Debt Collection Practices (Regulation F), 5766-5862 [2020-28422]
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Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations
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: Final rule; official
interpretation.
AGENCY:
The Bureau of Consumer
Financial Protection (Bureau) is issuing
this final rule to revise Regulation F,
which implements the Fair Debt
Collection Practices Act (FDCPA). The
final rule governs certain activities by
debt collectors, as that term is defined
in the FDCPA. Among other things, the
final rule clarifies the information that
a debt collector must provide to a
consumer at the outset of debt collection
communications, prohibits debt
collectors from bringing or threatening
to bring a legal action against a
consumer to collect a time-barred debt,
and requires debt collectors to take
certain actions before furnishing
information about a consumer’s debt to
a consumer reporting agency.
DATES: This rule is effective on
November 30, 2021.
FOR FURTHER INFORMATION CONTACT: Joel
Singerman, Counsel, or Dania Ayoubi,
Joseph Baressi, Seth Caffrey, Brandy
Hood, David Jacobs, Courtney Jean,
Adam Mayle, Kristin McPartland,
Michael Silver, 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:
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SUMMARY:
I. Summary of the Final Rule
The Bureau is finalizing amendments
to Regulation F, 12 CFR part 1006,
which implements the FDCPA.1 The
amendments prescribe Federal rules
governing the activities of debt
collectors, as that term is defined in the
FDCPA (debt collectors or FDCPA debt
collectors). The final rule clarifies the
information that a debt collector must
provide to a consumer at the outset of
debt collection communications and
provides a model validation notice
containing such information. The final
rule also addresses consumer protection
concerns related to passive collections
(i.e., the practice of furnishing
information about a debt to a consumer
reporting agency before communicating
with the consumer about the debt) and
the collection of debt that is beyond the
statute of limitations (i.e., time-barred
debt). On November 30, 2020, the
Bureau published a final rule in the
Federal Register that focused on debt
collection communications and related
practices by debt collectors (November
2020 Final Rule). The November 2020
Final Rule reserved certain sections of
Regulation F in anticipation of this final
rule.
As discussed in the November 2020
Final Rule, 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.2 The statute was a
response to ‘‘abundant evidence of the
use of abusive, deceptive, and unfair
debt collection practices by many debt
collectors.’’ 3 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.’’ 4
The FDCPA established specific
consumer protections, enabling
consumers to establish controls on
when and how debt collectors contact
them, establishing privacy protections
surrounding the collection of debts, and
protecting consumers from certain
collection practices. The FDCPA also
established broad consumer protections,
prohibiting harassment or abuse, false or
misleading representations, and unfair
practices. In the Dodd-Frank Wall Street
Reform and Consumer Protection Act
(Dodd-Frank Act), Congress provided
the Bureau with authority under the
FDCPA to prescribe substantive rules
with respect to the collection of debts by
debt collectors. The Bureau issues this
final rule, like the November 2020 Final
Rule, to implement and interpret the
FDCPA.
A. Coverage and Organization of the
Final Rule
The final rule is based primarily on
the Bureau’s authority to issue rules to
implement the FDCPA and,
consequently, covers debt collectors, as
that term is defined in the FDCPA.
As revised in the November 2020
Final Rule, Regulation F contains four
subparts. Subpart A contains generally
2 15
3 15
1 15
U.S.C. 1692 et seq.
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U.S.C. 1692(e).
U.S.C. 1692(a).
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B. Scope of the Final Rule
FDCPA section 809(a) requires that a
debt collector send a written notice
containing certain information about the
debt and actions the consumer may take
in response (the validation notice) to a
consumer within five days of the initial
communication, unless such validation
information was provided in the initial
communication or the consumer has
paid the debt.5 The final rule clarifies
the information about the debt and the
consumer’s rights with respect to the
debt that a debt collector must provide
to a consumer at the outset of debt
collection communications, including
(if applicable) on a validation notice.
The final rule also requires a debt
collector to provide prompts that a
consumer can use to dispute the debt,
request information about the original
creditor, or take certain other actions.
The final rule provides a safe harbor for
compliance with these disclosure
requirements for debt collectors who
use the model validation notice or
certain variations of the notice.
The final rule also prohibits a debt
collector from suing or threatening to
sue a consumer to collect time-barred
debt. In addition, the final rule prohibits
a debt collector from furnishing
information about a debt to a consumer
reporting agency before engaging in
specific outreach to the consumer about
the debt. The final rule also addresses
certain other disclosure-focused
provisions, such as clarifying how a
debt collector may respond to a
consumer’s request for original-creditor
information if the original creditor is the
same as the current creditor.
Additionally, the final rule interprets
the definition of consumer under the
FDCPA to include deceased natural
persons and, relatedly, provides that, if
a debt collector knows or should know
that the a consumer is deceased, and the
debt collector has not previously
provided the validation information to
the deceased consumer, the debt
collector must provide that information
to a person who is authorized to act on
behalf of the deceased consumer’s
estate.
5 15
4 Id.
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applicable provisions, such as
definitions that apply throughout the
regulation. Subpart B contains rules for
FDCPA debt collectors. Subpart C is
reserved for any future debt collection
rulemakings. Subpart D contains certain
miscellaneous provisions. This final
rule adds additional provisions in
subparts A, B, and D.
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II. Background
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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. Other
times, a debt arises from a consumer’s
use of an open-end line of credit,
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 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.6 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.7
The November 2020 Final Rule
provides an extensive overview of the
debt collection market (including the
roles of creditors, third-party debt
collectors, debt buyers, and a variety of
service providers in the market),
methods of debt collection, and
consumer protection concerns in debt
collection.8 Below the Bureau
summarizes information regarding debt
collection methods and consumer
protection concerns specifically related
to the topics addressed in this final rule.
B. Debt Collection Methods
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
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. Once a debt collector has
6 See Bureau of Consumer Fin. Prot., Fair Debt
Collection Practices Act: CFPB Annual Report 2013,
at 9 (Mar. 20, 2013), https://
www.consumerfinance.gov/data-research/researchreports/annual-report-on-the-fair-debt-collectionpractices-act/ (2013 FDCPA Annual Report).
7 See id.
8 See 85 FR 76734, 76735–37 (Nov. 30, 2020).
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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.
As already noted, 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 includes: (1)
Certain details about the debt, such as
the amount of the debt and the name of
the creditor to whom the debt is owed;
and (2) a description of consumer
protections, such as the consumer’s
rights to dispute the debt and to request
information about the original creditor.
A debt collector may send a validation
notice containing the required
information as the initial
communication to the consumer or send
the required information in a validation
notice within five days after the initial
communication. Currently, validation
notices include little or no information
about the debt beyond the information
specifically listed in FDCPA section
809(a). This information may not be
sufficient for the consumer to recognize
the debt, particularly if, for example, the
amount owed has changed over time
due to interest, fees, payment, or credits,
or if the debt collector has changed
since an original collection attempt.
A 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 engage in
active debt collection efforts by
affirmatively locating and contacting
consumers, some debt collectors
collecting relatively small debts—such
as many medical, utility, and
telecommunications debts—report the
debts to consumer reporting agencies
and then wait for consumers to contact
them after discovering the debts on their
consumer reports.9
As discussed in the November 2020
Final Rule, a debt owner may also try
to recover on a debt through litigation.10
And debt collectors sometimes attempt
to collect debt for which the applicable
statute of limitations has expired. The
length of the limitations period for debt
collection claims usually varies by State
9 Bureau of Consumer Fin. Prot., Consumer Credit
Reports: A Study of Medical and Non-Medical
Collections, at 35–36 (Dec. 2014), https://
files.consumerfinance.gov/f/201412_cfpb_reports_
consumer-credit-medical-and-non-medicalcollections.pdf (CFPB Medical Debt Report).
10 See 85 FR 76735, 76736 (Nov. 30, 2020).
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and debt type; most limitations periods
are between three and six years,
although some are as long as 15 years.
Currently, in most States, expiration of
the statute of limitations, if raised by the
consumer as an affirmative defense,
precludes the debt collector from
recovering on the debt through
litigation, but it does not extinguish the
debt itself. If the debt is not
extinguished, a debt collector may use
non-litigation means, such as letters and
telephone calls, to collect a time-barred
debt, as long as those means do not
violate the FDCPA or other laws.11
C. Consumer Protection Concerns
As discussed in the November 2020
Final Rule, each year consumers submit
tens of thousands of complaints about
debt collection to Federal regulators.12
A significant proportion of those
complaints involve debts that
consumers believe they do not owe,
which may be because the debt is being
collected in error or because the
consumer does not recognize the debt.
Consumers also file thousands of private
actions each year against debt collectors
who allegedly have violated the FDCPA,
including many cases alleging violations
related to the validation notice. Since
the Bureau began operations in 2011, it
has brought numerous debt collection
11 See
85 FR 12672, 12672–73 (Mar. 3, 2020).
e.g., Bureau of Consumer Fin. Prot., Fair
Debt Collection Practices Act: CFPB Annual Report
2020, at 13 (Mar. 2020), https://
files.consumerfinance.gov/f/documents/cfpb_
fdcpa_annual-report-congress_03-2020.pdf (2020
FDCPA Annual Report); Fed. Trade Comm’n, 2019
Consumer Sentinel Network Databook, at 7 (Jan.
2020), https://www.ftc.gov/system/files/documents/
reports/consumer-sentinel-network-data-book-2019/
consumer_sentinel_network_data_book_2019.pdf;
Bureau of Consumer Fin. Prot., Fair Debt Collection
Practices Act: CFPB Annual Report 2019, at 15–16
(Mar. 2019), https://files.consumerfinance.gov/f/
documents/cfpb_fdcpa_annual-report-congress_032019.pdf (2019 FDCPA Annual Report); Fed. Trade
Comm’n, 2018 Consumer Sentinel Network
Databook, at 4, 7 (Feb. 2019), https://www.ftc.gov/
system/files/documents/reports/consumer-sentinelnetwork-data-book-2018/consumer_sentinel_
network_data_book_2018_0.pdf; Bureau of
Consumer Fin. Prot., Fair Debt Collection Practices
Act: CFPB Annual Report 2018, at 14–15 (Mar.
2018), https://files.consumerfinance.gov/f/
documents/cfpb_fdcpa_annual-report-congress_032018.pdf (2018 FDCPA Annual Report); Fed. Trade
Comm’n, 2017 Consumer Sentinel Network
Databook, at 3, 6 (Mar. 2018), https://www.ftc.gov/
system/files/documents/reports/consumer-sentinelnetwork-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-AnnualReport.pdf (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-bookjanuary-december-2016/csn_cy-2016_data_
book.pdf.
12 See,
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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.13 In many of
these cases, the Bureau has obtained
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 Federal Trade
Commission (FTC) and State regulators
also have brought numerous additional
actions against debt collectors for
violating Federal and State debt
collection and consumer protection
laws.
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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.14 When Congress enacted the
FDCPA in 1977, it found that ‘‘[e]xisting
laws and procedures for redressing . . .
injuries [were] inadequate to protect
consumers.’’ 15 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.’’ 16
The FDCPA was enacted, in part, ‘‘to
eliminate abusive debt collection
practices by debt collectors, [and] to
insure that those debt collectors who
13 See, e.g., Stipulated Final Judgment and
Consent Order, Consumer Fin. Prot. Bureau v.
Encore Capital Grp., Inc., 3:20–cv–01750 (S.D. Cal.
Oct. 15, 2020), https://www.courtlistener.com/
recap/gov.uscourts.casd.686719/
gov.uscourts.casd.686719.5.1.pdf; Consent Order, In
re Asset Recovery Assocs., 2019–BCFP–0009 (Aug.
28, 2019), https://www.consumerfinance.gov/
documents/7938/cfpb_asset-recovery-associates_
consent-order_2019-08.pdf; Consent Order, In re
Encore Capital Grp., Inc., 2015–CFPB–0022 (Sept.
9, 2015), https://files.consumerfinance.gov/f/
201509_cfpb_consent-order-encore-capitalgroup.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-correctivegroup.pdf.
14 15 U.S.C. 45.
15 15 U.S.C. 1692(b).
16 15 U.S.C. 1692(a).
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refrain from using abusive debt
collection practices are not
competitively disadvantaged.’’ 17
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.
The FDCPA, in general, applies to
debt collectors as that term is defined
under the statute. As discussed further
in the section-by-section analysis of
§ 1006.2(i) of the November 2020 Final
Rule, the FDCPA 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).
FDCPA section 803(6) also sets forth
several exclusions from the general
definition.
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 have
developed since 1977. 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.’’ 18
III. Summary of the Rulemaking
Process
A. The November 2020 Final Rule
The Bureau issued the November
2020 Final Rule to finalize certain
provisions of the proposed rule that the
Bureau published in the Federal
Register on May 21, 2019, to amend
Regulation F.19 Specifically, the
November 2020 Final Rule primarily
addressed debt collection
communications and related practices
by debt collectors. The November 2020
Final Rule reserved certain sections of
U.S.C. 1692(e).
section 814(d), 15 U.S.C. 1692l(d).
19 See 84 FR 23274 (May 21, 2019).
Regulation F in anticipation of this final
rule.
B. The 2019 Proposal and 2020
Supplemental Proposal
As noted, on May 21, 2019, the
Bureau published a proposed rule (the
May 2019 proposal or proposal) in the
Federal Register to amend Regulation
F.20 The proposal provided a 90-day
comment period that would have closed
on August 19, 2019. To allow interested
persons more time to consider and
submit their comments, the Bureau
issued an extension of the comment
period until September 18, 2019.21 In
response to the May 2019 proposal, the
Bureau received more than 14,000
comments from consumers, consumer
groups, members of Congress, other
government agencies, creditors, debt
collectors, industry trade associations,
and others. As discussed below, the
Bureau has considered those comments
in deciding to issue this final rule.
As relevant to this final rule, in the
May 2019 proposal, the Bureau
proposed to implement and interpret
FDCPA section 809(a) and (b) regarding
the information that debt collectors
must provide to consumers at the outset
of debt collection communications and
debt collectors’ obligations to respond to
consumers’ disputes and requests for
original-creditor information, including
if the consumer obligated or allegedly
obligated to pay the debt has died. The
Bureau also proposed to prohibit debt
collectors from bringing or threatening
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. And the Bureau
proposed to prohibit debt collectors
from furnishing information regarding a
debt to a consumer reporting agency
before communicating with the
consumer about the debt.
On February 21, 2020, the Bureau
released a supplemental notice of
proposed rulemaking to amend
Regulation F to require debt collectors
to make certain disclosures when
collecting time-barred debts (the
February 2020 proposal).22 The
February 2020 proposal provided a 60day comment period that would have
closed on May 4, 2020. To allow
interested persons more time to
consider and submit their comments,
the Bureau issued two extensions of the
comment period, the first until June 5,
2020, and the second until August 4,
17 15
20 Id.
18 FDCPA
21 84
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FR 37806 (Aug. 2, 2019).
85 FR 12672 (Mar. 3, 2020).
22 See
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2020.23 In response to the February 2020
proposal, the Bureau received
approximately 90 comments from
consumers, consumer groups, members
of Congress, other government agencies,
creditors, debt collectors, industry trade
associations, and others. As discussed
below, the Bureau has considered those
comments in adopting this final rule.
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C. Consumer Testing
The Bureau has undertaken two
rounds of qualitative disclosure testing
and one round of quantitative disclosure
testing, all of which have informed this
final rule.
First, as discussed in more detail in
the May 2019 proposal, the Bureau in
2014 contracted with a third-party
vendor, Fors Marsh Group (FMG), to
assist with developing, and to conduct
qualitative consumer testing of the
model validation notice.24 This initial
qualitative testing included focus group
testing, cognitive testing, and usability
testing conducted by FMG.25 Through
the testing, the Bureau sought insight
into consumers’ understanding of debt
collection protections and how
consumers would interact with the
forms if the forms were incorporated
into a final rule. Specific findings from
the consumer testing are discussed in
more detail in part V where relevant. In
conjunction with the release of the May
2019 proposal, the Bureau made
available a report prepared by FMG
regarding the focus group testing,26 the
cognitive testing,27 the usability
23 See 85 FR 17299 (Mar. 27, 2020) (first
extension); 85 FR 30890 (May 21, 2020) (second
extension).
24 The Bureau also tested a statement of consumer
rights disclosure, but the Bureau decided not to
propose to require debt collectors to provide such
a disclosure to consumers. Instead, the Bureau
proposed in the May 2019 proposal to require
certain debt collectors to provide with the
validation information 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
§ 1006.34(c)(3)(iv). Because the Bureau did not
propose to require debt collectors to provide
consumers with a statement of consumer rights
disclosure, the Bureau did not summarize testing
related to that disclosure in the May 2019 proposal.
25 See 84 FR 23274, 23279 (May 21, 2019).
26 See generally Fors Marsh Grp., Debt Collection
Focus Groups (Aug. 2014), https://
files.consumerfinance.gov/f/documents/cfpb_debtcollection_fmg-focus-group-report.pdf (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.
27 See generally Fors Marsh Grp., Debt Collection
Cognitive Interviews (n.d.), https://
files.consumerfinance.gov/f/documents/cfpb_debtcollection_fmg-cognitive-report.pdf (FMG Cognitive
Report). The cognitive testing was conducted in
accordance with OMB control number 3170–0022,
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testing,28 and a report prepared by FMG
summarizing the focus group testing,
cognitive testing, and usability testing.29
Second, to obtain additional
information about consumer
comprehension and decision-making in
response to sample debt collection
disclosures relating to time-barred debt,
in 2017 the Bureau contracted with ICF
International, Inc. (ICF) to conduct a
web survey of approximately 8,000
individuals possessing a broad range of
demographic characteristics.30 This
quantitative testing concluded in late
September 2019, and, in conjunction
with the release of the February 2020
proposal, the Bureau 31 and ICF 32
published detailed reports summarizing
the testing methodology and results.
The February 2020 proposal provides an
extensive overview of the quantitative
testing.33
Third, to further evaluate the
effectiveness of the model validation
notice, the Bureau contracted with FMG
again in 2019 to conduct an additional
round of qualitative testing. Because of
the COVID–19 pandemic, FMG
conducted this consumer testing by
telephone, completing 51 one-on-one
usability interviews between October 5
and October 15, 2020. The qualitative
testing showed, among other things, that
80 percent of participants shared
positive initial reactions to the model
Generic Information Collection Plan for the
Development and/or Testing of Model Forms,
Disclosures, Tools, and Other Similar Related
Materials.
28 See generally Fors Marsh Grp., Debt Collection
User Experience Study (Feb. 2016), https://
files.consumerfinance.gov/f/documents/cfpb_debtcollection_fmg-usability-report.pdf (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.
29 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 (FMG Summary
Report).
30 OMB approved the Bureau’s request to conduct
the survey on May 7, 2019. See Office of
Information & Regulatory Affairs, Office of Mgmt.
& Budget, ICR—OIRA Conclusion, https://
www.reginfo.gov/public/do/PRAViewICR?ref_
nbr=201902-3170-001# (last visited Feb. 18, 2020).
31 See Bureau of Consumer Fin. Prot., Disclosure
of Time-Barred Debt and Revival: Findings from the
CFPB’s Quantitative Disclosure Testing (Feb. 2020),
https://files.consumerfinance.gov/f/documents/
cfpb_debt-collection-quantitative-disclosuretesting_report.pdf (CFPB Quantitative Testing
Report).
32 See ICF Int’l, Inc., Quantitative Survey Testing
of Model Disclosure Clauses and Forms for Debt
Collection: Methodology Report (Jan. 21, 2020),
https://files.consumerfinance.gov/f/documents/
cfpb_icf_debt-survey_methodology-report.pdf.
33 See 85 FR 12672, 12676–77 (Mar. 3, 2020).
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validation notice and indicated that the
information in the notice was clear and
available actions were obvious. In
addition, 88 percent of participants
rated the overall model validation
notice as ‘‘very easy’’ or ‘‘easy’’ to
understand, and no participants rated
the notice as ‘‘difficult’’ or ‘‘very
difficult’’ to understand. Finally, 77
percent of participants answered
correctly over 90 percent of the time
when, after reviewing the notice, they
were asked to answer certain questions
about information included on the
notice. In conjunction with release of
this final rule, the Bureau is making
available a report prepared by FMG
regarding the qualitative testing.34
D. Other Outreach 35
In November 2013, the Bureau began
the rulemaking process with the
publication of an Advance Notice of
Proposed Rulemaking (ANPRM)
regarding debt collection.36 As
discussed in the May 2019 proposal, the
ANPRM sought information about a
wide variety of both first- and thirdparty debt collection practices. The
Bureau received more than 23,000
comments in response to the ANPRM,
which the Bureau considered when
developing the proposals.
To better understand the operational
costs of debt collection firms, including
law firms, the Bureau also 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).37 The Operations Study focused
on understanding how debt collection
firms obtain information about
delinquent consumer accounts and
attempt to collect on those accounts.
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
34 See generally Fors Marsh Grp., Consumer
Financial Protection Bureau (CFPB) Usability
Testing Report: Model Validation Notice (Nov. 20,
2020), https://files.consumerfinance.gov/f/
documents/cfpb_model-validation-notice_report_
2020-12.pdf (November 2020 Qualitative Testing
Report).
35 The preamble to the May 2019 proposal
includes a more thorough discussion of the
outreach the Bureau conducted prior to issuing the
proposal. See 84 FR 23274, 23278–80 (May 21,
2019).
36 78 FR 67848 (Nov. 12, 2013).
37 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 (CFPB Debt
Collection Operations Study).
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the Office of Management and Budget
(OMB).38 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),39 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
gathered information from the small
entity representatives and made
findings and recommendations
regarding the potential compliance costs
and other impacts on those entities of
the proposals under consideration.
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.40 The Bureau considered these
findings and recommendations in
preparing the proposals and this final
rule.
The Bureau has also met on many
occasions with various stakeholders,
including consumer advocates, 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 41 and its
Request for Information Regarding the
Bureau’s Inherited Regulations and
38 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. 857 (1996) (as amended by the Small
Business and Work Opportunity Act of 2007, Public
Law. 110–28, tit. VIII, subtit. C, sec. 8302, 121 Stat.
204 (2007)).
39 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 28,
2016), https://files.consumerfinance.gov/f/
documents/20160727_cfpb_Outline_of_
proposals.pdf (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.
40 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
(Small Business Review Panel Report).
41 83 FR 12286 (Mar. 21, 2018).
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Inherited Rulemaking Authorities; 42 the
Bureau considered these comments in
developing the proposals and this final
rule. In addition, the Bureau has
engaged in general outreach, speaking at
consumer advocate and industry events
and visiting consumer organizations and
industry stakeholders. The Bureau has
provided other regulators with
information about the proposals and
this final rule, has sought their input,
and has received feedback that has
helped the Bureau to prepare this final
rule.
Under the Dodd-Frank Act, the
Bureau is required to conduct an
assessment of significant rules within
five years of the rule’s effective date.
The Bureau anticipates that this final
rule may be significant and therefore
may require an assessment within five
years of the rule’s effective date. The
Bureau is preparing now for this
possible assessment. Specifically, the
Bureau is considering how best to
obtain information now to serve as a
baseline for evaluation of the costs,
benefits, and other effects of the final
rule. The Bureau expects to collect data
and other information from consumers,
debt collectors, and other stakeholders
to understand whether the rule is
achieving its goals under the FDCPA
and the Dodd-Frank Act, and to help the
Bureau measure the costs and benefits
of the rule. Topics of data collection
could include: whether consumers are
better able to identify a debt when
receiving validation information after
the rule compared to before the rule;
whether debt collectors are receiving
higher or lower rates of consumer
disputes after the rule compared to
before the rule; whether greater clarity
about FDCPA requirements helps
reduce litigation related to the
validation notice after the rule
compared to before the rule; and costs
of the rule, both anticipated and
unexpected, for consumers or for
industry. The Bureau expects to conduct
outreach in 2021 to explore how best to
obtain such data, including potentially
through surveying consumers or firms
or by collecting operational data.
IV. Legal Authority
The Bureau is issuing this final rule
primarily 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.43
42 83
FR 12881 (Mar. 26, 2018).
U.S.C. 1692l(d). As noted, the Bureau is the
first Federal agency with authority to prescribe
43 15
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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.’’ 44 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.45
‘‘Federal consumer financial law’’
includes title X of the Dodd-Frank Act
and the FDCPA.46 No provisions in this
final rule are based on section 1031 of
the Dodd-Frank Act.47
These and other authorities are
discussed in greater detail in parts IV.A
through C below. Part IV.A discusses
the Bureau’s authority under sections
806 through 808 of the FDCPA. Parts
IV.B through C discuss the Bureau’s
relevant authorities under the DoddFrank Act.
A. FDCPA Sections 806 Through 808
As discussed in part V, the Bureau is
finalizing several provisions, in whole
or in part, pursuant to its authority to
interpret FDCPA sections 806 through
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. The
November 2020 Final Rule provides an
overview of how the Bureau interprets
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
substantive debt collection rules under the FDCPA.
Prior to the Dodd-Frank Act’s grant of rulemaking
authority to the Bureau, no agency had authority to
issue substantive rules with respect to the
collection of debts by debt collectors under the
FDCPA, but 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 provisions, are
discussed in part V.
44 12 U.S.C. 5512(a).
45 12 U.S.C. 5512(b)(1).
46 12 U.S.C. 5481(12)(H), (14).
47 The Bureau proposed to rely on its Dodd-Frank
Act section 1031 authority (relating to unfair,
deceptive, or abusive acts or practices in connection
with consumer financial products or services) to
support two interventions in the May 2019
proposal. The Bureau has not finalized any
provisions of this final rule (or, as discussed in the
November 2020 Final Rule, of that final rule),
pursuant to its authority under Dodd-Frank Act
section 1031.
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debt.’’ 48 Then, ‘‘[w]ithout limiting the
general application of the foregoing,’’ it
lists six examples of conduct that
violate that section.49 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.’’ 50 Then,
‘‘[w]ithout limiting the general
application of the foregoing,’’ section
807 lists 16 examples of conduct that
violate that section.51 Finally, FDCPA
section 808 prohibits a debt collector
from ‘‘us[ing] unfair or unconscionable
means to collect or attempt to collect
any debt.’’ 52 Then, ‘‘[w]ithout limiting
the general application of the
foregoing,’’ FDCPA section 808 lists
eight examples of conduct that violate
that section.53 Consistent with the
approach in the November 2020 Final
Rule 54 and as proposed in the May 2019
proposal,55 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 decisions.56
In particular, the Bureau notes that,
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,57 as are
opinions by courts that have addressed
this issue.58 Accordingly, the Bureau
may interpret the general provisions of
FDCPA sections 806 to 808 to prohibit
48 15
U.S.C. 1692d.
U.S.C. 1692d(1)–(6).
50 15 U.S.C. 1692e.
51 15 U.S.C. 1692e(1)–(16).
52 15 U.S.C. 1692f.
53 15 U.S.C. 1692f(1)–(8).
54 See 85 FR 76734, 76738 (Nov. 30, 2020).
55 84 FR 23274, 23281–82 (May 21, 2019).
56 Where the Bureau prescribes 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.
57 See, e.g., S. Rep. No. 382, 95th Cong., 1st Sess.
2, 4 (1977), reprinted in 1977 U.S.C.C.A.N. 1695,
1698 (S. Rep. 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).
58 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.’’).
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conduct that the specific examples in
FDCPA sections 806 through 808 do not
address if the conduct violates the
general prohibitions. In addition, the
Bureau uses the specific examples to
inform its understanding of the general
prohibitions. The Bureau also interprets
FDCPA sections 806 through 808 in
light of the significant body of existing
court decisions interpreting those
sections, including, where applicable,
cases discussing the collection of timebarred debt.59 Finally, consistent with
the majority of courts, the Bureau
interprets FDCPA sections 806 through
808 to incorporate an objective,
‘‘unsophisticated’’ or ‘‘least
sophisticated’’ consumer standard.60
B. 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.’’ 61 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(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.’’ 62 The Bureau is
finalizing §§ 1006.34 and 1006.38 based
in part on its authority under DoddFrank Act section 1032.
59 Id. See, e.g., Holzman v. Malcolm S. Gerald &
Assocs., 920 F.3d 1264 (11th Cir. 2019); Tatis v.
Allied Interstate, LLC, 882 F.3d 422 (3d Cir. 2018);
Pantoja v. Portfolio Recovery Assocs., LLC, 852 F.3d
679 (7th Cir. 2017), cert. denied, 138 S. Ct. 736
(2018); Daugherty v. Convergent Outsourcing Inc.,
836 F.3d 507 (5th Cir. 2016); Buchanan v.
Northland Grp., Inc., 776 F.3d 393 (6th Cir. 2015);
McMahon v. LVNV Funding, LLC, 744 F.3d 1010,
1020 (7th Cir. 2014).
60 85 FR 76734, 76740 (Nov. 30, 2020); 84 FR
23274, 23282–83 (May 21, 2019).
61 12 U.S.C. 5532(a).
62 12 U.S.C. 5532(c).
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C. Other Authorities Under the DoddFrank Act
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.’’ 63 ‘‘Federal consumer financial
laws’’ include the FDCPA and title X of
the Dodd-Frank Act.64 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).65 See part
VII for a discussion of the Bureau’s
standards for rulemaking under DoddFrank Act section 1022(b)(2).
V. Section-by-Section Analysis
Subpart A—General
Section 1006.1
and Coverage
Authority, Purpose,
1(c) Coverage
In the November 2020 Final Rule, the
Bureau adopted § 1006.1(c)(1) to specify
that, except as provided in § 1006.108
and appendix A, Regulation F 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)).66 The Bureau also noted
that it was not finalizing, as part of the
November 2020 Final Rule, proposed
§ 1006.1(c)(2), which provided that
certain provisions of Regulation F
applied to debt collectors only when
they were collecting consumer financial
product or service debt, as defined in
§ 1006.2(f). The Bureau explained that it
was not finalizing § 1006.1(c)(2) as part
of the November 2020 Final Rule
because all of the provisions of that final
rule apply to debt collectors as defined
in § 1006.2(i). The Bureau nevertheless
reserved § 1006.1(c)(2) so that the
Bureau could clarify which provisions
of this final rule, if any, apply to debt
collectors only if they are collecting
debt related to a consumer financial
product or service.
For the reasons discussed in the
section-by-section analysis of § 1006.34,
two provisions of that section
(§ 1006.34(c)(2)(iii) and (3)(iv)) apply to
debt collectors only if they are
collecting debt related to a consumer
63 12
U.S.C. 5512(b)(1).
U.S.C. 5481(14).
65 12 U.S.C. 5512(b)(2).
66 85 FR 76734, 76742 (Nov. 30, 2020).
64 12
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financial produce or service as defined
in § 1006.2(f). Therefore, the Bureau is
finalizing § 1006.1(c)(2) to provide that
certain provisions of Regulation F apply
to debt collectors only if they are
collecting debt related to a consumer
financial product or service as defined
in § 1006.2(f), and to specify that those
provisions are § 1006.34(c)(2)(iii) and
(3)(iv).
Section 1006.2
Definitions
2(e) Consumer
FDCPA section 803(3) defines a
consumer as any natural person
obligated or allegedly obligated to pay
any debt.67 The Bureau proposed
§ 1006.2(e) to implement this definition
and to interpret it to include a deceased
natural person who is obligated or
allegedly obligated to pay a debt.68 The
Bureau explained that this
interpretation would ensure that
individuals trying to resolve a deceased
consumer’s debts have the same legal
right to receive the validation notice,
and to dispute the debt and request
information about the original creditor,
as the deceased consumer would have
had.
As the Bureau noted in the November
2020 Final Rule, the Bureau received a
number of comments regarding its
proposal to interpret the term consumer
to include deceased natural persons.
The Bureau also noted that it had
proposed that interpretation, in large
part, to facilitate delivery of validation
notices under proposed § 1006.34 if the
consumer obligated, or allegedly
obligated, on the debt has died. Further,
the Bureau noted that it planned to
address comments received regarding
that interpretation, and to determine
whether to finalize that interpretation,
as part of this final rule. Thus, as
finalized in the November 2020 Final
Rule, § 1006.2(e) provides that the term
consumer means any natural person
obligated or allegedly obligated to pay
any debt.69 The Bureau now addresses
comments received regarding its
proposal to interpret the definition to
include deceased natural persons.
Several commenters supported the
Bureau’s proposed interpretation. One
industry commenter stated that, in the
decedent debt context, the person acting
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67 15
U.S.C. 1692a(3).
84 FR 23274, 23288 (May 21, 2019).
69 For the reasons discussed in the November
2020 Final Rule, § 1006.2(e) as finalized in that rule
also provides that, for purposes of § 1006.6, the
term consumer includes the persons described in
§ 1006.6(a). To account for any revisions adopted in
this final rule, it also specifies that the Bureau may
further define the term in Regulation F to clarify its
application when the consumer is deceased. See 85
FR 76734, 76744–45, 76888 (Nov. 30, 2020).
