d) to prescribe rules 
with respect to the collection of debts by debt collectors, the Bureau 
proposes Sec.  1006.30(c) to implement FDCPA section 810. Proposed 
Sec.  1006.30(c) mirrors the statute, except that minor changes have 
been made for organization and clarity. The Bureau requests comment on 
proposed Sec.  1006.30(c), including on whether additional 
clarification is needed.
---------------------------------------------------------------------------

    \412\ 15 U.S.C. 1692h.
---------------------------------------------------------------------------

30(d) Legal Actions by Debt Collectors
    FDCPA section 811 restricts the venue in which a debt collector may 
initiate legal action on a debt against a consumer.\413\ Pursuant to 
its authority under FDCPA section 814(d) to prescribe rules with 
respect to the collection of debts by debt collectors, the Bureau 
proposes Sec.  1006.30(d) to implement FDCPA section 811. Proposed 
Sec.  1006.30(d) mirrors the statute, except that minor changes have 
been made for organization and clarity. The Bureau requests comment on 
proposed Sec.  1006.30(d), including on whether additional 
clarification is needed.
---------------------------------------------------------------------------

    \413\ 15 U.S.C. 1692i.
---------------------------------------------------------------------------

30(e) Furnishing Certain Deceptive Forms
    FDCPA section 812(a) prohibits any person from knowingly designing, 
compiling, and furnishing any form that would be used to create the 
false belief in a consumer that a person other than the consumer's 
creditor is participating in the collection of, or in an attempt to 
collect, a debt the consumer allegedly owes, if in fact the creditor is 
not participating.\414\ Pursuant to its authority under FDCPA section 
814(d) to prescribe rules with respect to the collection of debts by 
debt collectors, the Bureau proposes Sec.  1006.30(e) to implement 
FDCPA section 812(a). Because the Bureau's rulemaking authority under 
FDCPA section 814(d) is limited to debt collectors, as that term is 
defined in the FDCPA, proposed Sec.  1006.30(e)'s coverage is more 
limited than that of FDCPA section 812(a), which applies to any person. 
Proposed Sec.  1006.30(e) would not narrow coverage under the statute. 
Proposed Sec.  1006.30(e) otherwise generally mirrors the statute, 
except that minor changes have been made for organization and clarity. 
The Bureau requests comment on proposed Sec.  1006.30(e), including on 
whether additional clarification is needed.
---------------------------------------------------------------------------

    \414\ 15 U.S.C. 1692j.
---------------------------------------------------------------------------

Section 1006.34 Notice for Validation of Debts
    FDCPA section 809(a) generally requires a debt collector to provide 
certain information to a consumer either at the time that, or shortly 
after, the debt collector first communicates with the consumer in 
connection with the collection of a debt. The required information--
i.e., the validation information--includes details about the debt and 
about consumer protections, such as the consumer's rights to dispute 
the debt and to request information about the original creditor.\415\
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    \415\ See 15 U.S.C. 1692g(a).
---------------------------------------------------------------------------

    The requirement to provide validation information is an important 
component of the FDCPA and was intended to improve the debt collection 
process by helping consumers to recognize debts that they owe and raise 
concerns about debts that are unfamiliar. Congress in 1977 considered 
the requirement a ``significant feature'' of the statute, explaining 
that it was designed to ``eliminate the recurring problem of debt 
collectors dunning the wrong person or attempting to collect debts 
which the consumer has already paid.'' \416\ Despite the FDCPA's 
requirement that debt collectors provide validation information, 
Congress provided the Bureau with rulemaking authority in 2010 
apparently to address inadequacies around validation and verification, 
among other things.\417\ In addition, debt collectors have sought 
clarification about how to provide additional information consistent 
with the statute. For these reasons, and as discussed in more detail 
below, the Bureau proposes Sec.  1006.34 to require debt collectors to 
provide certain validation information to consumers and to specify when 
and how the information must be provided.
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    \416\ S. Rept. No. 382, supra note 70, at 4; see also Jacobson 
v. Healthcare Fin. Servs., Inc., 516 F.3d 85, 95 (2d Cir. 2008) 
(validation notices ``make the rights and obligations of a 
potentially hapless debtor as pellucid as possible''); Wilson v. 
Quadramed Corp., 225 F.3d 350, 354 (3d Cir. 2000); Miller v. Payco-
Gen. Am. Credits, Inc., 943 F.2d 482, 484 (4th Cir. 1991); Swanson 
v. S. Oregon Credit Serv., Inc., 869 F.2d 1222, 1225 (9th Cir. 
1988).
    \417\ See S. Rept. No. 111-176, at 19 (``In addition to concerns 
about debt collection tactics, the Committee is concerned that 
consumers have little ability to dispute the validity of a debt that 
is being collected in error.'').
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34(a)(1) Validation Information Required
    FDCPA section 809(a) provides, in relevant part, that, within five 
days after the initial communication with a consumer in connection with 
the collection of any debt, a debt collector shall send the consumer a 
written notice containing certain information, unless that information 
is contained in the initial communication or the consumer has paid the 
debt.\418\ Proposed Sec.  1006.34(a)(1) would implement and interpret 
this general requirement.\419\
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    \418\ See 15 U.S.C. 1692g(a). FDCPA section 809(a) provides that 
a debt collector need not send the written notice if the consumer 
pays the debt before the time that the notice is required to be 
sent. Proposed Sec.  1006.34(a)(2) would implement that exception.
    \419\ Proposed Sec.  1006.34(c) describes the validation 
information that proposed Sec.  1006.34(a)(1) would require debt 
collectors to provide.
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    Proposed Sec.  1006.34(a)(1)(i) addresses situations in which the 
debt collector provides the validation information in writing or 
electronically.\420\ Proposed Sec.  1006.34(a)(1)(i) would clarify 
that, in those situations, a debt collector may provide the validation 
information by sending the consumer a validation notice either in the 
initial communication or within five days of that communication.\421\ 
In either case,

[[Page 23334]]

the debt collector would be required to provide the validation notice 
in a manner that satisfies the delivery requirements in Sec.  
1006.42(a).\422\
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    \420\ Proposed Sec.  1006.34(b)(4) would define a validation 
notice as any written or electronic notice that provides the 
validation information described in Sec.  1006.34(c).
    \421\ Proposed Sec.  1006.34(b)(2) provides that, with limited 
exceptions, initial communication means the first time that, in 
connection with the collection of a debt, a debt collector conveys 
information, directly or indirectly, to the consumer regarding the 
debt.
    \422\ As discussed in the section-by-section analysis of 
proposed Sec.  1006.42, the proposed rule would provide a general 
standard for the delivery of required disclosures, including the 
validation notice, in writing or electronically, and would clarify, 
among other things, how debt collectors may provide required notices 
to consumers by email or text message.
---------------------------------------------------------------------------

    Proposed Sec.  1006.34(a)(1)(ii) would clarify that a debt 
collector could provide the validation information orally in the 
initial communication.\423\ The Bureau requests comment on whether 
clarification regarding content and formatting requirements is needed 
for a debt collector who provides the validation information orally.
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    \423\ While FDCPA section 809(a) does not prohibit a debt 
collector from providing validation information orally in the debt 
collector's initial communication, it may be impractical for debt 
collectors to do so given that proposed Sec.  1006.34(c) would 
require a significant amount of validation information that debt 
collectors may not currently provide. In addition, debt collectors 
providing the validation information orally would not be able to use 
Model Form B-3 in appendix B to receive a safe harbor for compliance 
with Sec.  1006.34(a).
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    Proposed comment 34(a)(1)-1 would clarify the provision of 
validation notices if the consumer is deceased. As described in the 
section-by-section analysis of proposed Sec.  1006.2(e), the failure to 
provide a validation notice to a person who is authorized to act on 
behalf of the deceased consumer's estate, such as the executor, 
administrator, or personal representative, may cause difficulty or 
delay in resolving the estate's debts. Proposed comment 34(a)(1)-1 
explains that, if the debt collector knows or should know that the 
consumer is deceased, and if the debt collector has not previously 
provided the deceased consumer the validation information, a person who 
is authorized to act on behalf of the deceased consumer's estate 
operates as the consumer for purposes of providing a validation notice 
under Sec.  1006.34(a)(1).\424\ As explained in the section-by-section 
analysis of proposed Sec.  1006.2(e), the Bureau proposes to interpret 
the term consumer to include deceased consumers.
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    \424\ This interpretation is supported by the proposed 
definition of consumer, which, as discussed in the section-by-
section analysis of proposed Sec.  1006.2(e), is defined to include 
``[a]ny natural person, whether living or deceased, who is obligated 
or allegedly obligated to pay any debt.''
---------------------------------------------------------------------------

    The Bureau's interpretation of FDCPA section 809 in proposed Sec.  
1006.34(a)(1) would require a debt collector to provide the validation 
information when collecting debt from a deceased consumer if the debt 
collector has not previously provided the consumer the validation 
information. In such circumstances, under proposed comment 34(a)(1)-1, 
the debt collector must provide the validation information to an 
individual that the debt collector identifies by name who is authorized 
to act on behalf of the deceased consumer's estate. If a debt collector 
knows or should know that the consumer is deceased, it may be unclear 
whether the debt collector should continue to address the validation 
notice to the deceased consumer, or whether the debt collector instead 
should address the notice to the individual who is authorized to act on 
behalf of the deceased consumer's estate. In light of this uncertainty, 
the Bureau proposes to interpret sending the validation information to 
a deceased consumer (i.e., the deceased consumer's estate) to mean 
providing the validation information to an individual that the debt 
collector identifies by name who is authorized to act on behalf of the 
deceased consumer's estate. As explained below, this interpretation may 
be preferable to addressing the validation information using the name 
of the deceased consumer or using ``the estate of'' with the name of 
the deceased consumer.
    Accordingly, just as a debt collector attempting to collect a debt 
from a living consumer generally would provide a validation notice to 
the consumer within five days after the initial communication with such 
consumer (where the validation information was not contained in the 
initial communication), the proposal generally would require a debt 
collector attempting to collect a debt from a deceased consumer's 
estate to provide the validation notice to the named person who is 
authorized to act on behalf of the deceased consumer's estate. The 
validation notice would have to be provided within five days after the 
initial communication with such person.
    In its Policy Statement on Decedent Debt, the FTC expressed concern 
about debt collectors addressing substantive written communications to 
the decedent's estate, or to an unnamed executor or administrator.\425\ 
In the FTC's experience, individuals who lack the authority to resolve 
the estate but who wish to be helpful are likely to open these 
communications, which makes such communications insufficiently targeted 
to a consumer with whom the debt collector may generally discuss the 
debt. Therefore, according to the FTC, ``communication[s] addressed to 
the decedent's estate, or an unnamed executor or administrator, [are] 
location communication[s] and must not refer to the decedent's debts.'' 
\426\ The FTC also noted that letters addressed to deceased consumers 
raised similar concerns, although there may be circumstances where a 
debt collector neither knows nor has reason to know that the consumer 
has died. The Bureau agrees with these concerns. The requirement in 
proposed comment 34(a)(1)-1 to send any required validation notice to a 
named person who is authorized to act on behalf of the deceased 
consumer's estate would limit the practice of addressing validation 
notices to deceased consumers or unnamed executors, administrators, or 
personal representatives because a debt collector would be required to 
identify a person who is authorized to act on behalf of the deceased 
consumer's estate in order to properly direct any communication to that 
individual. The Bureau requests comment on the effects of any potential 
inconsistency between proposed comment 34(a)(1)-1 and the consumer 
protections that the FTC sought to achieve when it published its Policy 
Statement on Decedent Debt.
---------------------------------------------------------------------------

    \425\ FTC Policy Statement on Decedent Debt, supra note 192.
    \426\ Id. at 44920.
---------------------------------------------------------------------------

    The Bureau proposes Sec.  1006.34(a)(1) to implement and interpret 
FDCPA section 809(a) and pursuant to its authority under FDCPA section 
814(d) to prescribe rules with respect to the collection of debts by 
debt collectors. The Bureau requests comment on proposed Sec.  
1006.34(a)(1) and its related commentary.
34(a)(2) Exception
    FDCPA section 809(a) contains a limited exception that provides 
that, if required information is not contained in the initial 
communication, a debt collector need not send the consumer a written 
notice within five days of the debt collector's initial communication 
with the consumer in connection with the collection of the debt if the 
consumer has paid the debt prior to the time that the notice is 
required to be sent.\427\ Pursuant to its authority to implement and 
interpret FDCPA section 809(a) and its authority under FDCPA section 
814(d) to prescribe rules with respect to the collection of debts by 
debt collectors, the Bureau proposes Sec.  1006.34(a)(2) to implement 
this exception. Proposed Sec.  1006.34(a)(2) provides that a debt 
collector who

[[Page 23335]]

otherwise would be required to send a validation notice pursuant to 
proposed Sec.  1006.34(a)(1)(i)(B) is not required to do so if the 
consumer has paid the debt prior to the time that proposed Sec.  
1006.34(a)(1)(i)(B) would require the validation notice to be sent. 
Proposed Sec.  1006.34(a)(2) generally restates the statute, except for 
minor changes for organization and clarity.
---------------------------------------------------------------------------

    \427\ See 15 U.S.C. 1692g(a).
---------------------------------------------------------------------------

34(b) Definitions
    To facilitate compliance with Sec.  1006.34, proposed Sec.  
1006.34(b) would define several terms that appear throughout the 
section. Except as discussed otherwise below, the Bureau proposes these 
definitions to implement and interpret FDCPA section 809(a) and 
pursuant to its authority under FDCPA section 814(d) to prescribe rules 
with respect to the collection of debts by debt collectors.
34(b)(1) Clear and Conspicuous
    To facilitate compliance with proposed Sec.  1006.34(d)(1), which 
would require that the validation information described in Sec.  
1006.34(c) be clear and conspicuous, proposed Sec.  1006.34(b)(1) would 
define the term clear and conspicuous. The Bureau proposes to define 
the term clear and conspicuous for purposes of Regulation F consistent 
with the standards used in other consumer financial services laws and 
their implementing regulations, including Regulation E, subpart B 
(Remittance Transfers).\428\ Proposed Sec.  1006.34(b)(1) thus provides 
that disclosures are clear and conspicuous if they are readily 
understandable and, in the case of written and electronic disclosures, 
the location and type size are readily noticeable to consumers. Oral 
disclosures are clear and conspicuous if they are given at a volume and 
speed sufficient for a consumer to hear and comprehend them. The Bureau 
proposes to adopt this standard to help ensure that required 
disclosures, including disclosures containing validation information, 
are readily understandable and noticeable to consumers. Disclosures 
that are not clear and conspicuous will not be effective, defeating the 
purpose of the disclosures.
---------------------------------------------------------------------------

    \428\ See 12 CFR 1005.31(a)(1), comment 31(a)(1)-1.
---------------------------------------------------------------------------

    The Bureau requests comment on proposed Sec.  1006.34(b)(1), 
including on whether basing the clear and conspicuous standard on 
existing regulations, such as Regulation E, presents any consumer 
protection or compliance issues, including for validation information 
delivered electronically or orally. The Bureau also requests comment on 
whether additional clarification about the meaning of clear and 
conspicuous would be useful in the context of the specific information 
that proposed Sec.  1006.34(a)(1) would require.
34(b)(2) Initial Communication
    As discussed above, FDCPA section 809(a) requires debt collectors 
to provide consumers with certain validation information either in the 
debt collector's initial communication with the consumer in connection 
with the collection of the debt, or within five days after that initial 
communication. FDCPA section 803(2) defines the term communication 
broadly to mean the conveying of information regarding a debt directly 
or indirectly to any person through any medium.\429\ FDCPA section 
809(d) and (e) identifies particular communications that are not 
initial communications with the consumer in connection with the debt 
for purposes of FDCPA section 809(a) and that therefore do not trigger 
the validation notice requirement.\430\ Pursuant to FDCPA section 
809(d), an initial communication excludes a communication in the form 
of a formal pleading in a civil action. Pursuant to FDCPA section 
809(e), an initial communication also excludes the sending or delivery 
of any form or notice that does not relate to the collection of the 
debt and is expressly required by the Internal Revenue Code of 1986, 
title V of the Gramm-Leach-Bliley Act, or any provision of Federal or 
State law relating to notice of a data security breach or privacy, or 
any regulation prescribed under any such provision of law.
---------------------------------------------------------------------------

    \429\ See 15 U.S.C. 1692a(2). See also the section-by-section 
analysis of proposed Sec.  1006.2(d).
    \430\ See 15 U.S.C. 1692g(d), (e).
---------------------------------------------------------------------------

    Proposed Sec.  1006.34(b)(2) would implement FDCPA section 809(a), 
(d), and (e) by defining the term initial communication to mean the 
first time that, in connection with the collection of a debt, a debt 
collector conveys information, directly or indirectly, regarding the 
debt to the consumer, other than a communication in the form of a 
formal pleading in a civil action, or a communication in any form or 
notice that does not relate to the collection of the debt and is 
expressly required by any of the laws referenced in FDCPA section 
809(e).
    The Bureau requests comment on proposed Sec.  1006.34(b)(2) and on 
whether additional clarification about the term initial communication 
would be helpful. The Bureau specifically requests comment on the 
scenario in which a debt collector's first attempt to communicate with 
a consumer is through an electronic communication method, such as an 
email or a text message, and the consumer provides no response. For 
example, as proposed, if a debt collector sends a consumer an email 
notifying the consumer that a debt has been placed with the debt 
collector but includes no other information, the debt collector would 
be required to send the consumer a validation notice within five days, 
even if the consumer did not reply to the debt collector's email. The 
Bureau requests comment about the risks, costs, and benefits to 
industry and consumers of treating these types of debt collection 
communications as initial communications that would trigger Sec.  
1006.34(a)(1).
34(b)(3) Itemization Date
    FDCPA section 809(a)(1) requires debt collectors to disclose to 
consumers, either in the debt collector's initial communication in 
connection with the collection of the debt, or within five days after 
that communication, the amount of the debt.\431\ In proposed Sec.  
1006.34(c)(2)(vii) through (ix), the Bureau would interpret the phrase 
``amount of the debt'' to mean that debt collectors must disclose 
information about the amount of the debt as of a particular 
``itemization date.'' \432\ To facilitate compliance with Sec.  
1006.34(c)(2)(vii) through (ix), proposed Sec.  1006.34(b)(3) would 
define the term itemization date.
---------------------------------------------------------------------------

    \431\ See 15 U.S.C. 1692g(a)(1).
    \432\ Proposed Sec.  1006.34(c)(2)(vii) and (viii) would require 
debt collectors to disclose, respectively, the itemization date and 
the amount of the debt on the itemization date. Proposed Sec.  
1006.34(c)(2)(ix) would require debt collectors to disclose an 
itemization of the debt reflecting interest, fees, payments, and 
credits since the itemization date. For additional discussion of 
these provisions, see the section-by-section analysis of proposed 
Sec.  1006.34(c)(2)(vii) through (ix).
---------------------------------------------------------------------------

    Account information available to debt collectors may vary by debt 
type because some account information is not universally tracked or 
used across product markets. For example, the Bureau understands that 
charge off is fundamental account information for credit card debt, but 
appears not to be applicable for some other debt types. To ensure that 
debt collectors working in a variety of product markets can comply with 
proposed Sec.  1006.34(c)(2)(vii) through (ix), the Bureau proposes to 
define the term itemization date to mean any one of four reference 
dates for which a debt collector can ascertain the amount of the debt: 
(1) The last statement date, (2) the charge-off date, (3) the last 
payment date, or (4) the

[[Page 23336]]

transaction date.\433\ As discussed further in the section-by-section 
analysis of proposed Sec.  1006.34(b)(3)(i) through (iv), the proposed 
definition is designed to allow the use of dates that debt collectors 
could identify with relative ease because they reflect routine and 
recurring events and that correspond to notable events in the debt's 
history that consumers may recall or be able to verify with records. 
The proposed definition also is designed to include dates for which 
debt collectors typically may receive account information from debt 
owners and that, therefore, debt collectors should be able to use to 
provide the disclosures described in Sec.  1006.34(c)(vii) through 
(ix).
---------------------------------------------------------------------------

    \433\ The four reference dates are set forth in proposed Sec.  
1006.34(b)(3)(i) through (iv). See the section-by-section analysis 
of proposed Sec.  1006.34(b)(3)(i) through (iv).
---------------------------------------------------------------------------

    Proposed comment 34(b)(3)-1 explains that a debt collector may 
select any of the potential reference dates listed in proposed Sec.  
1006.34(b)(3) as the itemization date to comply with Sec.  1006.34. 
Once a debt collector uses one of the reference dates for a specific 
debt in a communication with an individual consumer, however, the debt 
collector would be required to use that reference date for that debt 
consistently when providing disclosures as proposed by Sec.  1006.34 to 
that consumer. If a debt collector provides the consumer with 
validation information based on different reference dates for the same 
debt, the consumer may have difficulty recognizing the debt and be less 
likely to engage with the debt collector. Thus, a debt collector who 
used reference dates inconsistently for the same debt could undermine 
the purpose of proposed Sec.  1006.34.
    The Bureau's Small Business Review Panel Outline described a 
proposal under consideration that would have required a debt collector 
to provide an itemization of the debt based on a single reference date, 
the date of default.\434\ Multiple small entity representatives 
expressed concern with that proposal, noting both that default has no 
established definition and that the default concept may be inapplicable 
to some debt types, such as medical debt.\435\ Small entity 
representatives also noted that determining a date of default can 
involve State law interpretations that impose significant costs. 
Consistent with these concerns, the Small Business Review Panel Report 
recommended that the Bureau consider alternatives to the date of 
default and suggested the charge-off date, last payment date, or date 
of service instead.\436\ Based in part on this feedback, the Bureau 
believes that it may be difficult to identify a single reference date 
that applies to all debt types across all relevant markets and, as a 
result, proposes to define itemization date as one of the four 
potential reference dates.
---------------------------------------------------------------------------

    \434\ See Small Business Review Panel Outline, supra note 56, at 
appendix F.
    \435\ See Small Business Review Panel Report, supra note 57, at 
18.
    \436\ Id.
---------------------------------------------------------------------------

    The Bureau requests comment on proposed Sec.  1006.34(b)(3) and on 
comment 34(b)(3)-1, including on whether the itemization date 
definition will facilitate compliance with the requirement to disclose 
the validation information in Sec.  1006.34(c)(vii) through (ix), and 
on whether additional clarification regarding the itemization date 
definition is needed. The Bureau also requests comment on whether the 
proposed itemization date definition would not capture certain debt 
types, such as mortgage debt where coupon books are provided instead of 
periodic statements, and on whether additional or alternative reference 
dates should be considered. The Bureau also requests comment on whether 
creditors' data management systems capture information related to the 
reference dates that the proposed itemization date definition would 
incorporate. Further, the Bureau requests comment on whether the 
proposed definition should mandate a single reference date, which would 
standardize validation notices across all relevant markets, and if so, 
what reference date might be suitable for all types of debt. In 
addition, the Bureau requests comment on how the proposed definition 
should function with respect to a debt that multiple debt collectors 
have attempted to collect. For example, the Bureau requests comment on 
whether a subsequent debt collector should be permitted to use a 
different itemization date than a prior debt collector used for the 
same debt.
    Finally, the Bureau requests comment on whether the proposed 
itemization date definition should be structured as a prescriptive 
ordering of potential reference dates, such as a hierarchy. For 
example, this alternative approach could require a debt collector to 
determine the itemization date by identifying the first date in a 
hierarchy of four reference dates set forth in proposed Sec.  
1006.34(b)(3)(i) through (iv) for which a debt collector could 
ascertain the amount of the debt using readily available information. 
With respect to this alternative approach, the Bureau requests comment 
on whether the use of any particular reference date, such as the last 
statement date, is more likely than other reference dates, such as the 
charge-off date, to improve consumer understanding of the required 
disclosures. The Bureau also requests comment on whether, for purposes 
of a hierarchy, any particular reference date would be more likely than 
others to impose costs or burdens on debt collectors.
    The Bureau proposes Sec.  1006.34(b)(3), including the specific 
dates described in proposed Sec.  1006.34(b)(3)(i) through (iv), 
pursuant to its authority under FDCPA section 814(d) to prescribe rules 
with respect to the collection of debts by debt collectors. The Bureau 
also proposes Sec.  1006.34(b)(3) pursuant to its authority under 
section 1032(a) of the Dodd-Frank Act to prescribe rules to ensure that 
the features of consumer financial products and services are disclosed 
to consumers fully, accurately, and effectively.
34(b)(3)(i)
    When placing a debt for collection, creditors frequently may 
provide debt collectors with the last periodic or written account 
statements provided to consumers. Therefore, in many cases, last 
statement information should be readily available to debt collectors. 
In addition, many consumers may recall the amount of the debt on the 
last statement because this figure may be the most recent amount of the 
debt the consumer has seen, or the consumer may be able to verify that 
amount with their records.
    For these reasons, proposed Sec.  1006.34(b)(3)(i) would permit 
debt collectors to use the last statement date as the itemization date. 
Pursuant to proposed Sec.  1006.34(b)(3)(i), last statement date would 
mean the date of the last periodic statement or written account 
statement or invoice provided to the consumer. Proposed comment 
34(b)(3)(i)-1 explains that a statement provided by a creditor or a 
third party acting on the creditor's behalf, including a creditor's 
service provider, may constitute the last statement provided to the 
consumer for purposes of Sec.  1006.34(b)(3)(i). The Bureau requests 
comment on proposed Sec.  1006.34(b)(3)(i) and on comment 34(b)(3)(i)-
1, including on how often creditors provide periodic statements, 
written statements, and invoices to debt collectors, and on whether 
there are specific debt types for which creditors may not provide such 
statements. In addition, the Bureau requests comment on whether a 
validation notice that a previous debt collector provided to the 
consumer should constitute a last statement for purposes of proposed 
Sec.  1006.34(b)(3)(i).

[[Page 23337]]

34(b)(3)(ii)
    When placing credit card accounts for collection, creditors 
frequently may provide debt collectors with account information at 
charge off, including the charge-off date. For this reason, some small 
entity representatives suggested during the SBREFA process that, for 
credit card debt, the Bureau should define the itemization date to mean 
the charge-off date.\437\ Charge off is relevant to debt types other 
than credit cards, as well, and consumers may approximately recognize 
the amount of a debt due at charge off because charge off often occurs 
shortly after a last account statement is provided.
---------------------------------------------------------------------------

    \437\ Id.
---------------------------------------------------------------------------

    For these reasons, proposed Sec.  1006.34(b)(3)(ii) would permit 
debt collectors to use the charge-off date--i.e., the date that the 
debt was charged off--as the itemization date. The Bureau requests 
comment on proposed Sec.  1006.34(b)(3)(ii). The Bureau generally 
requests comment on how often creditors provide charge-off information 
to debt collectors and on whether there are specific debt types for 
which charge off is not a relevant concept. In addition, the Bureau 
requests comment on whether creditors assess fees or penalties at 
charge off, which would cause the amount the consumer owed at charge 
off to differ significantly from the amount that appeared on the last 
periodic statement, invoice, or other written statement that the 
consumer received.
34(b)(3)(iii)
    In some cases, creditors may provide debt collectors with account 
information related to a consumer's last payment. For this reason, some 
small entity representatives suggested during the SBREFA process that 
the Bureau define the itemization date to mean the last payment 
date.\438\ Consumers also may recognize the amount of a debt that 
reflects the balance after the consumer's last payment.\439\ Proposed 
Sec.  1006.34(b)(3)(iii) thus would permit debt collectors to use the 
last payment date--i.e., the date the last payment was applied to the 
debt--as the itemization date. The Bureau requests comment on proposed 
Sec.  1006.34(b)(3)(iii), including on how often creditors provide debt 
collectors with last payment date information. The Bureau also requests 
comment on how proposed Sec.  1006.34(b)(3)(iii) should be applied if a 
third party made the last payment on the debt. For example, such a 
third-party payment might include a partial payment on a consumer's 
medical debt by an insurance provider.
---------------------------------------------------------------------------

    \438\ Id.
    \439\ See FMG Focus Group Report, supra note 38, at 20-21.
---------------------------------------------------------------------------

34(b)(3)(iv)
    For some debt types, including for medical debt, creditors may 
provide debt collectors with account information related to the 
transaction date (e.g., the date a service or good was provided to a 
consumer). Some small entity representatives thus suggested during the 
SBREFA process that the Bureau define the itemization date for medical 
debt to mean the date of service.\440\ In addition, consumers may 
recognize the amount of a debt on the transaction date, which may be 
reflected in a copy of a contract or a bill provided by a creditor. For 
these reasons, proposed Sec.  1006.34(b)(3)(iv) would permit debt 
collectors to use the transaction date--i.e., the date of the 
transaction that gave rise to the debt--as the itemization date.
---------------------------------------------------------------------------

    \440\ Small Business Review Panel Report, supra note 57, at 18.
---------------------------------------------------------------------------

    Proposed comment 34(b)(3)(iv)-1 explains that the transaction date 
is the date that a creditor provided, or made available, a good or 
service to a consumer and includes examples of transaction dates. The 
comment also explains that, if a debt has more than one potential 
transaction date, a debt collector may use any such date as the 
transaction date but must use whichever transaction date it selects 
consistently, as described in comment 34(b)(3)-1. The Bureau requests 
comment on proposed Sec.  1006.34(b)(3)(iv) and on comment 
34(b)(3)(iv)-1, including on how often creditors provide transaction 
date information to debt collectors and on whether the transaction date 
concept is inapplicable to certain debt types.
34(b)(4) Validation Notice
    As already discussed, FDCPA section 809(a) provides, in relevant 
part, that, within five days after the initial communication with a 
consumer in connection with the collection of any debt, a debt 
collector shall send the consumer a written notice containing certain 
information, unless that information is contained in the initial 
communication or the consumer has paid the debt.\441\ If debt 
collectors have provided the validation information in writing, whether 
in the initial communication or within five days after that 
communication, debt collectors and others commonly have referred to the 
document containing the information as a ``validation notice,'' or ``g 
notice.'' The Bureau understands that most debt collectors do not 
currently send validation notices electronically. As discussed in the 
section-by-section analysis of proposed Sec.  1006.42, the Bureau 
proposes to clarify how debt collectors may send validation notices 
electronically in compliance with applicable law.
---------------------------------------------------------------------------

    \441\ See 15 U.S.C. 1692g(a).
---------------------------------------------------------------------------

    To facilitate compliance with proposed Sec.  1006.34, as well as to 
account for the possibility that more debt collectors may begin 
providing the validation information electronically, proposed Sec.  
1006.34(b)(4) would define validation notice to mean a written or 
electronic notice that provides the validation information described in 
proposed Sec.  1006.34(c). The Bureau requests comment on proposed 
Sec.  1006.34(b)(4).
34(b)(5) Validation Period
    FDCPA section 809(b) contains certain requirements that a debt 
collector must satisfy if a consumer disputes a debt or requests the 
name and address of the original creditor. If a consumer disputes a 
debt in writing within 30 days of receiving the validation information, 
a debt collector must stop collection of the debt until the debt 
collector obtains verification of the debt or a copy of a judgment 
against the consumer and mails it to the consumer.\442\ Similarly, if a 
consumer requests the name and address of the original creditor in 
writing within 30 days of receiving the validation information, FDCPA 
section 809(b) requires the debt collector to cease collection of the 
debt until it obtains and mails such information to the consumer.\443\ 
FDCPA section 809(b) also prohibits a debt collector, during the 30-day 
period consumers have to dispute a debt or request information about 
the original creditor, from engaging in collection activities and 
communications that overshadow, or are inconsistent with, the 
disclosure of the consumer's rights to dispute the debt and request 
original-creditor information, which are sometimes referred to as 
``verification rights.'' \444\
---------------------------------------------------------------------------

    \442\ 15 U.S.C. 1692g(b).
    \443\ See id. The Bureau refers to the consumer's rights to 
dispute the validity of the debt and to request original-creditor 
information collectively as the consumer's ``verification rights.''
    \444\ Id.
---------------------------------------------------------------------------

    As described in the section-by-section analysis of Sec.  
1006.34(c)(3)(i) through (iii), the proposed rule would require debt 
collectors to disclose to a consumer the date certain on which the 
consumer's FDCPA section 809(b) verification rights expire. Without 
additional clarification, debt collectors may be uncertain how to 
calculate this

[[Page 23338]]

date certain. First, debt collectors may be unsure how to reliably 
determine when a consumer has received the validation information 
(i.e., the event that triggers the running of the 30-day period). In 
addition, some debt collectors may honor disputes and original-creditor 
information requests that a consumer provides after the 30-day period 
to dispute a debt or request information about the original creditor 
set forth in the FDCPA expires and may benefit from clarification about 
how to specify a longer period.
    To facilitate compliance with the proposed requirement to provide 
the date certain on which the consumer's verification rights expire, 
proposed Sec.  1006.34(b)(5) would define the term validation period to 
mean the period starting on the date that a debt collector provides the 
validation information described in Sec.  1006.34(c) and ending 30 days 
after the consumer receives or is assumed to receive the validation 
information. To clarify how to calculate the end of the validation 
period--including how debt collectors may disclose a period that 
provides consumers additional time to exercise their validation 
rights--proposed Sec.  1006.34(b)(5) also would provide that a debt 
collector may assume that a consumer receives validation information on 
any day that is at least five days (excluding legal public holidays, 
Saturdays, and Sundays) after the debt collector provides it. Proposed 
Sec.  1006.34(b)(5) is designed to provide a debt collector with a 
straightforward yet flexible way to determine the last date of the 
validation period referenced in Sec.  1006.34(c)(3)(i) through (iii). 
The Bureau proposes Sec.  1006.34(b)(5) on the basis that consumers 
will typically receive a validation notice no more than five days 
(excluding legal public holidays, Saturdays, and Sundays) after the 
debt collector provides it. Further, proposed Sec.  1006.34 would not 
prohibit a debt collector from honoring a consumer's request to 
exercise verification rights after the date certain that appears in the 
validation notice pursuant to Sec.  1006.34(c)(3)(i) through (iii).
    Proposed comment 34(b)(5)-1 would clarify that, if a debt collector 
sends a subsequent validation notice to a consumer because the consumer 
did not receive the original validation notice, and the consumer has 
not otherwise received the validation information, the debt collector 
must calculate the end of the validation period based on the date the 
consumer receives or is assumed to receive the subsequent validation 
notice. In other words, proposed comment 34(b)(5)-1 would clarify that, 
if a debt collector sends an initial validation notice that was not 
received and then sends a subsequent validation notice, the validation 
period ends 30 days after the consumer receives or is assumed to 
receive the subsequent validation notice.
    The Bureau requests comment on proposed Sec.  1006.34(b)(5) and on 
comment 34(b)(5)-1. In particular, the Bureau requests comment on debt 
collectors' current practices for determining the end of the validation 
period. The Bureau also requests comment on whether the length of the 
five-day timing presumption should be modified and on whether different 
timing presumptions should apply depending on whether a validation 
notice is delivered by mail or electronically, for example by email or 
text message. Finally, the Bureau requests comment on whether a 
different timing presumption should apply if validation information is 
provided orally.
34(c) Validation Information
    Proposed Sec.  1006.34(c) sets forth the validation information 
that debt collectors would be required to disclose under Sec.  
1006.34(a)(1). As described below, the validation information that 
proposed Sec.  1006.34(c) would require consists of four general 
categories: Information to help consumers identify debts (including the 
information specifically referenced in FDCPA section 809(a)); 
information about consumers' protections in debt collection; 
information to facilitate consumers' ability to exercise their rights 
with respect to debt collection; and certain other statutorily required 
information.
34(c)(1) Debt Collector Communication Disclosure
    FDCPA section 807(11) requires a debt collector to disclose in its 
initial written communication with a consumer--and if the initial 
communication is oral, in that oral communication as well--that the 
debt collector is attempting to collect a debt and that any information 
obtained will be used for that purpose. FDCPA section 807(11) also 
requires a debt collector to disclose in each subsequent communication 
that the communication is from a debt collector.\445\ As discussed 
above, the Bureau proposes the Sec.  1006.18(e) disclosure to implement 
FDCPA section 807(11). If a debt collector provides validation 
information, the debt collector engages in a debt collection 
communication and must make an appropriate FDCPA section 807(11) 
disclosure.\446\ The Bureau proposes Sec.  1006.34(c)(1) to provide 
that the Sec.  1006.18(e) disclosure is validation information that 
must be provided to the consumer pursuant to Sec.  1006.34(a)(1). The 
Bureau requests comment on proposed Sec.  1006.34(c)(1).
---------------------------------------------------------------------------

    \445\ See the section-by-section analysis of proposed Sec.  
1006.18(e).
    \446\ See, e.g., Dorsey v. Morgan, 760 F. Supp. 509 (D. Md. 
1991).
---------------------------------------------------------------------------

34(c)(2) Information About the Debt
    While validation notices in use today typically contain the 
specific information required under FDCPA section 809(a), the Bureau 
understands that debt collectors often do not include any other 
information to help consumers identify debts.\447\ As a result, 
validation notices in use today may lack sufficient information to 
enable some consumers to exercise their FDCPA section 809 rights. For 
example, the Bureau's qualitative consumer research indicates that 
certain information that appears to help consumers to recognize a 
debt--including a debt's original account number or an itemization of 
interest and fees--may not consistently appear on validation 
notices.\448\ Complaints about insufficient information to verify debts 
consistently rank among the most frequent types of consumer debt 
collection complaints received by the Bureau.\449\ Further, validation 
notices in use today may not be written in plain language that promotes 
consumer understanding. Thus, in some cases, consumers may not 
understand information about the debt that appears on the validation 
notice.
---------------------------------------------------------------------------

    \447\ See Small Business Review Panel Outline, supra note 56, at 
15.
    \448\ See FMG Cognitive Report, supra note 40, at 8-11.
    \449\ In its 2019 FDCPA Annual Report, the Bureau noted that 72 
percent of consumers who complain about written notifications about 
debt stated that they did not receive enough information to verify 
the debt. 2019 FDCPA Annual Report, supra note 11, at 17. Consumers 
have consistently complained to the Bureau about receiving 
insufficient information to verify debts. See 2018 FDCPA Annual 
Report, supra note 16, at 15-16; 2017 FDCPA Annual Report, supra 
note 21, at 16.
---------------------------------------------------------------------------

    The Bureau's understanding is consistent with FTC findings, as well 
as with consumer advocate and industry feedback. According to the FTC, 
debt collectors do not provide sufficient information to allow 
consumers to determine whether they owe a debt in question or to 
exercise their FDCPA rights.\450\ Observing that validation notices 
lack sufficient detail for consumers to recognize whether a debt 
belongs to them, the FTC has suggested that more information about the 
debt

[[Page 23339]]

should appear in validation notices.\451\ In response to the Bureau's 
ANPRM, consumer advocates stated that many validation notices contain 
insufficient information for consumers to evaluate whether they owe a 
debt. Industry commenters also identified additional information for 
validation notices that would help consumers recognize debts, such as 
the date of the consumer's last payment and itemization information.
---------------------------------------------------------------------------

    \450\ FTC Modernization Report, supra note 176, at 21.
    \451\ Id. at 29.
---------------------------------------------------------------------------

    The lack of information about the debt currently provided in 
validation notices--combined with limited disclosure of consumers' 
rights with respect to debt collection, which is discussed in the 
section-by-section analysis of proposed Sec.  1006.34(c)(3)--may 
disadvantage both consumers and debt collectors. If a consumer receives 
a validation notice for an unfamiliar debt, the consumer may experience 
uncertainty, which may lead to the consumer disputing a debt that is 
owed. If a consumer disputes a debt the consumer owes but does not 
recognize, the debt collector must spend time and resources responding 
to a dispute that could have been avoided had the consumer initially 
received more complete information. Participants in the Bureau's 
consumer testing also reported that the inability to recognize a debt 
is a major concern because of the risk of potential fraud or identity 
theft.\452\ In addition, a consumer may, in some instances, pay an 
unfamiliar debt that the consumer did not owe.\453\
---------------------------------------------------------------------------

    \452\ FMG Focus Group Report, supra note 38, at 13.
    \453\ Academic research and agency experience offer insight into 
why some consumers may pay debts that they do not owe in response to 
debt collection efforts. In one study of how consumers would react 
to a validation notice concerning a debt that they did not owe, 3 
percent of respondents stated that they would pay the debt rather 
than dispute it. The study's authors hypothesized that fear of 
negative credit reporting may explain this behavior. See Jeff Sovern 
et al., Validation and Verification Vignettes: More Results from an 
Empirical Study of Consumer Understanding of Debt Collection 
Validation Notices, Rutgers L. Rev. (forthcoming) (manuscript at 46-
47), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3219171. In 
a settlement agreement with a debt collector, the FTC alleged that 
many consumers paid purported debts that they did not owe because 
they believed that the debts were real, or because they wanted to 
stop harassing debt collection efforts. See Complaint at ] 22, Fed. 
Trade Comm'n v. Lombardo Daniels & Moss, LLC. No. 3:17-CV-503-RJC 
(W.D.N.C. Aug. 21, 2017), https://www.ftc.gov/system/files/documents/cases/lombardo_complaint_8-29-17.pdf.
---------------------------------------------------------------------------

    In light of these concerns, proposed Sec.  1006.34(c)(2) would 
describe the information about the debt and the parties related to the 
debt that debt collectors must provide to the consumer under Sec.  
1006.34(a)(1).\454\ The section-by-section analysis of proposed Sec.  
1006.34(c)(2)(i) through (x) discusses the specific items of 
information, which would include existing statutory disclosures, 
designed to help consumers recognize debts. Except where noted--for 
example, in the case of merchant brand information for credit card debt 
under proposed Sec.  1006.34(c)(2)(iii)--the information described in 
proposed Sec.  1006.34(c) is not conditioned on availability. Thus, if 
a debt collector does not have a piece of information for a debt, the 
debt collector would be unable able to comply with proposed Sec.  
1006.34(a)(1) for that debt.
---------------------------------------------------------------------------

    \454\ Proposed Sec.  1006.34(c)(5) would establish a special 
rule for information about the debt for certain residential mortgage 
debt.
---------------------------------------------------------------------------

    The Bureau requests comment on proposed Sec.  1006.34(c)(2), 
including on whether any of the proposed items should be excluded or 
any additional items should be added. The Bureau also requests comments 
on whether proposed Sec.  1006.34(c)(2)'s content requirements risk 
overwhelming consumers and decreasing their understanding, thereby 
making the proposed disclosures less effective.
    Except with respect to Sec.  1006.34(c)(2)(iv), the Bureau proposes 
Sec.  1006.34(c)(2) pursuant to its authority under FDCPA section 
814(d) to prescribe rules with respect to the collection of debts by 
debt collectors and, as described more fully below, its authority to 
implement and interpret FDCPA section 809. Except with respect to Sec.  
1006.34(c)(2)(vi) and (x), the Bureau also proposes Sec.  1006.34(c)(2) 
pursuant to its authority under section 1032(a) of the Dodd-Frank Act, 
on the basis that the validation information describes the debt, which 
is a feature of debt collection. Requiring disclosure of validation 
information may help to ensure that the features of debt collection are 
fully, accurately, and effectively disclosed to consumers, such that 
consumers may better understand whether they owe particular debts and, 
consequently, the costs, benefits, and risks associated with paying or 
not paying those debts.
34(c)(2)(i)
    FDCPA section 809(b) provides that a consumer may notify a debt 
collector in writing, within 30 days after receipt of the information 
required by FDCPA section 809(a), that the consumer is exercising 
certain verification rights, including the right to dispute the debt. 
FDCPA section 809(a)(3) through (5), in turn, requires debt collectors 
to disclose how consumers may exercise their verification rights. To 
notify a debt collector in writing that the consumer is exercising the 
consumer's verification rights, the consumer must have the debt 
collector's name and address.\455\ For this reason, and pursuant to its 
authority to interpret FDCPA section 809(a)(3) through (5) and (b), as 
well as its authority under Dodd-Frank Act section 1032(a), the Bureau 
proposes Sec.  1006.34(c)(2)(i) to provide that the debt collector's 
name and mailing address is validation information that must be 
provided to the consumer under Sec.  1006.34(a)(1). The Bureau requests 
comment on proposed Sec.  1006.34(c)(2)(i) and on whether additional 
clarification would be useful.
---------------------------------------------------------------------------

    \455\ Participants in the Bureau's consumer testing reported 
that contact information for debt collectors, including the debt 
collector's mailing address, is important. FMG Focus Group Report, 
supra note 38, at 15-16.
---------------------------------------------------------------------------

34(c)(2)(ii)
    FDCPA section 809(a) requires debt collectors to disclose 
information about the debt itself that helps consumers identify the 
debt and facilitate resolution of the debt. Like the information 
specifically referenced in FDCPA section 809(a), the consumer's name 
and address is essential information about the debt that may help a 
consumer determine whether the consumer owes a debt and is the intended 
recipient of a validation notice. For this reason, and pursuant to its 
authority to interpret FDCPA section 809(a), as well as its authority 
under Dodd-Frank Act section 1032(a), the Bureau proposes Sec.  
1006.34(c)(2)(ii) to provide that the consumer's name and mailing 
address is validation information that must be provided to the consumer 
under Sec.  1006.34(a)(1).\456\
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    \456\ As discussed in part VI, debt collectors may already 
include the consumer's complete name information available on 
validation notices, so proposed Sec.  1006.34(c)(2)(ii) may not pose 
significant operational challenges.
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    To avoid confusing or misleading consumers, the consumer's name and 
mailing address used by the debt collector in a validation notice would 
be the most complete information that the debt collector obtained from 
the creditor or another source. For example, a consumer advocate has 
noted that including the consumer's complete name in the validation 
notice would help senior consumers who may be contacted about a debt 
owed by a spouse or an adult child. Because a consumer may share the 
same last name as a spouse or an adult child, the consumer may need 
complete name information--for example, a name suffix such as 
``Junior'' or ``Senior''--to determine whether the consumer is the

[[Page 23340]]

validation notice's intended recipient, or whether the consumer 
received the validation notice in error. Proposed comment 34(c)(2)(ii)-
1 therefore would clarify that the consumer's name should reflect what 
the debt collector reasonably determines is the most complete version 
of the name information about which the debt collector has knowledge, 
whether obtained from the creditor or another source. Proposed comment 
34(c)(2)(ii)-1 further explains that a debt collector would not be able 
to omit name information in a manner that would create a false, 
misleading, or confusing impression about the consumer's identity.
    The Bureau requests comment on proposed Sec.  1006.34(c)(2)(ii) and 
on comment 34(c)(2)(ii)-1, including on whether additional 
clarification would be useful. The Bureau specifically requests comment 
on how debt collectors currently determine the complete version of a 
consumer's name if creditors or third parties, such as a skip tracing 
vendors, provide conflicting name information. The Bureau also requests 
comment on what a debt collector should be required to do to reasonably 
determine the consumer's complete name information.
34(c)(2)(iii)
    The purpose of FDCPA section 809 is to ``eliminate the recurring 
problem of debt collectors dunning the wrong person or attempting to 
collect debts which the consumer has already paid.'' \457\ Consistent 
with this purpose, FDCPA section 809(a) requires debt collectors to 
disclose to consumers certain information, including the name of the 
creditor, to help consumers identify debts and determine whether they 
owe them. For credit card debts, the merchant brand appears to be an 
integral part of the name of the creditor that helps consumers identify 
debts and determine whether they owe them. Merchant brands appear to be 
salient information for debts arising from use of co-branded or 
private-label credit cards because consumers may associate such debts 
more closely with merchant brands than with credit card issuers.\458\ 
For example, the Bureau's consumer focus group findings indicate 
consumers use merchant brands to recognize credit card debts.\459\
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    \457\ S. Rept. No. 382, supra note 70, at 4.
    \458\ The Bureau believes that merchant brand information is 
unique to credit card debt. Other types of debt do not typically 
involve an entity like a merchant, whom the consumer may associate 
with the debt but who did not provide the credit, product, or 
service that gave rise to the debt.
    \459\ FMG Focus Group Report, supra note 38, at 13-14; FMG 
Usability Report, supra note 41, at 43-44.
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    For this reason, and pursuant to its authority to interpret FDCPA 
section 809(a), as well as its authority under Dodd-Frank Act section 
1032(a), the Bureau proposes Sec.  1006.34(c)(2)(iii) to provide that 
the merchant brand, if any, associated with a credit card debt, to the 
extent available to the debt collector, is validation information that 
must be provided to the consumer under Sec.  1006.34(a)(1). Proposed 
comment 34(c)(2)(iii)-1 provides an example of merchant brand 
information that the Bureau believes would be available to a debt 
collector and must be included on a validation notice. The Bureau 
requests comment on proposed Sec.  1006.34(c)(2)(iii) and on comment 
34(c)(2)(iii)-1. In particular, the Bureau requests comment on whether 
merchant brand or similar information should be required for debts 
other than credit card debts.
34(c)(2)(iv)
    FDCPA section 809(a)(2), which requires debt collectors to disclose 
to consumers the name of the creditor to whom the debt is owed, 
typically is understood to refer to the current creditor.\460\ When the 
original creditor (or the creditor as of the itemization date) and the 
current creditor are the same, a consumer is more likely to recognize 
the creditor's name. If they are different, however, a consumer may be 
less likely to recognize the current creditor. For example, after the 
itemization date, a creditor may have sold a debt to a debt buyer, or 
may have changed its corporate identity following a merger or 
acquisition, and the consumer may not have had any contact with the new 
entity before collections began. In these cases, the consumer may be 
more likely to recognize the name of the creditor as of the itemization 
date than the name of the current creditor. This is because (as 
discussed in the section-by-section analysis of proposed Sec.  
1006.34(b)(3)) the itemization date is intended to reflect a notable 
event in a debt's history that the consumer may recall, or for which 
the consumer may have records. A consumer may be more likely to 
recognize the creditor as of that date than the current creditor, with 
whom the consumer may have no prior relationship.
---------------------------------------------------------------------------

    \460\ See the section-by-section analysis of proposed Sec.  
1006.34(c)(2)(vi) regarding FDCPA section 809(a)(2)'s requirement to 
disclose the name of the creditor to whom the debt is owed.
---------------------------------------------------------------------------

    For these reasons, and pursuant to its authority under Dodd-Frank 
Act section 1032(a), the Bureau proposes Sec.  1006.34(c)(2)(iv) to 
provide that, if a debt collector is collecting a consumer financial 
product or service debt, as that term is defined in Sec.  1006.2(f), 
the name of the creditor to whom the debt was owed on the itemization 
date is validation information that the debt collector must provide to 
the consumer under Sec.  1006.34(a)(1). The Bureau requests comment on 
proposed Sec.  1006.34(c)(2)(iv).
34(c)(2)(v)
    The purpose of FDCPA section 809 is to ``eliminate the recurring 
problem of debt collectors dunning the wrong person or attempting to 
collect debts which the consumer has already paid.'' \461\ The Bureau 
believes that the problem of debt collectors attempting to collect 
debts from consumers who do not owe the debts continues today. For 
example, ``attempts to collect debt not owed'' is consistently the most 
common type of debt collection complaint consumers provide to the 
Bureau.\462\
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    \461\ S. Rept. No. 382, supra note 70, at 4.
    \462\ See 2019 FDCPA Annual Report, supra note 11, at 16 (40 
percent of consumer complaints about debt collection involve 
attempts to collect debt not owed); 2018 FDCPA Annual Report, supra 
note 16, at 15 (39 percent of consumer complaints about debt 
collection involve attempts to collect debt not owed).
---------------------------------------------------------------------------

    Consistent with the FDCPA's purpose, FDCPA section 809(a) requires 
debt collectors to disclose to consumers certain information, such as 
the amount of the debt itself, to help consumers identify debts. An 
account number associated with a debt on the itemization date may be 
integral information that a consumer uses to identify the debt itself. 
For example, the Bureau's consumer testing suggests that a validation 
notice that includes an account number appears to ease concerns that a 
debt is fraudulent because the consumer may recognize the number or be 
able to verify the debt with their records.\463\ In addition, in 
response to the Bureau's ANPRM, State attorneys general, consumer 
advocates, and industry stakeholders all provided feedback that the 
account number associated with a debt may help a consumer recognize the 
debt. For these reasons, and pursuant to its authority to interpret 
FDCPA section 809(a), as well as its authority under Dodd-Frank Act 
section 1032(a), the Bureau proposes Sec.  1006.34(c)(2)(v) to provide 
that the account number, if any, associated with the debt on the 
itemization date, or a

[[Page 23341]]

truncated version of that number, is validation information that the 
debt collector must provide to the consumer under Sec.  1006.34(a)(1).
---------------------------------------------------------------------------

    \463\ FMG Focus Group Report, supra note 38, at 19.
---------------------------------------------------------------------------

    Debt collectors may wish to truncate account numbers to prevent 
disclosure of consumer account information, or to comply with 
applicable privacy rules, such as the FTC Safeguards Rule.\464\ 
Proposed comment 34(c)(2)(v)-1 explains that debt collectors may do so 
provided that the account number remains recognizable. For example, in 
lieu of disclosing a complete account number, debt collectors may 
disclose only the last four digits of the number. The Bureau requests 
comment on proposed Sec.  1006.34(c)(2)(v) and on comment 34(c)(2)(v)-
1, including on whether the Bureau should mandate truncation of account 
numbers rather than making truncation optional. Further, the Bureau 
requests comment on whether additional clarification about truncation 
would be helpful. For example, such clarification might explain when a 
truncated account number is recognizable, or how debt collectors may 
indicate that digits have been omitted from a truncated account number.
---------------------------------------------------------------------------

    \464\ See 16 CFR part 314.
---------------------------------------------------------------------------

34(c)(2)(vi)
    FDCPA section 809(a)(2) requires debt collectors to disclose to 
consumers the name of the creditor to whom the debt is owed. By using 
the present tense ``is owed,'' the statute appears to refer to the 
creditor to whom the debt is owed when the debt collector makes the 
disclosure. For this reason, and pursuant to its authority to implement 
and interpret FDCPA section 809(a)(2), the Bureau proposes Sec.  
1006.34(c)(2)(vi) to provide that the name of the current creditor is 
validation information that the debt collector must provide to the 
consumer under Sec.  1006.34(a)(1).
34(c)(2)(vii)
    FDCPA section 809(a)(1) requires debt collectors to disclose to 
consumers the amount of the debt. In Sec.  1006.34(c)(2)(viii), the 
Bureau proposes to interpret FDCPA section 809(a)(1), and to use its 
authority under Dodd-Frank Act section 1032(a), to provide that the 
amount of the debt on the itemization date is validation information 
that the debt collector must disclose under Sec.  1006.34(a)(1).\465\ 
Consistent with proposed Sec.  1006.34(c)(2)(viii)--and for the same 
reasons and pursuant to the same authority discussed in the section-by-
section analysis thereof--the Bureau proposes Sec.  1006.34(c)(2)(vii) 
to provide that the itemization date, as defined in Sec.  
1006.34(b)(3), also is validation information that must be provided to 
the consumer under Sec.  1006.34(a)(1).\466\ The itemization date would 
indicate the beginning of the time period that the itemization of the 
debt in proposed Sec.  1006.34(c)(2)(ix) is intended to capture. The 
Bureau requests comment on proposed Sec.  1006.34(c)(2)(vii).
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    \465\ See the section-by-section analysis of proposed Sec.  
1006.34(c)(2)(viii).
    \466\ As discussed in the section-by-section analysis of 
proposed Sec.  1006.34(b)(3) and (c)(2)(viii) and (ix), the 
itemization date is the reference date for, among other things, the 
itemization of the debt, which the Bureau believes may help a 
consumer identify an alleged debt. For additional discussion of 
these provisions, see the section-by-section analysis of proposed 
Sec.  1006.34(c)(2)(iv) and (v).
---------------------------------------------------------------------------

34(c)(2)(viii)
    FDCPA section 809(a)(1) requires debt collectors to disclose to 
consumers the amount of the debt. The phrase ``the amount of the debt'' 
is ambiguous; it does not specify which debt amount is being referred 
to, even though the debt amount may change over time. For example, 
because of accrued interest or fees, the current amount of the debt 
(i.e., the amount on the date that the validation information is 
provided) may be more than the amount of the debt at origination. 
Because of applied payments or credits, the current amount of the debt 
also may be less than the amount of the debt the consumer originally 
incurred. If the amount of the debt has changed over time, consumers 
may not recognize the debt or the current amount of the debt. By 
contrast, consumers may recognize the amount of the debt as of the 
itemization date. As discussed in the section-by-section analysis of 
proposed Sec.  1006.34(b)(3), the itemization date reflects a notable 
event in a debt's history that a consumer may recall or be able to 
verify with records, particularly if that amount is itemized as 
described in Sec.  1006.34(c)(ix).
    Because the amount of the debt on the itemization date may help a 
consumer recognize a debt and determine whether the amount of a debt is 
accurate, the Bureau proposes to interpret FDCPA section 809(a)(1), and 
to use its authority under Dodd-Frank Act section 1032(a), to provide 
in Sec.  1006.34(c)(2)(viii) that the amount of the debt on the 
itemization date is validation information that the debt collector must 
provide to the consumer under Sec.  1006.34(a)(1).\467\ Proposed 
comment 34(c)(2)(viii)-1 explains that this amount includes any fees, 
interest, or other charges owed as of the itemization date. The Bureau 
requests comment on proposed Sec.  1006.34(c)(2)(viii) and on comment 
34(c)(2)(viii)-1.
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    \467\ Proposed Sec.  1006.34(c)(2)(x) separately provides that 
the current amount of the debt also is validation information that 
must be disclosed under Sec.  1006.34(a)(1). See the section-by-
section analysis of proposed Sec.  1006.34(c)(2)(x).
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34(c)(2)(ix)
    FDCPA section 809(a)(1) requires a debt collector to disclose to 
consumers the amount of the debt. This disclosure is intended to help 
consumers recognize debts that they owe and raise concerns about debts 
that are unfamiliar or inaccurate. For the reasons discussed in the 
section-by-section analysis of proposed Sec.  1006.34(c)(2)(viii) and 
(x), the Bureau proposes to implement and interpret FDCPA section 
809(a)(1) to provide that debt collectors must disclose to consumers 
both the amount of the debt on the itemization date and the current 
amount of the debt (i.e., the amount of the debt on the date that the 
validation information is provided).
    In conjunction with the amount of the debt on the itemization date 
and the current amount of the debt, an itemization of how the amount of 
the debt changed between those dates may be an integral part of the 
amount of the debt. Specifically, consumers may be better positioned to 
recognize whether they owe a debt and to evaluate whether the current 
amount alleged due is accurate if they understand how the amount 
changed over time due, for example, to interest, fees, payments, and 
credits that have been assessed or applied to the debt.
    The Bureau's qualitative consumer testing indicates that an 
itemization appears to improve consumer understanding about and 
recognition of the debt.\468\ In particular, some testing participants 
emphasized that an itemization in a tabular format helped them 
understand specific fees and charges.\469\ The FTC has also suggested 
that the validation notice should contain an itemization that includes 
principal, interest, and fees.\470\ Some State debt collection laws 
also require that the validation notice include an itemization.\471\
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    \468\ FMG Usability Report, supra note 41, at 16-19.
    \469\ FMG Cognitive Report, supra note 40, at 10.
    \470\ FTC Modernization Report, supra note 176, at v.
    \471\ See Cal. Civ. Code sec. 1788.52(a)(2); NYCRR Sec.  
1.2(b)(2).
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    Courts have also observed that an itemization may enhance consumer 
understanding. Some courts have opined that an itemized accounting 
helps a consumer assess the validity of

[[Page 23342]]

an alleged debt.\472\ Further, some courts have held that a debt 
collector's failure to properly disclose interest and fees--or to 
disclose that a debt may increase in the future due to interest and 
fees--may violate the FDCPA.\473\
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    \472\ See, e.g., Haddad v. Alexander, Zelmanski, Danner & 
Fioritto, PLLC, 758 F. 3d 777, 785 (6th Cir. 2015).
    \473\ See Avila v. Riexinger & Associates, LLC, 817 F.3d 72, 76 
(2d Cir. 2016) (holding that 15 U.S.C. 1692e requires debt 
collectors to disclose when the amount of a debt may increase due to 
interest and fees); Miller v. McCalla, Raymer, Padrick, Cobb, 
Nichols, and Clark, LLC, 214 F.3d 872, 875-76 (7th Cir. 2000) 
(finding that a validation notice's omission of accrued interest and 
fees violated 15 U.S.C. 1692g(a)(1)'s requirement to disclose the 
amount of the debt); Wood v. Allied Interstate, LLC (17 C 4921), 
2018 WL 2967061, at *2-3 (N.D. Ill. June 13, 2018) (holding that an 
itemization that listed ``$0.00'' due in interest and fees, when 
interest and fees were not allowed, could violate 15 U.S.C. 1692e 
and 1692f).
---------------------------------------------------------------------------

    An itemization also may discourage debt collectors from engaging in 
unfair, deceptive, or abusive practices by ensuring that consumers 
have, as a matter of course, sufficient information to evaluate claims 
of indebtedness presented in validation notices. For example, requiring 
a debt collector to disclose an itemization of the debt may help a 
consumer identify erroneous or fabricated fees that a creditor or debt 
collector may have added that inflated the amount of an alleged debt. 
An itemization requirement also may help debt collectors disclose 
interest and fees in a manner that provides essential information to 
consumers and reduces debt collectors' legal risk when providing 
validation notices.
    For these reasons, and pursuant to its authority to interpret FDCPA 
section 809(a)(1), as well as its authority under Dodd-Frank Act 
section 1032(a), the Bureau proposes Sec.  1006.34(c)(2)(ix) to provide 
that an itemization of the current amount of the debt, in a tabular 
format reflecting interest, fees, payments, and credits since the 
itemization date, is validation information that must be provided to 
the consumer under Sec.  1006.34(a)(1). Proposed comment 34(c)(2)(ix)-1 
would clarify how debt collectors can disclose that no interest, fees, 
payments, or credits were assessed or applied to a debt.
    The Bureau requests comment on proposed Sec.  1006.34(c)(2)(ix) and 
on comment 34(c)(2)(ix)-1. In particular, the Bureau requests comment 
on whether the itemization should be more detailed--for example, by 
reflecting each fee charged and each payment received--or whether 
certain itemization categories, such as credits and payments, should be 
combined. The Bureau also requests comment on whether the itemization 
proposal is practicable across all categories of debt or conflicts with 
disclosure requirements established by other applicable law, such as 
State case law, statutory law, and regulatory law, as well as 
disclosures required by judicial opinions or orders.
34(c)(2)(x)
    FDCPA section 809(a)(1) requires debt collectors to disclose to 
consumers the amount of the debt. As noted, however, the phrase ``the 
amount of the debt'' is ambiguous; it does not specify which debt 
amount is being referred to, even though the debt amount may change 
over time. One reasonable interpretation of FDCPA section 809(a)(1) is 
that ``amount of the debt'' refers to the current amount of the debt, 
which is the amount of the debt on the date that the validation 
information is provided. For this reason, and pursuant to its authority 
to implement and interpret FDCPA section 809(a)(1), proposed Sec.  
1006.34(c)(2)(x) provides that the current amount of the debt is 
validation information that the debt collector must provide to the 
consumer under Sec.  1006.34(a)(1).
    Proposed comment 34(c)(2)(x)-1 explains that, for residential 
mortgage debt subject to Sec.  1006.34(c)(5), a debt collector may 
comply with Sec.  1006.34(c)(2)(x) by including in the validation 
notice the total balance of the outstanding mortgage, including 
principal, interest, fees, and other charges. The Bureau proposes this 
to accommodate debt collectors collecting mortgage debt, who sometimes 
disclose to consumers the total balance of the outstanding mortgage, 
rather than the current amount due on a given date when providing the 
amount of the debt pursuant to FDCPA section 809(a)(1).\474\ The Bureau 
requests comment on proposed Sec.  1006.34(c)(2)(x) and on comment 
34(c)(2)(x)-1.
---------------------------------------------------------------------------

    \474\ Under Regulation Z, 12 CFR 1026.41(d)(3), certain mortgage 
servicers are required to provide a past-payment breakdown that may 
be functionally equivalent to, and as useful for the consumer, as 
the disclosures that would be required by proposed Sec.  
1006.34(c)(2)(vii) through (ix). As discussed in the section-by-
section analysis of proposed Sec.  1006.34(c)(5), the Bureau 
proposes a special rule that would allow servicers of certain 
residential mortgage debt to satisfy the requirements of proposed 
Sec.  1006.34(c)(2)(vii) through (ix) by providing disclosures 
required by Regulation Z, 12 CFR 1026.41(d)(3).
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34(c)(3) Information About Consumer Protections
    The disclosures in FDCPA section 809(a) help consumers determine if 
a particular debt is theirs and facilitate action in response to a 
collection attempt. The Bureau understands, however, that debt 
collectors typically may disclose only the information that FDCPA 
section 809(a) specifically references and may provide the FDCPA 
section 809 information using statutory language, rather than plain 
language that consumers can more easily comprehend.
    Consumer advocates, State agencies, and State attorneys general 
provided ANPRM feedback that validation notices do not contain enough 
information about a consumer's rights with respect to debt 
collection.\475\ The FTC similarly has asserted that debt collectors 
generally do not provide enough information about the actions consumers 
may take under the FDCPA, which makes it difficult for some consumers 
to exercise those rights.\476\ The Bureau's consumer focus group 
findings also indicate that consumers often are unfamiliar with or have 
erroneous beliefs about their FDCPA rights.\477\ Many testing 
participants responded favorably to sample validation notices that 
disclosed additional rights and protections.\478\ Consumer testing also 
suggests that consumers generally prefer disclosures written in plain 
language, as opposed to statutory language.\479\
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    \475\ Consumer complaints received by the Bureau tend to 
corroborate this feedback. In its 2019 FDCPA Annual Report, the 
Bureau noted that 25 percent of consumers who complained about 
written notifications about debt stated that they did not receive a 
notice of their right to dispute. See 2019 FDCPA Annual Report, 
supra note 11, at 17.
    \476\ FTC Modernization Report, supra note 176, at v. The notion 
that some consumers may have difficulty exercising FDCPA 
verification rights is supported by one academic study that found a 
substantial proportion of survey respondents did not understand they 
would need to dispute a debt in writing to trigger certain FDCPA 
protections. According to the study, 75 percent of consumers who 
were shown a court-approved validation notice believed that they 
could orally exercise their verification rights, even though the 
notice expressly stated that disputes must be in writing. See Jeff 
Sovern & Kate E. Walton, ``Are Validation Notices Valid? An 
Empirical Evaluation of Consumer Understanding of Debt Collection 
Validation Notices,'' 70 SMU L. Rev. 63, at 94-98 (2017).
    \477\ FMG Focus Group Report, supra note 38, at 6-8.
    \478\ FMG Cognitive Report, supra note 40, at 27-33.
    \479\ Id. at 26-27; FMG Summary Report, supra note 42, at 25-26.
---------------------------------------------------------------------------

    To address these concerns, proposed Sec.  1006.34(c)(3) would deem 
certain information about a consumer's rights with respect to debt 
collection to be validation information that must be provided to the 
consumer under Sec.  1006.34(a)(1). This information, which is 
discussed in the section-by-section analysis of proposed Sec.  
1006.34(c)(3)(i) through (vi), would include disclosures specifically 
referenced in FDCPA

[[Page 23343]]

section 809(a)(4) and (5), as well as additional disclosures intended 
to help consumers understand their debt collection rights.\480\ The 
Bureau requests comment on proposed Sec.  1006.34(c)(3) generally, 
including on whether any of the proposed items should be excluded or 
any additional items should be added.
---------------------------------------------------------------------------

    \480\ See 15 U.S.C. 1692g(a)(4) and (5).
---------------------------------------------------------------------------

    The Bureau proposes Sec.  1006.34(c)(3)(i) through (iii) and (v) 
pursuant to its authority under FDCPA section 814(d) to prescribe rules 
with respect to the collection of debts by debt collectors and, as 
described more fully below, its authority to implement and interpret 
FDCPA section 809. The Bureau also proposes Sec.  1006.34(c)(3) 
pursuant to its authority under section 1032(a) of the Dodd-Frank Act, 
on the basis that a consumer's rights are a feature of debt collection. 
Requiring disclosure of information about these rights may help to 
ensure that the features of debt collection are fully, accurately, and 
effectively disclosed to consumers, such that consumers may better 
understand the costs, benefits, and risks associated with debt 
collection.
34(c)(3)(i)
    FDCPA section 809(a)(4) requires debt collectors to disclose to 
consumers their right under FDCPA section 809(b) to dispute the 
validity of the debt within 30 days after receipt of the validation 
information (i.e., during the validation period). As discussed in the 
section-by-section analysis of proposed Sec.  1006.38, if a consumer 
disputes a debt in accordance with FDCPA section 809(b), a debt 
collector must cease collecting the debt until the debt collector 
provides verification to the consumer; this is sometimes referred to as 
the collections pause. FDCPA section 809(a)(4) does not expressly 
indicate that a debt collector must disclose to consumers that a 
dispute triggers FDCPA section 809(b)'s collections pause, or whether a 
debt collector must disclose the end date of the validation period.
    FDCPA section 809(b)'s collections pause is an integral feature of 
the dispute right disclosure required by FDCPA section 809(a)(4). 
Unless debt collectors disclose the collections pause, consumers may 
not fully appreciate their FDCPA dispute right. Participants in the 
Bureau's consumer testing reported that knowing about the collections 
pause was important and would encourage them to exercise their dispute 
right if they question a debt's validity.\481\ This is consistent with 
the FTC's observation that consumers are generally unaware of the 
collections pause, even though it may benefit them.\482\
---------------------------------------------------------------------------

    \481\ FMG Cognitive Report, supra note 40, at 30; see also FMG 
Summary Report, supra note 42, at 25.
    \482\ FTC Modernization Report, supra note 176, at 26-27.
---------------------------------------------------------------------------