68 See
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on behalf of a deceased consumer’s
estate should have the same rights
regarding validation notices and
disputes as the consumer would have
had if the consumer were still living.
Another industry commenter reported
that many debt collectors currently
attempt to treat deceased consumers as
‘‘consumers’’ under the FDCPA and
explained that the proposal would
provide additional clarity that would
benefit both consumers and debt
collectors in resolving the debts of
deceased consumers. A group of
consumer advocates supported
clarifying the rights of executors,
administrators, and personal
representatives regarding validation
notices and disputes. However, as
discussed below, these consumer
advocate commenters opposed the
proposed interpretation and suggested a
different way to address the issue.
Other commenters opposed
interpreting the term consumer to
include deceased natural persons who
are obligated or allegedly obligated to
pay a debt. One industry commenter
asserted that the proposed interpretation
would serve no purpose because
deceased consumers lacked privacy
interests. A trade group commenter
stated that no evidence of confusion
existed in the decedent debt context,
and that the Bureau’s interpretation
would expand the class of individuals
entitled to sue debt collectors for
violations of the FDCPA and the final
rule. Finally, a group of consumer
advocates suggested that the Bureau’s
interpretation was unnecessary because
proposed comments 34(a)(1)–1 and 38–
1 would clarify that 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) and 1006.38.70 These
commenters also stated that, if the
Bureau were attempting to change the
class of individuals who may bring civil
actions against debt collectors, the
FDCPA already allows any ‘‘person’’ to
bring such claims.
For the reasons discussed below, the
Bureau is revising § 1006.2(e), as set
forth in the November 2020 Final Rule,
to clarify that the definition of consumer
includes deceased natural persons. As
explained in the May 2019 proposal, 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).71 Because the
70 See the section-by-section analyses of
§§ 1006.34 and 1006.38.
71 See 84 FR 23274, 23288 (May 21, 2019).
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definition of consumer in FDCPA
section 803(3) is silent with respect to
deceased consumers, other FDCPA
provisions that refer to a debt collector’s
obligations to a consumer lack clarity in
the decedent debt context. For example,
FDCPA provisions requiring debt
collectors to provide validation
information, and to respond to disputes
and requests for original-creditor
information, do not address situations
in which the person obligated or
allegedly obligated to pay the debt is
deceased. Uncertainty surrounding
these provisions increases the risk of
consumer harm in the decedent debt
context. Specifically, without validation
information and an opportunity to
dispute the debt, individuals trying to
resolve debts in a deceased consumer’s
estate will lack information needed to
determine whether they are being asked
to pay the right debt, in the right
amount, and to the right debt collector,
and, consequently, whether they should
assert dispute rights.
Accordingly, to increase clarity and to
decrease the risk of consumer harm, the
Bureau is revising § 1006.2(e) to provide
that the term consumer means any
natural person, whether living or
deceased, obligated or allegedly
obligated to pay any debt. The Bureau
also is revising § 1006.2(e) to delete the
statement that the Bureau may further
define the term to clarify its application
when the consumer is deceased, since
this final rule contains that further
definition.72 Relatedly, the Bureau is
finalizing the commentary to
§§ 1006.34(a)(1) and 1006.38 that
clarifies 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 §§ 1006.34(a)(1) and
1006.38.
Regarding the comment that deceased
consumers have no privacy rights, the
Bureau disagrees. In its Policy
Statement on Decedent Debt, the FTC
prohibited debt collectors from openly
referring to a deceased consumer’s debts
in communications with third parties,
instead adopting an approach that
‘‘balance[d] the legitimate needs of the
collector with the privacy interests of
72 In the proposal, the Bureau explained that its
interpretation was ‘‘consistent with a modern trend
in the law that favors recognizing, as a default, the
continued existence of a natural person after
death.’’ 84 FR 23274, 23288 (May 21, 2019).
Consumer advocates pointed out that the authority
cited for this proposition comes from contexts other
than the FDCPA. But these commenters do not
explain why this fact undermines the existence of
the trend described by the Bureau.
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the decedent.’’ 73 In the November 2020
Final Rule, the Bureau took a similar
approach regarding location
communications for decedent debt.74
Moreover, interpreting the term
consumer in § 1006.2(e) to include
deceased natural persons is supported
by more than concern for a decedent’s
privacy; it also clarifies debt collector’s
obligations to a consumer and, in turn,
to those authorized to act on the
consumer’s behalf, if the consumer has
died. This includes clarifying a debt
collector’s obligations under the
FDCPA’s provisions, as implemented in
this final rule and in the November 2020
Final Rule, regarding validation
information and disputes and requests
for original-creditor information, which
help to ensure that consumers are not
paying the wrong debt, in the wrong
amount, to the wrong debt collector.
This interpretation also clarifies the
application of § 1006.22(f)(4), which the
Bureau adopted in the November 2020
Final Rule to prohibit debt collectors
from communicating or attempting to
communicate with a person in
connection with the collection of a debt
through a social media platform if the
communication or attempt to
communicate is viewable by the general
public or the person’s social media
contacts.75 In adopting that provision,
the Bureau discussed that a consumer
advocate commenter had stated that the
Bureau should broaden the prohibition
to apply to deceased consumers, such
that debt collectors would be prohibited
from posting publicly about a deceased
consumer’s alleged debt on the
consumer’s social media page. The
consumer advocate commenter stated
that a debt collector’s only reason for
doing so would be to pressure surviving
relatives to pay the debt, either to
protect the deceased consumer’s
reputation or out of a sense of moral
obligation.76
In finalizing § 1006.22(f)(4) in the
November 2020 Final Rule, Bureau
noted that the prohibition applied to
communications and attempts to
communicate with ‘‘a person,’’ and that
person, as defined in § 1006.2(k),
includes a consumer. The Bureau again
noted that it had received a number of
73 Fed. Trade Comm’n, Statement of Policy
Regarding Communications in Connection with the
Collection of Decedents’ Debts at 44921 (July 27,
2011), https://www.ftc.gov/sites/default/files/
documents/federal_register_notices/statementpolicy-regarding-communications-connectioncollection-decedents-debts-policy-statement/
110720fdcpa.pdf (FTC Policy Statement on
Decedent Debt).
74 See 85 FR 76734, 76797–00, 76890, 76900
(Nov. 30, 2020).
75 See id. at 76836–39, 76892.
76 See id. at 76836–39.
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comments regarding its proposal to
interpret the term consumer to include
deceased natural persons and that it
would address such comments in this
final rule. In determining to revise
§ 1006.2(e) to include a deceased natural
person who is obligated or allegedly
obligated to pay a debt, the Bureau thus
also clarifies that the prohibition in
§ 1006.22(f)(4) includes deceased
consumers.
The Bureau disagrees with the
industry commenter that there is no
evidence of confusion about the
definition of consumer in the decedent
debt context. As explained above, the
FDCPA’s current lack of clarity in the
decedent debt context creates
uncertainty in several situations arising
during the collection of debts belonging
to deceased consumers. Therefore, the
Bureau determines that additional
clarity will improve the debt collection
system for all parties.
Nor does § 1006.2(e) expand the class
of potential plaintiffs who may bring
suit under the FDCPA and Regulation F,
as an industry commenter alleged. The
civil liability provision of the FDCPA
already creates liability for violations
committed against any person.77 As
noted in the proposal, the trend in the
law has been to recognize, as a default,
the continued existence of a natural
person after death for purposes of
bringing civil actions, particularly for
remedial statutes like the FDCPA.78 This
commenter did not explain how the
Bureau’s interpretation would result in
a lawsuit by someone other than a
‘‘person’’ under the statute.
Finally, the Bureau disagrees, as
suggested by certain commenters, that
the commentary to §§ 1006.34(a)(1) and
1006.38 (final comments 34(a)(1)–1 and
38–3) provide adequate clarity without
interpreting the term consumer to
include deceased natural persons. In
fact, interpreting the term consumer to
include deceased natural persons is a
necessary predicate to provide that the
persons identified in those comments
operate as the consumer for purposes of
the requirements relating to validation
information, disputes, and requests for
original-creditor information.
Commenters raised additional issues
related to § 1006.2(e). A few industry
commenters suggested that the Bureau’s
proposed interpretation was
inconsistent with the Bureau’s mortgage
servicing rules regarding successors in
interest. One trade group commenter
stated that allowing any individual
authorized to act on behalf of a deceased
consumer’s estate to meet Regulation F’s
77 15
U.S.C. 1692k.
84 FR 23274, 23288 (May 21, 2019).
78 See
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definition of consumer under
§ 1006.2(e) will complicate and
potentially impede the existing
successor in interest process under
Regulations X and Z. The commenter
explained that, under proposed
comment 34(a)(1)–1, mortgage servicers
who are also debt collectors under
Regulation F would have to send
validation information to the person
authorized to act on behalf of the
deceased consumer’s estate but would
not be able to send foreclosure-related
disclosures required under State law to
the same person, unless that person had
assumed ownership of the obligation.
The commenter also suggested that,
under proposed comment 38–1, debt
collectors would be required to focus
resources on verifying the identify of an
individual asserting to be a person
authorized to act on behalf of the
deceased consumer’s estate, which
would take away from legitimate efforts
to respond to disputes and requests for
original-creditor information.
Another trade group commenter
stated that the clarification in proposed
comment 34(a)(1)–1 to send the
validation notice to the person
authorized to act on behalf of the
deceased consumer’s estate if the debt
collector knows or should know that the
consumer is deceased would, unlike the
Bureau’s mortgage servicing rules,
appear to create an affirmative
obligation for mortgage servicers to track
down information about potential
successors in interest and cloud
requirements for mortgage servicers
under Regulation X. For this reason, a
third trade group commenter suggested
that, if a required notice must be sent
and no individual has come forward as
a potential or confirmed successor in
interest, the Bureau should permit
mortgage servicers to address a
validation notice to the deceased
consumer or ‘‘the estate of’’ the
deceased consumer rather than require
a search for an individual to whom to
address the notice.
As the Bureau has previously
explained, while many mortgage
servicers are not subject to the FDCPA,
mortgage servicers that acquired a
mortgage loan at the time that it was in
default may be subject to the FDCPA
with respect to that mortgage loan.79 As
discussed below, the Bureau concludes
that including a deceased natural person
who is obligated or allegedly obligated
to pay a debt within the definition of
consumer under § 1006.2(e) is not
inconsistent with the Bureau’s mortgage
servicing rules on successors in interest.
79 See 85 FR 76734, 76758 (Nov. 30, 2020); 81 FR
71977, 71978 (Oct. 19, 2016).
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Although one commenter asserted that
finalizing this definition as proposed
would complicate and potentially
impede the existing successor in interest
process, the commenter failed to explain
why that would be the case and the
Bureau does not believe that to be the
case.
Regarding delivery of validation
information, as discussed below,
comment 34(a)(1)–1 clarifies that, if a
debt collector knows or should know
that a consumer is deceased, and if the
debt collector has not previously
provided the validation information to
the deceased consumer, then in such
circumstances, to comply with
§ 1006.34(a)(1), a debt collector must
provide the validation information to an
individual whom the debt collector
identifies by name and who is
authorized to act on behalf of the
deceased consumer’s estate.80 A person
who is authorized to act on behalf of a
deceased consumer’s estate may include
the executor, administrator, or personal
representative. However, as discussed in
the November 2020 Final Rule, for
purposes of Regulations X and Z, a
successor in interest is, in general, a
person to whom an ownership interest
either in a property securing a mortgage
loan subject to subpart C of Regulation
X, or in a dwelling securing a closedend consumer credit transaction under
Regulation Z, is transferred under
specified circumstances including, for
example, after a consumer’s death or as
part of a divorce.81 Therefore, a person
who is authorized to act on behalf of a
deceased consumer’s estate for purposes
of Regulation F may or may not also be
a successor in interest under
Regulations X and Z, depending on
whether an ownership interest in a
property securing a mortgage loan or a
dwelling securing a closed-end
consumer credit transaction is
transferred to that person under the
circumstances specified in Regulations
X and Z.82
Comment 34(a)(1)–1 provides debt
collectors clarity regarding to whom the
validation information must be
provided in the narrow circumstance in
which the debt collector knows or
should know that a consumer is
deceased and the debt collector has not
previously provided the validation
80 See the section-by-section analysis of
§ 1006.34(a)(1).
81 See 85 FR 76734, 76758–59 (Nov. 30, 2020).
See also 12 CFR 1024.31, 1026.2(a)(27)(i). A
confirmed successor in interest, in turn, means a
successor in interest once a mortgage servicer has
confirmed the successor in interest’s identity and
ownership interest in the property that secures the
mortgage loan or in the dwelling. See 12 CFR
1024.31, 1026.2(a)(27)(ii).
82 12 CFR 1024.31, 1026.2(a)(27).
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information to the deceased consumer.
According to the comment, under these
circumstances, a debt collector who is
collecting the debt of a deceased
consumer must determine who is
authorized to act on behalf of a deceased
consumer’s estate. These efforts,
however, do not create an affirmative
obligation under the Bureau’s mortgage
servicing rule for a mortgage servicer
that is subject to the FDCPA with
respect to a mortgage loan to seek out
potential successors in interest within
the meaning of the mortgage servicing
rules. Under the mortgage servicing
rules, a mortgage servicer is not required
to conduct a search for potential
successors in interest if the mortgage
servicer has not received actual notice
of their existence.83 If, in the course of
determining who is authorized to act on
behalf of a deceased consumer’s estate
for purposes of § 1006.34(a)(1), a
mortgage servicer receives actual notice
of the existence of a potential successor
in interest, the mortgage servicer must,
as required under Regulation X,
maintain policies and procedures
reasonably designed to ensure that the
servicer can retain this information and
promptly facilitate communication with
the potential successor in interest.84
However, because a mortgage servicer
that is subject to the FDCPA with
respect to a mortgage loan may comply
with both this final rule and the
applicable successor in interest
provisions under Regulations X and Z,
the Bureau concludes there is no
conflict with the mortgage servicing
rules. Additionally, nothing in this final
rule is intended to alter the successor in
interest provisions in Regulations X and
Z or to impose additional requirements
under Regulations X and Z.
In response to the commenter’s
concern regarding the burdens under
comment 38–1 of determining who is
authorized to act on behalf of a deceased
consumer’s estate before responding to
a dispute or request for original-creditor
information, the potential burdens
associated with responding to such
incoming disputes and requests will be
significantly reduced once a debt
collector has procedures in place to
make that threshold determination or
has already made that determination for
purposes of providing the validation
information as described in comment
34(a)(1)–1.
83 12 CFR 1024.38(b)(1)(vi); comment
38(b)(1)(vi)–1.
84 Id. The general servicing policies, procedures,
and requirements in 12 CFR 1024.38 do not apply
to a mortgage servicer that qualifies as a small
servicer pursuant to 12 CFR 1026.41(e). See 12 CFR
1024.30(b)(1).
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The Bureau declines to adopt the
suggestion to allow mortgage servicers
to address a validation notice to the
deceased consumer or to ‘‘the estate of’’
the deceased consumer. As discussed in
the proposal, the Bureau shares the view
of the FTC, which stated in its Policy
Statement on Decedent Debt that
individuals who lack the authority to
resolve the estate but who wish to be
helpful are likely to open
communications addressed to the
decedent’s estate, or to an unnamed
executor or administrator, which makes
such communications insufficiently
targeted to a consumer with whom the
debt collector may generally discuss the
debt.85 The Bureau, therefore, shares the
view of the FTC that ‘‘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.’’ 86 Accordingly, comment
34(a)(1)–1 specifies that 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.
A group of consumer advocates stated
that certain other provisions of the
Bureau’s proposal, such as
§ 1006.14(e)’s prohibition on publishing
lists of consumers who allegedly refuse
to pay debts and § 1006.18(b)(1)(iv)’s
prohibition on falsely representing or
implying that the consumer committed
any crime or other conduct in order to
disgrace the consumer, should apply to
deceased consumers. But, these
commenters claimed, other provisions,
like § 1006.6(b)(1)’s restrictions on
communicating at inconvenient times or
places, were nonsensical as applied to
deceased consumers. Therefore, these
commenters argued, the Bureau’s
interpretation in proposed § 1006.2(e)
was overbroad.
The Bureau acknowledges that there
may be certain provisions in the
November 2020 Final Rule and in this
final rule that refer to a consumer that
simply will be inapplicable in the
context of a deceased consumer.87
Nevertheless, as consumer advocates
acknowledged, other provisions that
85 See
84 FR 23274, 23334 (May 21, 2019).
Policy Statement on Decedent Debt, supra
note 73, at 44920.
87 For example, § 1006.6(b) restricts, among other
things, the times at which debt collectors can
communicate or attempt to communicate with
consumers. See 85 FR 76734, 76889 (Nov. 30, 2020).
To the extent that ‘‘communicate’’ includes having
a conversation, the Bureau believes it is obvious
that this prohibition is simply inapplicable in the
case of a deceased consumer (but does apply to
having a conversation with the executor or
administrator of the consumer’s estate).
86 FTC
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refer to a consumer will apply to
deceased consumers. For example, as
discussed above, interpreting the term
consumer in § 1006.2(e) to include
deceased natural persons means that, as
applied to § 1006.22(f)(4), debt
collectors are prohibited from posting
publicly about a deceased consumer’s
alleged debt on a deceased consumer’s
public-facing social media page. In
situations that are currently unclear,
such as delivery of validation
information, the final rule adopts
commentary clarifying debt collectors’
obligations.
This group of consumer advocates
also recommended that the Bureau
require debt collectors to provide a
validation notice to the person
authorized to act on behalf of the
deceased consumer’s estate even if
validation information already was
provided to the consumer. These
commenters also asked the Bureau to
provide that the validation period starts
from the date the person authorized to
act on behalf of the deceased
consumer’s estate receives the
validation notice, and to require debt
collectors to respond to disputes and
requests for original-creditor
information submitted by this person,
even if a response already was provided
to the consumer. The Bureau declines to
adopt these suggestions because the
Bureau finds that, in the scenario
described, the debt collector has already
satisfied the debt collector’s obligations
to the consumer as set forth in FDCPA
section 809 and §§ 1006.34 and 1006.38.
Depending on the facts, the debt
collector could be required to provide a
validation notice or dispute response to
the person authorized to act on behalf
of the deceased consumer’s estate,88 but
the Bureau declines to require debt
collectors to do so in all cases.
Nevertheless, the Bureau notes that debt
collectors who voluntarily provide
validation notices after a consumer dies
(as some industry commenters reported
is done), and who, in doing so, start a
new validation period, do not thereby
violate the FDCPA or Regulation F.
For the reasons discussed above, 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 is finalizing
§ 1006.2(e) as proposed 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.
88 See the section-by-section analysis of
§ 1006.34(b)(5).
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2(f) Consumer Financial Product or
Service
As discussed in the November 2020
Final Rule, the Bureau proposed
§ 1006.2(f) to define consumer financial
product or service debt to mean any
debt related to any consumer financial
product or service, as consumer
financial product or service is defined
in section 1002(5) of the Dodd-Frank
Act.89 As also discussed in the
November 2020 Final Rule, the Bureau
did not finalize § 1006.2(f) as part of that
rulemaking because the Bureau did not
finalize in that rulemaking any
provisions for which the definition in
proposed § 1006.2(f) would have been
relevant.
For the reasons discussed in the
section-by-section analyses of
§§ 1006.1(c) and 1006.34, the Bureau is
adopting in this final rule two
provisions (§ 1006.34(c)(2)(iii) and
(3)(iv)) that apply to debt collectors only
if they are collecting debt related to a
consumer financial product or service.
This includes, for example, debt
collectors collecting debts related to
consumer mortgage loans or credit
cards.90 To facilitate compliance with
those provisions, the Bureau is adopting
§ 1006.2(f) to provide that consumer
financial product or service has the
meaning in section 1002(5) of the DoddFrank Act (12 U.S.C. 5481(5)).
The Bureau notes that it originally
proposed § 1006.2(f) to define the term
‘‘consumer financial product or service
debt.’’ However, because the relevant
defined term in the Dodd-Frank Act is
‘‘consumer financial product or
service,’’ and because certain
commenters observed that including
two definitions of the term ‘‘debt’’ in the
rule would be confusing, the Bureau is
finalizing § 1006.2(f) to provide that the
defined term in the rule is ‘‘consumer
financial product or service’’ and that
the term has the same meaning given to
it in section 1002(5) of the Dodd-Frank
Act.
Subpart B—Rules for FDCPA Debt
Collectors
Section 1006.26 Collection of TimeBarred Debts
The May 2019 proposal and the
February 2020 proposal both addressed
the collection of time-barred debt. In the
May 2019 proposal, the Bureau
proposed to define several terms
(proposed § 1006.26(a)) and to prohibit
debt collectors from bringing or
threatening to bring legal actions against
consumers to collect certain time-barred
89 85
FR 76734, 76745 (Nov. 30, 2020).
84 FR 23274, 23286 (May 21, 2019).
90 See
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5775
debts (proposed § 1006.26(b)). In the
February 2020 proposal, the Bureau
proposed to require debt collectors to
provide disclosures if collecting certain
time-barred debts (proposed
§ 1006.26(c)). The February 2020
proposal also included model language
and forms that debt collectors could use
to comply with the proposed disclosure
requirements. In the November 2020
Final Rule, the Bureau noted that it
planned to address its proposals
regarding time-barred debt in this final
rule, and the Bureau reserved § 1006.26
for that purpose. After considering the
comments received in response to both
the May 2019 and February 2020
proposals, the Bureau is now finalizing
proposed § 1006.26(a) and (b) with
modifications as described below. The
Bureau is not finalizing proposed
§ 1006.26(c).
26(a) Definitions
Proposed § 1006.26(a) defined two
terms not defined in the FDCPA: Statute
of limitations and time-barred debt. The
Bureau proposed to define these terms
to facilitate compliance with proposed
§ 1006.26(b) and (c). As discussed
below, the Bureau is finalizing
§ 1006.26(a) as proposed. The Bureau is
finalizing § 1006.26(a) pursuant to its
authority under FDCPA section 814(d)
to prescribe rules with respect to the
collection of debts by debt collectors.
26(a)(1) Statute of Limitations
Proposed § 1006.26(a)(1) defined 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.91
Statutes of limitation, which typically
are established by State law, provide
time limits for bringing suit on legal
claims. As the Bureau explained in the
May 2019 proposal, statutes of
limitation serve several purposes.92
First, statutes of limitations advance a
defendant’s interest in repose. That is,
they reflect a legislative judgment that it
is ‘‘unjust to fail to put the adversary on
notice to defend within a specified
period of time.’’ 93 Second, statutes of
limitations eliminate stale claims. That
is, they protect defendants and the
courts from having to deal with cases in
which ‘‘the search for truth may be
seriously impaired by the loss of
evidence, whether by death or
disappearance of witnesses, fading
91 See
84 FR 23274, 23327–28 (May 21, 2019).
generally Rotella v. Wood, 528 U.S. 549,
555 (2000) (identifying ‘‘the basic policies of all
limitations provisions’’ as ‘‘repose, elimination of
stale claims, and certainty’’).
93 United States v. Kubrick, 444 U.S. 111, 117
(1979).
92 See
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memories, disappearance of documents,
or otherwise.’’ 94 Third, statutes of
limitations provide ‘‘certainty about a
plaintiff’s opportunity for recovery and
a defendant’s potential liabilities.’’ 95
For debt collection claims, the length of
the applicable statute of limitations
often varies by State and, within each
State, by debt type. Although most
statutes of limitations applicable to debt
collection claims are between three and
six years, some are as long as 15 years.
Several commenters addressed
proposed § 1006.26(a)(1). One industry
commenter confirmed that the proposed
definition of statute of limitations
comported with debt collectors’
understanding of the term. A number of
other industry commenters requested
that the Bureau modify the definition to
account for the fact that it can be
challenging to determine the applicable
statute of limitations in certain
circumstances. For example, two
industry commenters requested that the
Bureau clarify that, in determining the
applicable statute of limitations, a debt
collector need only conduct a
reasonable investigation based on
objectively ascertainable facts, and that
a debt collector would only be charged
with knowing that the statute of
limitations has expired if the law is
clearly established. The commenters
also requested that the Bureau more
specifically define certain elements of
the term statute of limitations to lessen
the burden on debt collectors of
determining whether a debt is time
barred. For example, they suggested
defining ‘‘applicable law’’ as the law of
the jurisdiction where the consumer
resides or is believed to reside at the
time collections begin, or the law of the
jurisdiction in which the consumer
signed any underlying contract.
Commenters suggested that these
changes would make it easier for a debt
collector to determine the statute of
limitations applicable to a particular
debt while protecting a debt collector
from liability when it is difficult
determine the exact date on which a
debt becomes time barred.
The Bureau is finalizing
§ 1006.26(a)(1) as proposed. As industry
commenters confirmed, the definition of
statute of limitations in § 1006.26(a)(1)
is consistent with debt collectors’
understanding of the term. The Bureau
declines to modify the definition to
identify the type of investigation a debt
collector must or should undertake to
ascertain the applicable statute of
limitations. The Bureau also declines to
94 Id.
95 Young v. United States, 535 U.S. 43, 47 (2002)
(quoting Rotella, 528 U.S. at 555).
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define the term ‘‘applicable law’’ in the
manner requested by commenters. The
Bureau recognizes that, in some cases, it
can be challenging and costly for a debt
collector to determine what statute of
limitations applies to a legal action
against the consumer to collect a
particular debt, and that, in some cases,
the commenters’ suggestions could
reduce those challenges and costs. The
Bureau declines, however, to address
the challenges and costs associated with
determining whether a debt is time
barred by modifying the definition of
statute of limitations, a term with a
meaning widely understood by debt
collectors, or by defining new terms.
Comments relating to the difficulty of
determining whether a debt is time
barred are discussed further in the
section-by-section analysis of
§ 1006.26(b).
26(a)(2) Time-Barred Debt
Proposed § 1006.26(a)(2) defined the
term time-barred debt to mean a debt for
which the applicable statute of
limitations has expired.96
As the Bureau explained in the May
2019 proposal, 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.97 Others do so to
assess whether they can sue to collect
the debt, which may affect their
collection strategy. In addition, the
information that debt buyers generally
receive when bidding on and
purchasing debts, and the information
that other debt collectors generally
receive at placement, may allow them to
determine whether the applicable
statute of limitations has expired.98
Several commenters addressed
proposed § 1006.26(a)(2). An industry
96 See
84 FR 23274, 23328 (May 21, 2019).
e.g., Cal. Civ. Code sec. 1788.52(d)(3);
Conn. Gen. Stat. sec. 36a–805(a)(14); Mass. Code
Regs., tit. 940, § 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).
98 See Fed. Trade Comm’n, The Structure and
Practices of the Debt Buying Industry, at 49 (Jan.
2013), https://www.ftc.gov/sites/default/files/
documents/reports/structure-and-practices-debtbuying-industry/debtbuyingreport.pdf (FTC Debt
Buying Report) (‘‘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.’’). Similarly, the majority
of respondents to the Bureau’s Debt Collection
Operations Study reported always or often receiving
certain information and documentation that may be
relevant to determining whether a debt is time
barred, such as debt balance at charge off, account
agreement documentation, and billing statements.
See CFPB Debt Collection Operations Study, supra
note 37, at 23.
97 See,
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commenter confirmed that the proposed
definition comported with debt
collectors’ understanding of the term.
Two other industry commenters
expressed concern that the term timebarred debt may imply that a debt
collector has no right at all to collect the
debt, whereas in most jurisdictions a
debt’s time-barred status only limits the
debt collector’s right to recover on the
debt through a lawsuit. Several industry
commenters expressed concern that the
proposal seemed to contemplate that a
debt is a single amount that becomes
time barred at a single moment in time
and noted that not all debts operate in
that manner. For example, these
commenters stated that an installment
loan could become time barred on a
rolling basis depending on when each
installment was due. In addition,
according to some commenters, a legal
action to collect a debt may be based on
more than one legal theory or involve
more than one cause of action, and each
theory or cause of action may be subject
to a different statute of limitations.
Similarly, according to some
commenters, certain secured debts may
be subject to more than one method of
suit and more than one statute of
limitations. For example, these
commenters asserted, in some States a
mortgagee may choose whether to
pursue a remedy at law on the note, a
remedy in equity on the mortgage, or
both, and the statute of limitations
applicable to these claims may differ.
Relatedly, one industry commenter
asked the Bureau to clarify that debt
collectors are not prohibited from taking
legal action to enforce a lien even if a
claim on the underlying obligation is
time barred. Alternatively, the
commenter asked the Bureau to clarify
that the requirements of proposed
§ 1006.26 would apply only when all
causes of action associated with the
underlying note and with the security
instrument are time barred.99
The Bureau is finalizing
§ 1006.26(a)(2) as proposed. As industry
commenters confirmed, the definition of
time-barred debt in § 1006.26(a)(2) is
consistent with debt collectors’
99 Another commenter seeking clarification on the
scope of proposed § 1006.26(b) asserted that in rem
enforcement of a security instrument is not
inherently debt collection. The Bureau notes that
§ 1006.26, like the rest of this final rule, applies
only to FDCPA debt collectors. The Supreme Court
recently held that a business engaged in no more
than nonjudicial foreclosure proceedings is not an
FDCPA debt collector, except for the limited
purpose of FDCPA section 808(6). See Obduskey v.
McCarthy & Holthus LLP, 139 S. Ct. 1029 (2019).
FDCPA section 808(6) specifically prohibits taking
or threatening to take any nonjudicial action in
certain circumstances, such as where there is no
present right to possession through an enforceable
security instrument.
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understanding of the term. In response
to commenters’ concerns that the term
time-barred debt might imply that a debt
collector has no right to collect the debt,
the Bureau notes that, in most
jurisdictions, as commenters observed
and as is discussed in the section-bysection analysis of § 1006.26(b), a debt
is not extinguished when the statute of
limitations expires. Rather, in these
jurisdictions, a debt collector still may
collect the debt using non-litigation
means, such as telephone calls and
letters, and the Bureau’s use of the term
time-barred debt neither changes that
fact nor is meant to imply otherwise.
With respect to industry commenters’
concern about debts for which multiple
statutes of limitation may be relevant,
the Bureau notes that a debt is a timebarred debt under § 1006.26(a)(2) if the
applicable statute of limitations has
expired. The applicable statute of
limitations depends on the specific legal
action the debt collector takes or
represents that it will take. For some
debts, such as certain installment loans
and secured debts, it may be the case
that one claim associated with a debt is
time barred while another claim
associated with the debt is not. In such
a case, the prohibitions in § 1006.26(b)
apply to the time-barred claim only.
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26(b) Legal Actions and Threats of Legal
Actions Prohibited
The Bureau proposed § 1006.26(b) to
prohibit a debt collector from bringing
or threatening 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.100 In
response to comments, the Bureau is
finalizing proposed § 1006.26(b) with
two principal changes. First, the Bureau
is not adopting the proposed knows-orshould-know standard; instead, a debt
collector may violate final § 1006.26(b)
even if the debt collector neither knew
nor should have known that a debt was
time barred. Second, consistent with the
Supreme Court’s decision in Midland
Funding, LLC v. Johnson, the final rule
clarifies that the prohibitions in
§ 1006.26(b) do not apply to proofs of
claim filed in bankruptcy
proceedings.101
Prohibitions
As the Bureau explained in the May
2019 proposal, in most States the
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
100 See
101 137
84 FR 23274, 23328–29 (May 21, 2019).
S. Ct. 1407 (2017).
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not extinguish the debt itself.102 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 if the
consumer proves the expiration of the
statute of limitations as an affirmative
defense, the court will dismiss the suit.
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 avoid litigation. In some
jurisdictions, a consumer’s payment on
or acknowledgement of a debt can
revive the debt collector’s right to sue
for the entire amount, opening the
consumer to new legal liability.103
Similarly, suits on time-barred debts
may lead to judgments against
consumers on claims for which those
consumers had meritorious defenses,
including defenses based on the statute
of limitations. Few consumers who are
sued for allegedly unpaid debts—
whether time barred or not—actually
defend themselves in court, and those
102 See generally Midland Funding, LLC v.
Johnson, 137 S. Ct. 1407, 1411–12 (2017) (noting
that under ‘‘the law of many States . . . a creditor
has the right to payment of a debt even after the
limitations period expires,’’ and collecting State
laws). In Mississippi and Wisconsin, however,
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.’’).
103 Revival extinguishes the consumer’s right to
raise the expiration of the statute of limitations as
an affirmative defense to litigation; that is, it revives
the debt collector’s right to sue to collect the debt.
Although State revival laws vary, there are
generally several circumstances in which revival
occurs. First, in some States, a consumer’s partial
payment on a time-barred debt revives the debt
collector’s right to sue. Second, in some States, a
consumer’s written acknowledgement of a timebarred debt revives the debt collector’s right to sue.
Third, a consumer’s oral acknowledgement of a
time-barred debt may revive the debt collector’s
right to sue in some States. See, e.g., Lima v.
Schmidt, 595 So. 2d 624, 631 (La. 1992) (‘‘Our
courts have consistently held that renunciation
must be clear, direct, and absolute and manifested
by words or actions of the party in whose favor
prescription has run.’’) (citations omitted); 22 Tenn.
Pract. Contract Law and Practice § 12:88 (rev. Aug.
2020) (‘‘[T]he defendant may revive a plaintiff’s
remedy that has been barred by the statute of
limitations. This event can occur either when the
defendant expressly promises to pay a debt or when
the defendant acknowledges the debt and expresses
a willingness to pay it . . . . The expression of a
defendant’s willingness to pay might be implied
from the words or action of a debtor . . . .’’)
(citations and internal quotation marks omitted).
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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.104
Consumer and consumer advocate
commenters generally supported the
prohibitions in proposed § 1006.26(b).
Many of these commenters also argued
that, to prevent deception, the Bureau
should prohibit the collection of timebarred debt altogether, even though the
Bureau did not propose such a
prohibition in the May 2019 proposal or
the February 2020 proposal. The Bureau
certainly supports measures to prevent
deception because of the harm it causes
to consumers. However, the Bureau
concludes that is not necessary to ban
the collection of time-barred debt to
prevent potential deception. As
discussed in the February 2020
proposal, the Bureau’s quantitative
testing generally indicates that
disclosures, in certain situations, can be
effective in curing the potential
deception associated with the collection
of time-barred debt.105 The Bureau
concludes that a prohibition on the
collection of time-barred debt would
impose significant burden on debt
collectors to identify such debts and
would decrease the value of time-barred
debts to little or nothing; a debt has
little or no value if the owner cannot
collect the debt either in litigation or
outside of litigation. The Bureau
declines to impose such extraordinarily
large costs because much less costly
measures—namely, disclosures—can be
104 See FTC Debt Buying Report, supra note 98,
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 37, at 18
(observing that respondents reported obtaining
default judgments in 60 to 90 percent of their filed
suits); cf. Kimber v. Fed. Fin. Corp., 668 F. Supp.
1480, 1478 (M.D. Ala. 1987) (‘‘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.’’).
105 See 85 FR 12672, 12677–79 (Mar. 3, 2020).
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effective in preventing potential
deception.
Moreover, the Bureau emphasizes that
prohibiting the collection of time-barred
debt when doing so is unnecessary to
prevent potential deception is
inconsistent with the First Amendment
limitations on the Bureau’s authority to
ban commercial speech. Courts have
held that a debt collector who asks a
consumer to pay a debt is engaging in
commercial speech.106 Prohibiting the
collection of time-barred debt therefore
would restrict commercial speech. The
Supreme Court has held that restrictions
on commercial speech are permissible
when they: (1) Are supported by a
substantial government interest; (2)
directly advance that interest; and (3)
are no more extensive than necessary to
serve that interest.107 If the potential
deception associated with the collection
of time-barred debt can be cured by a
disclosure, then prohibiting the
collection of time-barred debt would
impose a restriction that is more
extensive than necessary.108 As noted
above, the Bureau’s quantitative testing
generally indicates that, in certain
situations involving the collection of
time-barred debt, disclosures can be
effective in curing potential deception.
Therefore, the Bureau declines to
finalize a prohibition on the collection
of time-barred debt.
In addition to consumers and
consumer advocates, several industry
commenters, Federal agency staff, and
one local government commenter
expressed support for the proposed
prohibitions. Commenters who
supported the proposed prohibitions
asserted that suits and threats of suit on
time-barred debts may induce
consumers to make payments they
otherwise would not make. Some
consumer advocate commenters noted
that these payments can revive the debt
collector’s right to sue in certain
jurisdictions. Additionally, consumer
advocate commenters asserted that
consumers often assume that the mere
filing of a lawsuit means that they owe
the debt, that the amount owed is
accurately stated, and that the debt
collector has the legal right to collect the
debt, whereas in fact the debt collector
may lack support for its claims. These
commenters also asserted that
consumers generally lack the knowledge
and resources to defend their rights in
106 See, e.g., ACA Int’l v. Healey, 457 F. Supp. 3d
17, 25–26 (D. Mass. 2020); Stover v. Fingerhut
Direct Mktg., 709 F. Supp. 2d 473, 479 (S.D. W.Va.
2009).
107 See Cent. Hudson Gas & Elec. Corp. v. Pub.
Serv. Comm’n, 447 U.S. 557, 566 (1980).
108 In re R.M.J., 455 U.S. 191, 203 (1982); see also
Pearson v. Shalala, 164 F.3d 650 (D.C. Cir. 1999).
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court, and, as a consequence, many
claims result in default judgments on
debts that were not legally enforceable.
Consumer advocate commenters also
provided anecdotes and pointed to
recent enforcement actions to show that
debt collectors continue to sue and
threaten to sue on time-barred debt.109
One industry commenter who
supported elements of proposed
§ 1006.26(b) acknowledged that
proposed § 1006.26(b) is consistent with
long-standing FDCPA case law.
Several industry commenters who
opposed proposed § 1006.26(b) argued
that the Bureau should not prohibit
suits and threats of suit on time-barred
debt because, in most jurisdictions,
expiration of the statute of limitations
does not prohibit a debt collector from
bringing suit but rather provides the
consumer with an affirmative defense to
liability. According to these
commenters, proposed § 1006.26(b)
would effectively preempt State
affirmative defense laws by making
expiration of the statute of limitations a
total bar to suit, thereby interfering with
debt collectors’ right to legal recourse
under State law. Relatedly, an industry
commenter argued that State courts are
capable of addressing situations in
which a debt collector sues to collect a
time-barred debt, including by
dismissing the debt collector’s claim
and awarding sanctions if appropriate.
Another industry commenter asserted
that consumers should be responsible
for tracking the legal obligations
associated with their debts, and that it
would be unduly burdensome to require
debt collectors to determine whether a
debt is time barred, particularly for debt
collectors who are small businesses.
Some industry commenters argued
that the Bureau lacks the authority to
prohibit suits and threats of suit on
time-barred debts. For example, several
industry commenters argued that
proposed § 1006.26(b) exceeds the
Bureau’s authority because, in their
view, nothing in the FDCPA permits the
Bureau to preempt State laws relating to
debt collection or access to courts or
establishes a Federal role in determining
State law defenses. Similarly, one
industry commenter asserted that
109 See, e.g., Consent Order ¶¶ 65–69, In re Encore
Capital Grp., Inc., No. 2015–CFPB–0022 (Sept. 9,
2015), https://files.consumerfinance.gov/f/201509_
cfpb_consent-order-encore-capital-group.pdf;
Consent Order ¶¶ 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;
see also Complaint ¶¶ 30–35, Bureau of Consumer
Fin. Prot. v. Encore Capital Grp., Inc., No.
2020CV1750 (S.D. Cal. Sept. 8, 2020), https://
www.consumerfinance.gov/documents/9167/cfpb_
encore-capital-group-et-al_complaint_2020-08.pdf.
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proposed § 1006.26(b) contradicts the
Federal Rules of Civil Procedure and
State-law equivalents and abridges a
debt collector’s right to petition the
courts. The commenter pointed to
Federal Rule of Civil Procedure 11,
pursuant to which an attorney’s claims,
defenses, and other legal contentions
must be warranted by existing law or by
a nonfrivolous argument for extending,
modifying, or reversing existing law or
for establishing new law. According to
this commenter, the proposed
prohibitions conflict with Rule 11 and
its equivalents by discouraging debt
collectors from filing legitimate lawsuits
that argue in good faith for the
modification or reversal of existing law.
Final § 1006.26(b) prohibits a debt
collector from bringing or threatening to
bring a legal action against a consumer
to collect a time-barred debt. A debt
collector who sues or threatens to sue a
consumer to collect a time-barred debt
explicitly or implicitly misrepresents to
the consumer that the debt is legally
enforceable, and that misrepresentation
is material to consumers because it may
affect their conduct with regard to the
collection of that debt, including
whether to pay it.110 The Bureau’s
consumer testing suggests that
consumers often are uncertain about
their rights concerning time-barred
debt.111 Consumers sued or threatened
with suit on a time-barred debt
generally do not recognize that the debt
is time barred, that time-barred debts are
unenforceable in court, or that they
must raise the expiration of the statute
of limitations as an affirmative defense.
The prohibitions in final § 1006.26(b)
generally are consistent with the current
state of the law. 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.112 The FTC
110 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.’’).
111 See FMG Focus Group Report, supra note 26,
at 9–10; FMG Cognitive Report, supra note 27, at
36–37; FMG Summary Report, supra note 29, at 35–
36; see also Fed. Trade Comm’n, Repairing a
Broken System: Protecting Consumers in Debt
Collection Litigation and Arbitration at iii, 26 (July
2010), https://www.ftc.gov/sites/default/files/
documents/reports/federal-trade-commissionbureau-consumer-protection-staff-report-repairingbroken-system-protecting/debtcollectionreport.pdf
(FTC Litigation Report).
112 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
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also has concluded that the FDCPA bars
actual and threatened suits on timebarred debt.113 In addition, the
prohibitions in final § 1006.26(b)
generally are consistent with current
industry practice. For example, a
number of industry commenters stated
they do not sue or threaten to sue on
time-barred debt as a matter of policy,
and one trade group commenter stated
that it requires its members to refrain
from suing or threatening to sue on
time-barred debts.
The Bureau recognizes that, in most
jurisdictions, expiration of the statute of
limitations provides the consumer with
an affirmative defense to liability, but it
does not bar a debt collector from
bringing suit. The Bureau concludes,
however, that consumers are unlikely to
know whether the applicable statute of
limitations has expired or that the
expiration of the statute of limitations
provides an affirmative defense. Suits
and threats of suit on time-barred debts
therefore imply to the least
sophisticated consumer not simply that
the debt collector may sue or has sued
the consumer but also that the debt
collector’s claim is legally enforceable.
For time-barred debts, this is misleading
because expiration of the statute of
limitations provides the consumer with
a complete defense.114 Accordingly, the
Bureau concludes that bringing or
threatening to bring a legal action to
collect a time-barred debt is a deceptive
practice under FDCPA section 807 even
if expiration of the statute of limitations
is an affirmative defense rather than a
categorical bar to suit.
As explained below, the Bureau is
finalizing § 1006.26(b) as an
interpretation of FDCPA section 807’s
prohibition on deception; such an
interpretation is squarely within the
Bureau’s authority under FDCPA
section 814(d) to prescribe rules with
respect to the collection of debts by debt
collectors. Contrary to commenters’
claims, § 1006.26(b) does not preempt
State laws relating to when a debt
collector may bring a lawsuit in State
court. Rather, it provides that a debt
collector who sues or threatens to sue a
consumer to collect a time-barred debt
violates the FDCPA even if applicable
State law permits the suit. In addition,
v. Galaxy Asset Mgmt., 641 F.3d 28, 33 (3d Cir.
2011) (per curiam); Goins v. JBC & Assocs., P.C.,
352 F. Supp. 2d 262, 273 (D. Conn. 2005); Kimber,
668 F. Supp. at 1487–89.
113 FTC Litigation Report, supra note 111, at 23.
114 See, e.g., Goins, 352 F. Supp. 2d at 272
(holding that, although the statute of limitations is
an affirmative defense, threatening to bring suit on
time-barred debt ‘‘can at best be described as a
‘misleading’ representation, in violation of
§ 1692e,’’ because the statute of limitations is a
complete defense to any suit).
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contrary to commenters’ assertions,
§ 1006.26(b) does not exceed the
Bureau’s authority by regulating access
to the courts or litigation activities. Debt
collectors have repeatedly argued that
they cannot be held liable under the
FDCPA for actions taken in litigation
because, for example, the United States
Constitution allows debt collectors to
petition the courts, or because the
Federal Rules of Civil Procedure (or
their State equivalents) allow debt
collectors to argue for the modification
or reversal of existing law. Many courts
have rejected such arguments, generally
reasoning that the FDCPA
unquestionably applies to litigation
activities.115 The fact that expiration of
a State’s statute of limitations may not
extinguish a debt under State law or bar
a lawsuit in State court unless an
affirmative defense is raised and proven
does not render the FDCPA’s
prohibition on using deceptive or
misleading representations or means in
debt collection inapplicable. There is
nothing unusual about the proposition
that some behavior permitted by State
law may nevertheless violate Federal
law. Moreover, nothing in § 1006.26(b)
prohibits a debt collector from bringing
a legal action against a consumer in
which the debt collector argues for an
extension, modification, or reversal of
existing law or the establishment of new
law—including a legal action in which
the debt collector argues that a debt is
not time barred. Debt collectors remain
free to do so. But a debt collector who
brings such an action may violate
§ 1006.26(b) if a court ultimately
determines that the debt was time
barred.
Liability Standard
Proposed § 1006.26(b) would have
prohibited a debt collector from
bringing or threatening to bring a legal
action against a consumer to collect a
time-barred debt only if the debt
collector knew or should have known
the debt was time barred.
In proposing a knows-or-should-know
standard, the Bureau explained that
determining whether a debt is time
barred may involve analyzing which
State law applies, which statute of
limitations applies, when the statute of
limitations began to run, and whether
the statute of limitations has been tolled
or reset. In many cases, a debt collector
115 See, e.g., Aguilar v. LVNV Funding LLC, No.
2:19–cv–105, 2019 WL 3369706, at *3–4 (M.D. Fla.
July 26, 2019); Tobing v. Parker McCay, P.A., No.
3:17–cv–00474, 2018 WL 2002799, at *9 (D.N.J.
Apr. 30, 2018); Consumer Fin. Prot. Bureau v.
Frederick J. Hanna & Assocs., P.C., 114 F. Supp. 3d
1342, 1359–61 (N.D. Ga. 2015); Johnson v. Riddle,
305 F.3d 1107, 1118 (10th Cir. 2002).
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will know, or will be able to 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,
such as if the case law in a State is
unclear as to which statute of
limitations applies to a particular type
of debt. The proposed knows-or-shouldknow standard was meant to address
this concern by not imposing liability
on a debt collector if it had no way of
knowing that a particular debt was time
barred. But the Bureau also
acknowledged that it sometimes may be
difficult to determine whether a knowsor-should-know standard has been met.
Such uncertainty could increase
litigation costs and make it difficult for
consumers and government agencies to
bring actions against debt collectors. To
address this concern, the Bureau sought
comment on 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.
Industry commenters generally did
not support a strict liability standard.
These commenters generally agreed that
it can be difficult for a debt collector to
determine whether a debt is time barred
and asserted that holding debt collectors
strictly liable for good faith errors would
be unduly harsh. These commenters
stated, for example, that determining the
applicable statute of limitations and
whether it has expired may require
analyzing a variety of factual and legal
questions specific to the debt, and that,
in many cases, a debt collector may
reach the wrong conclusion even after
undertaking a reasonable investigation
and analysis. Industry commenters
asserted that debt collectors may be
unable to reliably determine the statute
of limitations before filing suit because
the law is unclear, because some
information relevant to the analysis may
be unavailable, or both. Some industry
commenters also asserted that the
analysis may change over time. For
example, according to these
commenters, a consumer’s decision to
move to a different State after signing a
loan agreement could affect a debt
collector’s analysis of which State law
applies and whether the statute of
limitations has been tolled. As another
example, an industry commenter stated
that, in certain jurisdictions, the statute
of limitations applicable to mortgage
debt is in flux because of unprecedented
access by consumers to loss mitigation
and an increase in bankruptcy filings in
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the wake of the foreclosure crisis.
Several industry commenters also
expressed concern that debt collectors
who are not attorneys may have
particular difficulty making an accurate
time-barred debt determination. For
these reasons, industry commenters
asserted that a strict liability standard,
which would leave no room for error,
would expose debt collectors to liability
even though it would be challenging or
very costly in many circumstances to
determine if a debt is time barred.
Some industry commenters supported
the proposed knows-or-should-know
standard. These commenters generally
asserted that the proposed standard
would help debt collectors avoid
liability for good-faith mistakes in
determining whether a debt is time
barred—something industry
commenters argued is important given
the complexity and uncertainty of
certain time-barred debt analyses. One
industry commenter asserted that the
proposed standard also would
adequately protect consumers from
harm. However, several industry
commenters who expressed general
support for the proposed standard also
asked the Bureau to provide additional
guidance, including examples of
circumstances in which a debt collector
neither knows nor should know that a
debt is time barred.
Not all industry commenters
supported the proposed knows-orshould-know standard. Some industry
commenters argued that the proposed
standard was vague and subjective and
could increase litigation risk rather than
mitigating it. Other industry
commenters asked the Bureau to clarify
that the knows-or-should-know
standard depends on the specific
understanding and sophistication of the
particular debt collector. They asserted,
for example, that what an attorney debt
collector knows or should know about
a debt’s time-barred status may differ
from what a non-attorney debt collector
knows or should know.
Some industry commenters who
opposed the proposed knows-or-shouldknow standard offered alternative
standards. For example, several industry
commenters recommended that the
Bureau finalize a reasonable
investigation standard such that a debt
collector who sued or threatened to sue
to collect a time-barred debt would not
be liable if the debt collector undertook
a reasonable investigation before doing
so. Similarly, some industry
commenters argued that a debt collector
who acts in good faith should not be
liable for suits and threats of suit on
time-barred debts. Other industry
commenters suggested that the Bureau
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finalize a liability standard akin to
qualified immunity such that a debt
collector who sued or threatened to sue
to collect a time-barred debt would not
be liable unless the applicable statute of
limitations was clearly established.
Other industry commenters suggested
that the Bureau finalize an actual
knowledge standard such that a debt
collector who sued or threatened to sue
on a time-barred debt would be liable
only if the debt collector knew the debt
was time barred.
Some commenters suggested that the
Bureau finalize various safe harbors for
debt collectors. For example, industry
commenters recommended safe harbors
for debt collectors collecting debts of a
certain age and for debt collectors who
rely on information provided by the
creditor. Other industry commenters
suggested that a debt collector who
maintains and follows reasonable
procedures for determining whether a
debt is time barred should receive a safe
harbor from liability in the event that
the debt collector inadvertently sues or
threatens to sue on a time-barred debt.
One industry commenter requested that
the Bureau specifically confirm that
FDCPA section 813(c)’s bona fide error
defense would apply to violations of
§ 1006.26(b).
Other commenters, including
consumers, consumer advocates,
academics, some members of Congress,
a group of State Attorneys General, and
several local governments, urged the
Bureau to adopt a strict liability
standard. Although some of these
commenters acknowledged that
determining whether a debt is time
barred can be complicated,116 others
argued that determining whether a debt
is time barred is relatively
straightforward in most cases. One
commenter suggested that, if the Bureau
finalizes the proposed knows-or-shouldknow standard, the Bureau should
clarify that in most cases a debt
collector will know (or should know)
whether the statute of limitations has
run because in most cases debt
collectors have the necessary
information to make the determination.
Some consumer advocate commenters
who argued for a strict liability standard
stated that it would incentivize debt
collectors to determine whether a debt
is time barred before threatening or
116 A group of academic commenters challenged
the Bureau’s assertion that debt buyers generally
receive enough information to determine whether a
debt is time barred. These commenters noted that
fewer than half of respondents to the Bureau’s
industry survey reported receiving account
agreement documentation or billing statements,
information that the commenters believed would
help a debt collector calculate the applicable statute
of limitations and whether it has expired.
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filing suit. Some consumer advocate
commenters suggested that this would
help reduce the consumer protection
risks associated with the collection of
time-barred debt, including the risk that
consumers may be unable to adequately
protect their rights in court and the risk
that consumers may make a payment on
the debt under the misimpression that
the debt is legally enforceable, which
could revive the debt collector’s right to
sue. Some commenters expressed
concern that the proposed knows-orshould-know standard would not
adequately incentivize debt collectors to
determine the time-barred status of
debts. Around two dozen members of
Congress asserted that finalizing a
knows-or-should-know standard
without additional protections could
encourage willful ignorance on the part
of a debt collector about the time-barred
status of a debt. A group of State
Attorneys General and some consumer
advocate commenters similarly argued
that a knows-or-should-know standard
would promote willful ignorance by
debt collectors.
A number of commenters, including
consumer advocate commenters and a
group of State Attorneys General,
advocated a strict liability standard
because, in their view, debt collectors
generally have more resources and
expertise and better access to
information than consumers. These
commenters generally asserted that it
would often be difficult for a consumer
to establish that a debt was time barred
and that the debt collector knew or
should have known that fact.
Many of these commenters also
argued that the proposed knows-orshould-know standard was inconsistent
with the FDCPA (which some
commenters described as a strict
liability statute) and with FDCPA
section 807’s prohibition on deception
(which does not include a knowledge
element). Some commenters pointed out
that, because FDCPA section 813(c)
provides debt collectors with a bona
fide error defense to liability in certain
circumstances, a strict liability standard
would not expose debt collectors to
undue liability. Commenters also argued
that the proposed knows-or-shouldknow standard was inconsistent with
case law imposing or implying a strict
liability standard when evaluating
claims that a debt collector sued or
threatened to sue to collect a timebarred debt. Several commenters agreed
with the Bureau that a strict liability
standard generally would reduce
ambiguity and be easier to enforce than
the proposed knows-or-should-know
standard. Federal government agency
staff encouraged the Bureau to consider
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further whether a knows-or-shouldknow standard would place an
unnecessary burden on law enforcement
agencies.
The Bureau is not finalizing the
proposed knows-or-should-know
standard and is instead finalizing a
strict liability standard. Although
determining whether a debt is time
barred can be challenging or costly in
certain circumstances, the Bureau
concludes that the proposed knows-orshould-know standard is generally
inconsistent with FDCPA section 807,
which does not include an exception or
exclusion for debt collectors whose
deceptive statements are unintentional
or for whom ensuring that a statement
is not deceptive is burdensome.117 The
Bureau also concludes that a strict
liability standard is more consistent
with FDCPA section 807’s prohibition
on deception, as well as case law
imposing or implying such a standard
when evaluating claims under FDCPA
section 807 generally and claims related
to suits and threats of suit on timebarred debt specifically.118
Moreover, the Bureau notes that a
knows-or-should-know standard could,
in some circumstances, shift the risk
that a claim is deceptive from debt
collectors to consumers. As explained
above, suits and threats of suit on timebarred debt can cause consumer harm.
In a case in which it is difficult or costly
to determine whether a debt is time
barred, a knows-or-should-know
standard could allow debt collectors to
avoid liability for causing such harm. In
other consumer protection contexts,
courts and the FTC have recognized that
an advertiser who makes an
unsubstantiated claim may be liable for
deception even if the cost of
substantiating the claim is high or
prohibitively expensive.119 The
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117 For
the same reasons, the Bureau concludes
that the alternative standards proposed by industry
commenters—including, for example, an actual
knowledge standard, a reasonable-investigation
standard, or a clearly-established-law standard—are
generally inconsistent with FDCPA section 807.
118 See, e.g., Pantoja, v. Portfolio Recovery
Assocs., LLC, 852 F.3d 679, 683 (7th Cir. 2017);
Buchanan v. Northland Grp., Inc., 776 F.3d 393,
399 (6th Cir. 2015); Phillips v. Asset Acceptance,
LLC, 736 F.3d 1076, 1083–84 (7th Cir. 2013); Clark
v. Capital Credit & Collection Servs., 460 F.3d 1162,
1176 (9th Cir. 2006); Gearing v. Check Brokerage
Corp., 233 F.3d 469, 472 (7th Cir. 2000).
119 See, e.g., POM Wonderful, LLC v. FTC, 777
F.3d 478, 497 (D.C. Cir. 2015) (‘‘We acknowledge
that RCTs [i.e., randomized clinical trials] may be
costly. . . . Yet if the cost of an RCT proves
prohibitive, petitioners can choose to specify a
lower level of substantiation for their claims. As the
Commission observed, the need for RCTs is driven
by the claims petitioners have chosen to make.’’)
(internal brackets and quotation marks omitted); In
re POM Wonderful LLC, 2013 WL 268926, at *50
(F.T.C. Jan. 16, 2013) (rejecting argument that an
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Bureau’s decision to finalize a strict
liability standard is generally consistent
with this principle.
The Bureau emphasizes that, although
a strict liability standard might create
some risk for debt collectors if a debt’s
time-barred status is unclear, debt
collectors have multiple ways to manage
such risk. In particular, a debt collector
can avoid liability under § 1006.26(b) by
confirming that the statute of limitations
has not expired before bringing or
threatening to bring a legal action.
Similarly, a debt collector who is
ultimately unable to determine with
certainty whether a debt is time barred
can avoid liability under § 1006.26(b) by
refraining from bringing or threatening
to bring a legal action while, in most
States, continuing with non-litigation
collection activities. Moreover, a debt
collector who brings or threatens to
bring a legal action against a consumer
to collect a time-barred debt may,
depending upon the reason for the debt
collector’s error, have a defense to civil
liability under FDCPA section 813 if the
debt collector shows by a
preponderance of evidence that the
violation was not intentional and
resulted from a bona fide error
notwithstanding the maintenance of
procedures reasonably adapted to avoid
any such error.120 For these reasons, the
Bureau concludes that finalizing a strict
liability standard under § 1006.26(b)
does not pose an undue risk of liability
for debt collectors, even in cases in
which a debt collector is unable to
determine with certainty whether a debt
is time barred.
Requests for Clarification
Several commenters asked the Bureau
to clarify the scope of proposed
§ 1006.26(b)’s prohibitions.121 Two
advertiser may ‘‘make particular claims that go
beyond the substantiation it possesses and then ask
the Commission to excuse the inadequacy of its
support by asserting that [the] advertiser did the
best it could because the proper substantiation for
the actual claim would be too expensive’’); In re
Kroger Co., 98 F.T.C. 639, 737 (1981) (‘‘Where the
demands of the purse require such compromises,
the advertiser must generally limit the claims it
makes for its data or make appropriate disclosures
to insure proper consumer understanding of the
survey’s results.’’).
120 See Jerman v. Carlisle, McNellie, Rini, Kramer
& Ulrich LPA, 559 U.S. 573 (2010) (holding that
bona fide error defense is not available when
FDCPA violation arises from a debt collector’s
mistaken interpretation of FDCPA’s legal
requirements but noting that bona fide error defense
is available when FDCPA violation arises from
certain other types of errors).
121 Commenters also asked the Bureau to adopt a
number of interventions that the Bureau did not
propose, such as a prohibition on revival and a
prohibition on perpetual tolling, which commenters
asserted prevents a statute of limitations from ever
expiring in certain circumstances. The Bureau did
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5781
industry commenters suggested that the
term ‘‘legal action’’ is unclear and could
be interpreted to encompass any action
in any court of law or equity. These
commenters suggested replacing ‘‘legal
action’’ with ‘‘lawsuit,’’ asserting that,
although ‘‘legal action’’ and ‘‘lawsuit’’
have overlapping meanings, ‘‘lawsuit’’
has a narrower connotation that
excludes certain legal actions, such as
bankruptcy proceedings. Alternatively,
these commenters argued that, if the
Bureau declines to change the term legal
action, the prohibitions in proposed
§ 1006.26(b) should be adjusted to
specifically exclude certain types of
legal actions, such as garnishment
actions, probate actions, and the filing
of proofs of claim in bankruptcy
proceedings.122 Another commenter
asked the Bureau to clarify that, for
purposes of proposed § 1006.26(b), the
term ‘‘legal action’’ does not include
‘‘non-original complaints,’’ such as
amended complaints, supplemental
complaints, complaints re-filed after a
prior dismissal without prejudice, postjudgment court filings, or post-judgment
communications (such as executions or
garnishments).
Final § 1006.26(b) uses the term ‘‘legal
action.’’ In Midland Funding, LLC v.
Johnson, the Supreme Court held that
filing a proof of claim on a time-barred
debt in a bankruptcy proceeding does
not violate the FDCPA sections 807 or
808.123 Consistent with Midland, the
final rule clarifies that § 1006.26(b) does
not prohibit the filing of proofs of claim
in a bankruptcy proceeding. The Bureau
does not see a basis to categorically
exclude other types of legal actions,
such as garnishment and probate
actions, from the prohibitions in
§ 1006.26(b). No other section of the
FDCPA pertaining to legal actions
contains a similar exclusion, and the
commenters did not explain why they
believe an exclusion is merited here.
At least one industry commenter
asked the Bureau to clarify the types of
actions and statements that qualify as a
threat of legal action or that could be
interpreted by a consumer as a threat of
legal action. The Bureau declines to do
so at this time. Whether a particular
action or statement constitutes a threat
of legal action depends on the facts and
circumstances of the particular case.
Nevertheless, the Bureau notes that
§ 1006.26(b) prohibits not only explicit
not propose these interventions and it is not
finalizing them.
122 A consumer advocate commenter argued that
the rule should expressly prohibit filing a
bankruptcy proof of claim to recover a time-barred
debt.
123 137 S. Ct. 1407 (2017).
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threats of legal action but also implicit
ones.
For the reasons discussed above, the
Bureau is finalizing § 1006.26(b), which
provides that a debt collector must not
bring or threaten to bring a legal action
against a consumer to collect a timebarred debt. Section 1006.26(b) also
states that these prohibitions do not
apply to proofs of claim filed in
connection with a bankruptcy
proceeding. The Bureau is finalizing
§ 1006.26(b) as an interpretation of
FDCPA section 807. 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 time-barred debts because
such suits and threats of suit explicitly
or implicitly misrepresent, and 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.124 The Bureau’s
interpretation of FDCPA section 807 is
generally consistent with wellestablished case law holding that suits
and threats of suits on time-barred debt
violate FDCPA section 807.125
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Proposed Provision Not Finalized
In the February 2020 proposal, the
Bureau proposed to require a debt
collector collecting a debt that the debt
collector knows or should know is a
time-barred debt to provide time-barred
debt disclosures and, if applicable,
revival disclosures (proposed
§ 1006.26(c)(1) and (2)).126 The Bureau
124 A consumer advocate commenter requested
that the Bureau clarify that a debt collector who
brings or threatens to bring a legal action against a
consumer to collect a time-barred debt also violates
the Dodd-Frank Act. The Bureau is finalizing
§ 1006.26(b) as an interpretation of FDCPA section
807 only.
125 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.
126 Specifically, proposed § 1006.26(c)(1) would
have required a debt collector collecting a debt that
the debt collector knows or should know is a timebarred debt to disclose (i) that the law limits how
long a consumer can be sued for a debt and that,
because of the age of the debt, the debt collector
will not sue the consumer to collect it; and (ii) if,
under applicable law, the debt collector’s right to
bring a legal action against the consumer can be
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proposed to require these disclosures in
the debt collector’s initial
communication with the consumer, on
any validation notice, and in certain
situations if the debt became time
barred during collections. The February
2020 proposal also included, among
other things, model forms and language
a debt collector could have used to
comply with the proposed disclosure
requirements (proposed Model Forms
B–4 through B–7), and it provided a safe
harbor to a debt collector who used the
model forms or language (proposed
§ 1006.26(c)(3)). In support of proposed
§ 1006.26(c), the Bureau cited, among
other things, the results of its
quantitative testing survey.127
Although some commenters
expressed general support for the idea of
addressing the risk of deception
associated with the collection of timebarred debts by requiring time-barred
debt and revival disclosures, many
commenters opposed the Bureau’s
specific proposal. According to industry
commenters, the proposal would have
imposed a significant burden on debt
collectors by requiring them to conduct
time-barred debt and revival analyses
for each debt in collection. These
commenters also reported that they
would face a significant risk of liability
given uncertainty about the statute of
limitations and revival law in at least
some States. Industry commenters
stated that most debt collectors lack the
legal training to determine whether a
debt is time barred or the circumstances
in which it can be revived. To comply
with the disclosure requirements, these
commenters asserted that debt collectors
would need to engage an attorney or
otherwise incur substantial costs.
Industry commenters particularly
objected to imposing these costs on debt
collectors who never sue to collect
debts, or never sue to collect revived
debts. Industry commenters also raised
concerns about being required to
respond to legal questions from
consumers as a result of providing the
disclosures.
Among consumer, consumer
advocate, academic, and State Attorneys
General commenters who opposed the
Bureau’s proposal, many doubted that
disclosures can effectively convey
information about topics as complicated
and unfamiliar to consumers as timebarred debt and revival. These
commenters also raised concerns about
the Bureau’s proposed model
disclosures, characterizing them as
revived, then the fact that revival can occur and the
circumstances in which it can occur. 85 FR 12672,
12696 (Mar. 3, 2020).