    The validation period end date similarly is an integral feature of 
a consumer's dispute right. Unless debt collectors disclose the end 
date of the validation period, consumers may be uncertain about the 
time period during which they are entitled to dispute the debt under 
FDCPA section 809(b).
    For these reasons, and pursuant to its authority to interpret FDCPA 
section 809(a)(4) and (b), as well as its authority under Dodd-Frank 
Act section 1032(a), the Bureau proposes Sec.  1006.34(c)(3)(i) to 
provide that validation information includes a statement that specifies 
the end date of the validation period and states that, if the consumer 
notifies the debt collector in writing before the end of the validation 
period that the debt, or any portion of the debt, is disputed, the debt 
collector must cease collection of the debt until the debt collector 
sends the consumer either the verification of the debt or a copy of a 
judgment. The Bureau requests comment on proposed Sec.  
1006.34(c)(3)(i).
34(c)(3)(ii)
    FDCPA section 809(a)(5) requires debt collectors to disclose to 
consumers their right under FDCPA section 809(b) to request, within 30 
days after receipt of the validation information, the name and address 
of the original creditor, if different than the current creditor. FDCPA 
section 809(a)(5) does not expressly indicate that a debt collector 
must disclose to consumers that an original-creditor information 
request invokes FDCPA section 809(b)'s collections pause, or whether a 
debt collector must disclose the end date of the validation period.
    FDCPA section 809(b)'s collections pause is an integral feature of 
the consumer's right to request original-creditor information under 
FDCPA section 809(a)(5). Unless debt collectors disclose the 
collections pause, consumers may not fully appreciate their right to 
request original-creditor information under FDCPA section 809(b).
    The validation period end date similarly is an integral feature of 
a consumer's right to request original-creditor information. Unless 
debt collectors disclose the validation period end date, consumers may 
be uncertain about the time period during which they are entitled to 
request original-creditor information under FDCPA section 809(b).
    For these reasons, and pursuant to its authority to interpret FDCPA 
section 809(a)(5) and (b), as well as its authority under Dodd-Frank 
Act section 1032(a), the Bureau proposes Sec.  1006.34(c)(3)(ii) to 
provide that validation information includes a statement that specifies 
the end date of the validation period and states that, if the consumer 
requests in writing before the end of the validation period the name 
and address of the original creditor, the debt collector must cease 
collection of the debt until the debt collector sends the consumer the 
name and address of the original creditor, if different from the 
current creditor. The Bureau requests comment on proposed Sec.  
1006.34(c)(3)(ii). In particular, the Bureau notes that the proposed 
Sec.  1006.34(c)(3)(ii) disclosure language that appears on proposed 
Model Form B-3 omits the statutory phrase, ``if different from the 
current creditor.'' The Bureau intentionally omitted this phrase to 
achieve a plain language disclosure that enhances consumer 
understanding. The Bureau requests comment on whether omitting this 
phrase on proposed Model Form B-3 would enhance consumer understanding 
by simplifying the statutory language, or whether it might lead 
consumers incorrectly to conclude that a debt collector always would 
need to cease collection upon request for original-creditor 
information, even if the original creditor and the current creditor 
were the same.
34(c)(3)(iii)
    FDCPA section 809(a)(3) requires a debt collector to disclose to a 
consumer that, unless the consumer disputes the validity of the debt 
within 30 days of receipt of the validation information, the debt 
collector will assume the debt to be valid. The Bureau is aware that 
courts in various jurisdictions have reached different conclusions 
about whether FDCPA section 809(a)(3) requires debt collectors to 
recognize oral disputes, received within 30 days of a consumer's 
receipt of the validation information, about the validity of the 
debt.\483\ These differing decisions

[[Page 23344]]

principally arise from the fact that, whereas FDCPA section 809(a)(4) 
and (5) explicitly require a consumer to submit a written dispute to 
invoke the FDCPA's verification rights, FDCPA section 809(a)(3) 
specifies no writing requirement. In the absence of an express writing 
requirement in FDCPA section 809(a)(3), the majority of circuit courts 
that have considered this issue have determined that a consumer's oral 
dispute triggers certain FDCPA protections, including, for example, 
FDCPA section 810's payment application requirement.\484\ These 
decisions have created uncertainty for debt collectors in some 
jurisdictions when seeking to comply with FDCPA section 809(a)'s 
disclosure requirements.\485\
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    \483\ Compare Clark v. Absolute Collection Serv., Inc., 741 F.3d 
487, 490 (4th Cir. 2014) (holding that oral disputes trigger certain 
FDCPA protections, including under FDCPA section 809(a)(3)), Hooks 
v. Forman, Holt, Eliades & Ravin, LLC, 717 F.3d 282, 286 (2d Cir. 
2013) (same), and Camacho v. Bridgeport Fin. Inc., 430 F.3d 1078, 
1082 (9th Cir. 2005) (same), with Graziano v. Harrison, 950 F.2d 
107, 112 (3d Cir. 1991) (``[A] dispute, to be effective, must be in 
writing''), and Durnell v. Stoneleigh Recovery Assocs., LLC, (No. 
18-2335), 2019 WL 121197, at *3-4 (E.D. Pa. Jan. 7, 2019) (holding 
that a validation notice that ``mirror[ed] the language'' of the 
FDCPA section 809 still violated the FDCPA because disputes must be 
in writing).
    \484\ See 15 U.S.C. 1692i; Camacho, 430 F.3d at 1081-82 (holding 
that oral disputes trigger certain FDCPA protections, including 
under FDCPA sections 807(8) and 810).
    \485\ See, e.g., Caprio v. Healthcare Revenue Recovery Grp., 709 
F.3d 142, 151-52 (3d Cir. 2013) (holding that a collection letter 
encouraging a consumer to ``please call'' the debt collector 
violated FDCPA section 809(a)); Riggs v. Prober & Raphael, 681 F.3d 
1097, 1103-04 (9th Cir. 2012) (holding that a validation notice that 
implied a written dispute requirement--but that did not expressly 
require a written dispute--did not violate FDCPA section 809(a)(3)); 
Homer v. Law Offices of Frederic I. Weinberg & Assocs., P.C., 292 F. 
Supp. 3d 629, 633-34 (E.D. Pa. 2017) (holding that a validation 
notice that used ``hears from you'' language was deceptive because 
it suggested that disputes could be made orally).
---------------------------------------------------------------------------

    Consistent with the position articulated by the majority of circuit 
courts, and pursuant to its authority to implement and interpret FDCPA 
section 809(a)(3) as well as its authority under Dodd-Frank Act section 
1032(a), the Bureau proposes to interpret FDCPA 809(a)(3) to allow oral 
disputes. The Bureau believes that this may be the most persuasive 
interpretation of Congressional intent, given the lack of the words 
``in writing'' in FDCPA 809(a)(3), as compared to the presence of those 
words throughout FDCPA 809(a)'s other provisions. Accordingly, the 
Bureau proposes Sec.  1006.34(c)(3)(iii) to provide that validation 
information includes a statement that specifies the end date of the 
validation period and states that, unless the consumer contacts the 
debt collector to dispute the validity of the debt, or any portion of 
the debt, before the end of the validation period, the debt collector 
will assume that the debt is valid. Model Form B-3 would inform 
consumers that they have the option to ``call'' or ``write'' a debt 
collector to dispute the validity of a debt during the validation 
period. While Model Form B-3 would alert consumers to an oral dispute 
option, the form would clarify that only a written dispute would invoke 
verification rights pursuant to FDCPA sections 809(a)(4) and (5).\486\ 
As discussed in the section-by-section analysis of proposed Sec.  
1006.34(d)(2), the use of Model Form B-3 would provide debt collectors 
with a safe harbor for compliance with FDCPA section 809(a)'s 
disclosure requirements.\487\ The Bureau requests comment on whether 
debt collectors require additional clarification about how to comply 
with FDCPA section 809(a)(3).
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    \486\ See the section-by-section analysis of proposed Sec.  
1006.34(c)(3)(i) and (ii).
    \487\ See the section-by-section analysis of proposed Sec.  
1006.34(d)(2).
---------------------------------------------------------------------------

34(c)(3)(iv)
    As discussed in the section-by-section analysis of proposed Sec.  
1006.34(c)(3), consumers may not receive sufficient information about 
their rights and protections in debt collection. While validation 
information helps consumers determine if a particular debt is theirs 
and facilitates action in response to a collection attempt, consumers 
could benefit if validation information included additional information 
about consumer protections in debt collection. The Bureau makes such 
information available on its website and intends to develop additional 
resources to enhance consumer understanding of these protections and 
the debt collection process in general. The Bureau is developing a 
reference document that would describe certain legal protections 
relevant to debt collection. This reference document was initially 
conceived as a mandatory disclosure that debt collectors would be 
required to provide to consumers along with the validation notice. 
Although the Bureau does not propose to require debt collectors to 
provide the reference document to consumers, if the Bureau finalizes 
proposed Sec.  1006.34(c)(3)(iv), the Bureau would publish a version of 
the document as a consumer resource on the Bureau's website before the 
final rule's effective date.\488\
---------------------------------------------------------------------------

    \488\ For additional detail about information that may appear on 
the reference document, refer to appendix G of the Small Business 
Review Panel Outline, supra note 56.
---------------------------------------------------------------------------

    To enhance consumer understanding of protections available during 
the debt collection process, and pursuant to its authority under Dodd-
Frank Act section 1032(a), the Bureau proposes Sec.  1006.34(c)(3)(iv) 
to provide that, if a debt collector is collecting a consumer financial 
product or service debt, as defined in Sec.  1006.2(f), then validation 
information includes a statement that informs the consumer that 
additional information regarding consumer rights in debt collection is 
available on the Bureau's website at https://www.consumerfinance.gov.\489\ The Bureau proposes this requirement on 
the basis that this information informs consumers how to exercise their 
FDCPA rights and protections and therefore is a feature of debt 
collection. The Bureau requests comment on proposed Sec.  
1006.34(c)(3)(iv).
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    \489\ To the extent that the Bureau develops a more specific 
landing page for information about consumer protections during the 
debt collection process, the Bureau would include the website 
address for that landing page in a final rule.
---------------------------------------------------------------------------

34(c)(3)(v)
    As discussed below, proposed Sec.  1006.34(c)(4) would provide that 
validation information includes information that a consumer can use to 
take certain actions, which generally include disputing a debt or 
requesting original-creditor information.\490\ As discussed in the 
section-by-section analysis of proposed Sec.  1006.34(c)(3)(i) and 
(ii), FDCPA section 809(b) provides that consumers must notify a debt 
collector ``in writing'' to dispute a debt or request original-creditor 
information. As discussed in the section-by-section analysis of 
proposed Sec.  1006.38, the Bureau would interpret FDCPA section 
809(b)'s writing requirement as being satisfied when a consumer submits 
a dispute or request for original-creditor information to the debt 
collector via a medium of electronic communication through which a debt 
collector accepts electronic communications from consumers, such as 
email or a website portal. Thus, debt collectors only would be required 
to give legal effect to consumer disputes or requests for original-
creditor information submitted electronically where a debt collector 
chooses to accept electronic communications from consumers. This would 
apply regardless of whether the validation notice itself is delivered 
electronically.
---------------------------------------------------------------------------

    \490\ Proposed Sec.  1006.34(c)(4) would set forth required 
consumer response information. Proposed Sec.  1006.34(d)(3)(iii)(B) 
and (vi)(B) would permit certain other consumer response information 
related to payment requests and requests for Spanish-language 
validation notices.
---------------------------------------------------------------------------

    Further, FDCPA section 809(b) prohibits debt collector 
communications during the validation period that are inconsistent with 
the disclosure of a consumer's verification rights. If debt collectors 
refuse to accept consumers' disputes or requests for original-creditor 
information through a medium of electronic communication after

[[Page 23345]]

providing an electronic validation notice through that same medium, 
consumers may become confused about how to exercise their verification 
rights. While the FDCPA does not directly address electronic debt 
collection communications, a reasonable consumer could expect to be 
able to respond to a debt collector through the same medium of 
electronic communication that the debt collector used to contact the 
consumer. Because of the potential for confusion, a debt collector's 
refusal to accept a dispute or request for original-creditor 
information electronically after providing a validation notice 
electronically may be inconsistent with the effective disclosure of the 
consumer's verification rights.
    For these reasons, and pursuant to its authority to interpret FDCPA 
section 809(a) and (b), as well as its authority under Dodd-Frank Act 
section 1032(a), the Bureau proposes Sec.  1006.34(c)(3)(v) to provide 
that validation information includes a statement explaining how a 
consumer can take the actions described in Sec.  1006.34(c)(4) 
electronically, if the debt collector sends the validation notice 
electronically. Proposed comment 34(c)(3)(v)-1 explains that a debt 
collector may provide the information described in proposed Sec.  
1006.34(c)(3)(v) by including the statements, ``We accept disputes 
electronically,'' using that phrase or a substantially similar phrase, 
followed by an email address or website portal that a consumer can use 
to take the action described in Sec.  1006.34(c)(4)(i), and ``We accept 
original creditor information requests electronically,'' using that 
phrase or a substantially similar phrase, followed by an email address 
or website portal that a consumer can use to take the action described 
in Sec.  1006.34(c)(4)(ii). Proposed comment 34(c)(3)(v)-1 also would 
clarify that, if a debt collector accepts electronic communications 
from consumers through more than one medium, such as by email and 
through a website portal, the debt collector is only required to 
provide information regarding one of these media but may provide 
information about additional media.
    During the SBREFA process, small entity representatives supported 
the Bureau's proposal to clarify how debt collectors could use newer 
communication technologies, such as email and text messages, which some 
consumers may prefer.\491\ Consistent with this feedback, the Small 
Business Review Panel Report recommended that the Bureau consider 
whether the debt collection rule should promote newer communication 
technologies, and, if so, establish guidelines for the appropriate use 
of such technologies.\492\ Proposed Sec.  1006.34(c)(3)(v) is 
responsive to this feedback. The Bureau requests comment on proposed 
Sec.  1006.34(c)(3)(v) and on comment 34(c)(3)(v)-1.
---------------------------------------------------------------------------

    \491\ See Small Business Review Panel Report, supra note 57, at 
16-17; see also CFPB Debt Collection Consumer Survey, supra note 18, 
at 37 (finding that email was the most preferred contact method for 
11 percent of consumers contacted about a debt in collection).
    \492\ Small Business Review Panel Report, supra note 57, at 38.
---------------------------------------------------------------------------

34(c)(3)(vi)
    As discussed elsewhere in this proposed rule--for example, in the 
section-by-section analysis of proposed Sec.  1006.42--the use of 
electronic media such as email and text messages for debt collection 
communications may further the interests of both consumers and debt 
collectors, but communications sent by such media may require tailored 
protections for consumers. One such protection, as proposed in Sec.  
1006.6(e), would require a debt collector who communicates or attempts 
to communicate with a consumer electronically in connection with the 
collection of a debt using a specific email address, telephone number 
for a text message, or other electronic-medium address to include in 
such communication or attempt to communicate a clear and conspicuous 
statement describing one or more ways the consumer can opt out of 
further electronic communications or attempts to communicate by the 
debt collector to that address or telephone number.
    Consistent with proposed Sec.  1006.6(e), and pursuant to the legal 
authorities discussed in the section-by-section analysis thereof, the 
Bureau proposes Sec.  1006.34(c)(3)(vi) to provide that, for a 
validation notice delivered in the body of an email pursuant to Sec.  
1006.42(b)(1) or (c)(2)(i), validation information includes the opt-out 
statement required by Sec.  1006.6(e). Proposed comment 34(c)(3)(vi)-1 
explains that, if a validation notice is delivered on a website 
pursuant to Sec.  1006.42(c)(2)(ii), the validation notice need not 
contain the opt-out statement because the statement will be required in 
any email or text message that provides a hyperlink to the website 
where the notice is placed. Proposed comment 34(c)(3)(vi)-1 further 
explains that delivery of a validation notice that a debt collector 
previously provided pursuant to Sec.  1006.42(b)(1) or (c)(2)(i) or 
(ii) is not rendered ineffective because a consumer opts out of future 
electronic communications. The Bureau requests comment on proposed 
Sec.  1006.34(c)(3)(vi) and on comment 34(c)(3)(vi)-1.
34(c)(4) Consumer Response Information
    The FTC has noted that some consumers do not receive sufficient 
information explaining how they may exercise their FDCPA rights.\493\ 
This observation is consistent with at least one academic study, which 
found that many consumers did not understand how to properly exercise 
their FDCPA verification rights even after reviewing a typical 
validation notice.\494\
---------------------------------------------------------------------------

    \493\ See FTC Modernization Report, supra note 176, at v.
    \494\ See Jeff Sovern & Kate E. Walton, Are Validation Notices 
Valid? An Empirical Evaluation of Consumer Understanding of Debt 
Collection Validation Notices, 70 SMU L. Rev. 63, 94-98 (2017).
---------------------------------------------------------------------------

    During the development of this proposal, the Bureau tested 
validation notices that included information about how consumers could 
exercise their FDCPA verification rights using a separate section of 
the notice, which consumers could detach and return to the debt 
collector. For purposes of this section-by-section analysis, the Bureau 
refers to this information as consumer response information. The 
Bureau's usability testing indicated that consumers understood that 
they could use the consumer response information to dispute a debt, or 
to communicate that information about the debt in the validation notice 
was incorrect.\495\ The usability testing findings thus indicated that 
the consumer response information enhanced consumers' comprehension of 
their dispute rights.\496\
---------------------------------------------------------------------------

    \495\ See FMG Usability Report, supra note 41, at 59-60.
    \496\ See id.
---------------------------------------------------------------------------

    The Bureau's testing suggests that requiring debt collectors to 
disclose consumer response information, segregated from other 
validation information, appears to help consumers exercise their FDCPA 
section 809(b) rights to dispute the validity of a debt and to request 
original-creditor information. Further, the consumer response 
information may facilitate a debt collector's ability to process and 
understand a consumer's response to a validation notice. For example, 
by requiring the consumer response information section to include 
statements describing specific reasons for disputes, proposed Sec.  
1006.34(c)(4) could reduce the burden of responding to generic or 
ambiguous disputes. While the proposal would not require consumers to 
indicate a specific dispute

[[Page 23346]]

description listed in the consumer response information, consumers may 
be likely to do so, thereby lessening the number of generic disputes 
(e.g., a communication that only contains the statement ``I dispute'' 
with no further detail) sent to debt collectors.\497\
---------------------------------------------------------------------------

    \497\ Usability testing findings suggested that consumers 
generally understood how to use the consumer response information 
section to indicate a specific reason for a dispute. See id. at 59-
61.
---------------------------------------------------------------------------

    For these reasons, the Bureau proposes requiring a consumer 
response information section on the validation notice. Specifically, 
proposed Sec.  1006.34(c)(4) provides that the validation information 
that must be disclosed under Sec.  1006.34(a)(1) includes certain 
consumer response information situated next to prompts that the 
consumer could use to indicate that action or request. The information, 
which is discussed in the section-by-section analysis of proposed Sec.  
1006.34(c)(4)(i) through (iii), would include statements describing 
certain actions that a consumer could take, including submitting a 
dispute, identifying the reason for the dispute, providing additional 
detail about the dispute, and requesting original-creditor 
information.\498\
---------------------------------------------------------------------------

    \498\ As discussed in the section-by-section analysis of 
proposed Sec.  1006.34(d)(3)(iii)(B) and (vi)(B), a debt collector 
also could choose to include a payment disclosure and Spanish-
language validation notice request disclosure as consumer response 
information.
---------------------------------------------------------------------------

    Proposed Sec.  1006.34(c)(4) provides that the consumer response 
information section must be segregated from the validation information 
described in Sec.  1006.34(c)(1) through (3) and from any optional 
information included pursuant to Sec.  1006.34(d)(3)(i), (ii), (iv), or 
(v) and, if the validation information is provided in writing or 
electronically, located at the bottom of the notice and under the 
headings, ``How do you want to respond?'' and ``Check all that 
apply:''. Requiring the consumer response information section to be 
presented in this manner may help consumers respond to the disclosures 
required under Sec.  1006.34(a)(1). Specifically, requiring the 
information to be located at the bottom of a validation notice may 
enable consumers to use the bottom section of the notice to reply to 
the debt collector while retaining the required disclosures located in 
the validation notice's upper section. Proposed comment 34(c)(4)-1 
would clarify that, if the validation information is provided in 
writing or electronically, a prompt described in Sec.  1006.34(c)(4) 
may be formatted as a checkbox, as in Model Form B-3.
    The Bureau requests comment on proposed Sec.  1006.34(c)(4). The 
Bureau specifically requests comment on whether validation information 
should include consumer response information, and, if so, on whether 
any of the proposed items should be excluded or any additional items 
should be added.
    The Bureau proposes Sec.  1006.34(c)(4) pursuant to its authority 
under FDCPA section 814(d) to prescribe rules with respect to the 
collection of debts by debt collectors and, as described more fully 
below, its authority to implement and interpret FDCPA section 809. The 
Bureau also proposes Sec.  1006.34(c)(4) pursuant to its authority 
under section 1032(a) of the Dodd-Frank Act, on the basis that the 
information in proposed Sec.  1006.34(c)(4)(i) through (iii) informs 
consumers how to exercise their rights under FDCPA section 809(b) and 
therefore is a feature of debt collection. Requiring disclosure of the 
information may help to ensure that the features of debt collection are 
fully, accurately, and effectively disclosed to consumers, such that 
consumers may better understand the costs, benefits and risks 
associated with debt collection.
34(c)(4)(i) Dispute Prompts
    FDCPA section 809(a)(4) requires a debt collector to disclose to 
consumers their right under FDCPA section 809(b) to dispute the 
validity of the debt within 30 days after receipt of the validation 
notice. As discussed in the section-by-section analysis of proposed 
Sec.  1006.34(c)(3)(i), which would implement and interpret FDCPA 
section 809(a)(4), some consumers may not adequately understand this 
FDCPA dispute right or may face challenges when attempting to exercise 
it. Providing consumers with prepared dispute statements may assist 
consumers by helping them articulate the nature of their disputes. 
Enabling consumers to communicate specific information about their 
disputes also may reduce the number of burdensome, generic disputes 
received by debt collectors and may allow debt collectors to provide 
more relevant information in response.
    For this reason, and pursuant to its authority to implement and 
interpret FDCPA section 809(a)(4), as well as its authority under Dodd-
Frank Act section 1032(a), the Bureau proposes Sec.  1006.34(c)(4)(i) 
to provide that consumer response information includes statements, 
situated next to prompts, that the consumer can use to dispute the 
validity of a debt and to specify a reason for that dispute. Proposed 
Sec.  1006.34(c)(4)(i), which is designed to work in tandem with 
proposed Sec.  1006.34(c)(3)(i), would provide that consumer response 
information includes the following four statements, listed in the 
following order, using the following phrasing or substantially similar 
phrasing,\499\ each next to a prompt: ``I want to dispute the debt 
because I think:''; ``This is not my debt''; ``The amount is wrong''; 
and ``Other: (please describe on reverse or attach additional 
information).'' The first three proposed dispute categories appear to 
capture the vast majority of consumer disputes about the validity of a 
debt.
---------------------------------------------------------------------------

    \499\ To provide debt collectors with greater flexibility, the 
Bureau does not propose to require a debt collector to use the exact 
phrasing set forth in proposed Sec.  1006.34(c)(4)(i).
---------------------------------------------------------------------------

    During the SBREFA process, small entity representatives suggested 
that including dispute prompts in the validation notice could increase 
dispute volume and frequency, which could cause debt collectors to 
incur more costs investigating and responding to disputes. Some small 
entity representatives particularly were concerned that the consumer 
response information might increase the number of generic disputes that 
lack enough detail for debt collectors to provide responsive 
information to consumers. Several small entity representatives also 
objected to a potential dispute prompt that would state, ``You are not 
the right person to pay,'' noting that this statement would not provide 
debt collectors enough information to respond effectively to the 
dispute and would require the debt collector to re-contact the 
consumer, imposing costs on both debt collectors and consumers. The 
Small Business Review Panel Report recommended that the Bureau consider 
further its proposed consumer response information, including 
soliciting more specific disputes.
    In response to this feedback, the proposed rule omits the dispute 
prompt, ``You are not the right person to pay.'' However, the proposed 
rule retains the consumer response information concept. Proposed Sec.  
1006.34(c)(4)(i) may facilitate consumers' ability to exercise their 
dispute right, which is an important FDCPA protection. In addition, 
proposed Sec.  1006.34(c)(2), by requiring more information about the 
debt, may help consumers recognize debts that they owe, reducing the 
number of disputes arising from lack of consumer recognition and, 
thereby, limiting overall dispute volume. Further, any information that 
consumers provide in response to the free-form dispute prompt in 
proposed Sec.  1006.34(c)(4)(i)(D) could help debt collectors better 
understand the nature of a consumer's dispute and respond

[[Page 23347]]

more efficiently than if consumers had provided generic disputes.
    The Bureau requests comment on proposed Sec.  1006.34(c)(4)(i), 
including on whether any dispute prompts should be added, revised, or 
removed. In addition, the Bureau requests comment on the potential 
risks, costs, and benefits of the dispute prompts for both consumers 
and industry, including on whether proposed Sec.  1006.34(c)(4)(i) will 
impact dispute volumes or affect the proportion of specific disputes 
that debt collectors receive as compared to generic disputes.
    As discussed in the section-by-section analysis of proposed Sec.  
1006.38, the Bureau would interpret FDCPA section 809(b) to require a 
debt collector to honor disputes that a consumer provides via a medium 
of written electronic communication \500\ accepted by the debt 
collector, such as a dispute portal accessed on or through a hyperlink 
in an electronic communication. The Bureau declines to propose 
requirements related to debt collector website communications, 
including the content or formatting of dispute information accessible 
via website or hyperlink.\501\ The Bureau requests comment on whether 
the Bureau should propose rules concerning website communications. In 
particular, the Bureau requests comment about the risks, costs, and 
benefits to consumers and industry related to prescribing requirements 
for the content and formatting of debt collector website 
communications.
---------------------------------------------------------------------------

    \500\ For ease of reference, the Bureau uses the phrase 
``written electronic communications'' to refer to emails, text 
messages, and other electronic communications that are readable. The 
Bureau's use of this phrase has no bearing on the Bureau's 
interpretation of the terms ``written'' or ``in writing'' under any 
law or regulation, including the FDCPA or the E-SIGN Act.
    \501\ While the Bureau does not propose rules specifically 
addressing debt collector website communications, such 
communications are subject to existing legal requirements, including 
those under the FDCPA and the Dodd-Frank Act. For example, debt 
collectors may be liable for website communications that violate the 
Dodd-Frank Act's prohibition on unfair, deceptive, or abusive 
practices, or the overshadowing prohibition under FDCPA section 
809(b).
---------------------------------------------------------------------------

34(c)(4)(ii) Original-Creditor Information Prompt
    FDCPA section 809(a)(5) requires a debt collector to disclose to 
consumers their right under FDCPA section 809(b) to request the name 
and address of the original creditor, if different from the current 
creditor.\502\ As discussed in the section-by-section analysis of 
proposed Sec.  1006.34(c)(3)(ii), which would implement and interpret 
FDCPA section 809(a)(5), some consumers may not adequately understand 
their right to request original-creditor information or how to exercise 
it. Providing consumers with a prepared statement that they could use 
to request original-creditor information could help to address this 
concern.
---------------------------------------------------------------------------

    \502\ Proposed Sec.  1006.34(c)(2)(iv) also would require that 
the validation notice include the name of the creditor to whom the 
debt was owed on the itemization date, if the debt collector is 
collecting a consumer financial product or service debt, as defined 
in proposed Sec.  1006.2(f).
---------------------------------------------------------------------------

    For this reason, and pursuant to its authority to interpret FDCPA 
section 809(a)(5), as well as its authority under Dodd-Frank Act 
section 1032(a), the Bureau proposes Sec.  1006.34(c)(4)(ii) to provide 
that consumer response information includes the statement, ``I want you 
to send me the name and address of the original creditor,'' using that 
phrase or a substantially similar phrase, next to a prompt the consumer 
could use to request original-creditor information. Proposed Sec.  
1006.34(c)(4)(ii) is intended to work in tandem with proposed Sec.  
1006.34(c)(3)(ii). The Bureau requests comment on proposed Sec.  
1006.34(c)(4)(ii).
34(c)(4)(iii) Mailing Addresses
    FDCPA section 809(b) assumes that a consumer has the ability to 
write to a debt collector to exercise the consumer's verification 
rights. Requiring a debt collector to include mailing addresses for the 
consumer and the debt collector, which would include the consumer's and 
the debt collector's names, along with the consumer response 
information described in proposed Sec.  1006.34(c)(4)(i) and (ii), may 
facilitate consumers' use of that address information to exercise their 
debt collection rights. For example, for mailed validation notices, a 
debt collector may choose to format the addresses to appear in a return 
envelope's glassine window, which the Bureau understands is industry 
practice. Alternatively, the mailing address may be useful in the event 
the consumer loses the upper portion of the validation notice 
containing the debt collector's contact information. In this scenario, 
the consumer also could review the mailing address in the consumer 
response information section to confirm that the consumer was the 
intended recipient of the validation notice. For these reasons, and 
pursuant to its authority to implement FDCPA section 809(a), as well as 
its authority under Dodd-Frank Act section 1032(a), the Bureau proposes 
Sec.  1006.34(c)(4)(iii) to provide that consumer response information 
includes mailing addresses for the consumer and the debt collector.
    The Bureau requests comment on proposed Sec.  1006.34(c)(4)(iii). 
The Bureau understands that some debt collectors use letter vendors to 
mail validation notices and that, in some cases, the letter vendor's 
mailing address may appear on validation notices in lieu of the debt 
collector's mailing address. The Bureau requests comment on whether 
proposed Sec.  1006.34(c)(4)(iii) would be consistent with current 
practices related to debt collectors' use of letter vendors to mail 
validation notices.
34(c)(5) Special Rule for Certain Residential Mortgage Debt
    FDCPA section 809(a)(1) requires a debt collector to disclose to 
consumers the amount of the debt. As discussed in the section-by-
section analysis of proposed Sec.  1006.34(c)(2)(vii) through (ix), the 
Bureau interprets FDCPA section 809(a)(1) to require debt collectors to 
disclose three pieces of itemization-related information: The 
itemization date; the amount of the debt on the itemization date; and 
an itemization of the debt reflecting interest, fees, payments, and 
credits since the itemization date.\503\ The Bureau proposes to 
establish a special rule that would replace these disclosure 
requirements for debt collectors collecting certain residential 
mortgage debt.
---------------------------------------------------------------------------

    \503\ Proposed Sec.  1006.34(c)(2)(x) would require debt 
collectors also to disclose the current amount of the debt.
---------------------------------------------------------------------------

    For certain residential mortgage debt subject to 12 CFR 1026.41, 12 
CFR 1026.41(b) generally requires that a periodic statement be 
delivered or placed in the mail within a reasonably prompt time after 
the payment due date or the end of any courtesy period provided for the 
previous billing cycle. The Bureau believes that most residential 
mortgage debt is subject to this requirement, although exceptions 
exist.\504\ The Bureau understands that a consumer is provided with 
such a periodic statement every billing cycle, even when a loan is 
transferred between

[[Page 23348]]

servicers. Pursuant to Regulation Z, 12 CFR 1026.41(d)(3), such a 
periodic statement must include a past payment breakdown, which shows 
the total of all payments received since the last statement, including 
a breakdown showing the amount, if any, that was applied to principal, 
interest, escrow, fees, and charges, and the amount, if any, sent to 
any suspense or unapplied funds account.
---------------------------------------------------------------------------

    \504\ The periodic statement requirement pursuant to 12 CFR 
1026.41(b) does not apply to open-end consumer credit transactions, 
such as a home equity line of credit. See 12 CFR 1026.41(a)(1). 
Pursuant to 12 CFR 1026.41(e), certain types of transactions are 
exempt from Sec.  1026.41(b)'s periodic statement requirement, 
including reverse mortgages, timeshare plans, certain charged-off 
mortgage loans, mortgage loans with certain consumers in bankruptcy, 
and fixed-rate mortgage loans where a servicer provides the consumer 
with a coupon book for payment. Further, small servicers as defined 
by 12 CFR 1026.41(e)(4)(ii) are entirely exempt from the periodic 
statement requirement. Where the Sec.  1026.41(b) periodic statement 
was not provided, a debt collector collecting debts related thereto 
would not be able to satisfy proposed Sec.  1006.34(c)(2)(vii) 
through (ix) by providing a consumer, at the same time as the 
validation notice, a copy of the most recent periodic statement 
provided to the consumer under Sec.  1026.41(b).
---------------------------------------------------------------------------

    The Bureau believes that these periodic statement disclosures may 
be functionally equivalent to, and as useful for the consumer as, the 
information described in proposed Sec.  1006.34(c)(2)(vii) through 
(ix). For example, 12 CFR 1026.41(d)(3) requires that the past payment 
breakdown reflect payments, interest, and other charges since the last 
periodic statement. This requirement is consistent with the proposed 
rule: Pursuant to proposed Sec.  1006.34(b)(3)'s itemization date 
definition, a debt collector may use the date of the last periodic 
statement as the reference date for the itemization-related information 
required by proposed Sec.  1006.34(c)(2)(vii) through (ix). Further, 
the periodic statement required by 12 CFR 1026.41(b) is tailored to 
disclose mortgage information effectively. For example, the periodic 
statement under 12 CFR 1026.41(d) specifically addresses disclosure of 
escrow and suspense account information. Proposed Sec.  
1006.34(c)(2)(vii) through (ix), which applies to debts more generally, 
is silent with respect to these mortgage-specific concepts.
    For these reasons, proposed Sec.  1006.34(c)(5) would establish 
that, for debts subject to Regulation Z, 12 CFR 1026.41, a debt 
collector need not provide the validation information described in 
Sec.  1006.34(c)(2)(vii) through (ix) if the debt collector provides 
the consumer, at the same time as the validation notice, a copy of the 
most recent periodic statement provided to the consumer under 12 CFR 
1026.41(b), and refers to that periodic statement in the validation 
notice. Proposed comment 34(c)(5)-1 provides examples clarifying how 
debt collectors may comply with Sec.  1006.34(c)(5).
    The Bureau proposes Sec.  1006.34(c)(5) to implement and interpret 
the FDCPA section 809(a)(1) requirement that the validation notice 
include the amount of the debt, and pursuant to its FDCPA section 
814(d) authority to prescribe rules with respect to the collection of 
debts by debt collectors. The Bureau also proposes this requirement 
under section 1032(a) of the Dodd-Frank Act to prescribe rules to 
ensure that the features of consumer financial products and services 
are disclosed fully, accurately, and effectively. The Bureau proposes 
this requirement on the basis that the information otherwise required 
to be disclosed under Sec.  1006.34(c)(2)(vii) through (ix) is a 
feature of debt collection and the alternative information that 
proposed Sec.  1006.34(c)(5) would permit is equally effective and 
accurate for the collection of debts subject to 12 CFR 1026.41. For the 
reasons described above, the Bureau proposes Sec.  1006.34(c)(5) to 
ensure that the debt, which is a feature of debt collection, is fully, 
accurately, and effectively disclosed in a manner that permits the 
consumer to understand the costs, benefits, and risks associated with 
debt collection.
    The Bureau requests comment on proposed Sec.  1006.34(c)(5) and on 
comment 34(c)(5)-1. In particular, the Bureau requests comment on the 
application of proposed Sec.  1006.34(c)(5) to mortgage debt for which 
consumers were provided coupon books. For instance, the Bureau believes 
that for mortgage debt for which consumers were provided coupon books, 
debt collectors could comply with proposed Sec.  1006.34(c)(5) because 
servicers generally have a practice of providing periodic statements to 
delinquent consumers, even if coupon books were previously provided. 
The Bureau also requests comment on the extent to which creditors, 
assignees, and servicers for transaction types that are exempt from 12 
CFR 1026.41(b)'s periodic statement requirement pursuant to Sec.  
1026.41(e) nevertheless provide periodic statements voluntarily and, if 
so, whether the Bureau should clarify how proposed Sec.  1006.34(c)(5) 
would apply in those circumstances. The Bureau also requests comment on 
the application of proposed Sec.  1006.34(c)(5) to servicers exempt 
from 12 CFR 1026.41(b)'s periodic statement requirement pursuant to 
Sec.  1026.41(e), such as small servicers or servicers servicing 
mortgage loans that have been charged off, and servicers who provide 
modified periodic statements pursuant to 12 CFR 1026.41(f) where a 
consumer on the mortgage loan is a debtor in bankruptcy. Finally, the 
Bureau also requests comment on whether there are other debt types, 
such as student loan debt, for which the information described in 
proposed Sec.  1006.34(c)(vii) through (ix) may duplicate existing 
disclosure requirements.
34(d) Form of Validation Information
34(d)(1) In General
34(d)(1)(i)
    FDCPA section 809(a)'s required disclosures will be ineffective 
unless a debt collector discloses them in a manner that is readily 
understandable to consumers. For this reason, the Bureau proposes Sec.  
1006.34(d)(1) to require that the validation information described in 
Sec.  1006.34(c) be conveyed in a clear and conspicuous manner. As 
discussed in the section-by-section analysis of Sec.  1006.34(b)(1), 
the Bureau proposed to define the term clear and conspicuous consistent 
with the standards used in other consumer financial services laws and 
their implementing regulations. The clear and conspicuous standard 
would apply to written, electronic, and oral disclosures.
    The Bureau proposes Sec.  1006.34(d)(1)(i) to implement and 
interpret FDCPA section 809(a), and pursuant to its authority under 
FDCPA section 814(d) to prescribe rules with respect to the collection 
of debts by debt collectors. The Bureau also proposes Sec.  
1006.34(d)(1)(i) pursuant to its authority under section 1032(a) of the 
Dodd-Frank Act to prescribe rules to ensure that the features of 
consumer financial products and services are disclosed fully, 
accurately, and effectively. The Bureau proposes this requirement on 
the basis that validation information is a feature of debt collection 
and this information must be readily understandable to be effectively 
and accurately disclosed. The Bureau requests comment on proposed Sec.  
1006.34(d)(1)(i).
34(d)(1)(ii)
    As discussed in the section-by-section analysis of proposed Sec.  
1006.34(d)(2), the Bureau proposes Model Form B-3 in appendix B as a 
model validation notice form that debt collectors could use to comply 
with the disclosure requirements of proposed Sec.  1006.34(a)(1) and 
(d)(1). Model Form B-3 was developed over multiple rounds of consumer 
testing and through additional feedback and consideration, as described 
in part III.B above. The Bureau believes that this form effectively 
discloses the information described in proposed Sec.  1006.34(c). For 
the same reasons and pursuant to the same authority discussed in the 
section-by-section analysis of proposed Sec.  1006.34(d)(1)(i), 
proposed Sec.  1006.34(d)(1)(ii) would require that, if provided in a 
validation notice, the content, format, and placement of the 
information described in proposed Sec.  1006.34(c) and the optional

[[Page 23349]]

disclosures permitted by proposed Sec.  1006.34(d)(3) must be 
substantially similar to proposed Model Form B-3 in appendix B.
    Proposed comment 34(d)(1)(ii)-1 explains that a debt collector may 
make certain changes to the content, format, and placement of the 
validation information described in Sec.  1006.34(c) as long as the 
resulting disclosures are substantially similar to Model Form B-3 in 
appendix B of the regulation. Proposed comment 34(d)(1)(ii)-1 also 
provides an example of a change that debt collectors may make to the 
validation notice if the consumer is deceased. As described in the 
section-by-section analyses of Sec. Sec.  1006.2(e) and 1006.6(a)(4), 
the proposal includes interpretations of the term consumer designed to 
clarify communications between debt collectors and individuals 
attempting to resolve the debts of a deceased consumer, including 
provision of the validation notice to such individuals. Although the 
validation notice will contain the name of the deceased consumer, some 
persons who are authorized to act on behalf of the deceased consumer's 
estate may be misled by the use of second person pronouns such as 
``you'' in the validation notice. For example, the model validation 
notice states that ``you owe'' the debt collector.
    While nothing in the proposed rule would prohibit a debt collector 
from including a cover letter to explain the nature of the validation 
notice, proposed comment 34(d)(1)(ii)-1 also would clarify that a debt 
collector may modify inapplicable language in the validation notice 
that could suggest that the recipient of the notice is liable for the 
debt. For example, if a debt collector sends a validation notice to a 
person who is authorized to act on behalf of the deceased consumer's 
estate, and if that person is not liable for the debt, the debt 
collector may use the deceased consumer's name instead of ``you.'' In 
other contexts, such as mortgage servicing, the Bureau has allowed 
servicers to include an explanatory notice and acknowledgement form, 
add an affirmative disclosure, or adjust language in required notices 
to reduce the risk of confusion to successors in interest.\505\ The 
Bureau proposes a similar approach in Sec.  1006.34 and comment 
34(d)(1)(ii)-1. The Bureau requests comment on proposed comment 
34(d)(1)(ii)-1, on the risk of confusion or deception caused by the 
second-person framing of the model validation notice in the deceased-
consumer context, and on options for reducing any possible confusion or 
deception.
---------------------------------------------------------------------------

    \505\ 81 FR 72160, 72182 (Oct. 19, 2016).
---------------------------------------------------------------------------

34(d)(2) Safe Harbor
    A model validation notice form that provides a safe harbor may 
benefit both consumers and debt collectors. A model validation notice 
form may effectively disclose validation information required by Sec.  
1006.34(a)(1) in a manner that permits consumers to understand the 
costs, benefits, and risks associated with debt collection. Further, a 
model form may afford debt collectors protection from liability that 
could arise if they developed and used their own forms. During the 
SBREFA process, small entity representatives asserted that a model form 
that provided protection from liability would promote efficiency and 
predictability for debt collectors by reducing legal risk.\506\ Because 
of these potential benefits, the Bureau has developed a model 
validation notice--Model Form B-3 in appendix B.
---------------------------------------------------------------------------

    \506\ Small Business Review Panel Report, supra note 57, at 22; 
see also Johnson v. Revenue Mgmt. Corp., 169 F.3d 1057, 1059-60 (7th 
Cir. 1999) (holding that where a validation notice included demands 
for ``prompt payment'' and that the consumer call the debt collector 
``immediately,'' such statements may confuse a consumer or 
overshadow their verification rights); Adams v. Law Offices of 
Stuckert & Yates, 926 F.Supp. 521, 527 (E.D. Pa. 1996) (holding that 
a validation notice threatening a lawsuit violated the FDCPA); 
Vaughn v. CSC Credit Servs., Inc. (No. 93-4151), 1995 WL 51402, at 
*3 (N.D. Ill. Feb. 3, 1995) (holding that a statement on a 
validation notice about a debt's potential negative impact on 
consumer's credit score violated FDCPA section 809(b) because it 
overshadowed the verification rights disclosures).
---------------------------------------------------------------------------

    Model Form B-3 was evaluated over multiple rounds of consumer 
testing, as described in part III.B above, as well as through 
additional feedback and consideration.\507\ Based on this testing, the 
Bureau believes that Model Form B-3 effectively discloses the 
validation information required by Sec.  1006.34(a)(1). Because of 
Model Form B-3's effectiveness, and pursuant to its authority under 
section 1032(b) of the Dodd-Frank Act, the Bureau proposes Sec.  
1006.34(d)(2) to permit a debt collector to comply with Sec.  
1006.34(a)(1)(i) and (d)(1) by using Model Form B-3 in appendix B.
---------------------------------------------------------------------------

    \507\ See generally FMG Cognitive Report, supra note 40; FMG 
Usability Report, supra note 41; FMG Summary Report, supra note 42.
---------------------------------------------------------------------------

    Proposed comment 34(d)(2)-1 explains that, although the use of 
Model Form B-3 in appendix B is not required, a debt collector who uses 
the model form, including a debt collector who delivers the model form 
electronically, will be in compliance with the disclosure requirements 
of Sec.  1006.34(a)(1)(i) and (d)(1) and the requirements of FDCPA 
section 809(a). Proposed comment 34(d)(2)-1 also explains that a debt 
collector who includes on Model Form B-3 the optional disclosures 
described in proposed Sec.  1006.34(d)(3) continues to be in compliance 
as long as those disclosures are made consistent with the instructions 
in Sec.  1006.34(d)(3). Further, proposed comment 34(d)(2)-1 explains 
that a debt collector may embed hyperlinks in Model Form B-3 if 
delivering the form electronically and continue to be in compliance as 
long as the hyperlinks are included consistent with Sec.  
1006.34(d)(4)(ii).
    The Bureau requests comment on proposed Sec.  1006.34(d)(2) and on 
proposed comment 34(d)(2)-1. In particular, the Bureau requests comment 
on whether the Bureau should provide additional clarification about how 
to deliver Model Form B-3 electronically in a manner that affords 
protection from liability pursuant to proposed Sec.  1006.34(d)(2). For 
example, the Bureau requests comment on whether to prescribe or define 
additional formatting requirements (e.g., type size) or delivery 
standards for validation notices delivered electronically. The Bureau 
also requests comment on the risks, costs, and benefits to consumers 
and industry of extending the protection from liability pursuant to 
proposed Sec.  1006.34(d)(2) to validation notices delivered 
electronically.
34(d)(3) Optional Disclosures
    Proposed Sec.  1006.34(d)(3) provides that a debt collector may 
include the optional information described in proposed Sec.  
1006.34(d)(3)(i) through (vi) if providing the validation information 
required by Sec.  1006.34(a)(1). These optional disclosures may assist 
debt collectors and consumers by providing additional information about 
the debt and consumers' rights with respect to debt collection in a 
manner that does not violate FDCPA section 809(b)'s overshadowing 
prohibition, a prohibition implemented by Sec.  1006.38(b). Under the 
proposal, providing the disclosures in proposed Sec.  1006.34(d)(3) 
would not be regarded as overshadowing or inconsistent with the 
disclosure about the consumer's right to dispute the debt or request 
the name and address of the original creditor. The Bureau proposes 
Sec.  1006.34(d)(3) to implement and interpret FDCPA section 809(a) and 
(b) and pursuant to its FDCPA section 814(d) authority to prescribe 
rules with respect to the collection of debts by debt collectors and 
pursuant to its authority under section 1032(a) of the Dodd-Frank Act 
to prescribe rules to ensure that the features of consumer financial 
products

[[Page 23350]]

and services are disclosed fully, accurately, and effectively.
34(d)(3)(i) Telephone Contact Information
    Telephone communications may benefit both debt collectors and 
consumers by providing a low-cost and convenient communication method. 
Debt collectors routinely contact consumers by telephone and currently 
include their telephone numbers in validation notices. Also, some 
consumers may prefer to engage with debt collectors by telephone rather 
than by other communication methods.\508\ For these reasons, proposed 
Sec.  1006.34(d)(3)(i) would permit a debt collector to include the 
debt collector's telephone contact information, including telephone 
number and the times that the debt collector accepts consumer telephone 
calls, along with the validation information. The Bureau requests 
comment on proposed Sec.  1006.34(d)(3)(i).
---------------------------------------------------------------------------

    \508\ A Bureau survey found that 30 percent of consumers who had 
been contacted about a debt in the prior year would most prefer to 
be contacted about a debt in collection at a non-work telephone 
number, as compared to a work telephone number, postal mail, email, 
or in-person visits. See CFPB Debt Collection Consumer Survey, supra 
note 18, at 36-37.
---------------------------------------------------------------------------

34(d)(3)(ii) Reference Code
    Many debt collectors currently include reference codes on 
validation notices for administrative purposes. Proposed Sec.  
1006.34(d)(3)(ii) would accommodate this practice by permitting a debt 
collector to include, along with the validation information, a number 
or code that the debt collector uses to identify the debt or the 
consumer. The Bureau requests comment on proposed Sec.  
1006.34(d)(3)(ii).
34(d)(3)(iii) Payment Disclosures
    Payment disclosures that provide a method to easily send payment to 
a debt collector may benefit both consumers and debt collectors. For 
consumers who recognize and choose to repay all or part of a debt, 
payment disclosures may make the transaction more efficient and 
convenient. For consumers who determine that they owe a debt but may 
not be ready to repay all of it at that time, payment disclosures may 
facilitate a discussion that can lead to repayment, settlement, or a 
payment plan.\509\ Consumer testing suggests that consumers believe 
that a payment option is an important disclosure that should appear in 
the validation notice.\510\ The Bureau also received feedback from debt 
collectors requesting the ability to request payment from consumers 
when providing validation information. For example, during the SBREFA 
process, small entity representatives requested the ability to include 
payment options in the consumer response information that Sec.  
1006.34(c)(4) would require.\511\
---------------------------------------------------------------------------

    \509\ FMG Focus Group Report, supra note 38, at 9.
    \510\ FMG Cognitive Report, supra note 40, at 17-19.
    \511\ Small Business Review Panel Report, supra note 57, at 22-
23.
---------------------------------------------------------------------------

    Consumer advocates recommended that the Bureau prohibit debt 
collectors from including payment disclosures along with validation 
information. Consumer advocates expressed concerns that a consumer who 
desires to dispute a debt might misconstrue the disclosure to require 
the consumer to submit a payment in order to exercise the FDCPA dispute 
right. The Bureau's proposal does not treat these concerns as 
persuasive. While some formulations of a payment disclosure could 
create a false sense of urgency or exaggerate the consequences of non-
payment,\512\ the Bureau believes that payment disclosures can be 
designed to articulate payment requests in a neutral, non-threatening 
manner. Moreover, the Bureau's consumer testing indicates that 
consumers who encounter a payment disclosure on a validation notice 
understand that a payment is not required to dispute a debt.\513\
---------------------------------------------------------------------------

    \512\ FMG Focus Group Report, supra note 38, at 11-12.
    \513\ FMG Usability Report, supra note 41, at 59-61.
---------------------------------------------------------------------------

    For these reasons, the Bureau proposes to allow debt collectors to 
include certain payment disclosures along with the validation 
information. Proposed Sec.  1006.34(d)(3)(iii) would permit a debt 
collector to include certain payment disclosures in the validation 
notice. Proposed Sec.  1006.34(d)(3)(iii) would require that these 
optional payment disclosures be no more prominent than any of the 
validation information described in proposed Sec.  1006.34(c). Proposed 
Sec.  1006.34(d)(3)(iii)(A) would allow the debt collector to include 
in the validation notice the statement ``Contact us about your payment 
options,'' using that phrase or a substantially similar phrase. 
Proposed Sec.  1006.34(d)(3)(iii)(B) would allow the debt collector to 
include in the consumer response information section that would be 
required by proposed Sec.  1006.34(c)(4) the statement, ``I enclosed 
this amount,'' using that phrase or a substantially similar phrase, 
payment instructions after that statement, and a prompt. The Bureau 
requests comment on proposed Sec.  1006.34(d)(3)(iii), including on 
whether the payment disclosures should be permitted and, if so, whether 
the payment disclosures should be modified.
34(d)(3)(iv) Disclosures Required by Applicable Law
    Some States require specific disclosures to appear on the 
validation notice. The Small Business Review Panel Report recommended 
that the Bureau consider how to reconcile the Bureau's model validation 
notice and such required State law disclosures.\514\ The Bureau also 
understands that some courts have prescribed additional validation 
notice disclosure requirements, or have fashioned optional disclosures 
that offer a safe harbor to debt collectors providing information 
required by the FDCPA. For example, several courts have crafted 
language that debt collectors may use to comply with FDCPA section 
809(a)(1) by disclosing that the amount of a debt may vary because of 
accruing interest and fees.\515\ In response to these judicial 
opinions, industry commenters have requested that the Bureau address 
how debt collectors may disclose that the amount of a debt may vary 
because of accruing interest and fees.
---------------------------------------------------------------------------

    \514\ Small Business Review Panel Report, supra note 57, at 34.
    \515\ See, e.g., Avila v. Riexinger & Associates, LLC, 817 F.3d 
72, 77 (2d Cir. 2016); Miller v. McCalla, Raymer, Padrick, Cobb, 
Nichols, and Clark, LLC, 214 F.3d 872, 876 (7th Cir. 2000).
---------------------------------------------------------------------------

    To enable debt collectors to comply both with Sec.  1006.34(a)(1) 
and with other applicable disclosure requirements, the Bureau proposes 
Sec.  1006.34(d)(3)(iv) to permit a debt collector to include, on the 
front of the validation notice, a statement that other disclosures 
required by applicable law appear on the reverse of the form and, on 
the reverse of the validation notice, any such legally required 
disclosures. Proposed comment 34(d)(3)(iv)-1 provides examples of 
disclosure requirements that proposed Sec.  1006.34(d)(3)(iv) would 
cover, including disclosures required by State statutes or regulations 
and disclosures required by judicial opinions or orders.
    The Bureau requests comment on proposed Sec.  1006.34(d)(3)(iv) and 
on comment 34(d)(3)(iv)-1. The Bureau requests comment on conflicts 
that might arise between the Bureau's model validation notice and other 
disclosures required by applicable law. In particular, the Bureau 
requests comment on whether proposed Sec.  1006.34(d)(3)(iv) would 
allow debt collectors to comply with applicable law, including on

[[Page 23351]]

whether any disclosures required by applicable law must be included on 
the front of the validation notice. The Bureau also requests comment on 
whether proposed Sec.  1006.34(d)(3)(iv) should cover a debt collector 
who includes on the reverse of the model form disclosures that are 
permitted, but not required, by applicable law.
34(d)(3)(v) Information About Electronic Communications
    Despite the advent of new technologies, the bulk of debt collection 
communication continues to occur by telephone and mail. Promoting newer 
technologies may be beneficial both to consumers and debt collectors. 
During the SBREFA process, small entity representatives supported the 
Bureau's proposal to clarify how debt collectors could use newer 
communication technologies, such as email and text messages, and some 
consumers may prefer electronic communications to traditional 
communication methods.\516\ Consistent with this feedback, the Small 
Business Review Panel Report recommended that the Bureau consider 
whether the debt collection rule should promote newer communication 
technologies, and, if so, establish guidelines for their appropriate 
use.\517\
---------------------------------------------------------------------------

    \516\ Small Business Review Panel Report, supra note 57, at 16-
17; CFPB Debt Collection Consumer Survey, supra note 18, at 37 
(finding that email was the most preferred contact method for 11 
percent of consumers contacted about a debt in collection).
    \517\ Small Business Review Panel Report, supra note 57, at 38.
---------------------------------------------------------------------------

    For these reasons, proposed Sec.  1006.34(d)(3)(v) would permit 
certain information about electronic communications to appear along 
with the validation information. First, proposed Sec.  
1006.34(d)(3)(v)(A) would permit debt collectors to provide the debt 
collector's website and email address. Second, as discussed above, 
proposed Sec.  1006.34(c)(3)(v) provides that, if a debt collector 
sends a validation notice electronically, the debt collector must 
include a statement explaining how a consumer can take the actions 
described in proposed Sec.  1006.34(c)(4) electronically. Proposed 
Sec.  1006.34(d)(3)(v)(B) would permit a debt collector to include the 
statement described in proposed Sec.  1006.34(c)(3)(v) for validation 
notices not provided electronically. The Bureau requests comment on 
proposed Sec.  1006.34(d)(3)(v).
34(d)(3)(vi) Spanish-Language Translation Disclosures
    Validation information includes important information about the 
debt and the consumer's rights with respect to debt collection. 
Consumers with limited English proficiency may benefit from 
translations of the validation notice in some circumstances, and 
Spanish speakers represent the second-largest language group in the 
United States after English speakers.\518\ Spanish-speaking consumers 
with limited English proficiency may benefit from a Spanish-language 
disclosure informing them of their ability to request a Spanish-
language translation, if a debt collector chooses to make such a 
translation available. Further, debt collectors may wish to provide 
validation information in Spanish, as doing so may facilitate their 
communications with consumers. For these reasons, proposed Sec.  
1006.34(d)(3)(vi) would allow debt collectors to include along with the 
validation information optional Spanish-language disclosures that 
consumers may use to request a Spanish-language validation notice.
---------------------------------------------------------------------------

    \518\ As of 2016, 40 million residents in the United States aged 
five and older spoke Spanish at home. See U.S. Census Bureau, 
Profile America for Facts for Features CB17-FF.17: Hispanic Heritage 
Month 2017, at 4 (Oct. 17, 2017), https://www.census.gov/newsroom/facts-for-features/2017/hispanic-heritage.html.
---------------------------------------------------------------------------

34(d)(3)(vi)(A)
    Proposed Sec.  1006.34(d)(3)(vi)(A) would permit a debt collector 
to provide a statement in Spanish informing a consumer that the 
consumer can request a Spanish-language validation notice. 
Specifically, proposed Sec.  1006.34(d)(3)(vi)(A) would allow the 
statement, ``P[oacute]ngase en contacto con nosotros para solicitar una 
copia de este formulario en espa[ntilde]ol,'' using that phrase or a 
substantially similar phrase in Spanish. In English, this phrase means, 
``You may contact us to request a copy of this form in Spanish.'' If 
providing this optional disclosure, a debt collector may include 
supplemental information in Spanish that specifies how a consumer may 
request a Spanish-language validation notice. Proposed comment 
34(d)(3)(vi)(A)-1 explains that, for example, a debt collector may 
provide a statement in Spanish that a consumer can request a Spanish-
language validation notice by telephone or email.
    The Bureau requests comment on proposed Sec.  1006.34(d)(3)(vi)(A) 
and on comment 34(d)(3)(vi)(A)-1. The Bureau specifically requests 
comment on: (1) Debt collectors' current collections activities 
conducted in Spanish, as well as other non-English languages, including 
whether debt collectors provide validation notices in non-English 
languages; (2) any benefits, costs, or risks posed for consumers and 
industry by the disclosure described in proposed Sec.  
1006.34(d)(3)(vi)(A); (3) examples of supplemental Spanish-language 
instructions for requesting a translated validation notice that debt 
collectors may wish to provide pursuant to proposed Sec.  
1006.34(d)(3)(vi)(A); and (4) the benefits or risks this supplemental 
language disclosure may present, including whether such supplementary 
information would make the proposed Sec.  1006.34(d)(3)(vi)(A) 
disclosure less effective.
34(d)(3)(vi)(B)
    Proposed Sec.  1006.34(d)(3)(vi)(B) would permit debt collectors to 
provide a statement in Spanish in the consumer response information 
section that a consumer can use to request a Spanish-language 
validation notice. Proposed Sec.  1006.34(d)(3)(vi)(B) would permit the 
consumer response information section required by Sec.  1006.34(c)(4) 
to include the statement, ``Quiero esta forma en espa[ntilde]ol,'' 
using that phrase or a substantially similar phrase in Spanish. In 
English, this phrase means ``I want this form in Spanish.'' Proposed 
Sec.  1006.34(d)(3)(vi)(B) would require this statement to be next to a 
prompt, which the consumer could use to request a Spanish-language 
validation notice. The Bureau requests comment on proposed Sec.  
1006.34(d)(3)(vi)(B).
34(d)(4) Validation Notices Delivered Electronically
    As discussed in the section-by-section analysis of proposed Sec.  
1006.42, promoting electronic communications may benefit consumers and 
debt collectors. Allowing debt collectors to make certain formatting 
modifications to validation notices delivered electronically may help 
consumers exercise their verification rights under FDCPA section 809. 
Certain formatting modifications also may facilitate a debt collector's 
ability to process and understand a consumer's response to a validation 
notice delivered electronically. Accordingly, the Bureau proposes Sec.  
1006.34(d)(4) to permit a debt collector to, at its option, format a 
validation notice delivered electronically in the manner described in 
proposed Sec.  1006.34(d)(4)(i) and (ii).\519\
---------------------------------------------------------------------------

    \519\ As described in proposed Sec.  1006.42(b)(4), the Bureau 
proposes additional formatting requirements applicable to validation 
notices delivered electronically.
---------------------------------------------------------------------------

    The Bureau proposes Sec.  1006.34(d)(4) to implement and interpret 
FDCPA section 809(a) by establishing formatting requirements that 
facilitate the consumer's right to dispute a debt and

[[Page 23352]]

request original-creditor information, and pursuant to its FDCPA 
section 814(d) authority to prescribe rules with respect to the 
collection of debts by debt collectors. The Bureau also proposes these 
requirements under section 1032(a) of the Dodd-Frank Act to prescribe 
rules to ensure that the features of consumer financial products and 
services are disclosed fully, accurately, and effectively. The Bureau 
requests comment on proposed Sec.  1006.34(d)(4).
34(d)(4)(i) Prompts
    Proposed Sec.  1006.34(d)(4)(i) would permit a debt collector 
delivering a validation notice electronically pursuant to Sec.  1006.42 
to display any prompt required by Sec.  1006.34(c)(4)(i) or (ii) or 
(d)(3)(iii)(B) or (vi)(B) as a fillable field. Allowing a debt 
collector to design a validation notice delivered electronically so 
that a consumer can take the actions described in proposed Sec.  
1006.34(c)(4) by clicking a prompt would benefit consumers and 
industry. The Bureau believes that this design modification would help 
consumers exercise their FDCPA verification rights. Further, the Bureau 
believes this design modification would improve consumer engagement and 
facilitate a debt collector's ability to process and understand a 
consumer's response to the validation notice. The Bureau requests 
comment on proposed Sec.  1006.34(d)(4)(i).
34(d)(4)(ii) Hyperlinks
    Proposed Sec.  1006.34(d)(4)(ii) would permit a debt collector 
delivering a validation notice electronically to embed hyperlinks into 
the validation notice that, when clicked, connect consumers to the debt 
collector's website or permit consumers to take the actions described 
in proposed Sec.  1006.34(c)(4). This formatting modification may help 
consumers exercise their FDCPA verification rights when they are 
already engaging with the validation notice in an online setting. This 
modification also may improve consumer engagement and facilitate a debt 
collector's ability to process and understand a consumer's response to 
the validation notice. The Bureau requests comment on proposed Sec.  
1006.34(d)(4)(ii).
34(e) Translations Into Other Languages
    Consumers with limited English proficiency may benefit from 
translated disclosures, and some debt collectors may want to respond to 
the needs of consumers with limited English proficiency using 
translated disclosures, if doing so is consistent with the debt 
collector's individual debt collection practices and preferences. At 
the same time, some consumers who receive translated disclosures may 
also desire to receive English-language disclosures, either because 
they are fluent in English, or because they wish to share the 
disclosures with an English-speaking spouse or assistance provider. 
English-language disclosures may also allow consumers to confirm the 
accuracy of the translation.
    For these reasons, the Bureau proposes Sec.  1006.34(e) to provide 
that a debt collector may send a consumer the validation notice 
completely and accurately translated into any language, if the debt 
collector also sends an English-language validation notice in the same 
communication that satisfies proposed Sec.  1006.34(a)(1). If a debt 
collector already has provided a consumer an English-language 
validation notice that satisfies proposed Sec.  1006.34(a)(1) and 
subsequently provides the consumer a validation notice translated into 
any other language, the debt collector need not provide an additional 
copy of the English-language notice. Proposed comment 34(e)-1 would 
clarify that the language of a validation notice obtained from the 
Bureau's website is considered a complete and accurate translation, 
although debt collectors are permitted to use other validation notice 
translations so long as they are accurate and complete.
    Consumer advocacy groups have commented that debt collectors should 
be required to provide validation notices translated into other 
languages, in particular Spanish, at a consumer's request. For example, 
some consumer advocacy groups suggested that debt collectors should be 
required to provide a Spanish-language translation on the reverse of 
every English-language validation notice.\520\ The Bureau declines to 
propose a mandatory requirement that debt collectors provide translated 
validation notices to consumers. Requiring debt collectors to provide a 
translation on a separate page with each validation notice could result 
in significant cost on a cumulative, industry-wide basis, especially 
for smaller debt collectors and for languages whose use is not 
prevalent in the United States. Proposed Sec.  1006.34(e) may strike an 
appropriate balance by allowing a debt collector to provide translated 
validation notices if they are complete and accurate and doing so is 
consistent with the debt collector's individual debt collection 
practices and preferences in a manner that does not impose undue 
burden.
---------------------------------------------------------------------------

    \520\ The Bureau raised such an alternative approach as a 
proposal under consideration in the Small Business Review Panel 
Outline. See Small Business Review Panel Outline, supra note 56, at 
appendix F.
---------------------------------------------------------------------------

    The Bureau requests comment on proposed Sec.  1006.34(e) and on 
comment 34(e)-1. The Bureau also requests comment on whether debt 
collectors should be required to provide a validation notice translated 
into a non-English language at a consumer's request.
    The Bureau proposes Sec.  1006.34(e) pursuant to its authority 
under section 1032(a) of the Dodd-Frank Act to prescribe rules to 
ensure that the features of consumer financial products and services 
are disclosed fully, accurately, and effectively. The Bureau proposes 
Sec.  1006.34(e) to ensure that the features of debt collection are 
fully, accurately, and effectively disclosed.
Section 1006.38 Disputes and Requests for Original-Creditor Information
    FDCPA section 809(b) requires debt collectors both to refrain from 
taking certain actions during the 30 days after the consumer receives 
the validation information or notice described in FDCPA section 809(a) 
(i.e., during the validation period) and to take certain actions if a 
consumer either disputes the debt in writing, or requests the name and 
address of the original creditor in writing, during the validation 
period.\521\ FDCPA section 809(c) states that a consumer's failure to 
dispute a debt under FDCPA section 809(b) may not be construed by any 
court as an admission of liability.\522\ Proposed Sec.  1006.38 would 
implement and interpret FDCPA section 809(b) and (c) as discussed 
below. Except as otherwise noted, the Bureau proposes Sec.  1006.38 
pursuant to its authority under FDCPA section 814(d) to prescribe rules 
with respect to the collection of debts by debt collectors.
---------------------------------------------------------------------------

    \521\ 15 U.S.C. 1692g(b).
    \522\ 15 U.S.C. 1692g(c).
---------------------------------------------------------------------------

    Proposed comment 38-1 would clarify the applicability of Sec.  
1006.38 in the decedent debt context. As described in the section-by-
section analysis of Sec.  1006.2(e), the Bureau proposes to interpret 
the term consumer in FDCPA section 803(3) to include deceased 
consumers.\523\ This interpretation would apply to FDCPA section 
809(b), as implemented by Sec.  1006.38, so that a deceased consumer 
(i.e., that consumer's estate) would have the same rights under FDCPA 
section 809(b) as

[[Page 23353]]

any living consumer. Accordingly, proposed comment 38-1 would clarify 
that, if the debt collector knows or should know that the consumer is 
deceased, and if the debt collector has not previously sent the 
deceased consumer a written validation notice, then a person who is 
authorized to act on behalf of the deceased consumer's estate \524\ 
operates as the consumer for purposes of Sec.  1006.38. Proposed 
comment 38-1 provides that, if such a person submits either a written 
request for original-creditor information or a written dispute to the 
debt collector during the validation period, then Sec.  1006.38(c) or 
(d)(2)(i), respectively, would require the debt collector to respond to 
that request or dispute. In addition, just as with living consumers, 
the proposal would require a debt collector attempting to collect a 
debt from a deceased consumer's estate to cease collection of the debt 
until, where appropriate, the debt collector has mailed the name and 
address of the original creditor or provided verification of the debt.
---------------------------------------------------------------------------

    \523\ The Bureau proposes to define the term consumer to include 
``any natural person, whether living or deceased, obligated or 
allegedly obligated to pay any debt.'' See the section-by-section 
analysis of proposed Sec.  1006.2(e).
    \524\ See the section-by-section analysis of proposed Sec.  
1006.6(a)(4) and comment 6(a)(4)-1.
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    Proposed comment 38-2 also applies generally to proposed Sec.  
1006.38. Proposed comment 38-2 notes that proposed Sec.  1006.38 
contains requirements related to a dispute or request for original-
creditor information timely submitted in writing by the consumer. 
Proposed comment 38-2 lists three examples of forms of communication 
that the consumer can use for these purposes. The second example is a 
medium of electronic communication; the Bureau proposes this example in 
light of section 101 of the E-SIGN Act.\525\
---------------------------------------------------------------------------

    \525\ 15 U.S.C. 7001(a).
---------------------------------------------------------------------------

    The E-SIGN Act could affect whether a consumer satisfies the ``in 
writing'' requirement of FDCPA section 809(b) by submitting a dispute 
or request for original-creditor information electronically. Section 
101(a)(1) of the E-SIGN Act generally provides that a record relating 
to a transaction in or affecting interstate or foreign commerce may not 
be denied legal effect, validity, or enforceability solely because it 
is in electronic form.\526\ However, section 101(b)(2) of the E-SIGN 
Act does not require any person to agree to use or accept electronic 
records or electronic signatures, other than a governmental agency with 
respect to a record other than a contract to which it is a party.\527\ 
Section 104(b)(1)(A) of the E-SIGN Act permits a Federal agency with 
rulemaking authority under a statute to interpret by regulation the 
application of E-SIGN Act section 101 to that statute.\528\
---------------------------------------------------------------------------

    \526\ 15 U.S.C. 7001(a)(1).
    \527\ 15 U.S.C. 7001(b)(2).
    \528\ 15 U.S.C. 7004(b)(1)(A).
---------------------------------------------------------------------------

    The Bureau proposes to interpret the applicability of the E-SIGN 
Act as it relates to FDCPA section 809(b)'s writing requirement for 
consumer disputes or requests for original-creditor information. 
Specifically, the Bureau would interpret FDCPA section 809(b)'s writing 
requirement as being satisfied when a consumer submits a dispute or 
request for original-creditor information using a medium of electronic 
communication through which a debt collector accepts electronic 
communications from consumers, such as email or a website portal.\529\ 
Thus, debt collectors would be required to give legal effect to 
consumer disputes or requests for original-creditor information 
submitted electronically only if a debt collector chooses to accept 
electronic communications from consumers. The Bureau proposes to codify 
this interpretation of the E-SIGN Act in comment 38-3. The Bureau 
requests comment on proposed comments 38-1 through 3.
---------------------------------------------------------------------------

    \529\ This interpretation is responsive to consumer advocates' 
feedback recommending that, if a debt collector makes an electronic 
means of communication available to consumers, electronic 
communications received from consumers through that channel should 
satisfy FDCPA section 809(b).
---------------------------------------------------------------------------

38(a) Definitions
38(a)(1) Duplicative Dispute
    The Bureau proposes to define the term duplicative dispute in Sec.  
1006.38(a)(1). The Bureau proposes Sec.  1006.38(a)(1) as an 
interpretation of FDCPA section 809(b) and to facilitate compliance 
with proposed Sec.  1006.38(d)(2)(ii), which would establish an 
alternative to proposed Sec.  1006.38(d)(2)(i) \530\ applicable if a 
debt collector reasonably has determined that a dispute is a 
duplicative dispute. Proposed Sec.  1006.38(a)(1) would define the term 
duplicative dispute to mean a dispute submitted by the consumer in 
writing within the validation period that satisfies two criteria. The 
first criterion is that the dispute is substantially the same as a 
dispute previously submitted by the consumer in writing within the 
validation period for which the debt collector already has satisfied 
the requirements of Sec.  1006.38(d)(2)(i). The second criterion is 
that the dispute does not include new and material supporting 
information.
---------------------------------------------------------------------------

    \530\ Proposed Sec.  1006.38(d)(2)(i) would implement the 
requirements in FDCPA section 809(b) regarding disputes and 
verification. See the section-by-section analysis of proposed Sec.  
1006.38(d)(2)(i).
---------------------------------------------------------------------------