127 See id. at 12678–79.
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confusing, vague, and ineffective—
particularly for the least sophisticated
consumer.128 Some consumer advocate
commenters also expressed concern
about the accuracy of the proposed
disclosures and the frequency with
which the Bureau proposed to require
them. These commenters urged the
Bureau to reconsider or significantly
revise the proposal.
Given industry commenters’ concerns
about the burden on debt collectors of
the Bureau’s specific proposal, and
consumer advocate commenters’
concerns about whether the Bureau’s
specific proposal would effectively cure
consumer deception, the Bureau has
decided not to finalize proposed
§ 1006.26(c). In deciding not to finalize
proposed § 1006.26(c), the Bureau
determines only that the specific
disclosure requirements described in
the February 2020 proposal may not
sufficiently accommodate the concerns
raised by different stakeholders.
However, the Bureau concludes, as
discussed in the February 2020
proposal, that, in many circumstances,
disclosures can effectively cure the
potential deception associated with the
collection of time-barred debt.
Finally, the Bureau emphasizes that
the FDCPA, the November 2020 Final
Rule, and this final rule nevertheless
apply to debt collectors’ activities
involving the collection of time-barred
debts, including debt collectors’
communications when collecting such
debts. Accordingly, a debt collector may
not use any false, deceptive, or
misleading representation or means in
connection with the collection of a timebarred debt. Nor may a debt collector
use unfair or unconscionable means to
collect or attempt to collect a timebarred debt. Depending on the
circumstances associated with the
collection of a specific time-barred debt,
a debt collector may decide that, to
avoid violating the FDCPA and the final
128 Courts have applied an objective standard of
an ‘‘unsophisticated’’ or ‘‘least sophisticated’’
consumer to claims brought under FDCPA section
807. Jensen v. Pressler & Pressler, 791 F.3d 413, 419
(3d Cir. 2015) (‘‘The standard is an objective one,
meaning that the specific plaintiff need not prove
that she was actually confused or misled, only that
the objective least sophisticated debtor would be.’’);
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) (per
curiam) (same). This standard ‘‘protects the
consumer who is uninformed, naive, or trusting, yet
it admits an objective element of reasonableness.’’
Gammon v. GC Servs. Ltd. P’ship, 27 F.3d 1254,
1257 (7th Cir. 1994). As discussed in part IV, the
Bureau interprets FDCPA sections 807 to
incorporate an objective, ‘‘unsophisticated’’ or
‘‘least sophisticated’’ consumer standard.
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rule, the debt collector needs to disclose
information to consumers about the debt
collector’s ability to sue and the
possibility of revival and, in that case,
the debt collector may do so.
Section 1006.30
Practices
Other Prohibited
30(a) Required Actions Prior to
Furnishing Information
The Bureau proposed in § 1006.30(a)
to prohibit so-called passive collections,
i.e., the practice of a debt collector
furnishing to a consumer reporting
agency, as defined in section 603(f) of
the Fair Credit Reporting Act (FCRA),129
information regarding a debt before
communicating with the consumer
about the debt. The Bureau proposed
§ 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;
pursuant to its authority to interpret
FDCPA section 806, which 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; and pursuant to its
authority to interpret FDCPA section
808, which prohibits a debt collector
from using 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.130
For the reasons discussed below, the
Bureau is: (1) Finalizing § 1006.30(a) as
§ 1006.30(a)(1), with changes to specify
the required actions that a debt collector
generally must take before furnishing
information to a consumer reporting
agency; and (2) finalizing in
§ 1006.30(a)(2) a special rule for
information furnished to certain
specialty consumer reporting agencies.
30(a)(1) In General
The Bureau received comments on
proposed § 1006.30(a) from consumer
advocates and individuals, nonprofits,
129 15
U.S.C. 1681a(f).
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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130 See,
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industry commenters, and government
agencies. Many commenters supported
the proposed prohibition on passive
collections. A consumer group
emphasized the consumer harms
identified in the proposal and agreed
that, because with passive collections a
consumer does not know a debt is in
collection, the practice can cause a
consumer’s credit score to decrease,
increase the cost of future credit for the
consumer, make it more difficult for a
consumer to obtain affordable housing,
and jeopardize some job opportunities,
all without the consumer’s knowledge.
Three government commenters also
supported the proposed prohibition; one
of them reported receiving consumer
complaints regarding passive
collections. An industry commenter
supporting the proposal noted that the
commenter provides consumers with a
90-day grace period before furnishing
information to consumer reporting
agencies.
A number of comments, primarily
from industry or industry trade groups,
opposed the prohibition or suggested
changes or clarifications. Two industry
trade groups and a law firm commenter
argued that proposed § 1006.30(a)
should not be finalized because it
conflicts with the FCRA, including
section 623(a)(7), which requires certain
financial institutions to provide written
notice to customers if they furnish
negative information to a consumer
reporting agency, and section 623(a)(5),
which requires furnishers to provide
certain information about a reported
delinquency to the consumer reporting
agency no later than 90 days after
furnishing information.131 Other
industry commenters argued that the
proposal would encourage consumers to
ignore communications, provide
inaccurate forwarding information to
the creditor, or falsely mark mail as
undeliverable to avoid having collection
items furnished to consumer reporting
agencies. In addition, several industry
commenters stated that locating
consumers for certain debts, such as
medical debt, telecommunications debt,
or rental debt, is costly and may not be
justified for small amounts. If debt
collectors cannot passively collect these
debts, the commenters argued, then the
debts are effectively uncollectible. One
industry trade group similarly argued
that passive collections benefits
consumers who otherwise cannot be
located, rather than harming them,
because the collection item on their
credit report will provide them contact
information for the debt collector,
131 15
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5783
which the consumer can then use to
make payment arrangements.
A number of commenters suggested
changing or clarifying the proposed
requirement to ‘‘communicate’’ before
furnishing information to a consumer
reporting agency. Some urged the
Bureau to adopt a stricter requirement,
such as by requiring written notice to
the consumer before reporting,
mandating specific disclosure language,
imposing across-the-board waiting
periods before reporting, or prohibiting
indirect communications. Others
expressed concern that the proposal
would impose more stringent
communication requirements than the
FDCPA otherwise requires and asked
the Bureau to relax the proposal, such
as by clarifying that proof of receipt of
a communication is not required, by
allowing debt collectors to satisfy the
proposed requirement by leaving
limited-content messages (as defined in
§ 1006.2(j) of the November 2020 Final
Rule), or by permitting debt collectors to
presume receipt of a communication
after a waiting period expires.
After considering all of the comments,
the Bureau is finalizing proposed
§ 1006.30(a) and its related commentary
with substantial revisions, as follows.
Subject to § 1006.30(a)(2) (discussed
below), final § 1006.30(a)(1) requires a
debt collector to take certain actions
before furnishing information about a
debt to a consumer reporting agency, as
defined in section 603(f) of the FCRA.
Specifically, the debt collector must
either: (1) Speak to the consumer about
the debt in person or by telephone, or
(2) place a letter in the mail or send an
electronic message to the consumer
about the debt and wait a reasonable
period of time to receive a notice of
undeliverability. During the reasonable
period, the debt collector must permit
receipt of, and monitor for, notifications
of undeliverability from
communications providers. If the debt
collector receives such a notification
during the reasonable period, the debt
collector must not furnish information
about the debt to a consumer reporting
agency until the debt collector
otherwise satisfies § 1006.30(a)(1). The
Bureau is finalizing commentary to
clarify these requirements as discussed
below.
The Bureau finalizes the requirements
under § 1006.30(a)(1) to address
consumer harms that may arise if a debt
collector furnishes information about a
debt to a consumer reporting agency
without first informing the consumer
about the debt. As discussed in the
proposal, consumers who have not been
informed about the debt are likely to be
unaware that they have a debt in
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collection unless they obtain and review
their consumer report. In turn, many
consumers may not obtain 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 feel pressure to pay
debts that they otherwise would
dispute, including debts they do not
owe, or may face the denial of an
application, a higher interest rate, or
other negative consequences.
In addition, as discussed in the
proposal, debt collectors may attempt to
collect debts passively if the expected
return from that technique exceeds the
cost of attempting to collect the debt by
communicating with consumers.132 The
Bureau understands that imposing a
requirement intended to inform the
consumer about a debt before furnishing
information about a debt to consumer
reporting agencies will increase costs for
debt collectors who do not currently
attempt to do so. However, passive
collection practices can harm
consumers for the reasons discussed
above. The Bureau has determined that
the final rule best balances debt
collectors’ cost concerns with
protections for consumers against the
harms imposed by passive collection
practices. Final § 1006.30(a)(1) gives a
debt collector flexibility to contact
consumers in a variety of ways,
including in person, by telephone, by
mail, or by electronic message.133 This
gives debt collectors flexibility to
contact the consumer in a manner that
works best for their operations, and debt
collectors need not confirm receipt of
mail or electronic messages.
Although proposed § 1006.30(a) used
the term ‘‘communicate,’’ the proposal
did not clearly specify a debt collector’s
obligations if the debt collector learned
after furnishing information to a
consumer reporting agency that no
communication actually occurred
(because, e.g., the communication was
sent by mail to the consumer’s current
address but the debt collector later
received a notification that the letter
was not delivered). Some commenters
raised concerns that the proposal’s use
of the term ‘‘communicate’’ could be
construed to require debt collectors to
confirm a consumer’s receipt of the
information before furnishing
132 84
FR 23274, 23330 (May 21, 2019).
medical offices, telecommunications
companies, and rental offices typically have contact
information for their customers, and because a
variety of options to verify and forward mail to a
consumer’s new address exist, a debt collector of
such debts should be able to satisfy § 1006.30(a)’s
requirements without incurring significant costs.
133 Because
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information about a debt to a consumer
reporting agency.
To respond to such comments, and
because the proposal was designed to
increase the likelihood that consumers
would learn that a debt attributed to
them is in collection but was not
intended to be a broader limitation on
furnishing valid information about debts
to consumer reporting agencies, the
Bureau finalizes specific requirements a
debt collector must take before
furnishing. The actions specified in the
final rule are ones that increase the
likelihood that a consumer will learn
about a debt before a debt collector
begins furnishing information about that
debt to a consumer reporting agency.
For this reason, after a debt collector has
complied with § 1006.30(a)(1) and
furnished information to a consumer
reporting agency, the debt collector may
furnish additional information with
respect to that debt without having to
repeat the actions specified in
§ 1006.30(a)(1). Accordingly, the Bureau
does not incorporate a receipt
requirement in final § 1006.30(a)(1) and,
instead of using the term
‘‘communicate,’’ sets forth the specific
actions that a debt collector must take
before furnishing.
The Bureau has also determined that
final § 1006.30(a)(1) does not conflict
with FCRA section 623(a)(7) or (5)
because those provisions have different
requirements and goals than
§ 1006.30(a)(1). FCRA section 623(a)(7)
applies only to ‘‘financial institutions’’
as defined in FCRA section 603(t),
which will cover few, if any, FDCPA
debt collectors. Final § 1006.30(a)(1)
does not prevent debt collectors from
complying with the FCRA, and the
FCRA does not prevent debt collectors
from complying with final
§ 1006.30(a)(1).134 The FCRA also does
not state that it is the exclusive Federal
law governing credit reporting and,
indeed, the FDCPA also references a
debt collector’s interactions with
consumer reporting agencies.135
Because final § 1006.30(a)(1) clearly
describes the specific actions that a debt
collector must take before furnishing
134 For example, FCRA section 623(a)(7) requires
certain financial institutions that furnish negative
information to a consumer reporting agency, as
defined in FCRA section 603(p), to provide a
written notice to consumers prior to, or no later
than 30 days after, furnishing the negative
information. A financial institution that is required
to provide a written notice under FCRA section
623(a)(7) and that is also acting as an FDCPA debt
collector could comply with both requirements by,
for example, placing a letter in the mail to the
consumer that contains sufficient information to
satisfy both requirements before furnishing
information to a consumer reporting agency.
135 See, e.g., 15 U.S.C. 1692c(b), 1692d(3).
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information about a debt to a consumer
reporting agency, a debt collector may
ensure compliance with the final rule
based on the debt collector’s own
actions, such as by placing a letter about
the debt in the mail to the consumer and
waiting a reasonable period of time to
receive a notice of undeliverability.
Therefore, the final rule also resolves
concerns about consumers avoiding a
debt collector’s communications to
prevent the debt collector from
furnishing information to a consumer
reporting agency.
The final rule specifies in
§ 1006.30(a)(1)(i) and (ii) the methods by
which a debt collector may meet its
obligation to take certain actions before
furnishing information about a debt to a
consumer reporting agency. All of the
methods require that information ‘‘about
the debt’’ be conveyed to the consumer.
Although the final rule does not specify
the particular information required to
meet the ‘‘about the debt’’ requirement,
the final rule adds comment 30(a)(1)–1
to clarify that the validation information
required by § 1006.34(c), including such
information if provided in a validation
notice, is information ‘‘about the debt.’’
Under § 1006.30(a)(1), information
about a debt must be transmitted ‘‘to the
consumer’’ as defined in § 1006.2(e). A
debt collector who sends information
about the debt that reaches a
‘‘consumer’’ as defined in § 1006.6(a),
which includes additional persons,136
may not have communicated with the
consumer as defined in § 1006.2(e).
The Bureau notes that, in taking any
of the actions specified in
§ 1006.30(a)(1), a debt collector must
comply with the FDCPA and the
November 2020 Final Rule, including
the prohibition on communicating, in
connection with the collection of any
debt, with a third party.137
Proposed comment 30(a)–1 provided
clarifications regarding the term
‘‘communicate’’ in proposed
§ 1006.30(a)(1). Because final
§ 1006.30(a)(1) does not use the term
‘‘communicate’’ and instead states the
specific actions the debt collector must
take before furnishing information about
a debt to a consumer reporting agency,
proposed comment 30(a)–1 is no longer
136 For purposes of § 1006.6(a), the term
‘‘consumer’’ also includes the consumer’s spouse,
parent (if the consumer is a minor), legal guardian,
executor or administrator of the consumer’s estate,
if the consumer is deceased, and a confirmed
successor in interest. See 85 FR 76734, 76889 (Nov.
30, 2020).
137 A debt collector sending an email or text
message who uses the procedures provided for in
§ 1006.6(d)(4) or (5) as finalized in the November
2020 Final Rule does not violate the prohibition on
third-party disclosure under § 1006.6(d)(1).
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necessary and the Bureau is not
finalizing it.
The final rule specifies in
§ 1006.30(a)(1)(ii) that a debt collector
who places a letter in the mail or sends
an electronic message to the consumer
about the debt to satisfy § 1006.30(a)(1)
must wait a reasonable period of time to
receive a notice of undeliverability
before furnishing information about a
debt to a consumer reporting agency.
New comment 30(a)(1)–2 clarifies that
the reasonable period of time begins on
the date that the debt collector places
the letter in the mail or sends the
electronic message. Comment 30(a)(1)–2
also provides a safe harbor for waiting
a reasonable period of time by clarifying
that a period of 14 consecutive days
after the date that the debt collector
places a letter in the mail or sends an
electronic message is a reasonable
period of time.
Comment 30(a)(1)–3 clarifies that a
debt collector who places a letter in the
mail or sends an electronic message to
the consumer about the debt to satisfy
§ 1006.30(a)(1) and does not receive a
notice of undeliverability during the
reasonable period of time, and who
thereafter furnishes information about
the debt to a consumer reporting agency,
does not violate § 1006.30(a)(1) even if
the debt collector subsequently receives
a notice of undeliverability. Comment
30(a)(1)–3 also provides three examples
illustrating this requirement.
The Bureau determines that these
provisions clarify the proposal with
respect to pre-furnishing outreach by
mail or electronic message and provide
protection for consumers.138 The Bureau
understands that the U.S. Postal Service
typically notifies senders of most
undeliverable-as-addressed mail within
14 days. The amount of time it takes a
communications provider to return a
notice of undeliverability with respect
to electronic messages is less clear.
While an undeliverability notice is
typically received soon after sending an
electronic message, the Bureau
understands that the time for receiving
a notice of undeliverability with respect
to such electronic messages may vary by
provider, and the Bureau does not have
sufficient information to determine a
uniform time period for electronic
messages. Nevertheless, the Bureau has
no reason to believe that notices of
undeliverability are typically received
more than 14 days after an electronic
message is sent. Therefore, the Bureau is
finalizing the same safe harbor time
138 The Bureau does not impose a similar period
when a debt collector speaks to a consumer about
the debt in person or by telephone because these
scenarios do not have the potential for an
equivalent undeliverable notice outcome.
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period (i.e., 14 consecutive days) for
electronic messages as for mailed
letters.139 The Bureau may consider
revising the safe harbor for electronic
messages in the future based on actual
stakeholder experience with this
provision.
The Bureau recognizes that the final
rule may result in instances in which
debt collectors furnish information
about a debt to a consumer reporting
agency even though the consumer has
not been made aware of the collection
item, either because the mail or
electronic message is returned as
undeliverable after the reasonable
period has passed or is not received but
is also not returned. These consumers
will not have the same opportunity to
receive a message about their debt as
those consumers for whom the mail or
electronic message is delivered.
Nevertheless, the Bureau determines
that establishing a requirement that debt
collectors wait a reasonable period of
time after placing a letter in the mail or
sending an electronic message provides
sufficient consumer protection without
unduly prohibiting a debt collector from
furnishing information about a valid
debt to a consumer reporting agency.
The Bureau declines commenters’
other suggestions, such as those to
require communications in writing,
dictate specific language, apply longer
waiting periods (e.g., 180 days), or
establish other safe harbors because the
suggestions are unnecessary to achieve
the purpose of the passive collections
ban. For example, requiring written
communications and specific disclosure
language is unnecessary to put the
consumer on notice that a debt is in
collections. Additional safe harbors are
unnecessary and unwarranted at this
time because the final rule clarifies the
specific actions that must occur before
furnishing information to a consumer
reporting agency.
30(a)(2) Special Rule—Information
Furnished to Certain Specialty
Consumer Reporting Agencies
The Bureau did not propose a special
rule regarding furnishing to specialty
consumer reporting agencies. An
industry commenter and a consumer
reporting agency argued in a joint
comment that the final rule should
exempt from § 1006.30(a) information
139 The Bureau notes that the 14-consecutive-day
period is a safe harbor. To comply with the rule,
a debt collector only needs to wait a ‘‘reasonable
period of time’’ to receive a notice of
undeliverability. Therefore, a debt collector who
shows that the debt collector waited a reasonable
time period to receive notices of undeliverability for
electronic messages may be able to satisfy the
requirements of the final rule without waiting 14
days.
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furnished to certain nationwide
specialty consumer reporting agencies
described in FCRA section 603(x)(3),
i.e., consumer reporting agencies that
maintain and compile files on
consumers on a nationwide basis
relating to check writing history (‘‘check
verification consumer reporting
agencies’’).
The commenters explained that
merchants use check verification
consumer reporting agencies to
determine whether they should accept a
particular check. When a merchant
seeks check verification information, the
check verification consumer reporting
agency issues a check verification report
with a code that will indicate if the
check appears acceptable, the check is
potentially fraudulent, or the checking
account is likely overdrawn. These
inquiries are usually completed in real
time, while a transaction is occurring in
a checkout lane or in remote retailing.
The commenters expressed concern that
proposed § 1006.30(a) would degrade
the timely content of check verification
reports issued by check verification
consumer reporting agencies because
debt collectors would be required to
delay or refrain from reporting
altogether, which would undermine the
accuracy of check verification reports
and reduce the willingness of merchants
to accept checks.
The commenters argued that the
current system benefits consumers by
alerting them to potential fraud or that
their account may be overdrawn.
Requiring contact before furnishing
information would harm these
consumers because the fraud or
overdrawn status of the account may
never be detected and, thus, consumers
may not be alerted to potential fraud or
may unknowingly continue writing
checks on an overdrawn account.
Further, the commenters stated that
these requirements could harm
consumers by decreasing the number of
merchants that accept checks or
increasing prices at merchants who
continue to accept checks.
The commenters also expressly
recognized the harm that can occur if a
debt unexpectedly appears on a creditrelated consumer reporting agency
report if the consumer is applying for
credit, a job, or rental housing, and
cannot move forward with the
transaction. However, they noted that
check verification reporting does not
present comparable risk of harm
because (1) such reports are used to
determine whether a particular check
should be accepted, not to evaluate a
consumer’s creditworthiness for credit,
a job, or rental housing; and (2) any
harm caused by refusal to accept a
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check is outweighed by benefits,
including alerting the consumer to
potential fraud and preventing them
from incurring additional overdraft or
non-sufficient funds fees.
After carefully considering the
comment, the Bureau has determined
that § 1006.30(a) should not apply to a
debt collector’s furnishing of
information about a debt to a check
verification consumer reporting agency.
The Bureau finds that a debt collector’s
furnishing of information about a debt
to a check verification consumer
reporting agency before engaging in
outreach to the consumer about the debt
is unlikely to undermine the ability of
consumers to decide whether to pay
debts in the same manner as the
furnishing of information about debts to
other consumer reporting agencies. As a
result, the Bureau has not found that
furnishing information about a debt to a
check verification consumer reporting
agency before engaging in outreach to
the consumer about the debt constitutes
conduct that may have the natural
consequence of harassment, oppression,
or abuse in violation of FDCPA section
806, or that is an unfair or
unconscionable means to collect or
attempt to collect a debt under FDCPA
section 808.
Immediate and frequent reporting
appears to be a critical aspect of check
verification consumer reporting, and it
appears that imposing a requirement
that debt collectors inform consumers
about debts before furnishing
information to those check verification
consumer reporting agencies would
require significant operational changes
and could significantly reduce the
effectiveness of those reports. This is
unlike credit-related reporting, which
typically involves less immediate
furnishing. The Bureau also finds that
the consumer harm that § 1006.30(a)(1)
is designed to address is not present for
check verification consumer reporting
because these reports are unlikely to be
used in making credit, employment, or
rental housing decisions. While
consumers could also be harmed if they
are unaware of checking account report
items, the harm of reducing the
effectiveness of the check verification
system, including the potential harm to
consumers if checks are accepted by
fewer merchants, outweighs the benefits
of requiring communication before
furnishing. In addition, the immediacy
of the current check verification system
provides countervailing benefits to
consumers who are alerted to potential
fraud or to discontinue writing checks
on an overdrawn account. Further, a
special rule for check verification
consumer reporting agencies is
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consistent with several State laws
regulating passive collections.140 For
these reasons, the Bureau concludes that
furnishing of information to a check
verification consumer reporting agency
before engaging in outreach to the
consumer does not raise concerns under
FDCPA sections 806 and 808 similar to
furnishing to other types of consumer
reporting agencies.
Therefore, the final rule adds
§ 1006.30(a)(2) to state that
§ 1006.30(a)(1) does not apply to a debt
collector’s furnishing of information
about a debt to a nationwide specialty
consumer reporting agency that
compiles and maintains information on
a consumer’s check writing history, as
described in FCRA section 603(x)(3).141
For the reasons discussed above, the
Bureau is adopting final § 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. The Bureau is also adopting
final § 1006.30(a) pursuant to its
authority to interpret FDCPA section
806, which 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,
and FDCPA section 808, which
prohibits a debt collector from using
unfair or unconscionable means to
collect or attempt to collect any debt.
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.142 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
and receive verification of the debt and
to request information about the original
creditor. When this validation
information is provided in writing, the
140 Colo. Rev. Stat. sec. 12–14–108 limits when
‘‘debt collectors’’ may furnish information to a
consumer reporting agency, but exempts checks,
negotiable instruments, or credit card drafts.
California and Utah also limit when information
can be furnished to a consumer reporting agency,
but those laws only apply to ‘‘creditors.’’ Cal. Civ.
Code sec. 1785.26; Utah Code sec. 70C–7–107.
141 If and to the extent a check verification
consumer reporting agency compiles and maintains
other types of information specified in FCRA
section 603(x) (e.g., residential or tenant history),
the special rule in § 1006.30(a)(2) does not apply
with respect to a debt collector’s furnishing of that
information to the check verification consumer
reporting agency.
142 See 15 U.S.C. 1692g(a).
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document containing the information is
commonly referred to as a ‘‘validation
notice.’’
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 FDCPA,
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.’’ 143
Congress provided the Bureau with
rulemaking authority in 2010 apparently
to address continuing inadequacies
around validation information and
verification, among other things.144 In
addition, debt collectors have sought
clarification about how to provide
information consistent with the FDCPA,
noting, for instance, that a significant
number of lawsuits are filed each year
alleging deficiencies in their validation
notices.
For these reasons, the Bureau
proposed § 1006.34 to require debt
collectors to provide certain validation
information to consumers and to specify
when and how the information must be
provided. As discussed in more detail
below, the Bureau is finalizing § 1006.34
with modifications in response to
feedback and for clarity and consistency
with other provisions in this final rule
and the November 2020 Final Rule.
Final § 1006.34(a) sets forth the
general requirement to provide
validation information and describes
how such information may be provided
on a validation notice. Section
1006.34(b) sets forth definitions for
purposes of § 1006.34. Section
1006.34(c) sets forth the validation
information, and § 1006.34(d) sets forth
a general requirement that such
information be clear and conspicuous.
Section 1006.34(d) also provides safe
harbors for use of Model Form B–1 in
appendix B to Regulation F, specified
variations of the model notice, or a
143 S. Rep. No. 382, supra note 57; 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).
144 See S. Rep. 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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substantially similar form, and describes
optional disclosures that debt collectors
may, but are not required to, provide
with the validation information.145
Section 1006.34(e) affirmatively permits
debt collectors to provide validation
notices translated into other languages
and requires debt collectors who offer to
provide consumers translated notices to
provide them to consumers who request
them.
As discussed in further detail in the
section-by-section analysis of
§ 1006.34(d), the Bureau proposed to
require that validation notices must be
the same as, or substantially similar to,
the proposed model validation notice.
The Bureau is not finalizing that
requirement. Instead, the final rule
provides certain safe harbors for
compliance with the information and
form requirements in § 1006.34(c) and
(d)(1) for debt collectors who use the
model validation notice, specified
variations of the model notice, or a
substantially similar notice.
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34(a)(1) In General
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 the validation information,
unless that information is contained in
the initial communication or the
consumer has paid the debt. The Bureau
proposed § 1006.34(a)(1) to implement
and interpret this general
requirement.146 Specifically, proposed
§ 1006.34(a)(1) provided that, subject to
a limited exception for if a consumer
has already paid a debt, a debt collector
must provide a consumer the required
validation information either: (1) By
sending the consumer a validation
notice (i.e., a written or electronic
notice) 147 in the manner permitted by
145 The Bureau proposed a model validation
notice as Model Form B–3. The Bureau is finalizing
that form, with revisions, as Model Form B–1. This
Notice refers to proposed Model Form B–3 as the
‘‘proposed model validation notice’’ or the
‘‘proposed model notice’’ and final Model Form B–
1 as the ‘‘model validation notice’’ or ‘‘model
notice.’’ This Notice uses the phrase ‘‘specified
variations of the model notice’’ to refer to the
specifically enumerated versions of the model
notice that receive a safe harbor pursuant to
§ 1006.34(d)(2)(i) and (ii) (i.e., notices that are the
same as, or substantially similar to, the model
notice but for: Omitting some or all of the optional
disclosures that appear on the model notice;
including optional disclosures that do not appear
on the model notice; or including certain
disclosures on a separate page as permitted by
§ 1006.34(c)(2)(viii) and (5)).
146 See 84 FR 23274, 23333–34 (May 21, 2019).
147 Proposed § 1006.34(b)(4) defined a validation
notice as any written or electronic notice that
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§ 1006.42 148 in the initial
communication with the consumer in
connection with the collection of the
debt (proposed § 1006.34(a)(1)(i)(A)) or
within five days of that initial
communication (proposed
§ 1006.34(a)(1)(i)(B)); or (2) by providing
the validation information orally in the
initial communication (proposed
§ 1006.34(a)(1)(ii)).149 As discussed
below, the Bureau is adopting
§ 1006.34(a)(1) with certain minor
revisions.
Some commenters recommended that
the Bureau modify proposed
§ 1006.34(a)(1) generally. Some
consumer advocate commenters stated
that the Bureau should require debt
collectors to provide non-electronic,
written validation notices to all
consumers. According to at least one
commenter, the Bureau should require a
written validation notice even if a debt
collector also provides the validation
information electronically. Another
consumer advocate commenter asked
the Bureau to require debt collectors to
provide a consumer a validation notice
in every communication.
The Bureau declines to require debt
collectors to always provide written,
non-electronic validation notices to
consumers. For the reasons set forth in
the November 2020 Final Rule, the
Bureau interprets FDCPA section 809(a)
as not requiring that the notice of debt
be provided in writing when it is
contained in the initial
communication.150 Moreover, if FDCPA
section 809(a) does require that the
notice of debt be provided in writing—
i.e., if the validation information is not
contained within the initial
communication—nothing in the FDCPA
prohibits a debt collector from
providing the required written
validation notice electronically in
accordance with the consumer-consent
provisions of section 101(c) of the E–
SIGN Act. In turn, if a statute (here, the
FDCPA) requires a written disclosure,
the E–SIGN Act’s consumer-consent
provisions specify requirements
pursuant to which debt collectors may
send the required written disclosures
electronically. Accordingly, pursuant to
provides the validation information described in
§ 1006.34(c).
148 As finalized, § 1006.42 generally requires debt
collectors to send written disclosures in a manner
that is reasonably expected to provide actual notice,
and in a form that the consumer may keep and
access later. 85 FR 76734, 76893 (Nov. 30, 2020).
149 Proposed § 1006.34(b)(2) provided 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.
150 85 FR 76734, 76854 (Nov. 30, 2020).
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§ 1006.42, a debt collector may send the
validation notice electronically under
§ 1006.34(a)(1)(i)(A) (i.e., within the
initial communication) if the debt
collector complies with § 1006.42(a)(1),
which requires that the debt collector
send the notice in a manner that is
reasonably expected to provide actual
notice, and in a form that the consumer
may keep and access later. A debt
collector may send the validation notice
electronically under § 1006.34(a)(1)(i)(B)
(i.e., not within the initial
communication) if the debt collector
complies with § 1006.42(a)(1) and also
complies with § 1006.42(b), which
requires that the debt collector send the
notice in accordance with section 101(c)
of the E–SIGN Act. The Bureau
concludes that, if debt collectors send
validation notices electronically as
described above, there is a reasonable
likelihood that consumers will receive
and be able to retain the notices.
The Bureau determines, therefore,
that it is unnecessary and unwarranted
to impose the burden on debt collectors
that would result from a requirement to
always provide the validation notice in
written, non-electronic form; to provide
a validation notice in written form even
if the debt collector also provides the
validation notice electronically; or to
provide a validation notice or validation
information with every consumer
communication.151 Such requirements
would go beyond the FDCPA’s
provisions and would be unduly
burdensome on debt collectors, because,
as stated above, the Bureau concludes
that the Regulation F provisions that the
Bureau is adopting provide sufficient
consumer protection. Accordingly, the
Bureau does not impose such
requirements.
The Bureau received few comments
specifically about proposed
§ 1006.34(a)(1)(i). Commenters who
provided feedback supported the
Bureau’s proposal. Thus, the Bureau is
adopting § 1006.34(a)(1)(i) largely as
proposed.
A large number of commenters
responded to the clarification in
proposed § 1006.34(a)(1)(ii) that debt
collectors may provide validation
information orally in the initial
communication. Commenters, including
most consumer advocates who
addressed the topic, urged the Bureau to
151 The Bureau additionally notes that, if a statute
(here, FDCPA section 809(a)) requires a written
disclosure, E–SIGN Act section 104(c)(1) states that
Federal agencies’ authority to interpret E–SIGN Act
section 101 (including the consumer-consent
provisions in E–SIGN Act section 101(c)) does not
include the ‘‘authority to impose or reimpose any
requirement that a record be in a tangible printed
or paper form.’’ See 15 U.S.C. 7004(c)(1).
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prohibit debt collectors from providing
validation information orally. These
commenters stated that debt collectors
could not effectively convey orally to
consumers the amount of validation
information that the Bureau
proposed.152 Commenters argued that, if
validation information were conveyed
orally, a consumer would be unable to
review the information at a later time,
unless the consumer transcribed or
recorded the communication with the
debt collector. Commenters stated that
this dynamic would place an
unreasonable burden on consumers and
would be atypical compared to other
consumer law disclosure regimes,
which mandate that required notices be
provided in written form. At least one
commenter stated that oral delivery
would be incompatible with the
formatting requirements in proposed
§ 1006.34(d).
On the other hand, some industry
commenters supported the Bureau’s
clarification that debt collectors may
provide validation information orally.
These commenters asked the Bureau to
provide additional guidance about oral
delivery of validation information,
including, for example, specific content
for an oral notice, such as a script.
As proposed, the Bureau is finalizing
the provision in § 1006.34(a)(1)(ii) that
debt collectors may provide the required
validation information orally in the
initial communication. The Bureau
agrees that there may be significant
challenges to conveying the required
validation information orally.153
Nevertheless, FDCPA section 809(a)
does not prohibit oral delivery. FDCPA
section 809(a) states that the required
validation information may be
‘‘contained in the initial
communication’’ and that a written
notice is mandatory only if that required
information is not contained in the
152 Proposed § 1006.34(c) described the validation
information that proposed § 1006.34(a)(1) would
have required debt collectors to provide. As
discussed in the section-by-section analysis of
§ 1006.34(c), the final rule requires debt collectors
to provide up to 18 items of validation information.
153 Section 1006.34(c) requires a significant
amount of validation information that debt
collectors may not currently include in the
validation information they provide to consumers.
It might be difficult for a debt collector to convey
all of the required information orally, particularly
in an initial communication, which is the only
context in which a debt collector could comply
with its legal obligation by providing the validation
information orally. Further, real-time
communications with consumers are unpredictable.
Accordingly, even if the required components of the
validation information are contained in the oral
communication, the debt collector might not
convey them in a way that meets the requirements
of the regulation; for example, as commenters noted
the debt collector might not convey the required
information clearly and conspicuously.
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initial communication. Further, FDCPA
section 807(11) indicates that the initial
communication may be oral.154
Accordingly, the Bureau concludes that
the most reasonable interpretation of
FDCPA sections 809(a) and 807(11) is
that the FDCPA permits the required
validation information to be conveyed
orally if it is contained in the initial
communication.
Moreover, debt collectors providing
validation information orally will not be
able to use the model validation notice
and therefore will not receive a safe
harbor for compliance under
§ 1006.34(d)(2). The Bureau declines to
provide additional guidance about oral
delivery of validation information. The
Bureau is not aware of debt collectors
providing validation information orally
today, and, for the reasons discussed,
the Bureau believes they will be
unlikely to do so in the future. As a
result, the Bureau concludes that such
additional guidance is not necessary or
warranted at this time.
The Bureau proposed comment
34(a)(1)–1 to clarify the provision of
validation notices if the consumer is
deceased. Proposed comment 34(a)(1)–1
explained 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
validation information under
§ 1006.34(a)(1). Under proposed
comment 34(a)(1)–1, a debt collector
attempting to collect a debt from a
deceased consumer’s estate generally
would provide the validation
information to the named person who is
authorized to act on behalf of the
deceased consumer’s estate, if the debt
collector had not already provided that
information to the consumer.
As discussed in the section-by-section
analysis of § 1006.2(e), the Bureau is
interpreting the term consumer to mean
any natural person, whether living or
deceased, who is obligated or allegedly
obligated to pay any debt. And the
Bureau is adopting commentary
clarifying how this definition operates
in the decedent debt context, including
with respect to debt collectors’
obligations to provide the validation
information and respond to disputes
and requests for original-creditor
information. Accordingly, the Bureau is
finalizing comment 34(a)(1)–1 as
proposed.
154 See
PO 00000
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For all of 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 is finalizing
§ 1006.34(a)(1) to implement and
interpret the FDCPA section 809(a)
requirement that debt collectors provide
validation information to consumers.
34(a)(2) Exception
FDCPA section 809(a) contains a
limited exception that provides that, if
required validation information is not
contained in the initial communication,
a debt collector need not send the
consumer a written validation notice
within five days of that communication
if the consumer has paid the debt prior
to the time that the notice is required to
be sent. The Bureau proposed in
§ 1006.34(a)(2) to implement this
exception by providing that a debt
collector who otherwise would be
required to send a validation notice
pursuant to § 1006.34(a)(1)(i)(B) is not
required to do so if the consumer has
paid the debt prior to the time that
§ 1006.34(a)(1)(i)(B) would require the
validation notice to be sent. Proposed
§ 1006.34(a)(2) generally restated the
statute, except for minor changes for
organization and clarity.155
At least two consumer advocate
commenters recommended that debt
collectors be required to provide a
validation notice even if a consumer has
already paid the debt. According to
these commenters, some consumers,
including seniors, will pay a debt that
they do not owe or recognize because
they ‘‘pay first and ask questions later.’’
These commenters suggested that
validation information would help such
consumers assess after the fact whether
they paid a debt that they owed. An
industry trade group commenter stated
that, for open-end credit, a debt
collector should be permitted to satisfy
§ 1006.34(a)(1) by providing a periodic
statement pursuant to Regulation Z, 12
CFR 1026.7, because periodic
statements disclose sufficient account
information to consumers.
The Bureau declines to require debt
collectors to provide a validation notice
if a consumer has already paid the debt.
FDCPA section 809(a) explicitly
provides that a debt collector is not
required to send the validation notice if
the consumer has paid the debt, and the
Bureau has determined that it is neither
necessary nor warranted to adopt a rule
requiring otherwise.
The Bureau also declines to adopt
recommendations to include an
exception to § 1006.34(a)(1) for open155 See
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end credit, because a periodic statement
provided in accordance with Regulation
Z, 12 CFR 1026.7, is not an adequate
substitute for the validation
information. While such a periodic
statement discloses some information
about the debt, it typically does not
disclose other information required
under the final rule, such as the
information about consumer protections
required by FDCPA section 809(a)(3)
through (5) and the corresponding
provisions of final § 1006.34.
Accordingly, pursuant to its authority
under FDCPA section 814(d) to
prescribe rules with respect to the
collection of debts by debt collectors,
and to implement and interpret FDCPA
section 809(a), the Bureau is finalizing
§ 1006.34(a)(2) as proposed.
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34(b) Definitions
To facilitate compliance with
§ 1006.34, proposed § 1006.34(b)
defined several terms that appear
throughout the section. As discussed
below, the Bureau is finalizing those
definitions and related commentary
with certain modifications in response
to feedback. Consistent with the
proposal, unless noted otherwise below,
the Bureau is finalizing the 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
The Bureau proposed § 1006.34(b)(1)
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, for example, Regulation E,
subpart B (Remittance Transfers).156
Proposed § 1006.34(b)(1) thus provided
that disclosures are clear and
conspicuous if they are readily
understandable. The proposal provided
that, in the case of written and
electronic disclosures, the location and
type size also must be readily noticeable
to consumers and that, in the case of
oral disclosures, the disclosures must be
given at a volume and speed sufficient
for a consumer to hear and comprehend
them.157 For the reasons discussed
below, the Bureau is adopting
§ 1006.34(b)(1) largely as proposed but
with minor modifications for clarity and
in response to feedback.
An industry commenter objected to
the clear and conspicuous definition in
156 See
12 CFR 1005.31(a)(1), comment 31(a)(1)–
157 See
84 FR 23274, 23335 (May 21, 2019).
1.
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proposed § 1006.34(b)(1). This
commenter stated that a clear-andconspicuous requirement is unnecessary
in the debt collection context because
consumers have an ongoing relationship
with debt collectors, and a consumer
therefore has the ability to ask a debt
collector to explain a particular
disclosure or communication if the
consumer does not understand it.
Other commenters asked the Bureau
to clarify the proposed definition. For
instance, industry trade group and
consumer advocate commenters offered
various suggestions for specific font size
or disclosure placement requirements.
At least one industry commenter
suggested that the Bureau explain how
proposed § 1006.34(b)(1) would interact
with State disclosure laws, which may
have their own clear-and-conspicuous
standards that dictate font size or
disclosure placement. An industry trade
group commenter asked the Bureau to
provide additional guidance about oral
delivery of the validation information
because, in the commenter’s view, the
proposal that oral communications be
‘‘given at a volume and speed sufficient
for a consumer to hear and comprehend
them’’ was ambiguous.
The Bureau disagrees that ongoing
relationships between debt collectors
and consumers make a clear and
conspicuous definition unnecessary or
unwarranted in the debt collection
context. Consumer financial services
laws and their implementing regulations
commonly include standards for clear
and conspicuous disclosures provided
in the context of ongoing customer and
business relationships between
consumers and consumer financial
services providers.158 Additionally,
validation information is provided at
the outset of collection
communications. If a consumer chooses
not to engage with the debt collector, no
ongoing communications will be
established.
The Bureau declines to further clarify
the clear and conspicuous definition in
§ 1006.34(b)(1) by, for example,
dictating font sizes or requirements
regarding disclosure placement as
requested by some commenters.
158 See, e.g., 12 CFR 1026.5(a)(1)(i) (disclosures
for open-end credit) and 12 CFR 1026.17(a)(1)
(disclosures for closed-end credit). Moreover, a
consumer does not typically get to choose which
debt collector collects the consumer’s debt, whereas
a consumer does choose his or her financial
services providers. Further, some customer
relationships between consumers and debt
collectors may be of shorter duration than customer
relationships between consumers and other types of
consumer financial services providers. These
factors suggest that a standard for clear and
conspicuous disclosures may be even more
important in the debt collection context than in
other consumer financial services contexts.
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5789
Different debt collectors may design
their communications in different ways,
and the Bureau does not believe it is
necessary or warranted to specify such
details, as long as the disclosure
satisfies the clear and conspicuous
standard. In addition, the definition is
consistent with, and provides the same
level of specificity as, standards in some
other consumer financial services laws
and their implementing regulations,
including but not limited to the
Bureau’s Remittance Transfers rule,159
which do not specify font size or
disclosure placement requirements.
Moreover, the Bureau concludes that the
lack of more prescriptive guidance will
not impose material burden on debt
collectors. As discussed in the sectionby-section analysis of § 1006.34(d)(2), a
debt collector who uses the model
validation notice, specified variations of
the model notice, or a substantially
similar form, receives a safe harbor for
the information requirements in
§ 1006.34(c) and for the clear-andconspicuous requirement in
§ 1006.34(d)(1). Because debt collectors
may use the model validation notice,
specified variations of the model notice,
or a substantially similar form if
providing validation notices, debt
collectors need not incur significant
expenses ascertaining what meets the
clear-and-conspicuous standard.
Nevertheless, the final rule does clarify
that, in the case of written and
electronic disclosures, although no
minimum font size is required, the
location and type size must be both
readily noticeable and legible to
consumers.160
The Bureau declines to revise
§ 1006.34(b)(1) to clarify how the
definition of clear and conspicuous
interrelates with State disclosure laws.
A debt collector can comply with both
§ 1006.34(b)(1) and State disclosure
requirements that specify font size or
disclosure placement. With respect to
font size, the Bureau concludes, in
general, that debt collectors satisfying
State-law minimum-font-size
requirements will also satisfy the
standard in § 1006.34(b)(1) for a type
size that is readily noticeable and
legible to consumers. With respect to
disclosure placement, as discussed in
the section-by-section analysis of
159 See 12 CFR 1005.31(a)(1), comment 31(a)(1)–
1. See also, e.g., the general disclosure requirements
for open-end and closed-end credit in, respectively,
12 CFR 1026.5(a)(1) and 1026.17(a)(1) and their
commentary.
160 The section-by-section analysis of
§ 1006.38(b)(2) discusses a new safe harbor from the
overshadowing prohibition in § 1006.38(b)(1) for a
debt collector who uses the model validation
notice.
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§ 1006.34(d)(3)(iv), a debt collector may
place disclosures specifically required
under other applicable law, which
includes disclosures specifically
required by State law, on the reverse (or,
in certain specified circumstances, on
the front) of the validation notice. The
Bureau believes that § 1006.34(d)(3)(iv)
will permit debt collectors to provide
State law disclosures in a manner that
is clear and conspicuous under
applicable law.
The Bureau also declines to further
clarify the meaning of clear and
conspicuous in the context of oral
delivery of validation information. The
Bureau determines that the proposed
and final regulatory text is sufficiently
clear and that the final rule will not
impose an undue burden on debt
collectors, particularly in light of the
Bureau’s expectation that few, if any,
oral disclosures will be provided.
For the reasons discussed above, the
Bureau is finalizing § 1006.34(b)(1) to
provide that clear and conspicuous
means readily understandable and that,
in the case of written and electronic
disclosures, the location and type size
also must be readily noticeable and
legible to consumers, although no
minimum type size is mandated. Final
§ 1006.34(b)(1) also provides that oral
disclosures must be given at a volume
and speed sufficient for the consumer to
hear and comprehend them.
34(b)(2) Initial Communication
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.161 FDCPA section 809(d) and
(e) identifies particular communications
that are not initial communications for
purposes of FDCPA section 809(a) and
that therefore do not trigger the
validation notice requirement.162
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
161 See 15 U.S.C. 1692a(2). The November 2020
Final Rule implemented this definition in
§ 1006.2(d). 85 FR 76734, 76888 (Nov. 30, 2020).
162 See 15 U.S.C. 1692g(d), (e).
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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.
The Bureau proposed § 1006.34(b)(2)
to implement FDCPA section 809(a), (d),
and (e) by defining the term initial
communication. The proposed
definition largely restated the FDCPA
and defined initial communication as
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).163
An industry trade group
recommended a bankruptcy-specific
exception to the definition of initial
communication for debt collectors
collecting debts owed by consumers in
bankruptcy. The commenter expressed
concern that certain actions by a debt
collector in the context of a consumer’s
bankruptcy proceeding, in particular
filing a proof of claim, may be construed
to be an initial communication and
therefore trigger the FDCPA section
809(a) validation notice requirement.164
Additionally, according to the
commenter, content on the validation
notice, including the debt collection
communication disclosure required by
FDCPA section 807(11), could be
construed as a demand for payment that
violates the automatic stay provisions of
the United States Bankruptcy Code
(Bankruptcy Code) 165 or, if the
consumer has been relieved of personal
liability, the discharge injunction.166
According to the commenter, some
courts have opined that a debt collector
would face an irreconcilable conflict
163 See
84 FR 23274, 23335 (May 21, 2019).
receive a distribution from a bankruptcy
estate, a creditor generally must file with the
bankruptcy court a proof of claim, which includes
details about an alleged debt or interest. See Fed.
R. Bankr. P. 3002.
165 See 11 U.S.C. 362.
166 A debtor’s bankruptcy petition operates as an
automatic stay that, among other things, prohibits
‘‘any act to collect, assess, or recover a claim against
the debtor that arose before the commencement of
the case.’’ 11 U.S.C. 362(a)(6). When a debtor’s
liability is discharged through bankruptcy, the
discharge ‘‘operates as an injunction against the
commencement or continuation of an action, the
employment of process, or an act, to collect, recover
or offset any such debt as a personal liability of the
debtor, whether or not discharge of such debt is
waived.’’ 11 U.S.C. 524(a)(2).
164 To
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between complying with the FDCPA
and the Bankruptcy Code if the debt
collector were required to provide a
validation notice to a consumer in
bankruptcy.167
The Bureau has determined to
interpret the term initial communication
not to include proofs of claim filed in
bankruptcy proceedings. Courts have
reached different conclusions about
whether the FDCPA conflicts with the
Bankruptcy Code.168 The Bureau is
unaware of any case definitively
holding that a proof of claim is an initial
communication and that a debt collector
therefore must provide a validation
notice after filing a proof of claim. On
the other hand, some courts have held
that proofs of claim are not initial
communications because, under FDCPA
section 809(d), they are communications
in the form of a formal pleading in a
civil action.169 Further, the Bureau has
decided to permit a debt collector to file
a proof of claim in a bankruptcy
proceeding as required by the
Bankruptcy Code without thereby
triggering the debt collector’s obligation
to provide a validation notice under the
FDCPA, because the Bureau finds it
unlikely that consumer harm will result
if a consumer does not receive a
validation notice subsequent to a proof
of claim in bankruptcy. The bankruptcy
proof-of-claim form is filed under
penalty of perjury, and a person who
files a fraudulent claim could be fined
up to $500,000, imprisoned for up to 5
years, or both.170 Thus, the Bureau
concludes that bankruptcy proof-ofclaim forms generally are likely to
contain accurate information about the
debt.
Accordingly, to provide clarity for
debt collectors while maintaining
protections for consumers, the Bureau is
interpreting the term initial
167 See, e.g., In re Chaussee, 399 B.R. 225, 238
(B.A.P. 9th Cir. 2008) (‘‘In our opinion, the debt
validation provisions required by the FDCPA
clearly conflict with the claims processing
procedures contemplated by the [Bankruptcy] Code
and Rules.’’).
168 See Walls v. Wells Fargo Bank, 276 F.3d 502,
511 (9th Cir. 2002) (holding that the Bankruptcy
Code precludes application of FDCPA requirements
in bankruptcy cases); Chaussee, 399 B.R. at 239
(same); contra Simon v. FIA Card Servs., N.A., 732
F.3d 259, 274 (3d Cir. 2013) (stating that when
‘‘FDCPA claims arise from communications a debt
collector sends a bankruptcy debtor in a pending
bankruptcy proceeding, and the communications
are alleged to violate the Bankruptcy Code or Rules,
there is no categorical preclusion of the FDCPA
claims’’).
169 See Simon, 732 F.3d at 273; Townsend v.
Quantum3 Grp., LLC, 535 B.R. 415, 423 (M.D. Fla.
2015); In re Brimmage, 523 B.R. 134, 141–42 (Bankr.
N.D. Ill. 2015).
170 The official bankruptcy proof-of-claim form is
available here: https://www.uscourts.gov/forms/
bankruptcy-forms/proof-claim-0.
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communication not to include proofs of
claim filed in bankruptcy. Specifically,
the Bureau is adopting new comment
34(b)(2)–1, which clarifies that a proof
of claim that a debt collector files in a
bankruptcy proceeding in accordance
with the requirements of the Bankruptcy
Code is a communication in the form of
a formal pleading in a civil action and
therefore is not an initial
communication for purposes of
§ 1006.34. The Bureau adopts this
comment as an interpretation of the
phrase ‘‘[a] communication in the form
of a formal pleading in a civil action’’
in FDCPA section 809(d). The Bureau
interprets that phrase to include a proof
of claim that a debt collector files in a
bankruptcy proceeding in accordance
with the requirements of the Bankruptcy
Code.
The Bureau acknowledges that other
scenarios may exist in which a debt
collector communicates with a
consumer in bankruptcy and
subsequently may be required to
provide a validation notice. To the
extent that debt collectors do provide
validation notices to consumers in
bankruptcy, § 1006.34(a)(1) implements
an existing FDCPA disclosure
requirement and does not create a new
tension between the FDCPA and the
Bankruptcy Code. In addition, nothing
in the final rule requires debt collectors
to include payment requests in the
validation information; instead,
payment requests are optional
disclosures that § 1006.34(d)(3)(iii)
permits debt collectors to include along
with the validation information.
Consequently, a debt collector
concerned that a payment request
would violate the Bankruptcy Code’s
automatic stay or discharge injunction is
not required to include a payment
request and, additionally, could use the
model validation notice, specified
variations of the model notice, or a
substantially similar form, without a
payment request and receive a safe
harbor under § 1006.34(d)(2).
An industry trade group
recommended that the Bureau exclude
from the § 1006.34(b)(2) definition of
initial communication the notice of
transfer of loan servicing required by
Regulation X.171 According to the
171 Generally, under Regulation X, each transferor
servicer and transferee servicer of any mortgage
loan shall provide to the borrower a notice of
transfer for any assignment, sale, or transfer of the
servicing of the mortgage loan. 12 CFR
1024.33(b)(1). Generally, the transferor servicer
shall provide the notice of transfer to the borrower
not less than 15 days before the effective date of the
transfer of the servicing of the mortgage loan. The
transferee servicer shall provide the notice of
transfer to the borrower not more than 15 days after
the effective date of the transfer. The transferor and
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commenter, after an FDCPA-covered
mortgage debt is transferred and a
consumer receives a servicing transfer
notice, the transferee may not have
received all the information necessary to
send a validation notice within the fiveday timeframe required by FDCPA
section 809(a). For this reason, the
commenter suggested that Regulation X
servicing transfer notices should not
trigger the validation information
requirement.
The Bureau declines to interpret the
term initial communication to exclude
servicing transfer notices required by
Regulation X. Section 1006.34(b)(2)
largely mirrors existing language in
FDCPA sections 803(2) and 809(a), (d),
and (e) and does not impose new
substantive requirements or obligations
on covered entities. As discussed in the
section-by-section analysis of
§ 1006.34(c), Regulation F will result in
validation notices containing more
information about the debt than they
typically do today, but that information
is, generally, either routine account
information that owners of debts
currently provide to debt collectors or
that owners of debts can include
without significant additional expense.
Although the commenter argues that
there may be timing considerations
unique to mortgage servicing transfer
notices, the Bureau determines that
such timing concerns do not warrant an
exception that would deem a mortgage
servicing transfer notice, even one that
does convey information, directly or
indirectly, regarding the debt to the
consumer to be excluded from the
definition of an ‘‘initial
communication.’’
Other commenters asked the Bureau
to clarify whether a consumer-initiated
communication, such as a consumer
visiting a debt collector’s website or a
consumer leaving a voicemail with a
debt collector, would constitute an
initial communication under proposed
§ 1006.34(b)(2). The Bureau notes that,
under § 1006.34(b)(2), for an initial
communication to occur, a debt
collector must ‘‘convey[ ] information,
directly or indirectly, regarding the
debt. . . .’’ Section 1006.34(b)(2) is
clear that, if a debt collector conveys no
information, directly or indirectly,
regarding the debt, an initial
communication has not occurred and,
consequently, the validation notice
requirement has not been triggered.
Thus, a consumer’s voicemail left with
a debt collector generally would not
transferee servicers may provide a single notice, in
which case the notice shall be provided not less
than 15 days before the effective date of the transfer
of the servicing of the mortgage loan. 12 CFR
1024.33(b)(3)(i).
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5791
qualify as an initial communication.
Similarly, an initial communication
generally would not include a
consumer’s visit to a debt collector’s
website, unless during that visit the debt
collector conveyed information
regarding the consumer’s specific
debt.172
For the reasons discussed above, the
Bureau is finalizing § 1006.34(b)(2)
largely as proposed but with a revision
to clarify that proofs of claim filed in
bankruptcy proceedings are not initial
communications.
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.173 The Bureau
proposed in § 1006.34(c)(2)(vii) through
(ix) to interpret the phrase ‘‘amount of
the debt’’ to mean that debt collectors
must disclose the amount of the debt as
of a particular ‘‘itemization date.’’ 174 To
facilitate compliance with proposed
§ 1006.34(c)(2), the Bureau proposed
§ 1006.34(b)(3) to define itemization
date as one of four reference dates for
which a debt collector can ascertain the
amount of the debt. The proposed
reference dates were the last statement
date, the charge-off date, the last
payment date, and the transaction
date.175
The proposed definition of
itemization date was 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 was intended to include
dates for which debt collectors typically
may receive account information from
debt owners and that, therefore, debt
172 For example, a debt collector potentially could
convey information regarding the debt during a
consumer’s visit to a website through a website chat
feature.
173 See 15 U.S.C. 1692g(a)(1).
174 Proposed § 1006.34(c)(2)(vii) and (viii) would
have required 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 have required 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, which have been renumbered in
the final rule, see the section-by-section analysis of
§ 1006.34(c)(2)(vi) through (viii).
175 See 84 FR 23274, 23335–37 (May 21, 2019).
The reference dates were set forth in proposed
§ 1006.34(b)(3)(i) through (iv) and are discussed in
the section-by-section analysis of those paragraphs
below.
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collectors would be able to use to
provide the disclosures proposed in
§ 1006.34(c)(viii) and (ix).
Proposed comment 34(b)(3)–1
explained that a debt collector could
select any of the four reference dates as
the itemization date. Once a debt
collector used one of the reference dates
for a specific debt in a communication
with a consumer, however, the debt
collector would be required to use that
reference date for that debt consistently
when providing disclosures pursuant to
§ 1006.34 to that consumer.
For the reasons discussed below, the
Bureau is adopting § 1006.34(b)(3) and
its related commentary largely as
proposed but with minor wording
changes and to include an additional
reference date in response to feedback:
The judgment date. The Bureau also is
adopting new comment 34(b)(3)–2,
which provides that a debt collector
may use a different reference date than
a prior debt collector used for the same
debt.
Some industry commenters supported
the itemization date definition in
proposed § 1006.34(b)(3). At least two
industry commenters supported
providing debt collectors with a choice
of several reference dates because a debt
collector might not be able ascertain the
amount of the debt on a single reference
date. According to an industry trade
group commenter, the proposed
reference dates would provide adequate
flexibility, as a creditor’s information
systems will have recorded at least one
of those dates for any given debt.
Another industry trade group
commenter stated that the proposal’s
standardization of account information
would allow debt collectors to build
better internal procedures and improve
consumer communication practices. An
industry commenter stated that
proposed § 1006.34(b)(3) would require
significant client education and
information technology investment but
ultimately concluded that the
framework was feasible.
Other commenters objected to
proposed § 1006.34(b)(3). An industry
commenter stated that creditors may
provide debt collectors information
about multiple reference dates.
According to this commenter, analyzing
creditor records to identify and organize
account information as of a single
reference date would be complicated,
costly, and increase the likelihood of
validation notice errors. A group of
consumer advocate commenters stated
that, instead of permitting debt
collectors to choose between reference
dates, § 1006.34(b)(3) should define the
itemization date as a single reference
date supported by consumer testing.
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The Bureau determines that
§ 1006.34(b)(3) will facilitate
compliance with the itemization daterelated requirements in final
§ 1006.34(c)(2)(vi) through (viii).
Account information available to debt
collectors may vary by debt type
because some account information is
not universally tracked or used across
product markets. To facilitate the ability
of debt collectors across debt markets to
comply with Regulation F, the final rule
permits debt collectors to determine the
itemization date by selecting from one
of five reference dates for which they
can ascertain the amount of the debt.
The Bureau finds that this framework
will not result in undue industry
burden. Debt collectors today routinely
analyze and organize account
information included in files from
creditors when creditors place accounts
for collection. Debt collectors should be
able to use or build on these existing
functions to select an itemization date
based on the definition in
§ 1006.34(b)(3). Therefore, even if
creditors provide or retain account
information based on multiple reference
dates, debt collectors should not face
substantial new costs or litigation risks
from complying with § 1006.34(b)(3).
The Bureau declines consumer
advocates’ suggestion to specify a single
reference date. As discussed in the
proposal, the Bureau considered
requiring debt collectors to provide an
itemization of the debt based on a single
reference date but rejected that
approach because of the infeasibility of
identifying a single reference date that
applies to all debt types across all
relevant markets.176 The group of
consumer advocate commenters that
recommended a single reference date
did not suggest or provide evidence that
it would be feasible to identify a single
date that would be appropriate for all
types of debt. The Bureau also declines
to exercise its discretion to conduct
consumer testing to attempt to
determine an optimal itemization date
for debt collectors to use within each
debt collection market (e.g., mortgage
debt, credit card debt, student loan debt,
medical debt, and so on). The Bureau
determines that such testing is not
necessary or warranted, because the
Bureau finds that debt collectors’ use of
any one of the five itemization dates set
forth in § 1006.34(b)(3) should
correspond, in most cases, to events in
the debt’s history that consumers may
recall or be able to verify with records.
In the proposal, the Bureau requested
comment on whether the itemization
date should be structured as a
176 See
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prescriptive ordering of reference dates,
such as a hierarchy that would permit
a debt collector to use a date listed later
in the hierarchy only if the debt
collector did not have information about
any dates earlier in the hierarchy.
Industry and industry trade group
commenters generally favored the
proposed flexible approach. According
to commenters, a prescriptive ordering
would significantly increase costs and
litigation risk for debt collectors. As
noted above, consumer advocates
expressed concern that the proposed
approach would result in disclosure of
itemization dates that are not
meaningful to consumers and urged the
Bureau to use consumer testing to
determine a date that would be
meaningful.
The Bureau agrees that a prescriptive
ordering could impose undue costs and
litigation risks for debt collectors. In
addition, as discussed below in the
section-by-section analysis of
§ 1006.34(b)(3)(i) through (v), each
reference date may be meaningful to
consumers because it corresponds to a
notable event in the debt’s history that
consumers may recall or be able to
verify with records. Because each
reference date may be meaningful to a
consumer, and because each reference
date may be more or less meaningful to
the consumer than one of the other
reference dates depending on the
circumstances surrounding the debt,
there may not be a benefit to consumers
if the Bureau were to structure the dates
as a hierarchy. The Bureau therefore
declines to adopt a prescriptive ordering
of the reference dates.
Some commenters who did not object
to the proposed itemization date
framework in principle either raised
concerns that the proposed reference
dates would not accommodate debts in
all product markets or recommended
additional reference dates. At least one
industry trade group commenter asked
the Bureau to clarify what reference date
debt collectors should use for debts in
bankruptcy. An industry commenter
stated that the proposal might not
accommodate a debt a consumer owes
to a government, such as a tax debt.
According to this commenter, although
the FDCPA does not cover many debts
consumers owe to governments,177 some
debt collectors who collect debts on
behalf of Federal government agencies
are legally or contractually obliged to
177 FDCPA section 803(5) defines a ‘‘debt’’ as any
obligation arising out of a transaction ‘‘primarily for
personal, family, or household purposes.’’ 15 U.S.C.
1692a(5). According to the commenter, a debt a
consumer owes to a government in many cases does
not meet this definition.
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abide by the FDCPA.178 This commenter
stated that the proposed reference dates
might not accommodate tax debt
because, in some instances, it will be
the case that no previous statement was
provided, no prior payment was made,
and there was no transaction per se
between the consumer and the
government creditor.
According to another commenter, an
additional reference date for student
loan debt is necessary because debt
collectors collecting Federal student
loans do not receive any of the proposed
reference dates at the time of placement.
Some commenters suggested that the
Bureau permit debt collectors to use the
date of default as defined by the Higher
Education Act of 1965; commenters
argued that this date is a widely used
reference date in the student loan
market.179 By contrast, an FTC
commissioner urged the Bureau not to
use the Higher Education Act’s
definition of default and instead to use
the date a student loan borrower
becomes 90 days past due.
In addition, an industry commenter
recommended that § 1006.34(b)(3)
incorporate: (1) The date a creditor
places a debt with the debt collector, or
(2) the date the debt collector provides
validation information to the consumer.
Another industry commenter suggested
that § 1006.34(b)(3) incorporate the date
of a previously obtained court judgment.
The Bureau determines that
§ 1006.34(b)(3)—in conjunction with the
five reference dates described in
§ 1006.34(b)(3)(i) through (v)—provides
adequate flexibility for debts in all
product markets, including for debts in
bankruptcy. A debt collector may
choose which of the five reference dates
to use based on the facts and
circumstances surrounding the history
of the debt—e.g., whether a creditor
provided statements, whether the
consumer made payments—and the
information available to the debt
collector.
178 For example, debt collectors who collect on
behalf of the Internal Revenue Service under a
‘‘qualified tax collection contract’’ generally are
required by statute to comply with the FDCPA. See
26 U.S.C. 6306(g) (‘‘The provisions of the [FDCPA]
shall apply to any qualified tax collection contract,
except to the extent superseded by section 6304,
section 7602(c), or by any other provision of this
title.’’).
179 The Higher Education Act defines ‘‘default’’ as
‘‘the failure of a borrower . . . to make an
installment payment when due, or to meet other
terms of the promissory note, the Act, or regulations
as applicable, if the Secretary or guaranty agency
finds it reasonable to conclude that the borrower
and endorser, if any, no longer intend to honor the
obligation to repay, provided that this failure
persists for—(1) 270 days for a loan repayable in
monthly installments; or (2) 330 days for a loan
repayable in less frequent installments.’’ 34 CFR
682.200(b).
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With respect to which reference date
a debt collector should use to itemize a
tax obligation a consumer owes to a
government, the date the tax was
assessed may be a transaction date for
tax debt, as discussed in the section-bysection analysis of § 1006.34(b)(3)(iv). In
addition, a date on which the
government provided a written invoice
or tax bill may constitute a last
statement date for tax debt under
§ 1006.34(b)(3)(i).
The Bureau determines that a
reference date specific to student loan
debt is unnecessary and unwarranted
because the reference dates in
§ 1006.34(b)(3) are sufficient. For
virtually any student loan debt, there
will be a last statement date as
described in § 1006.34(b)(3)(i), a last
payment date as described in
§ 1006.34(b)(3)(ii), or a transaction date
as described in § 1006.34(b)(3)(iv). For
many student loan debts, all three
reference dates will exist.
The Bureau also declines to
incorporate into § 1006.34(b)(3) the date
of placement or the date the debt
collector provides the validation notice.
From a consumer’s perspective, these
dates do not correspond to notable
events in a debt’s history that the
consumer may recall or be able to verify.
As noted above, however, in response to
feedback, the Bureau is adding a new
reference date called the ‘‘judgment
date,’’ which is the date of a final court
judgment that determines the amount of
the debt owed by the consumer. The
judgment date is discussed in the
section-by-section analysis of final
§ 1006.34(b)(3)(v).