    Proposed comment 38(a)(1)-1 would clarify that, for purposes of 
Sec.  1006.38(a)(1), a later dispute can be substantially the same as 
an earlier dispute even if the later dispute does not repeat verbatim 
the language of the earlier dispute. Proposed comment 38(a)(1)-2 would 
clarify that, for purposes of Sec.  1006.38(a)(1), information is new 
if the consumer did not provide the information when submitting an 
earlier dispute, and information is material if it is reasonably likely 
to change the verification the debt collector provided or would have 
provided in response to the earlier dispute. Proposed comment 38(a)(1)-
2 also provides an example of new and material information.
    The Bureau requests comment on proposed Sec.  1006.38(a)(1) and its 
related commentary. In particular, the Bureau requests comment on 
whether to specify criteria for determining whether one dispute is 
substantially similar to another dispute, and, if so, what those 
criteria should be. In addition, the Bureau requests comment on the 
estimated percentage of current repeat disputes that would qualify as 
duplicative disputes under the definition in proposed Sec.  
1006.38(a)(1), including whether and how that figure is likely to vary 
by debt type.
38(a)(2) Validation Period
    To facilitate compliance in responding to disputes or requests for 
original-creditor information, proposed Sec.  1006.38(a)(2) provides 
that the term validation period as used in Sec.  1006.38 has the same 
meaning given to it in Sec.  1006.34(b)(5).
38(b) Overshadowing of Rights To Dispute or Request Original-Creditor 
Information
    FDCPA section 809(b) provides that, for 30 days after the consumer 
receives the validation information or notice described in FDCPA 
section 809(a), a debt collector must not engage in collection 
activities or communications that overshadow or are inconsistent with 
the disclosure of the consumer's right to dispute the debt or request 
information about the original creditor.\531\ Proposed Sec.  1006.38(b)

[[Page 23354]]

would implement this prohibition and generally restates the statute, 
with only minor changes for style and clarity.
---------------------------------------------------------------------------

    \531\ 15 U.S.C. 1692g(b). This language was added to the FDCPA 
by the Financial Services Regulatory Relief Act of 2006, Public Law 
109-351, section 802(c), 120 Stat. 2006 (2006), after an FTC 
advisory opinion on the same subject. See Fed. Trade Comm'n, 
Advisory Opinion to American Collector's Ass'n (Mar. 31, 2000) 
(opining that the 30-day period set forth in FDCPA section 809(a) 
``is a dispute period within which the consumer may insist that the 
collector verify the debt, and not a grace period within which 
collection efforts are prohibited'' but that ``[t]he collection 
agency must ensure, however, that its collection activity does not 
overshadow and is not inconsistent with the disclosure of the 
consumer's right to dispute the debt specified by [s]ection 
809(a).'').
---------------------------------------------------------------------------

38(c) Requests for Original-Creditor Information
    FDCPA section 809(b) provides that, if a consumer requests the name 
and address of the original creditor in writing within 30 days of 
receiving the validation information or notice described in FDCPA 
section 809(a), the debt collector must cease collection of the debt 
until the debt collector obtains and mails that information to the 
consumer.\532\ Proposed Sec.  1006.38(c) would implement and interpret 
this requirement.
---------------------------------------------------------------------------

    \532\ Id.
---------------------------------------------------------------------------

    In general, proposed Sec.  1006.38(c) mirrors the statute, with 
minor changes for style and clarity. However, to accommodate various 
electronic media through which a debt collector could send original-
creditor information under proposed Sec.  1006.42, proposed Sec.  
1006.38(c) would interpret FDCPA section 809(b) to require debt 
collectors to ``provide,'' rather than to ``mail,'' original-creditor 
information to consumers in a manner consistent with the delivery 
provisions in proposed Sec.  1006.42. As described above, the Bureau 
proposes this interpretation to harmonize FDCPA section 809(b)'s 
writing requirement with the E-SIGN Act. The Bureau requests comment on 
proposed Sec.  1006.38(c) and on whether to clarify further how to 
interpret proposed Sec. Sec.  1006.38(c) and 1006.42 together.
38(d) Disputes
38(d)(1) Failure To Dispute
    FDCPA section 809(c) provides that a consumer's failure to dispute 
a debt may not be construed by any court as an admission of liability 
by the consumer.\533\ Proposed Sec.  1006.38(d)(1) would implement 
FDCPA section 809(c) and generally restates the statute, with only 
minor changes for style.
---------------------------------------------------------------------------

    \533\ 15 U.S.C. 1692g(c).
---------------------------------------------------------------------------

38(d)(2) Response to Disputes
    FDCPA section 809(b) provides that, if a consumer disputes a debt 
in writing within 30 days of receiving the validation information or 
notice described in section 809(a), the debt collector must cease 
collection of the debt, or any disputed portion of the debt, until the 
debt collector obtains verification of the debt or a copy of a judgment 
and mails it to the consumer.\534\ Proposed Sec.  1006.38(d) would 
implement and interpret this requirement as follows.
---------------------------------------------------------------------------

    \534\ 15 U.S.C. 1692g(b).
---------------------------------------------------------------------------

38(d)(2)(i)
    Proposed Sec.  1006.38(d)(2)(i) would implement FDCPA section 
809(b)'s general requirements regarding disputes and verification. 
Proposed Sec.  1006.38(d)(2)(i) generally mirrors the statute, with 
minor changes for style and clarity. However, to accommodate various 
electronic media through which a debt collector could send a copy of 
verification or a judgment under proposed Sec.  1006.42, proposed Sec.  
1006.38(d)(2)(i) would interpret FDCPA section 809(b) to require debt 
collectors to ``provide,'' rather than to ``mail,'' such information to 
consumers in a manner consistent with the delivery provisions in 
proposed Sec.  1006.42. As described above, the Bureau proposes this 
interpretation to harmonize FDCPA section 809(b)'s writing requirement 
with the E-SIGN Act. The Bureau requests comment on proposed Sec.  
1006.38(d)(2)(i) and on whether to clarify further how to interpret 
proposed Sec. Sec.  1006.38(d)(2)(i) and 1006.42 together. The Bureau 
also requests comment on whether to clarify that a debt collector who 
ceases collection of a debt in response to a consumer's written dispute 
may communicate with the consumer one additional time to inform the 
consumer that the debt collector is ceasing collection of the 
debt.\535\
---------------------------------------------------------------------------

    \535\ Such a clarification would be consistent with the FTC's 
position in its October 5, 2007 advisory opinion regarding the same 
topic. See Fed. Trade Comm'n, Advisory Opinion to ACA International 
(Oct. 5, 2007), https://www.ftc.gov/sites/default/files/documents/public_statements/debt-collector-informing-consumer-who-has-disputed-debt-its-collection-efforts-have-ceased-would-not./p064803fairdebt.pdf.
---------------------------------------------------------------------------

38(d)(2)(ii)
    Proposed Sec.  1006.38(d)(2)(ii) would establish an alternative way 
for debt collectors to respond to disputes that they reasonably 
conclude are duplicative disputes, as that term is defined in proposed 
Sec.  1006.38(a)(1).
    Some members of the debt collection industry have described being 
overwhelmed by the number of repeat disputes they receive. In response 
to the Bureau's ANPRM, some industry commenters estimated that between 
10 and 20 percent of consumer disputes reiterate, without providing any 
new supporting information, earlier disputes to which debt collectors 
have already responded.\536\ An industry commenter also estimated that, 
for medical debts, the percentage of repeat disputes may be as high as 
50 or 60 percent of all disputes. Members of the debt collection 
industry have also expressed uncertainty about how FDCPA section 
809(b)--which, as discussed above, requires a debt collector who 
receives a written dispute within the validation period to cease 
collecting the debt, or any disputed portion of the debt, until it 
provides the consumer with a copy either of verification of the debt or 
of a judgment--applies to repeat disputes. This uncertainty may drive 
up costs for debt collectors and harm consumers. Some debt collectors, 
for example, may spend time and resources re-investigating identical 
disputes and resending identical verification before continuing with 
collections. This may leave debt collectors with fewer resources to 
investigate and respond to non-repeat disputes. It may also impede the 
collection of legitimate debts.\537\
---------------------------------------------------------------------------

    \536\ These figures appear to include both repeat disputes filed 
within the 30-day validation period and repeat disputes filed 
outside of the 30-day validation period. As noted in the section-by-
section analysis of proposed Sec.  1006.38(a)(1), the definition of 
duplicative disputes would include only disputes filed within the 
validation period. As also noted in that section-by-section 
analysis, the Bureau requests comment on the percentage of repeat 
disputes that would qualify as duplicative disputes under the 
proposed definition of duplicative dispute.
    \537\ See, e.g., Hawkins-El v. First Am. Funding, LLC, 891 F. 
Supp. 2d 402, 410 (E.D.N.Y. 2012) (``Plaintiff cannot forestall 
collection efforts by repeating the same unsubstantiated assertions 
and thereby contend that the debt is `disputed.' If Plaintiff were 
permitted to do so, debtors would be able to prevent collection 
permanently by sending letters, regardless of their merit, stating 
that the debt is in dispute. Such a result is untenable, as it would 
make debts effectively uncollectable.''); Derisme v. Hunt Leibert 
Jacobson P.C., 880 F. Supp. 2d 339, 370-71 (D. Conn. 2012) (``To 
allow a consumer to [repeatedly dispute a debt and repeatedly 
receive verification] would lead to the illogical result that a 
consumer could avoid paying its debt by repeatedly disputing the 
debt.'').
---------------------------------------------------------------------------

    The challenges that repeat disputes can pose to industry and 
consumers are not unique to the debt collection market, and the Bureau 
has clarified the treatment of repeat disputes in other contexts. Under 
Regulation X, 12 CFR 1024.35(g)(1)(i), for example, a mortgage servicer 
is not required to comply with certain error resolution requirements 
when the asserted error is substantially the same as an error 
previously asserted by the borrower for which the servicer has 
previously complied with its obligations under the rule, unless the 
borrower provides new and material information to support the notice of 
error. Similarly, under Regulation V, 12 CFR 1022.43(f)(1)(ii), a 
furnisher of information to a consumer reporting

[[Page 23355]]

agency is not required to investigate a direct dispute if the dispute 
is substantially the same as a previous dispute with respect to which 
the furnisher has already satisfied the applicable reinvestigation 
requirements, unless the dispute includes certain information not 
previously provided to the furnisher. Just as the Bureau's regulations 
outline a process for responding to repeat disputes in the mortgage 
servicing and credit reporting context, the Bureau proposes to outline 
a process pursuant to which debt collectors may respond to duplicative 
disputes in a less burdensome way.
    Consumers may submit repeat disputes for various reasons. Some may 
do so to avoid paying debts they owe or because they disagree with the 
outcome of the earlier dispute. Others may do so because they are 
unfamiliar with the dispute process. For example, some consumers who 
submit repeat disputes may not know that they can include supporting 
documentation with their disputes. Knowing if and why debt collectors 
might regard a dispute as duplicative may help consumers prepare 
clearer, more specific disputes. Those disputes, in turn, could improve 
the accuracy of the information in the debt collection system and help 
to ensure that debt collectors collect the right amounts from the right 
consumers. This could be achieved, for example, through a consumer 
notice requirement.
    Other Bureau rules that address repeat disputes contain consumer 
notice provisions. Under Regulation X, 12 CFR 1024.35(g)(2), for 
example, a mortgage servicer who determines that a notice of error is 
substantially the same as an error previously asserted by the borrower 
for which the servicer has previously complied with its error 
resolution obligations under the rule must notify the borrower of its 
determination and provide the basis for that determination. Similarly, 
under Regulation V, 12 CFR 1022.43(f)(2), a furnisher who determines 
that a direct dispute is substantially the same as a previous dispute 
for which the furnisher has already satisfied the applicable 
reinvestigation requirements must notify the consumer of its 
determination, provide the reasons for that determination, and identify 
any information required to investigate the disputed information.
    For these reasons, proposed Sec.  1006.38(d)(2)(ii) would provide 
that, upon receipt of a duplicative dispute, as defined in Sec.  
1006.38(a)(1), a debt collector must cease collection of the debt, or 
any disputed portion of the debt, until the debt collector either: 
Notifies the consumer in writing or electronically in a manner 
permitted by Sec.  1006.42 that the dispute is duplicative, provides a 
brief statement of the reasons for the determination, and refers the 
consumer to the debt collector's response to the earlier dispute; or 
satisfies Sec.  1006.38(d)(2)(i). The Bureau proposes Sec.  
1006.38(d)(2)(ii) to clarify that debt collectors are not required to 
expend resources conducting repetitive dispute investigations unless 
there is a reasonable basis for re-opening a prior investigation 
because of new and material information.
    Proposed comment 38(d)(2)(ii)-1 explains that a debt collector 
complies with the requirement to provide a brief statement of the 
reasons for its determination that the dispute is duplicative if the 
notice states that the dispute is substantially the same as an earlier 
dispute submitted by the consumer and the consumer has not included any 
new and material information in support of the earlier dispute. 
Proposed comment 38(d)(2)(ii)-1 also explains that a debt collector 
complies with the requirement to refer the consumer to the debt 
collector's response to the earlier dispute if the notice states that 
the debt collector responded to the earlier dispute and provides the 
date of that response.
    The Bureau requests comment on proposed Sec.  1006.38(d)(2)(ii) and 
proposed comment 38(d)(2)(ii)-1, including on whether any additional 
clarification is needed. In particular, the Bureau requests comment on 
how debt collectors currently handle repeat disputes and the costs to 
debt collectors of doing so, distinguishing, to the extent possible, 
between repeat disputes filed during the validation period and repeat 
disputes filed after the validation period. The Bureau also requests 
comment on whether, in responding to disputes that would qualify as 
duplicative disputes under the proposed rule, debt collectors expect to 
use the method in proposed Sec.  1006.38(d)(2)(i) or the method in 
proposed Sec.  1006.38(d)(2)(ii), as well as the expected costs and 
benefits of using each method. In addition, the Bureau requests comment 
on the risks to consumers, if any, posed by proposed Sec.  
1006.38(d)(2)(ii).
    The Bureau proposes Sec.  1006.38(d)(2)(ii) to implement and 
interpret FDCPA section 809(b). In particular, proposed Sec.  
1006.38(d)(2)(ii) interprets what it means for a debt collector to 
``obtain[ ] verification of the debt or any copy of a judgment'' and to 
provide a ``copy of such verification or judgment'' to the consumer 
when the debt collector reasonably determines that a dispute is a 
duplicative dispute. In circumstances where a consumer submits a timely 
written dispute that is duplicative of an earlier dispute for which the 
debt collector already obtained and mailed to the consumer a copy of 
verification of the debt or a judgment, the Bureau interprets FDCPA 
section 809(b)'s requirement to provide a ``copy of such verification 
or judgment'' to the consumer to mean that a debt collector must 
provide the consumer either with another copy of the materials the debt 
collector provided in response to the earlier dispute, or with a notice 
explaining the reasons for the debt collector's determination that the 
dispute is duplicative and referring the consumer to the materials the 
debt collector provided in response to the earlier dispute.
    The Bureau also proposes the notice requirement of proposed Sec.  
1006.38(d)(2)(ii) pursuant to its authority under Dodd-Frank section 
1032(a). As discussed above, Dodd-Frank Act section 1032(a) provides 
that the Bureau ``may prescribe rules to ensure that the features of 
any consumer financial product or service, both initially and over the 
term of the product or service, are fully, accurately, and effectively 
disclosed to consumers in a manner that permits consumers to understand 
the costs, benefits, and risks associated with the product or service, 
in light of the facts and circumstances.'' The Bureau proposes Sec.  
1006.38(d)(2)(ii)'s notice requirement on the basis that a debt 
collector's decision to treat a dispute as a duplicative dispute under 
proposed Sec.  1006.38(d)(2)(ii) is a feature of debt collection. 
Knowing that a debt collector has determined that a dispute is a 
duplicative dispute, and the reasons for that determination, may help a 
consumer understand the costs, benefits, and risks associated with 
filing additional disputes and deciding whether to pay a debt.
Section 1006.42 Providing Required Disclosures
42(a) Providing Required Disclosures
42(a)(1) In General
    The proposed rule would require debt collectors to provide certain 
disclosures to consumers. Proposed Sec.  1006.42(a)(1) would require a 
debt collector who provides such required disclosures in writing or 
electronically to do so: (1) In a manner that is reasonably expected to 
provide actual notice to the consumer, and (2) in a form that the 
consumer may keep and access later. The first prong of proposed Sec.  
1006.42(a)(1) would not require a debt collector to ensure a consumer's 
actual receipt of required

[[Page 23356]]

disclosures; it would require instead a reasonable expectation of 
actual notice. The second prong would require a debt collector, when 
providing a required disclosure in writing or electronically, to 
provide it, for example, in a form that the consumer could print or, in 
the case of disclosures provided by hyperlink to a website, in a form 
that consumers could access for a reasonable period of time.\538\
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    \538\ See the section-by-section analysis of proposed Sec.  
1006.42(c)(2)(ii). For ease of reference, throughout the section-by-
section analysis of proposed Sec.  1006.42, the Bureau uses the 
shorthand term ``retainability'' to refer to the consumer's ability 
to keep and access a disclosure later.
---------------------------------------------------------------------------

    Proposed comment 42-1 explains how a debt collector could comply 
with the general delivery standard in the decedent debt context. The 
proposed comment provides that, if a debt collector knows or should 
know that a consumer is deceased, a person who is authorized to act on 
behalf of the deceased consumer's estate operates as the consumer for 
purposes of Sec.  1006.42.\539\
---------------------------------------------------------------------------

    \539\ Proposed comment 42-1 is consistent with proposed comments 
34(a)(1)-1 and 38-1, which also would clarify delivery standards in 
the decedent debt context.
---------------------------------------------------------------------------

    Proposed comment 42(a)(1)-1 would clarify that a debt collector who 
provides a required disclosure in writing or electronically and who 
receives a notice that the disclosure was not delivered has not 
provided the disclosure in a manner that is reasonably expected to 
provide actual notice under Sec.  1006.42(a)(1).
    Proposed Sec.  1006.42(a)(1) would apply only if a debt collector 
provides required disclosures in writing or electronically; it would 
not apply if a debt collector provides required disclosures orally. 
Apart from disclosures that a communication is from a debt collector or 
is for a debt collection purpose--which proposed Sec.  1006.42(a)(2) 
would exclude from the general delivery standard \540\--the Bureau has 
not identified widespread instances of debt collectors providing 
required disclosures, such as the validation information, orally. In 
addition, the Bureau's proposal would require debt collectors to 
include more information in validation notices than they may currently 
provide, which may further decrease the likelihood that debt collectors 
would deliver such disclosures orally. For these reasons, the Bureau's 
proposal focuses on clarifying general delivery requirements only for 
required disclosures delivered electronically or in writing. The Bureau 
requests comment on this approach, including on whether the Bureau 
should address oral delivery of required disclosures and, if so, what 
standards should apply, including how an oral disclosure could be 
provided in a form that the consumer may keep and access later. The 
Bureau also requests comment on the frequency with which debt 
collectors provide required disclosures orally today and the frequency 
with which debt collectors would expect to provide disclosures orally 
under the proposed rule.
---------------------------------------------------------------------------

    \540\ See the section-by-section analysis of proposed Sec.  
1006.42(a)(2).
---------------------------------------------------------------------------

    Proposed Sec.  1006.42(a)(1) also would not apply to any non-
required debt collection communications, such as emails that contain 
only a request for payment. The Bureau requests comment on proposed 
Sec.  1006.42(a)(1) and on proposed comments 42-1 and 42(a)(1)-1, 
including on whether any additional clarification is needed as to this 
general standard and on its costs to debt collectors and benefits to 
consumers. In particular, the Bureau requests comment on the current 
practices of debt collectors upon learning that a consumer has not 
received a required disclosure--for example, because the disclosure has 
been returned as undeliverable--as well as the risks, costs, and 
benefits that these practices pose to consumers and industry. The 
Bureau also requests comment on whether a delivery method that does not 
satisfy proposed Sec.  1006.42(a)(1)'s notice requirement should be 
permitted as long as the debt collector confirms that the consumer 
received actual notice.
    The Bureau proposes Sec.  1006.42(a)(1) to implement and interpret 
FDCPA section 809(a) and (b) and pursuant to its authority under FDCPA 
section 814(d) to prescribe rules with respect to the collection of 
debts by debt collectors. Under FDCPA section 809(a), a debt collector 
must ``send the consumer'' a written validation notice unless the 
information is ``contained in the initial communication'' with the 
consumer, and under FDCPA section 809(b), a debt collector must ``mail[ 
] to the consumer'' any original-creditor or verification information 
the debt collector provides. The Bureau proposes to require a form of 
delivery that is reasonably expected to provide actual notice on the 
basis that such a requirement is implicit in the concepts of 
``send[ing] the consumer a written notice,'' information being 
``contained in'' the initial communication, and ``mail[ing]'' 
information to the consumer.\541\ Similarly, the Bureau proposes to 
require a form of delivery that the consumer may keep and access later 
on the basis that such a requirement is also implicit in the concepts 
of ``send[ing] the consumer a written notice,'' information being 
``contained in'' the initial communication, and ``mail[ing]'' 
information to the consumer--requirements traditionally satisfied 
through sending a paper document but that the Bureau is now adapting to 
electronic communications.
---------------------------------------------------------------------------

    \541\ There is support for this interpretation in court 
decisions. See, e.g., Lavallee v. Med-1 Solutions, LLC, No. 1:15-cv-
01922-DML-WTL, 2017 WL 4340342, at *4 (S.D. Ind. Sept. 29, 2017) 
(``[I]f notice is not sent in a manner in which receipt should be 
presumed as a matter of logic and common experience, then it cannot 
be considered to have been `sent'.''); Johnson v. Midland Credit 
Mgmt. Inc., No. 1:05 CV 1094, 2006 WL 2473004, at *12 (N.D. Ohio 
Aug. 24, 2006) (``[W]hen a written notice is returned as 
undeliverable, it has not actually been sent to the consumer. 
Rather, it has been sent to an improper address for the consumer. . 
. . If the debt collector knows the validation notice was sent to 
the wrong address, the debt collector has not complied with the 
plain language of the statute.'').
---------------------------------------------------------------------------

    The Bureau also proposes Sec.  1006.42(a)(1) as an interpretation 
of FDCPA section 808's prohibition on using unfair or unconscionable 
means to collect a debt. It may be unfair or unconscionable under FDCPA 
section 808 for a debt collector to deliver a disclosure using a method 
that is not reasonably expected to provide actual notice to the 
consumer or that does not allow the consumer to retain the disclosure 
and access it later. If debt collectors deliver disclosures in a manner 
that does not meet these standards, consumers may not receive required 
information or have it available for future reference, potentially 
leading them to take different actions with respect to debts than they 
otherwise would have. A debt collector's decision to provide a required 
disclosure in a manner not reasonably expected to provide actual notice 
or in a form that the consumer cannot keep and access later is outside 
of a consumer's control; therefore, a consumer cannot reasonably avoid 
the injury caused by a debt collector who provides a required 
disclosure in such a manner or form. In addition, as noted, providing 
required disclosures in a manner not reasonably expected to provide 
actual notice or in a form that the consumer cannot keep and access 
later could effectively thwart FDCPA section 809's validation notice, 
original-creditor, and dispute-verification provisions. Thus, whatever 
benefits debt collectors may receive from such conduct do not appear to 
be outweighed by the costs to consumers.
42(a)(2) Exceptions
    Although proposed Sec.  1006.42(a)(1) generally requires that debt 
collectors

[[Page 23357]]

provide required disclosures in a manner reasonably expected to provide 
actual notice and in a form consumers can keep and access later, 
proposed Sec.  1006.42(a)(2) identifies two circumstances in which a 
debt collector would not need not to comply with proposed Sec.  
1006.42(a)(1) in providing required disclosures. The first circumstance 
involves the disclosure required by proposed Sec.  1006.6(e); the 
second circumstance involves the disclosure required by proposed Sec.  
1006.18(e).
    Proposed Sec.  1006.6(e) would require a debt collector who 
communicates or attempts to communicate with a consumer electronically 
using a particular email address, telephone number for text messages, 
or other electronic-medium address to include in each such 
communication or attempt to communicate a clear and conspicuous 
statement describing how the consumer can opt out of further electronic 
communications or attempts to communicate to that address or telephone 
number. Proposed Sec.  1006.18(e) would require a debt collector to 
disclose in its initial communication with a consumer that the debt 
collector is attempting to collect a debt and that any information 
obtained with be used for that purpose, and to disclose in each 
subsequent communication that the communication is from a debt 
collector.
    The disclosures that would be required by proposed Sec. Sec.  
1006.6(e) and 1006.18(e) would accompany all electronic debt collection 
communications. Thus, absent an exception for these provisions, 
proposed Sec.  1006.42(a)(1) would apply to all electronic debt 
collection communications. This, in turn, would mean that all 
electronic debt collection communications effectively would have to 
meet the notice and retainability requirements of Sec.  1006.42(a)(1)--
including even relatively routine communications, such as ones that 
convey settlement offers, payment requests, scheduling messages, and 
other information not required by the FDCPA or Regulation F. The Bureau 
believes that requiring all such communications to be provided in a 
manner reasonably expected to provide actual notice and in a form 
consumers can keep and access later is likely to impose an unnecessary 
burden on debt collectors with little corresponding benefit to 
consumers.
    As discussed above, the Bureau proposes Sec.  1006.42(a)(1) as an 
interpretation of certain terms in FDCPA section 809 and pursuant to 
FDCPA section 808. Because the disclosures in proposed Sec. Sec.  
1006.6(e) and 1006.18(e) do not arise under FDCPA section 809, and 
because they may not implicate FDCPA section 808's prohibition on using 
unfair or unconscionable means to collect or attempt to collect any 
debt, the Bureau proposes generally to except them from the 
requirements of Sec.  1006.42(a)(1). For this reason, proposed Sec.  
1006.42(a)(2) provides that a debt collector need not comply with Sec.  
1006.42(a)(1) when providing the disclosure required by Sec.  1006.6(e) 
or Sec.  1006.18(e) in writing or electronically, unless the disclosure 
is included on a notice required by Sec.  1006.34(a)(1)(i) or Sec.  
1006.38(c) or (d)(2), or in an electronic communication containing a 
hyperlink to such a notice. Any disclosure provided pursuant to 
proposed Sec.  1006.6(e) or Sec.  1006.18(e), however, would need to be 
provided clearly and conspicuously. This clear-and-conspicuous 
requirement would apply even where proposed Sec.  1006.42(a)(1) would 
not. The Bureau requests comment on proposed Sec.  1006.42(a)(2), 
including whether the exceptions identified in proposed Sec.  
1006.42(a)(2) are underinclusive or overinclusive.
42(b) Requirements for Certain Disclosures Provided Electronically
    The FDCPA requires three disclosures to be provided in writing. As 
the Bureau proposes to implement them in Regulation F, these 
disclosures are: (1) The validation notice described in proposed Sec.  
1006.34(a)(1)(i)(B); (2) the original-creditor disclosure described in 
proposed Sec.  1006.38(c); and (3) the validation-information 
disclosure described in proposed Sec.  1006.38(d)(2).\542\ The Bureau 
interprets the FDCPA's writing requirement to permit these disclosures 
to be provided electronically.\543\ If provided electronically, 
however, they are subject to the E-SIGN Act, the Federal statute that 
provides standards for when delivery of a disclosure by electronic 
record satisfies a requirement in a statute, regulation, or other rule 
of law that the disclosure be provided or made available to a consumer 
in writing.\544\ Proposed Sec.  1006.42(b) lists the requirements that 
debt collectors would need to follow to satisfy proposed Sec.  
1006.42(a)(1) and, relatedly, the E-SIGN Act, when providing these 
disclosures electronically. As discussed below, each requirement 
described in proposed Sec.  1006.42(b) addresses either the actual 
notice or retainability aspect of proposed Sec.  1006.42(a), or both. 
Unless otherwise noted, the Bureau proposes Sec.  1006.42(b) for the 
same reasons and pursuant to the same authority discussed in the 
section-by-section analysis of proposed Sec.  1006.42(a)(1).
---------------------------------------------------------------------------

    \542\ For ease of reference, throughout the section-by-section 
analysis of proposed Sec.  1006.42, the Bureau refers to these three 
disclosures as the ``required disclosures.'' The disclosure required 
by FDCPA section 807(11) must be in writing only if the debt 
collector otherwise is communicating with the consumer in writing. 
As discussed in the section-by-section analysis of proposed Sec.  
1006.42(a)(2), the Bureau proposes to exclude FDCPA section 807(11) 
written disclosures from meeting the delivery requirements in 
proposed Sec.  1006.42(a)(1) unless the disclosures are included on 
a notice required by Sec. Sec.  1006.34(a)(1)(i) or 1006.38(c) or 
(d)(2), or in an electronic communication containing a hyperlink to 
such a notice.
    \543\ See the section-by-section analyses of proposed Sec. Sec.  
1006.34 and 1006.38.
    \544\ See 15 U.S.C. 7001-7006.
---------------------------------------------------------------------------

    The Bureau requests comment on proposed Sec.  1006.42(b), including 
on the frequency with which debt collectors currently provide required 
disclosures electronically, and the proportion of such disclosures 
provided by email, text message, and other electronic means. To the 
extent debt collectors do not currently provide required disclosures 
electronically, the Bureau requests comment on why that is so. The 
Bureau also requests comment on whether to require that debt collectors 
who provide required disclosures electronically maintain reasonable 
written policies and procedures designed to ensure that debt collectors 
comply with the requirements of proposed Sec.  1006.42(b).\545\ Several 
Bureau rules include similar policies-and-procedures requirements.\546\ 
Requiring such policies and procedures may facilitate compliance with 
proposed Sec.  1006.42(b) by debt collectors who provide required 
disclosures electronically, and may promote effective and efficient 
enforcement and supervision by the Bureau and other Federal agencies. 
However, requiring such policies and

[[Page 23358]]

procedures could impose costs on debt collectors, which, if passed on 
to creditors, could ultimately reduce consumers' access to credit. The 
Bureau therefore requests comment on the expected costs and benefits of 
requiring debt collectors who provide required disclosures 
electronically to maintain reasonable written policies and procedures 
designed to comply with the requirements of proposed Sec.  1006.42(b).
---------------------------------------------------------------------------

    \545\ Such a requirement could be based on the Bureau's 
authority under Dodd-Frank Act sections 1022(b)(1) or 1024(b)(7) or 
both.
    \546\ See, e.g., Regulation E, 12 CFR 1005.33(g) (requiring 
remittance transfer providers to ``develop and maintain written 
policies and procedures that are designed to ensure compliance with 
the error resolution requirements applicable to remittance transfers 
under this section''); Regulation X, 12 CFR 1024.38(a) (requiring 
mortgage servicers to ``maintain policies and procedures that are 
reasonably designed to achieve'' certain objectives); Regulation Z, 
12 CFR 1026.36(j) (requiring depository institutions to ``establish 
and maintain written policies and procedures reasonably designed to 
ensure and monitor the compliance of the depository institution, its 
employees, its subsidiaries, and its subsidiaries' employees'' with 
certain requirements of the rule); id. 1026.51 (requiring card 
issuers to ``establish and maintain reasonable written policies and 
procedures to consider the consumer's ability to make the required 
minimum payments under the terms of the account based on a 
consumer's income or assets and a consumer's current obligations'').
---------------------------------------------------------------------------

42(b)(1)
    The proposed rule would provide debt collectors with a choice 
between two general options for providing the required disclosures 
electronically. The first option would be to comply with the E-SIGN Act 
after the consumer provides affirmative consent directly to the debt 
collector. The second option would be to comply with the alternative 
procedures described in proposed Sec.  1006.42(c). As explained in this 
section-by-section analysis (discussing the proposed E-SIGN Act option) 
and the section-by-section analysis of proposed Sec.  1006.42(c) 
(discussing the proposed alternative procedures), a debt collector who 
satisfies the requirements of either option has taken necessary but not 
sufficient actions to support a finding that the debt collector has 
provided the electronic disclosure in a manner that is reasonably 
expected to provide actual notice and in a form that the consumer may 
keep and access later.\547\
---------------------------------------------------------------------------

    \547\ The debt collector still would need to satisfy the 
requirements in proposed Sec.  1006.42(b)(2) through (4).
---------------------------------------------------------------------------

    Regarding the E-SIGN Act option, E-SIGN Act section 101(c) sets 
forth a detailed process for ensuring the consumer's informed, 
affirmative consent before delivering disclosures electronically.\548\ 
Before a consumer may consent to electronic delivery, the consumer must 
receive a clear and conspicuous statement of: (1) The consumer's right 
not to consent and to withdraw consent; (2) the scope of the consumer's 
consent, including whether it applies only to the particular 
transaction which gave rise to the obligation to provide the disclosure 
or to identified disclosures that may be provided or made available 
during the course of the parties' relationship; (3) the procedures for 
withdrawing consent; (4) how the consumer may obtain paper copies of 
electronic records; and (5) any hardware and software requirements for 
access to and retention of electronic records.\549\ The consumer must 
consent electronically, or confirm the consumer's consent 
electronically, in a manner that reasonably demonstrates that the 
consumer can access information in the electronic form that will be 
used to provide the information that is the subject of the 
consent.\550\ In light of these requirements, a debt collector who 
delivers required disclosures electronically in accordance with E-SIGN 
Act section 101(c) (and who satisfies Sec.  1006.42(b)(2) through (4)) 
may reasonably expect to have provided the consumer with actual notice 
in a form that the consumer may keep and access later.
---------------------------------------------------------------------------

    \548\ 15 U.S.C. 7001(c).
    \549\ Id.
    \550\ Id. Further, after providing consent, if a change in the 
hardware or software requirements needed to access or retain 
electronic records creates a material risk that the consumer will 
not be able to access or retain a subsequent electronic record that 
was the subject of the consent, the person providing the electronic 
record must provide the consumer with new disclosures and the 
consumer must provide new consent. Id.
---------------------------------------------------------------------------

    The proposed rule would clarify that, to deliver disclosures 
electronically in accordance with E-SIGN Act section 101(c), a debt 
collector must obtain affirmative consent directly from the consumer. 
The Bureau proposes this requirement as an interpretation of E-SIGN Act 
section 101(c), pursuant to its authority under E-SIGN Act section 
104(b)(1)(A) to interpret the E-SIGN Act through regulations.\551\ E-
SIGN Act section 101(c) permits electronic delivery of required 
disclosures if, among other things, the consumer ``has affirmatively 
consented to such use and has not withdrawn such consent.'' The E-SIGN 
Act does not state that, in the debt collection context, a debt 
collector may rely on E-SIGN Act consent provided by the consumer to 
the original creditor or person to whom the debt is owed. Rather, the 
E-SIGN Act generally limits the consumer's consent to ``records 
provided or made available during the course of the parties' 
relationship'' or ``only to the particular transaction which gave rise 
to the obligation to provide the record.'' \552\
---------------------------------------------------------------------------

    \551\ See 15 U.S.C. 7004(b)(1). The Bureau's proposed 
interpretation of E-SIGN Act section 101(c) is ``with respect to'' 
the FDCPA within the meaning of E-SIGN Act section 104(b). The 
proposed interpretation is therefore limited to disclosures required 
under Regulation F, which must be provided in the name of and on 
behalf of the FDCPA-covered debt collector. The Bureau does not 
propose to issue an interpretation applicable to disclosures 
required by other statutes or regulations, including where third 
parties may provide disclosures in the name of or on behalf of the 
creditor.
    \552\ 15 U.S.C. 7001(c)(1)(B)(ii).
---------------------------------------------------------------------------

    In the debt collection context, the Bureau interprets ``the 
parties' relationship'' to exclude a debt collector with whom the 
creditor may eventually place the account, because the consumer and the 
debt collector typically have no relationship at the time the consumer 
provides E-SIGN Act consent to the creditor. Indeed, the consumer 
likely does not know the identity of the debt collector the creditor 
may hire, and the creditor may not know either. In the debt collection 
context, the Bureau also interprets ``only the particular transaction 
which gave rise to the obligation to provide the record'' to exclude 
interactions between the consumer and the debt collector with whom the 
creditor may eventually place the account. The statute uses the word 
``only'' before referring to ``the particular transaction,'' suggesting 
that the relevant transaction is limited and occurs within the confines 
of the ``parties' relationship.'' Accordingly, the Bureau does not 
propose to interpret a consumer's affirmative consent to receive 
electronic disclosures from a creditor under the E-SIGN Act as 
affirmative consent to receive electronic disclosures from a debt 
collector under the E-SIGN Act. Instead, the Bureau proposes to 
interpret E-SIGN Act section 101(c) to require that a consumer's 
consent be given directly to the debt collector. The Bureau's proposed 
interpretation is consistent with several FDCPA provisions pertaining 
to consumer consent for certain debt collection communications,\553\ as 
well as the ANPRM comments of several industry participants and 
consumer advocates.
---------------------------------------------------------------------------

    \553\ See 15 U.S.C. 1692c(a) (permitting certain communications 
with ``the prior consent of the consumer given directly to the debt 
collector''); 15 U.S.C. 1692c(b) (same).
---------------------------------------------------------------------------

    For these reasons, proposed Sec.  1006.42(b)(1) would, except as 
provided in Sec.  1006.42(c), require a debt collector to provide the 
required disclosures in accordance with section 101(c) of the E-SIGN 
Act after the consumer provides affirmative consent directly to the 
debt collector. The Bureau proposes to codify this interpretation of 
the E-SIGN Act in comment 42(b)(1)-1. The Bureau requests comment on 
proposed Sec.  1006.42(b)(1) and on proposed comment 42(b)(1)-1, 
including on the extent to which debt collectors currently obtain E-
SIGN Act consent directly from the consumer. If debt collectors 
currently do not obtain such consent, the Bureau requests comment on 
the reasons why not and on any specific circumstances in which debt 
collectors rely instead upon consent the consumer originally provided 
to the creditor under the E-SIGN Act. The Bureau also requests comment 
on whether to permit such reliance, or transfer of consent, in

[[Page 23359]]

certain specific circumstances and, if so, what those circumstances 
should be.
42(b)(2)
    Proposed Sec.  1006.42(b)(2) provides that, to comply with Sec.  
1006.42(a)(1) when providing the required disclosures electronically, a 
debt collector also must identify the purpose of the communication. 
Proposed Sec.  1006.42(b)(2) seeks to increase the likelihood that a 
consumer who receives an electronic debt collection disclosure can 
distinguish the communication from junk mail or ``spam.'' \554\ Reports 
estimate that over 200 billion emails are sent and received worldwide 
each day \555\ and that spam accounts for over half of all email 
traffic.\556\ Given the volume of information, including spam, 
transmitted by email, the likelihood that consumers will receive actual 
notice of emailed debt collection disclosures may depend, in part, on 
their ability to distinguish between the debt collector's communication 
transmitting the disclosure and spam.
---------------------------------------------------------------------------

    \554\ The term ``spam'' generally refers to unsolicited 
commercial email. See, e.g., 15 U.S.C. 7701(a)(2) (finding, in 
connection with CAN-SPAM Act of 2003, that ``[t]he convenience and 
efficiency of electronic mail are threatened by the extremely rapid 
growth in the volume of unsolicited commercial electronic mail.'').
    \555\ Radicati Grp., Inc., Email Statistics Report, 2015-19, 
Executive Summary, at 3-4 (Mar. 2015), https://www.radicati.com/wp/wp-content/uploads/2015/02/Email-Statistics-Report-2015-2019-Executive-Summary.pdf.
    \556\ Symantec, internet Security Threat Report, at 24 (Apr. 
2017), https://www.symantec.com/content/dam/symantec/docs/reports/istr-22-2017-en.pdf.
---------------------------------------------------------------------------

    According to one recent study, the two most important factors in a 
consumer's decision to open an email are whether the consumer 
recognizes the sender and whether the email includes a relevant subject 
line.\557\ At the outset of collections, a consumer may not recognize 
the name of a debt collector who sends an email or text message. The 
subject line of an email, or the first line of a text message, may 
therefore be an especially important means of alerting consumers to 
important debt collection communications. To address the spam problem, 
many email providers and third parties have developed sophisticated 
filters to help consumers identify and segregate potential spam 
messages.\558\ There may be a risk that such filters will erroneously 
identify a legitimate debt collection communication as spam. Using a 
specific, informative subject line may decrease that risk.\559\
---------------------------------------------------------------------------

    \557\ Direct Mktg. Ass'n, Consumer Email Tracker 2017, at 18 
(2017),https://dma.org.uk/uploads/misc/5a1583ff3301a-consumer-email-tracking-report-2017-(2)_5a1583ff32f65.pdf.
    \558\ See, e.g., Todd Jackson, How Our Spam Filter Works, 
Official Gmail Blog (Oct. 31, 2007), https://gmail.googleblog.com/2007/10/how-our-spam-filter-works.html.
    \559\ See, e.g., IBM, Which keywords or characters can trigger 
spam filters?, IBM Knowledge Ctr., https://www.ibm.com/support/knowledgecenter/en/SSWU4L/Email/imc_Email/List_of_Keywords-Characters_Which_Can_Tr190.html (last visited May 6, 2019).
---------------------------------------------------------------------------

    For these reasons, proposed Sec.  1006.42(b)(2) would require a 
debt collector to identify the purpose of the communication by 
including, in the subject line of an email or in the first line of a 
text message transmitting the required disclosure, the name of the 
creditor to whom the debt currently is owed or allegedly is owed and 
one additional piece of information identifying the debt, other than 
the amount. Including limited but relevant information about the 
creditor and the debt in the subject line of an email, or in the first 
line of a text message, may improve a consumer's ability to distinguish 
the communication from spam or junk, and therefore may increase the 
likelihood that the consumer will receive actual notice within the 
meaning of proposed Sec.  1006.42(a)(1).\560\
---------------------------------------------------------------------------

    \560\ As explained in the section-by-section analysis of 
proposed Sec.  1006.42(b)(1), (c)(1), and (e)(2), the email or text 
message can only be sent to an email address or telephone number 
that satisfies certain criteria. Those criteria are designed to 
ensure that the email address or telephone number is one the 
consumer actually used, thereby limiting privacy concerns.
---------------------------------------------------------------------------

    Because the amount of the debt may change over time as interest and 
fees accrue, including the current amount of the debt in the subject 
line of an email or the first line of a text message, without further 
itemization, may not help the consumer recognize a debt that belongs to 
the consumer or that the communication pertains to debt collection. 
Proposed comment 42(b)(2)-1 provides examples of information 
identifying the debt, other than the amount, that a debt collector 
could use to comply with proposed Sec.  1006.42(b)(2). These include a 
truncated account number, the name of the original creditor, the name 
of any store brand associated with the debt, the date of sale of a 
product or service giving rise to the debt, the physical address of 
service, and the billing address on the account.
    The Bureau requests comment on proposed Sec.  1006.42(b)(2) and on 
proposed comment 42(b)(2)-1. In particular, the Bureau requests comment 
on the risk that an email provider's spam filter may prevent a debt 
collector's email from reaching a consumer's inbox, including on 
whether any particular words or phrases in the subject line of an email 
are likely to cause a spam filter to identify a legitimate debt 
collection communication as spam and on whether debt collectors should 
be required to take any other steps to decrease the likelihood that an 
email will be filtered as spam. The Bureau also requests comment on 
whether any particular words or phrases in the subject line of an email 
or in the first line of a text message are likely to help consumers 
distinguish between spam and debt collection communications. In 
addition, the Bureau requests comment on the risks to consumers, if 
any, of including the name of the creditor to whom the debt is owed, a 
truncated account number, the date of sale of a product or service 
giving rise to the debt, the physical address of service, the billing 
address, or any other particular item of information in the subject 
line of an email or in the first line of a text message. The Bureau 
also requests comment on how consumers handle emails marked as spam, 
including on the frequency with which consumers review their spam 
folders to identify emails they should read, and the extent to which 
major email providers delete unread emails in spam folders.
42(b)(3)
    Proposed Sec.  1006.42(b)(3) describes a third requirement that a 
debt collector would need to satisfy to comply with proposed Sec.  
1006.42(a)(1) when providing the required disclosures electronically. 
Just as a debt collector who sends a paper letter by postal mail may 
receive notice that the letter was undeliverable, a debt collector who 
sends an email or a text message may receive notice from a 
communications carrier that the email or text message was 
undeliverable. This notice often takes the form of an automated 
message. Proposed Sec.  1006.42(b)(3) would require a debt collector to 
permit receipt of notifications of undeliverability from communications 
providers, monitor for any such notifications, and treat any such 
notifications as precluding a reasonable expectation of actual notice 
for that delivery attempt.
    The Bureau proposes this requirement because it appears 
unreasonable for a debt collector to expect that a consumer has actual 
notice of an electronic disclosure if that disclosure has been returned 
as undelivered. There is support for this interpretation in court 
decisions. For example, in a similar context, courts have held that a 
paper validation notice sent to the consumer by postal mail but 
returned to the debt collector as undeliverable was not actually sent 
to the consumer within the

[[Page 23360]]

meaning of FDCPA section 809(a).\561\ The Bureau requests comment on 
proposed Sec.  1006.42(b)(3), including on how a debt collector who 
attempts to deliver a required disclosure electronically may become 
aware that the disclosure has not been delivered. The Bureau also 
requests comment on whether debt collectors should be required to take 
any steps in addition to those described in proposed Sec.  
1006.42(b)(3).
---------------------------------------------------------------------------

    \561\ See, e.g., Johnson v. Midland Credit Mgmt. Inc., No. 1:05 
CV 1094, 2006 WL 2473004, at *12-13 (N.D. Ohio Aug. 24, 2006) 
(``[W]hen a written notice is returned as undeliverable, it has not 
actually been sent to the consumer. Rather, it has been sent to an 
improper address for the consumer. . . . If the debt collector knows 
the validation notice was sent to the wrong address, the debt 
collector has not complied with the plain language of the 
statute.'').
---------------------------------------------------------------------------

42(b)(4)
    Proposed Sec.  1006.42(b)(4) describes an additional step that a 
debt collector must take to comply with proposed Sec.  1006.42(a)(1). 
Proposed Sec.  1006.42(b)(4) would apply only when a debt collector 
provides electronically the validation notice described in proposed 
Sec.  1006.34(a)(1)(i)(B). Proposed Sec.  1006.42(b)(4) seeks to ensure 
that debt collectors provide the validation notice in a format that is 
compatible with the range of commercially available electronic devices 
a consumer may use to view the disclosure.
    According to recent research, smartphone ownership has doubled 
since 2011, and today a larger share of consumers own a smartphone (77 
percent) than a desktop or laptop computer (73 percent).\562\ In 
addition, roughly half of all consumers own a tablet computer.\563\ As 
a result, consumers may view disclosures on a variety of screen sizes. 
A disclosure that automatically adjusts to the size of the consumer's 
screen is sometimes called a ``responsive'' disclosure. If a consumer 
views a disclosure using a device to which the disclosure is not 
responsive, the disclosure may appear in small text with truncated 
margins; in some cases, the disclosure may be difficult for the 
consumer to read and navigate. In addition, some research suggests that 
mobile-friendly design may improve consumer attention to digital 
information.\564\ Consistent with these considerations, the Bureau's 
2016 final rule concerning prepaid accounts under Regulations E and Z 
(2016 Prepaid Final Rule) requires financial institutions to provide 
electronic disclosures required by that rule in a form that is 
responsive to different screen sizes.\565\
---------------------------------------------------------------------------

    \562\ internet & Tech, Mobile Fact Sheet, Pew Res. Ctr. (Feb. 5, 
2018), https://www.pewinternet.org/fact-sheet/mobile.
    \563\ Id.
    \564\ For example, a 2014 marketing study found that optimizing 
email messages to be read on a variety of devices boosted the rate 
at which consumers clicked on hyperlinks. See Lauren Smith, The 
Science of Email Clicks: The Impact of Responsive Design & Inbox 
Testing, Litmus (Dec. 8, 2014), https://litmus.com/blog/the-science-of-email-clicks-the-impact-of-responsive-design-inbox-testing.
    \565\ 12 CFR 1005.18(b)(6)(i)(B); comment 18(b)(6)(i)(B)-2.
---------------------------------------------------------------------------

    Given the prevalence of mobile technology, it may be unreasonable 
for a debt collector to expect that a consumer has actual notice of an 
electronic disclosure that does not adjust to the screen size of the 
consumer's mobile device. On smaller screens, such a disclosure may be 
illegible if viewed in its entirety. As a result, some information may 
be lost to consumers. This may be especially true as to disclosures, 
such as the validation notice described in proposed Sec.  
1006.34(a)(1)(i)(B), with formatting elements meant to draw a 
consumer's attention to particularly important information when the 
entirety of the disclosure is in view. For example, the validation 
notice's presentation of information in a tabular format could be lost 
to consumers using mobile devices if the validation notice is not in a 
responsive format viewable on smaller screens.
    In addition, graphical representations of textual content generally 
cannot be accessed by assistive technology used by the blind and 
visually impaired, such as screen readers. Providing electronically-
delivered disclosures in machine-readable text may help ensure that 
consumers who use screen readers can access the information. Thus, 
unless a debt collector knows that a consumer does not use a screen 
reader, it also may be unreasonable for a debt collector to expect that 
a consumer has actual notice of an electronic disclosure that is not 
machine readable. The Bureau's 2016 Prepaid Final Rule requires 
financial institutions to provide electronic disclosures required by 
that rule using machine-readable text that is accessible on screen 
readers.\566\
---------------------------------------------------------------------------

    \566\ 12 CFR 1005.18(b)(6)(i)(B); comment 18(b)(6)(i)(B)-3.
---------------------------------------------------------------------------

    To address concerns about readability on mobile devices and 
accessibility for persons with disabilities, proposed Sec.  
1006.42(b)(4) would require a debt collector who provides 
electronically the validation notice described in Sec.  
1006.34(a)(1)(i)(B) to do so in a responsive format that is reasonably 
expected to be accessible on a screen of any commercially available 
size and via commercially available screen readers.\567\ Proposed Sec.  
1006.42(b)(4) would apply only to the validation notice described in 
proposed Sec.  1006.34(a)(1)(i)(B). It would not apply to the original-
creditor disclosure described in proposed Sec.  1006.38(c) because that 
disclosure typically is brief and does not feature standardized 
information or formatting. It also would not apply to the verification 
disclosures described in proposed Sec.  1006.38(d)(2). Those 
disclosures may include images of original paper documents, and it does 
not appear that commercially available file formats for delivering 
images electronically could comply with proposed Sec.  1006.42(b)(4). 
It may therefore be impractical to require debt collectors to provide 
the verification disclosures in accordance with proposed Sec.  
1006.42(b)(4).
---------------------------------------------------------------------------

    \567\ In connection with this proposal, the Bureau intends to 
make available on its website the source code for a version of the 
validation notice that would comply with proposed Sec.  
1006.42(b)(4). Based on its own feasibility testing of a mail merge 
process, the Bureau believes that the burden on debt collectors of 
populating an email based on this source code with transaction data 
may be low.
---------------------------------------------------------------------------

    Proposed comment 42(b)(4)-1 provides examples of how to satisfy 
proposed Sec.  1006.42(b)(4). The comment explains that a debt 
collector provides the validation notice in a responsive format 
accessible on a screen of any commercially available size if, for 
example, the notice adjusts to different screen sizes by stacking 
elements in a manner that accommodates consumer viewing on smaller 
screens while still meeting the other applicable formatting 
requirements in proposed Sec.  1006.34. It also explains that a debt 
collector provides the validation notice in a manner accessible via 
commercially available screen readers if, for example, the validation 
notice is machine readable.
    The Bureau requests comment on proposed Sec.  1006.42(b)(4) and on 
proposed comment 42(b)(4)-1. In particular, the Bureau requests comment 
on the cost to debt collectors of developing and using a validation 
notice that is responsive to screen size and accessible via screen 
readers, including the one-time costs of designing such a disclosure 
and the ongoing costs of populating such a disclosure with information 
about individual debts. The Bureau also requests comment on how those 
costs might change if the Bureau provides debt collectors with source 
code for a version of the validation notice that would comply with 
proposed Sec.  1006.42(b)(4). In addition, the Bureau requests comment 
on whether the original-creditor disclosure described in

[[Page 23361]]

proposed Sec.  1006.38(c) and the validation-information disclosure 
described in proposed Sec.  1006.38(d)(2) should be subject to proposed 
Sec.  1006.42(b)(4).
42(c) Alternative Procedures for Providing Certain Disclosures 
Electronically
    Under proposed Sec.  1006.42(b)(1), a debt collector who provides 
the required disclosures electronically must, except as provided in 
Sec.  1006.42(c), comply with section 101(c) of the E-SIGN Act as 
interpreted by the Bureau in the proposed rule. Proposed Sec.  
1006.42(c) would allow for electronic delivery of the required 
disclosures outside of the E-SIGN Act's consent process. The Bureau 
proposes this alternative because debt collectors and consumers may 
benefit from greater flexibility as to electronic disclosures.
    According to industry commenters to the Bureau's ANPRM and to the 
small entity representatives who participated in the SBREFA process, it 
is often infeasible for debt collectors to send electronic disclosures 
for two reasons. First, debt collectors are concerned about violating 
FDCPA section 805(b)'s limitations on third-party communications when 
they engage in electronic communications with consumers, an issue the 
Bureau proposes to address in Sec.  1006.6(d)(3).\568\ Second, the 
process for obtaining E-SIGN Act consent is particularly cumbersome in 
the debt collection context, where consumers and debt collectors 
typically lack a pre-existing relationship.
---------------------------------------------------------------------------

    \568\ See the section-by-section analysis of proposed Sec.  
1006.6(d)(3).
---------------------------------------------------------------------------

    The process for obtaining consumer consent under the E-SIGN Act may 
impose a substantial burden on electronic commerce in the unique 
context of debt collection. Most communication between debt collectors 
and consumers continues to take place by telephone and postal mail, 
neither of which is well-suited to obtaining E-SIGN Act consent. 
Section 101(c) of the E-SIGN Act requires that the consumer receive 
certain disclosures before consenting to electronic delivery. These 
disclosures may be more than 1,000 words long and, although a debt 
collector could provide them over the telephone, they could take a 
considerable amount of time to recite to the consumer. Moreover, on a 
telephone call, it may be challenging for a consumer to ``reasonably 
demonstrate[ ]'' the ability to ``access information in the electronic 
form that will be used to provide the information that is the subject 
of the consent,'' as required by E-SIGN Act section 
101(c)(1)(C)(ii).\569\ Similarly, although a debt collector could 
provide E-SIGN disclosures by postal mail, it is not clear how a 
consumer could, by postal mail, ``reasonably demonstrate'' the ability 
to access electronic information.
---------------------------------------------------------------------------

    \569\ Id.
---------------------------------------------------------------------------

    Thus, even if a debt collector incorporates some elements of the E-
SIGN Act consent process into an initial telephone or postal mail 
communication, the debt collector likely still must rely on the 
consumer to take the further step of demonstrating the ability to 
access electronic information. A debt collector may be uncertain 
whether and when the consumer will take this further step. Such 
uncertainty may be particularly challenging in connection with 
delivering the validation notice. Under FDCPA section 809(a) and 
proposed Sec.  1006.34(a)(1)(i)(B), the debt collector must send the 
validation notice within five days of the debt collector's initial 
communication with the consumer, leaving little time for the debt 
collector to arrange an alternative delivery method if the consumer 
does not complete the E-SIGN Act consent process soon after receiving 
the initial communication. While a debt collector could, by 
introductory letter, ask the consumer to complete the entire E-SIGN Act 
consent process online, a consumer may be unlikely to respond quickly 
to such a request from a debt collector with whom the consumer lacks a 
prior relationship.
    Further, it may not be effective for debt collectors to adopt the 
practice that creditors often use of sending emails or text messages 
with hyperlinks directing consumers to websites requesting E-SIGN Act 
consent. Even if the creditor previously identified the debt collector 
for the consumer,\570\ the debt collector would need to send the 
validation notice within five days of the initial communication, again 
leaving little time for the debt collector to arrange an alternate 
delivery method if the consumer does not consent to electronic delivery 
quickly.\571\
---------------------------------------------------------------------------

    \570\ See the section-by-section analysis of proposed Sec.  
1006.6(d)(3).
    \571\ As discussed in the section-by-section analysis of 
proposed Sec.  1006.42(b)(1), the Bureau proposes to interpret the 
E-SIGN Act to require consent to be provided directly from the 
consumer to the debt collector.
---------------------------------------------------------------------------

    The Bureau is not aware of instances in which a debt collector has 
delivered a validation notice electronically pursuant to E-SIGN Act 
consent provided directly to the debt collector. Industry commenters to 
the Bureau's ANPRM generally stated that debt collectors do not send 
validation notices electronically. Similarly, a consumer advocate 
commenter stated that a survey of its members did not find any evidence 
that debt collectors currently deliver validation notices 
electronically. However, the consumer advocate commenter also stated 
that, given the consent requirements of the E-SIGN Act and the timing 
requirements of the FDCPA, it is conceivable that electronic delivery 
of validation notices could occur under current law. More recently, the 
consumer advocate commenter noted that several debt collectors may be 
delivering validation notices electronically.\572\ However, it is 
unclear how widespread this practice is and whether it involves 
consumer consent provided directly to the debt collector.\573\
---------------------------------------------------------------------------

    \572\ Similarly, an association of State regulators stated that 
many technologically sophisticated debt collectors provided 
disclosures electronically, but it did not provide further details.
    \573\ Direct consent may be easier to obtain for required 
disclosures other than the validation notice. For example, in 
response to the ANPRM, one industry trade association reported that 
20 percent of members that responded to a survey delivered 
verification materials by email and fax. However, this commenter did 
not identify the proportion sent by email, and it did not indicate 
whether these debt collectors obtained E-SIGN Act consent directly 
from the consumer before doing so. Another industry trade 
association commenting on the ANPRM stated that electronic delivery 
of verification materials occurs rarely.
---------------------------------------------------------------------------

    For these reasons, the Bureau proposes Sec.  1006.42(c), which 
describes procedures a debt collector may use to provide the required 
disclosures electronically without the need to comply with section 
101(c) of the E-SIGN Act. As discussed below, proposed Sec.  
1006.42(c)(1) would require a debt collector to send an electronic 
communication to a particular email address or, in the case of a text 
message, a particular telephone number. Proposed Sec.  1006.42(c)(2) 
would provide two methods from which debt collectors could choose for 
placing a required disclosure in such an electronic communication. A 
debt collector who follows the procedures described in proposed Sec.  
1006.42(c) would satisfy proposed Sec.  1006.42(a)(1)'s requirement to 
provide the required disclosures in a manner that is reasonably 
expected to provide actual notice and in a form that the consumer may 
keep and access later, provided that the debt collector also satisfies 
proposed Sec.  1006.42(b)(2) through (4).
    The Bureau proposes Sec.  1006.42(c) pursuant to its authority, 
under section 104(d)(1) of the E-SIGN Act, to exempt a specified 
category or type of record from the requirements relating to

[[Page 23362]]

consent in section 101(c) of the E-SIGN Act if such exemption is 
necessary to eliminate a substantial burden on electronic commerce and 
will not increase the material risk of harm to consumers.\574\ The 
Bureau proposes the exemption on the basis that requiring debt 
collectors to comply with the consent requirements in section 101(c) E-
SIGN Act may impose a substantial burden on electronic commerce by 
potentially reducing opportunities for consumers and debt collectors to 
communicate and resolve debts more quickly; for consumers to submit 
disputes more easily; and for consumers to make online payments in 
response to notices delivered electronically. Further, as discussed in 
part VI, the Bureau estimates that as many as 140 million validation 
notices are sent annually, almost all by postal mail. As also discussed 
in part VI, electronic delivery costs may be substantially lower than 
the costs of printing disclosures and delivering them by postal 
mail.\575\ Given the number of validation notices sent annually, and 
the unique challenges in the debt collection context of obtaining E-
SIGN Act consent to receive them electronically, these printing and 
mailing costs also may impose a substantial burden on the debt 
collection industry, which may, in turn, result in increased cost and 
decreased availability of credit.
---------------------------------------------------------------------------

    \574\ 15 U.S.C. 7004(d)(1).
    \575\ As discussed in part VI, the Bureau estimates that it 
costs between $0.50 and $0.80 to send a validation notice by postal 
mail, whereas the marginal cost of sending a validation notice 
electronically is approximately zero.
---------------------------------------------------------------------------

    The procedures described in proposed Sec.  1006.42(c) are designed 
so as not to increase the material risk of harm to consumers. Consumers 
are exposed to a materially increased risk of harm when electronic 
delivery of the required disclosures by the alternative method would 
make consumers less likely to receive, identify, open, read, or 
understand the disclosures, or would increase the likelihood of an 
unintended third-party disclosure. Pursuant to its E-SIGN Act exemption 
authority, the Bureau designed each component of proposed Sec.  
1006.42(c) to prevent an increase in these risks. For example, as 
discussed below, the procedures in proposed Sec.  1006.42(c) are 
designed to help ensure that, among other things, the email address or 
telephone number to which a debt collector sends a required disclosure 
or a hyperlink to such a disclosure belongs to the consumer; the 
consumer is prepared to receive electronic disclosures at that email 
address or telephone number; the consumer is prepared to view required 
disclosures electronically, including when provided on a website; and 
the consumer can retain electronic disclosures.
    The Bureau requests comment on proposed Sec.  1006.42(c), including 
on whether the requirements relating to consent in section 101(c) of 
the E-SIGN Act--including as the Bureau proposes to interpret them--
impose a substantial burden on electronic commerce in the debt 
collection context, and on whether proposed Sec.  1006.42(c) is 
necessary and sufficient to eliminate those burdens. With respect to 
possible burdens on electronic commerce, the Bureau requests 
information on the costs of delivering required disclosures 
electronically, how those costs compare to delivering required 
disclosures on paper, and the broader impacts of increased electronic 
delivery in the debt collection context. The Bureau also requests 
comment on whether the procedures described in proposed Sec.  
1006.42(c) increase the material risk of harm to consumers and, if so, 
any adjustments that can be made to mitigate that risk.
42(c)(1)
    To help ensure that a consumer receives a required disclosure 
provided electronically when a debt collector uses the alternative 
procedures, proposed Sec.  1006.42(c)(1) would require a debt collector 
to provide the disclosure by sending an electronic communication to an 
email address or, in the case of a text message, a telephone number 
that the creditor or a prior debt collector could have used to provide 
electronic disclosures related to that debt in accordance with section 
101(c) of the E-SIGN Act. This may include, for example, an email 
address or telephone number covered by the consumer's unwithdrawn E-
SIGN Act consent provided directly to the creditor or a prior debt 
collector. The Bureau proposes to exercise its E-SIGN Act exemption 
authority to limit the email addresses and telephone numbers to which a 
debt collector may send required disclosures under proposed Sec.  
1006.42(c)(1) on the basis that, if a consumer has not provided 
unwithdrawn E-SIGN Act consent for a particular email address or 
telephone number to the creditor or a prior debt collector, a new debt 
collector should not presume that the consumer is able or prepared to 
receive electronic disclosures at that email address or telephone 
number.
    Proposed comment 42(c)(1)-1 would clarify that, if a consumer has 
opted out of debt collection communications to a particular email 
address or telephone number by, for example, following instructions 
provided pursuant to Sec.  1006.6(e), then a debt collector cannot use 
that email address or telephone number to deliver disclosures under 
Sec.  1006.42(c). This would be the case even if the consumer provided 
unwithdrawn E-SIGN Act consent allowing the creditor or an earlier debt 
collector to use that email address or telephone number.
    The Bureau requests comment on proposed Sec.  1006.42(c)(1) and on 
proposed comment 42(c)(1)-1, including on the risks and benefits of 
allowing debt collectors to use an email address or telephone number 
with respect to which the consumer provided to the creditor or a prior 
debt collector unwithdrawn E-SIGN Act consent related to the debt. The 
Bureau also requests comment on how often creditors obtain E-SIGN Act 
consent from consumers and how often consumers withdraw any such 
consent.
42(c)(2)
    Proposed Sec.  1006.42(c)(2) would provide two methods from which 
debt collectors could choose for placing a required disclosure in an 
electronic communication. The first method, described in proposed Sec.  
1006.42(c)(2)(i), would be to place the disclosure in the body of an 
email. The second method, described in proposed Sec.  
1006.42(c)(2)(ii), would be to place the disclosure on a secure website 
that is accessible by clicking on a hyperlink included within an 
electronic communication, provided certain other conditions are met.
42(c)(2)(i)
    Proposed Sec.  1006.42(c)(2)(i) would allow a debt collector to 
place the disclosure in the body of an email sent to an email address 
described in Sec.  1006.42(c)(1). Proposed comment 42(c)(2)(i)-1 would 
clarify that a debt collector places a disclosure in the body of an 
email if the disclosure's content is viewable within the email itself. 
Some pre-proposal feedback suggested that creditors rarely provide 
required disclosures within the body of an email if those disclosures 
include transaction-specific information. This may be because email has 
not traditionally been viewed as a secure form of communication. It may 
also be because creditors prefer to provide required disclosures in a 
PDF or similar format. On the other hand, many creditors now send email 
alerts to consumers, and these alerts often include transaction-
specific information. In addition, the use of technology that protects

[[Page 23363]]

consumer privacy by encrypting emails while in transit appears to be 
increasing.\576\ For these reasons, providing a disclosure in the body 
of an email may pose no more risk of third-party interception than 
delivery by mail.\577\
---------------------------------------------------------------------------

    \576\ For example, at least one major email provider reports 
that a growing number of email providers encrypt messages sent to 
and from their services using Transport Layer Security encryption, 
and that use of ``in transit'' encryption continues to increase. See 
Google, Email Encryption in Transit, Google Transparency Rep., 
https://transparencyreport.google.com/safer-email/overview (last 
visited May 6, 2019).
    \577\ In pre-proposal feedback, several industry stakeholders 
and a small entity representative who participated in the SBREFA 
process requested that the Bureau clarify how to deliver required 
disclosures by text message. As described in the section-by-section 
analysis of proposed Sec.  1006.42(c)(2)(ii), the Bureau's proposal 
would, subject to certain conditions, permit a debt collector to use 
a text message to deliver a hyperlink to a disclosure placed on a 
secure website.
---------------------------------------------------------------------------

    The Bureau requests comment on proposed Sec.  1006.42(c)(2)(i) and 
on proposed comment 42(c)(2)(i)-1, including on the risks and benefits 
of allowing a debt collector to place a required disclosure in the body 
of an email without first providing the consumer with notice and an 
opportunity to opt out. In addition, the Bureau requests comment on 
whether creditors or debt collectors currently provide required 
disclosures bearing transaction-specific information in the body of 
emails and, if not, the reasons why not. The Bureau also requests 
comment on the prevalence of ``in-transit'' encryption technology and 
whether that technology has reduced any concerns about the security of 
emails. The Bureau also requests comment on the prevalence of 
technology that would allow a consumer to save or print a text message.
42(c)(2)(ii)
    Proposed Sec.  1006.42(c)(2)(ii) provides that, in lieu of placing 
a disclosure in the body of an email, a debt collector who is 
delivering a required disclosure electronically pursuant to the 
alternative procedures may place the disclosure on a secure website 
that is accessible by clicking on a clear and conspicuous hyperlink 
included within an electronic communication sent to an email address or 
a telephone number described in Sec.  1006.42(c)(1). However, this 
method would be available only if three additional conditions, 
described in proposed Sec.  1006.42(c)(2)(ii)(A) through (C), are 
satisfied.
    First, proposed Sec.  1006.42(c)(2)(ii)(A) would require that the 
disclosure be accessible on the website for a reasonable period of time 
and be capable of being saved or printed. The Bureau proposes these 
requirements because a disclosure that is only briefly accessible, like 
a disclosure that cannot be saved or printed, may be unlikely to 
provide notice in a form the consumer can keep and access later.
    Second, proposed Sec.  1006.42(c)(2)(ii)(B) would require that the 
consumer receive notice and an opportunity to opt out of hyperlinked 
delivery as described in proposed Sec.  1006.42(d). Placing a required 
disclosure on a secure website and sending the consumer an electronic 
communication containing a hyperlink may be more convenient for some 
debt collectors than including the required disclosure in the body of 
an email. However, because debt collectors and consumers typically lack 
a pre-existing relationship, delivering a required disclosure by 
hyperlink without first alerting the consumer by separate means may not 
be reasonably expected to provide actual notice. Federal agencies have 
advised consumers against clicking on hyperlinks provided by unfamiliar 
senders.\578\ According to recent reports, some scams have used fake 
debt collection emails to lure consumers into clicking on 
hyperlinks.\579\ To address these risks, some consumer email services 
can be configured to block hyperlinks from unrecognized senders.\580\ 
Consumers may be likely to follow safe browsing habits and not click on 
a hyperlink in an initial communication from an unfamiliar debt 
collector.\581\ Therefore, it may be unreasonable for a debt collector 
to expect that a consumer has actual notice of an electronic disclosure 
delivered by hyperlink if the consumer does not expect to receive a 
hyperlinked disclosure from that particular debt collector. Proposed 
Sec.  1006.42(d), discussed below, describes consumer notice-and-opt-
out processes meant to ensure that, before a debt collector sends a 
required disclosure by hyperlink, the consumer expects to receive it 
and does not object to such receipt. By helping the consumer identify 
the sender in advance, a notice-and-opt-out process may also reduce the 
risk that the consumer will treat an email containing a hyperlink as 
spam.
---------------------------------------------------------------------------

    \578\ For example, the FTC advises consumers not to open links 
or attachments to emails they do not recognize, in order to prevent 
phishing and malware. See Fed. Trade Comm'n, Phishing (July 2017), 
https://www.consumer.ftc.gov/articles/0003-phishing; Fed. Trade 
Comm'n, Malware (Nov. 2015), https://www.consumer.ftc.gov/articles/0011-malware. The FDIC offers consumers similar guidance. See Fed. 
Deposit Ins. Comm'n, Beware of Malware: Think Before You Click, 
https://www.fdic.gov/consumers/consumer/news/cnwin16/malware.html 
(last updated Mar. 8, 2016).
    \579\ See, e.g., Claer Barrett, Beware Fake Debt Collection 
Emails, Says Action Fraud, Fin. Times, Apr. 8, 2016, https://www.ft.com/content/43fdbb30-fce4-11e5-b3f6-11d5706b613b.
    \580\ See Microsoft Off. Support, Help Keep Spam and Junk Email 
Out of Your Inbox in Outlook.com, Microsoft, https://support.office.com/en-us/article/help-keep-spam-and-junk-email-out-of-your-inbox-in-outlook-com-a3ece97b-82f8-4a5e-9ac3-e92fa6427ae4 
(last visited May 6, 2019).
    \581\ In comments to the Bureau's ANPRM, a large debt collector 
agreed that consumers may view disclosures from unknown collectors 
with suspicion, such as when the consumer has not received advance 
information about the debt collector from a creditor.
---------------------------------------------------------------------------