With respect to the Bureau’s request
for comment about whether a
subsequent debt collector should be
permitted to use a different itemization
date than a prior debt collector used for
the same debt, industry and industry
trade group commenters generally
agreed that requiring debt collectors to
use the same reference date as a prior
collector would be burdensome and
impractical. These commenters stated
that debt collectors would be unable to
ensure compliance with such a
requirement because a creditor might
not disclose the reference date that a
prior debt collector used. By contrast, an
academic and a consumer advocate
commenter stated that a debt collector
should be required to use the same
itemization date the prior debt collector
used because a consumer may not be
able to assess the amount owed if the
subsequent debt collector uses a
different reference date.
The final rule permits a debt collector
to use a different itemization date than
a prior debt collector used for the same
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5793
debt. The availability of account
information, including about a prior
debt collector’s activities, to a
subsequent debt collector depends on
the creditor or debt buyer who places
the debt with the subsequent debt
collector. If the creditor or debt buyer
does not provide the previously used
itemization date, the subsequent debt
collector may be unable to determine
that date, and therefore fail to comply
with a requirement to use it. It is
conceivable that, were the rule to
require use of the same itemization date
previously used, debt collectors and
creditors could begin to structure their
contracts and processes to enable
creditors and debt collectors to transfer
a previously used itemization date.
However, establishing such contracts
and processes would likely impose costs
on creditors and debt collectors,180 and
those costs would likely be passed on to
consumers. Further, the Bureau finds
that the costs are not warranted because
permitting a subsequent debt collector
to use a different itemization date will
maintain protections for consumers, as
long as the debt collector uses one of the
five itemization dates specified in the
rule. As stated above, the Bureau finds
that the five itemization dates are all
dates that should result in reasonably
meaningful and recognizable debt
amounts for consumers. Accordingly,
the Bureau is adopting new comment
34(b)(3)–2 to clarify that, when selecting
an itemization date pursuant to
§ 1006.34(b)(3), a debt collector may use
a different reference date than a prior
debt collector who attempted to collect
the debt.
For the reasons set forth above, the
Bureau is finalizing § 1006.34(b)(3) and
its related commentary with minor
wording changes and to include a new
reference date, the judgment date, in
§ 1006.34(b)(3)(v). In addition, the
Bureau is adopting new comment
34(b)(3)–2 to explain that a debt
collector may use a different reference
date than a prior debt collector. The
Bureau is finalizing § 1006.34(b)(3) and
§ 1006.34(b)(3)(i) through (v), discussed
below, 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
180 In order for the contractual framework and
processes to achieve the desired result of a creditor
passing the previously used itemization date to the
current debt collector, creditors would have to
structure contracts to require the previous debt
collectors to pass back to the creditors the
previously used itemization dates so that the
creditors, in turn, can pass them on to the current
debt collectors. Developing and implementing such
contractual provisions and processes across the
debt collection industry would likely impose
potentially significant costs.
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authority under Dodd-Frank Act section
1032(a) 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)
The Bureau proposed in
§ 1006.34(b)(3)(i) to permit debt
collectors to use as the itemization date
the date of the last periodic statement or
written account statement or invoice
provided to the consumer. Proposed
comment 34(b)(3)(i)–1 explained 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).
Commenters disagreed about whether
the Bureau should adopt the last
statement date as a permissible
reference date. Several industry and
industry trade group commenters
supported the proposal, stating that, for
some debts, the last statement date is
readily available to debt collectors and
recognizable to consumers. Some
commenters stated that, even when
creditors do not initially provide
periodic statements to debt collectors,
such statements are available upon
request. However, some consumer
advocate commenters stated that the last
statement date may not be meaningful to
some consumers and may not help them
recognize a debt. For example, a
commenter stated that a creditor may
send duplicates of the same periodic
statement or invoice to a consumer
multiple times, even when the balance
is changing due to interest or fees. In
this scenario, the commenter said, the
last statement a consumer received
would not reflect the actual amount
owed and would not be helpful to the
consumer.
At least two commenters stated that a
validation notice provided by a prior
debt collector should not constitute a
last statement for purposes of
§ 1006.34(b)(3)(i). According to a
consumer advocate commenter, the date
of a prior validation notice will not be
meaningful to consumers and,
consequently, an itemization as of that
date will not help consumers recognize
an alleged debt. An industry trade group
commenter advised against relying on a
validation notice provided by a prior
debt collector because creditors
generally do not provide previously sent
validation notices to subsequent debt
collectors.
The Bureau determines that the last
statement date may be used as a
reference date. Many creditors or third
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parties acting on a creditor’s behalf
routinely provide consumers with
account statements, such as periodic
statements or invoices. If a consumer
has received an account statement from
a creditor, the consumer either may
recognize the date that they last
received a statement or may be able to
verify that date in their records.181
Further, last statement information is
often readily available to debt collectors,
as debt collectors frequently receive, or
have the ability to request, last
statement information or records from
creditors.
The Bureau determines that only a
last statement or invoice provided to a
consumer by a creditor, as opposed to
a statement, such as a validation notice,
provided by a debt collector, should
serve as a basis for a last statement date
as defined in § 1006.34(b)(3)(i) because
consumers may be more likely to recall
or be able to verify a statement sent by
a creditor than by a debt collector. This
may be true even if a creditor issues a
statement after the debt has gone into
collection. Under § 1006.34(b)(3)(i),
such a new statement may serve as the
last statement for purposes of the
itemization date.
For these reasons, the Bureau is
finalizing § 1006.34(b)(3)(i) and its
related commentary with revisions to
provide that only a statement or invoice
provided by a creditor qualifies as a last
statement for purposes of
§ 1006.34(b)(3)(i). Specifically, the
Bureau is revising § 1006.34(b)(3)(i) to
state that the last statement date is the
date of the last periodic statement or
written account statement or invoice
provided to the consumer by a creditor.
The Bureau also is revising comment
34(b)(3)(i)–1 to provide that a statement
or invoice provided by a debt collector
is not a last statement for purposes of
§ 1006.34(b)(3)(i), unless the debt
collector is also a creditor.
34(b)(3)(ii)
The Bureau proposed in
§ 1006.34(b)(3)(ii) to permit debt
collectors to use the date that the debt
was charged off as the itemization date.
An industry trade group and an
industry commenter supported the use
of the charge-off date, particularly for
debts associated with open-end credit,
such as credit cards. The commenters
stated that charge off is a regulated
181 This
is likely to be true even if the consumer
has received a duplicative statement as the last
statement. In that scenario, under
§ 1006.34(c)(2)(vii), which requires a debt collector
to disclose the amount of the debt on the
itemization date, the debt amount that the debt
collector discloses to the consumer must be the debt
amount as of that last statement date.
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Federal standard for consumer credit 182
and would be a reliable reference date
for itemization-related disclosures in
some circumstances. An industry trade
group commenter stated that creditors
frequently provide debt collectors
account information as of the charge-off
date. Commenters stated that consumers
may recognize the amount due as of the
charge-off date because some creditors
provide charge-off statements that
reflect the charge-off balance and, they
said, consumers have the ability to
review these charge-off statements.
Other commenters objected to
including the charge-off date as a
permissible reference date. An industry
commenter stated that not all creditors
maintain account information as of the
charge-off date or communicate that
information to debt collectors at
placement. Consumer advocates and at
least two industry trade group
commenters stated that, although the
charge-off date may be widely used for
some financial products, it may not
resonate with consumers or help them
recognize a debt because consumers
might not know the charge-off date.183
The Bureau determines that the
charge-off date may be used as a
reference date. Creditors frequently
provide account information as of the
charge-off date for various types of
debts, including credit card debt, to debt
collectors. The Bureau acknowledges
that not all creditors maintain account
information as of the charge-off date or
provide such information to debt
collectors, but the charge-off date is only
one of five reference dates specified in
the final rule. Further, account
information at charge off is readily
available to a sufficiently large number
of debt collectors—including collectors
of credit card debt—to justify its
adoption as a reference date. In
addition, while consumers might not
know the specific charge-off date, they
may, in fact, recognize account
information as of approximately the
charge-off date because charge off often
occurs at around the time the creditor
provided a last account statement.
Further, as noted by commenters, some
creditors may provide consumers with
charge-off statements that reflect the
balance as of the charge-off date.
Accordingly, the Bureau is finalizing
§ 1006.34(b)(3)(ii) as proposed.
182 65 FR 36903 (June 12, 2000); Off. of the
Comptroller of the Currency, Bulletin 2000–20,
Uniform Retail Credit Classification and Account
Management Policy (June 20, 2000).
183 An individual commenter requested
clarification whether, for medical debt, the date of
charge off is the date a creditor places the account
for collection. The Bureau is not aware that such
a definition is commonly used.
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34(b)(3)(iii)
The Bureau proposed in
§ 1006.34(b)(3)(iii) to permit debt
collectors to use the date the last
payment was applied to the debt as the
itemization date.
Industry and consumer advocate
commenters generally supported
proposed § 1006.34(b)(3)(iii). These
commenters agreed that account
information as of the last payment date
is readily available to debt collectors
and recognizable to consumers.
According to one consumer advocate, a
consumer may have a general idea of
when a bill was last paid, especially if
the consumer’s delinquency was related
to a significant life event, such as a job
loss, a divorce, or an illness.
Accordingly, the Bureau determines that
the last payment date as defined in
§ 1006.34(b)(3)(iii) is an appropriate
reference date.
Commenters asked the Bureau to
clarify whether a third-party payment
could serve as the basis for the last
payment date. For example, several
trade group commenters stated that, if a
consumer’s car is repossessed, the sale
of the collateral may be applied to the
consumer’s balance after receipt of the
consumer’s last payment. Another
commenter raised the possibility of
third-party payments and insurance
adjustments in the medical debt context.
A group of consumer advocates
recommended that only a payment from
a consumer to a creditor should serve as
the basis for a last payment date.
According to this commenter, a last
consumer payment to a prior debt
collector may not be significant or
recognizable to a consumer.
The Bureau determines that thirdparty payments may serve as the basis
for the last payment date under
§ 1006.34(b)(3)(iii). The Bureau finds
that the date of a third-party payment on
the debt, such as a payment from an
auto repossession agent or an insurance
company, may be meaningful to a
consumer because such payments may
be accompanied by a notice to the
consumer, and therefore the consumer
could recognize or verify with records
the date of such payments.
The Bureau also determines that a
consumer’s payment to a prior debt
collector may serve as the last payment
date. The Bureau finds that consumers
are at least as likely to recognize or be
able to verify with records the status of
the debt as of the consumer’s last
payment to a prior debt collector as
consumers are able to recognize or
verify an earlier (perhaps much earlier)
payment to the creditor, particularly if
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the debt has been outstanding for a long
time.
For these reasons, the Bureau is
finalizing § 1006.34(b)(3)(iii) as
proposed to provide that the last
payment date is the date the last
payment was applied to the debt. The
Bureau also is adopting new comment
34(b)(3)(iii)–1, which clarifies that a
third-party payment applied to the debt,
such as a payment from an auto
repossession agent or an insurance
company, can be a last payment for
purposes of § 1006.34(b)(3)(iii).
34(b)(3)(iv)
The Bureau proposed in
§ 1006.34(b)(3)(iv) to permit debt
collectors to use as the itemization date
the date of the transaction that gave rise
to the debt. Proposed comment
34(b)(3)(iv)–1 explained that the
transaction date is the date that a
creditor provided, or made available, a
good or service to a consumer, and it
included examples of transaction dates.
The comment also explained 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.
A number of commenters, including
consumer advocates, industry trade
groups, and at least one industry
commenter, supported including the
transaction date in the itemization date
definition. According to several
commenters, consumers likely would
recognize the transaction date as
defined by proposed § 1006.34(b)(3)(iv).
At least one commenter stated that
creditors provide account information
as of the transaction date for some debt
types.
With respect to proposed comment
34(b)(3)(iv)–1, a consumer advocate
commenter stated that, if a debt has
more than one potential transaction
date, the debt collector should not be
permitted to choose which date to use
as the transaction date for purposes of
§ 1006.34(b)(3)(iv). The commenter
urged the Bureau to develop a
prescriptive standard for identifying the
appropriate transaction date for
scenarios where multiple transaction
dates exist.
Several commenters also stated that
determining the transaction date may be
problematic in some circumstances. For
example, a consumer advocate
commenter explained that, while
determining the transaction date is
straightforward with one-time
transactions, identifying the transaction
date may be more difficult with respect
to contracts for ongoing services, such
as gym memberships, cellular telephone
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contracts, or lawn care service contracts.
In addition, an industry commenter
stated that medical providers may
combine multiple dates of service into
one account or use family billing that
combines separate bills for family
members into one account. The
commenter suggested that, if an account
in collection reflects services on
multiple dates or for multiple
individuals, identifying a transaction
date may be difficult for the debt
collector.
The Bureau finds that, for some debts,
creditors may provide debt collectors
with account information related to the
transaction date. In addition, consumers
may recognize the amount of a debt on
the transaction date, which may be
reflected on a copy of a contract or a bill
provided by a creditor. For this reason,
the Bureau is finalizing
§ 1006.34(b)(3)(iv) as proposed to
provide that the transaction date, which
is the date of the transaction that gave
rise to the debt, can be the itemization
date for purposes of § 1006.34(b)(3).
As commenters noted, various dates
may serve as potential transaction dates
under § 1006.34(b)(3)(iv). For example,
potential transaction dates may include
the date a service or good was provided
to a consumer or the date that a
consumer signed a contract for a service
or good. In the case of a consumer’s tax
debt, the date a government assessed the
tax may be a transaction date for
purposes of § 1006.34(b)(3)(iv).184
Nevertheless, the Bureau declines to
adopt a prescriptive standard for
identifying the only transaction date
debt collectors may use. Both the
contract date and the service date are
significant dates that may resonate with
a consumer. Because the consumer may
recognize the amount of the debt on
those dates, the Bureau finds that either
date may serve as the transaction date.
Further, the Bureau determines that
developing a more prescriptive standard
that would apply to all debt types is not
feasible. For this reason, the Bureau is
finalizing comment 34(b)(3)(iv)–1, with
minor changes for clarity, to provide
that, if a debt has more than one
transaction date, a debt collector may
use any such date as the transaction
date, but the debt collector must use
whichever date the debt collector selects
consistently, as described in comment
34(b)(3)–1. Comment 34(b)(3)(iv)–1 also
addresses concerns regarding
identifying the transaction date for
medical debt that includes services on
184 See the discussion of tax debts in the
introductory section-by-section analysis of
§ 1006.34(b)(3).
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multiple dates or for multiple
individuals.185
The Bureau recognizes that the
transaction date may be difficult to
determine in some circumstances.
However, under the framework in
§ 1006.34(b)(3) for determining the
itemization date, the transaction date is
one of five reference dates from which
a debt collector may choose. Section
1006.34(b)(3) does not require a debt
collector to use the transaction date as
the reference date for itemizationrelated disclosures. If a debt collector
cannot determine the transaction date,
the debt collector may use another
reference date.
34(b)(3)(v)
As discussed above, the proposed
definition of itemization date included
four reference dates. In response to the
proposed definition, an industry
commenter suggested that the Bureau
add a fifth date—the date of a court
judgment. The Bureau has determined
to adopt this recommendation. As a
general matter, debt collectors will
know if a court judgment against a
consumer exists and consumers are
likely to recognize the date of a court
judgment against them or be able to
verify the date with records. Further, the
amount of the debt as of the date of a
court judgment is verifiable as it will
have been memorialized in court
records. Accordingly, the Bureau is
finalizing § 1006.34(b)(3)(v) to permit
debt collectors to use as the itemization
date the judgment date, which is the
date of a final court judgment that
determines the amount of the debt owed
by the consumer.
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34(b)(4) Validation Notice
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 specified information (i.e.,
validation information), unless that
information is contained in the initial
communication or the consumer has
paid the debt. Debt collectors and others
commonly refer to the written notice
185 Because of differences between various debt
types and the particular facts and circumstances of
any given transaction, § 1006.34(b)(3)(iv) provides
debt collectors flexibility when selecting a
transaction date. However, if the total amount of a
debt in collection includes amounts incurred on
different dates of service, the Bureau believes that,
even though § 1006.34(b)(3)(iv) does not require it,
debt collectors generally will select the last date of
service as the transaction date. This date may be
most recognizable to consumers. Further, disclosing
itemization-related information as of the last date,
as opposed to an earlier date, likely would be easier
for a debt collector.
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required by FDCPA section 809(a) as a
‘‘validation notice’’ or a ‘‘g notice.’’ The
Bureau proposed in § 1006.34(b)(4) to
define validation notice to mean a
written or electronic notice that
provides the validation information
described in § 1006.34(c).186 The Bureau
received no comments regarding
proposed § 1006.34(b)(4) and is
finalizing it with a minor wording
change for consistency with final
§ 1006.34(c).
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.187
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. Similarly, if a consumer
requests the name and address of the
original creditor in writing within 30
days of receiving the validation
information, the debt collector must
cease collection of the debt until the
debt collector obtains and mails such
information to the consumer. FDCPA
section 809(b) also prohibits a debt
collector, during the 30-day period for
written disputes and original-creditor
information requests, 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.’’
As described in the section-by-section
analysis of § 1006.34(c)(3)(i) through
(iii), the Bureau proposed to require
debt collectors to disclose to a consumer
the date certain on which the
consumer’s verification rights under
FDCPA section 809(b) expire. To
facilitate compliance with that proposed
requirement, proposed § 1006.34(b)(5)
defined 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.188 To clarify
how to calculate the end of the
validation period—including how debt
collectors may disclose a period that
provides consumers additional time
186 See
84 FR 23274, 23337 (May 21, 2019).
U.S.C. 1692g(b).
188 84 FR 23274, 23337–38 (May 21, 2019).
187 15
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beyond the required 30 days to exercise
their validation rights—proposed
§ 1006.34(b)(5) provided that a debt
collector may assume that a consumer
receives the 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 comment
34(b)(5)–1 clarified 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.
For the reasons discussed below, the
Bureau is finalizing proposed
§ 1006.34(b)(5) and proposed comment
34(b)(5)–1 (which is renumbered as
comment 34(b)(5)–2) with minor
wording changes for clarity and
consistency with other provisions of
Regulation F. The Bureau is adopting
new comment 34(b)(5)–1 to illustrate
how a debt collector may calculate the
end of the validation period before
sending the validation notice.
A number of commenters, including
industry commenters, supported
proposed § 1006.34(b)(5). According to
several commenters, the proposed
definition is consistent with current
industry practices. For example, with
respect to the proposed five-day
delivery timing assumption, industry
commenters stated that debt collectors
generally assume that a consumer
receives a validation notice five to eight
days after mailing. Consumer advocate
commenters objected to the proposed
definition, stating that debt collectors
should be obligated to honor consumer
verification requests at any time, not
only during the validation period.
Some commenters recommended
lengthening the proposed five-day
delivery timing assumption. A
consumer advocate commenter and an
industry trade group commenter
suggested that the validation period
definition should assume that the
consumer receives the validation notice
seven days after the debt collector mails
it to account for delays or bulk mail
delivery.189 Another trade group
189 United States Postal Service (USPS) delivery
times for Standard Mail, commonly referred to as
bulk mail, are typically longer than delivery times
for first-class mail. For example, based on the USPS
Originating Service Standards, bulk mail originated
in Washington, DC takes six days to reach New
York City, seven days to reach Denver, and nine
days to reach Seattle. By contrast, first-class mail
from Washington, DC reaches New York City in two
days and Denver and Seattle in three days. See U.S.
Postal Serv., Service Standards Maps, https://
postalpro.usps.com/ppro-tools/service-standardsmaps (last visited Nov. 16, 2020).
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commenter recommended a fixed tenday assumption that omits
consideration of weekends and
holidays.
Other commenters recommended
shortening the delivery timing
assumption. For example, an industry
trade group commenter recommended
that the Bureau eliminate the
assumption entirely and clarify that the
validation period commences upon
mailing of a validation notice. Other
industry commenters urged the Bureau
to shorten the assumption for nearinstantaneous communication methods,
such as electronic or oral delivery. In
contrast, at least two industry trade
groups commenters and a consumer
advocate commenter recommended a
uniform validation period across
delivery methods. According to an
industry trade group commenter, if the
validation period is not the same for all
delivery methods, consumers may be
confused if they receive validation
notices through different delivery
methods with different due dates.
After considering this feedback, the
Bureau determines that a validation
period definition will facilitate debt
collectors’ compliance with the
requirement in § 1006.34(c)(3) to
disclose to a consumer the date certain
on which the consumer’s FDCPA
section 809(b) verification rights expire.
The Bureau declines, as requested by
consumer advocate commenters, to
require a debt collector to comply with
a verification request that a consumer
submits after the 30-day period
provided by the statute has expired.
FDCPA section 809(b) establishes a 30day period for consumers to exercise
their verification rights.190
The Bureau also declines to modify
the length of the five-day delivery
timing assumption. The Bureau
proposed § 1006.34(b)(5) on the basis
that a consumer typically receives a
validation notice no more than five days
(excluding legal public holidays,
Saturdays, and Sundays) after the debt
collector provides the notice. Based on
its market monitoring activities, the
Bureau understands that debt collectors
typically send consumer
communications by first-class mail,
which generally is delivered in three
190 Although
the FDCPA and this implementing
regulation do not require a debt collector to provide
verification after the validation period expires, a
debt collector nevertheless may choose to do so.
The Bureau has received feedback from debt
collectors and at least one industry trade group that
many debt collectors respond to disputes with
verification, and to original-creditor-information
requests, after the validation period has expired.
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business days or less.191 The Bureau is
unaware that debt collectors typically
use bulk mail to deliver validation
notices, and commenters offered no
evidence otherwise. For these reasons,
the Bureau declines to extend the fiveday delivery timing assumption.
The Bureau also declines to shorten
the validation period’s five-day delivery
timing assumption. The FDCPA’s 30day validation period begins to run
when the consumer receives the
validation information.192 If the 30-day
clock began to run upon the debt
collector’s mailing of the validation
notice, as some commenters suggested,
the consumer would be deprived of the
full 30-day period provided by the
FDCPA to respond to the notice.
Further, the Bureau declines to shorten
the length of the validation period for
validation information provided by
communication methods such as
electronic delivery. A delivery timing
assumption that varied by delivery
method could pose compliance
challenges and incentivize use of one
communication method over another.
Therefore, as proposed, the five-day
delivery timing assumption applies
uniformly to all validation information
delivery methods.
A group of consumer advocates asked
the Bureau to define the validation
period based solely on when the
consumer is assumed to receive the
validation information. In other words,
this commenter requested that the rule
not permit the date that a consumer
actually received the validation notice
to serve as the basis of the validation
period. According to this commenter,
relying solely on the date that the
consumer is assumed to receive the
information would prevent confusion if
the date the consumer received the
notice and the date the debt collector
assumed the consumer received it are
different.
The Bureau declines to adopt this
suggestion. The FDCPA’s 30-day
validation period begins to run when
the consumer receives the validation
information. Nevertheless, the Bureau
determines that, at least in certain
contexts, the date that the consumer is
assumed to receive the validation notice
is the only date information that a debt
collector will have at the time the
191 See U.S. Postal Serv., Service Standards Maps,
https://postalpro.usps.com/ppro-tools/servicestandards-maps (last visited Dec. 1, 2020).
192 FDCPA section 809(a)(3) requires the
validation notice to include ‘‘a statement that
unless the consumer, within thirty days after
receipt of the notice, disputes the validity of the
debt, or any portion thereof, the debt will be
assumed to be valid by the debt collector.’’ 15
U.S.C. 1692g(a)(3) (emphasis added).
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validation information is generated.
Specifically, a debt collector who sends
a written or electronic validation notice
will not know, at the time the notice is
generated, the date on which the
consumer will receive the notice and,
therefore, must be able to use the date
of assumed receipt to calculate the
validation period end date. The Bureau
is adding new comment 34(b)(5)–1 to
clarify that, in such circumstances, debt
collectors may rely on the date of
assumed receipt, even if they learn after
sending the notice that the consumer
received the validation information on a
different date.
Several industry and industry trade
group commenters expressed concern
about the use of the term ‘‘legal public
holiday’’ in proposed § 1006.34(b)(5).
According to these commenters, legal
public holidays may include State and
local holidays that the debt collector is
not aware of and cannot reasonably
ascertain. In response to these concerns,
and consistent with § 1006.22(c)(1) in
the November 2020 Final Rule,193 the
Bureau is revising § 1006.34(b)(5) to
provide that a debt collector may
assume that a consumer receives the
validation information on any date that
is at least five days (excluding legal
public holidays identified in 5 U.S.C.
6103(a), Saturdays, and Sundays) after
the debt collector provides it.
Several industry commenters asked
the Bureau to clarify whether a debt
collector must receive a consumer’s
verification request before the validation
period end date, or whether the
consumer need only send the request by
the validation period end date for the
request to be effective. The Bureau
determines that a consumer’s
verification request—whether an
original-creditor information request or
a dispute—is effective if the consumer
sends or submits the request within the
30-day period established in
§ 1006.34(b)(5), even if the debt
collector does not receive the request
until after the 30-day period. In
specifying requirements for debt
collectors’ responses to consumers’
verification requests, § 1006.38(c) and
(d)(2) of the Bureau’s November 2020
Final Rule implemented FDCPA section
809(b) by providing that, upon receipt of
an original-creditor information request
(§ 1006.38(c)) or a dispute
(§ 1006.38(d)(2)) ‘‘submitted by the
consumer in writing within the
validation period, a debt collector must
cease collection of the debt . . . .’’
(emphasis added). The Bureau
determines that a consumer’s original193 85 FR 76734, 76833–34, 76892 (Nov. 30,
2020).
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creditor information request or dispute
has been ‘‘submitted by the consumer’’
for purposes of § 1006.38(c) and (d)(2) if
the consumer sends or submits the
request within the 30-day period
established in § 1006.34(b)(5), even if
the debt collector does not receive the
request until after the 30-day period.
For the reasons discussed above, the
Bureau is adopting § 1006.34(b)(5) to
provide that validation period means
the period starting on the date that a
debt collector provides the validation
information and ending 30 days after
the consumer receives or is assumed to
receive it. Section 1006.34(b)(5) also
specifies that a debt collector may
assume that a consumer receives the
validation information on any date that
is at least five days (excluding legal
public holidays identified in 5 U.S.C.
6103(a) (i.e., federally recognized public
holidays), Saturdays, and Sundays) after
the debt collector provides it.
Proposed comment 34(b)(5)–1
clarified 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.
At least two industry trade group
commenters stated that proposed
comment 34(b)(5)–1 was consistent with
current industry practice. According to
these commenters, if a validation notice
is returned as undeliverable, debt
collectors typically send a new
validation notice and provide a new
period for consumers to exercise their
verification rights. A law firm
commenter asked the Bureau to provide
additional guidance on a debt collector’s
duties if a validation notice is returned
as undeliverable after the validation
period has expired.
The Bureau concludes based on
feedback received and its own marketmonitoring, supervision, and
enforcement experience that proposed
comment 34(b)(5)–1 is consistent with
existing industry practice and therefore
is adopting it largely as proposed but
renumbered as comment 34(b)(5)–2. If a
validation notice is returned as
undeliverable after the validation period
has expired and the debt collector sends
a subsequent notice, then, as stated in
the comment, 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.
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34(c) Validation Information
Proposed § 1006.34(c) set forth the
validation information that proposed
§ 1006.34(a)(1) would have required
debt collectors to disclose. The
validation information consisted 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. Each of those categories is
addressed separately in the section-bysection analysis of § 1006.34(c)(1)
through (4).
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.194 A debt
collector must also disclose in each
subsequent communication that the
communication is from a debt collector.
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.195
The Bureau proposed to implement
the FDCPA section 807(11) disclosures
in § 1006.18(e).196 In turn, the Bureau
proposed in § 1006.34(c)(1) that the
§ 1006.18(e) disclosure is required
validation information. The Bureau
finalized § 1006.18(e) in the November
2020 Final Rule.197 Section
1006.18(e)(1) requires a debt collector to
disclose in its initial communication
that the debt collector is attempting to
collect a debt and that any information
obtained will be used for that purpose.
Section 1006.18(e)(2) requires a debt
collector to disclose in each subsequent
communication that the communication
is from a debt collector.
At least one industry trade group
supported proposed § 1006.34(c)(1)’s
cross-reference to the FDCPA section
807(11) requirement. A consumer
advocate commenter asked the Bureau
194 See
15 U.S.C. 1692e(11).
e.g., Dorsey v. Morgan, 760 F. Supp. 509
(D. Md. 1991).
196 See 84 FR 23274, 23322–23, 23402 (May 21,
2019).
197 See 85 FR 76734, 76830–31, 76891–92 (Nov.
30, 2020).
195 See,
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to clarify what version of the FDCPA
section 807(11) disclosure should
appear on the validation notice: The
longer, initial disclosure described in
§ 1006.18(e)(1) or the shorter,
subsequent disclosure described in
§ 1006.18(e)(2).
The Bureau is adopting new comment
34(c)(1)–1 to clarify that a debt collector
who provides the validation notice
required by § 1006.34(a)(1)(i)(A)—i.e., a
debt collector who provides the
validation notice in the initial
communication—complies with
§ 1006.34(c)(1) by providing the
disclosure described in § 1006.18(e)(1).
The disclosure described in
§ 1006.18(e)(1) is broader than, and
incorporates the content of, the
disclosure described in § 1006.18(e)(2).
Accordingly, new comment 34(c)(1)–1
also clarifies that a debt collector who
provides the validation notice required
by § 1006.34(a)(1)(i)(B)—i.e., a debt
collector who provides the validation
notice within five days of the initial
communication—complies with
§ 1006.34(c)(1) by providing either the
disclosure required by § 1006.18(e)(1) or
the disclosure required by
§ 1006.18(e)(2).198 The Bureau
determines that this clarification will
facilitate compliance, encourage use of
the model validation notice, and protect
consumers.
The consumer advocate commenter
also recommended that the Bureau
require every validation notice to
include a Spanish translation of the
FDCPA section 807(11) disclosure to
assist Spanish-speaking consumers. The
Bureau declines to do so. Mandating
that every debt collector provide a
Spanish translation of the disclosure is
unnecessary for the majority of
consumers, who are not Spanish
speakers. Further, a mandatory
translation could undermine the
effectiveness of the other validation
information disclosures. Moreover, the
November 2020 Final Rule contained a
targeted language access intervention on
this topic. Pursuant to § 1006.18(e)(4) in
that rule, debt collectors will be
required to make the FDCPA section
807(11) disclosure in the same language
or languages used for the rest of the
communication in which the
disclosures are conveyed. Thus, if a debt
collector provides a consumer a
198 The model validation notice includes the
disclosure required by § 1006.18(e)(1). As explained
in the section-by-section analysis of § 1006.34(d)(2),
new comment 34(d)(2)(i)–1 clarifies that a debt
collector who uses the model notice to provide a
validation notice as described in
§ 1006.34(a)(1)(i)(B) may replace the disclosure
required by § 1006.18(e)(1) with the disclosure
required by § 1006.18(e)(2) without losing the safe
harbor provided by use of the model notice.
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validation notice in Spanish pursuant to
§ 1006.34(e), the debt collector must
include on that notice a Spanish
translation of the FDCPA section
807(11) disclosure.
Accordingly, the Bureau is finalizing
§ 1006.34(c)(1) as proposed and is
finalizing new comment 34(c)(1)–1 as
described above.
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34(c)(2) Information About the Debt
Proposed § 1006.34(c)(2) specified
that certain information about the debt
and the parties related to the debt was
required validation information.199 The
section-by-section analysis of proposed
§ 1006.34(c)(2)(i) through (x) discussed
the specific items of information, which
were designed to help consumers
recognize debts and included existing
disclosures. The Bureau addresses
comments related to specific disclosures
in the section-by-section analysis of
§ 1006.34(c)(2)(i) through (x). In this
section-by-section analysis, the Bureau
addresses comments related to
§ 1006.34(c)(2) more generally.
Some commenters supported
proposed § 1006.34(c)(2). A consumer
advocate and a municipal government
commenter stated that the proposed
validation information would help
consumers determine whether they owe
a debt. A group of State Attorneys
General stated that consumers today do
not consistently receive the information
they need to identify debts. According
to these commenters, consumers
routinely submit complaints that they
do not recognize the debts or creditors
disclosed on validation notices. An
industry trade group stated that it would
be feasible for debt collectors to disclose
the proposed information because debt
buyers routinely obtain such
information at purchase.
Other commenters objected to
proposed § 1006.34(c)(2) and suggested
that consumers do not need information
beyond what the FDCPA expressly
requires. An industry trade group stated,
without providing verifiable evidence,
that most debts are valid and asserted
that less than one-half of 1 percent of
debts lack a contractual basis or are
miscalculated. According to this
commenter, the small number of debts
that are problematic can be resolved by
consumers invoking their FDCPA
verification rights.