    Third, proposed Sec.  1006.42(c)(2)(ii)(C) would require that the 
consumer not have opted out during the opt-out period. The Bureau 
proposes this requirement because a debt collector may not reasonably 
expect that a consumer has actual notice of a hyperlinked disclosure if 
the consumer has opted out of receiving disclosures in that manner.
    The Bureau requests comment on proposed Sec.  1006.42(c)(2)(ii), 
including on the risks and benefits of allowing a debt collector to 
place a required disclosure on a secure website accessible by 
hyperlink, particularly compared to placing a required disclosure in 
the body of an email. The Bureau also requests comment on whether to 
clarify further what it means for a hyperlink to be clear and 
conspicuous and, if so, what factors may be relevant to determining 
whether a hyperlink is clear and conspicuous. In addition, the Bureau 
requests comment on whether to clarify further what it means for a 
disclosure to remain available on a website for a reasonable time and, 
if so, the length of time that should qualify as reasonable. In 
addition, the Bureau requests comment on the prevalence of anti-virus 
software and other technologies that identify whether a hyperlink 
included in an email or text message is safe, and whether consumers 
using such technologies are likely click on hyperlinks from 
unrecognized debt collectors. The Bureau also requests comment on 
whether debt collectors who wish to provide required disclosures 
electronically would be more likely to do so in the body of an email 
under proposed Sec.  1006.42(c)(2)(i) or on a secure website that is 
accessible by clicking on a hyperlinked included within an electronic 
communication under proposed Sec.  1006.42(c)(2)(ii), and the reasons 
why.
42(d) Notice and Opportunity To Opt Out of Hyperlinked Delivery
    Proposed Sec.  1006.42(d) describes two processes for providing 
consumers with notice and an opportunity to opt out of

[[Page 23364]]

hyperlinked delivery of required disclosures, as required by proposed 
Sec.  1006.42(c)(2)(ii)(B). A debt collector who wishes to place a 
required disclosure on a website that is accessible by clicking on a 
hyperlink included within an electronic communication would be required 
to choose between these notice-and-opt-out processes. One process, 
described in proposed Sec.  1006.42(d)(1), would involve a 
communication between the debt collector and the consumer before the 
required disclosure is provided; the other process, described in 
proposed Sec.  1006.42(d)(2), would involve a communication between the 
creditor and the consumer before the required disclosure is provided.
    Proposed comment 42(d)-1 would clarify that a debt collector's or a 
creditor's communication with a consumer pursuant to Sec.  
1006.42(d)(1) or (2), respectively, applies to all disclosures covered 
by Sec.  1006.42(a) that the debt collector thereafter sends regarding 
that debt, unless the consumer later designates that email address or, 
in the case of text messages, that telephone number as unavailable for 
the debt collector's use, such as by opting out pursuant to the 
instructions required by Sec.  1006.6(e). The Bureau proposes Sec.  
1006.42(d) for the same reasons and pursuant to the same authority 
discussed in the section-by-section analysis of proposed Sec.  
1006.42(c).
42(d)(1) Communication by the Debt Collector
    Under proposed Sec.  1006.42(d)(1), a debt collector must inform 
the consumer, in a communication with the consumer before providing the 
required disclosure, of the information in proposed Sec.  
1006.42(d)(1)(i) through (vi). Proposed Sec.  1006.42(d)(1)(i) and (ii) 
would require the debt collector to inform the consumer of the name of 
the consumer who owes or allegedly owes the debt, and the name of the 
creditor to whom the debt currently is owed or allegedly owed. The 
Bureau proposes to require this information to help the consumer 
identify whether the debt belongs to the consumer. Proposed Sec.  
1006.42(d)(1)(iii) and (iv) would require the debt collector to inform 
the consumer of the email address or telephone number from which and to 
which the debt collector intends to send the electronic communication 
containing the hyperlink. The Bureau proposes to require this 
information to help the consumer ensure that an electronic 
communication containing the hyperlink is directed to an appropriate 
email address or telephone number, and to help the consumer identify 
any such electronic communication once the communication reaches the 
consumer's inbox. Finally, proposed Sec.  1006.42(d)(1)(v) and (vi) 
would require the debt collector to inform the consumer of the 
consumer's ability to opt out of hyperlinked delivery of disclosures 
and to provide instructions for doing so within a reasonable period of 
time. The Bureau proposes to require this information to enable the 
consumer to choose whether to opt out of hyperlinked electronic 
disclosures from the debt collector--a choice the consumer would not 
have had the opportunity to make when providing E-SIGN Act consent 
originally to the creditor because the consumer likely would not have 
known the identity of any future debt collector.\582\
---------------------------------------------------------------------------

    \582\ As discussed in the section-by-section analysis of 
proposed Sec.  1006.42(c)(2)(ii), the rule would not permit a debt 
collector to deliver required disclosures by hyperlink to a consumer 
who opted out of such delivery.
---------------------------------------------------------------------------

    Proposed comment 42(d)(1)-1 would clarify that, for purposes of a 
debt collector's communication with the consumer under Sec.  
1006.42(d)(1), the term ``name of the consumer'' has the same meaning 
as the term ``consumer's name'' under Sec.  1006.34(c)(2)(ii). The 
comment also includes a cross-reference to proposed comment 
34(c)(2)(ii)-1, which explains that the consumer's name is what the 
debt collector reasonably determines is the most complete version of 
the name about which the debt collector has knowledge, whether obtained 
from the creditor or another source. Proposed comment 42(d)(1)-2 would 
clarify that, if a debt collector's communication with the consumer 
under Sec.  1006.42(d)(1) applies to multiple debts, Sec.  
1006.42(d)(1)(i) and (ii) require the debt collector to identify the 
consumer and the creditor for each debt to which the communication 
applies.\583\
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    \583\ As discussed in the section-by-section analysis of 
proposed Sec.  1006.42(c)(1), proposed comment 42(c)(1)-1 would 
clarify that, if a consumer has opted out of communications by the 
debt collector to an email address or, in the case of text messages, 
a telephone number, then that email address or telephone number 
cannot be used to deliver disclosures under Sec.  1006.42(c).
---------------------------------------------------------------------------

    Proposed comment 42(d)(1)-3 would clarify how the requirement to 
communicate with the consumer before providing a hyperlinked disclosure 
works together with the requirement to provide the consumer a 
reasonable period within which to opt out. The comment explains that, 
in an oral communication with the consumer, such as a telephone or in-
person conversation, the debt collector may require the consumer to 
make an opt-out decision during that same communication; however, a 
written or electronic communication that requires the consumer to make 
an opt-out decision within a period of five or fewer days does not 
satisfy proposed Sec.  1006.42(d)(1). The Bureau proposes to require a 
debt collector to allow a consumer more than five days to make an opt-
out decision in order to grant sufficient time for the consumer to see 
and respond to an opt-out notice provided in a written or electronic 
communication. Because no more than five days may elapse between an 
initial debt collection communication and the time the debt collector 
sends the validation notice under FDCPA section 809(a) as implemented 
by proposed Sec.  1006.34(a)(1)(i)(B), a debt collector who wishes to 
obtain consumer consent to hyperlinked delivery in an initial 
communication must do so orally.\584\ Proposed comment 42(d)(1)-4 would 
clarify that an opt-out notice provided by a debt collector under Sec.  
1006.42(d)(1) may be combined with an opt-out notice provided by the 
debt collector under Sec.  1006.6(d)(3)(i)(B)(1).
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    \584\ Under proposed Sec.  1006.6(e), the communication 
containing the hyperlink would need to include a clear and 
conspicuous statement describing one or more ways the consumer can 
opt out of further electronic communications or attempts to 
communicate by the debt collector to that address or telephone 
number. A consumer who no longer wished to receive hyperlinked 
delivery of required disclosures could revoke consent by following 
the opt-out instructions.
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    The Bureau requests comment on proposed Sec.  1006.42(d)(1) and its 
related commentary. In particular, the Bureau requests comment on 
whether, to limit the risk of third-party disclosure of the opt-out 
notice and to increase the likelihood that a consumer will receive 
actual notice of a required disclosure delivered by hyperlink, the rule 
should restrict the email addresses or telephone numbers to which a 
debt collector may send the opt-out notice that would be required by 
proposed Sec.  1006.42(d)(1), such as by requiring that the opt-out 
notice be sent to an email address or telephone number other than the 
one to which the debt collector intends to send the hyperlink. The 
Bureau also requests comment on whether the information required to be 
provided under proposed Sec.  1006.42(d)(1)(i) through (vi) is 
sufficient to allow a consumer to make an informed decision whether to 
opt out of receiving hyperlinked delivery of required disclosures. The 
Bureau also requests comment on whether to clarify further what it 
means to provide a reasonable opt-out period and, if so, how long an 
opt-out period should be to qualify as reasonable. In particular, the

[[Page 23365]]

Bureau requests comment on whether the requirement to allow a consumer 
more than five days to make an opt-out decision in response to an opt-
out notice delivered electronically, as described in proposed comment 
42(d)(1)-3, should be imposed or should be shortened or lengthened. In 
addition, the Bureau requests comment on how a debt collector could 
obtain a consumer's oral consent to hyperlinked delivery of required 
disclosures.
42(d)(2) Communication by the Creditor
    Instead of complying with the notice-and-opt-out process described 
in proposed Sec.  1006.42(d)(1), which would rely on a communication 
between the debt collector and the consumer, a debt collector could 
choose to comply with the notice-and-opt-out process described in 
proposed Sec.  1006.42(d)(2). The notice-and-opt-out process described 
in proposed Sec.  1006.42(d)(2) would rely on a communication between 
the creditor and the consumer.
    Under proposed Sec.  1006.42(d)(2), a debt collector must, no more 
than 30 days before the debt collector's electronic communication 
containing the hyperlink to the disclosure, confirm that the creditor: 
(1) Communicated with the consumer using the email address or, in the 
case of a text message, the telephone number to which the debt 
collector intends to send the electronic communication, and (2) 
informed the consumer of the information in proposed Sec.  
1006.42(d)(2)(i) through (iv). The Bureau proposes to require the 
creditor to have communicated using the same email address or telephone 
number to which the debt collector intends to send the electronic 
communication containing the hyperlink to help ensure that the email 
address or telephone number is a valid one. The Bureau proposes the 30-
day timing requirement to ensure that the creditor's communication with 
the consumer occurs shortly before the debt collector's delivery of the 
electronic communication containing the hyperlink to the consumer.
    Proposed Sec.  1006.42(d)(2)(i) and (ii) provide that the creditor 
must have informed the consumer of the placement or sale of the debt to 
the debt collector, and of the name the debt collector uses when 
collecting debts. The Bureau proposes to require this information to 
help the consumer identify the debt collector and the debt collector's 
relationship to the creditor and the account. Proposed Sec.  
1006.42(d)(2)(iii) provides that the creditor must have informed the 
consumer of the debt collector's option to use the consumer's email 
address or, in the case of a text message, the consumer's telephone 
number to provide any legally required debt collection disclosures in a 
manner that is consistent with Federal law. The Bureau proposes to 
require this information to help the consumer expect and recognize an 
electronic communication from the debt collector containing a hyperlink 
to a disclosure.
    Proposed Sec.  1006.42(d)(2)(iv) provides that the creditor must 
have informed the consumer of the information described in Sec.  
1006.42(d)(1)(iii), (v), and (vi). The Bureau proposes to require this 
information for the reasons discussed in the section-by-section 
analysis of proposed Sec.  1006.42(d)(1).\585\ Proposed comment 
42(d)(2)-1 would clarify that a creditor's communication with the 
consumer under Sec.  1006.42(d)(2) may apply to multiple debts being 
placed with or sold to the same debt collector at the same time. 
Proposed comment 42(d)(2)-2 would clarify how the requirement to 
communicate with the consumer before providing a hyperlinked disclosure 
works together with the requirement to provide the consumer a 
reasonable period within which to opt out. The comment explains that, 
in an oral communication with the consumer, such as a telephone or in-
person conversation, the creditor may require the consumer to make an 
opt-out decision during that same communication; however, a written or 
electronic communication that requires the consumer to make an opt-out 
decision within a period of five or fewer days does not satisfy 
proposed Sec.  1006.42(d)(2). The Bureau proposes to require a creditor 
to allow a consumer more than five days to make an opt-out decision in 
order to grant sufficient time for the consumer to see and respond to 
an opt-out notice provided in a written or electronic communication. 
Proposed comment 42(d)(2)-3 would clarify that an opt-out notice 
provided by a creditor under Sec.  1006.42(d)(2) may be combined with 
an opt-out notice provided by the creditor under Sec.  
1006.6(d)(3)(i)(B)(1).
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    \585\ The process described in proposed Sec.  1006.42(d)(2) for 
ensuring that consumers reasonably expect delivery of hyperlinked 
disclosures may generally align with some existing industry 
practices. For example, some creditors may already notify consumers 
when a debt is placed for collection or sold to a third party. The 
communications described in proposed Sec.  1006.42(d)(2) could be 
included in such notices.
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    The Bureau requests comment on proposed Sec.  1006.42(d)(2) and on 
proposed comment 42(d)(2)-1. In particular, the Bureau requests comment 
on whether the 30-day timing requirement should be lengthened or 
shortened. In addition, the Bureau requests comment on whether the 
information that proposed Sec.  1006.42(d)(2)(i) through (iv) would 
require is sufficient to allow a consumer to make an informed decision 
whether to opt out of receiving hyperlinked delivery of required 
disclosures. The Bureau also requests comment on how often creditors 
communicate with consumers regarding the placement or sale of a debt. 
The Bureau also requests comment on whether debt collectors who wish to 
provide required disclosures electronically pursuant to proposed Sec.  
1006.42(c)(2)(ii) would be more likely to choose the notice-and-opt-out 
process described in proposed Sec.  1006.42(d)(1) (communication by the 
debt collector) or the notice-and-opt-out process described in proposed 
Sec.  1006.42(d)(2) (communication by the creditor), and the reasons 
why.
42(e) Safe Harbors
    Proposed Sec.  1006.42(e) would establish two safe harbors, the 
first covering provision of disclosures by mail and the second covering 
provision of the validation notice within the body of an email that is 
a debt collector's initial communication with the consumer. Conduct 
that falls within these safe harbors would satisfy proposed Sec.  
1006.42(a)(1)'s notice and retainability requirements.
    The Bureau proposes Sec.  1006.42(e) to implement and interpret 
FDCPA sections 809(a) and (b) and pursuant to its authority under FDCPA 
section 814(d) to prescribe rules with respect to the collection of 
debts by debt collectors. Under FDCPA section 809(a), a debt collector 
must include certain information in the debt collector's initial 
communication with the consumer or ``send the consumer'' a ``written'' 
notice (i.e., the validation notice) containing that information. Under 
FDCPA section 809(b), a debt collector must ``mail[ ] to the consumer'' 
any original-creditor or verification information it provides. As 
discussed in the section-by-section analysis of proposed Sec.  
1006.42(a)(1), a form of delivery that is not reasonably expected to 
provide actual notice may not satisfy FDCPA section 809(a)'s 
requirement to ``send the consumer'' a notice or FDCPA section 809(b)'s 
requirement to ``mail[ ]'' original-creditor and verification 
information to the consumer. In addition, a written or electronic 
notice that is not retainable may not satisfy FDCPA section 809's 
writing requirement. Conversely, a debt collector may reasonably expect 
that conduct falling within the safe harbors described in proposed 
Sec.  1006.42(e) will provide actual notice to the consumer in a 
retainable form.

[[Page 23366]]

42(e)(1) Disclosures Provided by Mail
    Proposed Sec.  1006.42(e)(1) would establish a safe harbor for 
delivery of disclosures by mail. Specifically, proposed Sec.  
1006.42(e)(1) provides that a debt collector satisfies Sec.  
1006.42(a)(1) if the debt collector mails a printed copy of a required 
disclosure to the consumer's residential address, unless the debt 
collector receives notification from the entity or person responsible 
for delivery that the disclosure was not delivered.
    Although proposed Sec.  1006.42(e)(1) mentions the consumer's 
residential address, mailing a printed disclosure to another address, 
such as a consumer's post office box, may be reasonably expected to 
provide actual notice in certain circumstances. The Bureau understands, 
however, that most debt collectors send paper validation notices to 
residential addresses and that, in general, it is reasonable to expect 
that sending a validation notice to a consumer's residential address 
will provide actual notice. Accordingly, the safe harbor in proposed 
Sec.  1006.42(e)(1) only covers validation notices sent to residential 
addresses. The safe harbor in proposed Sec.  1006.42(e)(1) also would 
not apply if a debt collector receives notification that the disclosure 
was not delivered. This aspect of proposed Sec.  1006.42(e)(1) is 
consistent with case law holding that a written notice returned as 
undeliverable has not actually been sent to the consumer within the 
meaning of the FDCPA.\586\
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    \586\ See, e.g., Johnson v. CFS II, Inc., No. 12-CV-01091, 2013 
WL 1809081, at *10 (N.D. Cal. Apr. 28, 2013) (``[I]f a debtor rebuts 
the presumption of proper delivery by showing that notice was sent 
to an incorrect address or returned as undeliverable, the language 
and purpose of the FDCPA require further action by a debt 
collector.''); Johnson v. Midland Credit Mgmt. Inc., No. 1:05 CV 
1094, 2006 WL 2473004, at *12 (N.D. Ohio Aug. 24, 2006) (``[W]hile 
the plain language of the statute does not require the debt 
collector to ensure actual receipt of the validation notice, the 
plain language does require the debt collector to send the 
validation notice to a valid and proper address where the consumer 
may actually receive it. If the debt collector knows the validation 
notice was sent to the wrong address, the debt collector has not 
complied with the plain language of the statute.'').
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    Proposed comment 42(e)(1)-1 would clarify that, for purposes of 
Sec.  1006.42(e)(1), a disclosure is not mailed to a consumer's 
residential address if the debt collector knows or should know at the 
time of mailing that the consumer does not currently reside at that 
location. The Bureau proposes this comment because, in such a 
circumstance, the debt collector likely lacks a reasonable expectation 
of actual notice. The Bureau requests comment on proposed Sec.  
1006.42(e)(1) and on proposed comment 42(e)(1)-1.
42(e)(2) Validation Notice Contained in the Initial Communication
    In pre-proposal feedback, industry stakeholders asked the Bureau to 
clarify how to deliver the validation notice electronically in a debt 
collector's initial communication with the consumer. Proposed Sec.  
1006.42(e)(2) would provide a safe harbor to debt collectors who 
deliver a validation notice in the body of an email that is the debt 
collector's initial communication with the consumer, provided certain 
other conditions are satisfied.
    The E-SIGN Act's consumer consent provisions apply if a statute, 
regulation, or other rule of law requires that information relating to 
a transaction or transactions in or affecting interstate or foreign 
commerce be provided or made available to a consumer in writing.\587\ 
As discussed in the section-by-section analysis of proposed Sec.  
1006.34(a)(1), neither FDCPA section 809(a) nor proposed Regulation F 
prohibit a debt collector from providing the validation information 
described in proposed Sec.  1006.34(c) orally or electronically in the 
debt collector's initial communication with the consumer. Accordingly, 
the E-SIGN Act's consumer consent provisions do not apply to the extent 
a debt collector provides the validation information in the body of an 
email that is the debt collector's initial communication with the 
consumer.\588\ However, proposed Sec.  1006.42(a)(1) would apply.\589\ 
Thus, a debt collector who provides the validation notice in the body 
of an email that is the debt collector's initial communication with the 
consumer would need to do so in a manner reasonably expected to provide 
actual notice and in a form that the consumer may keep and access 
later.
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    \587\ 15 U.S.C. 7001(c).
    \588\ Conversely, the E-SIGN Act's consumer consent provisions 
do apply to the extent a debt collector provides the validation 
information outside of the initial communication because, under 
FDCPA section 809(a), that information must be in writing if not 
contained in the initial communication.
    \589\ This is because proposed Sec.  1006.42(a)(1) would apply 
if a debt collector provides in writing or electronically a 
disclosure that is required by Regulation F.
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    The processes described in proposed Sec.  1006.42(b) may be 
reasonably expected to provide actual notice in a form that the 
consumer may keep and access later. Accordingly, a debt collector who 
provides the validation notice in the body of an email that is the debt 
collector's initial communication with the consumer would satisfy Sec.  
1006.42(a)(1) by complying with Sec.  1006.42(b). Proposed Sec.  
1006.42(b)(1) would, except as provided in Sec.  1006.42(c), require a 
debt collector to provide the disclosure in accordance with the E-SIGN 
Act after the consumer provides affirmative consent directly to the 
debt collector. Proposed Sec.  1006.42(c)(1), which describes one 
element of the alternative procedures, would require a debt collector 
to provide the disclosure by sending an electronic communication to an 
email address or, in the case of a text message, a telephone number 
that the creditor or a prior debt collector could have used to provide 
electronic disclosures in accordance with section 101(c) of the E-SIGN 
Act.
    When it comes to providing the validation notice in the body of an 
email that is the initial communication with the consumer, however, it 
may be appropriate to expand the email addresses to which a debt 
collector may send the disclosure. In particular, because the E-SIGN 
Act does not apply to this form of delivery in the first place, it may 
not be necessary to limit the safe harbor to those email addresses for 
which a consumer has already provided E-SIGN Act consent to the 
creditor or a prior debt collector. Proposed Sec.  1006.6(d)(3) 
identifies procedures for identifying email addresses to which debt 
collection communications can be sent. As described in the section-by-
section analysis of proposed Sec.  1006.6(d)(3), these proposed 
procedures are designed to ensure that a debt collector who uses a 
particular email address or telephone number selected through the 
procedures does not have a reason to anticipate that an unauthorized 
third-party disclosure may occur. One point of the procedures is to 
identify an email address or telephone number that the consumer who 
owes or allegedly owes the debt uses. Thus, if a debt collector 
includes the validation notice in the body of an email that is its 
initial communication with the consumer, sending the email to an email 
address selected through the procedures described in proposed Sec.  
1006.6(d)(3) may be reasonably likely to provide actual notice to the 
consumer.
    For these reasons, proposed Sec.  1006.42(e)(2) provides that a 
debt collector who provides the validation notice described in Sec.  
1006.34(a)(1)(i)(A) within the body of an email that is the initial 
communication with the consumer satisfies Sec.  1006.42(a)(1) if the 
debt collector satisfies the requirements of Sec.  1006.42(b) for 
validation notices described in Sec.  1006.34(a)(1)(i)(B).\590\ If

[[Page 23367]]

such a debt collector follows the procedures described in proposed 
Sec.  1006.42(c), the debt collector may, in lieu of sending the 
validation notice to an email address that the creditor or a prior debt 
collector could use for delivery of electronic disclosures in 
accordance with section 101(c) of the E-SIGN Act (as described in Sec.  
1006.42(c)(1)), send the validation notice to an email address selected 
through the procedures described in proposed Sec.  1006.6(d)(3).
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    \590\ This means that, among other things, for a debt 
collector's conduct to fall within the safe harbor that proposed 
Sec.  1006.42(e)(2) would create, a debt collector would need to 
comply with the requirement proposed in Sec.  1006.42(b)(4) to 
provide the validation notice in a responsive form.
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    Proposed Sec.  1006.42(e)(2) would create a safe harbor. It would 
not establish the only way a debt collector may deliver the validation 
notice in the body of an email that is the debt collector's initial 
communication with the consumer. Nor would it provide a safe harbor for 
a debt collector delivering the validation notice as a hyperlink in an 
email or text message that is the debt collector's initial 
communication with the consumer. Indeed, for the reasons discussed in 
the section-by-section analysis of proposed Sec.  1006.42(c)(2)(ii), it 
may be unreasonable for a debt collector to expect that a consumer has 
actual notice of a validation notice delivered by hyperlink--no matter 
the email address or telephone number to which the electronic 
communication containing the hyperlink is sent--if the consumer does 
not expect to receive a hyperlinked disclosure from that particular 
debt collector. Proposed comment 42(e)(2)-1 would clarify that, if a 
consumer has opted out of debt collection communications to a 
particular email address or telephone number by, for example, following 
the instructions provided pursuant to Sec.  1006.6(e), then a debt 
collector cannot use that email address or telephone number to deliver 
disclosures under Sec.  1006.42(e)(2).
    The Bureau requests comment on proposed Sec.  1006.42(e)(2) and on 
proposed comment 42(e)(2)-1. In particular, the Bureau requests comment 
on whether using an email address selected through the procedures 
described in proposed Sec.  1006.6(d)(3) is reasonably likely to 
provide actual notice to the consumer. The Bureau also requests comment 
on whether a debt collector who wishes to provide the validation notice 
in the body of an email that is the debt collector's initial 
communication with the consumer is more likely to send the validation 
notice to an email address described in proposed Sec.  1006.42(c)(1) or 
to an email address selected through the procedures described in 
proposed Sec.  1006.6(d)(3). In addition, the Bureau requests comment 
on whether a debt collector who wishes to provide a validation notice 
in the debt collector's initial communication with the consumer is 
likely to use the safe harbor in proposed Sec.  1006.42(d)(2) and, if 
not, the reasons why not.

Subpart C--Reserved

Subpart D--Miscellaneous

Section 1006.100 Record Retention
    Proposed Sec.  1006.100 would require a debt collector to retain 
evidence of compliance with Regulation F. The purpose of a record 
retention requirement would be to promote effective and efficient 
enforcement and supervision of Regulation F. Any retention period 
therefore must be long enough to ensure access to evidence that the 
debt collector performed the actions and made the disclosures required 
by the regulation. For ease of compliance, any retention period also 
should have easily determinable beginning and end dates.
    For these reasons, the Bureau proposes Sec.  1006.100 to require a 
debt collector to retain evidence of compliance with Regulation F 
starting on the date that the debt collector begins collection activity 
on a debt and ending three years after: (1) The debt collector's last 
communication or attempted communication in connection with the 
collection of the debt; or (2) the debt is settled, discharged, or 
transferred to the debt owner or to another debt collector. Requiring 
debt collectors to begin retaining evidence of compliance when 
collection activity begins should provide an easily determinable start 
date.
    In the Small Business Review Panel Outline, the Bureau described a 
proposal to determine the end of the retention obligation from a debt 
collector's last communication or attempted communication with the 
consumer about a debt. Proposed Sec.  1006.100 is not limited to 
communications or attempted communications with a consumer; a 
communication with any person may serve as the end date from which the 
retention period may be calculated. Proposed Sec.  1006.100 also adds 
that the end of the retention period may be calculated from the time a 
debt is settled, discharged, or transferred to the debt owner or to 
another debt collector. This addition is intended to provide debt 
collectors with a more easily ascertainable date from which to measure 
their retention obligations, if such a date exists. The proposed three-
year retention period should promote effective and efficient 
enforcement and supervision of Regulation F while not unduly burdening 
debt collectors; during the SBREFA process, nearly all small entity 
representatives stated that they already retain many records for at 
least three years.
    Proposed comment 100-1 would clarify that, under proposed Sec.  
1006.100, a debt collector must retain evidence that the debt collector 
performed the actions and made the disclosures required by Regulation 
F. Proposed comment 100-1 also provides examples of the evidence that a 
debt collector could retain to show that the debt collector complied 
with certain sections of the regulation. Proposed comment 100-2 would 
clarify that proposed Sec.  1006.100 would not require debt collectors 
to retain paper copies of documents, provided the records are retained 
by a method that reproduces the records accurately. Proposed comment 
100-3 would clarify that proposed Sec.  1006.100 would not require debt 
collectors to record telephone calls, but that a debt collector who 
records such calls must retain the recordings if they are evidence of 
compliance with Regulation F.
    The Bureau requests comment on proposed Sec.  1006.100 and on 
whether any additional clarification is needed. In particular, the 
Bureau requests comment on the length of the retention period, the date 
from which the retention obligation should be measured, and the types 
of records that should be maintained. The Bureau also requests comment 
on the burden proposed Sec.  1006.100 would impose on debt collectors 
who may engage in initial attempts to collect a debt and then 
transition to monitoring the account without engaging in any collection 
communications but with the intent or option of restarting collection 
at a later date. The Bureau also requests comment on whether there are 
scenarios in which it is not possible to determine the last 
communication or attempted communication, such as when a person 
contacts the debt collector without outreach from the debt collector. 
The Bureau further requests comment on the merits of narrowing this 
prong to the debt collector's last communication or attempted 
communication with the consumer in connection with the collection of 
the debt, instead of the debt collector's last communication or 
attempted communication with any person. The Bureau requests comment on 
whether the two alternative proposed end dates of the retention period 
provide sufficient clarity on calculating the retention period.
    During the SBREFA process, some small entity representatives stated 
that

[[Page 23368]]

they retain some information, such as telephone calls or notes, for 
less than three years, and they expressed concern about the potential 
cost of storing additional data. The Small Business Review Panel 
recommended that the Bureau seek more information to estimate the costs 
of record retention and request comment about whether the retention of 
some records, such as telephone calls, poses particularly high costs 
for any debt collectors. The Bureau requests comment on these topics, 
on debt collectors' current record retention practices, and on the 
benefits to consumers of a record retention requirement that applies to 
all FDCPA-covered debt collectors.
    The Bureau proposes Sec.  1006.100 pursuant to its authority under 
Dodd-Frank Act section 1022(b)(1), which, among other things, provides 
that the Bureau's director may prescribe rules and issue orders and 
guidance as may be necessary or appropriate to enable the Bureau to 
administer and carry out the purposes and objectives of the Federal 
consumer financial laws and to prevent evasions thereof. The Bureau 
also proposes Sec.  1006.100 pursuant to Dodd-Frank Act section 
1024(b)(7)(A), which authorizes the Bureau to prescribe rules to 
facilitate supervision of persons identified as larger participants of 
a market for a consumer financial product or service as defined by rule 
in accordance with section 1024(a)(1)(B) of the Dodd-Frank Act; \591\ 
and Dodd-Frank Act section 1024(b)(7)(B), which authorizes the Bureau 
to require a person described in Dodd-Frank Act section 1024(a)(1) to 
retain records for the purpose of facilitating supervision of such 
persons and assessing and detecting risks to consumers. For the reasons 
described above, the Bureau proposes Sec.  1006.100 to facilitate 
supervision of, and to assess and detect risks to consumers posed by, 
debt collectors that are larger participants of the consumer debt 
collection market, as defined by rule, and to enable the Bureau to 
conduct enforcement investigations to identify and help prevent and 
deter the abusive, unfair, and deceptive debt collection practices 
identified in the regulation.
---------------------------------------------------------------------------

    \591\ 12 CFR 1090.105 defines larger participants of the 
consumer debt collection market.
---------------------------------------------------------------------------

Section 1006.104 Relation to State Laws
    FDCPA section 816 provides that the Act does not annul, alter, or 
affect, or exempt any person subject to the provisions of the Act from 
complying with the laws of any State \592\ with respect to debt 
collection practices, except to the extent that those laws are 
inconsistent with any provision of the Act, and then only to the extent 
of the inconsistency. FDCPA section 816 also provides that, for 
purposes of that section, a State law is not inconsistent with the Act 
if the protection such law affords any consumer is greater than the 
protection provided by the Act.\593\
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    \592\ Proposed Sec.  1006.2(l) would define State to mean ``any 
State, territory, or possession of the United States, the District 
of Columbia, the Commonwealth of Puerto Rico, or any political 
subdivision of any of the foregoing.''
    \593\ 15 U.S.C. 1692n.
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    The Bureau proposes Sec.  1006.104 to implement FDCPA section 816 
and pursuant to its authority under FDCPA section 814(d) to prescribe 
rules with respect to the collection of debts by debt collectors. 
Proposed Sec.  1006.104 mirrors the statute, except that proposed Sec.  
1006.104 refers to both the provisions of the Act and the corresponding 
provisions of Regulation F.
    As discussed in the section-by-section analysis of proposed Sec.  
1006.34, some States and localities impose their own disclosure 
requirements on debt collectors. During the SBREFA process, several 
small entity representatives expressed concern about possible overlap 
or inconsistencies between State and local disclosure requirements and 
the Bureau's proposed disclosure requirements. In its report, the Small 
Business Review Panel recommended that the Bureau continue to consider 
State law disclosures, particularly to determine whether there are any 
specific burdens or costs caused by overlap or conflict between the 
Bureau's disclosures and State disclosures. The Panel also recommended 
that the Bureau continue to consider whether clarifications may be 
necessary in the event that Federal disclosures overlap with State law 
requirements.\594\ Consistent with the Small Business Review Panel's 
recommendations, proposed comment 104-1 would clarify that a disclosure 
required by applicable State law that describes additional protections 
under State law does not contradict the requirements of the Act or the 
corresponding provisions of the regulation.\595\
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    \594\ Small Business Review Panel Report, supra note 57, at 34.
    \595\ In response to the Small Business Review Panel's 
recommendations on this issue, proposed Sec.  1006.34(d)(3)(iv) 
permits a debt collector to include State law disclosures on the 
reverse of the validation notice.
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    The Bureau requests comment on proposed Sec.  1006.104 and proposed 
comment 104-1, including on whether any additional clarification is 
needed. In particular, consistent with the Small Business Review 
Panel's recommendation, the Bureau requests comment on whether 
disclosures required by specific State or local laws are inconsistent 
with the Bureau's proposed disclosures, and any specific burdens or 
costs caused by such overlap or conflict.
Section 1006.108 Exemption for State Regulation and Appendix A 
Procedures for State Application for Exemption From the Provisions of 
the Act
    FDCPA section 817 provides that the Bureau shall by regulation 
exempt from the requirements of the Act any class of debt collection 
practices within any State if the Bureau determines that, under the law 
of that State, that class of debt collection practices is subject to 
requirements substantially similar to those imposed by the Act, and 
that there is adequate provision for enforcement.\596\ Sections 1006.1 
through 1006.8 of current Regulation F implement FDCPA section 817 and 
set forth procedures and criteria whereby States may apply to the 
Bureau for exemption of debt collection practices within the applying 
State from the provisions of the Act.\597\ The Bureau proposes to 
retain these procedures and criteria, reorganized as Sec.  1006.108 and 
appendix A and with the minor changes for clarity described below, to 
implement and interpret FDCPA section 817 and pursuant to its authority 
under FDCPA section 814(d) to prescribe rules with respect to the 
collection of debts by debt collectors.
---------------------------------------------------------------------------

    \596\ 15 U.S.C. 1692o.
    \597\ 12 CFR part 1006.
---------------------------------------------------------------------------

    Consistent with existing Sec.  1006.2, proposed Sec.  1006.108(a) 
provides that any State may apply to the Bureau for a determination 
that, under the laws of that State, any class of debt collection 
practices within that State is subject to requirements that are 
substantially similar to, or provide greater protection for consumers 
than, those imposed under FDCPA sections 803 through 812, and that 
there is adequate provision for State enforcement of such requirements. 
Proposed Sec.  1006.108(a) would clarify that, to be eligible for an 
exemption, the class of debt collection practices within that State 
also would need to be subject to requirements that are substantially 
similar to, or provide greater protection for consumers than, the 
provisions of Regulation F corresponding to FDCPA sections 803 through 
812.
    Proposed Sec.  1006.108(b) provides that the procedures and 
criteria whereby States may apply to the Bureau for exemption of a 
class of debt collection

[[Page 23369]]

practices within the applying State from the provisions of the Act and 
the corresponding provisions of Regulation F are set forth in appendix 
A to the regulation. Proposed appendix A, in turn, sets forth the 
procedures and criteria whereby States may apply to the Bureau for the 
exemption described in proposed Sec.  1006.108. Proposed appendix A 
largely mirrors existing Sec. Sec.  1006.1 through 1006.8, with certain 
organizational changes and other, minor changes for clarity and to more 
closely track the statute. The Bureau also proposes to amend the 
current notice system for acting on State requests for exemption to a 
proposed and final rule system.
    As with proposed Sec.  1006.108(a), proposed appendix A would 
clarify that, to be eligible for an exemption, the class of debt 
collection practices within the applying State also would need to be 
subject to requirements that are substantially similar to, or provide 
greater protection for consumers than, the provisions of Regulation F 
corresponding to FDCPA sections 803 through 812. The Bureau also 
proposes to revise certain phrases in existing Sec. Sec.  1006.1 
through 1006.8 to ensure uniform terminology throughout appendix A. For 
example, proposed appendix A would use the phrase ``more protective of 
consumers than'' State law throughout, rather than variations such as 
``more extensive than'' and ``more favorable than'' State law, which 
appear in certain places in existing Sec. Sec.  1006.3 and 1006.4.
    Proposed appendix A would include several additional changes to 
existing Regulation F.
    First, to streamline appendix A, the Bureau proposes to include two 
new definitions in proposed paragraph I(b). The first, in proposed 
paragraph I(b)(1), would define ``applicant State law'' to mean the 
State law that, for a class of debt collection practices within that 
State, is claimed to contain requirements that are substantially 
similar to the requirements that relevant Federal law imposes on that 
class of debt collection practices, and that contains adequate 
provision for State enforcement. The second, in proposed paragraph 
I(b)(3), would define ``relevant Federal law'' to mean sections 803 
through 812 of the Act (15 U.S.C. 1692a through 1692j) and the 
corresponding provisions of Regulation F. Accordingly, the proposed 
text of appendix A substitutes these terms throughout where 
appropriate.
    Second, proposed appendix A would strike existing Sec.  1006.3(c) 
as redundant of proposed paragraph III(a) as revised.
    Third, proposed paragraph III(d) of appendix A would repeat 
existing Sec.  1006.3(e) with certain clarifications. Existing Sec.  
1006.3(e) requires the applicant State to submit, among other 
supporting materials, information regarding the State's fiscal 
arrangements for administrative enforcement and the number and 
qualifications of enforcement personnel, along with a description of 
State enforcement procedures. In assessing the adequacy of State 
enforcement, however, existing Sec.  1006.4(b)--which is repeated in 
proposed paragraph IV(b) of appendix A--requires the Bureau to consider 
three general categories of information: necessary facilities, 
personnel, and funding. Because the criteria for evaluating the 
adequacy of State enforcement refers to these general categories of 
information, the Bureau proposes that paragraph III(d) of appendix A 
also refer to these general categories of information. Proposed 
paragraph III(d) of appendix A therefore would require the applicant 
State to submit information concerning the adequacy of enforcement, 
including information about necessary facilities, personnel, and 
funding. Proposed paragraph III(d) of appendix A also would clarify 
that examples of information relating to adequacy of enforcement that 
an applicant State must submit include the State's fiscal arrangements 
for administrative State enforcement, the number and qualifications of 
enforcement personnel, and a description of the State's enforcement 
procedures.
    Fourth, the Bureau proposes to clarify in proposed paragraph 
IV(a)(1)(i) of appendix A that the ``substantially similar'' standard 
in FDCPA section 817 applies to the Bureau's consideration of all 
aspects of the State law for which the exemption is sought, including 
defined terms and rules of construction. Existing Sec.  1006.4(a)(1)(i) 
states that defined terms and rules of construction must be ``the 
same'' as the FDCPA. The Bureau interprets FDCPA section 817's 
substantial similarity standard also to apply to defined terms and 
rules of construction. That standard permits variation from FDCPA 
defined terms and rules of construction, as long as the State law 
definitions and rules of construction are substantially similar to or 
more protective of consumers than the FDCPA. Accordingly, proposed 
paragraph IV(a)(1)(iv) of appendix A uses the phrase ``substantially 
similar'' rather than ``the same.''
    Fifth, proposed paragraph VI(b) of appendix A would repeat existing 
Sec.  1006.6(b) with certain clarifications. Existing Sec.  1006.6(b) 
requires a State that has obtained an exemption to submit such reports 
to the Bureau as the Bureau may from time to time require. The Bureau 
proposes to clarify that this provision requires the State to submit to 
the Bureau, not later than two years after the date the exemption is 
granted, and every two years thereafter, a written report concerning 
the manner in which the State has enforced its law in the preceding two 
years and an update of the information required under proposed 
paragraph III(d) of appendix A. By requiring such information to be 
updated every two years, proposed appendix A would ensure that the 
Bureau is aware of changes that may affect the State's capacity to 
enforce the laws that qualified the State for the exemption.
    The Bureau requests comment on proposed Sec.  1006.108 and proposed 
appendix A, and on whether any additional clarification is needed. The 
Bureau also requests comment on whether proposed Sec.  1006.108 should 
be clarified or broadened to allow for an exemption from provisions of 
Regulation F that are not based exclusively on FDCPA sections 803 
through 812. Similarly, the Bureau requests comment on whether proposed 
Sec.  1006.108 should be clarified or broadened to allow for an 
exemption from provisions of Regulation F that are based solely on the 
Bureau's authority under the Dodd-Frank Act. The Bureau potentially 
could adopt such a process pursuant to its exemption authority under 
section 1022(b)(3)(A) of the Dodd-Frank Act.
    Further, current Regulation F includes the phrase ``provide greater 
protection for consumers than,'' which is a concept incorporated from 
FDCPA section 816. It also provides that ``[a]fter an exemption is 
granted, the requirements of the applicable State law constitute the 
requirements of relevant Federal law, except to the extent such State 
law imposes requirements not imposed by the Act or this part.'' The 
Bureau does not propose to change this language in proposed Sec.  
1006.108 or proposed appendix A, as the Bureau does not seek to make 
additional substantive changes to the requirements for State requests 
for exemption. The Bureau requests comment on the use of this language 
in proposed Sec.  1006.108 and proposed appendix A.

[[Page 23370]]

Appendix C to Part 1006--Issuance of Advisory Opinions ⁵⁹⁸
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    \598\ Proposed appendix A is discussed in the section-by-section 
analysis of proposed Sec.  1006.108. Proposed appendix B is 
discussed in the section-by-section analyses of proposed Sec. Sec.  
1006.26 and 1006.34.
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    The Bureau proposes to add appendix C to Regulation F to publish a 
list of any advisory opinions that the Bureau issues pursuant to FDCPA 
section 813(e). Proposed appendix C would clarify that any act done or 
omitted in good faith in conformity with any advisory opinion issued by 
the Bureau, including those referenced in appendix C, provides the 
protection from liability for FDCPA-based violations afforded under 
FDCPA section 813(e). Proposed appendix C also includes instructions 
for requesting an advisory opinion. The Bureau requests comment on 
whether additional clarification regarding the effect of conformity 
with Bureau advisory opinions would be helpful.

Supplement I to Part 1006--Official Interpretations

    The Bureau proposes to add Supplement I to Regulation F to publish 
official interpretations of the regulation (i.e., commentary). Proposed 
comment I-1 explains that the commentary is the Bureau's vehicle for 
supplementing Regulation F and has been issued pursuant to the Bureau's 
authority to prescribe rules under 15 U.S.C. 1692l(d) and in accordance 
with the notice-and-comment procedures for informal rulemaking under 
the Administrative Procedure Act. Proposed comment I-2 sets forth the 
procedure for requesting that an official interpretation be added to 
Supplement I, and proposed comment I-3 describes how the commentary is 
organized and numbered. Proposed commentary relating to specific 
sections of the regulation are addressed in the section-by-section 
analyses of those sections, above. The Bureau requests comment on 
proposed comments I-1, -2, and -3, including on whether additional 
clarification regarding either the purpose or organization of 
Supplement I, or the procedure for requesting official interpretations, 
would be helpful.

VI. Dodd-Frank Act Section 1022(b) Analysis

A. Overview

    In developing the proposed rule, the Bureau has considered the 
proposal's potential benefits, costs, and impacts.\599\ The Bureau 
requests comment on the preliminary analysis presented below as well as 
submissions of additional data that could inform the Bureau's analysis 
of the benefits, costs, and impacts.
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    \599\ Specifically, section 1022(b)(2)(A) of the Dodd-Frank Act 
(12 U.S.C. 5512(b)(2)(A)) requires the Bureau to consider the 
potential benefits and costs of the regulation to consumers and 
covered persons, including the potential reduction of access by 
consumers to consumer financial products or services; the impact of 
the proposed rule on insured depository institutions and insured 
credit unions with $10 billion or less in total assets as described 
in section 1026 of the Dodd-Frank Act (12 U.S.C. 5516); and the 
impact on consumers in rural areas.
---------------------------------------------------------------------------

    Debt collectors play a critical role in markets for consumer 
financial products and services. Credit markets function because 
lenders expect that borrowers will pay them back. In consumer credit 
markets, if borrowers fail to repay what they owe per the terms of 
their loan agreement, creditors often engage debt collectors to attempt 
to recover amounts owed, whether through the court system or through 
less formal demands for repayment.
    In general, third-party debt collection creates the potential for 
market failures. Consumers do not choose their debt collectors, and as 
a result debt collectors do not have the same incentives that creditors 
have to treat consumers fairly.\600\ Certain provisions of the FDCPA 
may help mitigate such market failures in debt collection, for example 
by prohibiting unfair, deceptive, or abusive debt collection practices 
by third-party debt collectors.
---------------------------------------------------------------------------

    \600\ Consumers do choose their lenders, and in principle 
consumer loan contracts could specify which debt collector would be 
used or what debt collection practices would be in the event a loan 
is not repaid. Some economists have identified potential market 
failures that prevent loan contracts from including such terms even 
when they could make both borrowers and lenders better off. For 
example, terms related to debt collection may not be salient to 
consumers at the time a loan is made. Alternatively, if such terms 
are salient, a contract that provides for more lenient collection 
practices may lead to adverse selection, attracting a 
disproportionate share of borrowers who know they are more likely to 
default. See Thomas A. Durkin et al., Consumer Credit and the 
American Economy 521-525 (Oxford U. Press 2014) (discussing 
potential sources of market failure and potential problems with some 
of those arguments).
---------------------------------------------------------------------------

    Any restriction on debt collection may reduce repayment of debts, 
providing a benefit to some consumers who owe debts and an offsetting 
cost to creditors and debt collectors. A decrease in repayment will in 
turn lower the expected return to lending. This can lead lenders to 
increase interest rates and other borrowing costs and to restrict 
availability of credit, particularly to higher-risk borrowers.\601\ 
Because of this, policies that increase protections for consumers with 
debts in collection involve a tradeoff between the benefits of 
protections for such consumers and the possibility of increased costs 
of credit and reduced availability of credit for all consumers. Whether 
there is a net benefit from such protections depends on whether 
consumers value the protections enough to outweigh any associated 
increase in the cost of credit or reduction in availability of credit.
---------------------------------------------------------------------------

    \601\ See id. (discussing theory and evidence on how 
restrictions on creditor remedies affect the supply of credit). 
Empirical evidence on the impact of State laws restricting debt 
collection is discussed in section G below. The provisions in this 
proposal could also affect consumer demand for credit, to the extent 
that consumers contemplate collection practices when making 
borrowing decisions. However, there is evidence suggesting that 
consumer demand for credit is generally not responsive to 
differences in creditor remedies. See James Barth et al., Benefits 
and Costs of Legal Restrictions on Personal Loan Markets, Journal of 
Law & Economics, 29(2) (1986).
    \601\ See 15 U.S.C. 1692(e).
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    The proposal would further the FDCPA's goals of eliminating abusive 
debt collection practices and ensuring that debt collectors who refrain 
from such practices are not competitively disadvantaged.\602\ However, 
as discussed below, it is not clear based on the information available 
to the Bureau at this time whether the net effect of the proposal's 
different provisions would be to make it more costly or less costly for 
debt collectors to recover unpaid amounts, and therefore not clear 
whether the proposal would tend to increase or decrease the supply of 
credit. The proposed rule would benefit both consumers and debt 
collectors by increasing clarity and certainty about what the FDCPA 
prohibits and requires. When a law is unclear, it is more likely that 
parties will disagree about what the law requires, that legal disputes 
will arise, and that litigation will be required to resolve disputes. 
Since 2010, consumers have filed approximately 10,000 to 12,000 
lawsuits under the FDCPA each year.\603\ The number of disputes settled 
without litigation has likely been much greater.\604\ Perhaps more 
important than the costs of resolving legal disputes are the steps that 
debt collectors take to prevent legal disputes from arising in the 
first place. This includes direct costs of legal compliance, such as 
auditing and legal advice, as well as indirect costs from avoiding 
collection practices that might be both effective and legal but that 
raise potential legal risks. In some cases, debt

[[Page 23371]]

collectors seeking to follow the law and avoid litigation have adopted 
practices that appear to be economically inefficient, with costs that 
exceed the benefits to consumers or even impose net costs on 
consumers.\605\
---------------------------------------------------------------------------

    \602\ See id.
    \603\ See WebRecon LLC, WebRecon Stats for Dec 2017 & Year in 
Review, https://webrecon.com/webrecon-stats-for-dec-2017-year-in-review (last visited May 6, 2019). Greater clarity about legal 
requirements could reduce unintentional violations and could also 
reduce lawsuits because, when parties can better predict the outcome 
of a lawsuit, they may be more likely to settle claims out of court.
    \604\ Some debt collectors have reported that they receive 
approximately 10 demand letters for each lawsuit filed. See Small 
Business Review Panel Outline, supra note 56, at 69 n.105.
    \605\ For example, as discussed further below, many debt 
collectors currently avoid leaving voice messages for consumers or 
communicating with consumers by email because sending voice messages 
or emails may create legal risks.
---------------------------------------------------------------------------

    Several provisions of the proposed rule would likely change the way 
debt collectors communicate with consumers, and the potential impacts 
of these provisions are likely to interact with each other in ways that 
are difficult for the Bureau to predict. Most significant of these are 
the provisions related to frequency limits for telephone calls, 
limited-content messages, and electronic disclosures, although other 
provisions such as the proposed model validation notice might fall into 
this category as well. The communication provisions collectively are 
likely to reduce the number of telephone calls from debt collectors. 
Currently many, though by no means all, debt collectors communicate 
with consumers strictly through actual and attempted live telephone 
calls and postal mail, with no communication by voice message, email, 
text message, or other electronic media.
    It is possible that the net effect of the proposed provisions would 
be to make debt collection more effective: Debt collectors who 
currently communicate by live telephone calls in excess of the proposed 
limits could substitute for some of the excessive call volume by 
leaving voice messages and sending email, and consumers could respond 
to this change in communication channels by engaging with such debt 
collectors as much as or more than they currently do by telephone. If 
this occurs, consumers could benefit from a reduction in calls that may 
annoy, abuse, or harass them, as well as from resolving their 
outstanding debts in a more timely fashion. At the same time, debt 
collectors could benefit from reduced time spent making calls and from 
increased revenue. There is some reason to believe this may occur--as 
noted below, a substantial fraction of consumers prefers to communicate 
by email, and consumers may well be more likely to return a voice 
message than to answer their telephones in response to a call from an 
unknown number.
    Alternatively, the proposed provisions might make debt collection 
less effective: Debt collectors could comply with the frequency limits, 
reducing outbound calling, but end up not increasing contact with 
consumers by using voicemail and email as communication channels. This 
might occur if debt collectors still fear some legal risk from other 
channels, or if they find the new communication methods are not 
effective in reaching consumers. In this case, although the number of 
telephone calls would be reduced, it would come at the cost of making 
it more difficult for debt collectors to reach some consumers, reducing 
revenue and potentially imposing costs on both consumers and debt 
collectors from increased litigation to recover debts.
    The effect of the proposal on debt collectors would likely lie 
somewhere in between these two extremes, and the Bureau believes these 
effects will likely vary by debt collector and type of debt. If the 
proposed communication provisions were adopted in a final rule, some 
firms would likely adopt newer communication methods due to the reduced 
legal risk and find less need for telephone calls, while other firms 
would not do so or would not experience the same effect. Still other 
firms might be largely unaffected by the communication-related 
provisions in the proposal. As discussed below, some debt collectors 
currently place only one or two calls per week to any consumer, and 
such debt collectors are unlikely to change their calling practices and 
may not find it cost-effective to develop the information-technology 
infrastructure necessary to communicate by email or text message. 
Relatedly, the Bureau is aware of at least one mid-sized collection 
firm that primarily uses email for communication currently, and such 
firms also will be unlikely to alter their practices, although they may 
benefit from reduced litigation costs.
    In short, the proposed provisions related to communications would 
likely reduce the overall number of calls per consumer, while at the 
same time potentially reducing the number of calls required to reach 
each consumer. Although the Bureau believes it is likely that consumers 
would benefit directly from a reduction in calls that annoy, abuse, or 
harass them, the Bureau cannot predict the net effect of these 
provisions on debt collectors' costs and revenues or the net change in 
indirect costs to consumers from potential credit reporting and 
litigation in the event debt collectors cannot reach them.
    Apart from the proposed communication provisions, other provisions 
of the proposal could make debt collection either more or less costly 
in ways that are difficult to predict. For example, the proposed 
validation notice requirements would provide consumers with more 
information than they currently receive about debts, which could reduce 
costs to consumers and debt collectors from disputes that arise when 
consumers do not recognize the debt or understand the basis for the 
alleged amount due. At the same time, the proposal's clearer 
explanation of dispute rights could make consumers more likely to 
dispute, which could provide benefits to consumers while increasing 
costs for debt collectors. Disputes are costly for debt collectors to 
process, so these proposed requirements could either increase or 
decrease debt collector and consumer costs depending on the net effect 
on dispute rates.
    In developing the proposed rule, the Bureau has consulted, or 
offered to consult with, the appropriate prudential regulators and 
other Federal agencies, including regarding consistency with any 
prudential, market, or systemic objectives administered by such 
agencies.

B. Provisions To Be Analyzed

    The analysis below considers the potential benefits, costs, and 
impacts to consumers and covered persons of key provisions of the 
proposed rule (proposed provisions), which include:
    1. Prohibited communications with consumers.
    2. Frequency limits for telephone calls and telephone 
conversations.
    3. Limited-content messages.
    4. Time-barred debt: prohibiting suits and threats of suit.
    5. Communication prior to furnishing information.
    6. Prohibition on the sale or transfer of certain debts.
    7. Notice for validation of debts.
    8. Electronic disclosures and communications.
    In addition to the proposed provisions listed above, the Bureau 
proposes to codify several FDCPA provisions into the rule and to add 
certain clarifying commentary.

C. Data Limitations and Quantification of Benefits, Costs, and Impacts

    The discussion in this part VI.C relies on publicly available 
information as well as information the Bureau has obtained. To better 
understand consumer experiences with debt collection, the Bureau 
developed its 2015 Debt Collection Consumer Survey, which provides the 
first comprehensive and nationally representative data on consumers' 
experiences and preferences related to debt collection.\606\ The Bureau

[[Page 23372]]

also relies on its consumer complaint data, its Consumer Credit Panel, 
the Credit Card Database,\607\ and other sources to understand 
potential benefits and costs to consumers of the proposed rule.\608\ To 
better understand potential effects of the proposed rule on industry, 
the Bureau has engaged in significant outreach to industry, including 
the Operations Survey.\609\ In July 2016, the Bureau consulted with 
small entities as part of the SBREFA process and obtained important 
information on the potential impacts of proposals that the Bureau was 
considering at the time, many of which are included in the proposed 
rule.\610\
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    \606\ The Bureau's survey was conducted between December 2014 
and March 2015. Consumers with and without debts in collection were 
asked to complete this survey in order to provide the Bureau with 
data necessary to understand experience and demographics of 
consumers who have been contacted by debt collectors. Consumers were 
selected using the Bureau's Consumer Credit Panel, a de-identified 
1-in-48 sample of Americans with consumer reports at one of the 
nationwide CRAs. See CFPB Debt Collection Consumer Survey, supra 
note 18, at 7-10.
    \607\ The Credit Card Database is a compilation of de-identified 
loan-level information from the credit card portfolios of large 
banks. See Bureau of Consumer Fin. Prot., Credit Card Agreement 
Database, https://www.consumerfinance.gov/credit-cards/agreements/ 
(last visited May 6, 2019).
    \608\ For more information about Bureau data sources, see 
Sources and Uses of Data at the Bureau of Consumer Financial 
Protection (Sept. 2018), https://www.consumerfinance.gov/data-research/research-reports/sources-and-uses-data-bureau-consumer-financial-protection/.
    \609\ See CFPB Debt Collection Operations Study, supra note 45.
    \610\ See Small Business Review Panel Report, supra note 57.
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    The sources described above, together with other sources of 
information and the Bureau's market knowledge, form the basis for the 
Bureau's consideration of the likely impacts of the proposed rule. The 
Bureau makes every attempt to provide reasonable estimates of the 
potential benefits and costs to consumers and covered persons of this 
proposal. While the Debt Collection Consumer Survey provides 
representative data on consumer experiences with debt collection, the 
survey responses generally do not permit the Bureau to quantify, in 
dollar terms, how particular proposed provisions will affect consumers. 
With respect to industry impacts, much of the Bureau's existing data 
come from qualitative input from debt collectors and other entities 
that operate in this market rather than representative sampling that 
would allow the Bureau to estimate total benefits and costs.
    General economic principles and the Bureau's expertise in consumer 
financial markets, together with the data and findings that are 
available, provide insight into the potential benefits, costs, and 
impacts of the proposed rule. Where possible, the Bureau has made 
quantitative estimates based on these principles and the data 
available. Some benefits and costs, however, are not amenable to 
quantification, or are not quantifiable given the data available to the 
Bureau. The Bureau provides a qualitative discussion of those benefits, 
costs, and impacts. The Bureau requests additional data or studies that 
could help quantify the benefits and costs to consumers and covered 
persons of the proposed rule.

D. Baseline for Analysis

    In evaluating the potential benefits, costs, and impacts of the 
proposal, the Bureau takes as a baseline the current legal framework 
governing debt collection. This includes the requirements of the FDCPA 
as currently interpreted by courts and law enforcement agencies, other 
Federal laws, and the rules and statutory requirements promulgated by 
the States. In the consideration of benefits and costs below, the 
Bureau discusses its understanding of practices in the debt collection 
market under this baseline and how those practices would change under 
the proposal.
    Until the creation of the Bureau, no Federal agency was given the 
authority to write substantive regulations implementing the FDCPA, 
meaning that many of the FDCPA's requirements are subject to 
interpretations in court decisions that are not always consistent or 
fully authoritative, such as a single district court opinion on an 
issue. Debt collectors' practices reflect their interpretations of the 
FDCPA and their decisions about how to balance effective collection 
practices against litigation risk. Many of the impacts of the proposed 
rule relative to the baseline would arise from changes that debt 
collectors would make in response to additional clarity about the most 
appropriate interpretation of what conduct is permissible and not 
permissible under the FDCPA's provisions.

E. Coverage of Proposal

    The proposed rule would apply to debt collectors as defined in the 
FDCPA. This definition encompasses a number of types of businesses, 
which can be generally categorized as: Collection agencies, which 
collect payments owed to their clients, often for a contingency fee; 
debt buyers, which purchase delinquent debt and attempt to collect it, 
either themselves or through agents, or who may have as their principal 
purpose the collection of consumer debt; collection law firms that 
either have as their principal purpose the collection of consumer debt 
or regularly collect consumer debt owed to others; and loan servicers 
when they acquire servicing of loans already in default.
    Although creditors that collect on debts they own generally would 
not be affected directly by the proposal, they may experience indirect 
effects. Creditors that hire or sell debts to FDCPA-covered debt 
collectors may experience higher costs if debt collectors' costs 
increase and if those costs are passed on to creditors. As described 
below, the Bureau believes that many compliance costs on FDCPA-covered 
debt collectors will be one-time costs to come into compliance rather 
than ongoing costs to stay in compliance. To the extent compliance 
costs are incurred only once to adjust existing debt collectors' 
systems and do not increase costs for new entrants, they are unlikely 
to be passed on to creditors.

F. Potential Benefits and Costs to Consumers and Covered Persons

    The Bureau discusses the benefits and costs of the proposal to 
consumers and covered persons (generally FDCPA-covered debt collectors) 
in detail below.\611\ The Bureau believes that an important benefit of 
many of the proposed provisions to both consumers and covered persons--
compared to the baseline of the FDCPA as currently interpreted by 
courts and law enforcement agencies--is an increase in clarity and 
precision of the law governing debt collection. Greater certainty about 
legal requirements can benefit both consumers and debt collectors, 
making it easier for consumers to understand and assert their rights 
and easier for firms to ensure they are in compliance. The Bureau 
discusses these benefits in more detail with respect to certain 
provisions below but believes that they generally apply, in varying 
degrees, to all of the proposed provisions discussed below.
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    \611\ For purposes of the section 1022(b)(2) analysis, the 
Bureau considers any consequences that consumers perceive as harmful 
to be a cost to consumers. In considering whether consumers might 
perceive certain activities as harmful, the Bureau is not analyzing 
whether those activities would be unlawful under the FDCPA or the 
Dodd-Frank Act.
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1. Prohibited Communications With Consumers
    Proposed Sec.  1006.6(b) generally would implement FDCPA section 
805(a)'s prohibition on a debt collector communicating with a consumer 
at unusual or inconvenient times and places, with a consumer 
represented by an attorney, and at a consumer's place of employment. 
This section would also expressly prohibit attempts to make

[[Page 23373]]

such communications, which debt collectors already must avoid given 
that a successful attempt would be an FDCPA violation. Proposed Sec.  
1006.14(h)(1) would interpret FDCPA section 806's prohibition on a debt 
collector engaging in any conduct the natural consequence of which is 
to harass, oppress, or abuse any person in connection with the 
collection of a debt to prohibit debt collectors from communicating or 
attempting to communicate with consumers through a medium of 
communication if the consumer has requested that the debt collector not 
use that medium to communicate with the consumer.
    Debt collectors are already prohibited from communicating with 
consumers at a time or place that is known or should be known to be 
inconvenient to the consumer. The Bureau therefore expects that debt 
collectors already keep track of what consumers tell them about the 
times and places that they find inconvenient and avoid communicating or 
attempting to communicate with consumers at those times or places. 
Similarly, the proposed provisions regarding communication with 
attorneys and at the consumer's place of employment track consumer debt 
collector practices that are already required to comply with the FDCPA. 
The Bureau understands that many debt collectors currently employ 
systems and business processes designed to limit communication attempts 
to consumers at inconvenient times and places and that many debt 
collectors also use these systems and processes to prevent 
communications with consumers through media that consumers have told 
them are inconvenient. The proposed provisions might benefit consumers 
and debt collectors by providing further clarity in the application of 
the requirements of FDCPA section 805(a) and 806, but the Bureau does 
not expect that the proposed provision would cause significant changes 
to debt collectors' existing practices.
2. Frequency Limits for Telephone Calls and Telephone Conversations
    Proposed Sec.  1006.14(b)(1) would prohibit a debt collector from, 
in connection with the collection of a debt, placing telephone calls or 
engaging in telephone conversations repeatedly or continuously with 
intent to annoy, abuse, or harass any person at the called number. 
Proposed Sec.  1006.14(b)(2) provides that, subject to certain 
exceptions set forth in proposed Sec.  1006.14(b)(3), a debt collector 
violates proposed Sec.  1006.14(b)(1) if the debt collector places a 
telephone call to a person in connection with the collection of a 
particular debt either: (i) More than seven times within seven 
consecutive days, or (ii) within a period of seven consecutive days 
after having had a telephone conversation with the person in connection 
with the collection of such debt. Proposed Sec.  1006.14(b)(4) would 
clarify the effect of complying with the frequency limits in Sec.  
1006.14(b)(2), stating that a debt collector who does not exceed the 
limits complies with Sec.  1006.14(b)(1) and FDCPA section 806(5), and 
does not, based on the frequency of its telephone calls, violate Sec.  
1006.14(a), FDCPA section 806, or Dodd-Frank Act sections 1031 or 
1036(a)(1)(B).
    Potential benefits to consumers. Calls debt collectors make with 
intent to annoy, abuse, or harass consumers are likely to cause them 
harm, and the Bureau has evidence, discussed below and in part V, that 
many consumers perceive harm from debt collectors' repeated telephone 
calls.\612\ The proposed provision would limit this harm by capping the 
frequency of telephone calls and telephone conversations.\613\ FDCPA 
section 806 already prohibits conduct the natural consequence of which 
is to harass, oppress, or abuse any person. FDCPA section 806(5) also 
specifically prohibits repeated or continuous calling and telephone 
conversations with ``intent to annoy, abuse, or harass any person at 
the called number.'' These prohibitions have been interpreted 
differently by different courts, and while some debt collectors call 
consumers less frequently than the proposed frequency limits would 
permit, there are many debt collectors who place telephone calls to 
consumers or engage consumers in telephone conversations more 
frequently than the proposed frequency limits would permit.
---------------------------------------------------------------------------

    \612\ The FDCPA's standard of liability for excessive calling is 
not perceived harm by consumers, but rather depends on the debt 
collector's intent or the ``natural consequence'' of the conduct. 
See FDCPA section 806(5) and 806, 15 U.S.C. 1692d(5) and 1692d. 
Nonetheless, section 1022(b)(2)(A) of the Dodd-Frank Act requires 
the Bureau to consider the potential benefits and costs of its 
regulation to consumers and covered persons, which may include 
potential benefits or costs that were not contemplated or intended 
by the FDCPA.
    \613\ The proposed rule could have the ancillary effect of 
preventing some calls that are not intended to annoy, abuse, or 
harass consumers and could in fact prevent some calls that consumers 
would find beneficial, as discussed below under ``Potential costs to 
consumers.''
---------------------------------------------------------------------------

    To quantify consumer benefits from the proposed provision, the 
Bureau would need information regarding both how much the provision 
would reduce the number of calls debt collectors place to consumers and 
the benefit (or harm) each consumer would receive as a result of this 
reduction. Although the Bureau's data do not permit it to reliably 
quantify either the reduction in call frequency or how much borrowers 
would value this reduction in dollar terms, the discussion below 
summarizes the data available to the Bureau on these two points.
    Data from the CFPB Debt Collection Consumer Survey indicate that 
debt collectors often may attempt to contact consumers more frequently 
than seven times per week. In the survey, 35 percent of consumers who 
had been contacted by a debt collector said the debt collector had 
contacted or attempted to contact them four or more times per week, 
including 14 percent who said the debt collector had contacted or 
attempted to contact them eight or more times per week.\614\ Another 29 
percent said that the debt collector had attempted to contact them one 
to three times per week.\615\ The survey question did not ask 
respondents to distinguish between actual contacts and contact 
attempts, and consumers are likely not aware of all unsuccessful 
contact attempts. Still, the survey responses suggest that it is not 
uncommon for debt collectors to attempt to telephone consumers more 
than seven times per week, and the responses would be consistent with 
many debt collectors having live telephone conversations with consumers 
more frequently than the one time per week that generally would be 
permitted under the proposal.\616\ Based on this, it is reasonable to 
estimate that at least 6.9 million consumers \617\ are called by debt 
collectors more than seven times in one week during a year.
---------------------------------------------------------------------------

    \614\ CFPB Debt Collection Consumer Survey, supra note 18, at 44 
n.5.
    \615\ Id.
    \616\ Information from industry also confirms that debt 
collectors sometimes attempt to communicate more than seven times 
per week. See discussion under ``Costs to covered persons'' below.
    \617\ This is calculated as 14 percent of an estimated 49 
million consumers contacted by debt collectors each year. The Bureau 
estimates that about 32 percent of consumers with a credit file, or 
about 67 million, are contacted each year by a creditor or debt 
collector attempting to collect a debt. Of those, 23 percent were 
most recently contacted by a creditor, 63 percent by a debt 
collector, and 15 percent did not know whether the contact was from 
a creditor or debt collector. Based on this, the Bureau estimates 
that 73 percent of consumers were contacted by a debt collector, 
assuming that the share of consumers contacted by a debt collector 
is the same in this group as it is among consumers who did know 
whether the most recent contact was from a debt collector. See CFPB 
Debt Collection Consumer Survey, supra note 18, at 13, 40-41.
---------------------------------------------------------------------------

    The CFPB Debt Collection Consumer Survey provides evidence that 
many consumers would benefit if they received fewer calls from debt 
collectors, although it does not provide

[[Page 23374]]

evidence with which to estimate the dollar value of those benefits. 
Most respondents who had been contacted by a debt collector at least 
once per week said they had been contacted too often. As shown in Table 
1, 95 percent of respondents who said debt collectors had contacted or 
attempted to contact them four or more times per week and 76 percent of 
those reporting contact or attempted contact one to three times per 
week said that they had been contacted too often by the debt collector, 
whereas 22 percent of those contacted less than once per week said they 
had been contacted too often.

   Table 1--Consumers Indicating They Had Been Contacted Too Often, by
                            Contact Frequency
                                [Percent]
------------------------------------------------------------------------
                                                           Consumers who
                                                          said they were
                    Contact frequency                      contacted too
                                                               often
------------------------------------------------------------------------
Less than once per week.................................              22
One to three times per week.............................              76
Four or more times per week.............................              95
------------------------------------------------------------------------

    The survey questions did not distinguish between contact attempts 
and contacts that result in a live communication. They also did not 
distinguish among different types of contact, and survey responses may 
have included contacts such as letters or emails that would not be 
included in the proposed limits.\618\ Nonetheless, the results indicate 
that a large majority of consumers who are contacted at least once per 
week believe they are being contacted too frequently.
---------------------------------------------------------------------------

    \618\ The survey suggests that contact attempts from debt 
collectors other than by telephone or letter are relatively 
uncommon. Id. at 42, table 22. The Bureau understands that debt 
collectors seldom send letters more than once per week, so the 
survey responses suggest that a large majority of contact attempts 
are by telephone.
---------------------------------------------------------------------------

    The Bureau's consumer complaint data also indicate that consumers 
find frequent or repeated calls harmful. Communication tactics ranked 
third in debt collection complaints submitted to the Bureau during 
2018, and the majority of complaints in this category--55 percent, or 
about 6,000 complaints during 2018--were about frequent or repeated 
telephone calls.\619\
---------------------------------------------------------------------------

    \619\ See 2018 FDCPA Annual Report, supra note 16, at 16-17, 
table 1. Also note that consumers can identify only one issue to 
categorize their complaints, so that the count does not include 
cases in which a consumer chooses a different issue (such as ``I 
don't owe the debt'') but still express concern about call 
frequency.
---------------------------------------------------------------------------

    Although the Bureau does not have evidence that could be used to 
estimate the monetary value consumers attach to a reduction in call 
frequency, there is indirect evidence of costs consumers are willing to 
bear to avoid unwanted calls. One leading service that offers to block 
inbound ``robocalls'' to a consumer's cellular telephone charges $1.99 
per month for the service and claims over 1,000,000 users. Such 
services are an imperfect analogy to the proposed frequency limits for 
at least two different reasons: First, they are intended to completely 
block calls rather than limit their frequency; and second, such 
services block telemarketing calls in addition to debt collection 
calls, while not blocking all debt collection calls. Given these 
differences, the price of this service does not provide a precise 
analog for the value to consumers of the proposed call frequency 
limits. Nonetheless, the example does provide evidence that many 
consumers are willing to pay prices in the range of $24 per year to 
avoid unwanted telephone calls.\620\
---------------------------------------------------------------------------

    \620\ Another source of indirect evidence on the value to 
consumers of reduced call frequency is the Bureau's consumer 
complaints. The Bureau received approximately 6,000 complaints about 
call frequency during 2018. See id. Based on the Bureau's records, 
the average time for a consumer to file a complaint with the Bureau 
by telephone or through the web portal is approximately 15 minutes, 
although this varies over time and across complaint categories. 
Valuing consumers' time using the average U.S. private sector wage 
of approximately $27 per hour suggests that some consumers are 
willing to give up approximately $6.75 worth of their time in hopes 
of reducing call frequency from one debt collector. See U.S. Dept. 
of Labor, Bureau of Lab. Stat., Economic News Release: Employment 
Situation, table B-3 (Feb. 1, 2019), https://www.bls.gov/news.release/empsit.t19.htm.
---------------------------------------------------------------------------

    Some of the benefits from the proposed call frequency limits could 
be obtained if consumers used protections they already have under the 
FDCPA to help them avoid too-frequent debt collection calls. Debt 
collectors must cease most communications in response to a written 
request from the consumer to do so. Furthermore, because section 
805(a)(1) of the FDCPA prohibits debt collectors from communicating 
about a debt at any time or place that the debt collector knows or 
should know is inconvenient to the consumer, debt collectors risk 
violating section 805(a)(1) if they do not take heed when consumers say 
they do not want to communicate at certain times or places. However, 
many consumers may not want to completely cease communication about a 
debt because, for example, debt collectors who cannot recover through 
such communications may initiate litigation to recover on the debt. 
Many consumers may also be unaware of their rights to limit whether and 
how debt collectors communicate with them. For example, consumers who 
tell debt collectors to cease communication orally may not benefit 
because some debt collectors may not respond to consumers' requests to 
limit communications unless they are made in writing. In the Debt 
Collection Consumer Survey, 42 percent of respondents who had been 
contacted about a debt in collection reported having requested that a 
creditor or debt collector stop contacting them.\621\ These respondents 
generally did not make the request in writing.\622\ Of these consumers, 
approximately 75 percent reported that the creditor or debt collector 
did not stop attempting to contact them.\623\
---------------------------------------------------------------------------

    \621\ CFPB Debt Collection Consumer Survey, supra note 18, at 
35, table 17.
    \622\ Of consumers who asked not to be contacted, 87 percent 
said they made the request by telephone or in person only. Id. at 
34-35.
    \623\ Id.
---------------------------------------------------------------------------

    As discussed above, technological solutions are also increasingly 
available to consumers who want to avoid certain calls and may be used 
to screen out calls from some debt collectors. However, such solutions 
may be under-inclusive (in that they do not screen out calls from all 
debt collectors) or over-inclusive (in that a consumer may want to 
maintain some telephone contact with a debt collector rather than 
eliminating all calls from that debt collector).
    Potential costs to consumers. Consumers may benefit from 
communicating with debt collectors about their debts. For consumers 
being contacted about a debt they in fact owe, communicating with the 
debt collector may help consumers resolve the debt, which could help 
avoid further fees and interest, credit reporting harms, or lawsuits. 
For consumers being contacted about a debt they do not owe, 
communications from debt collectors may alert consumers to errors in 
their credit reports or that they are victims of identity theft. During 
the meeting of the Small Business Review Panel, some debt collectors 
said that frequency limits could extend the period needed to establish 
contact with a consumer, as further discussed below under ``Potential 
costs to covered persons.'' If the proposed frequency limits mean that 
debt collectors are less able to reach some consumers, or that 
communication with some consumers is delayed, those consumers may be 
harmed.
    To quantify any such harm, the Bureau would need data to estimate 
how the proposed frequency limits would affect whether and when debt 
collectors communicate with consumers as well as the harm consumers

[[Page 23375]]

experience when they do not communicate with debt collectors. The 
Bureau discusses the available evidence on how the proposed frequency 
limits would affect whether debt collectors communicate with consumers 
below in its discussion of costs to covered persons. As discussed 
there, the data are limited, but evidence the Bureau does have suggests 
that the proposed limits might somewhat reduce the number of consumers 
reached by telephone within a few months after a debt collector starts 
attempting contact, but that the reduction is likely to be limited to a 
relatively small fraction of debts.
    The Bureau does not have representative data that can be used to 
quantify the harm consumers experience when they do not communicate 
with debt collectors, or when those communications are delayed. If 
consumers do not communicate with debt collectors about debts, they 
could suffer additional harm from debt collection in some cases, 
particularly if the debt collector or creditor initiates a lawsuit. A 
suit could lead to increased fees, legal costs, and the possibility of 
a judgment that could lead to garnishment of wages or other legal steps 
to recover the debt.
    To the extent that some debt collectors currently call less than 
the proposed frequency limits to avoid legal risks, such debt 
collectors could increase their calling frequency as a result of the 
proposal. This would result in costs to some consumers if they find the 
increase in call frequency harmful.
    Potential benefits to covered persons. As with several other 
provisions of the proposed rule, the proposed limits would reduce legal 
uncertainty about the interpretation of existing FDCPA language. 
Frequent telephone calls are a consistent source of consumer-initiated 
litigation and consumer complaints to Federal and State law enforcement 
agencies. By establishing a clear standard for call frequency, the 
proposed provision would make it easier for debt collectors to know 
what calling patterns are permitted and avoid the costs of litigation 
and threats of litigation. To the extent that some debt collectors 
currently call less than the proposed frequency limits to avoid legal 
risks, such debt collectors could increase their calling frequency, 
potentially increasing collection revenue.
    Some debt collectors might also benefit from a reduction in calls 
made by other debt collectors. The Bureau understands that many 
consumers have multiple debts being collected by different debt 
collectors.\624\ In seeking payments from consumers, multiple debt 
collectors compete with each other for consumers' attention, which can 
lead to a large aggregate number of debt collection calls, potentially 
overwhelming some consumers and making them less likely to answer calls 
or otherwise engage with debt collectors.\625\ This in turn could make 
it harder for each debt collector to recover outstanding debt.\626\ 
Thus, one potential benefit to debt collectors of the proposed call 
frequency limits is a lower frequency of telephone calls by other debt 
collectors, which could make consumers more likely to engage and repay.
---------------------------------------------------------------------------

    \624\ The Bureau's survey indicates that 72 percent of consumers 
with a debt in collection were contacted about two or more debts in 
collection, and 16 percent were contacted about five or more debts. 
Id. at 13, table 1.
    \625\ For example, borrowers could simply ignore telephone calls 
or could adopt call screening or blocking technology.
    \626\ In other words, debt collectors may face a ``prisoner's 
dilemma,'' in which each debt collector has incentives to call more 
frequently even though debt collectors might collectively benefit 
from a mutual reduction in call frequency.
---------------------------------------------------------------------------

    In addition, some debt collectors specialize in approaches to 
collection that do not rely on frequent call attempts, and these debt 
collectors may benefit from the proposed call frequency limits. In 
particular, debt collectors who focus on litigation and those who 
communicate with consumers primarily by means not covered by the 
proposed limits, such as letters and emails, may be more effective in 
communicating with consumers relative to debt collectors who are 
affected by the proposed limits. This, in turn, may increase their 
market share at the expense of debt collectors who are more dependent 
on frequent calls.
    Potential costs to covered persons. The proposed provision would 
impose at least two categories of costs on debt collectors. First, it 
would mean that debt collectors must track the frequency of outbound 
telephone calls, which would require many debt collectors to bear one-
time costs to update their systems and train staff, and which would 
create ongoing costs for some debt collectors. Second, for some debt 
collectors, the proposed provision would require a reduction in the 
frequency with which they place telephone calls to consumers, which 
could make it harder to reach consumers and delay or reduce collections 
revenue.
    With respect to one-time implementation costs, many debt collectors 
would incur costs to revise their systems to incorporate the proposed 
call frequency limits. Such revisions could range from small updates to 
existing systems to the introduction of completely new systems and 
processes. The Bureau understands that larger debt collectors generally 
already implement system limits on call frequency to comply with client 
contractual requirements, debt collector internal policies, and State 
and local laws.\627\ Such debt collectors might need only to revise 
existing calling restrictions to ensure that existing systems comply 
with the caps. Larger collection agencies might also need to respond to 
client requests for additional reports and audit items to verify that 
they comply with the caps, which could require these agencies to make 
systems changes to alter the reports and data they produce for their 
clients to review.
---------------------------------------------------------------------------

    \627\ See CFPB Debt Collection Operations Study, supra note 45, 
at 28-29.
---------------------------------------------------------------------------

    Smaller debt collectors and collection law firms are less likely to 
have existing systems that track or limit calling frequency, and may 
therefore face larger costs to establish systems to do so. However, 
many smaller debt collectors report that they generally attempt to 
reach each consumer by telephone only one or two times per week and 
generally do not speak to a consumer more than one time per week, which 
suggests that their practices are already within the proposed frequency 
limits.\628\ For such debt collectors, existing policies may be 
sufficient to ensure compliance with the proposed provision.
---------------------------------------------------------------------------

    \628\ See id. at 29.
---------------------------------------------------------------------------

    With respect to ongoing costs of compliance, the Bureau expects 
that the proposed limit on call attempts in Sec.  1006.14(b)(2)(i) 
could have an impact on some debt collectors' ability to reach 
consumers, particularly when the debt collector has not yet established 
contact with a consumer. These impacts are discussed below. The 
Bureau's understanding, based on feedback from small entity 
representatives and other industry outreach, is that the proposed limit 
of one telephone conversation per week in Sec.  1006.14(b)(2)(ii) is 
unlikely to affect debt collectors' ability to communicate with 
consumers in most cases.^{629 630}
---------------------------------------------------------------------------

    \629\ The impact might be greater if consumers could not consent 
to more frequent contact. For example, if a debt collector reached a 
consumer on the telephone and the consumer said it was not a good 
time to speak, then the proposal would permit the debt collector and 
consumer to agree to speak again at a specified time within less 
than one week. See the section-by-section analysis of proposed Sec.  
1006.14(b)(3)(ii).
    \630\ Similarly, the Bureau expects that debt collectors would 
be largely unaffected by the proposal to apply the frequency limits 
to location contacts with third parties because the Bureau 
understands that while location calls may be made to several 
numbers, they do not generally involve frequently calling each 
number.

---------------------------------------------------------------------------

[[Page 23376]]

    The proposed limit of placing no more than seven telephone calls 
per week would cause many debt collectors to place telephone calls less 
frequently than they currently do. This decrease in telephone calls may 
impose ongoing costs on debt collectors by increasing the time it takes 
to establish contact with consumers. Most debt collectors rely heavily 
on telephone calls as a means of establishing contact with consumers. 
While debt collectors generally send letters in addition to 
calling,\631\ the Bureau understands that response rates to letters can 
be quite low. If contact with consumers is delayed, it will delay 
collection revenue and may reduce revenue if consumers who are reached 
later are less willing or able to repay the debt. In addition, if the 
debt collector is unable to reach the consumer using the permitted 
number of telephone calls during the period the owner of the debt 
permits the debt collector to attempt to collect the debt, then the 
call frequency limits might prevent a debt collector from reaching the 
consumer entirely.\632\
---------------------------------------------------------------------------

    \631\ In the Bureau's survey, 85 percent of respondents who had 
been contacted by a debt collector said that they had been contacted 
by telephone and 71 percent said that they had been contacted by 
letter. Respondents were asked to select all ways in which they had 
been contacted. CFPB Debt Collection Consumer Survey, supra note 18, 
at 29-30, table 14.
    \632\ If the provision were to cause some debt collectors to 
lose revenue for this reason, the amounts not collected would 
generally be transferred to another party: Either to consumers (if 
the amounts were never collected) or to another debt collector (if 
the amounts were collected through further collection efforts, 
including through a lawsuit).
---------------------------------------------------------------------------

    Some debt collectors do not place telephone calls frequently enough 
to be affected by the proposed caps. While the Bureau understands that 
some debt collectors regularly call consumers two to three times per 
day or more, others have told the Bureau that they seldom attempt to 
call more than once or twice per week. These differences may reflect 
different debt types and collection strategies. For example, smaller 
debt collectors frequently retain debts indefinitely, and they may face 
less pressure to reach consumers quickly than debt collectors who 
collect debts for a limited period. Debt collectors who focus on 
litigation may also place less emphasis on establishing telephone 
communication with consumers.
    Some debt collectors have indicated that frequent calling is 
especially important if the debt collector has multiple potential 
telephone numbers and does not know the best way to reach the 
consumer.\633\ Additionally, some debt collectors specialize in 
attempting to collect debts for which the creditor has lost contact 
with the consumer, and frequent call attempts to establish contact with 
the consumer may be especially important for such debt collectors.
---------------------------------------------------------------------------

    \633\ See, e.g., Small Business Review Panel Report, supra note 
57, at appendix A (letter from Venable).
---------------------------------------------------------------------------

    For debt collectors who currently call consumers more frequently, 
the proposed frequency limits could affect when and if they establish 
communication with consumers. The Bureau does not have representative 
data that would permit it to quantify how the proposed limits on call 
frequency would impact how long it takes to establish contact or 
whether contact is established at all. However, the Bureau has analyzed 
microdata on outbound calling from one large collection agency (Calling 
Data) that helps illustrate the potential impact of the proposed 
limits. While the data from this agency may not be representative of 
the market as a whole, the results of the Bureau's analysis of the data 
are generally consistent with summary information shared by other large 
collection agencies.\634\
---------------------------------------------------------------------------

    \634\ The summary information was shared with Bureau staff 
during industry outreach meetings that are part of the Bureau's 
routine market-monitoring efforts. Although most debt collectors are 
small firms, evidence suggests that a majority of debt collected is 
collected by collection agencies with 100 or more employees. See 
CFPB Debt Collection Operations Study, supra note 45, at 7.
---------------------------------------------------------------------------

    The Calling Data show that, in the first eight weeks of 
collections, the overall frequency of call attempts to consumers who 
have not yet spoken with the debt collector declines slowly. Roughly 40 
percent of consumers receive more than seven calls per week in the 
first four weeks, but this drops to 27 percent by week eight. Although 
the overall distribution of contact attempts changes slowly from week 
to week, the data show that over time some consumers get called more, 
while others get called less. Consumers with whom a ``right-party 
contact'' (RPC) has been established and who made no payment and 
consumers for whom RPC has not been achieved tend to receive the most 
collection calls. Consumers who have engaged but made a partial payment 
receive fewer calls. Moreover, the debt collector who provided the 
Calling Data engages in ``call sloping,'' meaning that it places fewer 
total calls each week that it works a portfolio of debts.
    The Calling Data show that, for the debts included in that data 
set, consumers who take longer to reach are not less likely to pay. 
Although the probability that each call results in an RPC declines with 
successive calls, the rate at which RPCs are translated into payments 
increases steadily through at least the first 50 calls. As a result, an 
RPC that is achieved in any of the first 50 calls is approximately 
equal in value to the debt collector as an RPC that is achieved with 
fewer calls, suggesting that call attempts remain important to debt 
collection even after many calls have been attempted.
    Summary data provided by some other large debt collectors indicate 
that the number of calls needed to reach consumers can vary 
considerably, but that the majority of debts would not be affected or 
would be affected very little by the proposed frequency limits. These 
data indicate that 50 percent or more of consumers who are ultimately 
reached by these debt collectors are reached within the first seven 
calls overall (not per week), though other debt collectors have 
indicated that it takes 15 to 21 calls to reach 50 percent of such 
consumers. These data also indicate that reaching 95 percent of 
consumers may take between 50 and 60 calls, meaning that 5 percent of 
consumers reached are contacted only after more than 50 or 60 
communication attempts.
    There are limitations to using the data discussed above to make 
inferences about how limits on telephone calls may affect debt 
collectors' ability to reach consumers. This is in part because 
establishing contact depends on factors other than the number of calls 
made (e.g., the time of day called) and in part because debt collectors 
subject to frequency limits might change their contact behavior in ways 
that permit them to reach a given number of consumers with fewer calls, 
as discussed further below. In addition, other aspects of the proposed 
rule, including the provision that would clarify the legal status of 
limited-content voice messages, could make it easier for debt 
collectors to reach consumers with a smaller number of calls.
    The data discussed above may not be representative, meaning that 
some debt collectors might need more or fewer calls to reach similar 
numbers of consumers. Overall, however, the available data suggest that 
the proposed limits would somewhat reduce the ability of debt 
collectors to reach consumers by telephone within a few months, but 
that the reduction is likely to be limited to a relatively small 
fraction of debts. This could affect primarily debt collectors who 
receive placements of debts for four to six months and do not engage in 
litigation. Such debt collectors could lose revenue if the limits 
prevent them from

[[Page 23377]]

establishing contact with consumers or if collections based on 
telephone calls become less effective and, as a result, creditors place 
more debts with debt collectors specializing in litigation.
    To illustrate potential effects of the provision on debt collector 
revenue, the Bureau used the Calling Data to simulate the effect of the 
proposed frequency limits under specific assumptions about how the call 
frequency limits affect collections. That is, the Bureau created a 
``but-for'' version of the Calling Data in which calls that would not 
have been permitted under the proposed frequency limits were assumed to 
have been either delayed or eliminated, and compared RPCs and payments 
in this ``but-for'' data with the actual outcomes achieved by the debt 
collector. This is at best a rough approximation of the effects of the 
proposed provision, both because it relies heavily on the assumptions 
made and because it is based on the data of one particular debt 
collector, and may not be representative of other firms in the 
industry.
    The Bureau created two versions of its simulation analysis, one of 
which uses more conservative assumptions as to the impact of the 
proposed provision on successful contacts and collections. However, the 
Bureau believes that even the more conservative version of this 
analysis likely overstates the potential effects of the proposed 
frequency limits because it cannot reflect any changes the debt 
collector would make to its calling strategy in response to the 
frequency limits. That is, one would expect a rational collection firm 
to strategically choose which calls to eliminate or delay in response 
to the proposed frequency limits, while the Bureau's analysis must to 
some extent select calls arbitrarily. In particular, at least for the 
debt collector who provided data to the Bureau, debts with multiple 
telephone numbers would be most likely to be affected by the frequency 
limits. The Bureau is not able to identify telephone type (such as 
mobile vs. landline, or work vs. home) in the data, but the debt 
collector would generally be able to do so. The Bureau would expect 
debt collectors in similar situations to omit calls to less promising 
telephone numbers, rather than call the same telephones and cease 
calling earlier in the process.
    In the first, more conservative version of the simulation (Version 
1), the Bureau assumed that all calls in excess of the proposed 
frequency limit each week were simply shifted to the next week.\635\ 
The Bureau assumed that any successful RPCs that occur after the 25th 
simulated week would never occur under a frequency limit because in 
reality the debt collector was only contracted to collect on the debts 
in the data for up to 25 weeks. Version 1 implicitly assumes that the 
probability that a call results in an RPC does not depend on how much 
time has passed since collection began, only on the number of calls 
that have been made.
---------------------------------------------------------------------------

    \635\ For example, if the debt collector called a particular 
consumer 10 times in the first week, eight times in the second week, 
and five times in the third week, in the Bureau's simulation, the 
last three calls in the first week would become the first three 
calls in the second week. The second week would then have a total of 
11 calls, and the last four calls would become the first four calls 
in the third week. The third week would then have eight calls, so 
the last call would become the first call of the fourth week, and so 
on.
---------------------------------------------------------------------------

    In a second, more aggressive version of the simulation (Version 2), 
the Bureau assumed that any calls that would be above the proposed 
frequency limit are eliminated, rather than shifted forward. When a 
consumer's first RPC would have occurred on a call that would not be 
permitted under the proposed frequency limit in a given week, the 
Bureau treats the data for that debt as censored as of that week.\636\
---------------------------------------------------------------------------

    \636\ That is, the Bureau assumes that it does not know when or 
whether that consumer would ever have a successful RPC, only that 
there was no RPC up until that week. The Bureau then calculates the 
percent of debts with an RPC by the 25th week of collections using 
the Kaplan-Meier product limit estimator for the survival function, 
a standard tool for measuring rates of an outcome when some 
observations are censored. It is necessary to assume that such 
consumers are censored because in reality after an initial RPC, the 
debt collector generally changes its calling behavior, particularly 
if it obtains a promise to pay.
---------------------------------------------------------------------------

    The Bureau made additional assumptions that were common to both 
versions of the simulation. For inbound calls, that is, calls from 
consumers to the debt collector, the Bureau assumed that the calls were 
not delayed or eliminated. Thus, the Bureau is implicitly assuming that 
inbound calls are prompted by letters from the debt collector or other 
external factors, rather than by a number of calls.\637\ The Bureau 
also made additional assumptions to simulate the effect on payments. 
The Calling Data indicate if the consumer ever paid and how much, but 
they do not always indicate when payment was received--the Bureau 
observes the timing of payments only if the consumer made a payment 
over the telephone. About one-half of all consumers in the data who 
make at least a partial payment do so without ever having an RPC. For 
the simulation, the Bureau assumed that, if the debt collector achieved 
at least one RPC in the simulation, then the amount of any payments 
made by the consumer is unchanged. If the consumer received an RPC in 
the original data but did not receive any RPC in the simulation, the 
Bureau assumed that any payments recorded in the original data did not 
occur for purposes of the simulation.
---------------------------------------------------------------------------

    \637\ The debt collector who provided the data does not leave 
voicemails, but it is possible that consumers eventually return a 
call in response to repeated missed calls on their telephones.
---------------------------------------------------------------------------

    Table 2 shows the results of the simulation analysis described 
above. Under Version 1, the proposed frequency limit would reduce first 
RPCs by 2.76 percent of the first RPCs and dollars collected by 1 
percent.\638\ The average first RPC would be delayed by less than one 
week. These effects are not evenly distributed across consumers, 
however. In the simulation, the debt collector is much more likely to 
miss an RPC or payment when it calls multiple telephone numbers for a 
consumer.\639\ For consumers where the debt collector calls only one 
telephone number, hardly any miss an RPC in the simulation, and the 
average delay is almost zero. This is because the debt collector rarely 
calls a particular telephone more than seven times per week. In 
contrast, for consumers where the debt collector calls five or more 
telephone numbers, the simulation predicts that the frequency limit 
would eliminate more

[[Page 23378]]

than 7 percent of RPCs and delay the remaining RPCs by almost two 
weeks.
---------------------------------------------------------------------------

    \638\ The change in payments is less than the change in RPCs 
both because some consumers pay without an RPC (and the Bureau 
assumed this did not change in the simulation) and because consumers 
in the data who had an earlier first RPC, and thus were less likely 
to be affected by the frequency limits, were also more likely to pay 
in full.
    \639\ The Bureau does not observe in the data how many telephone 
numbers the consumer has, only how many the debt collector chooses 
to call.
---------------------------------------------------------------------------

    The assumptions of Version 2 suggest a more substantial effect on 
RPCs and collections, although the Bureau notes again that even Version 
1 likely overstates the potential effect of the proposed provision. The 
simulation predicts that RPCs would decline by 15.7 percent, and 
dollars collected would decline by 7.7 percent.

                                     Table 2--Results of Simulation Analysis
----------------------------------------------------------------------------------------------------------------
                                                                                                  Percent change
                                            Assumed effect of     Percent change   Average delay    in dollars
                Version                  proposed call frequency  in RPCs within   in remaining      collected
                                                  limit              25 weeks      RPCs (weeks)      within 25
                                                                                                       weeks
----------------------------------------------------------------------------------------------------------------
Version 1.............................  Calls above limit roll             -2.76            0.85           -1.04
                                         to next week.
Version 2.............................  Calls above limit                  -15.7               0            -7.7
                                         eliminated.
----------------------------------------------------------------------------------------------------------------

    Overall, the Bureau believes that the simulation analysis 
overstates the potential effect of the provision because it ignores any 
changes debt collectors would make to mitigate the effects of the call 
frequency limit. Nevertheless, certain assumptions that the Bureau 
makes for simplicity likely reduce the predicted impact of the 
provision. In particular, in Version 1 the Bureau assumes that a call 
with an RPC that is shifted later due to the proposed frequency limit 
will remain an RPC. This may not be true in practice. Empirically, the 
probability that a call results in an RPC declines over time--this is 
evident in the data examined by the Bureau and is consistent with input 
from industry stakeholders. If consumers are less likely to answer the 
telephone as time passes, irrespective of the number of calls debt 
collectors have made, the proposed frequency limit could reduce 
payments and revenue by a larger fraction than the simulation suggests 
(assuming no re-optimization by debt collectors).\640\
---------------------------------------------------------------------------

    \640\ Another assumption that might reduce the predicted effect 
of the proposed frequency limits in both versions is the assumption 
that payment is tied to whether or not the first RPC occurs. For 
instance, in Version 1, the Bureau assumed that a consumer would not 
pay under the frequency limits only if the first RPC would have 
occurred after the 25th week in the simulation. Yet about a quarter 
of consumers in the data who eventually pay some portion of their 
debt had at least two RPCs. It may be that the subsequent RPCs were 
necessary for the payment to occur, but the Bureau's analysis did 
not track whether subsequent RPCs occurred after the 25th week under 
the simulated frequency limits. The Bureau also notes there is an 
implicit assumption in both versions of the simulation that could 
lead to overstating the effect of the proposed frequency limits. The 
simulation assumes that, if all RPCs for a consumer were eliminated 
by the proposed frequency limits, then the consumer would never pay. 
Given that, as noted above, a substantial number of consumers in the 
original data pay despite having no RPCs, it is possible that some 
consumers whose RPCs were eliminated by the proposed frequency 
limits would nonetheless pay something eventually.
---------------------------------------------------------------------------

    Debt collectors could take steps to reduce the number of calls 
necessary to establish contact and mitigate any lost revenue from the 
proposed frequency limit. As indicated, if multiple telephone numbers 
are available, debt collectors might reduce their calls to numbers that 
they can identify as being less likely to yield a successful contact. 
In addition, the Bureau understands that debt collectors can reduce the 
number of calls needed to establish an RPC by purchasing higher-quality 
contact information from data vendors.
    In addition and as discussed below, the Bureau's proposed rule also 
includes provisions that could reduce the legal risks associated with 
other means of communication, such as voice messages or emails, which 
could enable debt collectors to reach consumers more effectively with 
fewer calls. This could mitigate the impact of call frequency limits 
and might mean that the net effect of the proposal would be to increase 
the likelihood that debt collectors are able to reach consumers. In 
addition, debt collectors who are unable to reach consumers as a result 
of frequency limits might still pursue such debts through litigation. 
To the extent that frequent call attempts play a more important role in 
collecting certain types of debt relative to others, some debt 
collectors might shift their business toward collecting those types for 
which frequent calls are less important.
    The Bureau requests data and other information about the benefits 
and costs of the proposed frequency limits for both consumers and debt 
collectors. In particular, the Bureau requests data and other 
information on current calling practices, how those practices are 
likely to be affected by the proposed frequency limits, and how those 
changes are likely to affect debt collectors' ability to contact 
consumers.
    Alternative approaches to limiting the frequency of communications 
or communication attempts. The Bureau considered alternatives to the 
proposed frequency limits on debt collector telephone calls and 
telephone conversations. The potential benefits and costs of those 
alternatives to consumers and covered persons relative to the proposal 
are discussed briefly below.
    The Bureau considered proposing a broader version of proposed Sec.  
1006.14(b)(1)(i) that would have prohibited repeated or continuous 
attempts to contact a person by other media, such as by sending 
letters, emails, or text messages to a person in connection with the 
collection of a debt. Such an approach could provide additional 
benefits to consumers if they are harassed or abused by frequent 
communication from debt collectors who use such media. However, as 
discussed in part V, the Bureau is not aware of evidence demonstrating 
that debt collectors commonly harass consumers or others through 
repeated or continuous debt collection contacts by media other than 
telephone calls. The cost of sending letters is much higher than that 
of placing telephone calls, which likely discourages frequent 
communication by mail, and the Bureau has received few complaints about 
debt collectors sending excessive letters. The Bureau understands that 
few debt collectors currently communicate by email or text message, and 
stakeholders have suggested that such media may be inherently less 
harassing than telephone calls because, for example, recipients may 
have more ability to decide whether or when to engage with an email or 
a text message than with a debt collection telephone call.
    In addition, during the SBREFA process, some small entity 
representatives suggested that compliance with a rule that limited the 
frequency of communications by media other than telephone calls would 
be more costly than compliance with a rule that applied only to calls. 
These small entity representatives indicated that, while many existing 
debt collection systems already track the frequency of telephone calls, 
modifying systems to

[[Page 23379]]

track communication by other media would be significantly more 
expensive.
    The Bureau also considered a proposal that would have limited the 
number of calls permitted to any particular telephone number (e.g., at 
most two calls to each of a consumer's landline, mobile, and work 
telephone numbers). The Bureau considered such a limit either instead 
of or in addition to an overall limit on the frequency of telephone 
calls to one consumer. Such an alternative could potentially reduce the 
effect of frequency limits on debt collector calls if it permitted more 
total calls when a consumer has multiple telephone numbers. Such an 
approach could impose smaller costs on debt collectors in some cases by 
making it easier to contact consumers for whom debt collectors have 
multiple telephone numbers. At the same time, such an approach might 
provide smaller consumer benefits compared to the proposal by 
potentially permitting a high frequency of calls in some cases. Some 
consumers could receive (and some debt collectors could place) more 
telephone calls simply based on the number of telephone numbers that 
certain consumers happened to have (and that debt collectors happened 
to know about). Such an approach also could create incentives for debt 
collectors to, for example, place telephone calls to less convenient 
telephone numbers after exhausting their telephone calls to consumers' 
preferred numbers.
3. Limited-Content Messages
    Proposed Sec.  1006.2(j) would define a limited-content message as 
a message for a consumer that includes all of the content described in 
Sec.  1006.2(j)(1), that may include any of the content described in 
Sec.  1006.2(j)(2), and that includes no other content. In particular, 
proposed Sec.  1006.2(j)(1) provides that a limited-content message 
must include all of the following: The consumer's name, a request that 
the consumer reply to the message, the name or names of one or more 
natural persons whom the consumer can contact to reply to the debt 
collector, a telephone number that the consumer can use to reply to the 
debt collector, and, if applicable, a disclosure explaining how the 
consumer can stop receiving messages through a particular medium.\641\ 
Proposed Sec.  1006.2(j)(2) provides that a limited-content message 
also may include one or more of the following: A salutation, the date 
and time of the message, a generic statement that the message relates 
to an account, and suggested dates and times for the consumer to reply 
to the message. Proposed Sec.  1006.2(b) and (d), which define the 
terms attempt to communicate and communication, respectively, provide 
that a limited-content message is an attempt to communicate but is not 
a communication.
---------------------------------------------------------------------------

    \641\ As discussed below, proposed Sec.  1006.6(e) would require 
a debt collector who communicates or attempts to communicate with a 
consumer electronically in connection with the collection of a debt 
using a particular email address, telephone number for text 
messages, or other electronic-medium address to include in such 
communication or attempt to communicate a clear and conspicuous 
statement describing one or more ways the consumer can opt out of 
further electronic communications or attempts to communicate by the 
debt collector to that address or telephone number.
---------------------------------------------------------------------------

    Potential benefits and costs to consumers. As discussed below under 
``potential benefits and costs to covered persons,'' many debt 
collectors currently do not leave voice or text messages for consumers 
because of the risk of litigation. The Bureau expects that, by 
clarifying that ``communication'' for purposes of the FDCPA does not 
include the proposed limited-content message, the proposed rule would 
make debt collectors more likely to leave voice or text messages if 
they are unable to reach consumers by telephone.
    In general, an increased use of voice and text messages should make 
it more convenient for consumers to communicate with debt collectors 
because consumers will be better able to arrange a discussion at a time 
that is convenient for them rather than at a time when the debt 
collector happens to reach them. Related to this, some consumers 
express annoyance at receiving repeated calls from callers who do not 
leave messages. To the extent that debt collectors respond to the 
proposed rule by leaving messages when a consumer does not answer the 
telephone, the proposal might help address that problem.
    If more debt collectors are willing to leave messages, it may lead 
to an indirect benefit to consumers by reducing the number of unwanted 
call attempts without reducing the likelihood that consumers 
communicate with debt collectors. Although some debt collectors may 
leave frequent messages or continue to call frequently despite having 
left messages, an industry trade publication recommends a best practice 
of waiting three to seven days after leaving a message to give the 
consumer an opportunity to return the call.\642\ During the meeting of 
the Small Business Review Panel, small entity representatives indicated 
that limited-content messages would reduce the need for frequent 
calling.\643\ Thus, some consumers may experience reduced numbers of 
calls if more debt collectors leave messages and wait for a return 
call.
---------------------------------------------------------------------------

    \642\ insideARM, Operations Guide: Call Volume 10 (Nov. 14, 
2014).
    \643\ Small Business Review Panel Report, supra note 57, at 25.
---------------------------------------------------------------------------

    Debt collectors cannot be certain that a voice message will be 
heard only by the consumer for whom it was left. Some consumers could 
be harmed by an increase in limited-content messages, either because 
they are harassed by frequent messages or because the messages increase 
the risk of third-party disclosure. Although the message itself would 
not convey any information about the debt, some third parties who hear 
the message may discover that the caller is a debt collector, either 
because they have familiarity with the type of generic messages that 
debt collectors leave or because they do further research, such as by 
researching the telephone number. On the other hand, the proposal might 
lead debt collectors who currently leave more detailed messages that 
risk revealing the purpose of the call to third parties to switch to 
messages that reveal no information about the debt. In such instances, 
the impact of the proposal may be to reduce the likelihood of third-
party disclosures.
    Survey results indicate that consumers are concerned about third 
parties overhearing voice messages left by debt collectors, with nearly 
two-thirds of consumers saying it is very important that others do not 
hear or see a message from a creditor or debt collector, as shown in 
Table 3 below. However, most respondents also said that they would 
prefer that a voice message from a debt collector indicate that the 
caller is attempting to collect a debt. Even among consumers who said 
it was ``very important'' that others not see or hear messages about 
debt collection, 63 percent said they preferred that the purpose of the 
call be included in a message from a creditor or debt collector 
attempting to collect the debt. This suggests that many consumers 
either do not expect third parties to overhear voice messages left for 
them or attach greater importance to knowing what the call is about 
than to the risk a third party will overhear the message.

[[Page 23380]]



 Table 3--Preferences Regarding Others Seeing or Hearing Debt Collector
                                 Message
                                [Percent]
------------------------------------------------------------------------
                                                             Consumers
   Importance of others not seeing or                        contacted
            hearing a message              All consumers   about a debt
                                                           in collection
------------------------------------------------------------------------
Very important..........................              64              65
Somewhat important......................              23              24
Not at all important....................              14              10
------------------------------------------------------------------------

    Potential benefits and costs to covered persons. The Bureau 
understands that many debt collectors avoid leaving messages, or leave 
them only under limited circumstances, because of the legal risk 
associated with leaving a message. Currently, debt collectors leaving a 
voice message for a consumer either omit the disclosure stating that 
the call is from a debt collector (the so-called ``mini-Miranda'' 
warning) and risk being deemed in violation of FDCPA section 807(11) or 
include that disclosure and risk that the existence of a debt will be 
disclosed to a third party hearing the message and that they will be 
deemed in violation of FDCPA section 805(b). The proposed provision 
would reduce both direct and indirect costs to some debt collectors by 
interpreting the FDCPA not to require the mini-Miranda warning in a 
limited-content message, which would reduce legal risks associated with 
messages.
    Debt collectors may indirectly benefit from clarification of the 
type of messages that may be left because messages may make it easier 
to establish contact with consumers. Currently, many debt collectors 
limit or avoid leaving messages for fear of FDCPA liability.\644\ 
Leaving messages may be a more efficient way of reaching consumers than 
repeated call attempts without leaving messages. For example, consumers 
who do not answer calls from callers they do not recognize might return 
a message. If so, the proposed provision could permit debt collectors 
to reach such consumers with fewer contact attempts.
---------------------------------------------------------------------------

    \644\ In the Bureau's Debt Collection Operations Study, 42 of 58 
respondents reported sometimes leaving voice messages. Of those that 
do leave voice messages, many reported leaving them only under 
certain specific circumstances. CFPB Debt Collection Operations 
Study, supra note 45, at 29-30.
---------------------------------------------------------------------------

    The proposal may also reduce the direct costs of voicemail-related 
litigation, which can be large.\645\ While the Bureau does not have 
data on the costs to debt collectors of defending such litigation, some 
debt collectors have suggested that resolving an individual lawsuit 
typically costs $5,000 to $10,000, and resolving a class action could 
cost much more. Moreover, debt collectors report that the large 
majority of threatened lawsuits are settled before a suit is filed, so 
the frequency of filed lawsuits substantially understates how often 
debt collectors bear costs from claimed FDCPA violations.\646\ The 
Bureau anticipates that the proposed clarification of the definition of 
communication would significantly reduce any legal risk to debt 
collectors of leaving voice messages that fit within the definition of 
limited-content message.
---------------------------------------------------------------------------

    \645\ There were at least 162 voicemail-related lawsuits filed 
in 2015 under section 805(b) of the FDCPA, which prohibits third-
party disclosures; of these, 11 cases were class actions. In 
addition, at least 125 voicemail-related lawsuits were pursued under 
section 807(11), which prohibits communicating with a consumer 
without providing the mini-Miranda disclosure; of these 49 cases 
were class actions. See Small Business Review Panel Outline, supra 
note 56, at 69 n.104 (citing data provided by WebRecon, LLC).
    \646\ Some debt collectors have reported that they receive 
approximately 10 demand letters for every lawsuit filed and that 
FDCPA claims are typically settled for $1,000 to $3,000. See id. at 
69 n.105.
---------------------------------------------------------------------------

    The proposed provision would generally not require debt collectors 
to incur new costs because it would not require any debt collectors to 
change their policies regarding messages. However, in order to obtain 
benefits from the provision, debt collectors who plan to adopt the 
practice of leaving limited-content messages would incur one-time costs 
to develop policies and procedures to implement limited-content 
messages under the rule and to train employees on these policies and 
procedures.
    The Bureau requests data and other information about the benefits 
and costs to consumers and covered persons of the proposed limited-
content messages. In particular, the Bureau requests information that 
is informative of how consumers would respond to limited-content 
messages, how the proposed limited-content messages would affect debt 
collectors' ability to contact consumers, and the one-time and ongoing 
costs to debt collectors who plan to adopt the practice of leaving 
limited-content messages.
4. Time-Barred Debt: Prohibiting Suits and Threats of Suit
    Proposed Sec.  1006.26(b) would prohibit a debt collector from 
suing or threatening to sue on a debt that the debt collector knows or 
should know is time-barred.
    As discussed in part V, multiple courts have held that the FDCPA 
prohibits suits and threats of suit on time-barred debt. In light of 
this, the Bureau understands that most debt collectors do not knowingly 
sue or threaten to sue consumers to collect time-barred debts, and 
therefore the Bureau does not expect this provision of the proposed 
rule to have a significant effect on most consumers or debt 
collectors.\647\
---------------------------------------------------------------------------

    \647\ For example, small entity representatives at the meeting 
of the Small Business Review Panel indicated that it was standard 
practice in the industry not to knowingly initiate lawsuits to 
collect time-barred debt. See Small Business Review Panel Report, 
supra note 57, at 35. Some industry groups have adopted policies 
requiring members to refrain from suing or threatening to sue on 
time-barred debts. See, e.g., Receivables Mgmt. Ass'n, Receivables 
Management Certification Program at 32 (Jan. 19, 2018), https://rmassociation.org/wp-content/uploads/2018/02/Certification-Policy-version-6.0-FINAL-20180119.pdf.
---------------------------------------------------------------------------

    To the extent that there are costs to covered persons or benefits 
to consumers from this provision, they will most likely come from 
reduced payments on time-barred debts, to the extent that some debt 
collectors currently use lawsuits or threats to sue on time-barred 
debts as a strategy to elicit payment.\648\ If it is currently true 
that (1) suing or threatening to sue on debts is an important means of 
collection for debts for which the statute of limitations is close to 
expiring, and (2) most debt collectors stop suing or threatening to sue 
once the statute of limitations for a debt expires, then one

[[Page 23381]]

would expect repayment rates to drop after the statute of limitations 
expires, and that drop might be made more significant by the proposed 
provision. Such a reduction in payments would benefit consumers who owe 
the debts while imposing costs on debt collectors and creditors and 
potentially increasing the cost of credit generally.
---------------------------------------------------------------------------

    \648\ As noted above in section V, although multiple courts have 
held and the FTC has stated that suing or threating to sue on time-
barred debts violates the FDCPA, the Bureau's enforcement experience 
has shown that some debt collectors may continue to sue or threaten 
to sue on time-barred debts. The proposal could reduce such activity 
by eliminating any legal uncertainty about whether such suits or 
threats of suit are permitted and potentially by strengthening 
enforcement of the prohibition.
---------------------------------------------------------------------------

    The Bureau therefore attempted to indirectly measure the potential 
effect of the provision by examining the behavior of consumers who owe 
debts that either recently expired or are close to expiring under their 
state's statutes of limitations. To do so, the Bureau used data from 
its Consumer Credit Panel (CCP), which contains information from one of 
the three nationwide CRAs. The Bureau used data from the CCP to attempt 
to estimate the current effect of State statutes of limitation on the 
propensity of consumers to pay old debts in collection.
    The CCP contains information on collections tradelines--records 
that were furnished to this nationwide CRA by third-party debt 
collectors or debt buyers. The Bureau analyzed these data to determine 
whether the probability of payment declines around the expiration of 
the statute of limitations in the consumer's State. Specifically, the 
Bureau followed debts reported in the CCP from the time they were first 
reported on consumers' credit records until they either showed some 
record of payment or disappeared from the credit records.\649\ In this 
analysis, the Bureau assumed that the applicable statute of limitations 
is the one applicable to written contracts in the consumer's State of 
residence and that the statute of limitations begins for a debt on the 
date that the debt first appears on the consumer's credit report.\650\ 
The Bureau assumed this starting date because there was no other 
reasonable basis in the available data to assign the beginning of the 
statute of limitations. There is likely to be some inaccuracy in this 
assumption due to a variety of factors, including delays between the 
beginning of the period defined by the statute of limitations and the 
first report and cases in which the applicable statute of limitations 
is not the one in the consumer's State. However, if the estimated 
expiration of the statute of limitations is at least approximately 
correct in most cases, then one would expect to observe whether the 
expiration of the statute of limitations has an effect on the 
likelihood that a debt is reported to have been paid.
---------------------------------------------------------------------------

    \649\ Debts in the CCP that are reported by multiple debt 
collectors, for instance if the debt is transferred or sold, are not 
explicitly linked. As in the Bureau's prior quarterly Consumer 
Credit Trends report on collection of telecommunication debt, 
tradelines were linked based on the dollar amount and opening dates 
associated with the tradelines. Bureau of Consumer Fin. Prot., 
Quarterly Consumer Credit Trends: Telecommunication Debt Collection 
(Aug. 22, 2018), https://www.consumerfinance.gov/data-research/research-reports/quarterly-consumer-credit-trends-telecommunications-debt-collection/. For this analysis, a tradeline 
was considered to be a continuation of a previous debt if it had the 
same original balance and it was opened on or after the latest 
balance date for the previous tradeline. Debt collectors do not 
appear to consistently report payment information when furnishing 
information to the nationwide CRA. As such, for this analysis, the 
Bureau considered a debt to have had a payment made if in any month: 
(1) There is a positive payment amount; (2) there is a populated 
last payment date, or (3) the account is marked paid in full or 
settled. With regard to the timing of the first payment, the 
Bureau's analysis used the earliest value of the last payment date 
for a debt, if populated, or the earliest balance data associated 
with a payment amount or paid-in-full flag, as appropriate. The 
method for determining whether a debt was ever paid is the same as 
is used in Charles Romeo and Ryan Sandler, The Effect of Debt 
Collection Laws on Access to Credit (Bureau of Consumer Fin. Prot., 
Office of Research Working Paper No. 2018-01, Feb. 12, 2018), 
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3124954.
    \650\ The collections tradelines in the CCP are primarily 
medical debts, utility debts, and telecommunications debts, and it 
is the Bureau's understanding that the statute of limitations for 
written contracts is the one that would generally apply for these 
types of debts. Relatively few collection tradelines relate to 
credit card debt; the Bureau understands that this is because credit 
card issuers prefer to furnish information to the nationwide CRAs 
regarding their customers' accounts even when accounts have been 
charged off and placed with a debt collector.
---------------------------------------------------------------------------

    The Bureau calculated the probability of payment occurring after a 
given number of days, conditional on no payment occurring before--in 
technical terms, the ``hazard rate'' for payments--for all collections 
tradelines in the CCP. The Bureau then calculated the average hazard 
rate based on the number of months before or after the estimated 
expiration of the applicable statute of limitations. This calculation 
is plotted in Figure 1, below.\651\ The figure shows that the 
probability of a collections tradeline showing evidence of payment 
declines steadily for at least one year leading up to the estimated 
expiration of the statute of limitations, and continues to decline at 
roughly the same rate afterwards.\652\ Thus, while the probability of 
payment declines over time, the reduced ability to pursue litigation 
does not seem to materially affect payments on collections tradelines. 
Combined with the Bureau's understanding that debt collectors generally 
do not sue on time-barred debt, this suggests that the proposed 
provision would be unlikely to cause any further reduction in the rate 
of repayment on time-barred debt.\653\
---------------------------------------------------------------------------

    \651\ The overall level of the hazard rate in the figure is 
quite low--on the order of two-tenths of 1 percent. This is to be 
expected given the monthly nature of the series--although around 10 
percent of all collections tradelines eventually show some evidence 
of payment, the proportion that do so in any given month is quite 
low.
    \652\ While Figure 1 is based on all collections tradelines, 
regardless of the type of original creditor, the pattern over time 
looks very similar if the calculation is done separately by type of 
original creditor.
    \653\ Alternatively, this result would also be consistent with 
all debt collectors currently ignoring the statute of limitations 
and continuing to sue or threaten to sue on time-barred debt. 
However, as discussed above, the Bureau understands that most debt 
collectors avoid suits or threats of suits on time-barred debt.

---------------------------------------------------------------------------

[[Page 23382]]

[GRAPHIC] [TIFF OMITTED] TP21MY19.000

    Because the available data do not permit the Bureau to identify the 
expiration of the statute of limitations precisely, the analysis above 
may fail to identify some effects. The Bureau requests data and other 
evidence on how the expiration of the statute of limitations affects 
debt collection in the current market.
5. Communication Prior To Furnishing Information
    Proposed Sec.  1006.30(a) would prohibit a debt collector from 
furnishing information to a CRA regarding a debt before communicating 
with the consumer about that debt, a requirement that a debt collector 
could satisfy by sending a validation notice prior to furnishing 
information.
    Potential benefits and costs to consumers. The proposal would help 
ensure that consumers learn about an alleged debt before a debt 
collector furnishes adverse information to a CRA. When consumers 
believe that the information is in error, they will have an opportunity 
to dispute the debt.
    When debt collectors furnish information about unpaid debts to 
CRAs, that information can appear on consumer credit reports, 
potentially limiting consumers' ability to obtain credit, employment, 
or housing. If consumers are unaware that information about a possible 
unpaid debt is being furnished to a CRA, then they may not realize that 
their ability to obtain credit, employment or housing may be affected 
by the debt's presence on their credit reports. They may pay more for 
credit or lose out on employment or housing because they are unaware 
that their credit scores have been negatively affected or they may 
discover the adverse information only when they apply for credit, 
employment, or housing.
    To quantify the potential consumer benefits from the proposal, the 
Bureau would need to know: (1) How frequently consumers are unaware 
debt collectors had furnished information about their debts to credit 
bureaus but would become aware of it if the debt collectors 
communicated with consumers prior to furnishing data; and (2) the 
benefit to these consumers of becoming aware they had a debt in 
collections.
    In many cases, consumers would not be affected by the proposed 
provision because many debt collectors already send validation notices 
before furnishing information to CRAs. Many other consumers would not 
be affected because debt collectors do not furnish information to CRAs 
for some or all debts on which they are seeking to recover.
    The Bureau understands that most debt collectors mail validation 
notices to consumers shortly after they receive accounts for 
collections.\654\ A minority of debt collectors sometimes or always 
mail validation notices only after speaking with consumers (whether 
contact was initiated by the debt collector or the consumer).\655\ In 
addition, a number of debt collectors do not furnish information to 
CRAs, so again in these cases the proposed provision would not affect 
consumers. The Bureau does not have representative data to estimate how 
often consumers would be affected by the proposed provision, but the 
evidence suggests that a relatively small share of debt collectors 
furnish information to CRAs before providing a validation notice. If 
this occurs in 5 percent of cases, for example, it could result in 
approximately 7 million additional validation notices sent each year 
(assuming that no debt collectors would cease credit reporting in 
response to the proposed provision).\656\
---------------------------------------------------------------------------

    \654\ See CFPB Debt Collection Operations Study, supra note 45, 
at 28.
    \655\ In the Bureau's Operations Study, 53 of 58 respondents 
said that they send a validation notice shortly after debt 
placement, and of those that do not, three respondents that said 
that they furnish data to CRAs. CFPB Debt Collection Operations 
Study, supra note 45, at 28. During the meeting of the Small 
Business Review Panel, only one small entity representative 
described additional burdens it would face as a result of a 
requirement to communicate with consumers before furnishing 
information to credit bureaus.
    \656\ This estimate assumes 140 million validation notices are 
sent each year, based on an estimated 49 million consumers contacted 
by debt collectors each year and an assumption that each receives 
notices about an average of approximately 2.8 notices during the 
year.
---------------------------------------------------------------------------

    Learning that a debt is in collections shortly after the 
collections process begins can help consumers prevent or mitigate harm 
from adverse information on their credit reports. It can be 
particularly important if the information

[[Page 23383]]

about the debt is inaccurate because in those cases consumers who learn 
of the alleged debt can dispute the item under the FCRA. By informing 
consumers about the collection item before it is furnished to a CRA, 
the proposal would make it less likely that consumers learn about a 
collection item when they are in the process of applying for credit or 
other benefits, at which point they may feel pressure to resolve the 
item and may not have the opportunity to fully dispute the item.
    An FTC report addressed the prevalence of collections-related 
errors in credit reports.\657\ The FTC report analyzed data from a 
sample of 1,001 consumers and identified errors in the credit records 
of three nationwide CRAs. The report found collections-related errors 
in 4.9 percent of credit reports, and credit reports with documented 
errors contained, on average, 1.8 errors per report. The Bureau's Debt 
Collection Consumer Survey also suggests that debt collectors made 
collection errors, finding that 53 percent of consumers who said they 
had been contacted about one or more debts in collection said that 
these contacts included at least one debt the consumer thought was in 
error.\658\
---------------------------------------------------------------------------

    \657\ Fed. Trade Comm'n, Report to Congress under Section 319 of 
the Fair and Accurate Credit Transactions Act of 2003, (2012).
    \658\ CFPB Debt Collection Consumer Survey, supra note 18, at 
24.
---------------------------------------------------------------------------

    Credit scores are based on a wide variety of information in 
consumer credit files. While many errors have only small effects on 
consumers' credit scores,\659\ in some cases information in credit 
files about unpaid debts can have a reasonably large impact on credit 
scores. For example, analysis of telecommunications collection items in 
credit reports has shown that, while additional collection items have 
relatively small effects in some cases, it can have substantial effects 
for some consumers, with an average reduction in credit score of more 
than 41 points for super-prime consumers.\660\ In some circumstances, 
these changes could lead to higher interest rates for consumers or 
denial of credit, in particular for borrowers with otherwise high 
credit scores.
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    \659\ See Fed. Trade Comm'n, Report to Congress under Section 
319 of the Fair and Accurate Credit Transactions Act of 2003, at 43 
(2012).
    \660\ See Brian Bucks et al., Collection of Telecommunication 
Debt, Bureau of Consumer Fin. Prot. (Aug. 2018).
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    Potential benefits and costs to covered persons. The proposal would 
affect the practices of debt collectors who sometimes furnish 
information about consumers' debts to CRAs before the debt collectors 
have communicated with consumers. The Bureau understands that most debt 
collectors mail validation notices to consumers shortly after they 
receive the accounts for collections and before they furnish data on 
those accounts, and so they already would be in compliance with the 
proposed requirement.\661\ Forty-five out of 58 debt collectors 
responding to the Bureau's Operations Survey said that they furnish 
information to credit bureaus.\662\ Of these respondents, all but three 
said that they send a validation notice upon account placement, such 
that the proposed requirement would be satisfied. These debt collectors 
likely would need to review their policies to ensure that validation 
notices always are sent (or validation information is provided in an 
initial communication) prior to reporting on accounts, which the Bureau 
expects would involve a small one-time cost. Other debt collectors do 
not furnish information at all to CRAs and so would not be affected by 
the proposed requirement.
---------------------------------------------------------------------------

    \661\ In the Operations Survey, 53 of 58 respondents said that 
they send a validation notice shortly after debt placement. CFPB 
Debt Collection Operations Study, supra note 45, at 28.
    \662\ Id. at 19.
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    Debt collectors who furnish information to CRAs but provide 
validation notices to consumers only after they have been in contact 
with consumers would need to change their practices and would face 
increased costs as a result of the proposal. Because these debt 
collectors are already required to provide validation notices to 
consumers (unless validation information is provided in an initial 
communication), the Bureau expects that they already have systems in 
place for sending notices and would not face one-time compliance costs 
greater than those of other debt collectors. However, debt collectors 
would face ongoing costs from sending validation notices to more 
consumers than they would otherwise, at an estimated cost of $0.50 to 
$0.80 per debt if sent by postal mail.\663\ To the extent debt 
collectors take advantage of opportunities to send validation notices 
electronically, an option the proposal elsewhere seeks to make more 
viable, the marginal cost of sending each notice is likely to be 
approximately zero. Alternatively, these debt collectors could cease 
furnishing information to CRAs, which could impact the effectiveness of 
their collection efforts.\664\ Because debt collectors could choose the 
less burdensome of these options, the additional costs of delivering 
notices represent an upper bound on the burden of the provision for 
debt collectors.
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    \663\ See CFPB Debt Collection Operations Study, supra note 45, 
at 32-33. One small entity representative on the Bureau's Small 
Business Review Panel indicated that, for about one-half of its 
accounts, it currently sends validation notices only after speaking 
with a consumer, and that, if it were required to send validation 
notices to all consumers, it would incur additional mailing costs of 
$0.63 per mailing for an estimated 400,000 accounts per year.
    \664\ If debt collectors furnish information to CRAs less 
frequently this could make consumer reports less informative in 
general, which could have negative effects on the credit system by 
making it harder for creditors to assess credit risk.
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    The Bureau requests data and other information about the benefits 
and costs to consumers and covered persons of the proposed requirement. 
In particular, the Bureau requests information that would help the 
Bureau to estimate the number of consumers affected by the proposed 
provision, the benefits for these consumers, and the potential costs to 
covered persons of complying with the proposed provision.
6. Prohibition on the Sale or Transfer of Certain Debts
    Proposed Sec.  1006.30(b)(1) would prohibit a debt collector from 
selling, transferring, or placing for collection a debt if the debt 
collector knows or should know that the debt was paid or settled, the 
debt was discharged in bankruptcy, or an identity theft report was 
filed with respect to the debt. Proposed Sec.  1006.30(b)(2) would 
create several exceptions to this prohibition.
    The Bureau understands, based on its market knowledge and outreach 
to debt collectors, that debt collectors generally do not sell, 
transfer, or place for collections debts (other than in circumstances 
covered in the exceptions) if they have reason to believe the debts 
cannot be validly collected because they have been paid, they were 
settled in bankruptcy, or an identity theft report was filed with 
respect to them.\665\ Therefore, the Bureau expects the benefits and 
costs of this provision to be minimal.
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    \665\ With respect to debts subject to an identity theft report, 
FCRA section 615(f) already prohibits a debt collector from selling, 
transferring for consideration, or placing for collection debts if 
the debt collector has been notified by a consumer reporting agency 
that the debt resulted from identity theft.
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7. Notice for Validation of Debts
    Proposed Sec.  1006.34 would implement and interpret FDCPA section 
809(a), (b), (d), and (e). Specifically, proposed Sec.  1006.34(a) 
provides that, subject to certain exceptions, a debt collector must 
provide a consumer the validation information described in Sec.  
1006.34(c). Proposed Sec.  1006.34(c) would implement FDCPA section 
809(a)'s content

[[Page 23384]]

requirements and require that the validation notice include certain 
information about the debt and the consumer's protections with respect 
to debt collection that debt collectors do not currently provide on 
validation notices. Proposed Sec.  1006.34(d) would set forth general 
formatting requirements and permit debt collectors to comply with these 
requirements by using the proposed model validation notice in appendix 
B. Proposed Sec.  1006.34(e) would permit, but not require, debt 
collectors to provide a consumer the validation notice translated into 
any language, if the debt collector also sends an English-language 
validation notice.
    Potential benefits and costs to consumers. The proposed validation 
information may benefit consumers in four ways. First, the disclosures 
would provide more information about the debt, which may help consumers 
determine whether the debt is theirs and whether the reported amount 
owed is accurate. Second, the notice would provide a plain-language 
disclosure of the consumer's rights in debt collection, in particular 
the right to dispute, which should help consumers to know their rights 
and be able to exercise them. Third, the validation information would 
include consumer response information that should make it easier for 
consumers to take certain actions, including disputing a debt. Finally, 
the proposed model validation notice form is intended to provide 
information to consumers in a more appealing and easy-to-read format, 
making it more likely that consumers read and comprehend the 
information than with the validation notices currently in use.
    To quantify the benefit of providing more and clearer validation 
information, the Bureau would need to estimate the impact of this 
additional information on consumers' ability to recognize their debts 
compared to what is currently provided on validation notices, as well 
as how consumers would respond to that additional information. Although 
the Bureau is not aware of data that would permit a full accounting of 
these benefits, below is a summary of information the Bureau is aware 
of that is relevant to some factors affecting these benefits.
    The Bureau understands that, in general, validation notices 
currently include little or no information about the debt beyond the 
information specifically listed in section 809(a) of the FDCPA (i.e., 
the current amount of the debt and the name of the current creditor). 
This information may not be sufficient for the consumer to recognize 
the debt, particularly if: (1) The amount owed has changed over time 
due to interest, fees, payments, or credits; (2) the debt collector has 
changed since an original collection attempt; or (3) the creditor's 
name is not one the consumer associates with the debt (as with some 
store-branded credit cards issued by third-party financial 
institutions). Consumers who do not recognize a debt because the 
information on a validation notice is insufficient may incur costs if 
they mistakenly dispute a debt they owe, pay a debt they do not owe, or 
ignore a debt on the assumption that the collection attempt is in 
error.
    Relative to current validation notices, the proposed validation 
information would include more specific details about the debt, such as 
the debt's account number and an itemization of the debt. The Bureau 
believes this information would benefit consumers by making it easier 
for them to determine whether they owe a debt and, therefore, reducing 
the likelihood of incurring costs due to mistakes like those noted 
above. The consumer can also use the consumer response information to 
request the name and address of the original creditor, which may 
further help the consumer to recognize the debt.
    To fully evaluate the benefits to consumers of disclosing 
additional information, the Bureau would need representative data to 
estimate how often consumers would read and understand the additional 
information on the notice and the extent to which that information 
increases consumer recognition and understanding compared to a notice 
without it. For example, the Bureau could further quantify some of the 
consumer benefits of the notice if the Bureau were able to estimate: 
(1) How many consumers ignore notices out of a mistaken conclusion that 
the debt is not theirs; (2) how many consumers dispute correct debts, 
and subsequently, how much time the proposed validation notice would 
save by obviating later interactions that result from improper 
disputes; and (3) how many consumers fail to dispute or make payments 
on incorrect debts. The Bureau is not aware of a source of information 
on the number of consumers in these categories or the possible time 
savings that could result from the proposed validation information. As 
discussed in the section-by-section analysis in part V, the Bureau 
currently is conducting additional consumer testing of possible time-
barred debt and revival disclosures. This testing may also provide 
additional evidence about the benefits of the proposed validation 
information to consumers.
    The Bureau's Debt Collection Consumer Survey suggests that the 
proposed validation information would likely be helpful in recognizing 
a debt. Specifically, when asked how helpful various pieces of 
information would be in figuring out whether they owed a debt, 
consumers were most likely to indicate that the creditor name, type of 
debt, and an itemization of the amount owed (such as principal, 
interest, and fees) were especially valuable. These opinions were 
echoed in focus groups in which consumers noted that after a debt is 
sold it is more difficult to recognize, and that they wanted as much 
information as possible to help them recognize the debt as theirs 
(especially the account number, creditor, and amount due) with the 
exception of sensitive information like social security numbers.\666\
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    \666\ FMG Focus Group Report, supra note 38, at 15-16.
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    To quantify the benefits of the proposed provision requiring a 
clear and conspicuous disclosure of a consumer's right to dispute a 
debt, the Bureau would need to estimate the number of consumers who 
fail to dispute debts that they do not owe because they are unaware of, 
or do not comprehend, their right to dispute. The Bureau cannot 
precisely quantify this benefit; however, the discussion below 
identifies several applicable considerations and estimates.
    The Bureau estimates that at least 49 million consumers are 
contacted by debt collectors each year.\667\ Twenty-eight percent of 
consumers who said they had been contacted about one or more debts in 
collection reported that the contacts included attempts to collect at 
least one debt that the consumers believed they did not owe.\668\ One-
third of consumers who had been contacted said the amount the creditor 
or debt collector was trying to collect was wrong for at least one of 
these debts, and 16 percent said the contacts included at least one 
contact about a debt that was instead owed by a family member. Taken 
together, more than one-half of the consumers (53 percent) who said 
they had been contacted about one or more debts in collection reported 
that they thought at least one of the debts they

[[Page 23385]]

were contacted about was in error. This suggests that there are many 
consumers who receive the validation notices in use today who might be 
likely to dispute based on their perception that either the debt is not 
theirs or is wrong.
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    \667\ See CFPB Debt Collection Consumer Survey, supra note 18, 
at 13, 40-41.
    \668\ The survey questions concerning consumer beliefs about 
errors in collections did not ask respondents to distinguish between 
debts owed to a debt collector and debts owed to a creditor. If 
consumers are more or less likely to believe there is an error for 
collection attempts by debt collectors, then this percentage and 
those below may over- or under-estimate the likelihood that a 
consumer believes a debt is in error when contacted by a debt 
collector.
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    Among the 53 percent of consumers who cited one of the issues noted 
above, 42 percent reported that they disputed a collection in the prior 
year, and 11 percent of consumers who had not cited one of those issues 
indicated that they had disputed a debt. The fact that less than one-
half of the consumers who questioned a debt about which the creditor or 
collector contacted them reported disputing a debt is consistent with 
the possibility that some consumers do not dispute in response to a 
collection effort because they are not aware of the option to dispute 
or do not understand the steps required to do so. The proposed clear 
and conspicuous statement of the dispute right could benefit consumers 
by making salient the possibility of dispute.
    The survey's finding that only 42 percent of consumers who thought 
they experienced an error with a debt in collection disputed the error 
suggests consumers are uncertain about how to dispute a debt in 
collection or that they believe that disputes require too much time and 
effort relative to the expected benefit. The consumer response 
information could reduce these impediments to disputing debts that 
consumers believe are in error. Specifically, the consumer response 
information would provide a clear means of disputing a debt in a way 
that triggers the protections provided by the FDCPA and this proposed 
rule, if finalized. Furthermore, the convenience of the consumer 
response information could reduce barriers to responding by eliminating 
or reducing the burden of, for example, deciding what information is 
relevant and how to phrase the response.\669\ This could allow some 
consumers to save time and avoid other negative consequences, such as 
lower credit scores due to a debt they may not owe being listed as 
unpaid in their credit files.
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    \669\ A 2016 research report by the United Kingdom's Financial 
Conduct Authority showed that, in a large randomized control trial, 
a tear off form (with a text or email reminder) led to more 
consumers switching from a current savings account to one with a 
better interest rate relative to getting only an informational text 
and/or email reminder and relative to an informational box with 
instructions on how to switch. Paul Adams et al., Attention, Search 
and Switching: Evidence on Mandated Disclosure from the Savings 
Market, (UK Fin. Conduct Authority, Occasional Paper No. 19 2016). 
https://www.fca.org.uk/publication/occasional-papers/occasional-paper-19.pdf.
---------------------------------------------------------------------------

    Additionally, the consumer response information includes an option 
to request information about the original creditor. This additional 
information may help consumers in determining whether the debt is 
theirs.
    The Bureau has proposed a model validation notice. Several 
considerations went into the content and design of the model validation 
notice. First, consumers must have relevant and accurate information to 
make informed decisions on how to act with regard to the debt; 
therefore the Bureau conducted consumer testing to identify what pieces 
of information consumers considered to be important to help them 
identify whether a debt was theirs, whether the amount stated was 
correct, and how the amount the debt collector was attempting to 
collect has changed over time (e.g., due to fees, interest, and 
payments).\670\ However, there is some indication that consumers tend 
to not read certain types of standard-form disclosures.\671\ To try to 
avoid this result, the Bureau conducted consumer testing exploring how 
consumers interacted and engaged with the notice and the pieces of 
information contained therein.\672\ This helped the Bureau understand 
whether consumers were inclined to engage with the document in general, 
and which pieces of the validation notice received more or less 
consumer attention.
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    \670\ FMG Summary Report, supra note 42.
    \671\ See, e.g., Ian Ayres & Alan Schwartz, The No-Reading 
Problem in Consumer Contract Law, 66 Stan. L. Rev. 545 (2014); 
Yannis Bakos et al., Does Anyone Read the Fine Print? Consumer 
Attention to Standard-Form Contracts, 43 J.Legal Studies 1, 1-35 
(2014); George R. Milne & Mary J. Culnan, Strategies for Reducing 
Online Privacy Risks: Why Consumers Read (or Don't Read) Online 
Privacy Notices, 18 J. Interactive Mktg. 3, 15-29 (2004); Jonathan 
A. Obar & Anne Oeldorf-Hirsch, The Biggest Lie on the internet: 
Ignoring the Privacy Policies and Terms of Service Policies of 
Social Networking Services, (York U., draft version, 2018), https://dx.doi.org/10.2139/ssrn.2757465.
    \672\ FMG Cognitive Report, supra note 40.
---------------------------------------------------------------------------

    The Bureau incorporated the findings from this consumer testing in 
its design of the proposed model validation notice form. To increase 
both engagement and comprehension of the validation information, the 
Bureau designed the proposed form to be visually engaging. The proposed 
form uses plain language wherever possible and conforms to 
recommendations the SEC set forth in their plain English handbook.\673\ 
To reduce the perceived complexity of the information, the proposed 
form uses a clear hierarchy of information through positioning in a 
columnar format, varying type-size, and bold-faced type for subsection 
headings. It uses shading to highlight the amount due and uses plain 
language rather than technical terms. Usability testing research using 
eye-tracking suggests that participants were able to locate relevant 
information on the proposed form, with most participants able to 
quickly locate their account number and the contact information of the 
creditor.\674\ The information presented in the proposed form is also 
concise, presenting consumers with a manageable amount of information 
about the debt and what they can do in response to the notice. This is 
important, as the perceived cost to a consumer of reading a disclosure 
increases with the amount of information provided.\675\
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    \673\ See Sec. Exchange Comm'n, A Plain English Handbook (Aug. 
1998), https://www.sec.gov/pdf/handbook.pdf.
    \674\ FMG Summary Report, supra note 42.
    \675\ The idea that consumers may decrease their engagement with 
information when more information is provided is somewhat supported 
by research on ``choice overload.'' This work indicates that if 
choice sets are large, some people opt to make no choice at all. 
See, e.g., Sheena Iyengar et al., How Much Choice is Too Much? 
Contributions to 401(k) Retirement Plans, in Pension Design and 
Structure: New Lessons from Behavioral Finance, at 83 (Oxford U. 
Press 2004).
---------------------------------------------------------------------------

    The Bureau expects consumers to experience few costs as a result of 
the proposed provision.
    Potential benefits to covered persons. The proposed provision would 
significantly reduce the litigation risk that debt collectors face when 
mailing validation notices. This would benefit debt collectors 
directly, by reducing litigation costs related to validation notices. 
It could also indirectly benefit debt collectors by adding information 
to validation notices that would be helpful to debt collectors and 
consumers but which debt collectors currently do not include for fear 
that it would increase litigation risk. The proposed validation 
information may also make consumers more likely to dispute, which could 
increase costs for debt collectors, as discussed under ``Potential 
costs to covered persons'' below.
    The Bureau understands that debt collectors currently face 
litigation risk associated with the validation notices they send, 
reflecting, in part, conflicting court decisions about what language is 
required and what language is permitted in the notices.\676\ The 
proposal would reduce this risk for debt collectors who use the 
proposed model form.
---------------------------------------------------------------------------

    \676\ See Small Business Review Panel Report, supra note 57, at 
22.
---------------------------------------------------------------------------

    The proposed validation information would include specific 
information about the debt intended to help consumers identify the debt 
and understand the amount the debt collector claims is owed. The 
Bureau's qualitative consumer research and the

[[Page 23386]]

Bureau's complaint data suggest that the information currently included 
in validation notices is often not sufficient for consumers to identify 
a debt or whether the amount owed is correct.\677\ If consumers are 
better able to identify debts, they may be less likely to dispute or 
ignore a debt that they in fact owe, and at the same time may be better 
able to articulate the basis for a dispute of a debt that they do not 
owe. These effects could benefit debt collectors by reducing the costs 
associated with consumer disputes. Although it is possible that debt 
collectors could currently provide such information on validation 
notices, the Bureau understands that some debt collectors who would 
like to provide additional information do not do so largely due to the 
legal risks associated with including information in the validation 
notice beyond what is expressly listed in the FDCPA.\678\ The proposal 
would significantly reduce this legal risk.
---------------------------------------------------------------------------

    \677\ See supra notes 451-52 and accompanying text.
    \678\ See Small Business Review Panel Report, supra note 57, at 
22 (finding that small entities would benefit from a model notice 
that reduced litigation risk arising from conflicting court 
decisions about what information is permitted on a validation 
notice).
---------------------------------------------------------------------------

    To quantify the benefits of this provision to covered persons, the 
Bureau would need data on how frequently consumers do not recognize the 
debt or amount owed identified in a validation notice, how many 
consumers would better recognize the debt given the proposed 
information, and how consumers would act on that information. While the 
Bureau is not aware of available data that would permit it to estimate 
these numbers, the Debt Collection Consumer Survey does provide some 
basis for thinking that the proposed validation information would be 
helpful to consumers.
    The proposed validation information could reduce debt collector 
costs associated with disputes by preventing some disputes from 
consumers who are more likely to recognize that they owe a debt and by 
making disputes that debt collectors receive clearer and easier to 
resolve. Debt collectors report that processing disputes is a costly 
activity, and that it can be especially difficult to process disputes 
if the consumer provides little or no detail about the basis for a 
dispute. Debt collectors surveyed by the Bureau indicated that most 
disputes took between five minutes and one hour of staff time to 
resolve, with 15 to 30 minutes being the most common amount of 
time.\679\ Respondents said that disputes took the longest amount of 
time to resolve if the basis of the dispute was unclear or if the 
consumer said the debt was not theirs.\680\
---------------------------------------------------------------------------

    \679\ CFPB Debt Collection Operations Study, supra note 45, at 
31.
    \680\ Id.
---------------------------------------------------------------------------

    The Bureau does not have a basis to estimate how much the proposed 
validation information might affect dispute rates. As an illustration 
of potential cost savings if dispute rates fall, if the proposed 
information were to reduce the number of consumers who dispute by 1 
percent of all validation notices sent, and assuming that there are 140 
million validation notices sent per year,\681\ the overall number of 
annual disputes would fall by 1.4 million. Assuming an average time to 
process each dispute of 0.375 hours, the overall savings to industry 
would be estimated at 525,000 person-hours, or approximately 250 full-
time equivalents. Assuming labor costs for debt collectors of $22 per 
hour,\682\ this would represent industry cost savings of about $11.5 
million.
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    \681\ The assumption of 140 million validation notices per year 
is based on an estimated 49 million consumers contacted by debt 
collectors each year and an assumption that each consumer receives 
an average of approximately 2.8 notices during the year.
    \682\ This assumes an hourly wage of $15 and taxes, benefits, 
and incentives of $7 per hour. See CFPB Debt Collection Operations 
Study, supra note 45, at 17 (reporting estimated debt collector 
wages between $10 and $20 per hour plus incentives).
---------------------------------------------------------------------------

    The proposed validation information could also reduce the cost of 
processing disputes by making it easier for consumers who dispute to 
provide at least some information about the basis of their disputes. 
This could reduce the costs to covered persons of processing disputes 
by making it easier for debt collectors to investigate disputed debts 
in order to verify the debt.
    Potential costs to covered persons. Debt collectors already send 
validation notices to consumers to comply with the FDCPA, so the 
proposed validation information would generally affect the content of 
existing disclosures debt collectors are sending rather than require 
debt collectors to send entirely new disclosures. Nonetheless, debt 
collectors would incur certain costs to comply with the proposal. These 
include one-time compliance costs, the ongoing costs of obtaining the 
required validation information, and potentially ongoing costs of 
responding to a potential increase in the number of disputes.
    The proposed provision would require debt collectors to reformat 
their validation notices to accommodate the proposed validation 
information requirements. The Bureau expects that any one-time costs to 
debt collectors of reformatting the validation notice would be 
relatively small, particularly for debt collectors who rely on vendors, 
because the Bureau expects that most vendors would provide an updated 
notice at no additional cost.\683\ The Bureau understands from its 
outreach that many covered persons currently use vendors to provide 
validation notices.\684\ Surveyed firms, and their vendors, told the 
Bureau that vendors do not typically charge an additional cost to 
modify an existing template (although this practice might not apply if 
the proposal required more extensive changes to validation notices than 
vendors typically make today).\685\ Debt collectors and vendors would 
bear costs to understand the requirements of the provision and to 
ensure that their systems generate notices that comply with the 
requirements, although these costs would be mitigated somewhat by the 
availability of a model form.
---------------------------------------------------------------------------

    \683\ See id. at 33.
    \684\ In the Operations Study, over 85 percent of debt 
collectors surveyed by the Bureau reported using letter vendors. Id. 
at 32.
    \685\ Id. at 33
---------------------------------------------------------------------------

    The proposed validation information would require debt collectors 
to provide certain additional information about the debt, which would 
require that debt collectors receive and maintain certain data fields 
and incorporate them into the notices. The Bureau believes that the 
large majority of debt collectors already receive and maintain most 
data fields included in the proposed validation information. However, 
some respondents to the Debt Collection Operations Survey reported that 
they do not receive information from creditors about post-default 
interest, fees, payments, and credits.\686\ These debt collectors would 
have to update their systems to track these fields. The Bureau 
understands that such system updates would be likely to cost less than 
$1,000 for each debt collector.\687\
---------------------------------------------------------------------------

    \686\ In the Operations Study, 52 of 58 respondents reported 
receiving itemization of post-charge-off fees on at least some of 
their accounts. Id. at 23.
    \687\ Id. at 26.
---------------------------------------------------------------------------

    If debt collectors adjust their systems to produce notices 
including the new validation information, the Bureau would not expect 
there would be an increase in the ongoing costs of printing and sending 
validation notices. However, there could be ongoing costs related to 
the validation information requirements if the required data are not 
always available to debt collectors. The Bureau understands that some 
creditors do not currently track post-default charges and credits in a 
way that can be readily transferred to debt collectors.