Other commenters who objected to
proposed § 1006.34(c)(2) cited industry
burden. For example, one industry
commenter stated that requiring debt
199 84 FR 23274, 23338–42, 23404 (May 21, 2019).
Proposed § 1006.34(c)(5) set forth a special rule for
information about the debt for certain residential
mortgage debt.
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collectors to disclose the proposed
information about the debt and parties
related to the debt would increase costs
for debt collectors as well as for
creditors. Another industry commenter
suggested that proposed § 1006.34(c)(2)
was not feasible because debt collectors
rely on creditors for account
information and records. According to
this commenter, if creditors did not
provide the information, debt collectors
would be unable to comply with
§ 1006.34(c)(2).
Some commenters stated that the
information proposed § 1006.34(c)(2)
would require might confuse consumers
and questioned whether it was
supported by the Bureau’s consumer
testing.
Some commenters recommended that
the Bureau revise proposed
§ 1006.34(c)(2) to require additional
validation information. Federal
government agency staff, a group of
State Attorneys General, and a
government commenter suggested that
the name of the original creditor and the
date of the original transaction should
be required validation information. A
group of State Attorneys General
suggested that the Bureau require debt
collectors to provide information about
the debt as of the charge-off date. Two
associations representing State
regulatory agencies recommended that
the Bureau require disclosure of a debt
collector’s State license or registration
number, such as the Nationwide MultiState Licensing System identification.
According to these commenters,
requiring debt collectors to disclose
license or registration information
would assist regulators examining for
compliance with State debt collection
laws. In addition, a consumer advocate,
an industry trade group, and an industry
commenter recommended that, for
medical debt, validation information
should include the facility name
associated with the debt. According to
these commenters, a consumer may be
more likely to recognize a facility where
treatment was provided than the name
of the physician or healthcare provider
to whom the consumer owes the debt.
After considering the feedback, the
Bureau has determined to finalize
§ 1006.34(c)(2). The Bureau determines
that validation notices in use today
frequently lack sufficient information
about the debt and the parties related to
the debt, and this lack of information
undermines the ability of consumers to
determine whether they owe an alleged
debt. This conclusion is consistent with
feedback from Federal and State
government commenters, including the
FTC and a group of State Attorneys
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5799
General. The Bureau’s testing also
supports this conclusion.200
The Bureau determines that requiring
debt collectors to disclose the
information about the debt and parties
related to the debt in § 1006.34(c)(2) is
necessary. Industry commenters did not
support their claims about the relative
infrequency of problematic debts with
verifiable evidence.201 In addition, a
group of State Attorneys General stated
that consumers routinely complain that
they do not recognize debts being
collected, and the Bureau’s complaint
statistics indicate similar concerns
about debts among consumers.202 Thus,
the Bureau is finalizing § 1006.34(c)(2)
to require information about the debt
and parties related to the debt.
The Bureau also determines that
§ 1006.34(c)(2) will not impose undue
industry burden. As discussed in part
VII, while § 1006.34(c)(2) may increase
some costs for debt collectors, as well as
cause some indirect costs for creditors,
the Bureau does not expect these costs
to be substantial. The Bureau disagrees
that a significant number of debt
collectors will be unable to comply with
§ 1006.34(c)(2). The Bureau
acknowledges that debt collectors
depend on creditors to provide account
information and that creditors will not
be required by the final rule to provide
the information that § 1006.34(c)(2) will
require. Notwithstanding this fact, the
Bureau has received feedback that many
creditors today make available much of
the information mandated by
§ 1006.34(c)(2). To the extent that
creditors do not already provide debt
collectors with this information, the
Bureau determines that creditors will be
incentivized to do so after
§ 1006.34(c)(2)’s effective date because
the debt collectors they hire or sell debts
to will be unable to legally collect
without it.
200 Certain information that Bureau qualitative
testing indicates helps 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. See FMG
Cognitive Report, supra note 27, at 8–11.
201 Even assuming one commenter’s claim that
only one-half of 1 percent of debts lack a
contractual basis or are miscalculated, this error
rate would impact hundreds of thousands of
consumers annually. As the proposal noted, 49
million consumers are contacted by debt collectors
every year. See 84 FR 23274, 23382 n.656 (May 21,
2019). If one-half of 1 percent of these consumers
received validation notices for debts they did not
owe, 245,000 consumers could be impacted.
202 The most common debt collection complaint
received by the Bureau continues to be about
attempts to collect a debt that the consumer reports
is not owed. See 2020 FDCPA Annual Report, supra
note 12, at 14. Consumers may report that a debt
is not owed for a variety of reasons including, but
not limited to, that the debt is being collected in
error or that the consumer does not recognize the
debt.
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The Bureau determines that the
information required by § 1006.34(c)(2)
will not confuse consumers. As
discussed in part III.C, the Bureau has
validated the model validation notice
and the validation information
contained therein through four rounds
of consumer testing.
The Bureau declines the
recommendation to add certain
disclosures to § 1006.34(c)(2). First, the
Bureau declines to require the name of
the original creditor and the date of the
original transaction. Requiring this
additional information on validation
notices may overwhelm consumers, may
be repetitive, or may otherwise not add
to consumer understanding because the
validation information already includes
items such as the debt collector’s name
(§ 1006.34(c)(2)(i)), the name of the
creditor to whom the debt was owed on
the itemization date
(§ 1006.34(c)(2)(iii)), and the name of
the creditor to whom debt is currently
owed (§ 1006.34(c)(2)(v)).
The Bureau also declines to tie
information disclosure requirements to
the date that a debt was charged off
because charge off is not relevant to all
debt types. However, as discussed in the
section-by-section analysis of
§ 1006.34(b)(3)(ii), a debt collector may
use the charge-off date as the
itemization date, in which case
consumers will receive information
about the amount of the date as of the
charge-off date, as well as information
about interest, fees, payments, and
credits since that date.203
The Bureau also declines to require a
debt collector to disclose a State license
or registration number. If a debt
collector is specifically required by
applicable law to disclose such
information, a debt collector may do so
as an optional disclosure under final
§ 1006.34(d)(3)(iv)(A).
The Bureau does agree that a facility
name associated with a debt may be
helpful to consumers in the medical
debt context. The Bureau is not
modifying § 1006.34(c)(2) to require this
information, but final
§ 1006.34(d)(3)(vii) permits debt
collectors to include facility name as an
optional disclosure.
Accordingly, as noted above, the
Bureau is finalizing § 1006.34(c)(2) to
require debt collectors to provide
certain information about the debt and
the parties related to the debt. Except
with respect to final § 1006.34(c)(2)(iii),
the Bureau is finalizing § 1006.34(c)(2)
pursuant to its authority under FDCPA
section 814(d) to prescribe rules with
203 See the section-by-section analysis of
§ 1006.34(c)(2)(vii) and (viii).
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respect to the collection of debts by debt
collectors and, as described more fully
below, its authority to implement and
interpret FDCPA section 809. In
addition, except with respect to final
§ 1006.34(c)(2)(v) and (ix), the Bureau is
finalizing § 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.
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.204 FDCPA section 809(a)(3)
through (5), in turn, requires debt
collectors to disclose how consumers
may exercise their verification rights.
The proposal stated that 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.205
Proposed § 1006.34(c)(2)(i) therefore
provided that the debt collector’s name
and mailing address are required
validation information.
Industry and industry trade group
commenters recommended various
revisions to proposed § 1006.34(c)(2)(i).
First, some industry trade group
commenters suggested that the Bureau
permit a debt collector to disclose a
trade name or doing-business-as name
(DBA), in lieu of the debt collector’s
legal name. According to these
commenters, because a debt collector
may not use its legal name when
communicating with consumers, a
consumer may be more likely to
recognize the debt collector’s trade
name or DBA.
Next, one industry trade group
commenter recommended that the
Bureau permit a debt collector to
disclose a vendor’s mailing address
because some debt collectors do not
receive mail from consumers at their
office locations and instead use letter
vendors.
Finally, some industry and industry
trade group commenters recommended
that the Bureau permit debt collectors to
disclose multiple addresses. Some of
these commenters stated that debt
collectors may use separate addresses
for payments and other correspondence,
including disputes. For example, an
industry trade group stated that some
204 15
205 84
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FR 23274, 23339, 23404 (May 21, 2019).
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clients of debt collectors, including the
Department of Education, do not permit
debt collectors to receive payments at
their office locations and instead require
debt collectors to direct payments to a
‘‘lockbox,’’ which is a post office box
administered by a third party for the
receipt of payments.
A consumer advocate asked the
Bureau to modify proposed
§ 1006.34(c)(2)(i) to require debt
collectors to also disclose a telephone
number, an email address, and any
other method the debt collector uses for
consumer communications.
After considering the feedback, the
Bureau is adopting § 1006.34(c)(2)(i)
with a revision for clarity and is also
adopting two new comments to
incorporate certain suggestions made by
commenters.
As noted, some commenters suggested
that debt collectors who use multiple
mailing addresses be permitted to
include more than one mailing address
as validation information. The Bureau
declines to affirmatively permit the use
of more than one mailing address as
validation information. As discussed in
the proposal, the purpose of validation
information is to facilitate a consumer’s
exercise of their rights in debt
collection, namely, the right to dispute
the debt or to request original-creditor
information. Accordingly, the mailing
address included in the validation
information must be an address at
which the debt collector accepts
disputes and original-creditor
information requests. The Bureau is
revising § 1006.34(c)(2)(i) to
affirmatively state this requirement. If a
debt collector only accepts payments at
a different address than the address at
which it accepts disputes and originalcreditor information requests, the
Bureau notes that the debt collector
need not include payment disclosures
with the validation information; they
are optional disclosures under
§ 1006.34(d)(3)(iii).206 Moreover, if a
debt collector omits the optional
payment disclosures, the validation
206 The Bureau also notes that nothing in
Regulation F prevents a debt collector from using
a different mailing address in communications that
do not contain the validation information. For
example, if a debt collector accepts payments at a
different address, the payment address may be
included in a separate communication seeking
payment. Additionally, as noted at the outset of the
section-by-section analysis of § 1006.34, the Bureau
is not finalizing the proposed requirement that all
validation notices be substantially similar to the
Bureau’s model validation notice. Therefore, a debt
collector may include a separate payment address
on a validation notice, but a debt collector who
does so will not receive safe harbors pursuant to
§§ 1006.34(d)(2) and 1006.38(b)(2) and must
otherwise comply with the FDCPA and Regulation
F.
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notice will continue to contain contact
information for the debt collector,
including, at the debt collector’s option,
the debt collector’s telephone number
pursuant to § 1006.34(d)(3)(i), should
the consumer wish to reach out for
payment information or to make a
payment.
The Bureau is also adopting new
comment 34(c)(2)(i)–1 to clarify that a
debt collector may disclose the debt
collector’s trade name or DBA in lieu of
the debt collector’s legal name. The
Bureau observes that, in some cases, a
debt collector’s trade name or DBA may
be more recognizable to consumers than
the debt collector’s legal name. The
Bureau therefore determines that a debt
collector may use its trade name or DBA
when communicating with consumers.
However, when disclosing a trade name
or DBA, the debt collector may not do
so in a manner that violates the FDCPA
section 807 prohibition on false or
misleading representations. For
example, a debt collector may violate
the FDCPA and this final rule if the debt
collector discloses a trade name or DBA
that falsely represents or implies that
the debt collector is an attorney, when
that is not the case.207
Second, the Bureau is adopting new
comment 34(c)(2)(i)–2 to clarify that a
debt collector may disclose a vendor’s
mailing address, if that is an address at
which the debt collector accepts
disputes and requests for originalcreditor information. As one commenter
observed, some debt collectors may use
a vendor to receive mail from
consumers. The Bureau is finalizing
comment 34(c)(2)(i)–2 to accommodate
this business practice.
The Bureau declines to adopt the
recommendation of some commenters to
require debt collectors to disclose other
contact methods, including a telephone
number or an email address. The
FDCPA does not require debt collectors
to communicate by telephone or email.
However, as noted, § 1006.34(d)(3)(i)
permits a debt collector to disclose the
debt collector’s telephone number.
Likewise, § 1006.34(d)(3)(v)(A), permits
a debt collector to disclose the debt
collector’s website and email address.
34(c)(2)(ii)
FDCPA section 809(a) requires debt
collectors to disclose information about
the debt that helps consumers identify
the debt and facilitates resolution of the
debt. The proposal stated that, like the
information FDCPA section 809(a)
expressly requires, the consumer’s name
and address is essential information
about the debt that may help a
207 See
15 U.S.C. 1692e(3).
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consumer determine whether the
consumer owes a debt and is the
intended recipient of a validation
notice.208 The Bureau therefore
proposed § 1006.34(c)(2)(ii) to provide
that the consumer’s name and mailing
address is required validation
information. As discussed below,
proposed comment 34(c)(2)(ii)–1
clarified the meaning of the term
‘‘consumer’s name.’’
A consumer advocate and an industry
trade group expressed overall support
for the proposed provision. The
consumer advocate stated that consumer
name information would help a
consumer identify an alleged debt. The
consumer advocate also stated that
complete name information—such as a
first name, middle name, last name, and
suffix—would help consumers
determine whether a debt collector is
seeking a different consumer with a
similar name. According to the industry
trade group, it would be unreasonable
for a debt collector to omit known name
information. For the reasons discussed
in the proposal, the Bureau is finalizing
§ 1006.34(c)(2)(ii) as proposed.
Proposed comment 34(c)(2)(ii)–1
clarified 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 explained 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 and provided an example.
Some commenters raised concerns
about proposed comment 34(c)(2)(ii)–1.
A number of industry and industry
trade group commenters objected to the
statement that debt collectors would be
required to determine the most
complete version of the name about
which the debt collector has knowledge,
whether obtained from the creditor or
another source. These commenters
stated that the reference to ‘‘another
source’’ was ambiguous and would
create litigation risk and compel debt
collectors to conduct open-ended
research about a consumer’s name.
Several commenters urged the Bureau to
omit the reference to ‘‘another source.’’
The Bureau is finalizing comment
34(c)(2)–1 with revisions in response to
feedback and for clarity. First, the
Bureau is deleting the phrase ‘‘whether
obtained from the creditor or another
source.’’ This phrase is unnecessary as
208 84
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it does not alter the fundamental
expectation that a debt collector will
disclose the most complete and accurate
name about which the debt collector has
knowledge. In addition, the Bureau
determines that the reference to
‘‘another source’’ is ambiguous and may
create unjustified litigation risk and
industry burden.
Second, the Bureau is revising the
comment to clarify that a debt collector
must reasonably determine ‘‘the most
complete and accurate version’’ of a
consumer’s name. The Bureau intended
that a debt collector would be required
to disclose ‘‘accurate’’ consumer name
information, but proposed comment
34(c)(2)–1 only referred to ‘‘the most
complete version’’ of the consumer’s
name. Finally, the Bureau has
elaborated on the example of a debt
collector omitting a consumer’s name
information.
34(c)(2)(iii) 209
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.210 As the proposal stated, if 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 than the
name of the creditor as of the
itemization date. Proposed
§ 1006.34(c)(2)(iv) provided that, if a
debt collector is collecting a consumer
financial product or service debt (as that
term was defined in proposed
§ 1006.2(f)), the name of the creditor to
whom the debt was owed on the
itemization date is required validation
information.211 For the reasons
discussed below, the Bureau is
finalizing proposed § 1006.34(c)(2)(iv)
with minor wording changes and
renumbered as § 1006.34(c)(2)(iii), and
is adopting new comment 34(c)(2)(iii)–
1 to clarify that a debt collector may
disclose the trade name or DBA of the
creditor to whom the debt was owed on
the itemization date.
209 Proposed § 1006.34(c)(2)(iii) generally
provided that the merchant brand, if any, associated
with a credit card debt was required validation
information. The Bureau is finalizing merchant
brand information as an optional disclosure. See the
section-by-section analysis of § 1006.34(d)(3)(vii).
The Bureau therefore is finalizing proposed
§ 1006.34(c)(2)(iv) through (x) as § 1006.34(c)(2)(iii)
through (ix).
210 See 15 U.S.C. 1692g(a)(2). See the section-bysection analysis of § 1006.34(c)(2)(v).
211 84 FR 23274, 23404 (May 21, 2019).
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An industry trade group commenter
expressed support for requiring debt
collectors to disclose the creditor to
whom the debt was owed on the
itemization date but asked the Bureau to
clarify that a debt collector may disclose
this creditor’s trade name or DBA, as
opposed to its legal name, which a
consumer may not recognize.
A consumer advocate objected to the
proposal because a consumer may not
recognize the creditor to whom the debt
was owed on the itemization date.
According to the commenter, in some
cases, the itemization date may have
occurred years after the debt was
incurred. And, particularly if the debt
was transferred before the itemization
date, the consumer may not recognize
the creditor as of that date. As an
alternative, the commenter suggested
that a debt collector be required to
disclose the name of the original
creditor.
As discussed in the section-by-section
analysis of § 1006.34(c)(2)(i), an entity’s
trade name or DBA may be more
recognizable to consumers than an
entity’s legal name. It may be
appropriate for a debt collector to
disclose a creditor’s trade name or DBA,
in lieu of the creditor’s legal name,
when communicating with consumers.
Thus, the Bureau is adopting new
comment 34(c)(2)(iii)–1 to clarify that a
debt collector may disclose as validation
information the trade name or DBA of
the creditor to whom the debt was owed
on the itemization date.
The Bureau declines to require a debt
collector to disclose the name of the
original creditor as validation
information under § 1006.34(c). FDCPA
section 809(a)(5) and (b) require a debt
collector to provide the name and
address of the original creditor in
response to a consumer request. While
the Bureau acknowledges that, in some
cases, a consumer may not recognize the
creditor to whom the debt was owed on
the itemization date, this information
will still benefit some consumers. For
an older debt or a debt that has been
transferred, consumers may be more
likely to recognize the creditor as of the
itemization date than the current
creditor.
Accordingly, the Bureau is finalizing
§ 1006.34(c)(2)(iii) to provide that, if the
debt collector is collecting debt related
to a consumer financial product or
service as defined in § 1006.2(f), the
name of the creditor to whom the debt
was owed on the itemization date is
required validation information. In
addition, the Bureau is finalizing
comment 34(c)(2)(iii)–1 to clarify that a
debt collector may disclose the trade
name or DBA of the creditor to whom
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the debt was owed on the itemization
date.
34(c)(2)(iv)
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.’’ 212 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, to help consumers identify
debts. According to the proposal, an
account number associated with a debt
on the itemization date may be integral
information that a consumer uses to
identify the debt.213 The Bureau
proposed § 1006.34(c)(2)(v) to provide
that the account number, if any,
associated with the debt on the
itemization date, or a truncated version
of that number, is required validation
information. Proposed comment
34(c)(2)(v)–1 explained that a debt
collector may truncate an account
number provided that the account
number remains recognizable. For the
reasons discussed below, the Bureau is
adopting proposed § 1006.34(c)(2)(v),
renumbered as § 1006.34(c)(2)(iv), and
its related commentary with minor
wording changes.
Industry commenters, a consumer
advocate, and a group of State Attorneys
General, expressed overall support for
proposed § 1006.34(c)(2)(v). However,
one industry commenter recommended
that the Bureau exempt debt collectors
collecting residential mortgage debt
from the requirement to disclose an
account number. According to the
commenter, the account number for a
residential mortgage that has had a
servicing transfer may not be the current
account number, which might confuse
consumers.
The Bureau concludes that an account
number associated with a debt on the
itemization date may help some
consumers recognize the debt. The
Bureau declines to adopt the
recommendation to exempt debt
collectors collecting residential
mortgage debt from disclosing an
account number. As discussed in the
section-by-section analysis of
§ 1006.34(b)(3), the Bureau has
determined that the reference dates that
a debt collector may use to determine
the itemization date may be meaningful
to consumers because they correspond
to a notable event in the debt’s history
that consumers may recall or be able to
verify with records. By extension, the
212 S.
213 84
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Rep. No. 382, supra note 57, at 4.
FR 23274, 23340 (May 21, 2019).
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Bureau determines that an account
number associated with a debt as of one
of those dates will also likely resonate
with a consumer, even if it is not the
current account number.
Accordingly, the Bureau is finalizing
§ 1006.34(c)(2)(iv) and its related
commentary largely as proposed, with
only minor wording changes to the
commentary for clarity. No substantive
change is intended.
34(c)(2)(v)
FDCPA section 809(a)(2) requires debt
collectors to disclose to consumers the
name of the creditor to whom the debt
is owed.214 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.215 The Bureau proposed
§ 1006.34(c)(2)(vi) to provide that the
name of the current creditor is required
validation information. For the reasons
discussed below, the Bureau is
finalizing the proposal, renumbered as
§ 1006.34(c)(2)(v), and is adopting new
comment 34(c)(2)(v)–1 to clarify that a
debt collector may disclose the trade
name or DBA of the creditor to whom
the debt is currently owed, instead of its
legal name.
The Bureau received no comments
specifically addressing proposed
§ 1006.34(c)(2)(vi) and is finalizing it as
proposed but renumbered as
§ 1006.34(c)(2)(v). An industry trade
group commenter recommended that
the Bureau permit debt collectors to
disclose, along with the required
validation information, all current and
past creditors associated with the debt.
According to the commenter, some
creditors, such as healthcare and
financial services providers, may have
multiple sub-entities with different
corporate names. This commenter
suggested that disclosing more names of
creditors will increase the likelihood
that a consumer will recognize one of
them.
The Bureau declines to adopt this
recommendation. Disclosing all current
and past creditors along with the
validation information could
overwhelm and confuse consumers.216
Thus, as discussed in the section-bysection analysis of § 1006.34(c), the
Bureau is requiring debt collectors to
214 See
15 U.S.C. 1692g(a)(2).
FR 23274, 23341 (May 21, 2019).
216 During one round of cognitive testing,
participants were shown disclosure language that
included a list of prior creditors. Confusion was
observed when participants tried to explain the
difference between prior and current creditors. The
unclear relationship between creditors was
highlighted when participants attempted to identify
the creditor that currently owned the debt. See FMG
Cognitive Report, supra note 27, at 3–4.
215 84
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disclose as validation information only
two creditors: The creditor to whom the
debt was owed on the itemization date
(§ 1006.34(c)(2)(iii)) and the creditor to
whom the debt is currently owed
(§ 1006.34(c)(2)(v)). Nothing in the final
rule prohibits a debt collector from
including the name of another creditor
on a validation notice, but a debt
collector who does so will not receive
the § 1006.34(d)(2) safe harbor and will
risk not complying with the
requirements of § 1006.34, including the
§ 1006.34(b)(1) clear and conspicuous
standard.
As discussed in the section-by-section
analysis of § 1006.34(c)(2)(i) and (iii),
the Bureau is finalizing new comments
34(c)(2)(i)–1 and 34(c)(2)(iii)–1 to clarify
that a debt collector may disclose an
entity’s trade name or DBA, instead of
its legal name. The Bureau concludes
that it is also appropriate to permit a
debt collector to disclose the trade name
or DBA of a current creditor. Thus, the
Bureau is adopting new comment
34(c)(2)(v)–1 to clarify that a debt
collector may disclose the trade name or
a DBA of the creditor to whom the debt
is currently owed, instead of its legal
name.
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34(c)(2)(vi)
FDCPA section 809(a)(1) requires debt
collectors to disclose to consumers the
amount of the debt.217 In
§ 1006.34(c)(2)(viii), the Bureau
proposed 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 required
validation information.218 Consistent
with proposed § 1006.34(c)(2)(viii), the
Bureau proposed § 1006.34(c)(2)(vii) to
provide that the itemization date, as
defined in § 1006.34(b)(3), also is
required validation information. For the
reasons discussed below, the Bureau is
finalizing § 1006.34(c)(2)(vii) as
proposed but renumbered as
§ 1006.34(c)(2)(vi).
Several commenters, including an
industry commenter, an industry trade
group commenter, and a group of
consumer advocates, stated that the
itemization date may not be meaningful
to consumers or help them recognize
debts, if disclosed without an
explanation of its relevance. These
commenters, along with Federal
government agency staff, recommended
requiring debt collectors to disclose
with the itemization date a statement
explaining which reference date the
217 See
218 84
15 U.S.C. 1692g(a)(1).
FR 23274, 23341 (May 21, 2019).
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debt collector used to determine that
date.219
The Bureau declines to adopt this
recommendation. As discussed in the
section-by-section analysis of
§ 1006.34(b)(3), the Bureau determines
that the reference dates that a debt
collector may use to determine the
itemization date have a significant
likelihood of being meaningful to
consumers because they correspond to
notable events in a debt’s history that
consumers may recall or be able to
verify with records. Because each of the
reference dates may be meaningful to
consumers, the Bureau determines that
no additional disclosure explaining
their relevance is necessary. Moreover,
the Bureau determines that an
additional disclosure explaining the
reference date may confuse or
overwhelm some consumers. While a
debt collector likely could describe
some reference dates (e.g., a last
statement date) in a straightforward
manner, other reference dates (e.g., the
charge-off date and the transaction date)
do not lend themselves to a succinct
explanation. That is because some
reference dates reflect financial
concepts that are inherently complex
(i.e., charge off) or that could vary by
debt type and the facts and
circumstances surrounding a particular
debt (i.e., transaction dates). For such
reference dates, a statement explaining
their relevance could distract or confuse
consumers, thereby undermining the
efficacy of the other validation
information.
34(c)(2)(vii)
As noted, FDCPA section 809(a)(1)
requires debt collectors to disclose to
consumers the amount of the debt. As
discussed in the proposal, 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. As
also discussed in the proposal,
consumers may recognize the amount of
the debt as of the itemization date (as
the Bureau proposed to define that term
in § 1006.34(b)(3)). 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 proposed to
interpret FDCPA section 809(a)(1), and
to use its authority under Dodd-Frank
Act section 1032(a), to provide in
proposed § 1006.34(c)(2)(viii) that the
amount of the debt on the itemization
219 As
discussed in the section-by-section analysis
of § 1006.34(b)(3), the Bureau defines itemization
date to mean one of five reference dates for which
a debt collector can ascertain the amount of the
debt.
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5803
date is required validation
information.220 Proposed comment
34(c)(2)(viii)–1 explained that this
amount includes any fees, interest, or
other charges owed as of the itemization
date.
An industry commenter questioned
whether proposed § 1006.34(c)(2)(viii)
would significantly improve consumer
understanding. According to the
commenter, if a debt collector
determines the itemization date based
on the last statement date pursuant to
§ 1006.34(b)(3)(i), and if the debt is
placed for collection shortly after the
last statement was provided, the current
amount of the debt (which the Bureau
proposed as a separate item of required
validation information) and the amount
of the debt on the itemization date
would be approximately the same. The
commenter stated that, in this scenario,
disclosing the amount of the debt on the
itemization date would not benefit the
consumer.
The Bureau acknowledges that, for a
given debt, the amount owed on the
itemization date and the current amount
of the debt may be similar or even the
same. However, as discussed below in
the section-by-section analysis of final
§ 1006.34(c)(2)(viii), even in these cases,
the itemization of the debt will still be
required, and, as clarified in final
comment 34(c)(2)(viii)–1, the
itemization (if the amounts are the
same) will show $0 in interest, fees,
payments, and credits. As such, it
should be clear to the consumer why the
two amounts are the same. In many
other cases, these amounts will differ,
sometimes substantially. In these cases,
the amount of the debt on the
itemization date will help consumers
recognize or evaluate the debt.
For these reasons, the Bureau is
finalizing § 1006.34(c)(2)(viii) and its
related commentary as proposed but
renumbered as § 1006.34(c)(2)(vii).
34(c)(2)(viii)
As noted, FDCPA section 809(a)(1)
requires a debt collector to disclose to
consumers the amount of the debt. As
discussed, the Bureau proposed 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
220 84 FR 23274, 23341 (May 21, 2019). As
proposed, the Bureau is finalizing
§ 1006.34(c)(2)(ix) (renumbered from proposed
§ 1006.34(c)(2)(x)) separately to provide that the
current amount of the debt also is required
validation information.
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provided).221 In conjunction with the
amount of the debt on the itemization
date and the current amount of the debt,
the Bureau proposed § 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 required validation
information. Proposed comment
34(c)(2)(ix)–1 clarified how debt
collectors could disclose that no
interest, fees, payments, or credits were
assessed or applied to a debt.
For the reasons discussed below, the
Bureau is finalizing the proposal,
renumbered as § 1006.34(c)(2)(viii), with
revisions to permit debt collectors to
disclose the itemization on a separate
page provided in the same
communication with a validation
notice, if the debt collector includes on
the validation notice, where the
itemization would have appeared, a
statement referring to that separate page.
The Bureau also is finalizing comment
34(c)(2)(ix)–1 with a substantive
modification and renumbered as
comment 34(c)(2)(viii)–1, and is
adopting new comments 34(c)(2)(viii)–2
through–4 to clarify other aspects of
final § 1006.34(c)(2)(viii).
Commenters offered differing
opinions regarding proposed
§ 1006.34(c)(2)(ix). A group of State
Attorneys General, Federal government
agency staff, consumer advocate
commenters, some industry trade group
commenters, and at least one industry
commenter supported the proposed
provision. These commenters generally
agreed that an itemization of the debt
would help consumers recognize an
alleged debt and understand how the
debt had evolved over time due to
interest, fees, payments, and credits.
Further, the Bureau received feedback
that the proposal was consistent with
some industry practice. For instance, a
commenter noted an industry
certification standard that, during the
sales of certain debt types, requires debt
buyers to obtain or provide the unpaid
balance due on the account, with a
breakdown of the post-charge-off
balance, interest, fees, payments, and
credits or adjustments.222
The majority of industry and industry
trade group commenters objected to
proposed § 1006.34(c)(2)(ix). Some such
commenters stated that the proposed
itemization requirement would be
burdensome. According to several
221 84
FR 23274, 23341 (May 21, 2019).
Receivables Mgmt. Ass’n Int’l, Receivables
Management Certification Program, at 41–45 (Mar.
1, 2020), https://rmaintl.org/RMCP (last visited Dec.
9, 2020).
222 See
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industry commenters, debt collectors
would either have to manually access
itemization information in creditor files
or implement costly information
technology solutions to comply with the
proposed requirement. Some industry
commenters, industry trade groups, and
the SBA argued that the proposed
requirement would impose burdens on
creditors. Commenters stated that some
creditors may not maintain all of the
itemization information that the
proposal would require or do not
typically provide itemization
information at placement and that to do
so would involve significant expense.
Some commenters speculated that, to
avoid such costs, creditors might refer
fewer accounts for collection or file
more collections lawsuits against
consumers. The SBA, an industry trade
group, and industry commenters argued
that compliance costs could be onerous
for smaller creditors and debt collectors.
For the most part, commenters offered
qualitative assessments of industry
burden, but one industry trade group
did estimate that proposed
§ 1006.34(c)(2)(ix) would impose
billions of dollars in compliance costs
on industry.223
Some commenters stated that
proposed § 1006.34(c)(2)(ix) is
unnecessary or unhelpful. Multiple
industry commenters asserted that an
itemization is superfluous because
consumers can exercise their FDCPA
section 809 verification rights to receive
more account information if desired.
With respect to medical debt, an
industry trade group stated that
proposed § 1006.34(c)(2)(ix) is
unnecessary because the Internal
Revenue Service (IRS) requires nonprofit hospitals to send letters with
itemized information to consumers, and
health insurance companies routinely
mail to responsible parties ‘‘Explanation
of Benefits’’ documents that provide
details about coverage, payments, and
co-pays. Some commenters expressed
concern that proposed
§ 1006.34(c)(2)(ix) could increase legal
risk for debt collectors if the itemization
information confused consumers. At
least one industry commenter stated
that the Bureau’s consumer testing did
223 One industry trade group estimated that an
itemization requirement would cost $600 million in
professional fees to conduct legal analyses of
HIPAA compliance for medical debt, $30 million
for one-time system reprogramming for debt
collectors, and $3 billion for one-time system
reprogramming for creditors. The proposal allegedly
would also result in billions of dollars in ongoing
support costs and uncompensated medical care
because, according to the commenter, the proposed
requirement, if adopted, would increase the risks
that hospitals might be unable to use debt
collectors.
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not support proposed § 1006.34(c)(2)(ix)
because the testing did not involve
actual consumers assessing debts in a
real-world setting.
A few industry commenters objected
to proposed § 1006.34(c)(2)(ix) because
the FDCPA does not expressly require
an itemization of the current amount of
the debt.
Some industry and industry trade
group commenters objected to proposed
§ 1006.34(c)(2)(ix) because the
itemization that appears on the model
validation notice is formatted for a
single debt. According to commenters,
the proposal would not accommodate
debt collectors who combine multiple
debts in a single validation notice.