[[Page 23387]]

Under the proposal, debt collectors would be unable to send validation 
notices--and therefore unable to collect--if creditors do not provide 
this information.\688\ Some debt collectors might lose revenue as a 
result of not being able to collect debts if they do not obtain this 
information from creditors. The Bureau does not have representative 
data that would permit it to estimate how frequently this would occur.
---------------------------------------------------------------------------

    \688\ For example, the Bureau understands that after New York 
State began requiring itemization of post-charge-off fees and 
credits, some creditors were at least initially unable to provide 
this information and therefore did not place New York accounts for 
collection.
---------------------------------------------------------------------------

    Other potential costs to debt collectors could arise if changes to 
the validation information affect how consumers respond, particularly 
whether they dispute the debt. As discussed above, because the proposed 
validation information would include more detail, consumers might be 
more likely to recognize the debt and less likely to mistakenly dispute 
debts that they owe. On the other hand, the new consumer response 
information would make it easier to dispute debts or request the name 
and address of the original creditor. Together with the additional 
information about consumers' ability to dispute that would be provided, 
this could increase the number of consumers who dispute or request 
original-creditor information. The overall impact on dispute rates is 
unclear.
    The Bureau does not believe that any increases in dispute rates 
would be likely to substantially reduce collection revenue, but 
increased dispute rates would increase debt collector costs. With 
respect to collections revenue, the Bureau expects that, with some 
fairly limited exceptions, consumers who choose to pay a debt are 
generally those who recognize that they owe the debt and want to pay 
it, and that in most cases the proposed validation information would be 
unlikely to cause such consumers to dispute rather than pay.\689\ With 
respect to costs, the disclosures could lead consumers who do not 
recognize the debt or who believe there is a problem with the amount 
demanded to dispute the debt rather than ignoring it. Responding to 
disputes is a costly activity for debt collectors, so an increase in 
dispute rates would increase these costs. As discussed above, covered 
persons surveyed by the Bureau indicated that most disputes took 
between five minutes and one hour of staff time to resolve, with 15 to 
30 minutes being the most common amount of time.\690\
---------------------------------------------------------------------------

    \689\ While there is some evidence that consumers sometimes pay 
alleged debts even though they do not believe they owe them, such 
consumers may be motivated by factors, such as concerns about credit 
reporting, that are not addressed by the validation notice itself. 
See Jeff Sovern et al., Validation and Verification Vignettes: More 
Results from an Empirical Study of Consumer Understanding of Debt 
Collection Validation Notices, at 46-47 (St. John's U., Working 
Paper No. 18-0016, 2018), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3219171.
    \690\ CFPB Debt Collection Operations Study, supra note 45, at 
31. The discussion in ``Benefits to covered persons'' above provides 
an illustration of the potential impact on debt collectors of a 
change in dispute rates. Using the assumptions in that illustration, 
if the net impact of the proposal were to increase industrywide 
disputes by 1 million disputes per year, it could imply increased 
industry costs totaling around $8.25 million per year.
---------------------------------------------------------------------------

    The Bureau requests additional information about the benefits and 
costs to consumers and covered persons of the proposed validation 
information requirements, including information on whether and to what 
extent consumers would benefit from the requirements in the proposal, 
the costs to covered persons of providing the information that the 
proposal would require, and the likely effects of the proposal on 
consumer dispute rates.
    Alternative proposals to require Spanish-language disclosures. The 
Bureau considered proposals that would require debt collectors to 
provide a Spanish-language translation of the validation information 
under certain circumstances, such as on the reverse side of any 
English-language validation notice or if requested by a consumer. 
Consumers with limited English proficiency may benefit from 
translations of the validation information, and Spanish speakers 
represent the second-largest language group in the United States after 
English speakers.\691\
---------------------------------------------------------------------------

    \691\ In 2013, 38.4 million residents in the United States aged 
five and older spoke Spanish at home. See U.S. Census Bureau, Facts 
for Features: Hispanic Heritage Month 2015 (Sept. 14, 2015), https://www.census.gov/newsroom/facts-for-features/2015/cb15-ff18.html.
---------------------------------------------------------------------------

    Requiring Spanish-language disclosures would impose costs on some 
debt collectors. A requirement to send a Spanish-language disclosure on 
the back of each validation notice could increase mailing costs for all 
validation notices that are sent by mail, because it would require 
information that would otherwise be printed on the back of validation 
notices, such as State-mandated disclosures, to be provided on a 
separate page. A requirement to provide Spanish-language validation 
notices upon request could lead to a smaller increase in mailing costs 
but could require debt collectors to develop and maintain systems for 
tracking a consumer's language preference and responding to that 
preference.
    The Bureau understands that some debt collectors currently send 
validation notices in Spanish to some consumers. To the extent sending 
such notices is already prevalent it would limit the consumer benefits 
of a proposal that required Spanish-language translations as well as 
the costs to debt collectors of such a proposal, although there would 
still be costs associated with ensuring that such disclosures were made 
as required by regulation.
8. Electronic Disclosures and Communications
    The proposed rule includes provisions that the Bureau expects would 
encourage debt collectors to communicate with consumers by email and 
text message more frequently than they currently do. With respect to 
the validation notice, which most debt collectors currently provide by 
postal mail, proposed Sec.  1006.42 specifies methods that debt 
collectors would be able to use to send notices by email or by 
hyperlink to a secure website in a way that complies with the FDCPA's 
validation notice requirements. With respect to any communications 
about a debt, proposed Sec.  1006.6(d)(3) specifies procedures that 
debt collectors would be able to use to send an email or text message 
to a consumer about a debt without risking liability under the FDCPA 
for disclosure of the debt to a third party.
    Potential benefits and costs to consumers. Today, debt collectors 
generally communicate with consumers by letter and telephone. If the 
proposal were to lead debt collectors to increase their use of emails 
and text messages, the proposal would benefit consumers who prefer 
electronic communications to letters or telephone calls.
    Many consumers appear to prefer to receive certain disclosures 
about financial products by electronic means rather than postal mail. 
In 2016, of a sample of 203 million active general purpose credit card 
accounts, approximately 141 million accounts (69 percent of all 
accounts) were enrolled in online servicing, of which approximately 80 
million (39 percent of all accounts) opted into delivery of periodic 
statements by electronic means only.\692\ Because consumers who

[[Page 23388]]

experience debt collection differ from consumers who do not,\693\ these 
estimates would be more accurate if the Bureau knew how many consumers 
who experience debt collection have opted into receiving electronic-
only (paperless) disclosures from their creditors. It is not clear 
whether consumers who experience debt collection would be more or less 
digitally engaged with disclosures than their counterparts without debt 
collection experience.\694\
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    \692\ These estimates are based on data reported in Bureau of 
Consumer Fin. Prot., The Consumer Credit Card Market, at 164-66 
(Dec. 2017), https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2017.pdf. This rate has 
increased every year since at least 2013. These rates were lower for 
private label and retail co-brand cards, suggesting that the 
product's use case, acquisition channel, and consumer base 
composition may all affect both provider practices and consumer 
behavior.
    \693\ See CFPB Debt Collection Consumer Survey, supra note 18, 
at 15-17. Consumers who have experienced debt collection tend to 
have lower incomes, be under age 62, and be non-white.
    \694\ An FDIC survey that addressed access to banking services 
found that the share of respondents accessing bank accounts through 
online or mobile methods generally increased with income and was 
lower for respondents aged 65 or more. See 2017 FDIC National Survey 
of Unbanked and Underbanked Households at 27 & table 4.4 (Oct. 
2018), https://www.fdic.gov/household survey/.
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    Other data from the Debt Collection Consumer Survey show that about 
15 percent of consumers indicate that email is their most preferred 
method of being contacted about a debt in collection, with almost half 
of consumers indicating that a letter is their most preferred method, 
and about a quarter identifying a telephone as their most preferred 
method.\695\ The lower percentage for email may suggest that consumers 
are more likely to prefer electronic communications for periodic 
statements and similar disclosures than for debt collection 
communications. Taken together, the available data suggest that a 
minority of consumers--between 15 and 39 percent--would prefer 
electronic validation notices, while a majority--as many as 69 
percent--might prefer to receive electronic communications (other than 
the validation notice) instead of or in addition to paper 
communications or telephone calls.
---------------------------------------------------------------------------

    \695\ CFPB Debt Collection Consumer Survey, supra note 18, at 
23.
---------------------------------------------------------------------------

    As discussed above with respect to the proposal's provisions 
regarding call frequency, most consumers experiencing debt collection 
report that debt collectors call too often. The proposed provisions 
regarding electronic communications may have the indirect effect of 
reducing call frequency. These provisions may cause debt collectors to 
substitute email or text for telephone calls, and email or text may 
provide an easier channel for consumers to ask debt collectors to call 
less often. The benefits to consumers of reduced call frequency 
generally are discussed above. While some consumers prefer not to 
receive electronic communications from debt collectors, the Bureau 
believes that the proposal's opt-out provisions will reduce any harm to 
such consumers by making it relatively easy for consumers to stop 
attempts at electronic communication.
    The risk of third-party disclosure may be different for electronic 
debt collection communications than for letters or telephone calls, 
although the Bureau is not aware of evidence that would indicate 
whether such risk is higher or lower. Bureau data suggests that almost 
two-thirds of consumers consider it very important that third parties 
do not hear or see a message from a creditor or debt collector.\696\ To 
the extent that information in an electronic disclosure is less likely 
or more likely to be seen or heard by third parties than communications 
by mail or telephone, consumers receiving the validation notice 
electronically are likely to experience a benefit or a cost, 
respectively.
---------------------------------------------------------------------------

    \696\ See CFPB Debt Collection Consumer Survey, supra note 18, 
at 38.
---------------------------------------------------------------------------

    Receiving disclosures electronically rather than in the mail may 
affect the likelihood that borrowers notice and read the disclosures, 
which could lead to benefits or costs for consumers if they become more 
or less likely to inadvertently ignore or miss important information. 
The Bureau does not have information about how frequently consumers 
currently read validation notices sent by mail or how often they would 
read disclosures if sent by email or by hyperlink to a secure 
website.\697\ The requirement that debt collectors provide certain 
details about the debt in the subject line of an email or the first 
line of a text message may lower the likelihood that a consumer would 
miss or ignore the email or text message from the debt collector 
transmitting the disclosure. The option of providing the disclosure on 
a secure website, while reducing further the risk of third-party 
disclosure, may also reduce the likelihood the consumer would read it 
because more effort is required to obtain the disclosure.
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    \697\ One debt collector who currently communicates with 
consumers by email reports that 60 percent of consumers open at 
least one email and 25 percent click a link to review their options. 
See Small Business Review Panel Report, supra note 57, at 7. As of 
2015, about one tenth of all mass market credit card consumers 
accessed their online PDF periodic account statements in the final 
quarter of the year, which implies that fewer than one-half of 
consumers who receive only electronic statements viewed those 
statements. See Bureau of Consumer Fin. Prot., The Consumer Credit 
Card Market, at 134 figure 8 (Dec. 2015). However, the Bureau does 
not have data about the frequency with which consumers open or 
otherwise access paper periodic statements. In addition, notices of 
debts in collection may seem more serious or important than periodic 
statements, and may be more likely to be opened.
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    Based on available information, the Bureau does not believe that 
consumer comprehension of an electronic notice will be different from a 
paper notice. The proposal includes requirements designed to make 
electronic disclosures no harder to read than paper notices, including 
requiring that the proposed electronic disclosure resize to fit the 
consumer's screen. Some research suggests that shorter disclosures 
(e.g., one to two pages), such as the proposed notice, would result in 
similar levels of comprehension regardless of whether they are 
delivered on paper or electronically.\698\ In cases in which 
differences in performance exist between reading information on paper 
and electronically, the difference may be due to use of different 
reading strategies--people tend to scan and jump around more when 
reading electronic information than they do with paper.\699\ Studies of 
other reading-based tasks (surveys, ratings, and tests or quizzes) find 
no differences in performance between tasks completed on paper and 
electronically.\700\
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    \698\ Some recent studies find no differences in comprehension 
between information displayed on paper and information displayed on 
computers; many of these use relatively short texts. See, e.g., 
Robert Ball & Juan Pablo Hourcade, Rethinking Reading for Age from 
Paper and Computers, 27 Int'l J. Human-Computer Interaction 11 
(2011). In contrast, many studies using longer texts find 
comprehension is higher for paper. See, e.g., Lauren Singer & 
Patricia Alexander, Reading Across Mediums: Effects of Reading 
Digital and Print Texts on Comprehension and Calibration, 85 J. 
Experimental Educ. 1 (2017) (finding better engagement when 
undergraduates read from paper); Anne Mangen et al., Reading Linear 
Texts on Paper Versus Computer Screen, 58 Int'l J. Educ. Res. 61-68 
(2013) (finding that a small sample of high school students had 
lower comprehension of electronic information relative to paper); 
Scott Althaus & David Tewksbury, Agenda Setting and the ``New'' 
News: Patterns of Issue Importance Among Readers of the Paper and 
Online Versions of the New York Times, 29 Comm. Res. 2 (2002) 
(randomly assigned participants to read the paper or digital version 
of the New York Times and found better memory for readers of the 
paper version).
    \699\ Ziming Liu, Reading Behavior in the Digital Environment, 
61 J. Documentation 6 (2005).
    \700\ See Jan Noyes & Kate Garland, Computer- vs. Paper-based 
Tasks: Are They Equivalent?, 51 Ergonomics 9 (2008).
---------------------------------------------------------------------------

    Potential benefits and costs to covered persons. Debt collectors 
who send disclosures by email or hyperlink to a secure website rather 
than sending letters could benefit because they would no longer have to 
print and mail disclosures. The Bureau estimates that the marginal cost 
of mailing a validation notice is approximately $0.50 to $0.80, whereas 
the marginal cost of sending the same communication by email

[[Page 23389]]

would be approximately zero. The Bureau estimates that approximately 
140 million validation notices are mailed each year.\701\ Assuming, for 
example, that 40 percent of validation notices that are currently 
mailed were sent by email under the proposed rule (the approximate 
percentage of credit card customers electing paperless disclosures), 
and assuming average mailing costs of $0.65, this would suggest reduced 
costs to industry in the range of $36 million per year. To the extent 
that debt collectors were to provide validation notices by email more 
or less frequently than this under the proposal, the cost savings would 
be proportionately higher or lower.
---------------------------------------------------------------------------

    \701\ The assumption of 140 million validation notices per year 
is based on an estimated 49 million consumers contacted by debt 
collectors each year and an assumption that each receives an average 
of approximately 2.8 notices during the year.
---------------------------------------------------------------------------

    Debt collectors who use electronic communication may also benefit 
to the extent that some consumers are more likely to engage with debt 
collectors electronically than by telephone call or letter. During the 
SBREFA process, several small entity representatives said that 
communication by email or text message was preferred by some consumers 
and would be a more effective way to engage with them about their 
debts.\702\ One debt collector who currently uses email to contact 
consumers reports that its collection rates are greater than those of 
traditional debt collectors. While collection rates are likely to vary 
according to debt collector, type of debt, and related factors, 
clarifying the legality of electronic communications and disclosures 
would make it easier for debt collectors to test the efficacy of 
electronic communication and use it if they find it effective, 
potentially lowering costs and increasing the overall effectiveness of 
collections.
---------------------------------------------------------------------------

    \702\ See, e.g., Small Business Review Panel Report, supra note 
57, at appendix A.
---------------------------------------------------------------------------

    The Bureau requests additional information about the benefits and 
costs to consumers and covered persons of the proposed requirements 
related to electronic disclosure and communication, including 
information on whether and to what extent consumers would benefit from 
the requirements in the proposal and the benefits and costs to covered 
persons of providing electronic communications as discussed in the 
proposal.

G. Potential Reduction of Access by Consumers to Consumer Financial 
Products and Services

    This proposal contains a mix of provisions that would either 
restrict or encourage certain debt collection activities the net impact 
of which is uncertain. Economic theory indicates that it is possible 
for changes in debt collection rules, such as those contained in this 
proposal, to affect consumers' access to credit. Theory says that 
creditors should decide to extend credit based on the discounted 
expected value of the revenue stream from that extension of credit. 
This entails considering the possibility that the consumer will 
ultimately default. Specifically, the discounted expected value of an 
extension of credit will be the discounted present value of the stream 
of interest payments under the terms of the credit agreement, 
multiplied by the probability that the consumer pays, plus the 
discounted expected value of the creditor's recovery should the 
consumer default, times the probability of default. A profit-maximizing 
creditor will only extend credit to a given consumer if this expected 
value is positive.\703\ Anything that reduces the expected value of a 
creditor's recovery in the event of default, in general, will lower the 
discounted expected value of the extension of credit as a whole. This, 
in turn, may make potential extensions of credit with a discounted 
expected only slightly above zero to become negative, such that a 
creditor will be less willing to extend credit. Likewise, anything that 
increases the expected value of a creditor's recovery increases the 
discounted expected value of the credit extension, and may change the 
sign of the expected value of potential credit extensions that had 
negative expected values, such that a profit-maximizing creditor will 
be more willing to extend credit.
---------------------------------------------------------------------------

    \703\ For purposes of this discussion, the Bureau ignores risk 
preferences and assumes that creditors are risk neutral. That is, 
while a risk-averse decision maker would prefer a certain payment of 
$100 to an uncertain investment with expected value of $100, the 
discussion in this section assumes creditors are indifferent between 
these options. Creditors may be risk averse to some degree, such 
that they would prefer the certain investment to the gamble, or even 
risk seeking, such that they prefer a gamble with the prospect of a 
higher return. The theoretical argument described here does not 
hinge on creditors' risk preferences--the Bureau makes this 
assumption solely for ease of exposition.
---------------------------------------------------------------------------

    There are a few ways that the proposal might increase or decrease 
the expected value of creditors' recovery in the event of default, 
although theory alone gives no indication whether any of these actual 
effects on recovery would be large enough to have practical 
significance. The safe harbor for limited-content messages and 
affirming the legality of email use would tend to increase the expected 
value of recovery, while call frequency limits may reduce the expected 
value of recovery. First, to the extent that the proposal would raise 
costs for debt collectors, debt collectors in theory could pass these 
costs on to creditors, whether by charging higher contingency fees to 
creditors or by paying lower prices to creditors when buying debt.\704\ 
Second, the proposed rule may reduce the amount of expected recovery, 
either by making it less likely that consumers ultimately pay, or by 
reducing the amount that consumers pay in the event of a settlement. 
Finally, the proposed rule could increase the time it takes for debt 
collectors to recover. A rational creditor would discount future income 
more the further in the future it occurs, and so later payment of the 
same amount of money would reduce the discounted expected value of the 
payment. Alternatively, the proposed rule might lower costs for debt 
collectors, increase expected recovery, and decrease the time it takes 
for debt collectors to recover amounts owed.\705\
---------------------------------------------------------------------------

    \704\ The degree of this pass-through depends on the relative 
degree of market power held by debt collectors and creditors. If 
creditors have more market power, debt collectors will have limited 
ability to demand higher fees or lower wholesale prices. Given that 
many comments on the Small Business Review Panel Outline indicated 
that debt collectors have little market power in their interactions 
with creditors, it is likely that there is little pass-through of 
additional costs. See, e.g., Small Business Review Panel Report, 
supra note 57, at 16-17.
    \705\ Because creditors are generally not subject to the FDCPA, 
creditors could also respond to changes to debt collection rules by 
changing their decisions about whether to use third-party debt 
collectors or to collect debts themselves. The option to move debt 
collection activities ``in house'' could reduce any impact of the 
proposal on the costs of recovering unpaid debts.
---------------------------------------------------------------------------

    If the proposal were to reduce the expected value of extending 
credit, creditors might respond in three ways: (1) Increase their 
standards for lending, with an aim of reducing the probability of 
default; (2) reduce the amount of credit offered, thus reducing their 
losses in the event of a default; or (3) increase interest rates or 
other costs of credit such as fees, thus increasing their revenue from 
consumers who do not default. Which of these mechanisms any given 
creditor would pursue with respect to any given credit transaction 
would depend on the specifics of the particular credit market.
    The Bureau is aware of three empirical academic studies using 
modern data and methods that estimate the magnitude of the effect of 
debt collection restrictions on access to credit,\706\ one by a 
researcher affiliated

[[Page 23390]]

with the Federal Reserve Bank of Philadelphia (Fedaseyeu Study),\707\ 
another by researchers at the Federal Reserve Bank of New York (Fonseca 
Study),\708\ and a third by researchers at the Bureau (Romeo-Sandler 
Study).\709\ All three studies use changes in State or local debt 
collection laws and regulations to examine the effect of those laws on 
measures of credit access.
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    \706\ In addition, earlier empirical research examined the 
relationship between restrictions on creditor remedies and the 
supply of credit. See Thomas A. Durkin et al, Consumer Credit and 
the American Economy 521-525 (Oxford U. Press 2014) (summarizing 
this empirical literature).
    \707\ Viktar Fedaseyeu, Debt Collection Agencies and the Supply 
of Consumer Credit (Fed. Reserve Bank of Phila. Working Paper No. 
15-23, 2015).
    \708\ Julia Fonseca, Katherine Strair & Basit Zafar, Access to 
Credit and Financial Health: Evaluating the Impact of Debt 
Collection (Fed. Reserve Bank of N.Y. Staff Report No. 814, 2017).
    \709\ Charles Romeo & Ryan Sandler, The Effect of Debt 
Collection Laws on Access to Credit (Bureau of Consumer Fin. Prot., 
Off. of Research, Working Paper No. 2018-01, 2018.
---------------------------------------------------------------------------

    The Fedaseyeu Study used aggregate data on new credit card accounts 
combined with credit union call report data to examine the effect of 
various State law changes between 1999 and 2012 on the number of new 
revolving lines of credit opened each year in each State. This study 
finds that an additional restriction on debt collectors decreases the 
number of new accounts by about two accounts per quarter per 1,000 
consumers residing in a State. For comparison, the data used for the 
Fedaseyeu Study showed an average of 120 new accounts per quarter per 
1,000 consumers. The Fedaseyeu Study finds no effect of debt collection 
laws on the average credit card interest rate.\710\ However, the 
Fedaseyeu Study has some important limitations, particularly regarding 
extrapolating its results to the effects of the proposed rule. Most 
importantly, it considers a wide variety of types of debt collection 
laws, including provisions with limited consumer protection aspects. 
Specifically, a majority of the debt collection law changes included in 
the Fedaseyeu Study largely involve changes to licensing fees, bonds, 
or levels of statutory penalties for violations, rather than 
prohibiting or requiring specific conduct, and each such change is 
given the same weight as a law governing conduct.\711\ Leaving aside 
the question of whether monetary adjustments under State law are of a 
comparable magnitude to the proposed regulations under Federal law, the 
proposed rule focuses on conduct, rather than State licensing fees, 
bonds, or penalty amounts. As such, the results of the Fedaseyeu Study 
are less informative as to the effects of the proposed rule than they 
would be if the legal changes at issue were more comparable. The data 
analysis in the Fedaseyeu Study is also somewhat limited by the data 
that were available. The aggregate data used make it difficult to 
control for confounding factors, such as differences in credit scores 
between consumers.
---------------------------------------------------------------------------

    \710\ In addition to the results described here, the Fedaseyeu 
Study also examines the effect of debt collection laws on the number 
of debt collection firms per capita and a measure of the recovery 
rate from debt collection. The Bureau omits discussion of these 
results here because they are not directly relevant to the question 
of consumer access--the Bureau discusses potential effects on debt 
collection firms above.
    \711\ Specifically, Fedaseyeu created an index of debt 
collection regulation, with one point added for a tightening in any 
one of six categories of regulation, including licensing 
requirements, bonding requirements, and the creation of a board to 
regulate third-party debt collectors.
---------------------------------------------------------------------------

    The Fonseca Study follows a similar design as the Fedaseyeu Study 
and examines the same set of State law changes, but it employs 
microdata from the Federal Reserve Bank of New York's Consumer Credit 
Panel, a nationally representative sample of credit records from 
Equifax. The main results of the Fonseca Study focus on the initial 
loan amounts or limits for automobile loans, credit cards, and non-
traditional finance loans.\712\ The study finds a moderate effect on 
automobile loan amounts, and a small effect on initial credit card 
limits. Like the Fedaseyeu Study, a major limitation of the Fonseca 
Study is its focus on licensing requirements, which are not directly 
comparable to the provisions in the proposal. That the Fonseca Study 
finds larger effects on automobile loans than credit cards also raises 
questions. Although third-party debt collectors are sometimes involved 
in collecting on automobile loans when the loan balance exceeds the 
value of the car, most delinquent automobile debt is resolved through 
repossession. The fact that the Fonseca Study nonetheless found a 
moderately large effect on automobile balances suggests that possibly 
the study's methodology was not successful in isolating the causal 
effect of the debt collection laws, but instead was picking up other, 
unrelated, factors.
---------------------------------------------------------------------------

    \712\ The Fonseca Study defines non-traditional finance loans as 
``retail cards, personal loans and a residual loan category.'' Like 
the Fedaseyeu Study, the Fonseca Study also examines the effect of 
the debt collection laws studied on the number of debt collectors 
present in each State; again, the Bureau omits discussion of those 
results in this section.
---------------------------------------------------------------------------

    The Romeo-Sandler Study uses microdata from two large 
administrative datasets: The Bureau's Consumer Credit Panel (CCP) \713\ 
and Credit Card Database (CCDB).\714\ This study focuses on four recent 
major changes in State or local laws and regulations that imposed 
additional conduct requirements on either debt buyers or on all debt 
collectors.\715\ By focusing on the effect of changes to laws that 
regulate debt collector conduct, the results of the Romeo-Sandler Study 
are arguably more applicable to understanding the effects of the 
proposal, although the specific changes to State or local laws studied 
differ considerably from the provisions of the proposed rule.
---------------------------------------------------------------------------

    \713\ Although similar in nature, the Bureau's CCP is not the 
same as the Federal Reserve Bank of New York's Consumer Credit 
Panel, discussed above. The Bureau's CCP is an anonymized sample of 
credit records from one of the three nationwide CRAs, containing a 
1-in-48 representative sample of all adults with a credit record. 
The data contain all credit accounts (trade lines) and hard 
inquiries on a consumer's credit report, with a unique, anonymous 
identifier linking records belonging to the same consumer. This CCP 
does not contain any personally identifying information on 
individual consumers.
    \714\ The CCDB is a monthly panel describing balances, payments, 
and interest rates on all credit card accounts issued by a set of 
major banks, representing roughly 90 percent of the credit card 
market. As with the CCP, accounts are identified by an anonymous 
identifier, and the CCDB does not contain any personally identifying 
information.
    \715\ New laws were put into effect in North Carolina in October 
2009 and California in January 2014; both of these laws focused 
exclusively on debt buyers. In addition, New York City, in April 
2010, and New York State, in December 2014, introduced new debt 
collection restrictions through administrative regulations. These 
updated restrictions generally require debt collectors to take 
additional steps before collecting, including requiring additional 
documents to substantiate debts before collections can begin, 
requiring disclosures or additional documentation before lawsuits 
can be filed to enforce a debt, and requiring disclosures once the 
State's statute of limitations has run out.
---------------------------------------------------------------------------

    The Romeo-Sandler Study assesses three main outcomes: The 
probability that a credit inquiry results in an open credit card 
account, the credit limit on newly opened credit card accounts, and 
initial interest rates on credit card accounts. As discussed above, 
creditors might limit any of these factors to adjust for the effects of 
a regulation such as the proposal. The Romeo-Sandler Study controls for 
individual consumers' credit scores and census tract demographic 
information and flexibly adjusts for State-level trends over time that 
might otherwise bias the estimates of an analysis. As with the 
Fedaseyeu Study and Fonseca Study, the Romeo-Sandler Study found 
effects of debt collection laws that are in the direction predicted by 
theory (i.e., increased regulation increases the cost or decreases the 
availability of credit), but the effects are quite small in magnitude. 
Using the CCP, this study found that additional regulations on debt 
collectors' conduct caused the success rate of a credit inquiry to 
decline by less than 0.02 percentage points off a base

[[Page 23391]]

rate of about 43 percent. The study concludes that one can 
statistically reject that the effect was as large as 0.7 percentage 
points. The study provides some context for these effects by comparing 
them to the effect of changing consumers' credit scores. The study 
found that each credit score point increases the probability of a 
successful credit inquiry for subprime borrowers by about 0.2 
percentage points. Thus, the estimated effect of a debt collection law 
is equivalent to lowering consumers' credit scores by less than one 
point.\716\ The Romeo-Sandler Study finds similarly small effects on 
credit limits, which are again equivalent to a very small change in 
credit score. The magnitude of the credit limit effect in the Romeo-
Sandler Study is smaller than that found in the Fonseca Study.
---------------------------------------------------------------------------

    \716\ The study notes, as a point of comparison, that this 
effect is considerably smaller than that of routine errors in credit 
reports. See Fed. Trade Comm'n, Report to Congress Under Section 319 
of the Fair and Accurate Credit Transactions Act of 2003, at 43 
(Dec. 2012), https://www.ftc.gov/sites/default/files/documents/reports/section-319-fair-and-accurate-credit-transactions-act-2003-fifth-interim-federal-trade-commission/130211factareport.pdf.
---------------------------------------------------------------------------

    The Romeo-Sandler Study also analyzes the effect of debt collection 
laws on credit card interest rates using the CCDB. The study finds that 
initial interest rates increase slightly following a State or local 
debt collection law or regulation, but that this entirely takes the 
form of a reduced frequency of accounts with an introductory APR of 0 
percent--the level of positive initial interest rates are essentially 
unchanged.
    The Romeo-Sandler Study is also able to shed light on potential 
areas of heterogeneity in the effects of State debt collection laws 
because of its access to rich microdata. The Romeo-Sandler Study 
explores the effects separately for consumers with high and low credit 
scores, and finds somewhat larger (although still small) effects on 
consumers with sub-prime credit scores. This is consistent with theory. 
Even within the sub-sample of consumers with sub-prime credit scores, 
the effect of the laws is equivalent to a three-point decrease in sub-
prime borrowers' credit scores.
    The studies discussed above provide evidence that regulation of 
debt collection can affect consumer access to credit in ways consistent 
with economic theory. However, these studies do not speak directly to 
the likely effects of the proposed rule on consumer credit markets. The 
State or local laws analyzed in these studies implement a different set 
of consumer protections than those in the proposed rule. The proposed 
rule includes some provisions likely to increase debt collector costs, 
but it also includes other provisions, such as those related to 
limited-content messages and email and text messages, which could lower 
costs for some debt collectors. In addition, creditors and debt 
collectors might react differently to changes in State or local 
collection standards than the standards in the Bureau's proposed rule, 
which could affect all U.S. consumers. For instance, a nationwide 
creditor might choose not to adjust its credit standards in response to 
a change in only one State's debt collection laws, but might find it 
optimal to change its standards if similar laws applied nationwide or 
to a large share of its potential borrowers.

H. Potential Specific Impacts of the Proposed Rule

1. Depository Institutions and Credit Unions With $10 Billion or Less 
in Total Assets, as Described in Section 1026
    Depository institutions and credit unions are generally not debt 
collectors under the FDCPA and therefore would not be covered by the 
proposal. However, as noted above, creditors could experience indirect 
effects from the proposal to the extent they hire FDCPA-covered debt 
collectors or sell debt in default to such debt collectors. Such 
creditors could experience higher costs if debt collectors' costs 
increase and if debt collectors are able to pass those costs on to 
creditors.
    The Bureau understands that many depository institutions and credit 
unions with $10 billion or less in total assets rely on FDCPA-covered 
debt collectors to collect unpaid amounts, but the Bureau does not have 
data indicating whether such institutions are more or less likely than 
other creditors to do so. The Bureau requests additional data and other 
information about potential benefits and costs of the proposal for 
these institutions.
2. Impact of the Proposed Provisions on Consumers in Rural Areas
    Consumers in rural areas may experience benefits from the proposed 
rule that are different in certain respects from the benefits 
experienced by consumers in general. For example, consumers in rural 
areas may be more likely to borrow from small local banks and credit 
unions that may be less likely to outsource debt collection to FDCPA-
covered debt collectors. Debts owed by consumers in rural areas may 
also be more likely to be collected by smaller debt collectors, which 
the Bureau understands are less likely to attempt debt collection calls 
more frequently than the proposed frequency caps would permit. The 
proposed frequency caps may therefore have less of an impact on 
consumers in rural areas.
    The Bureau will further consider the impact of the proposed rule on 
consumers in rural areas. The Bureau therefore asks interested parties 
to provide data, research results, and other factual information on the 
impact of the proposed rule on consumers in rural areas.

I. Request for Information

    The Bureau will further consider the benefits, costs, and impacts 
of the proposed provisions and additional proposed modifications before 
finalizing the proposal. As noted above, there are a number of areas in 
which additional information would allow the Bureau to better estimate 
the benefits, costs, and impacts of this proposal and more fully inform 
the rulemaking. The Bureau asks interested parties to provide comment 
or data on various aspects of the proposed rule, as detailed in the 
section-by-section analysis. Information provided by interested parties 
regarding these and other aspects of the proposed rule may be 
considered in the analysis of the benefits, costs, and impacts of the 
final rule. The Bureau specifically requests precise cost or 
operational data that would permit it to better evaluate the potential 
impacts on consumers and covered persons, including impacts on 
collection rates, implementation costs and ongoing operational costs 
imposed by the proposed provisions. The Bureau also requests comment on 
the research referenced above, including its use of the Fedaseyeu 
Study, the Fonseca Study, and the Romeo-Sandler Study.

[[Page 23392]]

VII. Regulatory Flexibility Analysis

    Under section 603(a) of the Regulatory Flexibility Act (RFA), an 
initial regulatory flexibility analysis (IRFA) ``shall describe the 
impact of the proposed rule on small entities.'' \717\ Section 603(b) 
of the RFA sets forth the required elements of the IRFA. Section 
603(b)(1) requires a description of the reasons agency action is being 
considered.\718\ Section 603(b)(2) requires a succinct statement of the 
objectives of, and the legal basis for, the proposed rule.\719\ Section 
603(b)(3) requires a description of and, where feasible, an estimate of 
the number of small entities to which the proposed rule will 
apply.\720\ Section 603(b)(4) requires a description of the projected 
reporting, recordkeeping, and other compliance requirements of the 
proposed rule, including an estimate of the classes of small entities 
that will be subject to the requirement and the types of professional 
skills necessary for the preparation of the report or record.\721\ 
Section 603(b)(5) requires identifying, to the extent practicable, all 
relevant Federal rules which may duplicate, overlap, or conflict with 
the proposed rule.\722\ Section 603(c) requires a description of any 
significant alternatives to the proposed rule that accomplish the 
stated objectives of applicable statutes and that minimize any 
significant economic impact of the proposed rule on small 
entities.\723\ Finally, section 603(d)(1) requires a description of any 
projected increase in the cost of credit for small entities, a 
description of any significant alternatives to the proposed rule that 
accomplish the stated objectives of applicable statutes and that 
minimize any increase in the cost of credit for small entities (if such 
an increase in the cost of credit is projected), and a description of 
the advice and recommendations of representatives of small entities 
relating to the cost of credit issues.\724\
---------------------------------------------------------------------------

    \717\ 5 U.S.C. 603(a).
    \718\ 5 U.S.C. 603(b)(1).
    \719\ 5 U.S.C. 603(b)(2).
    \720\ 5 U.S.C. 603(b)(3).
    \721\ 5 U.S.C. 603(b)(4).
    \722\ 5 U.S.C. 603(b)(5).
    \723\ 5 U.S.C. 603(c).
    \724\ 5 U.S.C. 603(d)(1).
---------------------------------------------------------------------------

A. Description of the Reasons Why Agency Action Is Being Considered

    As noted in part I, the Bureau is issuing this proposed rule to 
implement and interpret the FDCPA, particularly with respect to debt 
collection communication, disclosure, and other related practices by 
FDCPA-covered debt collectors, and to further the FDCPA's goals of 
eliminating abusive debt collection practices and ensuring that debt 
collectors who refrain from abusive debt collection practices are not 
competitively disadvantaged.\725\ The FDCPA established certain 
consumer protections, but interpretive questions have arisen since its 
passage. Some questions, including those related to communication 
technologies that did not exist at the time the FDCPA was enacted (such 
as mobile telephones, emails, and text messages), have been the subject 
of inconsistent court decisions, resulting in legal uncertainty and 
additional cost for industry and consumers. The Bureau proposes to 
clarify how debt collectors may employ such technologies in compliance 
with the FDCPA and to address other communications- and disclosure-
related practices that currently pose a risk of harm to consumers, 
legal uncertainty to industry, or both. The Bureau also proposes that 
FDCPA-covered debt collectors comply with certain additional 
disclosure-related and record retention requirements pursuant to the 
Bureau's Dodd-Frank Act rulemaking authority; these proposed 
requirements are designed to enhance consumer understanding of the debt 
collection process and to promote effective and efficient enforcement 
and supervision of Regulation F.
---------------------------------------------------------------------------

    \725\ See 15 U.S.C. 1692(e).
---------------------------------------------------------------------------

B. Statement of the Objectives of, and Legal Basis for, the Proposed 
Rule

    As discussed in part IV, the Bureau issues this proposal pursuant 
to its authority under the FDCPA and the Dodd-Frank Act. The objectives 
of the proposed rule are to answer certain interpretive questions that 
have arisen since the FDCPA's passage and to further the FDCPA's goals 
of eliminating abusive debt collection practices and to ensuring that 
debt collectors who refrain from abusive debt collection practices are 
not competitively disadvantaged.\726\ As the first Federal agency with 
authority under the FDCPA to prescribe substantive rules with respect 
to the collection of debts by debt collectors, the Bureau proposes to 
clarify by rule how debt collectors may appropriately employ newer 
communication technologies in compliance with the FDCPA and to address 
other communications-related practices that currently pose a risk of 
harm to consumers, legal uncertainty to industry, or both. The Bureau 
also proposes to clarify consumer disclosure requirements to provide 
clarity for both consumers and industry participants. The Bureau 
intends that these clarifications will help to eliminate abusive debt 
collection practices and ensure that debt collectors who refrain from 
abusive debt collection practices are not competitively 
disadvantaged.\727\
---------------------------------------------------------------------------

    \726\ See 15 U.S.C. 1692(e).
    \727\ See id.
---------------------------------------------------------------------------

    As amended by the Dodd-Frank Act, FDCPA section 814(d) provides 
that the Bureau may ``prescribe rules with respect to the collection of 
debts by debt collectors,'' as that term is defined in the FDCPA.\728\ 
Section 1022(a) of the Dodd-Frank Act provides that ``[t]he Bureau is 
authorized to exercise its authorities under Federal consumer financial 
law to administer, enforce, and otherwise implement the provisions of 
Federal consumer financial law.'' \729\ ``Federal consumer financial 
law'' includes title X of the Dodd-Frank Act and the FDCPA. The legal 
basis for the proposed rule is discussed in detail in the legal 
authority analysis in part IV and in the section-by-section analysis in 
part V.
---------------------------------------------------------------------------

    \728\ 15 U.S.C. 1692l(d).
    \729\ 12 U.S.C. 5512(a).
---------------------------------------------------------------------------

C. Description and, Where Feasible, Provision of an Estimate of the 
Number of Small Entities To Which the Proposed Rule Will Apply

    As discussed in the Small Business Review Panel Report, for the 
purposes of assessing the impacts of the proposed rule on small 
entities, ``small entities'' is defined in the RFA to include small 
businesses, small nonprofit organizations, and small government 
jurisdictions.\730\ A ``small business'' is determined by application 
of SBA regulations in reference to the North American Industry 
Classification System (NAICS) classifications and size standards.\731\ 
Under such standards, the Small Business Review Panel (Panel) 
identified four categories of small entities that may be subject to the 
proposed provisions: Collection agencies (NAICS 561440) with $15 
million or less in annual receipts, debt buyers (NAICS 522298) with 
$38.5 million or less in annual revenues, collection law firms (NAICS 
54110) with $11 million or less in annual receipts, and servicers who 
acquire accounts in default. These servicers include depository 
institutions (NAICS 522110, 522120, and 522130) with $550 million or 
less in annual receipts or non-depository institutions (NAICS 522390) 
with $20.5 million or less in annual receipts. The Panel did not meet

[[Page 23393]]

with small nonprofit organizations or small government 
jurisdictions.\732\
---------------------------------------------------------------------------

    \730\ 5 U.S.C. 601(6).
    \731\ The current SBA size standards are found on SBA's website, 
https://www.sba.gov/content/table-small-business-size-standards.
    \732\ Small Business Review Panel Report, supra note 57, at 29.
---------------------------------------------------------------------------

    The following table provides the Bureau's estimate of the number 
and types of entities that may be affected by the proposed provisions:

                  Table 4--Estimated Number of Affected Entities and Small Entities by Category
----------------------------------------------------------------------------------------------------------------
                                                                                     Estimated
                                                                                   total number      Estimated
                                                                Small entity          of debt        number of
             Category                       NAICS                threshold          collectors     small entity
                                                                                      within           debt
                                                                                     category       collectors
----------------------------------------------------------------------------------------------------------------
Collection agencies...............  561440...............  $15.0 million in                9,000           8,800
                                                            annual receipts.
Debt buyers.......................  522298...............  $38.5 million in                  330             300
                                                            annual receipts.
Collection law firms..............  541110...............  $11.0 million in                1,000             950
                                                            annual receipts.
Loan servicers....................  522110, 522120, and    $550 million in                   700             200
                                     522130                 annual receipts for
                                     (depositories);        depository
                                     522390 (non-           institutions; $20.5
                                     depositories.          million or less for
                                                            non-depositories.
----------------------------------------------------------------------------------------------------------------

Descriptions of the Four Categories
    Collection agencies. The Census Bureau defines ``collection 
agencies'' (NAICS code 561440) as ``establishments primarily engaged in 
collecting payments for claims and remitting payments collected to 
their clients.'' \733\ In 2012, according to the Census Bureau, there 
were approximately 4,000 collection agencies with paid employees in the 
United States. Of these, the Bureau estimates that 3,800 collection 
agencies have $15.0 million or less in annual receipts and are 
therefore small entities.\734\ Census Bureau estimates indicate that in 
2012 there were also more than 5,000 collection agencies without 
employees, all of which are presumably small entities.
---------------------------------------------------------------------------

    \733\ As defined by the Census Bureau, collection agencies 
include entities that collect only commercial debt, and the 
proposals under consideration apply only to debt collectors of 
consumer debt. However, the Bureau understands that relatively few 
collection agencies collect only commercial debt.
    \734\ The Census Bureau estimates average annual receipts of 
$95,000 per employee for collection agencies. Given this, the Bureau 
assumes that all firms with fewer than 100 employees and 
approximately one-half of the firms with 100 to 499 employees are 
small entities, which implies approximately 3,800 firms.
---------------------------------------------------------------------------

    Debt buyers. Debt buyers purchase delinquent accounts and attempt 
to collect amounts owed, either themselves or through agents. The 
Bureau estimates that there are approximately 330 debt buyers in the 
United States, and that a substantial majority of these are small 
entities.\735\ Many debt buyers--particularly those that are small 
entities--also collect debt on behalf of other debt owners.\736\
---------------------------------------------------------------------------

    \735\ The Receivables Management Association, the largest trade 
group for this industry segment, states that it has approximately 
300 debt buyer members and believes that 90 percent of debt buyers 
are current members.
    \736\ The Bureau understands that debt buyers are generally 
nondepositories that specialize in debt buying and, in some cases, 
debt collection. The Bureau expects that debt buyers that are not 
collection agencies would be classified by the Census Bureau under 
``all other nondepository credit intermediation'' (NAICS Code 
522298).
---------------------------------------------------------------------------

    Collection law firms. The Bureau estimates that there are 1,000 law 
firms in the United States that either have as their principal purpose 
the collection of consumer debt or regularly collect consumer debt owed 
to others, so that the proposed rule would apply to them. The Bureau 
estimates that 95 percent of such law firms are small entities.\737\
---------------------------------------------------------------------------

    \737\ The primary trade association for collection attorneys, 
the National Creditors Bar Association (NARCA), states that it has 
approximately 600 law firm members, 95 percent of which are small 
entities. The Bureau estimates that approximately 60 percent of law 
firms that collect debt are NARCA members and that a similar 
fraction of non-member law firms are small entities.
---------------------------------------------------------------------------

    Loan servicers. Loan servicers would be covered by the proposed 
rule if they acquire servicing of loans already in default.\738\ The 
Bureau believes that this is most likely to occur with regard to 
companies that service mortgage loans or student loans. The Bureau 
estimates that approximately 200 such mortgage servicers may be small 
entities and that few, if any, student loan servicers that would be 
covered by the proposed rule are small.\739\
---------------------------------------------------------------------------

    \738\ The Bureau expects that loan servicers are generally 
classified under NAICS code 522390, ``Other Activities Related to 
Credit Intermediation.'' Some depository institutions (NAICS codes 
522110, 522120, and 522130) also service loans for others and may be 
covered by the proposed rule.
    \739\ Based on the December 2015 Call Report data as compiled by 
SNL Financial (with respect to insured depositories) and December 
2015 data from the Nationwide Mortgage Licensing System and Registry 
(with respect to non-depositories), the Bureau estimates that there 
are approximately 9,000 small entities engaged in mortgage 
servicing, of which approximately 100 service more than 5,000 loans. 
See 81 FR 72160, 72363 (Oct. 19, 2016). The Bureau's estimate is 
based on the assumption that all those servicing more than 5,000 
loans may acquire servicing of loans when loans are in default and 
that at most 100 of those servicing 5,000 loans or fewer acquire 
servicing of loans when loans are in default.
---------------------------------------------------------------------------

D. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements of the Proposed Rule, Including an Estimate of Classes of 
Small Entities That Will Be Subject to the Requirements and the Type of 
Professional Skills Necessary for the Preparation of the Report or 
Record

    The proposed rule would not impose new reporting requirements, but 
would impose new recordkeeping and compliance requirements on small 
entities subject to the proposal. The proposed requirements and the 
costs associated with them are discussed below.
1. Recordkeeping Requirements
    Proposed Sec.  1006.100 would require FDCPA-covered debt collectors 
to retain evidence of compliance with Regulation F starting on the date 
that the debt collector begins collection activity on a debt and ending 
three years after: (1) The debt collector's last communication or 
attempted communication in connection with the collection of the debt; 
or (2) the debt is settled, discharged, or transferred to the debt 
owner or to another debt collector.
    The Bureau believes that most debt collectors are already 
maintaining records for three or more years for legal purposes and 
therefore would not incur significant costs as a result of the 
proposal's record retention requirement. During the SBREFA process, 
nearly all small entity representatives stated that their current 
practices are already consistent with a three-year record retention 
requirement, and some said that they retain records for longer periods 
ranging from five to 10 years.\740\ Some participants said, however, 
that

[[Page 23394]]

they retain some information for a shorter period of time such as one 
year. Such small entities would incur additional costs for data storage 
and to update systems to reflect the longer storage period.
---------------------------------------------------------------------------

    \740\ Small Business Review Panel Report, supra note 57, at 28.
---------------------------------------------------------------------------

2. Compliance Requirements
    The proposal contains a number of compliance requirements that 
would apply to FDCPA-covered debt collectors who are small entities. 
The anticipated costs of compliance for small entities of these 
requirements are discussed below.
    In evaluating the potential impacts of the proposal on small 
entities, the Bureau takes as a baseline conduct in the debt collection 
markets under the current legal framework governing debt collection. 
This includes debt collector practices as they currently exist, 
responding to the requirements of the FDCPA as currently interpreted 
and other Federal laws as well as State statutes and rules. This 
baseline represents the status quo from which the impacts of this 
proposal will be evaluated.
    The Bureau requests comment on the estimated impacts on small 
entities discussed below and solicits data and analysis that would 
supplement the quantitative estimates discussed below or provide 
quantitative estimates of benefits, costs, or impacts for which there 
are currently only qualitative discussions.
    The discussion here is confined to the direct costs to small 
entities of complying with the requirements of the proposed rule, if 
finalized. Other impacts, such as the impacts of call frequency limits 
on debt collectors' ability to contact consumers, are discussed at 
length in part VI. The Bureau believes that, except where otherwise 
noted, the impacts discussed in part VI would apply to small entities.
(a) Prohibited Communications With Consumers
    Proposed Sec.  1006.6(b) generally would implement FDCPA section 
805(a)'s prohibition on a debt collector communicating with a consumer 
at unusual or inconvenient times and places, with a consumer 
represented by an attorney, and at a consumer's place of employment. 
This section would also expressly prohibit attempts to make such 
communications, which debt collectors already must avoid given that a 
successful attempt would be an FDCPA violation. Proposed Sec.  
1006.14(h)(1) would interpret FDCPA section 806's prohibition on a debt 
collector engaging in any conduct the natural consequence of which is 
to harass, oppress, or abuse any person in connection with the 
collection of a debt to prohibit debt collectors from communicating or 
attempting to communicate with consumers through a medium of 
communication if the consumer has requested that the debt collector not 
use that medium to communicate with the consumer.
    Debt collectors are already prohibited from communicating with 
consumers at a time or place that is known or should be known to be 
inconvenient to the consumer. The Bureau therefore believes that many 
debt collectors already keep track of what consumers tell them about 
the times and places that they find inconvenient and avoid 
communicating or attempting to communicate with consumers at these 
times or places. Similarly, the proposed provisions regarding 
communication with attorneys and at the consumer's place of employment 
track debt collector practices that already comply with the FDCPA. The 
Bureau understands that many debt collectors currently employ systems 
and business processes designed to limit communication attempts to 
consumers at inconvenient times and places and that many debt 
collectors also use these systems and processes to prevent 
communications with consumers through media that consumers have told 
them are inconvenient. For these reasons, the Bureau does not expect 
that the proposed provisions would significantly impact small entities 
subject to the proposal.
(b) Frequency Limits for Telephone Calls and Telephone Conversations
    Proposed Sec.  1006.14(b)(1) would prohibit a debt collector from, 
in connection with the collection of a debt, placing telephone calls or 
engaging in telephone conversation repeatedly or continuously with 
intent to annoy, abuse, or harass any person at the called number. 
Proposed Sec.  1006.14(b)(2) would provide that, subject to certain 
exceptions set forth in proposed Sec.  1006.14(b)(3), a debt collector 
violates proposed Sec.  1006.14(b)(1) if the debt collector places a 
telephone call to a person in connection with the collection of a 
particular debt either: (i) More than seven times within seven 
consecutive days; or (ii) within a period of seven consecutive days 
after having had a telephone conversation with the person in connection 
with the collection of such debt. Proposed Sec.  1006.14(b)(4) would 
clarify the effect of complying with the frequency limits in Sec.  
1006.14(b)(2), stating that a debt collector who does not exceed the 
limits complies with Sec.  1006.14(b)(1) and FDCPA section 806(5), and 
does not, based on the frequency of its telephone calls, violate Sec.  
1006.14(a), FDCPA section 806, or Dodd-Frank Act sections 1031 or 
1036(a)(1)(B).
    The proposed provision would impose at least two categories of 
costs on small entities subject to the FDCPA. First, it would mean that 
debt collectors must track the frequency of outbound telephone calls, 
which would require many debt collectors to bear one-time costs to 
update their systems and train staff and create ongoing costs for some 
debt collectors. Second, for some debt collectors, the proposed 
provision would require a reduction in the frequency with which they 
place telephone calls to consumers, which could make it harder to reach 
consumers and delay or reduce collections revenue.
    With respect to one-time implementation costs, many debt collectors 
would incur costs to revise their systems to incorporate the proposed 
call frequency limits. Such revisions could range from small updates to 
existing systems to the introduction of completely new systems and 
processes. The Bureau understands that larger debt collectors 
(including those that are small entities) generally already implement 
system limits on call frequency to comply with client contractual 
requirements, debt collector internal policies, and State and local 
laws.\741\ Such debt collectors might need only to revise existing 
calling restrictions to ensure that existing systems comply with the 
limits. Larger debt collectors might also need to respond to client 
requests for additional reports and audit items to verify that they 
comply with the limits, which could require these agencies to make 
systems changes to alter the reports and data they produce for their 
clients to review.
---------------------------------------------------------------------------

    \741\ Id. at 26.
---------------------------------------------------------------------------

    Smaller debt collectors and debt collection law firms are less 
likely to have existing systems that track or limit communication 
frequency, and may therefore face larger costs to establish systems to 
do so. However, many smaller debt collectors report that they generally 
attempt to reach each consumer by telephone only one or two times per 
week and generally do not speak to a consumer more than one time per 
week, which suggests that their practices are already within the 
proposed frequency limits.\742\ For such debt collectors, existing 
policies may be

[[Page 23395]]

sufficient to ensure compliance with the proposed provision.
---------------------------------------------------------------------------

    \742\ CFPB Debt Collection Operations Study, supra note 45, at 
29.
---------------------------------------------------------------------------

(c) Time-Barred Debt: Prohibiting Suits and Threats of Suit
    Proposed Sec.  1006.26(b) would prohibit a debt collector from 
suing or threatening to sue on a debt that the debt collector knows or 
should know is time-barred.
    As discussed in part V, courts have held that the FDCPA prohibits 
suits and threats of suit on time-barred debt. In light of this, the 
Bureau understands that most debt collectors do not knowingly sue or 
threaten to sue consumers to collect time-barred debts, and therefore 
the Bureau does not expect this provision of the proposed rule to have 
a significant effect on small entities.\743\
---------------------------------------------------------------------------

    \743\ For example, small entity representatives at the meeting 
of the Small Business Review Panel indicated that it was standard 
practice in the industry not to knowingly initiate lawsuits to 
collect time-barred debt. See Small Business Review Panel Report, 
supra note 57, at 35. Some industry groups have adopted policies 
requiring members to refrain from suing or threatening to sue on 
time-barred debts. See, e.g., Receivables Mgmt. Ass'n, Receivables 
Management Certification Program, at 32 (Jan. 19, 2018), https://rmassociation.org/wp-content/uploads/2018/02/Certification-Policy-version-6.0-FINAL-20180119.pdf.
---------------------------------------------------------------------------

(d) Communication Prior To Furnishing Information
    Proposed Sec.  1006.30(a) would prohibit a debt collector from 
furnishing information to a CRA regarding a debt before communicating 
with the consumer about that debt, a requirement that debt collectors 
could satisfy by sending a validation notice prior to furnishing 
information.
    The proposal would affect the practices of debt collectors who 
sometimes furnish information about consumers' debts to CRAs before the 
debt collectors have communicated with consumers. The Bureau 
understands that most debt collectors mail validation notices to 
consumers shortly after they receive the accounts for collections and 
before they furnish data on those accounts, and so they already would 
be in compliance with the proposed requirement.\744\ Forty-five out of 
58 debt collectors responding to the Debt Collection Operations Survey 
said that they furnish information to credit bureaus.\745\ In all but 
three of these cases, the respondents said that they send a validation 
notice upon account placement, such that the proposed requirement would 
be satisfied. These debt collectors would likely need to review their 
policies to ensure that validation notices are always sent (or 
validation information is provided in an initial communication) prior 
to reporting on the account, which the Bureau expects would involve a 
small one-time cost. Other debt collectors do not furnish information 
at all to CRAs and so would not be affected by the proposed 
requirement.
---------------------------------------------------------------------------

    \744\ In the Operations Study, 53 of 58 respondents said that 
they send a validation notice shortly after account placement. CFPB 
Debt Collection Operations Study, supra note 45, at 28.
    \745\ Id. at 19.
---------------------------------------------------------------------------

    Debt collectors who furnish information to CRAs but provide 
validation notices to consumers only after they have been in contact 
with consumers would need to change their practices and would face 
increased costs as a result of the proposal. Because these debt 
collectors are already required to provide validation notices to 
consumers once they communicate with those consumers (unless validation 
information is provided in an initial communication or the consumer 
pays the debt), the Bureau expects that they already have systems in 
place for sending notices and would not face one-time compliance costs 
greater than those of other debt collectors. However, debt collectors 
would face ongoing costs from sending validation notices to more 
consumers than they would otherwise, at an estimated cost of $0.50 to 
$0.80 per debt if sent by postal mail.\746\ To the extent debt 
collectors take advantage of opportunities to send validation notices 
electronically, an option the proposal elsewhere seeks to make more 
viable, the marginal cost of sending each notice is likely to be 
approximately zero. Alternatively, these debt collectors could cease 
furnishing information to CRAs, which could impact the effectiveness of 
their collection efforts.\747\ Because debt collectors could choose the 
less burdensome of these options, the additional costs of delivering 
notices represent an upper bound on the burden of the provision on 
small entities.
---------------------------------------------------------------------------

    \746\ One small entity representative on the Bureau's Small 
Business Review Panel indicated that, for about one-half of its 
debts, it sends validation notices only after speaking with a 
consumer and that, if it were required to send validation notices to 
all consumers, it would incur mailing costs of $0.63 per mailing for 
an estimated 400,000 accounts per year.
    \747\ If debt collectors furnish to credit reporting agencies 
less frequently this could make consumer reports less informative in 
general, which could have negative effects on the credit system by 
making it harder for creditors to assess credit risk.
---------------------------------------------------------------------------

(e) Prohibition on the Sale or Transfer of Certain Debts
    Proposed Sec.  1006.30(b)(1) would prohibit a debt collector from 
selling, transferring, or placing for collection a debt if the debt 
collector knows or should know that the debt was paid or settled, the 
debt was discharged in bankruptcy, or an identity theft report was 
filed with respect to the debt. Proposed Sec.  1006.30(b)(2) would 
create several exceptions to this prohibition.
    The Bureau understands, based on its market knowledge and outreach 
to debt collectors, that debt collectors generally do not sell, 
transfer, or place for collections debts (other than in circumstances 
covered in the exceptions) if they have reason to believe the debts 
cannot be validly collected because they have been paid, they were 
settled in bankruptcy, or an identity theft report was filed with 
respect to them. Therefore, the Bureau does not expect this provision 
to create significant compliance costs for small entities.
(f) Notice for Validation of Debts
    Proposed Sec.  1006.34 would implement and interpret FDCPA section 
809(a), (b), (d), and (e). Specifically, proposed Sec.  1006.34(a) 
provides that, subject to certain exceptions, a debt collector must 
provide a consumer the validation information described in Sec.  
1006.34(c). Proposed Sec.  1006.34(c) would implement FDCPA section 
809(a)'s content requirements and require that the validation notice 
include certain information about the debt and the consumer's 
protections with respect to debt collection that debt collectors do not 
currently provide on the validation notice. Proposed Sec.  1006.34(d) 
would set forth general formatting requirements and permit debt 
collectors to comply with these requirements by using the proposed 
model validation notice in appendix B.
    Debt collectors already send validation notices to consumers to 
comply with the FDCPA, so the proposed validation information would 
generally affect the content of existing disclosures debt collectors 
are already sending rather than require debt collectors to send 
entirely new disclosures. Nonetheless, debt collectors would incur 
certain costs to comply with the proposal. These include one-time 
compliance costs, the ongoing costs of obtaining the required 
validation information, and potentially ongoing costs of responding to 
a potential increase in the number of disputes.
    The proposed provision would require debt collectors to reformat 
their validation notices to accommodate the proposed validation 
information requirements. The Bureau expects that any one-time costs to 
debt collectors of reformatting the validation notice would

[[Page 23396]]

be relatively small, particularly for debt collectors who rely on 
vendors, because the Bureau expects that most vendors would provide an 
updated notice at no additional cost.\748\ The Bureau understands from 
its outreach that many debt collectors currently use vendors to provide 
validation notices.\749\ Surveyed firms, and their vendors, told the 
Bureau that vendors do not typically charge an additional cost to 
modify an existing template (although this practice might not apply if 
the proposal required more extensive changes to validation notices than 
vendors typically make today).\750\ Debt collectors and vendors would 
bear costs to understand the requirements of the proposed provision and 
to ensure that their systems generate notices that comply with the 
requirement, although these costs would be mitigated somewhat by the 
availability of a model form.
---------------------------------------------------------------------------

    \748\ See CFPB Debt Collection Operations Study, supra note 45, 
at 33.
    \749\ In the Operations Survey, over 85 percent of debt 
collectors surveyed by the Bureau reported using letter vendors. Id. 
at 32.
    \750\ Id. at 33.
---------------------------------------------------------------------------

    The proposed validation information requires debt collectors to 
provide certain additional information about the debt, which would 
require that debt collectors receive and maintain certain data fields 
and incorporate them into the notices. The Bureau believes that the 
large majority of debt collectors already receive and maintain most 
data fields included in the proposed validation information. However, 
some respondents to the Operations Survey reported that they do not 
receive from creditors information on post-default interest, fees, 
payments, and credits.\751\ These debt collectors would have to update 
their systems to track these fields. The Bureau understands that such 
system updates would be likely to cost less than $1,000 for each debt 
collector.\752\
---------------------------------------------------------------------------

    \751\ In the Operations Survey, 52 of 58 respondents reported 
receiving itemization of post-charge-off fees on at least some of 
their accounts. Id. at table 8.
    \752\ See id. at 26.
---------------------------------------------------------------------------

    If debt collectors adjust their systems to produce notices 
including the new validation information, the Bureau would not expect 
there would be an increase in the ongoing costs of printing and sending 
validation notices. However, there could be ongoing costs related to 
the validation information requirements if the required data are not 
always available to debt collectors. The Bureau understands that some 
creditors do not currently track post-default charges and credits in a 
way that can be readily transferred to debt collectors. Under the 
proposal, debt collectors would be unable to send validation notices--
and therefore unable to collect--if creditors do not provide this 
information.\753\ Some debt collectors might lose revenue as a result 
of not being able to collect debts if they do not obtain this 
information from creditors. The Bureau does not have representative 
data that would permit it to estimate how frequently this would occur.
---------------------------------------------------------------------------

    \753\ For example, the Bureau understands that after New York 
began requiring itemization of post-charge-off fees and credits, 
some creditors were at least initially unable to provide this 
information and therefore did not place New York accounts for 
collection.
---------------------------------------------------------------------------

(g) Electronic Disclosures and Communications
    The proposed rule includes provisions that the Bureau expects would 
encourage debt collectors to communicate with consumers by email and 
text message more frequently than they currently do. With respect to 
the validation notice, which most debt collectors currently provide by 
postal mail, proposed Sec.  1006.42 specifies methods that debt 
collectors would be able to use to send notices by email or by 
hyperlink to a secure website in a way that complies with the FDCPA's 
validation notice requirements. With respect to any communications 
about a debt, proposed Sec.  1006.6(d)(3) specifies procedures that 
debt collectors would be able to use to send an email or text message 
to a consumer about a debt without risking liability under the FDCPA 
for disclosure of the debt to a third party.
    The Bureau understands that few debt collectors currently 
communicate with consumers using electronic means. For debt collectors 
who do communicate with consumers electronically, the proposal would 
require them to provide a method for opting out of such communications 
and, if providing required disclosures electronically, to provide 
certain information about the account in the subject line. The Bureau 
understands that these requirements are common features of services 
that provide the ability to send email to consumers. The Bureau 
therefore does not anticipate that these requirements would impose 
significant costs on small entities that choose to communicate with 
consumers using electronic means.

E. Identification, to the Extent Practicable, of All Relevant Federal 
Rules That May Duplicate, Overlap, or Conflict With the Proposed Rule

    Certain other Federal laws and regulations include requirements 
that apply to FDCPA-covered debt collectors, as described below. 
However, consistent with the findings of the Small Business Review 
Panel, the Bureau is not aware of any other Federal regulations that 
currently duplicate, overlap, or conflict with the proposed rule.
    For example, the Bureau's Mortgage Rules under the Real Estate 
Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) 
include communication requirements and policies and procedures 
applicable to mortgage servicers, some of whom may also be subject to 
the FDCPA. As a result, when the Bureau issued the 2016 Servicing Final 
Rule, the Bureau concurrently issued an FDCPA interpretive rule to 
clarify the interaction of the FDCPA and specified mortgage servicing 
rules in Regulations X and Z.\754\
---------------------------------------------------------------------------

    \754\ See the section-by-section analysis of proposed Sec.  
1006.6(a)(5).
---------------------------------------------------------------------------

    The Fair Credit Reporting Act (FCRA) also includes certain 
provisions that apply to debt collectors, including a provision that 
prohibits any person from selling, transferring for consideration, or 
placing for collection a debt that the person has been notified 
resulted from identity theft.\755\
---------------------------------------------------------------------------

    \755\ 15 U.S.C. 1681m(f).
---------------------------------------------------------------------------

    Some Federal laws implemented by other government agencies also 
include protections and requirements that may apply to debt collection 
activities. For example, the Telephone Consumer Protection Act 
(TCPA),\756\ which is implemented by the Federal Communications 
Commission (FCC), affects some debt collection activities by 
restricting the use of automatic telephone dialing systems and 
artificial or prerecorded voice messages.\757\ In addition, the 
Servicemembers Civil Relief Act (SCRA) \758\ provides certain 
protections from civil actions against servicemembers in active duty. 
The SCRA restricts or limits actions against these personnel in a 
variety of areas related to financial management, including rental 
agreements, security deposits, evictions, credit card interest rates, 
judicial proceedings, and income tax payments.\759\
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    \756\ 47 U.S.C. 227.
    \757\ See ACA Int'l v. Fed. Commc'ns Comm'n, 885 F.3d 687 (DC 
Cir. 2018).
    \758\ 50 U.S.C. 3901-4043.
    \759\ The Bureau also recognizes that other Federal regulations, 
including those issued by the Department of Education, may relate to 
debt collection. The Bureau will consult again with other Federal 
agencies whose regulations may be related to this rulemaking prior 
to issuing a final rule.
---------------------------------------------------------------------------

    The Bureau requests comment on the intersection between the 
proposed rule and other Federal laws and regulations. The Bureau 
specifically requests

[[Page 23397]]

comment on conflicts that may arise between the proposed rule and other 
Federal laws and regulations and methods to minimize such conflicts to 
the extent they exist.

F. Description of Any Significant Alternatives to the Proposed Rule 
That Accomplish the Stated Objectives of the Applicable Statutes and 
Minimize Any Significant Economic Impact of the Proposed Rule on Small 
Entities

    Section 603(c) of the RFA requires the Bureau to describe in the 
IRFA any significant alternatives to the proposed rule that accomplish 
the stated objectives of applicable statutes and that minimize any 
significant economic impact of the proposed rule on small 
entities.\760\ In developing the proposed rule, the Bureau has 
considered alternative provisions and believes that none of the 
alternatives considered would be as effective at accomplishing the 
stated objectives of the FDCPA and the applicable provisions of title X 
of the Dodd-Frank Act while minimizing the impact of the proposed rule 
on small entities.
---------------------------------------------------------------------------

    \760\ 5 U.S.C. 603(c).
---------------------------------------------------------------------------

    In developing the proposal, the Bureau considered a number of 
alternatives, including those considered as part of the SBREFA process. 
Many of the alternatives considered would have resulted in greater 
costs to small entities than would the proposal. For example, the 
Bureau considered limiting the frequency of contacts or contact 
attempts by any media, rather than by telephone calls only, and the 
Bureau considered requiring debt collectors to provide validation 
notices in Spanish under certain circumstances. Because such 
alternatives would result in a greater economic impact on small 
entities than the proposal, they are not discussed here. The Bureau 
also considered alternatives that might have resulted in a smaller 
economic impact on small entities than the proposal. Certain of these 
alternatives are briefly described and their impacts relative to the 
proposed provisions are discussed below.
    Limitations on call frequency. The Bureau also considered a 
proposal that would have limited the number of calls permitted to any 
particular telephone number (e.g., at most two calls to each of a 
consumer's landline, mobile, and work telephone numbers). The Bureau 
considered such a limit either instead of or in addition to an overall 
limit on the frequency of telephone calls to one consumer. Such an 
alternative could potentially reduce the effect on debt collector calls 
if it permitted more calls when consumers have multiple telephone 
numbers. The Bureau decided to propose an aggregate approach because of 
concerns that a more prescriptive, per-telephone number approach could 
less effectively carry out the consumer protection purposes of the 
FDCPA--some consumers could receive (and some debt collectors could 
place) more telephone calls simply based on the number of telephone 
numbers that certain consumers happened to have (and that debt 
collectors happened to know about). Such an approach also could create 
incentives for debt collectors to, for example, place telephone calls 
to less convenient telephone numbers after exhausting their telephone 
calls to consumers' preferred numbers.
    The Bureau also considered alternatives to the proposal's bright-
line limit on call frequency. One alternative would be a rebuttable 
presumption of a violation when debt collectors call more frequently 
than the proposed limits, paired with a rebuttable presumption of 
compliance when debt collectors call less frequently. The presumptions 
could be rebutted based on the facts and circumstances of a particular 
situation. Another alternative would be to provide only a safe harbor 
for telephone calls below the frequency limits, with no provision for 
telephone calls above the frequency limits. Such an approach would 
provide certainty to both debt collectors and consumers about a per se 
permissible level of calling, but it would leave open the question of 
how many telephone calls is too many under the FDCPA and the Dodd-Frank 
Act. The Bureau decided not to propose such an approach because it 
appears that it would not provide the clarity that debt collectors and 
consumers have sought, nor would it appear to provide the same degree 
of consumer protection as a per se prohibition against telephone calls 
in excess of a specified frequency. However, the proposal solicits 
comment on these and other alternatives.

G. Discussion of Impact on Cost of Credit for Small Entities

    Section 603(d) of the RFA requires the Bureau to consult with small 
entities regarding the potential impact of the proposed rule on the 
cost of credit for small entities and related matters.\761\ To satisfy 
these statutory requirements, the Bureau provided notification to the 
Chief Counsel for Advocacy of the Small Business Administration (Chief 
Counsel) that the Bureau would collect the advice and recommendations 
of the same small entity representatives identified in consultation 
with the Chief Counsel through the SBREFA process concerning any 
projected impact and the proposed rule on the cost of credit for small 
entities. The Bureau sought to collect the advice and recommendations 
of the small entity representatives during the Small Business Review 
Panel meeting regarding the potential impact on the cost of business 
credit because, as small debt collectors with credit needs, the small 
entity representatives could provide valuable input on any such impact 
related to the proposed rule.
---------------------------------------------------------------------------

    \761\ 5 U.S.C. 603(d).
---------------------------------------------------------------------------

    The Bureau's Small Business Review Panel Outline asked small entity 
representatives to comment on how proposed provisions will affect cost 
of credit to small entities. The Bureau believes that the proposed rule 
will have little impact on the cost of credit. However, it does 
recognize that consumer credit may become more expensive and less 
available as a result of some of these provisions, although the Romeo-
Sandler Study indicates that the magnitude of the cost and availability 
of consumer credit from recent changes to State debt collection laws is 
small. Many small entities affected by the proposed rule use consumer 
credit as a source of credit and may, therefore, see costs rise if 
consumer credit availability decreases. The Bureau does not expect this 
to be a large effect and does not anticipate measurable impact.\762\
---------------------------------------------------------------------------

    \762\ Charles Romeo & Ryan Sandler, The Effect of Debt 
Collection Laws on Access to Credit, (Bureau of Consumer Fin. Prot., 
Off. of Research, Working Paper No. 2018-01, 2018).
---------------------------------------------------------------------------

    During the SBREFA process, several small entity representatives 
said that the proposals under consideration at that time could have an 
impact on the cost of credit for them and for their small business 
clients. Some small entity representatives said that they use lines of 
credit in their business and that regulations that raise their costs or 
reduce their revenue could mean they are unable to meet covenants in 
their loan agreements, causing lenders to reduce access to capital or 
increase their borrowing costs.

VIII. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA),\763\ Federal 
agencies are generally required to seek approval from the Office of 
Management and Budget (OMB) for information collection requirements 
prior to implementation. Under the PRA, the Bureau may not conduct or 
sponsor, and, notwithstanding any other provision of law, a person is 
not required to respond

[[Page 23398]]

to, an information collection unless the information collection 
displays a valid control number assigned by OMB.
---------------------------------------------------------------------------

    \763\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

    As part of its continuing effort to reduce paperwork and respondent 
burden, the Bureau conducts a preclearance consultation program to 
provide the general public and Federal agencies with an opportunity to 
comment on the information collection requirements in accordance with 
the PRA. This helps ensure that the public understands the Bureau's 
requirements or instructions, respondents can provide the requested 
data in the desired format, reporting burden (time and financial 
resources) is minimized, collection instruments are clearly understood, 
and the Bureau can properly assess the impact of collection 
requirements on respondents.
    The proposed rule would amend 12 CFR part 1006 (Regulation F), 
which implements the FDCPA. The Bureau's OMB control number for 
Regulation F is 3170-0056. This proposed rule would revise the 
information collection requirements contained in Regulation F that OMB 
has approved under that OMB control number.
    Under the proposal, the Bureau would require nine information 
collection requirements in Regulation F:
    1. State application for exemption (current Sec.  1006.2, proposed 
Sec.  1006.108).
    2. Opt-out notice for electronic communications or attempts to 
communicate (proposed Sec.  1006.6(e)).
    3. Communication with consumers prior to furnishing information 
(proposed Sec.  1006.30(a)).
    4. Validation notices (proposed Sec.  1006.34).
    5. Responses to requests for original-creditor information 
(proposed Sec.  1006.38(c)).
    6. Responses to disputes (proposed Sec.  1006.38(d)(2)(ii)).
    7. Subject-line information requirements when required disclosures 
are delivered electronically (proposed Sec.  1006.42(b)(2)).
    8. Notice and opt-out requirements for certain types of electronic 
delivery (proposed Sec.  1006.42(c)(3)).
    9. Record retention (proposed Sec.  1006.100).
    The first collection, the State application for an exemption, is 
required to obtain a benefit and its respondents are exclusively State 
governments. The information collected under this collection regards 
State law, and so no issue of confidentiality arises. The remaining 
collections would be to provide protection for consumers and would be 
mandatory. Because the Bureau does not collect any information in these 
remaining collections, no issue of confidentiality arises. The likely 
respondents would be for-profit businesses that are FDCPA-covered debt 
collectors, including contingency debt collection agencies, debt 
buyers, law firms, and loan servicers, or State governments in the case 
of applications under Sec.  1006.2 (proposed Sec.  1006.108).
    The collections of information contained in this proposed rule, and 
identified as such, have been submitted to OMB for review under section 
3507(d) of the PRA. A complete description of the information 
collection requirements, including the burden estimate methods, is 
provided in the information collection request (ICR) that the Bureau 
has submitted to OMB under the requirements of the PRA. Please send 
your comments to the Office of Information and Regulatory Affairs, OMB, 
Attention: Desk Officer for the Bureau of Consumer Financial 
Protection. Send these comments by email to [email protected] 
or by fax to 202-395-6974. If you wish to share your comments with the 
Bureau, please send a copy of these comments as described in the 
Addresses section above. The ICR submitted to OMB requesting approval 
under the PRA for the information collection requirements contained 
herein is available at www.regulations.gov as well as on OMB's public-
facing docket at www.reginfo.gov.
    Title of Collection: Regulation F: Fair Debt Collection Practices 
Act.
    OMB Control Number: 3170-0056.
    Type of Review: Revision of a currently approved collection.
    Affected Public: Private Sector; State Governments.
    Estimated Number of Respondents: 12,027.
    Estimated Total Annual Burden Hours: 1,029,500.
    Comments are invited on: (a) Whether the collection of information 
is necessary for the proper performance of the functions of the Bureau, 
including whether the information will have practical utility; (b) the 
accuracy of the Bureau's estimate of the burden of the collection of 
information, including the validity of the methods and the assumptions 
used; (c) ways to enhance the quality, utility, and clarity of the 
information to be collected; and (d) ways to minimize the burden of the 
collection of information on respondents, including through the use of 
automated collection techniques or other forms of information 
technology. Comments submitted in response to this proposal will be 
summarized and/or included in the request for OMB approval. All 
comments will become a matter of public record.
    If applicable, the notice of final rule will display the control 
number assigned by OMB to any information collection requirements 
proposed herein and adopted in the final rule.

List of Subjects in 12 CFR Part 1006

    Administrative practice and procedure, Consumer protection, Credit, 
Debt collection, Intergovernmental relations.

Authority and Issuance

0
For the reasons set forth above, the Bureau proposes to revise 
Regulation F, 12 CFR part 1006, to read as follows:

PART 1006--DEBT COLLECTION PRACTICES (REGULATION F)

Sec.

Subpart A--General

1006.1 Authority, purpose, and coverage.
1006.2 Definitions.

Subpart B--Rules for FDCPA Debt Collectors

1006.6 Communications in connection with debt collection.
1006.10 Acquisition of location information.
1006.14 Harassing, oppressive, or abusive conduct.
1006.18 False, deceptive, or misleading representations or means.
1006.22 Unfair or unconscionable means.
1006.26 Collection of time-barred debts.
1006.30 Other prohibited practices.
1006.34 Notice for validation of debts.
1006.38 Disputes and requests for original-creditor information.
1006.42 Providing required disclosures.

Subpart C--[Reserved]

Subpart D--Miscellaneous

1006. 100 Record retention.
1006.104 Relation to State laws.
1006.108 Exemption for State regulation.
Appendix A to Part 1006--Procedures for State application for 
exemption From the provisions of the Act
Appendix B to Part 1006--Model forms and clauses
Appendix C to Part 1006--Issuance of advisory opinions
Supplement I to Part 1006--Official interpretations

    Authority: 12 U.S.C. 5512, 5514(b), 5531, 5532; 15 U.S.C. 
1692l(d), 1692o, 7004.

Subpart A--General


Sec.  1006.1  Authority, purpose, and coverage.

    (a) Authority. This part, known as Regulation F, is issued by the 
Bureau of Consumer Financial Protection pursuant to sections 814(d) and 
817 of the Fair Debt Collection Practices Act (FDCPA or Act), 15 U.S.C. 
1692l(d), 1692o; title X of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (Dodd-

[[Page 23399]]

Frank Act), 12 U.S.C. 5481 et seq.; and paragraphs (b)(1) and (d)(1) of 
section 104 of the Electronic Signatures in Global and National 
Commerce Act (E-SIGN Act), 15 U.S.C. 7004.
    (b) Purpose. This part carries out the purposes of the FDCPA, which 
include eliminating abusive debt collection practices by debt 
collectors, ensuring that debt collectors who refrain from using 
abusive debt collection practices are not competitively disadvantaged, 
and promoting consistent State action to protect consumers against debt 
collection abuses. This part also prescribes requirements to ensure 
that certain features of debt collection are disclosed fully, 
accurately, and effectively to consumers in a manner that permits 
consumers to understand the costs, benefits, and risks associated with 
debt collection, in light of the facts and circumstances. Finally, this 
part sets record retention requirements to enable the Bureau to 
administer and carry out the purposes of the FDCPA, the Dodd-Frank Act, 
and this part, as well as to prevent evasions thereof. The record 
retention requirements also will facilitate supervision of debt 
collectors and the assessment and detection of risks to consumers.
    (c) Coverage. (1) Except as provided in Sec.  1006.108 and appendix 
A of this part regarding applications for State exemptions from the 
FDCPA, this part applies to debt collectors, as defined in Sec.  
1006.2(i), other than a person excluded from coverage by section 
1029(a) of the Consumer Financial Protection Act of 2010, title X of 
the Dodd-Frank Act (12 U.S.C. 5519(a)).
    (2) Certain provisions of this part apply to debt collectors only 
when they are collecting consumer financial product or service debt as 
defined in Sec.  1006.2(f). These provisions are Sec. Sec.  
1006.14(b)(1)(ii), 1006.34(c)(2)(iv) and (3)(iv), and 
1006.30(b)(1)(ii).


Sec.  1006.2  Definitions.

    For purposes of this part, the following definitions apply:
    (a) Act or FDCPA means the Fair Debt Collection Practices Act (15 
U.S.C. 1692 et seq.).
    (b) Attempt to communicate means any act to initiate a 
communication or other contact with any person through any medium, 
including by soliciting a response from such person. An attempt to 
communicate includes providing a limited-content message, as defined in 
paragraph (j) of this section.
    (c) Bureau means the Bureau of Consumer Financial Protection.
    (d) Communicate or communication means the conveying of information 
regarding a debt directly or indirectly to any person through any 
medium. A debt collector does not convey information regarding a debt 
directly or indirectly to any person if the debt collector provides 
only a limited-content message, as defined in paragraph (j) of this 
section.
    (e) Consumer means any natural person, whether living or deceased, 
obligated or allegedly obligated to pay any debt. For purposes of 
Sec. Sec.  1006.6 and 1006.14(h), the term consumer includes the 
persons described in Sec.  1006.6(a).
    (f) Consumer financial product or service debt means any debt 
related to any consumer financial product or service, as that term is 
defined in section 1002(5) of the Dodd-Frank Act (12 U.S.C. 5481(5)).
    (g) Creditor means any person who offers or extends credit creating 
a debt or to whom a debt is owed. The term creditor does not, however, 
include any person to the extent that such person receives an 
assignment or transfer of a debt in default solely to facilitate 
collection of the debt for another.
    (h) Debt, except for the purpose of paragraph (f) of this section, 
means any obligation or alleged obligation of a consumer to pay money 
arising out of a transaction in which the money, property, insurance, 
or services that are the subject of the transaction are primarily for 
personal, family, or household purposes, whether or not the obligation 
has been reduced to judgment. For the purpose of paragraph (f) of this 
section, debt means debt as that term is used in the Dodd-Frank Act.
    (i)(1) Debt collector means any person who uses any instrumentality 
of interstate commerce or mail in any business the principal purpose of 
which is the collection of debts, or who regularly collects or attempts 
to collect, directly or indirectly, debts owed or due, or asserted to 
be owed or due, to another. Notwithstanding paragraph (h)(2)(vi) of 
this section, the term debt collector includes any creditor that, in 
the process of collecting its own debts, uses any name other than its 
own that would indicate that a third person is collecting or attempting 
to collect such debts. For the purpose of Sec.  1006.22(e), the term 
also includes any person who uses any instrumentality of interstate 
commerce or mail in any business the principal purpose of which is the 
enforcement of security interests.
    (2) The term debt collector excludes:
    (i) Any officer or employee of a creditor while the officer or 
employee is collecting debts for the creditor in the creditor's name;
    (ii) Any person while acting as a debt collector for another person 
if:
    (A) The person acting as a debt collector does so only for persons 
with whom the person acting as a debt collector is related by common 
ownership or affiliated by corporate control; and
    (B) The principal business of the person acting as a debt collector 
is not the collection of debts;
    (iii) Any officer or employee of the United States or any State to 
the extent that collecting or attempting to collect any debt is in the 
performance of the officer's or employee's official duties;
    (iv) Any person while serving or attempting to serve legal process 
on any other person in connection with the judicial enforcement of any 
debt;
    (v) Any nonprofit organization that, at the request of consumers, 
performs bona fide consumer credit counseling and assists consumers in 
liquidating their debts by receiving payment from such consumers and 
distributing such amounts to creditors;
    (vi) Any person collecting or attempting to collect any debt owed 
or due, or asserted to be owed or due to another, to the extent such 
debt collection activity:
    (A) Is incidental to a bona fide fiduciary obligation or a bona 
fide escrow arrangement;
    (B) Concerns a debt that such person originated;
    (C) Concerns a debt that was not in default at the time such person 
obtained it; or
    (D) Concerns a debt that such person obtained as a secured party in 
a commercial credit transaction involving the creditor; and
    (vii) A private entity, to the extent such private entity is 
operating a bad check enforcement program that complies with section 
818 of the Act.
    (j) Limited-content message means a message for a consumer that 
includes all of the content described in paragraph (j)(1) of this 
section, that may include any of the content described in paragraph 
(j)(2) of this section, and that includes no other content.
    (1) Required content. A limited-content message is a message for a 
consumer that includes all of the following:
    (i) The consumer's name;
    (ii) A request that the consumer reply to the message;
    (iii) The name or names of one or more natural persons whom the 
consumer can contact to reply to the debt collector;
    (iv) A telephone number that the consumer can use to reply to the 
debt collector; and
    (v) If applicable, the disclosure required by Sec.  1006.6(e).
    (2) Optional content. In addition to the content described in 
paragraph (j)(1)

[[Page 23400]]

of this section, a limited-content message may include one or more of 
the following:
    (i) A salutation;
    (ii) The date and time of the message;
    (iii) A generic statement that the message relates to an account; 
and
    (iv) Suggested dates and times for the consumer to reply to the 
message.
    (k) Person includes natural persons, corporations, companies, 
associations, firms, partnerships, societies, and joint stock 
companies.
    (l) State means any State, territory, or possession of the United 
States, the District of Columbia, the Commonwealth of Puerto Rico, or 
any political subdivision of any of the foregoing.

Subpart B--Rules for FDCPA Debt Collectors


Sec.  1006.6  Communications in connection with debt collection.

    (a) Definition. For purposes of this section, the term consumer 
includes:
    (1) The consumer's spouse;
    (2) The consumer's parent, if the consumer is a minor;
    (3) The consumer's legal guardian;
    (4) The executor or administrator of the consumer's estate, if the 
consumer is deceased; and
    (5) A confirmed successor in interest, as defined in Regulation X, 
12 CFR 1024.31, and Regulation Z, 12 CFR 1026.2(a)(27)(ii).
    (b) Communications with a consumer--in general. Except as provided 
in paragraph (b)(4) of this section, a debt collector must not 
communicate or attempt to communicate with a consumer in connection 
with the collection of any debt as prohibited by paragraphs (b)(1) 
through (3) of this section.
    (1) Prohibitions regarding unusual or inconvenient times or places. 
A debt collector must not communicate or attempt to communicate with a 
consumer in connection with the collection of any debt:
    (i) At any unusual time, or at a time that the debt collector knows 
or should know is inconvenient to the consumer. In the absence of the 
debt collector's knowledge of circumstances to the contrary, a time 
before 8:00 a.m. and after 9:00 p.m. local time at the consumer's 
location is inconvenient; or
    (ii) At any unusual place, or at a place that the debt collector 
knows or should know is inconvenient to the consumer.
    (2) Prohibitions regarding consumer represented by an attorney. A 
debt collector must not communicate or attempt to communicate with a 
consumer in connection with the collection of any debt if the debt 
collector knows the consumer is represented by an attorney with respect 
to the debt and knows, or can readily ascertain, the attorney's name 
and address, unless the attorney:
    (i) Fails to respond within a reasonable period of time to a 
communication from the debt collector; or
    (ii) Consents to the debt collector communicating directly with the 
consumer.
    (3) Prohibitions regarding consumer's place of employment. A debt 
collector must not communicate or attempt to communicate with a 
consumer in connection with the collection of any debt at the 
consumer's place of employment, if the debt collector knows or has 
reason to know that the consumer's employer prohibits the consumer from 
receiving such communication.
    (4) Exceptions. The prohibitions in paragraphs (b)(1) through (3) 
of this section do not apply when a debt collector communicates or 
attempts to communicate with a consumer in connection with the 
collection of any debt with:
    (i) The prior consent of the consumer, given directly to the debt 
collector during a communication that does not violate paragraphs 
(b)(1) through (3) of this section; or
    (ii) The express permission of a court of competent jurisdiction.
    (c) Communications with a consumer--after refusal to pay or cease 
communication notice. (1) Prohibitions. Except as provided in paragraph 
(c)(2) of this section, a debt collector must not communicate or 
attempt to communicate further with a consumer with respect to a debt 
if the consumer notifies the debt collector in writing that:
    (i) The consumer refuses to pay the debt; or
    (ii) The consumer wants the debt collector to cease further 
communication with the consumer.
    (2) Exceptions. The prohibitions in paragraph (c)(1) of this 
section do not apply when a debt collector communicates or attempts to 
communicate further with a consumer with respect to the debt:
    (i) To advise the consumer that the debt collector's further 
efforts are being terminated;
    (ii) To notify the consumer that the debt collector or creditor may 
invoke specified remedies that the debt collector or creditor 
ordinarily invokes; or
    (iii) Where applicable, to notify the consumer that the debt 
collector or creditor intends to invoke a specified remedy.
    (d) Communications with third parties. (1) Prohibitions. Except as 
provided in paragraph (d)(2) of this section, a debt collector must not 
communicate, in connection with the collection of any debt, with any 
person other than:
    (i) The consumer;
    (ii) The consumer's attorney;
    (iii) A consumer reporting agency, if otherwise permitted by law;
    (iv) The creditor;
    (v) The creditor's attorney; or
    (vi) The debt collector's attorney.
    (2) Exceptions. The prohibition in paragraph (d)(1) of this section 
does not apply when a debt collector communicates, in connection with 
the collection of any debt, with a person:
    (i) For the purpose of acquiring location information, as provided 
in Sec.  1006.10;
    (ii) With the prior consent of the consumer given directly to the 
debt collector;
    (iii) With the express permission of a court of competent 
jurisdiction; or
    (iv) As reasonably necessary to effectuate a postjudgment judicial 
remedy.
    (3) Reasonable procedures for email and text message 
communications. A debt collector maintains procedures that are 
reasonably adapted, for purposes of FDCPA section 813(c), to avoid a 
bona fide error in sending an email or text message communication that 
would result in a violation of paragraph (d)(1) of this section if the 
debt collector, when communicating with a consumer using an email 
address or, in the case of a text message, a telephone number, 
maintains procedures that include steps to reasonably confirm and 
document that:
    (i) The debt collector communicated with the consumer using:
    (A) An email address or, in the case of a text message, a telephone 
number that the consumer recently used to contact the debt collector 
for purposes other than opting out of electronic communications;
    (B) A non-work email address or, in the case of a text message, a 
non-work telephone number, if:
    (1) The creditor or the debt collector notified the consumer 
clearly and conspicuously, other than through the specific non-work 
email address or non-work telephone number, that the debt collector 
might use that non-work email address or non-work telephone number for 
debt collection communications by email or text message, where the 
creditor or debt collector provided the notification no more than 30 
days before

[[Page 23401]]

the debt collector's first such communication, and the notification 
identified the legal name of the debt collector and the non-work email 
address or non-work telephone number the debt collector proposed to 
use, described one or more ways the consumer could opt out of such 
communications, and provided the consumer with a specified reasonable 
period in which to opt out before beginning such communications; and
    (2) The opt-out period specified in the notice described in 
paragraph (d)(3)(i)(B)(1) of this section has expired and the consumer 
has not opted out of receiving debt collection communications at the 
specific non-work email address or non-work telephone number, as 
applicable; or
    (C) A non-work email address or, in the case of a text message, a 
non-work telephone number that the creditor or a prior debt collector 
obtained from the consumer to communicate about the debt if, before the 
debt was placed with the debt collector, the creditor or the prior debt 
collector recently sent communications about the debt to that non-work 
email address or non-work telephone number, and the consumer did not 
request the creditor or the prior debt collector to stop using that 
non-work email address or non-work telephone number to communicate 
about the debt; and
    (ii) The debt collector took additional steps to prevent 
communications using an email address or telephone number that the debt 
collector knows has led to a disclosure prohibited by paragraph (d)(1) 
of this section.
    (e) Opt-out notice for electronic communications or attempts to 
communicate. A debt collector who communicates or attempts to 
communicate with a consumer electronically in connection with the 
collection of a debt using a specific email address, telephone number 
for text messages, or other electronic-medium address must include in 
such communication or attempt to communicate a clear and conspicuous 
statement describing one or more ways the consumer can opt out of 
further electronic communications or attempts to communicate by the 
debt collector to that address or telephone number. The debt collector 
may not require, directly or indirectly, that the consumer, in order to 
opt out, pay any fee to the debt collector or provide any information 
other than the email address, telephone number for text messages, or 
other electronic-medium address subject to the opt out.


Sec.  1006.10  Acquisition of location information.

    (a) Definition. The term location information means a consumer's:
    (1) Place of abode and telephone number at such place; or
    (2) Place of employment.
    (b) Form and content of location communications. A debt collector 
communicating with a person other than the consumer for the purpose of 
acquiring location information must:
    (1) Identify himself or herself individually by name, state that he 
or she is confirming or correcting the consumer's location information, 
and, only if expressly requested, identify his or her employer;
    (2) Not state that the consumer owes any debt;
    (3) Not communicate by postcard;
    (4) Not use any language or symbol on any envelope or in the 
contents of any communication by mail indicating that the debt 
collector is in the debt collection business or that the communication 
relates to the collection of a debt; and
    (5) After the debt collector knows the consumer is represented by 
an attorney with regard to the subject debt and has knowledge of, or 
can readily ascertain, such attorney's name and address, not 
communicate with any person other than that attorney, unless the 
attorney fails to respond to the debt collector's communication within 
a reasonable period of time.
    (c) Frequency of location communications. In addition to complying 
with the frequency limits in Sec.  1006.14(b), a debt collector 
communicating with any person other than the consumer for the purpose 
of acquiring location information about the consumer must not 
communicate more than once with such person unless requested to do so 
by such person, or unless the debt collector reasonably believes that 
the earlier response of such person is erroneous or incomplete and that 
such person now has correct or complete location information.


Sec.  1006.14  Harassing, oppressive, or abusive conduct.

    (a) In general. A debt collector must not engage in any conduct the 
natural consequence of which is to harass, oppress, or abuse any person 
in connection with the collection of any debt, including, but not 
limited to, the conduct described in paragraphs (b) through (h) of this 
section.
    (b) Repeated or continuous telephone calls or telephone 
conversations. (1) In general. (i) FDCPA prohibition. In connection 
with the collection of a debt, a debt collector must not place 
telephone calls or engage any person in telephone conversation 
repeatedly or continuously with intent to annoy, abuse, or harass any 
person at the called number.
    (ii) Identification and prevention of Dodd-Frank Act unfair act or 
practice. With respect to a debt collector who is collecting a consumer 
financial product or service debt, as defined in Sec.  1006.2(f), it is 
an unfair act or practice under section 1031 of the Dodd-Frank Act to 
place telephone calls or engage any person in telephone conversation 
repeatedly or continuously in connection with the collection of such 
debt, such that the natural consequence is to harass, oppress, or abuse 
any person at the called number. To prevent this unfair act or 
practice, such a debt collector must not exceed the frequency limits in 
paragraph (b)(2) of this section.
    (2) Frequency limits. Subject to paragraph (b)(3) of this section, 
a debt collector violates paragraphs (b)(1)(i) and (ii) of this 
section, as applicable, by placing a telephone call to a particular 
person in connection with the collection of a particular debt either:
    (i) More than seven times within seven consecutive days; or
    (ii) Within a period of seven consecutive days after having had a 
telephone conversation with the person in connection with the 
collection of such debt. The date of the telephone conversation is the 
first day of the seven-consecutive-day period.
    (3) Certain telephone calls excluded from the frequency limits. 
Telephone calls placed to a person do not count toward, and are 
permitted in excess of, the frequency limits in paragraph (b)(2) of 
this section if they are:
    (i) Made to respond to a request for information from such person;
    (ii) Made with such person's prior consent given directly to the 
debt collector;
    (iii) Not connected to the dialed number; or
    (iv) With the persons described in Sec.  1006.6(d)(1)(ii) through 
(vi).
    (4) Effect of complying with frequency limits. A debt collector who 
does not exceed the frequency limits in paragraph (b)(2) of this 
section complies with paragraph (b)(1) of this section and section 
806(5) of the FDCPA (15 U.S.C. 1692d(5)), and does not, based on the 
frequency of its telephone calls, violate paragraph (a) of this 
section, section 806 of the FDCPA (15 U.S.C. 1692d), or sections 1031 
or 1036(a)(1)(B) of the Dodd-Frank Act (12 U.S.C. 5531 or 
5536(a)(1)(B)).
    (5) Definition. For purposes of this paragraph (b), particular debt 
means each of a consumer's debts in collection.

[[Page 23402]]

However, in the case of student loan debts, the term particular debt 
means all student loan debts that a consumer owes or allegedly owes 
that were serviced under a single account number at the time the debts 
were obtained by the debt collector.
    (c) Violence or other criminal means. In connection with the 
collection of a debt, a debt collector must not use or threaten to use 
violence or other criminal means to harm the physical person, 
reputation, or property of any person.
    (d) Obscene or profane language. In connection with the collection 
of a debt, a debt collector must not use obscene or profane language, 
or language the natural consequence of which is to abuse the hearer or 
reader.
    (e) Debtor's list. In connection with the collection of a debt, a 
debt collector must not publish a list of consumers who allegedly 
refuse to pay debts, except to a consumer reporting agency or to 
persons meeting the requirements of sections 603(f) or 604(a)(3) of the 
Fair Credit Reporting Act (15 U.S.C. 1681a(f) or 1681b(a)(3)).
    (f) Coercive advertisements. In connection with the collection of a 
debt, a debt collector must not advertise for sale any debt to coerce 
payment of the debt.
    (g) Meaningful disclosure of identity. In connection with the 
collection of a debt, a debt collector must not place telephone calls 
without meaningfully disclosing the caller's identity, except as 
provided in Sec.  1006.10.
    (h) Prohibited communication media. (1) In general. In connection 
with the collection of any debt, a debt collector must not communicate 
or attempt to communicate with a consumer through a medium of 
communication if the consumer has requested that the debt collector not 
use that medium to communicate with the consumer. For purposes of this 
paragraph, the term ``consumer'' has the meaning given to it in Sec.  
1006.6(a).
    (2) Exceptions. Notwithstanding the prohibition in paragraph (h)(1) 
of this section:
    (i) If a consumer opts out in writing of receiving electronic 
communications from a debt collector, a debt collector may reply once 
to confirm the consumer's request to opt out, provided that the reply 
contains no information other than a statement confirming the 
consumer's request; or
    (ii) If a consumer initiates contact with a debt collector using an 
address or a telephone number that the consumer previously requested 
the debt collector not use, the debt collector may respond once to that 
consumer-initiated communication.


Sec.  1006.18  False, deceptive, or misleading representations or 
means.

    (a) In general. A debt collector must not use any false, deceptive, 
or misleading representation or means in connection with the collection 
of any debt, including, but not limited to, the conduct described in 
paragraphs (b) through (d) of this section.
    (b) False, deceptive, or misleading representations. (1) A debt 
collector must not falsely represent or imply that:
    (i) The debt collector is vouched for, bonded by, or affiliated 
with the United States or any State, including through the use of any 
badge, uniform, or facsimile thereof.
    (ii) The debt collector operates or is employed by a consumer 
reporting agency, as defined by section 603(f) of the Fair Credit 
Reporting Act (15 U.S.C. 1681a(f)).
    (iii) Any individual is an attorney or that any communication is 
from an attorney.
    (iv) The consumer committed any crime or other conduct in order to 
disgrace the consumer.
    (v) A sale, referral, or other transfer of any interest in a debt 
causes or will cause the consumer to:
    (A) Lose any claim or defense to payment of the debt; or
    (B) Become subject to any practice prohibited by this part.
    (vi) Accounts have been turned over to innocent purchasers for 
value.
    (vii) Documents are legal process.
    (viii) Documents are not legal process forms or do not require 
action by the consumer.
    (2) A debt collector must not falsely represent:
    (i) The character, amount, or legal status of any debt.
    (ii) Any services rendered, or compensation that may be lawfully 
received, by any debt collector for the collection of a debt.
    (3) A debt collector must not represent or imply that nonpayment of 
any debt will result in the arrest or imprisonment of any person or the 
seizure, garnishment, attachment, or sale of any property or wages of 
any person unless such action is lawful and the debt collector or 
creditor intends to take such action.
    (c) False, deceptive, or misleading collection means. A debt 
collector must not:
    (1) Threaten to take any action that cannot legally be taken or 
that is not intended to be taken.
    (2) Communicate or threaten to communicate to any person credit 
information that the debt collector knows or should know is false, 
including the failure to communicate that a disputed debt is disputed.
    (3) Use or distribute any written communication that simulates or 
that the debt collector falsely represents to be a document authorized, 
issued, or approved by any court, official, or agency of the United 
States or any State, or that creates a false impression about its 
source, authorization, or approval.
    (4) Use any business, company, or organization name other than the 
true name of the debt collector's business, company, or organization.
    (d) False representations or deceptive means. A debt collector must 
not use any false representation or deceptive means to collect or 
attempt to collect any debt or to obtain information concerning a 
consumer.
    (e) Disclosures required. (1) Initial communications. A debt 
collector must disclose in its initial communication with a consumer 
that the debt collector is attempting to collect a debt and that any 
information obtained will be used for that purpose. If the debt 
collector's initial communication with the consumer is oral, the debt 
collector must make the disclosure required by this paragraph again in 
its initial written communication with the consumer.
    (2) Subsequent communications. In each communication with the 
consumer subsequent to the communications described in paragraph (e)(1) 
of this section, the debt collector must disclose that the 
communication is from a debt collector.
    (3) Exception. Disclosures under paragraphs (e)(1) and (2) of this 
section are not required in a formal pleading made in connection with a 
legal action.
    (f) Assumed names. This section does not prohibit a debt 
collector's employee from using an assumed name when communicating or 
attempting to communicate with a person, provided that the employee 
uses the assumed name consistently and that the employer can readily 
identify any employee using an assumed name.
    (g) Safe harbor for meaningful attorney involvement in debt 
collection litigation submissions. A debt collector that is a law firm 
or who is an attorney complies with Sec.  1006.18 when submitting a 
pleading, written motion, or other paper submitted to the court during 
debt collection litigation if an attorney personally:
    (1) Drafts or reviews the pleading, written motion, or other paper; 
and
    (2) Reviews information supporting such pleading, written motion, 
or other paper and determines, to the best of the

[[Page 23403]]

attorney's knowledge, information, and belief, that, as applicable:
    (i) The claims, defenses, and other legal contentions are warranted 
by existing law;
    (ii) The factual contentions have evidentiary support; and
    (iii) The denials of factual contentions are warranted on the 
evidence or, if specifically so identified, are reasonably based on 
belief or lack of information.


Sec.  1006.22  Unfair or unconscionable means.

    (a) In general. A debt collector must not use unfair or 
unconscionable means to collect or attempt to collect any debt, 
including, but not limited to, the conduct described in paragraphs (b) 
through (f) of this section.
    (b) Collection of unauthorized amounts. A debt collector must not 
collect any amount unless such amount is expressly authorized by the 
agreement creating the debt or permitted by law. For purposes of this 
paragraph, the term ``any amount'' includes any interest, fee, charge, 
or expense incidental to the principal obligation.
    (c) Postdated payment instruments. A debt collector must not:
    (1) Accept from any person a check or other payment instrument 
postdated by more than five days unless such person is notified in 
writing of the debt collector's intent to deposit such check or 
instrument not more than ten, nor less than three, days (excluding 
legal public holidays, Saturdays, and Sundays) prior to such deposit.
    (2) Solicit any postdated check or other postdated payment 
instrument for the purpose of threatening or instituting criminal 
prosecution.
    (3) Deposit or threaten to deposit any postdated check or other 
postdated payment instrument prior to the date on such check or 
instrument.
    (d) Charges resulting from concealment of purpose. A debt collector 
must not cause charges to be made to any person for communications by 
concealment of the true purpose of the communication. Such charges 
include, but are not limited to, collect telephone calls and telegram 
fees.
    (e) Nonjudicial action regarding property. A debt collector must 
not take or threaten to take any nonjudicial action to effect 
dispossession or disablement of property if:
    (1) There is no present right to possession of the property claimed 
as collateral through an enforceable security interest;
    (2) There is no present intention to take possession of the 
property; or
    (3) The property is exempt by law from such dispossession or 
disablement.
    (f) Restrictions on use of certain media. A debt collector must 
not:
    (1) Communicate with a consumer regarding a debt by postcard.
    (2) Use any language or symbol, other than the debt collector's 
address, on any envelope when communicating with a consumer by mail, 
except that a debt collector may use the debt collector's business name 
on an envelope if such name does not indicate that the debt collector 
is in the debt collection business.
    (3) Communicate or attempt to communicate with a consumer using an 
email address that the debt collector knows or should know is provided 
to the consumer by the consumer's employer, unless the debt collector 
has received directly from the consumer either prior consent to use 
that email address or an email from that email address.
    (4) Communicate or attempt to communicate with a consumer in 
connection with the collection of a debt by a social media platform 
that is viewable by a person other than the persons described in Sec.  
1006.6(d)(1)(i) through (vi).
    (g) Safe harbor for certain emails and text messages relating to 
the collection of a debt. A debt collector who communicates with a 
consumer using an email address or telephone number and following the 
procedures described in Sec.  1006.6(d)(3) does not violate paragraph 
(a) of this section by revealing in the email or text message the debt 
collector's name or other information indicating that the communication 
relates to the collection of a debt.


Sec.  1006.26  Collection of time-barred debts.

    (a) Definitions. For purposes of this section:
    (1) Statute of limitations means the period prescribed by 
applicable law for bringing a legal action against the consumer to 
collect a debt.
    (2) Time-barred debt means a debt for which the applicable statute 
of limitations has expired.
    (b) Suits and threats of suit prohibited. A debt collector must not 
bring or threaten to bring a legal action against a consumer to collect 
a debt that the debt collector knows or should know is a time-barred 
debt.
    (c) [Reserved]


Sec.  1006.30  Other prohibited practices.

    (a) Communication prior to furnishing information. A debt collector 
must not furnish to a consumer reporting agency, as defined in section 
603(f) of the Fair Credit Reporting Act (15 U.S.C. 1681a(f)), 
information regarding a debt before communicating with the consumer 
about the debt.
    (b) Prohibition on the sale, transfer, or placement of certain 
debts. (1) In general. (i) FDCPA prohibition. Except as provided in 
paragraph (b)(2) of this section, a debt collector must not sell, 
transfer, or place for collection a debt if the debt collector knows or 
should know that:
    (A) The debt has been paid or settled;
    (B) The debt has been discharged in bankruptcy; or
    (C) An identity theft report, as defined in section 603(q)(4) of 
the Fair Credit Reporting Act (15 U.S.C. 1681a(q)(4)), was filed with 
respect to the debt.
    (ii) Identification of Dodd-Frank Act unfair act or practice. With 
respect to a debt collector who is collecting a consumer financial 
product or service debt, as defined in Sec.  1006.2(f), it is an unfair 
act or practice under section 1031 of the Dodd-Frank Act to sell, 
transfer, or place for collection a debt described in paragraph 
(b)(1)(i) of this section.
    (2) Exceptions. A debt collector may sell, transfer, or place for 
collection a debt described in paragraph (b)(1)(i) of this section if 
the debt collector:
    (i) Transfers the debt to the debt's owner;
    (ii) Transfers the debt to a previous owner of the debt if transfer 
is authorized under the terms of the original contract between the debt 
collector and the previous owner;
    (iii) Securitizes the debt or pledges a portfolio of such debt as 
collateral in connection with a borrowing; or
    (iv) Transfers the debt as a result of a merger, acquisition, 
purchase and assumption transaction, or transfer of substantially all 
of the debt collector's assets.
    (c) Multiple debts. If a consumer makes any single payment to a 
debt collector with respect to multiple debts owed by the consumer, the 
debt collector:
    (1) Must apply the payment in accordance with the directions given 
by the consumer, if any; and
    (2) Must not apply the payment to any debt that is disputed by the 
consumer.
    (d) Legal actions by debt collectors. (1) Action to enforce 
interest in real property. A debt collector who brings a legal action 
against a consumer to enforce an interest in real property securing the 
consumer's debt must bring the action only in a judicial district or 
similar legal entity in which such real property is located.
    (2) Other legal actions. A debt collector who brings a legal action 
against a consumer other than to enforce an interest in real property 
securing the consumer's debt must bring such action only in the 
judicial district or similar legal entity in which the consumer:

[[Page 23404]]

    (i) Signed the contract sued upon; or
    (ii) Resides at the commencement of the action.
    (3) Authorization of actions. Nothing in this part authorizes debt 
collectors to bring legal actions.
    (e) Furnishing certain deceptive forms. A debt collector must not 
design, compile, and furnish any form that the debt collector knows 
would be used to cause a consumer falsely to believe that a person 
other than the consumer's creditor is participating in collecting or 
attempting to collect a debt that the consumer allegedly owes to the 
creditor.


Sec.  1006.34  Notice for validation of debts.

    (a)(1) Validation information required. Except as provided in 
paragraph (a)(2) of this section, a debt collector must provide a 
consumer with the validation information described in paragraph (c) of 
this section either:
    (i) By sending the consumer a validation notice in a manner 
permitted by Sec.  1006.42:
    (A) In the initial communication, as defined in paragraph (b)(2) of 
this section; or
    (B) Within five days of that initial communication; or
    (ii) By providing the validation information orally in the initial 
communication.
    (2) Exception. A debt collector who otherwise would be required to 
send a validation notice pursuant to paragraph (a)(1)(i)(B) of this 
section is not required to do so if the consumer has paid the debt 
prior to the time that paragraph (a)(1)(i)(B) of this section would 
require the validation notice to be sent.
    (b) Definitions. For purposes of this section:
    (1) Clear and conspicuous means disclosures that are readily 
understandable. In the case of written and electronic disclosures, the 
location and type size also must be readily noticeable to consumers. In 
the case of oral disclosures, the disclosures also must be given at a 
volume and speed sufficient for the consumer to hear and comprehend 
them.
    (2) Initial communication means the first time that, in connection 
with the collection of a debt, a debt collector conveys information, 
directly or indirectly, regarding the debt to the consumer, other than 
a communication in the form of a formal pleading in a civil action, or 
any form or notice that does not relate to the collection of the debt 
and is expressly required by:
    (i) The Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.);
    (ii) Title V of the Gramm-Leach-Bliley Act (15 U.S.C. 6801 through 
6827); or
    (iii) Any provision of Federal or State law or regulation mandating 
notice of a data security breach or privacy risk.
    (3) Itemization date means any one of the following four reference 
dates for which a debt collector can ascertain the amount of the debt:
    (i) The last statement date, which is the date of the last periodic 
statement or written account statement or invoice provided to the 
consumer;
    (ii) The charge-off date, which is the date the debt was charged 
off;
    (iii) The last payment date, which is the date the last payment was 
applied to the debt; or
    (iv) The transaction date, which is the date of the transaction 
that gave rise to the debt.
    (4) Validation notice means a written or electronic notice that 
provides the validation information described in paragraph (c) of this 
section.
    (5) Validation period means the period starting on the date that a 
debt collector provides the validation information described in 
paragraph (c) of this section and ending 30 days after the consumer 
receives or is assumed to receive the validation information. For 
purposes of determining the end of the validation period, the debt 
collector may assume that a consumer receives the validation 
information on any date that is at least five days (excluding legal 
public holidays, Saturdays, and Sundays) after the debt collector 
provides it.
    (c) Validation information. (1) Debt collector communication 
disclosure. The statement required by Sec.  1006.18(e).
    (2) Information about the debt. Except as provided in paragraph 
(c)(5) of this section:
    (i) The debt collector's name and mailing address.
    (ii) The consumer's name and mailing address.
    (iii) If the debt is a credit card debt, the merchant brand, if 
any, associated with the debt, to the extent available to the debt 
collector.
    (iv) If the debt collector is collecting consumer financial product 
or service debt as defined in Sec.  1006.2(f), the name of the creditor 
to whom the debt was owed on the itemization date.
    (v) The account number, if any, associated with the debt on the 
itemization date, or a truncated version of that number.
    (vi) The name of the creditor to whom the debt currently is owed.
    (vii) The itemization date.
    (viii) The amount of the debt on the itemization date.
    (ix) An itemization of the current amount of the debt in a tabular 
format reflecting interest, fees, payments, and credits since the 
itemization date.
    (x) The current amount of the debt.
    (3) Information about consumer protections. (i) A statement that 
specifies what date the debt collector will consider the end date of 
the validation period and states that, if the consumer notifies the 
debt collector in writing before the end of the validation period that 
the debt, or any portion of the debt, is disputed, the debt collector 
must cease collection of the debt, or the disputed portion of the debt, 
until the debt collector sends the consumer either the verification of 
the debt or a copy of a judgment.
    (ii) A statement that specifies what date the debt collector will 
consider the end date of the validation period and states that, if the 
consumer requests in writing before the end of the validation period 
the name and address of the original creditor, the debt collector must 
cease collection of the debt until the debt collector sends the 
consumer the name and address of the original creditor, if different 
from the current creditor.
    (iii) A statement that specifies what date the debt collector will 
consider the end date of the validation period and states that, unless 
the consumer contacts the debt collector to dispute the validity of the 
debt, or any portion of the debt, before the end of the validation 
period, the debt collector will assume that the debt is valid.
    (iv) If the debt collector is collecting consumer financial product 
or service debt as defined in Sec.  1006.2(f), a statement that informs 
the consumer that additional information regarding consumer protections 
in debt collection is available on the Bureau's website at https://www.consumerfinance.gov.
    (v) A statement explaining how a consumer can take the actions 
described in paragraphs (c)(4) and (d)(3), as applicable, of this 
section electronically, if the debt collector sends a validation notice 
electronically.
    (vi) For a validation notice delivered in the body of an email 
pursuant to Sec.  1006.42(b)(1) or (c)(2)(i), the opt-out statement 
required by Sec.  1006.6(e).
    (4) Consumer response information. The following information, 
segregated from the validation information described in paragraphs 
(c)(1) through (3) of this section and from any optional information 
included pursuant to paragraphs (d)(3)(i), (ii), (iv), and (v) of this 
section, and, if provided in a validation notice, located at the bottom 
of the notice under the headings, ``How do you want to respond?'' and 
``Check all that apply:'':
    (i) Dispute prompts. The following statements, listed in the 
following order, and using the following phrasing or

[[Page 23405]]

substantially similar phrasing, each next to a prompt:
    (A) ``I want to dispute the debt because I think:;''
    (B) ``This is not my debt;''
    (C) ``The amount is wrong;'' and
    (D) ``Other (please describe on reverse or attach additional 
information).''
    (ii) Original-creditor information prompt. The statement, ``I want 
you to send me the name and address of the original creditor,'' using 
that phrase or a substantially similar phrase, next to a prompt.
    (iii) Mailing addresses. Mailing addresses for the consumer and the 
debt collector, which include the debt collector's and the consumer's 
names.
    (5) Special rule for certain residential mortgage debt. For 
residential mortgage debt subject to Regulation Z, 12 CFR 1026.41, a 
debt collector need not provide the validation information described in 
paragraphs (c)(2)(vii) through (ix) of this section if the debt 
collector:
    (i) Provides the consumer at the same time as the validation 
notice, a copy of the most recent periodic statement provided to the 
consumer under Regulation Z, 12 CFR 1026.41(b); and
    (ii) Refers to that periodic statement in the validation notice.
    (d) Form of validation information. (1) In general. (i) The 
validation information described in paragraph (c) of this section must 
be clear and conspicuous.
    (ii) If provided in a validation notice, the content, format, and 
placement of the validation information described in Sec.  1006.34(c) 
and of the optional disclosures permitted by paragraph (d)(3) of this 
section must be substantially similar to Model Form B-3 in appendix B 
of this part.
    (2) Safe harbor. A debt collector who uses Model Form B-3 in 
appendix B of this part complies with the requirements of paragraphs 
(a)(1)(i) and (d)(1) of this section.
    (3) Optional disclosures. A debt collector may, at its option, 
include any of the following information if providing the validation 
information required by paragraph (a)(1) of this section.
    (i) Telephone contact information. The debt collector's telephone 
contact information, including telephone number and the times that the 
debt collector accepts consumer telephone calls.
    (ii) Reference code. A number or code that the debt collector uses 
to identify the debt or the consumer.
    (iii) Payment disclosures. (A) The statement, ``Contact us about 
your payment options,'' using that phrase or a substantially similar 
phrase. The optional payment disclosure permitted by this paragraph 
must be no more prominent than any of the validation information 
described in paragraph (c) of this section; and
    (B) With the consumer response information described in paragraph 
(c)(4) of this section, the statement ``I enclosed this amount,'' using 
that phrase or a substantially similar phrase, payment instructions 
after that statement, and a prompt. The optional payment disclosure 
permitted by this paragraph must be no more prominent than the 
validation information described in paragraph (c) of this section.
    (iv) Disclosures required by applicable law. On the front of a 
validation notice, a statement that other disclosures required by 
applicable law appear on the reverse of the validation notice and, on 
the reverse of the validation notice, any such required disclosures.
    (v) Information about electronic communications. The following 
information:
    (A) The debt collector's website and email address.
    (B) If validation information is not provided electronically, the 
statement described in paragraph (c)(3)(v) of this section explaining 
how a consumer can take the actions described in paragraphs (c)(4) and 
(d)(3) of this section electronically.
    (vi) Spanish-language translation disclosures. The following 
disclosures regarding a consumer's ability to request a Spanish-
language translation of a validation notice:
    (A) The statement, ``P[oacute]ngase en contacto con nosotros para 
solicitar una copia de este formulario en espa[ntilde]ol'' (which means 
``Contact us to request a copy of the form in Spanish''), using that 
phrase or a substantially similar phrase in Spanish. If providing this 
optional disclosure, a debt collector may include supplemental 
information in Spanish that specifies how a consumer may request a 
Spanish-language validation notice.
    (B) With the consumer response information described in paragraph 
(c)(4) of this section, the statement ``Quiero esta forma en 
espa[ntilde]ol'' (which means ``I want this form in Spanish''), using 
that phrase or a substantially similar phrase in Spanish, next to a 
prompt.
    (4) Validation notices delivered electronically. If a debt 
collector delivers a validation notice electronically pursuant to Sec.  
1006.42, a debt collector may, at its option, format the validation 
notice as follows:
    (i) Prompts. Any prompt described in paragraphs (c)(4)(i) or (ii) 
or paragraphs (d)(3)(iii)(B) or (vi)(B) of this section may be 
displayed electronically as a fillable field.
    (ii) Hyperlinks. Hyperlinks may be embedded that, when clicked:
    (A) Connect consumers to the debt collector's website; or
    (B) Permit consumers to respond to the dispute and original-
creditor information prompts described in paragraphs (c)(4)(i) and (ii) 
of this section.
    (e) Translation into other languages. A debt collector may send the 
consumer a validation notice completely and accurately translated into 
any language if the debt collector also sends an English-language 
validation notice in the same communication that satisfies paragraph 
(a)(1) of this section. If a debt collector has already provided an 
English-language validation notice that satisfies paragraph (a)(1) of 
this section and subsequently provides the consumer a validation notice 
translated into any another language, the debt collector need not 
provide an additional copy of the English-language notice.


Sec.  1006.38  Disputes and requests for original-creditor information.

    (a) Definitions. For purposes of this section, the following 
definitions apply:
    (1) Duplicative dispute means a dispute submitted by the consumer 
in writing within the validation period that:
    (i) Is substantially the same as a dispute previously submitted by 
the consumer in writing within the validation period for which the debt 
collector already has satisfied the requirements of paragraph (d)(2)(i) 
of this section; and
    (ii) Does not include new and material information to support the 
dispute.
    (2) Validation period has the same meaning given to it in Sec.  
1006.34(b)(5).
    (b) Overshadowing of rights to dispute or request original-creditor 
information. During the validation period, a debt collector must not 
engage in any collection activities or communications that overshadow 
or are inconsistent with the disclosure of the consumer's rights to 
dispute the debt and to request the name and address of the original 
creditor.
    (c) Requests for original-creditor information. Upon receipt of a 
request for the name and address of the original creditor submitted by 
the consumer in writing within the validation period, a debt collector 
must cease collection of the debt until the debt collector provides the 
name and address of the original creditor to the consumer in

[[Page 23406]]

writing or electronically in a manner permitted by Sec.  1006.42.
    (d) Disputes. (1) Failure to dispute. The failure of a consumer to 
dispute the validity of a debt does not constitute a legal admission of 
liability by the consumer.
    (2) Response to disputes. Upon receipt of a dispute submitted by 
the consumer in writing within the validation period, a debt collector 
must cease collection of the debt, or any disputed portion of the debt, 
until the debt collector:
    (i) Provides a copy either of verification of the debt or of a 
judgment to the consumer in writing or electronically in a manner 
permitted by Sec.  1006.42; or
    (ii) In the case of a dispute that the debt collector reasonably 
determines is a duplicative dispute, either:
    (A) Notifies the consumer in writing or electronically in a manner 
permitted by Sec.  1006.42 that the dispute is duplicative, provides a 
brief statement of the reasons for the determination, and refers the 
consumer to the debt collector's response to the earlier dispute; or
    (B) Satisfies paragraph (d)(2)(i) of this section.


Sec.  1006.42  Providing required disclosures.

    (a) Providing required disclosures. (1) In general. A debt 
collector who provides disclosures required by this part in writing or 
electronically must do so in a manner that is reasonably expected to 
provide actual notice and in a form that the consumer may keep and 
access later.
    (2) Exceptions. A debt collector need not comply with paragraph 
(a)(1) of this section when providing the disclosure required by Sec.  
1006.6(e) or Sec.  1006.18(e) in writing or electronically, unless the 
disclosure is included on a notice required by Sec.  1006.34(a)(1)(i) 
or Sec.  1006.38(c) or (d)(2), or in an electronic communication 
containing a hyperlink to such notice.
    (b) Requirements for certain disclosures provided electronically. 
To comply with paragraph (a) of this section, a debt collector who 
provides the validation notice described in Sec.  1006.34(a)(1)(i)(B), 
or the disclosures described in Sec.  1006.38(c) or (d)(2), 
electronically must:
    (1) Except as provided in paragraph (c) of this section, provide 
the disclosure in accordance with section 101(c) of the Electronic 
Signatures in Global and National Commerce Act (E-SIGN Act) (15 U.S.C. 
7001(c)) after the consumer provides affirmative consent directly to 
the debt collector;
    (2) Identify the purpose of the communication by including, in the 
subject line of an email or in the first line of a text message 
transmitting the disclosure, the name of the creditor to whom the debt 
currently is owed or allegedly is owed and one additional piece of 
information identifying the debt, other than the amount;
    (3) Permit receipt of notifications of undeliverability from 
communications providers, monitor for any such notifications, and treat 
any such notifications as precluding a reasonable expectation of actual 
notice for that delivery attempt; and
    (4) When providing the validation notice described in Sec.  
1006.34(a)(1)(i)(B), provide the disclosure in a responsive format that 
is reasonably expected to be accessible on a screen of any commercially 
available size and via commercially available screen readers.
    (c) Alternative procedures for providing certain disclosures 
electronically. A debt collector who provides the validation notice 
described in Sec.  1006.34(a)(1)(i)(B), or the disclosures described in 
Sec.  1006.38(c) or (d)(2), electronically need not comply with 
paragraph (b)(1) of this section if the debt collector:
    (1) Provides the disclosure by sending an electronic communication 
to an email address or, in the case of a text message, a telephone 
number that the creditor or a prior debt collector could have used to 
provide electronic disclosures related to that debt in accordance with 
section 101(c) of the E-SIGN Act; and
    (2) Places the disclosure either:
    (i) In the body of an email sent to an email address described in 
paragraph (c)(1) of this section; or
    (ii) On a secure website that is accessible by clicking on a clear 
and conspicuous hyperlink included within an electronic communication 
sent to an email address or a telephone number described in paragraph 
(c)(1) of this section, provided that:
    (A) The disclosure is accessible on the website for a reasonable 
period of time and can be saved or printed;
    (B) The consumer receives notice and an opportunity to opt out of 
hyperlinked delivery as described in paragraph (d) of this section; and
    (C) The consumer, during the opt-out period, has not opted out.
    (d) Notice and opportunity to opt out of hyperlinked delivery. For 
a consumer to receive notice and an opportunity to opt out of 
hyperlinked delivery as required by paragraph (c)(2)(ii)(B) of this 
section, the debt collector must, before providing the disclosure, 
either:
    (1) Communication by the debt collector. Inform the consumer, in a 
communication with the consumer, of:
    (i) The name of the consumer who owes or allegedly owes the debt;
    (ii) The name of the creditor to whom the debt currently is owed or 
allegedly owed;
    (iii) The email address or telephone number from which the debt 
collector intends to send the electronic communication containing the 
hyperlink to the disclosure;
    (iv) The email address or telephone number to which the debt 
collector intends to send the electronic communication containing the 
hyperlink to the disclosure;
    (v) The consumer's ability to opt out of hyperlinked delivery of 
disclosures to such email address or telephone number; and
    (vi) Instructions for opting out, including a reasonable period 
within which to opt out; or
    (2) Communication by the creditor. Confirm that, no more than 30 
days before the debt collector's electronic communication containing 
the hyperlink to the disclosure, the creditor communicated with the 
consumer using the email address or, in the case of a text message, the 
telephone number to which the debt collector intends to send the 
electronic communication and informed the consumer of:
    (i) The placement or sale of the debt to the debt collector;
    (ii) The name the debt collector uses when collecting debts;
    (iii) The debt collector's option to use the consumer's email 
address or, in the case of a text message, the consumer's telephone 
number to provide any legally required debt collection disclosures in a 
manner that is consistent with Federal law; and
    (iv) The information in paragraphs (d)(1)(iii), (v), and (vi) of 
this section.
    (e) Safe harbors. (1) Disclosures provided by mail. A debt 
collector satisfies paragraph (a) of this section if the debt collector 
mails a printed copy of a disclosure to the consumer's residential 
address, unless the debt collector receives a notification from the 
entity or person responsible for delivery that the disclosure was not 
delivered.
    (2) Validation notice contained in the initial communication. A 
debt collector who provides the validation notice described in Sec.  
1006.34(a)(1)(i)(A) within the body of an email that is the initial 
communication with the consumer satisfies paragraph (a)(1) of this 
section if the debt collector satisfies the requirements of paragraph 
(b) of this section for validation notices described in Sec.  
1006.34(a)(1)(i)(B). If such a debt

[[Page 23407]]

collector follows the procedures described in paragraph (c) of this 
section, the debt collector may, in lieu of sending the validation 
notice to an email address that the creditor or a prior debt collector 
could use for delivery of electronic disclosures in accordance with 
section 101(c) of the E-SIGN Act (as described in paragraph (c)(1) of 
this section), send the validation notice to an email address selected 
through the procedures described in Sec.  1006.6(d)(3).

Subpart C--[Reserved]

Subpart D--Miscellaneous


Sec.  1006.100  Record retention.

    (a) A debt collector must retain evidence of compliance with this 
part starting on the date that the debt collector begins collection 
activity on a debt until three years after:
    (1) The debt collector's last communication or attempted 
communication in connection with the collection of the debt; or
    (2) The debt is settled, discharged, or transferred to the debt 
owner or to another debt collector.


Sec.  1006.104  Relation to State laws.

    Neither the Act nor the corresponding provisions of this part 
annul, alter, affect, or exempt any person subject to the provisions of 
the Act or the corresponding provisions of this part from complying 
with the laws of any State with respect to debt collection practices, 
except to the extent that those laws are inconsistent with any 
provision of the Act or the corresponding provisions of this part, and 
then only to the extent of the inconsistency. For purposes of this 
section, a State law is not inconsistent with the Act or the 
corresponding provisions of this part if the protection such law 
affords any consumer is greater than the protection provided by the Act 
or the corresponding provisions of this part.


Sec.  1006.108  Exemption for State regulation.

    (a) Exemption for State regulation. Any State may apply to the 
Bureau for a determination that, under the laws of that State, any 
class of debt collection practices within that State is subject to 
requirements that are substantially similar to, or provide greater 
protection for consumers than, those imposed under sections 803 through 
812 of the Act (15 U.S.C. 1692a through 1692j) and the corresponding 
provisions of this part, and that there is adequate provision for State 
enforcement of such requirements.
    (b) Procedures and criteria. The procedures and criteria whereby 
States may apply to the Bureau for exemption of a class of debt 
collection practices within the applying State from the provisions of 
the Act and the corresponding provisions of this part as provided in 
section 817 of the Act (15 U.S.C. 1692o) are set forth in appendix A of 
this part.

Appendix A to Part 1006--Procedures for State Application for Exemption 
from the Provisions of the Act

I. Purpose and Definitions

    (a) This appendix establishes procedures and criteria whereby 
States may apply to the Bureau for exemption of a class of debt 
collection practices within the applying State from the provisions 
of the Act and the corresponding provisions of this part as provided 
in section 817 of the Act (15 U.S.C. 1692o).
    (b) For purposes of this appendix:
    (1) Applicant State law means the State law that, for a class of 
debt collection practices within that State, is claimed to contain 
requirements that are substantially similar to the requirements that 
relevant Federal law imposes on that class of debt collection 
practices, and that contains adequate provision for State 
enforcement.
    (2) Class of debt collection practices includes one or more such 
classes of debt collection practices referred to in paragraph 
I(b)(1) of this appendix.
    (3) Relevant Federal law means sections 803 through 812 of the 
Act (15 U.S.C. 1692a through 1692j) and the corresponding provisions 
of this part.
    (4) State law includes State statutes, any regulations that 
implement State statutes, and formal interpretations of State 
statutes or regulations by a court of competent jurisdiction or duly 
authorized State agency.

II. Application

    Any State may apply to the Bureau pursuant to the terms of this 
appendix for a determination that the applicant State law contains 
requirements that, for a class of debt collection practices within 
that State, are substantially similar to, or provide greater 
protection for consumers than, the requirements that relevant 
Federal law imposes on that class of debt collection practices, and 
that contains adequate provision for State enforcement. The 
application must be in writing, addressed to the Assistant Director, 
Office of Regulations, Division of Research, Markets, and 
Regulations, Bureau of Consumer Financial Protection, 1700 G Street 
NW, Washington, DC 20552, signed by the Governor, Attorney General, 
or State official having primary enforcement responsibility under 
the State law that applies to the class of debt collection 
practices, and must be supported by the documents specified in this 
appendix.

III. Supporting Documents

    The application must be accompanied by the following, which may 
be submitted in paper or electronic form:
    (a) A copy of the applicant State law.
    (b) A comparison of each provision of relevant Federal law with 
the corresponding provisions of the applicant State law, together 
with reasons supporting the claim that the corresponding provisions 
of the applicant State law are substantially similar to, or provide 
greater protection to consumers than, the provisions of relevant 
Federal law and an explanation as to why any differences between the 
State statute or regulation and Federal law are not inconsistent 
with the provisions of relevant Federal law and do not result in a 
diminution in the protection otherwise afforded consumers; and a 
statement that no other State laws (including administrative or 
judicial interpretations) are related to, or would have an effect 
upon, the State law that is being considered by the Bureau in making 
its determination.
    (c) A comparison of the provisions of the State law that provide 
for enforcement with the provisions of section 814 of the Act (15 
U.S.C. 1692l), together with reasons supporting the claim that the 
applicant State law provides for adequate administrative 
enforcement.
    (d) A statement identifying the office designated or to be 
designated to enforce the applicant State law. The statement must 
show how the office provides for adequate enforcement of the 
applicant State law, including by showing that the office has 
necessary facilities, personnel, and funding. The statement must 
include, for example, complete information regarding the fiscal 
arrangements for administrative enforcement (including the amount of 
funds available or to be provided), the number and qualifications of 
personnel engaged or to be engaged in enforcement, and a description 
of the procedures under which the applicant State law is to be 
enforced by the State.

IV. Criteria for Determination

    The Bureau will consider the criteria set forth below, and any 
other relevant information, in determining whether applicant State 
law is substantially similar to, or provides greater protection to 
consumers than, relevant Federal law and whether there is adequate 
provision for enforcement of the applicant State law. In making that 
determination, the Bureau primarily will consider each provision of 
the applicant State law in comparison with each corresponding 
provision in relevant Federal law, and not the State law as a whole 
in comparison with the Act as a whole.
    (a)(1) In order for the applicant State law to be substantially 
similar to relevant Federal law, the applicant State law at least 
must provide that:
    (i) Definitions and rules of construction, as applicable, import 
a meaning and have an application that are substantially similar to, 
or more protective of consumers than, those prescribed by relevant 
Federal law.
    (ii) Debt collectors provide all of the applicable notices 
required by relevant Federal law, with the content and in the 
terminology, form, and time periods prescribed pursuant to relevant 
Federal law. The Bureau may determine whether additional notice 
requirements under the applicant State law affect a determination 
that the applicant State law is substantially similar to relevant 
Federal law.
    (iii) Debt collectors take all affirmative actions and abide by 
obligations substantially

[[Page 23408]]

similar to, or more protective of consumers than, those prescribed 
by relevant Federal law under substantially similar or more 
protective conditions and within the substantially similar or more 
protective time periods as are prescribed under relevant Federal 
law;
    (iv) Debt collectors abide by prohibitions that are 
substantially similar to or more protective of consumers than those 
prescribed by relevant Federal law;
    (v) Consumers' obligations or responsibilities are no more 
costly, lengthy, or burdensome than consumers' corresponding 
obligations or responsibilities under relevant Federal law; and
    (vi) Consumers' rights and protections are substantially similar 
to, or more protective of consumers than, those provided by relevant 
Federal law under conditions or within time periods that are 
substantially similar to, or more protective of consumers than, 
those prescribed by relevant Federal law.
    (2) In applying the criteria set forth in paragraph IV(a)(1) of 
this appendix, the Bureau will not consider adversely any additional 
requirements of State law that are not inconsistent with the purpose 
of the Act or the requirements imposed under relevant Federal law.
    (b) In determining whether provisions for enforcement of the 
applicant State law are adequate, consideration will be given to the 
extent to which, under the applicant State law, provision is made 
for administrative enforcement, including necessary facilities, 
personnel, and funding.

V. Public Comment

    In connection with any application that has been filed in 
accordance with the requirements of parts II and III of this 
appendix and following initial review of the application, a proposed 
rule concerning the application for exemption will be published by 
the Bureau in the Federal Register, and a copy of such application 
will be made available for examination by interested persons during 
business hours at the Bureau of Consumer Financial Protection, 1700 
G Street, NW, Washington, DC 20552. A comment period will be allowed 
from the date of such publication for interested parties to submit 
written comments to the Bureau regarding that application.

VI. Exemption From Requirements

    If the Bureau determines on the basis of the information before 
it that, under the applicant State law, a class of debt collection 
practices is subject to requirements substantially similar to, or 
that provide greater protection to consumers than, those imposed 
under relevant Federal law and that there is adequate provision for 
State enforcement, the Bureau will exempt the class of debt 
collection practices in that State from the requirements of relevant 
Federal law and section 814 of the Act in the following manner and 
subject to the following conditions:
    (a) A final rule granting the exemption will be published in the 
Federal Register, and the Bureau will furnish a copy of such rule to 
the State official who made application for such exemption, to each 
Federal authority responsible for administrative enforcement of the 
requirements of relevant Federal law, and to the Attorney General of 
the United States. Any exemption granted will be effective 90 days 
after the date of publication of such rule in the Federal Register.
    (b) Any State that receives an exemption must, through its 
appropriate official, take the following steps:
    (i) Inform the Assistant Director, Office of Regulations, 
Division of Research, Markets, and Regulations, Bureau of Consumer 
Financial Protection, 1700 G Street NW, Washington, DC 20552 in 
writing within 30 days of any change in the applicant State law. The 
report of any such change must contain copies of the full text of 
that change, together with statements setting forth the information 
and opinions regarding that change that are specified in paragraph 
III.
    (ii) Provide, not later than two years after the date the 
exemption is granted, and every two years thereafter, a report to 
the Bureau in writing concerning the manner in which the State has 
enforced the applicant State law in the preceding two years and an 
update of the information required under paragraph III(d) of this 
appendix.
    (c) The Bureau will inform any State that receives such an 
exemption, through its appropriate official, of any subsequent 
amendments of the Act or this part that might necessitate the 
amendment of State law for the exemption to continue.
    (d) After an exemption is granted, the requirements of the 
applicable State law constitute the requirements of relevant Federal 
law, except to the extent such State law imposes requirements not 
imposed by the Act or this part.

VII. Adverse Determination

    (a) If, after publication of a proposed rule in the Federal 
Register as provided under part V of this appendix, the Bureau finds 
on the basis of the information before it that it cannot make a 
favorable determination in connection with the application, the 
Bureau will notify the appropriate State official of the facts upon 
which such findings are based and will afford that State authority a 
reasonable opportunity to submit additional materials that 
demonstrate the basis for granting an exemption.
    (b) If, after having afforded the State authority such 
opportunity to demonstrate the basis for granting an exemption, the 
Bureau finds on the basis of the information before it that it still 
cannot make a favorable determination in connection with the 
application, the Bureau will publish in the Federal Register a final 
rule containing its determination regarding the application and will 
furnish a copy of such rule to the State official who made 
application for such exemption.

VIII. Revocation of Exemption

    (a) The Bureau reserves the right to revoke any exemption 
granted under the provisions of the Act or this part, if at any time 
it determines that the State law does not, in fact, impose 
requirements that are substantially similar to, or that provide 
greater protection to consumers than, relevant Federal law or that 
there is not, in fact, adequate provision for State enforcement.
    (b) Before revoking any such exemption, the Bureau will notify 
the State of the facts or conduct that, in the Bureau's opinion, 
warrant such revocation, and will afford that State such opportunity 
as the Bureau deems appropriate in the circumstances to demonstrate 
continued eligibility for an exemption.
    (c) If, after having been afforded the opportunity to 
demonstrate or achieve compliance, the Bureau determines that the 
State has not done so, a proposed rule to revoke such exemption will 
be published in the Federal Register. A comment period will be 
allowed from the date of such publication for interested persons to 
submit written comments to the Bureau regarding the intention to 
revoke.
    (d) If such exemption is revoked, a final rule revoking the 
exemption will be published by the Bureau in the Federal Register, 
and a copy of such rule will be furnished to the State, to the 
Federal authorities responsible for enforcement of the requirements 
of the Act, and to the Attorney General of the United States. The 
revocation becomes effective, and the class of debt collection 
practices affected within that State become subject to the 
requirements of sections 803 through 812 of the Act and the 
corresponding provisions of this part, 90 days after the date of 
publication of the final rule in the Federal Register.

Appendix B to Part 1006--Model Forms and Clauses

B-1 [Reserved]

B-2 [Reserved]

B-3 Model Form for Validation Notice Sec.  1006.34

BILLING CODE 4810-AM-P

[[Page 23409]]

[GRAPHIC] [TIFF OMITTED] TP21MY19.001

BILLING CODE 4810-AM-C

Appendix C to Part 1006--Issuance of Advisory Opinions

    1. Advisory opinions. Any act done or omitted in good faith in 
conformity with any advisory opinion issued by the Bureau, including 
advisory opinions referenced in this appendix, provides the 
protection afforded under section 813(e) of the Act. The Bureau will 
amend this appendix periodically to incorporate references to 
advisory opinions that the Bureau issues.
    2. Requests for issuance of advisory opinions. A request for an 
advisory opinion should be in writing and addressed to the Associate 
Director, Research, Markets, and Regulations, Bureau of Consumer 
Financial Protection, 1700 G Street NW, Washington, DC 20552. The 
request should contain a complete statement of all relevant facts 
concerning the issue, including copies of all pertinent documents. 
Designated officials will review and respond to requests for 
advisory opinions.
    3. Bureau-issued advisory opinions. The Bureau has issued the 
following advisory opinions:
    a. Safe Harbors from Liability under the Fair Debt Collection 
Practices Act for Certain Actions Taken in Compliance with Mortgage 
Servicing Rules under the Real Estate Settlement Procedures Act 
(Regulation X) and the Truth in Lending Act (Regulation Z), 81 FR 
71977 (Oct. 19, 2016).

[[Page 23410]]

Supplement I to Part 1006--Official Interpretations

Introduction

    1. Official status. This commentary is the vehicle by which the 
Bureau of Consumer Financial Protection supplements Regulation F, 12 
CFR part 1006, and has been issued under the Bureau's authority to 
prescribe rules under 15 U.S.C. 1692l(d) in accordance with the 
notice-and-comment procedures for informal rulemaking under the 
Administrative Procedure Act. Unless specified otherwise, references 
in this commentary are to sections of Regulation F or the Fair Debt 
Collection Practices Act, 15 U.S.C. 1692 et seq. No commentary is 
expected to be issued other than by means of this Supplement I.
    2. Procedure for requesting interpretations. Anyone may request 
that an official interpretation of the regulation be added to this 
commentary. A request for such an official interpretation must be in 
writing and addressed to the Associate Director, Research, Markets, 
and Regulations, Bureau of Consumer Financial Protection, 1700 G 
Street NW, Washington, DC 20552. The request must contain a complete 
statement of all relevant facts concerning the issue, including 
copies of all pertinent documents. Interpretations that are adopted 
will be incorporated in this commentary following publication in the 
Federal Register.
    3. Comment designations. Each comment in the commentary is 
identified by a number and the regulatory section or paragraph that 
it interprets. The comments are designated with as much specificity 
as possible according to the particular regulatory provision 
addressed. For example, comments to Sec.  1006.34(b)(3) are further 
divided by subparagraph, such as comment 34(b)(3)(i)-1 and comment 
34(b)(3)(iv)-1. Comments that have more general application are 
designated, for example, as comments 38-1 and 38-2. This 
introduction may be cited as comments I-1, I-2, and I-3.

Subpart A--General

Section 1006.2--Definitions

    2(b) Attempt to communicate.
    1. Examples. Section 1006.2(b) defines an attempt to communicate 
as any act to initiate a communication or other contact with any 
person through any medium, including by soliciting a response from 
such person. An act to initiate a communication or other contact 
with a person is an attempt to communicate regardless of whether the 
attempt, if successful, would be a communication that conveys 
information regarding a debt directly or indirectly to any person. 
Attempts to communicate include, but are not limited to, the 
following:
    i. Placing a telephone call to a person, regardless of whether 
the debt collector speaks to any person at the called number; or
    ii. Transmitting a limited-content message, as defined in Sec.  
1006.2(j), to a consumer by voicemail or text message sent directly 
to the consumer or by an oral message left with a third party who 
answers the consumer's home or mobile telephone number.
    2(d) Communicate or communication.
    1. Any medium. Section 1006.2(d) provides, in relevant part, 
that a communication can occur through any medium. ``Any medium'' 
includes any oral, written, electronic, or other medium. For 
example, a communication may occur in person or by telephone, audio 
recording, paper document, mail, email, text message, social media, 
or other electronic media.
    2(j) Limited-content message.
    1. In general. Section 1006.2(j) provides that a limited-content 
message is a message for a consumer that includes all of the content 
described in Sec.  1006.2(j)(1), that may include any of the content 
described in Sec.  1006.2(j)(2), and that includes no other content. 
Any other message is not a limited-content message. If a message 
includes content other than the specific items described in Sec.  
1006.2(j)(1) and (2), and such other content directly or indirectly 
conveys any information about a debt, including but not limited to 
any information that indicates that the message relates to the 
collection of a debt, the message is a communication, as defined in 
Sec.  1006.2(d). For example, a message that includes the consumer's 
account number is not a limited-content message because it includes 
more than a generic statement that the message relates to an 
account.
    2. Examples. i. The following example illustrates a limited-
content message that includes only the content described in Sec.  
1006.6(j)(1): ``This is Robin Smith calling for Sam Jones. Sam, 
please contact me at 1-800-555-1212.''
    ii. The following example illustrates a limited-content message 
that includes the content described in both Sec.  1006.6(j)(1) and 
(2): ``Hi, this message is for Sam Jones. Sam, this is Robin Smith. 
I'm calling to discuss an account. It is 4:15 p.m. on Wednesday, 
September 1. You can reach me or, Jordan Johnson, at 1-800-555-1212 
today until 6:00 p.m. eastern, or weekdays from 8:00 a.m. to 6:00 
p.m. eastern.''
    3. Message for a consumer. A debt collector may transmit a 
limited-content message to a consumer by, for example, leaving a 
voicemail at the consumer's telephone number, sending a text message 
to the consumer's mobile telephone number, or leaving a message 
orally with a third party who answers the consumer's home or mobile 
telephone. Other provisions of this part may, in certain 
circumstances, restrict a debt collector from transmitting a 
limited-content message or otherwise attempting to communicate with 
a consumer. See Sec. Sec.  1006.6(b) and (c) and 1006.22(f) and 
their related commentary for further guidance regarding when a debt 
collector is prohibited from attempting to communicate with a 
consumer.
    4. Meaningful disclosure of identity. A debt collector who 
places a telephone call and leaves only a limited-content message 
for a consumer does not violate Sec.  1006.14(g) with respect to 
that telephone call.
    Paragraph 2(j)(1)(iv).
    1. Telephone number that the consumer can use to respond. 
Section 1006.2(j)(1)(iv) provides that a limited-content message 
includes a telephone number that the consumer can use to reply to 
the debt collector. A voicemail or text message that spells out, 
rather than enumerates numerically, a vanity telephone number is not 
a limited-content message.

Subpart B--Rules for FDCPA Debt Collectors

Section 1006.6--Communications in Connection With Debt Collection

    6(a) Consumer.
    Paragraph 6(a)(1).
    1. Spouse. Section 1006.6(a)(1) provides that, for purposes of 
Sec.  1006.6, the term consumer includes a consumer's spouse. The 
surviving spouse of a deceased consumer is a spouse as that term is 
used in Sec.  1006.6(a)(1).
    Paragraph 6(a)(2).
    1. Parent. Section 1006.6(a)(2) provides that, for purposes of 
Sec.  1006.6, the term consumer includes a consumer's parent, if the 
consumer is a minor. A parent of a deceased minor consumer is a 
parent as that term is used in Sec.  1006.6(a)(2).
    Paragraph 6(a)(4).
    1. Personal representative. Section 1006.6(a)(4) provides that, 
for purposes of Sec.  1006.6, the term consumer includes the 
executor or administrator of the consumer's estate, if the consumer 
is deceased. The terms executor or administrator include the 
personal representative of the consumer's estate. A personal 
representative is any person who is authorized to act on behalf of 
the deceased consumer's estate. Persons with such authority may 
include personal representatives under the informal probate and 
summary administration procedures of many States, persons appointed 
as universal successors, persons who sign declarations or affidavits 
to effectuate the transfer of estate assets, and persons who dispose 
of the deceased consumer's assets extrajudicially.
    6(b) Communications with a consumer--in general.
    6(b)(1) Prohibitions regarding unusual or inconvenient times or 
places.
    1. Designation of inconvenience. Section 1006.6(b)(1) prohibits 
a debt collector from, among other things, communicating or 
attempting to communicate with a consumer in connection with the 
collection of any debt at a time or place that the debt collector 
knows or should know is inconvenient to the consumer. The debt 
collector may know, or should know, that a time or place is 
inconvenient if the consumer uses the word ``inconvenient'' to 
notify the debt collector. In addition, depending on the facts and 
circumstances, the debt collector may know, or should know, that a 
time or place is inconvenient even if the consumer does not use the 
word ``inconvenient'' to notify the debt collector. Further, if the 
consumer initiates a communication with the debt collector at a time 
or from a place that the consumer previously designated as 
inconvenient, the debt collector may respond once to that consumer-
initiated communication at that time or place. After that response, 
the debt collector must not communicate or attempt to communicate 
further with the consumer at that time or place until the consumer 
conveys that the time or place is no longer inconvenient. For 
example (unless an exception in Sec.  1006.6(b)(4) applies):

[[Page 23411]]

    i. Assume that a consumer tells a debt collector that the 
consumer ``is busy'' or ``cannot talk'' on weekdays from 3:00 p.m. 
to 5:00 p.m. Based on these facts, the debt collector knows or 
should know that, on weekdays, the time period between 3:00 p.m. and 
5:00 p.m. is inconvenient to the consumer and, thereafter, the debt 
collector must not communicate or attempt to communicate with the 
consumer between those times.
    ii. Assume the same facts as in comment 6(b)(1)-1.i, except 
that, after the consumer tells the debt collector that the consumer 
``is busy'' or ``cannot talk'' on weekdays from 3:00 p.m. to 5:00 
p.m., the consumer initiates a communication with the debt collector 
at 4:30 p.m. on a weekday. Based on these facts, Sec.  
1006.6(b)(1)(i) does not prohibit the debt collector from responding 
once to the consumer. Unless the consumer otherwise informs the debt 
collector, however, Sec.  1006.6(b)(1)(i) prohibits the debt 
collector from future communications or attempts to communicate with 
the consumer between 3:00 p.m. and 5:00 p.m. on weekdays.
    iii. Assume that a consumer tells a debt collector not to 
communicate with the consumer at school. Based on these facts, the 
debt collector knows or should know that communications to the 
consumer at school are inconvenient and, thereafter, the debt 
collector must not communicate or attempt to communicate with the 
consumer at that place.
    iv. Assume the same facts as in comment 6(b)(1)-1.iii, except 
that, after the consumer tells the debt collector not to communicate 
with the consumer at school, the consumer initiates a communication 
with the debt collector from school. Based on these facts, Sec.  
1006.6(b)(1)(ii) does not prohibit the debt collector from 
responding once to the consumer. Unless the consumer otherwise 
informs the debt collector, however, Sec.  1006.6(b)(1)(ii) 
prohibits the debt collector from future communications or attempts 
to communicate with the consumer at school.
    Paragraph 6(b)(1)(i).
    1. Time of electronic communication. Under Sec.  
1006.6(b)(1)(i), a debt collector is prohibited from communicating 
or attempting to communicate electronically, such as through email 
or text message, at a time the debt collector knows or should know 
is inconvenient to the consumer. For purposes of determining the 
time of an electronic communication under Sec.  1006.6(b)(1)(i), an 
electronic communication occurs when the debt collector sends it, 
not, for example, when the consumer receives or views it.
    2. Consumer's location. Under Sec.  1006.6(b)(1)(i), in the 
absence of the debt collector's knowledge of circumstances to the 
contrary, an inconvenient time for communicating with a consumer is 
before 8:00 a.m. and after 9:00 p.m. local time at the consumer's 
location. If a debt collector is unable to determine a consumer's 
location, then, in the absence of knowledge of circumstances to the 
contrary, the debt collector complies with Sec.  1006.6(b)(1)(i) if 
the debt collector communicates or attempts to communicate with the 
consumer at a time that would be convenient in all of the locations 
at which the debt collector's information indicates the consumer 
might be located. The following examples, which assume that the debt 
collector has no information about times the consumer considers 
inconvenient or other information about the consumer's location, 
illustrate the rule.
    i. Assume that a debt collector's information indicates that a 
consumer has a mobile telephone number with an area code associated 
with the Eastern time zone and a street address in the Pacific time 
zone. The convenient times to communicate with the consumer are 
after 11:00 a.m. Eastern time (8:00 a.m. Pacific time) and before 
9:00 p.m. Eastern time (6:00 p.m. Pacific time).
    ii. Assume that a debt collector's information indicates that a 
consumer has a mobile telephone number with an area code associated 
with the Eastern time zone and a landline telephone number with an 
area code associated with the Mountain time zone. The convenient 
times to communicate with the consumer are after 10:00 a.m. Eastern 
time (8:00 a.m. Mountain time) and before 9:00 p.m. Eastern time 
(7:00 p.m. Mountain time).
    6(b)(3) Prohibitions regarding consumer's place of employment.
    1. Work email. Section 1006.6(b)(3) prohibits a debt collector 
from communicating or attempting to communicate with a consumer in 
connection with the collection of any debt at the consumer's place 
of employment, if the debt collector knows or has reason to know 
that the consumer's employer prohibits the consumer from receiving 
such communication. For special rules regarding a consumer's work 
email, see Sec.  1006.22(f)(3).
    6(b)(4) Exceptions.
    Paragraph 6(b)(4)(i).
    1. Prior consent--in general. Section 1006.6(b)(4)(i) provides, 
in part, that the prohibitions in Sec.  1006.6(b)(1) on a debt 
collector communicating or attempting to communicate with a consumer 
in connection with the collection of any debt at a time or place 
that the debt collector knows or should know is inconvenient to the 
consumer do not apply if the debt collector communicates or attempts 
to communicate with the prior consent of the consumer. If the debt 
collector learns during a communication that the debt collector is 
communicating with a consumer at an inconvenient time or place, the 
debt collector may ask the consumer what time or place would be 
convenient. However, the debt collector cannot during that 
communication ask the consumer to consent to the continuation of the 
communication with the consumer at the inconvenient time or place.
    2. Directly to the debt collector. Section 1006.6(b)(4)(i) 
requires the prior consent of the consumer to be given directly to 
the debt collector. For example, a debt collector cannot rely on the 
prior consent of the consumer given to the original creditor or to a 
previous debt collector.
    6(c) Communications with a consumer--after refusal to pay or 
cease communication notice.
    6(c)(1) Prohibitions.
    1. Notification complete upon receipt. If, pursuant to Sec.  
1006.6(c)(1), a consumer notifies a debt collector in writing or in 
electronic form using a medium of electronic communication through 
which a debt collector accepts electronic communications from 
consumers, that the consumer either refuses to pay a debt or wants 
the debt collector to cease further communication with the consumer, 
notification is complete upon the debt collector's receipt of that 
information.
    2. Interpretation of the E-SIGN Act. Comment 6(c)(1)-1 
constitutes the Bureau's interpretation of section 101 of the E-SIGN 
Act as applied to FDCPA section 805(c). Under this interpretation, 
section 101(a) of the E-SIGN Act enables a consumer to satisfy the 
requirement in FDCPA section 805(c) that the consumer's notification 
of the debt collector be ``in writing'' through an electronic 
request. Further, section 101(b) of the E-SIGN Act is not 
contravened because the consumer may only satisfy the writing 
requirement using a medium of electronic communication through which 
a debt collect accepts electronic communications from consumers.
    6(c)(2) Exceptions.
    1. Written early intervention notice for mortgage servicers. The 
Bureau has interpreted the written early intervention notice 
required by 12 CFR 1024.39(d)(3) to fall within the exceptions to 
the cease communication provision in FDCPA section 805(c)(2) and 
(3). See 12 CFR 1024.39(d)(3), its commentary, and the Bureau's 2016 
FDCPA Interpretive Rule (81 FR 71977 (Oct. 19, 2016)).
    6(d) Communications with third parties.
    6(d)(1) Prohibitions.
    1. Limited-content message. Section 1006.2(j) provides, in part, 
that a limited-content message is not a communication, as defined in 
Sec.  1006.2(d). Because a limited-content message is not a 
communication, a debt collector does not violate Sec.  1006.6(d)(1) 
if the debt collector leaves a limited-content message for a 
consumer with a third party who answers the consumer's home or 
mobile telephone. Such a message is an attempt to communicate, as 
defined in Sec.  1006.2(b), with the consumer. However, if, during 
the course of the interaction with the third party, the debt 
collector conveys content other than the specific items described in 
Sec.  1006.2(j)(1) and (2), and such other content directly or 
indirectly conveys any information regarding a debt, the message is 
a communication, as defined in Sec.  1006.2(d), subject to the 
prohibition on third-party communications in Sec.  1006.6(d)(1). See 
Sec.  1006.2(j) and its related commentary for further guidance 
concerning limited-content messages.
    6(d)(2) Exceptions.
    1. Prior consent. See the commentary to Sec.  1006.6(b)(4)(i) 
for guidance concerning a consumer giving prior consent directly to 
a debt collector.
    6(d)(3) Reasonable procedures for email and text message 
communications.
    Paragraph 6(d)(3)(i).
    1. Non-work email address and telephone number. For purposes of 
Sec.  1006.6(d)(3)(i)(B) and (C), an email address is a non-work 
email address unless the debt collector knows or should know that 
the email address is provided to the consumer by the consumer's

[[Page 23412]]

employer. For purposes of Sec.  1006.6(d)(3)(i)(B) and (C), a 
telephone number is a non-work telephone number unless the debt 
collector knows or should know that the telephone number is provided 
to the consumer by the consumer's employer. See Sec.  1006.22(f)(3) 
and its related commentary for clarification regarding when a debt 
collector knows or should know that an email address is provided by 
a consumer's employer.
    Paragraph 6(d)(3)(i)(B).
    Paragraph 6(d)(3)(i)(B)(1).
    1. Format of notice. The opt-out notice described in Sec.  
1006.6(d)(3)(i)(B)(1) may be provided orally, in writing, or 
electronically. The notice must be provided clearly and 
conspicuously, as defined in Sec.  1006.34(b)(1). If the notice is 
provided in writing or electronically, it must comply with the 
requirements of Sec.  1006.42(a).
    2. Reasonable period for consumer to opt out in an oral 
communication. If a creditor or a debt collector provides the opt-
out notice described in Sec.  1006.6(d)(3)(i)(B)(1) to the consumer 
in an oral communication, such as a telephone or in-person 
conversation, the creditor or the debt collector may require the 
consumer to make an opt-out decision during that same communication.
    3. Combined notice concerning electronic communications and 
hyperlinked delivery of notices. A debt collector or a creditor may 
include the opt-out notice described in Sec.  1006.6(d)(3)(i)(B)(1) 
in the same communication as the opt-out notice described in Sec.  
1006.42(d)(1) or (2), as applicable.
    Paragraph 6(d)(3)(i)(B)(2).
    1. Expiration of opt-out period. Pursuant to Sec.  
1006.6(d)(3)(i)(B)(2), a debt collector may obtain a safe harbor 
from liability for making a disclosure that violates Sec.  
1006.6(d)(1) if, among other things, the debt collector communicates 
with a consumer using a specific non-work email address or non-work 
telephone number after the expiration of a specified opt-out period, 
if the consumer has not opted out. However, if the consumer requests 
after the expiration of the opt-out period that the debt collector 
not use the specific non-work email address or non-work telephone 
number, Sec.  1006.14(h) prohibits the debt collector from 
communicating or attempting to communicate with the consumer using 
that email address or telephone number. Likewise, if the consumer 
requests after the expiration of the opt-out period that the debt 
collector not communicate with the consumer by email or text 
message, Sec.  1006.14(h) prohibits the debt collector from 
communicating or attempting to communicate with the consumer by 
email or text message, including by using the specific non-work 
email address or non-work telephone number. See Sec.  1006.14(h).
    6(e) Opt-out notice for electronic communications or attempts to 
communicate.
    1. In general. Section 1006.6(e) requires a debt collector who 
communicates or attempts to communicate with a consumer 
electronically in connection with the collection of a debt using a 
specific email address, telephone number for text messages, or other 
electronic-medium address to include in such communication or 
attempt to communicate a clear and conspicuous statement describing 
one or more ways the consumer can opt out of further electronic 
communications or attempts to communicate by the debt collector to 
that address or telephone number. Clear and conspicuous has the same 
meaning as in Sec.  1006.34(b)(1). The following examples illustrate 
the rule.
    i. Assume that a debt collector sends a text message to a 
consumer's mobile telephone number. Pursuant to Sec.  1006.6(e), the 
text message must contain a clear and conspicuous statement 
describing how the consumer can opt out of receiving further text 
messages from the debt collector to that telephone number. For 
example, a text message would comply with this requirement by 
including the following instruction: ``Reply STOP to stop texts to 
this telephone number.''
    ii. Assume that a debt collector sends the consumer an email 
message. Pursuant to Sec.  1006.6(e), the email message must contain 
a clear and conspicuous statement describing how the consumer can 
opt out of receiving further email messages from the debt collector 
to that email address. For example, an email would comply with this 
requirement by including instructions in a textual format in the 
email, in a type size no smaller than the other text in the email, 
explaining that the consumer may opt out of receiving further email 
communications from the debt collector to that email address by 
replying with the word ``stop'' in the subject line.

Section 1006.10--Acquisition of Location Information

    10(a) Definition.
    1. Location information about deceased consumers. If a consumer 
obligated or allegedly obligated to pay any debt is deceased, 
location information includes the information described in Sec.  
1006.10(a) for a person who is authorized to act on behalf of the 
deceased consumer's estate.
    10(b) Form and content of location communications.
    Paragraph 10(b)(2).
    1. Executors, administrators, or personal representatives of a 
deceased consumer's estate. Section 1006.10(b)(2) prohibits a debt 
collector who is communicating with any person other than the 
consumer for the purpose of acquiring location information about the 
consumer from stating that the consumer owes any debt. If the 
consumer obligated or allegedly obligated to pay the debt is 
deceased and the debt collector is attempting to locate the person 
who is authorized to act on behalf of the deceased consumer's 
estate, the debt collector does not violate Sec.  1006.10(b)(2) by 
stating that the debt collector is seeking to identify and locate 
the person who is authorized to act on behalf of the deceased 
consumer's estate.

Section 1006.14--Harassing, Oppressive, or Abusive Conduct

    14(b) Repeated or continuous telephone calls or telephone 
conversations.
    14(b)(1) In general.
    1. In general. Section 1006.14(b)(1)(i) provides that, in 
connection with the collection of a debt, a debt collector must not 
place telephone calls or engage any person in telephone conversation 
repeatedly or continuously with intent to annoy, abuse, or harass 
any person at the called number. Section 1006.14(b)(1)(ii) provides 
that, with respect to a debt collector who is collecting a consumer 
financial product or service debt, as defined in Sec.  1006.2(f), it 
is an unfair act or practice under section 1031 of the Dodd-Frank 
Act to place telephone calls or engage any person in telephone 
conversation repeatedly or continuously in connection with the 
collection of such debt, such that the natural consequence is to 
harass, oppress, or abuse any person at the called number. For 
purposes of Sec.  1006.14(b)(1)(i) and (ii), placing a telephone 
call includes conveying a ringless voicemail but does not include 
sending an electronic message (e.g., a text message or an email) to 
a mobile telephone.
    14(b)(2) Frequency limits.
    Paragraph 14(b)(2)(i).
    1. Examples. Section 1006.14(b)(2)(i) provides that, subject to 
Sec.  1006.14(b)(3), a debt collector must not place a telephone 
call to a particular person more than seven times within seven 
consecutive days in connection with the collection of a particular 
debt. The following examples illustrate the rule.
    i. On Wednesday, March 1, a debt collector first attempts to 
communicate with a consumer in connection with the collection of a 
debt by placing a telephone call and leaving a limited-content 
message on the consumer's voicemail. Between Thursday and Sunday, 
the debt collector places six more telephone calls to the consumer, 
all of which go unanswered. As of Sunday, the debt collector has 
placed seven telephone calls to the consumer in connection with the 
collection of the credit card debt within the period of seven 
consecutive days that started on Wednesday, March 1. Subject to 
Sec.  1006.14(b)(3), the debt collector may place another telephone 
call to the consumer in connection with collection of the debt on 
Wednesday, March 8 but not before that date.
    ii. On Tuesday, October 5, a debt collector first attempts to 
communicate with a particular third party for the purpose of 
obtaining location information about a consumer by placing a 
telephone call to that third party that goes unanswered. Subject to 
Sec. Sec.  1006.10 and 1006.14(b)(3), the debt collector may place 
up to six more telephone calls to that third party for the purpose 
of obtaining location information about that consumer through 
Monday, October 11, unless the debt collector engages in a telephone 
conversation with the third party before that day. See Sec.  
1006.10(c) for further guidance concerning when a debt collector is 
prohibited from communicating with a person other than the consumer 
for the purpose of acquiring location information.
    2. Misdirected telephone calls. Section 1006.14(b)(2)(i) limits 
the number of times a debt collector may place telephone calls to a 
particular person within seven consecutive days in connection with 
the collection of a particular debt. If, within a period of seven 
consecutive days, a debt collector attempts to communicate with a 
particular person by placing telephone calls to a particular 
telephone number, and the debt collector then learns that the 
telephone number is not that person's number, the calls that the 
debt

[[Page 23413]]

collector made to that number are not considered to have been calls 
to that person during that seven-day period for purposes of Sec.  
1006.14(b)(2)(i). For example:
    i. Assume that a debt collector attempts to communicate with a 
consumer on Monday and Wednesday by placing one unanswered telephone 
call to a particular telephone number on each of those days. On 
Thursday, the debt collector learns that the telephone number 
belongs to someone else and that the consumer does not answer calls 
to that number. For purposes of Sec.  1006.14(b)(2)(i), the debt 
collector has not yet placed any telephone calls to that consumer 
during that seven-day period.
    Paragraph 14(b)(2)(ii).
    1. Examples. Section 1006.14(b)(2)(ii) provides that, subject to 
Sec.  1006.14(b)(3), a debt collector must not place a telephone 
call to a particular person in connection with the collection of a 
particular debt within a period of seven consecutive days after 
having had a telephone conversation with the person in connection 
with the collection of such debt. Section 1006.14(b)(2)(ii) also 
states that the date of the telephone conversation is the first day 
of the seven-consecutive-day period. The following examples 
illustrate the rule.
    i. On Tuesday, April 11, a debt collector first attempts to 
communicate with a consumer in connection with the collection of a 
debt by placing a telephone call to the consumer that the consumer 
does not answer. On Friday, April 14, the debt collector again 
places a telephone call to the consumer and has a telephone 
conversation with the consumer in connection with the collection of 
the debt. Subject to Sec.  1006.14(b)(3), the debt collector may not 
place a telephone call to the consumer in connection with the 
collection of that debt again until Friday, April 21.
    ii. On Thursday, August 13, a consumer initiates a telephone 
conversation with a debt collector regarding a debt. Subject to 
Sec.  1006.14(b)(3), the debt collector may not place a telephone 
call to the consumer in connection with the collection of that debt 
again until Thursday, August 20.
    14(b)(3) Certain telephone calls excluded from the frequency 
limits.
    Paragraph 14(b)(3)(i).
    1. Responsive calls. Section 1006.14(b)(3)(i) provides that 
telephone calls placed to a person to respond to the person's 
request for information do not count toward, and are permitted in 
excess of, the frequency limits in Sec.  1006.14(b)(2). Once the 
debt collector provides a response to a person's request for 
information, the exception in Sec.  1006.14(b)(3)(i) does not apply 
to subsequent telephone calls placed by the debt collector to the 
person, unless the person makes another request.
    2. Example. On Wednesday, October 4, a debt collector places a 
telephone call to a consumer. During the ensuing telephone 
conversation in connection with the collection of a debt, the 
consumer requests additional information about the debt that the 
debt collector does not have at the time of the call. While Sec.  
1006.14(b)(2) otherwise would prohibit the debt collector from 
placing a telephone call to the consumer again until Wednesday, 
October 11, Sec.  1006.14(b)(3)(i) provides that the debt collector 
may place telephone calls to respond to the consumer's request for 
information before the following Wednesday. Assume further that the 
debt collector provides a response to the consumer's request on 
Friday, October 6. Thereafter, the exception in Sec.  
1006.14(b)(3)(i) does not apply to subsequent telephone calls placed 
by the debt collector to the consumer, unless the consumer makes 
another request.
    Paragraph 14(b)(3)(ii).
    1. Prior consent. See the commentary to Sec.  1006.6(b)(4)(i) 
for guidance concerning a person giving prior consent directly to a 
debt collector.
    2. Example. On Friday, April 5, a debt collector places a 
telephone call to a consumer. During the ensuing telephone 
conversation in connection with the collection of a debt, the 
consumer requests that the debt collector call back at a later time. 
While Sec.  1006.14(b)(2) otherwise would prohibit the debt 
collector from placing a telephone call to the consumer again until 
Friday, April 12, Sec.  1006.14(b)(3)(ii) provides that the debt 
collector may place telephone calls pursuant to the consumer's prior 
consent before the following Friday. Assume further that the debt 
collector calls the consumer back on Monday, April 8, and that they 
have a telephone conversation on that date. Thereafter, the 
exception in Sec.  1006.14(b)(3)(ii) does not apply to subsequent 
telephone calls placed by the debt collector to the consumer, unless 
the consumer again provides prior consent directly to the debt 
collector.
    Paragraph 14(b)(3)(iii).
    1. Unconnected telephone calls. Section 1006.14(b)(3)(iii) 
provides that telephone calls placed to a person do not count 
toward, and are permitted in excess of, the frequency limits in 
Sec.  1006.14(b)(2) if they do not connect to the dialed number. A 
debt collector's telephone call does not connect to the dialed 
number if, for example, the debt collector receives a busy signal or 
an indication that the dialed number is not in service. Conversely, 
a debt collector's telephone call connects to the dialed number if, 
for example, the call causes a telephone to ring at the dialed 
number but no one answers the call, or the call does not cause a 
telephone to ring but is connected to a voicemail or other recorded 
message.
    2. Example. Section 1006.14(b)(3)(iii) provides that telephone 
calls placed to a person do not count toward, and are permitted in 
excess of, the frequency limits in Sec.  1006.14(b)(2) if they do 
not connect to the dialed number. For example, on Thursday, February 
2, a debt collector places a telephone call to a consumer about a 
credit card debt in response to which the debt collector receives a 
busy signal or an indication that the dialed number is not in 
service. That telephone call does not count toward the frequency 
limits in Sec.  1006.14(b)(2). Subject to Sec.  1006.14(b)(3), the 
debt collector may place seven more telephone calls to the consumer 
about that credit card debt through Wednesday, February 8, unless 
the debt collector engages in a telephone conversation with the 
consumer in connection with the collection of the debt before that 
day.
    14(b)(5) Definition.
    1. Particular debt. Section 1006.14(b)(2) limits the frequency 
with which a debt collector may place telephone calls to, or engage 
in telephone conversation with, a person in connection with the 
collection of a particular debt. Section 1006.14(b)(5) provides 
that, except in the case of student loan debt, the term particular 
debt means each of a consumer's debts in collection. For student 
loan debt, Sec.  1006.14(b)(5) provides that the term particular 
debt means all student loan debts that a consumer owes or allegedly 
owes that were serviced under a single account number at the time 
the debts were obtained by the debt collector. The following 
examples illustrate the rule.
    i. A debt collector is attempting to collect a medical debt and 
a credit card debt from the same consumer. Subject to Sec.  
1006.14(b)(3), the debt collector may, within a period of seven 
consecutive days, place seven unanswered telephone calls to the 
consumer in connection with the collection of the medical debt, and 
seven unanswered telephone calls to the consumer in connection with 
the collection of the credit card debt.
    ii. A debt collector is attempting to collect a medical debt and 
a credit card debt from the same consumer. On Monday, November 9, 
the debt collector engages in a telephone conversation with the 
consumer solely in connection with the collection of the medical 
debt, but the debt collector does not place any telephone calls to 
the consumer in connection with the collection of the credit card 
debt. Subject to Sec.  1006.14(b)(3), the debt collector may not 
place a telephone call to the consumer in connection with the 
collection of the medical debt again until Monday, November 16. 
Subject to Sec.  1006.14(b), however, the debt collector may place 
telephone calls to, and engage in a telephone conversation with, the 
consumer in connection with the collection of the credit card debt 
before Monday, November 16.
    iii. A debt collector is attempting to collect three student 
loan debts that were serviced under a single account number at the 
time that they were obtained by the debt collector and that are owed 
or allegedly owed by the same consumer. All three debts are treated 
as a single debt for purposes of Sec.  1006.14(b)(2). Subject to 
Sec.  1006.14(b)(3), the debt collector may place seven telephone 
calls within seven days to the consumer in connection with the 
collection of the debts. If, however, the debt collector engages the 
consumer in a telephone conversation in connection with the 
collection of any of the debts, the debt collector may not place a 
telephone call to the consumer again during the same seven-day 
period in connection with the collection of any of the debts.
    14(h) Prohibited communication media.
    14(h)(1) In general.
    1. Communication media. Section 1006.14(h) prohibits a debt 
collector from communicating or attempting to communicate with a 
consumer in connection with the collection of any debt through a 
medium of communication if the consumer has requested that the debt 
collector not use that medium to communicate with the

[[Page 23414]]

consumer. See comment 2(d)-1 for examples of communication media.
    2. Specific address or telephone number. Within a medium of 
communication, a consumer may request that a debt collector not use 
a specific address or telephone number. For example, if a debt 
collector has two mobile telephone numbers on file for a consumer, 
the consumer may request that the debt collector not use either or 
both mobile telephone numbers.

Section 1006.18--False, Deceptive, or Misleading Representations or 
Means

    18(e) Disclosures required.
    1. Communication. A limited-content message, as defined in Sec.  
1006.2(j), is not a communication, as that term is defined in Sec.  
1006.2(d). Thus, a debt collector who leaves a limited-content 
message for a consumer need not make the disclosures required by 
Sec.  1006.18(e)(1) and (2). However, if a debt collector leaves a 
voicemail message for a consumer that includes content in addition 
to the content described in Sec.  1006.2(j)(1) and (2) and which 
directly or indirectly conveys any information regarding a debt, the 
voicemail message is a communication, and the debt collector is 
required to make the Sec.  1006.18(e) disclosures. See the 
commentary to Sec.  1006.2(d) and (j) for additional clarification 
regarding the definitions of ``communication'' and ``limited-content 
messages.''
    18(e)(1) Initial communications.
    1. Example. A debt collector must make the disclosure required 
by Sec.  1006.18(e)(1) in the debt collector's initial communication 
with a consumer, regardless of whether that communication is written 
or oral, and regardless of whether the debt collector or the 
consumer initiated the communication. For example, assume that a 
debt collector who has not previously communicated with a consumer 
attempts to communicate with the consumer by leaving a limited-
content message, as defined in Sec.  1006.2(j), in the consumer's 
voicemail. After listening to the debt collector's limited-content 
message, the consumer initiates a telephone call to, and 
communicates with, the debt collector. Pursuant to Sec.  
1006.18(e)(1), because the consumer-initiated call is the ``initial 
communication'' between the debt collector and the consumer, the 
debt collector must disclose to the consumer during that telephone 
call that the debt collector is attempting to collect a debt and 
that any information obtained will be used for that purpose.

Section 1006.22--Unfair or Unconscionable Means

    22(f) Restrictions on use of certain media.
    Paragraph 22(f)(3).
    1. Consent to use employer-provided email address. Section 
1006.22(f)(3) prohibits a debt collector from communicating or 
attempting to communicate with a consumer using an email address 
that the debt collector knows or should know is provided to the 
consumer by the consumer's employer, unless the debt collector has 
received directly from the consumer either prior consent to use that 
email address or an email from that email address. The consumer 
could at any time, however, opt out of receiving emails at that 
address using instructions provided by a debt collector pursuant to 
Sec.  1006.6(e), or otherwise request not to receive emails at that 
address pursuant to Sec.  1006.14(h). See the commentary to Sec.  
1006.6(b)(4)(i) for additional guidance concerning a consumer giving 
prior consent directly to a debt collector.
    2. Receipt of email from employer-provided email address. 
Section 1006.22(f)(3) prohibits a debt collector from communicating 
or attempting to communicate with a consumer using an email address 
that the debt collector knows or should know is provided to the 
consumer by the consumer's employer, unless the debt collector has 
received directly from the consumer either prior consent to use that 
email address or an email from that email address. A debt collector 
who receives an email directly from a consumer from an email address 
provided by the consumer's employer may communicate or attempt to 
communicate with the consumer at that email address, even if the 
consumer's email does not provide prior consent to the debt 
collector. For example, assume a debt collector has provided to a 
consumer a validation notice pursuant to Sec.  1006.34 but has not 
otherwise communicated or attempted to communicate with the 
consumer. Assume further that the consumer subsequently sends an 
email directly to the debt collector from an email address that the 
debt collector knows or should know is provided to the consumer by 
the consumer's employer; that the consumer's email requests 
additional information about the debt but does not give prior 
consent to the debt collector's use of that email address; and that 
the debt collector neither knows nor has reason to know that the 
consumer's employer prohibits the consumer from receiving 
communications in connection with the collection of a debt. Section 
1006.22(f)(3) permits the debt collector to communicate or attempt 
to communicate with the consumer using that email address. The 
consumer could, however, subsequently opt out or request not to 
receive messages at that email address pursuant to Sec. Sec.  
1006.6(e) or 1006.14(h).
    3. Knowledge of employer-provided email address. For purposes of 
Sec.  1006.22(f)(3), a debt collector knows or should know an email 
address is provided to the consumer by the consumer's employer if, 
for example, the email address's top-level domain name is one 
ordinarily associated with work email addresses (e.g., .gov or 
.mil), the email address's domain name includes a corporate name 
that is not commonly associated with non-work email addresses (e.g., 
springsidemortgage.com), or the debt collector knows the identity of 
the consumer's employer and the email address's domain name includes 
the employer's name or an abbreviation of the employer's name (e.g., 
the debt collector knows that the consumer works at Example Mortgage 
Company and the email address is examplemortgagecompany.com or 
exmoc.com). In the absence of contrary information, a debt collector 
neither would know nor should know that an email address is provided 
to the consumer by the consumer's employer if the email address's 
domain name is one commonly associated with a provider of non-work 
email addresses.
    Paragraph 22(f)(4).
    1. Social media. Section 1006.22(f)(4) prohibits a debt 
collector from communicating or attempting to communicate with a 
consumer in connection with the collection of a debt by a social 
media platform that is viewable by a person other than the persons 
described in Sec.  1006.6(d)(1)(i) through (vi). For example, Sec.  
1006.22(f)(4) prohibits a debt collector from posting, in connection 
with the collection of a debt, any message, including a limited-
content message, for a consumer on a social media web page if that 
web page is viewable by the general public or the consumer's social 
media contacts. If a social media platform enables a debt collector 
to send a private message to the consumer that is not viewable by a 
person other than the persons described in Sec.  1006.6(d)(1)(i) 
through (vi), however, Sec.  1006.22(f)(4) does not prohibit a debt 
collector from communicating or attempting to communicate with a 
consumer in connection with the collection of a debt by sending such 
a private message to the consumer, including by sending a limited-
content message, although Sec. Sec.  1006.6(b) or 1006.14(h) 
nonetheless may prohibit the debt collector from sending such a 
private message if, for example, the consumer has requested that the 
debt collector not use that medium to communicate with the consumer.

Section 1006.30--Other Prohibited Practices

    30(a) Communication prior to furnishing information.
    1. Communication. Section 1006.30(a) prohibits a debt collector 
from furnishing information to a consumer reporting agency about a 
debt before communicating with the consumer about that debt. 
Pursuant to Sec.  1006.2(d), a debt collector has communicated with 
the consumer about the debt if the debt collector conveys 
information regarding a debt directly or indirectly to the consumer 
through any medium. Pursuant to Sec.  1006.2(d), a debt collector 
has not communicated with the consumer about the debt if the debt 
collector attempts to communicate with the consumer but no 
communication occurs. For example, a debt collector communicates 
with the consumer if the debt collector provides a validation notice 
to the consumer; a debt collector does not communicate with the 
consumer by leaving a limited-content message for the consumer. For 
additional clarification on providing disclosures in a manner that 
is reasonably expected to provide actual notice to consumers, see 
Sec.  1006.42.
    30(b) Prohibition on the sale, transfer, or placement of certain 
debts.
    30(b)(1) In general.
    30(b)(1)(i) FDCPA prohibition.
    Paragraph 30(b)(1)(i)(C).
    1. Identity theft report filed. Under Sec.  1006.30(b)(1)(i)(C), 
a debt collector may not sell, transfer, or place for collection a 
debt if the debt collector knows or should know that an identity 
theft report was filed with respect to the debt. A debt collector 
knows or should know that an identity theft report was filed if, for 
example, the debt collector has received a copy of the identity 
theft report.
    30(b)(2) Exceptions.

[[Page 23415]]

    Paragraph 30(b)(2)(i).
    1. In general. Under Sec.  1006.30(b)(2)(i), a debt collector 
who is collecting a debt described in Sec.  1006.30(b)(1)(i) may 
transfer the debt to the debt's owner. However, unless another 
exception under Sec.  1006.30(b)(2) applies, the debt collector may 
not transfer the debt or the right to collect the debt to another 
entity on behalf of the debt owner.

Section 1006.34--Notice for Validation of Debts

    34(a)(1) Validation information required.
    1. Deceased consumers. Section 1006.34(a)(1) generally requires 
a debt collector to provide the validation information described in 
Sec.  1006.34(c) either by sending the consumer a validation notice 
in a manner that satisfies Sec.  1006.42(a), or by providing the 
information orally in the debt collector's initial communication. If 
the debt collector knows or should know that the consumer is 
deceased, and if the debt collector has not previously provided the 
validation information to the deceased consumer, a person who is 
authorized to act on behalf of the deceased consumer's estate 
operates as the consumer for purposes of Sec.  1006.34(a)(1). In 
such circumstances, to comply with Sec.  1006.34(a)(1), a debt 
collector must provide the validation information to an individual 
that the debt collector identifies by name who is authorized to act 
on behalf of the deceased consumer's estate.
    34(b) Definitions.
    34(b)(3) Itemization date.
    1. In general. Section 1006.34(b)(3) defines itemization date 
for purposes of Sec.  1006.34. Section 1006.34(b)(3) states that the 
itemization date is any one of four potential references dates for 
which a debt collector can ascertain the amount of the debt. The 
four potential reference dates are the last statement date, the 
charge-off date, the last payment date, and the transaction date. A 
debt collector may select any of these dates as the itemization date 
to comply with Sec.  1006.34. Once a debt collector uses a reference 
date for a specific debt in a communication with an individual 
consumer, the debt collector must use that reference date for that 
debt consistently when providing disclosures required by Sec.  
1006.34 to that consumer. For example, if a debt collector uses the 
last statement date to determine and disclose the account number 
associated with the debt pursuant to Sec.  1006.34(c)(2)(v), the 
debt collector may not use the charge-off date to determine and 
disclose the amount of the debt pursuant to Sec.  
1006.34(c)(2)(viii).
    Paragraph 34(b)(3)(i).
    1. Last statement date. Under Sec.  1006.34(b)(3)(i), the last 
statement date is the date of the last periodic statement or written 
account statement or invoice provided to the consumer. For purposes 
of Sec.  1006.34(b)(3)(i), a statement provided by a creditor or a 
third party acting on the creditor's behalf, including a creditor's 
service provider, may constitute the last statement provided to the 
consumer.
    Paragraph 34(b)(3)(iv).
    1. Transaction date. Section 1006.34(b)(3)(iv) provides that the 
itemization date may be the date of the transaction that gave rise 
to the debt. The transaction date is the date that a creditor 
provided, or made available, a good or service to a consumer. For 
example, the transaction date for a debt arising from a medical 
procedure may be the date the medical procedure was performed, and 
the transaction date for a consumer's gym membership may be the date 
the membership contract was executed. In some cases, a debt 
collector may identify more than one potential transaction date. For 
example, a debt may have two transaction dates if a contract for a 
service is executed on one date and the service is performed on 
another date. If a debt has more than one transaction date, a debt 
collector may use any such date as the transaction date for purposes 
of Sec.  1006.34(b)(3)(iv) but must use whichever transaction date 
it selects consistently, as described in comment 34(b)(3)-1.
    34(b)(5) Validation period.
    1. Updated validation period. Section 1006.34(b)(5) defines the 
validation period as the period starting on the date that a debt 
collector provides the validation information required by Sec.  
1006.34(a)(1) and ending 30 days after the consumer receives or is 
assumed to receive those disclosures. Section 1006.34(c)(3)(i) 
through (iii) requires statements that specify the end date of the 
validation period. If a debt collector sends a subsequent validation 
notice to a consumer because the consumer did not receive the 
original validation notice and the consumer has not otherwise 
received the validation information described in Sec.  1006.34(c), 
the debt collector must calculate the end date of the validation 
period specified in the Sec.  1006.34(c)(3) disclosures based on the 
date the consumer receives or is assumed to receive the subsequent 
validation notice. For example, assume a debt collector sends a 
consumer a validation notice on January 1, and that notice is 
returned as undeliverable. After obtaining accurate location 
information, the debt collector sends the consumer a subsequent 
validation notice on January 15. Pursuant to Sec.  1006.34(b)(5), 
the end date of the validation period specified in the Sec.  
1006.34(c)(3) disclosures should be based on the date the consumer 
receives or is assumed to receive the validation notice sent on 
January 15.
    34(c) Validation information.
    34(c)(2) Information about the debt.
    Paragraph 34(c)(2)(ii).
    1. Consumer's name. Section 1006.34(c)(2)(ii) provides that 
validation information includes the consumer's name and mailing 
address. The consumer's name is what the debt collector reasonably 
determines is the most complete version of the name about which the 
debt collector has knowledge, whether obtained from the creditor or 
another source. It would be unreasonable for a debt collector to 
determine the consumer's name is the most complete version of the 
consumer's name if the debt collector has omitted name information 
in a manner that created a false, misleading, or confusing 
impression about the consumer's identity. For example, if the 
creditor provides the consumer's first name, middle name, last name, 
and name suffix to the debt collector, it would be unreasonable for 
the debt collector to not provide all of that information to the 
consumer.
    Paragraph 34(c)(2)(iii).
    1. Merchant brand. Section 1006.34(c)(2)(iii) provides that 
validation information includes the merchant brand, if any, 
associated with a credit card debt, to the extent that such 
information is available to the debt collector. For example, assume 
that a debt collector is attempting to collect a consumer's credit 
card debt. The credit card was issued by ABC Bank and was co-branded 
XYZ Store, and this information is available to the debt collector. 
The debt collector must provide the ``XYZ Store'' merchant brand 
information to the consumer.
    Paragraph 34(c)(2)(v).
    1. Account number truncation. Section 1006.34(c)(2)(v) provides 
that validation information includes the account number associated 
with the debt on the itemization date, or a truncated version of 
that number. If a debt collector uses a truncated account number, 
the account number must remain recognizable. For example, a debt 
collector may truncate a credit card account number so that only the 
last four digits appear on a validation notice.
    Paragraph 34(c)(2)(viii).
    1. Amount of the debt on the itemization date. Section 
1006.34(c)(2)(viii) provides that validation information includes 
the amount of the debt on the itemization date. The amount of the 
debt on the itemization date includes any fees, interest, or other 
charges owed as of that date.
    Paragraph 34(c)(2)(ix).
    1. Itemization of the debt. Section 1006.34(c)(2)(ix) provides 
that validation information includes an itemization of the current 
amount of the debt in a tabular format reflecting interest, fees, 
payments, and credits since the itemization date. When providing a 
validation notice, a debt collector must include fields in the 
notice for all of these items even if none of the items have been 
assessed or applied to the debt since the itemization date. A debt 
collector may indicate that the value of a required field is ``0'' 
or ``N/A,'' or may state that no interest, fees, payments, or 
credits have been assessed or applied to the debt.
    Paragraph 34(c)(2)(x).
    1. Current amount of the debt. Section 1006.34(c)(2)(x) provides 
that validation information includes the current amount of the debt 
(i.e., the amount as of when the validation information is 
provided). For residential mortgage debt subject to Regulation Z, 12 
CFR 1026.41, a debt collector may comply with the requirement to 
provide the current amount of the debt by providing the consumer the 
total balance of the outstanding mortgage, including principal, 
interest, fees, and other charges.
    34(c)(3) Information about consumer protections.
    Paragraph 34(c)(3)(v).
    1. Electronic communication media. Section 1006.34(c)(3)(v) 
provides that validation information includes a statement explaining 
how a consumer can take the actions described in Sec.  1006.34(c)(4) 
and (d)(3), as applicable, electronically, if the debt collector 
provides the validation notice electronically. A debt collector may 
provide the information described by Sec.  1006.34(c)(3)(v) by 
including the

[[Page 23416]]

statements, ``We accept disputes electronically at,'' using that 
phrase or a substantially similar phrase, followed by an email 
address or website portal that a consumer can use to take the action 
described in Sec.  1006.34(c)(4)(i), and ``We accept original 
creditor information requests electronically,'' using that phrase or 
a substantially similar phrase, followed by an email address or 
website portal that a consumer can use to take the action described 
in Sec.  1006.34(c)(4)(ii). If a debt collector accepts electronic 
communications from consumers through more than one medium, such as 
by email and through a website portal, the debt collector is only 
required to provide information regarding one of these media but may 
provide information on any additional media.
    Paragraph 34(c)(3)(vi).
    1. In general. Section 1006.34(c)(3)(vi) provides that, for a 
validation notice delivered in the body of an email pursuant to 
Sec.  1006.42(b)(1) or (c)(2)(i), validation information includes 
the opt-out statement required by Sec.  1006.6(e). If a validation 
notice is delivered on a website pursuant to Sec.  
1006.42(c)(2)(ii), the validation notice need not contain the opt-
out instructions because the consumer would have already received 
the opt-out instructions since those instructions are required for 
any email or text message that provides a hyperlink to the website 
where the notice is placed. Delivery of a validation notice that a 
debt collector previously provided pursuant to Sec.  1006.42(b)(1) 
or (c)(2)(i) or (ii) is not rendered ineffective because a consumer 
opts out of future electronic communications.
    34(c)(4) Consumer response information.
    1. Prompts. If the validation information is provided in writing 
or electronically, a prompt described in Sec.  1006.34(c)(4) may be 
formatted as a checkbox as in Model Form B-3 in appendix B.
    34(c)(5) Special rule for certain residential mortgage debt.
    1. In general. Section 1006.34(c)(5) provides that, for debts 
subject to Regulation Z, 12 CFR 1026.41, a debt collector need not 
provide the validation information described in Sec.  
1006.34(c)(2)(vii) through (ix) if the debt collector provides the 
consumer at the same time as the validation notice a copy of the 
most recent periodic statement provided to the consumer under 12 CFR 
1026.41(b), and the debt collector refers to that periodic statement 
in the validation notice. A debt collector may comply with the 
requirement to provide a copy of the most recent periodic statement 
and the validation notice at the same time by, for example, 
including both documents in the same mailing. A debt collector may 
comply with the requirement to refer to the periodic statement in 
the validation notice by, for example, including in the validation 
notice the statement, ``See the enclosed periodic statement for an 
itemization of the debt,'' situated next to the information about 
the current amount of the debt required by Sec.  1006.34(c)(2)(x). 
For debt subject to Sec.  1006.34(c)(5), a debt collector need not 
include the itemization table described in Sec.  1006.34(c)(2)(ix).
    34(d) Form of validation information.
    34(d)(1) In general.
    Paragraph 34(d)(1)(ii).
    1. Permissible changes. A debt collector may make certain 
changes to the content, format, and placement of the validation 
information described in Sec.  1006.34(c) as long as the resulting 
disclosures are substantially similar to Model Form B-3 in appendix 
B of this part. Acceptable changes include, for example:
    i. Modifications to remove language that could suggest liability 
for the debt if such language is not applicable. For example, if a 
debt collector sends a validation notice to a person who is 
authorized to act on behalf of the deceased consumer's estate (see 
comment 34(a)(1)-1), and that person is not liable for the debt, the 
debt collector may use the name of the deceased consumer instead of 
``you.''
    34(d)(2) Safe harbor.
    1. Safe harbor provided by use of model form. Although the use 
of Model Form B-3 in appendix B of this part is not required, a debt 
collector who uses the model form, including a debt collector who 
delivers the model form electronically, complies with the disclosure 
requirements of Sec.  1006.34(a)(1) and (d)(1). A debt collector who 
uses Model Form B-3 and includes the optional disclosures described 
in Sec.  1006.34(d)(3) continues to be in compliance as long as 
those disclosures are made consistent with the instructions in Sec.  
1006.34(d)(3). A debt collector who uses Model Form B-3 also may 
embed hyperlinks if delivering the form electronically and continue 
to be in compliance as long as the hyperlinks are included 
consistent with Sec.  1006.34(d)(4)(ii).
    34(d)(3) Optional disclosures.
    34(d)(3)(iv) Disclosures required by applicable law.
    1. Section 1006.34(d)(3)(iv) permits a debt collector to include 
on the front of the validation notice a statement that other 
disclosures required by applicable law appear on the reverse of the 
validation notice and, on the reverse of the validation notice, any 
such required disclosures. Disclosures required by other applicable 
law may include, for example, disclosure requirements established by 
State statutes or regulations, as well as disclosures required by 
judicial decisions or orders. To comply with Sec.  
1006.34(d)(3)(iv), a debt collector may include in the validation 
notice a disclosure that is substantially similar to the language 
about other required disclosures that appears on Model Form B-3 in 
appendix B of this part and place any such required disclosures on 
the reverse of the validation notice, located above the consumer 
information section described in Sec.  1006.34(c)(4).
    34(d)(3)(vi) Spanish-language translation disclosures.
    Paragraph 34(d)(3)(vi)(A).
    1. Customizing Spanish-language disclosure. Section 
1006.34(d)(3)(vi)(A) permits a debt collector to include 
supplemental information in Spanish that specifies how a consumer 
may request a Spanish-language validation notice. For example, a 
debt collector may include a statement in Spanish that a consumer 
can request a Spanish-language validation notice by telephone or 
email, if the debt collector chooses to accept consumer requests 
through those communication media.
    34(e) Translation into other languages.
    1. In general. Section 1006.34(e) permits a debt collector to 
satisfy Sec.  1006.34(a)(1) by sending a consumer a validation 
notice accurately translated into any language, if the debt 
collector also sends an English-language validation notice in the 
same communication or has already provided an English-language 
validation notice. The language of a validation notice a debt 
collector obtains from the Bureau's website is considered a complete 
and accurate translation, although debt collectors are permitted to 
use other validation notice translations so long as they are 
complete and accurate.

Section 1006.38--Disputes and Requests for Original-Creditor 
Information

    1. Deceased consumers. Section 1006.38 contains requirements 
related to disputes and requests for the name and address of the 
original creditor timely submitted in writing by the consumer. If 
the debt collector knows or should know that the consumer is 
deceased, and if the consumer has not previously disputed the debt 
or requested the name and address of the original creditor, a person 
who is authorized to act on behalf of the deceased consumer's estate 
operates as the consumer for purposes of Sec.  1006.38. In such 
circumstances, to comply with Sec.  1006.38(c) or (d)(2), 
respectively, a debt collector must respond to a request for the 
name and address of the original creditor or to a dispute timely 
submitted in writing by a person who is authorized to act on behalf 
of the deceased consumer's estate.
    2. In writing. Section 1006.38 contains requirements related to 
a dispute or request for the name and address of the original 
creditor timely submitted in writing by the consumer. A consumer has 
disputed the debt or requested the name and address of the original 
creditor in writing for purposes of Sec.  1006.38(c) or (d)(2) if 
the consumer, for example:
    i. Mails the written dispute or request to the debt collector;
    ii. Returns to the debt collector the consumer response form 
that Sec.  1006.34(c)(4)(i) requires to appear on the validation 
notice and indicates on the form a dispute or request;
    iii. Provides the dispute or request to the debt collector using 
a medium of electronic communication through which a debt collector 
accepts electronic communications from consumers, such as an email 
address or a website portal; or
    iv. Delivers the written dispute or request in person or by 
courier to the debt collector.
    3. Interpretation of the E-SIGN Act. Comment 38-2.ii constitutes 
the Bureau's interpretation of section 101 of the E-SIGN Act as 
applied to section 809(b) of the FDCPA. Under this interpretation, 
section 101(a) of the E-SIGN Act enables a consumer to satisfy 
through an electronic request the requirement in section 809(b) of 
the FDCPA that the consumer's notification of the debt collector be 
``in writing.'' Further, section 101(b) of the E-SIGN Act is not 
contravened because the consumer may only use a medium of electronic 
communication through which a debt collector accepts electronic 
communications from consumers.
    38(a) Definitions.

[[Page 23417]]

    38(a)(1) Duplicative dispute.
    1. Substantially the same. Section 1006.38(a)(1) provides that a 
dispute is a duplicative dispute if, among other things, the dispute 
is substantially the same as a dispute previously submitted by the 
consumer in writing within the validation period for which the debt 
collector has already satisfied the requirements of Sec.  
1006.38(d)(2)(i). A later dispute can be substantially the same as 
an earlier dispute even if the later dispute does not repeat 
verbatim the language of the earlier dispute.
    2. New and material information. Section Sec.  1006.38(a)(1) 
provides that a dispute that is substantially the same as a dispute 
previously submitted by the consumer in writing within the 
validation period for which the debt collector has already satisfied 
the requirements of Sec.  1006.38(d)(2)(i) is not a duplicative 
dispute if the consumer provides new and material information to 
support the dispute. Information is new if the consumer did not 
provide the information when submitting an earlier dispute. 
Information is material if it is reasonably likely to change the 
verification the debt collector provided or would have provided in 
response to the earlier dispute. The following example illustrates 
the rule:
    i. ABC debt collector is collecting a debt from a consumer and 
sends the consumer a validation notice. In response, the consumer 
submits a written dispute to ABC debt collector within the 
validation period asserting that the consumer does not owe the debt. 
The consumer does not include any information in support of the 
dispute. Pursuant to Sec.  1006.38(d)(2)(i), ABC debt collector 
provides the consumer a copy of verification of the debt. The 
consumer then sends a cancelled check showing the consumer paid the 
debt. The cancelled check is new and material information.
    38(d) Disputes.
    38(d)(2) Response to disputes.
    Paragraph 38(d)(2)(ii).
    1. Duplicative dispute notice. Section 1006.38(d)(2)(ii) 
provides that, in the case of a dispute that a debt collector 
reasonably determines is a duplicative dispute, the debt collector 
must cease collection of the debt, or any disputed portion of the 
debt, until the debt collector notifies the consumer that the 
dispute is duplicative or provides a copy either of verification of 
the debt or of a judgment to the consumer. If the debt collector 
notifies the consumer that the dispute is duplicative, Sec.  
1006.38(d)(2)(ii) requires that the notice provide a brief statement 
of the reasons for the debt collector's determination that the 
dispute is duplicative and refer the consumer to the debt 
collector's response to the earlier dispute. A debt collector 
complies with the requirement to provide a brief statement of the 
reasons for its determination if the notice states that the dispute 
is substantially the same as an earlier dispute submitted by the 
consumer and the consumer has not included any new and material 
information in support of the earlier dispute. A debt collector 
complies with the requirement to refer the consumer to the debt 
collector's response to the earlier dispute if the notice states 
that the debt collector responded to the earlier dispute and 
provides the date of that response.

Section 1006.42--Providing Required Disclosures

    1. Deceased consumers. Section 1006.42 contains requirements 
related to providing certain disclosures required by this part. If a 
debt collector knows or should know that a consumer is deceased, a 
person who is authorized to act on behalf of the deceased consumer's 
estate operates as the consumer for purposes of Sec.  1006.42.
    42(a) Providing required disclosures.
    42(a)(1) In general.
    1. Notice of undeliverability. Under Sec.  1006.42(a)(1), a debt 
collector who provides disclosures required by this part in writing 
or electronically must, among other things, do so in a manner that 
is reasonably expected to provide actual notice. A debt collector 
who provides a required disclosure in writing or electronically and 
who receives a notice that the disclosure was not delivered has not 
provided the disclosure in a manner that is reasonably expected to 
provide actual notice under Sec.  1006.42(a)(1). See comment 
34(b)(5)-1 for how to calculate the updated validation period when 
sending a subsequent validation notice.
    42(b) Requirements for certain disclosures provided 
electronically.
    Paragraph 42(b)(1).
    1. Interpretation of the E-SIGN Act. Section 1006.42(b)(1) 
constitutes the Bureau's interpretation of section 101 of the E-SIGN 
Act as applied to section 809 of the FDCPA. Under this 
interpretation, section 101(c) of the E-SIGN Act enables a debt 
collector to satisfy the requirement in section 809(a) of the FDCPA 
that the debt collector's notice be ``written,'' and to satisfy the 
requirement in section 809(b) of the FDCPA that the debt collector 
mail the consumer a copy of verification or a judgment, or the name 
and address of the original creditor, through an electronic notice 
if the consumer provides consent in accordance with the E-SIGN Act 
directly to the debt collector.
    Paragraph 42(b)(2).
    1. Information identifying the debt. Under Sec.  1006.42(b)(2), 
a debt collector who provides the validation notice described in 
Sec.  1006.34(a)(1)(i)(B), or the disclosures described in Sec.  
1006.38(c) or (d)(2), electronically must, among other things, 
identify the purpose of the communication by including, in the 
subject line of an email or in the first line of a text message 
transmitting the disclosure, the name of the creditor to whom the 
debt currently is owed or allegedly is owed and one additional piece 
of information identifying the debt, other than the amount. The 
following are examples of an additional piece of information, other 
than amount, identifying a debt: a truncated account number; the 
name of the original creditor; the name of any store brand 
associated with the debt; the date of sale of a product or service 
giving rise to the debt; the physical address of service; and the 
billing mailing address on the account.
    Paragraph 42(b)(4).
    1. Disclosures responsive to smaller screens. Under Sec.  
1006.42(b)(4), a debt collector who provides a validation notice 
electronically must provide the disclosure in a responsive format 
that is reasonably expected to be accessible on a screen of any 
commercially available size and via commercially available screen 
readers. A debt collector provides the validation notice in a 
responsive format accessible on a screen of any commercially 
available size if, for example, the notice adjusts to different 
screen sizes by stacking elements in a manner that accommodates 
consumer viewing on smaller screens while still meeting the other 
applicable formatting requirements in Sec.  1006.34. A debt 
collector provides the validation notice in a manner accessible via 
commercially available screen readers if, for example, the 
validation notice is machine readable.
    42(c) Alternative procedures for providing certain disclosures 
electronically.
    Paragraph 42(c)(1).
    1. Effect of consumer opt out. If a consumer has opted out of 
debt collection communications to a particular email address or 
telephone number by, for example, following instructions provided 
pursuant to Sec.  1006.6(e), then a debt collector cannot use that 
email address or telephone number to deliver disclosures under Sec.  
1006.42(c).
    Paragraph 42(c)(2).
    Paragraph 42(c)(2)(i).
    1. Body of an email. The alternative procedures in Sec.  
1006.42(c) permit a debt collector to place a disclosure in the body 
of an email. A debt collector places a disclosure in the body of an 
email if the disclosure's content is viewable within the email 
itself.
    42(d) Notice and opportunity to opt out of hyperlinked delivery.
    1. Communication covering multiple disclosures. A debt 
collector's or a creditor's communication with a consumer pursuant 
to Sec.  1006.42(d)(1) or (2), respectively, applies to all 
disclosures covered by Sec.  1006.42(a) that the debt collector 
thereafter sends regarding that debt, unless the consumer later 
designates that email address or, in the case of text messages, that 
telephone number, as unavailable for the debt collector's use, such 
as by opting out pursuant to the instructions required by Sec.  
1006.6(e).
    42(d)(1) Communication by the debt collector.
    1. Name of the consumer. For purposes of a debt collector's 
communication with the consumer under Sec.  1006.42(d)(1), the term 
``name of the consumer'' has the same meaning as the term 
``consumer's name'' under Sec.  1006.34(c)(2)(ii). See comment 
34(c)(2)(ii)-1.
    2. Debt collector communication covering multiple debts. If a 
debt collector's communication with a consumer under Sec.  
1006.42(d)(1) applies to multiple debts, Sec.  1006.42(d)(1)(i) and 
(ii) require the debt collector to identify the consumer and the 
creditor for each debt to which the communication applies.
    3. Form of communication with consumer before hyperlinked 
delivery. A debt collector's communication with the consumer under 
Sec.  1006.42(d)(1) must inform the consumer of, among other things, 
the consumer's ability to opt out of hyperlinked delivery of 
disclosures to an email address or, in the case of text messages, to 
a telephone number, and instructions for

[[Page 23418]]

opting out, including a reasonable period within which to opt out. 
This communication must, among other things, take place before the 
debt collector provides the hyperlinked disclosure, and the debt 
collector must allow the consumer a reasonable period within which 
to opt out. In an oral communication with the consumer, such as a 
telephone or in-person conversation, the debt collector may require 
the consumer to make an opt-out decision during that same 
communication. However, a written or electronic communication that 
requires the consumer to make an opt-out decision within a period of 
five or fewer days does not meet these timing criteria. Therefore, 
when using hyperlinked delivery for the validation notice required 
by Sec.  1006.34, an oral communication, such as a telephone 
conversation or in-person conversation, is necessary under Sec.  
1006.42(d)(1).
    4. Combined notice concerning electronic communications and 
electronic delivery of disclosures. An opt-out notice provided by a 
debt collector under Sec.  1006.42(d)(1) may be combined with an 
opt-out notice provided by the debt collector under Sec.  
1006.6(d)(3)(i)(B)(1). See comment 6(d)(3)(i)(B)(1)-3.
    42(d)(2) Communication by the creditor.
    1. Creditor communication covering multiple debts. A creditor's 
communication with the consumer under Sec.  1006.42(d)(2) may apply 
to multiple debts being placed with or sold to the same debt 
collector at the same time.
    2. Form of communication with consumer before hyperlinked 
delivery. A creditor's communication with the consumer under Sec.  
1006.42(d)(2) must inform the consumer of, among other things, the 
consumer's ability to opt out of hyperlinked delivery of disclosures 
to an email address or, in the case of a text message, to a 
telephone number, and instructions for opting out, including a 
reasonable period within which to opt out. This communication must, 
among other things, take place no more than 30 days before the debt 
collector's electronic communication containing the hyperlink to the 
disclosure, and the creditor must allow the consumer a reasonable 
period within which to opt out. In an oral communication with the 
consumer, such as a telephone or in-person conversation, the 
creditor may require the consumer to make an opt-out decision during 
that same communication. However, a written or electronic 
communication that requires the consumer to make an opt-out decision 
within a period of five or fewer days does not meet these timing 
criteria.
    3. Combined notice concerning electronic communications and 
electronic delivery of disclosures. An opt-out notice provided by a 
creditor under Sec.  1006.42(d)(2) may be combined with an opt-out 
notice provided by the creditor under Sec.  1006.6(d)(3)(i)(B)(1). 
See comment 6(d)(3)(i)(B)(1)-3.
    42(e) Safe harbors.
    42(e)(1) Disclosures provided by mail.
    1. Consumer's residential address. Section 1006.42(e)(1) 
provides that a debt collector satisfies Sec.  1006.42(a) if the 
debt collector mails a printed copy of a disclosure to the 
consumer's residential address, unless the debt collector receives a 
notification from the entity or person responsible for delivery that 
the disclosure was not delivered. For purposes of Sec.  
1006.42(e)(1), a disclosure is not mailed to the consumer's 
residential address if the debt collector knows or should know at 
the time of mailing that the consumer does not currently reside at 
that location.
    42(e)(2) Validation notice contained in the initial 
communication.
    1. Effect of consumer opt out. If a consumer has opted out of 
debt collection communications to a particular email address by, for 
example, following the instructions provided pursuant to Sec.  
1006.6(e), then a debt collector cannot use that email address to 
deliver disclosures under Sec.  1006.42(e)(2).

Subpart C--[Reserved]

Subpart D--Miscellaneous

Section 1006.100--Record Retention

    1. Evidence of required actions. Section 1006.100 requires a 
debt collector to retain evidence of compliance with this part. 
Thus, under Sec.  1006.100, a debt collector must retain evidence 
that the debt collector performed the actions and made the 
disclosures required by this part. For example, a debt collector 
could retain:
    i. Telephone call logs as evidence that the debt collector 
complied with the frequency limits in Sec.  1006.14; and
    ii. Copies or records of documents provided to the consumer as 
evidence that the debt collector provided the information required 
by Sec. Sec.  1006.34 and 1006.38 and met the delivery requirements 
of Sec.  1006.42.
    2. Methods of retaining records. Retaining records that are 
evidence of compliance with this part does not require retaining 
actual paper copies of documents. The records may be retained by any 
method that reproduces the records accurately (including computer 
programs) and that ensures that the debt collector can easily access 
the records (including a contractual right to access records 
possessed by another entity).
    3. Recorded telephone calls. Nothing in Sec.  1006.100 requires 
a debt collector to record telephone calls. However, under Sec.  
1006.100, a debt collector who records telephone calls must retain 
the recordings if the recordings are evidence of compliance with 
this part.

Section 1006.104--Relation to State Laws

    1. State law disclosure requirements. A disclosure required by 
applicable State law that describes additional protections under 
State law does not contradict the requirements of the Act or the 
corresponding provisions of this part.


    Dated: May 6, 2019.
Kathleen L. Kraninger,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2019-09665 Filed 5-20-19; 8:45 am]
 BILLING CODE 4810-AM-P

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