Several commenters stated that not
permitting debt collectors to include
multiple debts in one validation notice
would dramatically increase the volume
of mail sent to consumers and would
require consumers to exercise their
verification rights for each individual
debt in the event that a consumer has
a global dispute. Industry and industry
trade group commenters stated that the
inability to combine multiple debts
would be particularly challenging for
medical debt collectors. According to
some commenters, healthcare providers
routinely combine multiple debts, in
part because they utilize family billing,
which involves combining the separate
bills for family members of a primary
insured party. Commenters stated that
itemizations for medical debt may be
further complicated by the fact that
healthcare providers typically do not
maintain a rolling total of charges for a
general service and instead individually
bill for each good or service provided.
At least one trade group stated that
student loan debt presents comparable
itemization-related challenges because
student loan debt may be provided
through multiple disbursements with
separate account numbers.
An industry trade group suggested
that proposed § 1006.34(c)(2)(ix) would
not accommodate debts in bankruptcy.
According to the commenter, the
proposal did not have the specificity
necessary to account for how the
Bankruptcy Code permits a debtor to
cure pre-bankruptcy defaults over the
term of the bankruptcy plan while
maintaining regular post-bankruptcy
payments. In addition, the commenter
argued, the proposal would not
accommodate the nuances that arise in
the context of certain bankruptcy
scenarios, such as a cramdown plan or
a lien strip.224
224 Pursuant to 11 U.S.C. 1322(b)(5), a bankruptcy
court may change the underlying terms of a debt,
which is referred to as a ‘‘cramdown.’’ Pursuant to
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With regard to medical debt, industry
commenters, an industry trade group,
and the SBA stated that healthcare
providers might violate the Health
Insurance Portability and
Accountability Act of 1996 (HIPAA) 225
Privacy Rule if they provided the
proposed itemization.226 According to
these commenters, proposed
§ 1006.34(c)(2)(ix) would require debt
collectors to disclose more information
than the minimum necessary for
treatment of the patient, payment of the
bill, or healthcare operations, in
violation of HIPAA.
Commenters recommended various
modifications to proposed
§ 1006.34(c)(2)(ix). Industry and
industry trade group commenters
suggested that debt collectors should
not need to comply with proposed
§ 1006.34(c)(2)(ix) if interest and fees are
not charged on an account.227 An
industry commenter stated that debt
collectors should be permitted to
indicate ‘‘U’’ for ‘‘unknown’’ or
‘‘unavailable’’ in fields for which a
creditor did not provide the relevant
information.
Several commenters asked the Bureau
to clarify the proposal. An industry
commenter asked how a debt collector
could disclose third-party payments or
insurance adjustments, particularly in
the context of medical debt. An industry
trade group sought additional guidance
about how to disclose balance increases
that are not caused by interest or fees,
such as a balance increase caused by a
returned payment. Noting the existence
of validation notice itemization
requirements imposed by other
applicable law, such as New York State
regulations, two industry trade groups
requested guidance about how a debt
collector should simultaneously comply
with those requirements and proposed
§ 1006.34(c)(2)(ix).228
With respect to the Bureau’s request
for comment about whether the
proposed itemization should be more
detailed—for example, by reflecting
each fee charged and each payment
received—or whether certain
11 U.S.C. 1322(c)(2), a secured claim can be
converted to an unsecured claim, which is referred
to as a ‘‘lien strip.’’
225 Public Law 104–191, 110 Stat. 1936 (1996).
226 45 CFR part 160 and part 164 subparts A and
E.
227 In addition, an industry trade group suggested
that debt collectors should not be required to
comply with the itemization requirement for precharge-off debts, particularly if periodic statements
continue to be provided. The Bureau notes that, in
many cases, a person collecting a debt that was not
in default at the time it was obtained by such
person will not be a debt collector subject to the
FDCPA or Regulation F. See FDCPA section
803(6)(F)(iii), 15 U.S.C. 1692a(6)(F)(iii).
228 See 23 NYCRR 1.2(b)(2).
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itemization categories should be
combined as proposed, industry
commenters suggested that the Bureau
not deviate from the proposal. For
instance, a commenter stated that, in the
context of medical debts, listing all
payments and credits individually
could result in multiple additional
pages because of the number of thirdparty payments. In contrast, citing the
Bureau’s consumer testing, an academic
commenter argued that the itemization
should be more detailed because
consumers prefer to see penalties and
fees broken down into individual
charges.229
After considering these comments,
and for the reasons discussed below, the
Bureau is adopting the proposed
requirement, renumbered as
§ 1006.34(c)(2)(viii), with revisions to
provide that validation information
includes an itemization of the current
amount of the debt reflecting interest,
fees, payments, and credits since the
itemization date. Final
§ 1006.34(c)(2)(viii) further provides
that a debt collector may disclose the
itemization on a separate page provided
in the same communication with a
validation notice, if the debt collector
includes on the validation notice, where
the itemization would have appeared, a
statement referring to that separate page.
The Bureau determines that an
itemization of the debt will help a
significant number of consumers
recognize whether they owe a debt and
evaluate whether the debt is accurate,
because the itemization will disclose
how the amount may have changed over
time due, for example, to interest, fees,
payments, and credits that have been
assessed or applied to the debt.
The Bureau determines that
§ 1006.34(c)(2)(viii) will not create
undue industry burden in light of
modifications made in response to
comments.230 The Bureau acknowledges
that complying with the itemization
requirement may result in some
additional costs to debt collectors,
particularly if they do not currently
provide itemization information at
placement or on validation notices, as
well as in some indirect costs to
creditors. However, the Bureau
concludes that these costs will not
substantially impact companies’
business operations because the final
229 FMG
Summary Report, supra note 29.
example, as noted in the section-bysection analysis of § 1006.34(b)(3)(i), a creditor or a
third-party servicer acting on the creditor’s behalf
may issue a statement even after the debt has gone
into collection. In that case, under
§ 1006.34(b)(3)(i), that new statement may serve as
the last statement for purposes of the itemization
date.
230 For
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rule provides sufficient flexibility to
debt collectors to tailor the itemization
to specific business practices and types
of debt. Accordingly, the Bureau does
not conclude, as some commenters
suggested, that the itemization
requirement will result in creditors
referring significantly fewer accounts for
collections or filing more lawsuits
against consumers.231
Although several commenters stated
that the required itemization
information may not be available for
every debt, the Bureau notes that the
itemization of the debt is based on the
type of routine account information that
debt collectors typically provide in
response to consumer verification
requests and that, as such, debt
collectors should be able to obtain such
information to comply with the final
rule. While some debt collectors do not
currently provide this itemized
information at the outset of collection
communications, providing such
itemization information to consumers
already is considered a best practice in
some segments of the debt buying
industry, including for credit card debt
and student loan debt.232 Further, debt
collectors are already required to
disclose an itemization for some types
of debt in at least one jurisdiction, New
York State.233
In addition, as discussed in the
section-by-section analysis of
§ 1006.34(b)(3), the final rule’s
itemization date definition permits debt
collectors to select an itemization date
that is feasible for the type of debt in
collection and the information debt
collectors receive. And
§ 1006.34(c)(2)(viii) requires itemization
of fees, interest, and credits only
subsequent to the selected itemization
date. Thus, for example, if a debt
collector selects the last statement date
as the itemization date under
§ 1006.34(b)(3), and if the creditor has
231 An industry trade group cited an article to
suggest that collection lawsuits nearly doubled in
New York City since 2015 because of New York
State’s debt collection rules, which mandate an
itemization. See Yuka Hayashi, Debt Collectors
Wage a Comeback, Wall Street Journal (July 5,
2019). The Bureau notes that the article did not cite
a connection between higher rates of lawsuits and
the itemization requirement. Instead, the article
discussed the phenomenon of increasing lawsuits
nationwide, including in States like Texas, which
had not recently introduced a significant debt
collection rule.
232 See Receivables Mgmt. Ass’n Int’l, Receivables
Management Certification Program, at 41–45 (Mar.
1, 2020), https://rmaintl.org/RMCP (last visited Dec.
9, 2020).
233 See 23 NYCRR 1.2(b) (requiring debt collectors
to provide an itemized accounting of the debt
within five days after the initial communication
with a consumer in connection with the collection
of certain types of charged-off debt, such as credit
card debt).
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recently issued a statement to the
consumer, the debt collector need only
obtain and provide to the consumer an
itemization with fees, interest, and
credits subsequent to that last statement
date. And, as discussed in the sectionby-section analysis of § 1006.34(d)(2), a
debt collector may provide the
itemization on a separate page and
retain the safe harbor for the rest of the
validation notice. For all of these
reasons, the Bureau concludes that the
final rule will not impose undue
burdens on debt collectors and will
provide consumers with useful
information. The Bureau will monitor
whether the itemization date definition,
including the last statement date
definition, meets these goals.
The Bureau disagrees that
§ 1006.34(c)(2)(viii) is unnecessary or
unhelpful. The verification rights
afforded by FDCPA section 809 are an
important statutory protection; however,
they do not serve the same purpose or
provide an adequate substitute to the
itemization of the debt that
§ 1006.34(c)(2)(viii) will require. The
Bureau disagrees that an itemization of
the current amount of the debt is
unnecessary for medical debt, as some
commenters argued. Although some
non-profit hospitals or insurance
companies may provide itemization
information to some consumers,
commenters did not suggest, and the
Bureau is not aware of other evidence
indicating, that all consumers with
medical debt receive itemization
information such that
§ 1006.34(c)(2)(viii) would be
unnecessary. The Bureau also disagrees
with comments that an itemization will
confuse consumers. As the proposal
noted, the Bureau’s qualitative
consumer testing indicates that an
itemization improves consumer
understanding about the debt.234
The Bureau also disagrees that the
FDCPA’s not expressly requiring an
itemization is a sufficient reason for the
Bureau not to require it by rule. The
Bureau proposed and is finalizing the
itemization requirement pursuant to its
authority to interpret FDCPA section
809(a), as well as pursuant to its
authority under Dodd-Frank Act section
1032(a) to prescribe rules to ensure that
the features of debt collection are fully,
accurately, and effectively disclosed to
consumers.
The Bureau is revising
§ 1006.34(c)(2)(viii) to permit debt
collectors to disclose the itemization on
234 See 84 FR 23274, 23341 (May 21, 2019); FMG
Usability Report, supra note 28, at 16–19.
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a separate page.235 The itemization that
appears on the model validation notice
may not accommodate all debt types in
every instance. Some debt collectors
may have legitimate reasons to combine
multiple debts on a single validation
notice. This may be the case with
respect to medical debt (for instance,
owing to healthcare provider billing
practices) and student loan debt
(because consumers may receive loans
through multiple disbursements with
separate account numbers). As finalized,
§ 1006.34(c)(2)(viii) states that a debt
collector may disclose the itemization
on a separate page provided in the same
communication with a validation
notice, if the debt collector includes on
the validation notice, where the
itemization would have appeared, a
statement referring to that separate
page.236 New comment 34(c)(2)(viii)–3
clarifies that a debt collector may
comply with the requirement to refer to
the separate page by, for example,
including on the validation notice the
statement, ‘‘See the enclosed separate
page for an itemization of the debt,’’
situated next to the information about
the current amount of the debt required
by § 1006.34(c)(2)(ix).237
The Bureau is making an additional
change to § 1006.34(c)(2)(viii). As
finalized, § 1006.34(c)(2)(viii) omits the
proposed language that an itemization
must be ‘‘in a tabular format.’’ The
Bureau determined that it is
unnecessary and unwarranted to
mandate the use of a tabular format
because, if the itemization information
is provided on a separate page or orally,
using a tabular format may be
impractical or infeasible and, if the
itemization information is provided on
a validation notice, debt collectors
likely will use the tabular format shown
on the model notice such that they may
receive a safe harbor for compliance
with the information and form
requirements of § 1006.34(c) and (d)(1).
235 Under § 1006.34(d)(2)(ii), a debt collector who
otherwise uses the model validation notice or a
substantially similar form, but who provides the
itemization of the current amount of the debt on
separate page, receives a safe harbor for compliance
with the information and form requirements of
§ 1006.34(c) and (d)(1) except with respect to the
itemization that appears on the separate page.
236 For example, when delivering a validation
notice by mail, a debt collector may include the
separate itemization in the same envelope as the
validation notice. Similarly, when delivering a
validation notice electronically, a debt collector
may include the separate itemization in the same
email as the validation notice.
237 Section 1006.34(d)(2)(iii) establishes that a
debt collector who uses the model validation notice
and who provides an itemization on a separate page
receives a safe harbor for compliance with the
information and form requirements of § 1006.34(c)
and (d)(1), except with respect to the disclosures
that appear on the separate page.
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To accommodate debt collectors who
wish to combine multiple debts on a
single validation notice, the Bureau is
adopting new comment 34(c)(2)(viii)–4
to clarify that a debt collector who
combines multiple debts on a single
validation notice complies with
§ 1006.34(c)(2)(viii) by disclosing either
a single, cumulative itemization on the
validation notice or a separate
itemization of each debt on a separate
page or pages provided in the same
communication as the validation
notice.238
The Bureau concludes that the
itemization requirement will not cause
healthcare providers or debt collectors
to violate the HIPAA Privacy Rule. HHS
staff has advised the Bureau that the
HIPAA Privacy Rule generally permits
covered entities to disclose protected
health information required by
applicable law.239 Because disclosure of
itemization information will be
necessary to comply with
§ 1006.34(c)(2)(viii), this guidance
indicates that the HIPAA Privacy Rule
will permit its disclosure.
The Bureau declines to modify
§ 1006.34(c)(2)(viii) as commenters
otherwise recommended. An
itemization, even if no interest and fees
have been assessed or charged on an
account, remains relevant information
about the debt. Further, complying with
§ 1006.34(c)(2)(viii) if no interest and
fees have been assessed or charged is
relatively straightforward, and comment
34(c)(2)(viii)–1 clarifies how debt
collectors may do so.
However, the Bureau is finalizing
proposed comment 34(c)(2)(viii)–1 with
a modification to delete language stating
that debt collectors may indicate ‘‘N/A’’
in a required field when no interest,
fees, payments, or creditors have been
238 Relatedly, as discussed in the section-bysection analysis of § 1006.34(c)(2)(ix), the Bureau is
adopting new comment 34(c)(2)(ix)–2 to clarify that
a debt collector who combines multiple debts on a
single validation notice complies with
§ 1006.34(c)(2)(ix)’s requirement to disclose the
‘‘current amount of the debt’’ by disclosing on the
validation notice a single, cumulative figure that is
the sum of the current amount of all the debts.
239 See 45 CFR 164.512(a)(1) (‘‘A covered entity
may use or disclose protected health information to
the extent that such use or disclosure is required
by law and the use or disclosure complies with and
is limited to the relevant requirements of such
law.’’); see also U.S. Dep’t of Health & Human
Servs., Does the HIPAA Privacy Rule prevent health
plans and providers from using debt collection
agencies? Does the Privacy Rule conflict with the
Fair Debt Collection Practices Act?, https://
www.hhs.gov/hipaa/for-professionals/faq/268/doesthe-hipaa-privacy-rule-prevent-health-careproviders-from-using-debt-collection-agencies/
index.html (last visited Dec. 1, 2020) (noting that
the HIPAA Privacy Rule permits healthcare
providers to provide the minimum necessary
patient information to debt collectors for the
purpose of receiving payment).
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assessed or applied to the account
because different consumers may
interpret ‘‘N/A’’ differently. For
example, some consumers might
understand it as indicating ‘‘not
available,’’ and others might construe it
as meaning ‘‘not applicable.’’ To
eliminate this potential ambiguity, the
Bureau is revising comment
34(c)(2)(viii)–1 to provide that a debt
collector may indicate that the value of
a required field is ‘‘0,’’ ‘‘none,’’ or may
state that no interest, fees, payments, or
credits have been assessed or applied to
the debt. The Bureau also is revising the
comment to clarify, as was intended in
the proposal, that a debt collector may
not leave a required field blank.
The Bureau declines the
recommendation that debt collectors be
permitted to indicate ‘‘U’’ for
‘‘unknown’’ or ‘‘unavailable’’ in the
itemization if a creditor did not provide
the relevant information. Allowing debt
collectors to omit specific itemization
information in this manner could
incentivize debt collectors to avoid
receiving it, thereby undermining the
effectiveness of § 1006.34(c)(2)(viii).
Debt collectors sought clarification as
to how they should comply with
§ 1006.34(c)(2)(viii) in various scenarios.
Depending on the facts and
circumstances, a third-party payment or
insurance adjustment may be disclosed
as a ‘‘payment’’ or a ‘‘credit’’ in the
itemization. Also depending on the facts
and circumstances, a payment that is
returned may be omitted from the
itemization provided that the payment
and the return offset each other, and
provided that the amount of the debt
owed on the itemization date pursuant
to § 1006.34(c)(2)(vii) and the current
amount of the debt pursuant to
§ 1006.34(c)(2)(ix) are accurately
disclosed.
Regarding § 1006.34(c)(2)(viii)’s
interaction with itemization
requirements in other applicable law,
the Bureau is finalizing new comment
34(c)(2)(viii)–2, which states that, if a
debt collector is required by other
applicable law to provide an itemization
of the current amount of the debt with
the validation information, the debt
collector may comply with
§ 1006.34(c)(2)(viii) by disclosing the
itemization required by other applicable
law in lieu of the itemization described
in § 1006.34(c)(2)(viii), if the itemization
required by other applicable law is
substantially similar to the itemization
that appears on the model validation
notice. The Bureau is aware of only one
jurisdiction that requires debt collectors
to provide an itemization with the
validation information, and that
itemization is substantially similar to
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the itemization required by
§ 1006.34(c)(2)(viii).240 Further,
consumers likely would not benefit—
and, in fact, may be disadvantaged—by
receiving multiple itemizations with the
validation information. For instance,
although a debt collector could include
both the itemization required by
§ 1006.34(c)(2)(viii) on the front of a
validation notice, and, on the reverse,
an itemization specifically required by
other applicable law (as an optional
disclosure pursuant to
§ 1006.34(d)(3)(iv)), a consumer would
be unlikely to benefit from receiving
two itemizations. In addition,
permitting debt collectors to
simultaneously satisfy the Bureau’s
itemization requirement and a
substantially similar requirement under
other applicable law with one
itemization avoids burdening debt
collectors with the costs of creating
redundant disclosures.
The Bureau determines that the
itemization of the current amount of the
debt should not be more detailed (e.g.,
it should not include a detailed list of
all payments). The itemization that
appears on the model validation notice
has been validated through four rounds
of consumer testing and is effective, and
the Bureau agrees with commenters who
observed that a detailed disclosure of,
for example, all payments could be
overwhelming and not logistically
feasible.
For all of these reasons, the Bureau is
finalizing proposed § 1006.34(c)(2)(ix),
renumbered as § 1006.34(c)(2)(viii), to
provide that required validation
information includes an itemization of
the current amount of the debt reflecting
interest, fees, payments, and credits
since the itemization date. Final
§ 1006.34(c)(2)(viii) also provides that a
debt collector may disclose the
itemization on a separate page provided
in the same communication with a
validation notice if the debt collector
includes on the validation notice, where
the itemization would have appeared, a
statement referring to that separate page.
The Bureau is finalizing comment
34(c)(2)(ix)–1 with revisions and
renumbered as comment 34(c)(2)(viii)–1
and is adding comments 34(c)(2)(viii)–2
through –4 to clarify various aspects of
final § 1006.34(c)(2)(viii), as discussed
above. The Bureau is finalizing
§ 1006.34(c)(2)(viii) and its related
commentary pursuant to its authority to
interpret FDCPA section 809(a), as well
as its authority under Dodd-Frank Act
section 1032(a).
240 See
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5807
34(c)(2)(ix)
FDCPA section 809(a)(1) requires debt
collectors to disclose to consumers the
amount of the debt. Proposed
§ 1006.34(c)(2)(x) provided that the
current amount of the debt is required
validation information.241 Proposed
comment 34(c)(2)(x)–1 explained that,
for residential mortgage debt subject to
Regulation Z, 12 CFR 1026.41, a debt
collector could 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.
Some commenters raised concerns
about how proposed § 1006.34(c)(2)(x)
would disclose the current amount of
the debt. Industry and industry trade
group commenters stated that, if interest
and fees are increasing, the current
amount of the debt that appears on a
validation notice may no longer be
accurate by the time the consumer
receives the notice. Some commenters
stated that some State laws and court
decisions require debt collectors to
disclose if the current amount of the
debt may change due to interest and
fees.242 To address these concerns,
industry and industry trade group
commenters suggested that the Bureau
should either develop a stand-alone
increasing-interest-and-fee disclosure or
structure § 1006.34(c)(2)(x) to permit
debt collectors to disclose that the
itemized current amount of the debt
may increase or decrease.243
An industry trade group stated that
disclosing the current amount of the
debt as proposed would present
challenges for some reverse mortgage
debt because that amount might differ
from the amount disclosed in monthly
statements.244 The commenter
241 84
FR 23274, 23342, 23415 (May 21, 2019).
Avila v. Riexinger & Assocs., LLC, 817
F.3d 72, 76 (2d Cir. 2016) (holding that 15 U.S.C.
1692e requires debt collectors to disclose if the
amount of a debt may increase due to interest and
fees).
243 A trade group commenter recommended the
following dynamic balance disclosure: ‘‘As of the
date of this letter, the balance due on the account
is . Because interest, fees, and/or other
charges may change the total owed from day to day,
the amount due on the day you pay may be greater.
If you pay the amount shown above, an adjustment
may be necessary after we receive your payment, in
which event you may be informed of any other
amount due.’’
244 The Bureau understands that, for some reverse
mortgages, including Home Equity Conversion
Mortgages insured by the FHA, when the reverse
mortgage is due and payable, the amount due from
the borrower may not be the amount of outstanding
debt because these reverse mortgages are nonrecourse loans and a borrower will never owe more
than a portion of the appraised value of the home.
See 24 CFR 206.125.
242 See
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recommended that, to avoid potential
confusion in the context of reverse
mortgage debt, a debt collector should
be permitted to provide the last monthly
account statement in lieu of disclosing
the current amount of the debt.
A group of consumer advocates
recommended that, for residential
mortgage debt, the Bureau should
require debt collectors to disclose the
current amount of the total unpaid
balance owed as well as the arrearage
owed. According to this commenter, the
arrearage owed is important information
because, in many jurisdictions,
homeowners in default can pay the
arrearage to stop a foreclosure and
reinstate a mortgage.
After considering these comments, the
Bureau is finalizing § 1006.34(c)(2)(x) as
proposed but renumbered as
§ 1006.34(c)(2)(ix). In addition, the
Bureau is finalizing comment
34(c)(2)(x)–1 as proposed and is
adopting new comment 34(c)(2)(ix)–2 to
clarify how a debt collector who
combines multiple debts on a single
validation notice complies with
§ 1006.34(c)(2)(ix).
With respect to interest and fee
accrual when disclosing the current
amount of the debt, the Bureau declines
to incorporate an increasing-interest-orfee disclosure or to structure the current
amount of the debt as a dynamic
balance in § 1006.34(c)(2)(ix). The
Bureau notes, however, that comment
34(c)(2)(ix)–1 (proposed as comment
34(c)(2)(x)–1) clarifies that the current
amount of the debt is the amount of the
debt as of the date that the validation
information is provided. Therefore, a
debt collector satisfies the requirement
in § 1006.34(c)(2)(ix) without providing
a dynamic balance or increasinginterest-or-fee disclosure. Additionally,
as discussed in the section-by-section
analysis of § 1006.34(d)(3)(iv), the final
rule affirmatively permits debt
collectors to include along with the
required validation information other
disclosures specifically required by
applicable law. As such, debt collectors
may include a disclosure pursuant to a
judicial decision or order that the
current amount of the debt may increase
or vary due to interest, fees, or other
charges. This modification addresses the
challenges debt collectors face related to
interest and fee accrual in disclosing the
current amount of the debt.
The Bureau declines to permit debt
collectors collecting reverse mortgage
debt to include a last monthly account
statement in place of disclosing the
current amount of the debt. Unlike the
special rule for certain residential
mortgage debt discussed in the sectionby-section analysis of § 1006.34(c)(5),
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reverse mortgages are not generally
subject to a separate disclosure
requirement, such as 12 CFR
1026.41(b)’s periodic statement
requirement, that is functionally
equivalent to, or as useful to consumers
as, certain disclosures required by
§ 1006.34(c)(2). Reverse mortgages
generally are exempt from providing
periodic statements under the Truth in
Lending Act (TILA) 245 and its
implementing Regulation Z.246 While
reverse mortgages may be subject to a
monthly statement requirement that
would require entities to disclose the
‘‘total outstanding loan balance,’’ this
regulatory requirement is not as
prescriptive as the Bureau’s periodic
statement requirement for other
residential mortgage debt.247 Thus, the
Bureau determines that a last monthly
statement for a reverse mortgage debt is
not an adequate substitute for
§ 1006.34(c)(2)(ix).
The Bureau declines to require debt
collectors to separately disclose an
arrearage owed for residential mortgage
debt. Because the Bureau did not
propose this disclosure, it lacks the
benefit of public comment and
concludes that additional information,
including through public comment,
would be advisable before adopting any
such interpretation. However, the
Bureau notes that a debt collector who
utilizes the special rule for certain
residential mortgage debt described in
§ 1006.34(c)(5) to comply with
§ 1006.34(c)(2)(vi) through (viii) will
provide a periodic statement that may
disclose such information.248 Although
a mortgage servicer is not required to
use the special rule for certain
residential mortgage debt, a mortgage
servicer who does so and who otherwise
uses the model validation notice or a
245 15
U.S.C. 1601 et seq.
12 CFR 1026.41(e)(1).
247 The regulation provides: ‘‘The mortgagee shall
provide to the borrower a monthly statement
regarding the activity of the mortgage for each
month, as well as for the calendar year. The
statement shall summarize the total principal
amount which has been paid to the borrower under
the mortgage during that calendar year, the MIP
paid to the Commissioner and charged to the
borrower, the total amount of deferred interest
added to the outstanding loan balance, the total
outstanding loan balance, and the current principal
limit. The mortgagee shall include an accounting of
all payments for property charges. The statement
shall be provided to the borrower monthly until the
mortgage is paid in full by the borrower. The
mortgagee shall provide the borrower with a new
payment plan every time it recalculates monthly
payments or the payment option is changed. The
statements shall be in a format acceptable to the
Commissioner.’’ See 24 CFR 206.203(a).
248 12 CFR 1026.41(d)(8)(vi) requires a periodic
statement to include, if the consumer is more than
45 days delinquent, the total payment amount
needed to bring the account current.
246 See
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substantially similar form receives a safe
harbor for compliance pursuant to
§ 1006.34(d)(2)(ii). The Bureau therefore
expects that, in many circumstances, a
debt collector who is also a mortgage
servicer that is required to provide
periodic statements under Regulation Z,
12 CFR 1026.41 will disclose arrearage
information.
As noted in the section-by-section
analysis of § 1006.34(c)(2)(viii), industry
commenters requested further guidance
about how to combine multiple debts on
a single validation notice. The Bureau is
adopting new comment 34(c)(2)(ix)–2 to
clarify that a debt collector who
combines multiple debts on a single
validation notice complies with
§ 1006.34(c)(2)(ix) by disclosing on the
validation notice a single, cumulative
figure that is the sum of the current
amount of all the debts.
Proposed Provision Not Finalized
As discussed in the section-by-section
analysis of § 1006.26(c), in the February
2020 proposal, the Bureau proposed to
require debt collectors collecting timebarred debt to include time-barred debt
and revival disclosures on the
validation notice.249 Proposed
§ 1006.34(c)(2)(xi) provided that
validation information included those
disclosures, as applicable, if the debt
collector determined after a reasonable
investigation that such disclosures were
required by § 1006.26(c).250 For the
reasons discussed in the section-bysection analysis of § 1006.26(c), the
Bureau is not finalizing the proposed
time-barred debt disclosure
requirements and, accordingly, the
Bureau is not finalizing proposed
§ 1006.34(c)(2)(xi). However, as
discussed in the section-by-section
analysis of § 1006.34(d)(3)(iv)(B), any
disclosures relating to time-barred debt
that are specifically required by
applicable law or that provide safe
harbors under applicable law are
optional disclosures that the final rule
affirmatively permits debt collectors to
include on the validation notice.
34(c)(3) Information About Consumer
Protections
The disclosures in FDCPA section
809(a) help consumers to determine if a
particular debt is theirs and to facilitate
action in response to the receipt of
validation information. However, as the
proposal stated, debt collectors typically
disclose only the information that
FDCPA section 809(a) specifically
references and provide the FDCPA
section 809 information using statutory
249 See
250 Id.
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language, rather than plain language
that consumers can more easily
comprehend.251 To address these
concerns, proposed § 1006.34(c)(3)
provided that certain information about
a consumer’s rights with respect to debt
collection is required validation
information. This information, which is
discussed in the section-by-section
analysis of § 1006.34(c)(3)(i) through (vi)
below, included disclosures specifically
referenced in FDCPA section 809(a)(4)
and (5), as well as additional disclosures
intended to help consumers understand
their debt collection rights.252
Commenters generally supported
requiring debt collectors to disclose
information about a consumer’s rights
with respect to debt collection. Federal
government agency staff and a consumer
advocate commenter stated that
proposed § 1006.34(c)(3) would improve
consumers’ understanding of their rights
in debt collection. Some industry and
industry trade group commenters
supported using plain language
disclosures to explain consumer
protections in debt collection.
Some commenters recommended that
the Bureau require additional
disclosures about consumers’ rights
with respect to debt collection. Federal
government agency staff, a group of 28
State Attorneys General, and a number
of consumer advocate commenters
recommended that debt collectors be
required to disclose the FDCPA section
805(c) cease communication right.253 A
State regulatory agency recommended
that the Bureau require debt collectors
to disclose that a consumer’s failure to
act or to dispute a debt may have credit
reporting implications. This commenter
also recommended that § 1006.34(c)(3)
require debt collectors to disclose how
consumers may obtain an annual credit
report, which consumers are entitled to
under the FCRA and its implementing
Regulation V.254
The Bureau determines, as discussed
in the proposal, that consumers will
benefit from receiving additional
information about their rights in debt
collection and from plain language
disclosures rather than disclosures that
parrot the FDCPA’s statutory text.255
The Bureau therefore is adopting
§ 1006.34(c)(3). Specifically, as
discussed further in the section-bysection analysis below, the Bureau is
adopting § 1006.34(c)(3)(i) through (v)
and its related commentary with minor
modifications, but is not finalizing
proposed § 1006.34(c)(3)(vi), which
addressed the opt-out notice required by
§ 1006.6(e) for electronic
communications or attempts to
communicate.
The Bureau declines to require
additional disclosures about consumer
protections in debt collection, as some
commenters suggested. In particular, the
Bureau concludes that, although
consumers may benefit from
understanding the rights the
commenters discussed, those rights are
not sufficiently related to the purposes
of FDCPA section 809—i.e., helping
consumers to determine if a debt is
theirs and to facilitate action in
response to the receipt of validation
information—to require debt collectors
to include them as validation
information.256 In addition, as discussed
in the section-by-section analysis of
§ 1006.34(c)(3)(iv), the final rule
generally requires debt collectors to
include a statement that informs
consumers that additional information
regarding consumer protections in debt
collection is available on the Bureau’s
website, with a link to the
information.257 The Bureau’s website
will disclose more information about
consumer protections in debt collection,
including about the cease
communication right.
The Bureau is finalizing
§ 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 is finalizing § 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.
255 84
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251 84
FR 23274, 23342 (May 21, 2019).
252 See 15 U.S.C. 1692g(a)(4) and (5).
253 In the November 2020 Final Rule, the Bureau
finalized § 1006.6(c)(1) to implement FDCPA
section 805(c) and to provide that, ‘‘if a consumer
notifies a debt collector in writing that the
consumer refuses to pay a debt or that the consumer
wants the debt collector to cease further
communication with the consumer, the debt
collector must not communicate or attempt to
communicate further with the consumer with
respect to such debt.’’ 85 FR 76734, 78889 (Nov. 30,
2020).
254 See 15 U.S.C. 1681j(a); 12 CFR 1022.136.
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FR 23274, 23342 (May 21, 2019).
example, when Congress established the
cease communication right pursuant to FDCPA
section 805(c), Congress did not require its
disclosure pursuant to FDCPA section 809. The
Bureau concludes that was intentional. Thus, the
Bureau declines to include the cease
communication right as validation information that
debt collectors must disclose.
257 Section 1006.34(c)(3)(iv) requires debt
collectors to include the disclosure if they are
collecting debt related to a consumer financial
product or service, as defined in § 1006.2(f).
Otherwise, debt collectors can optionally include
the disclosure under § 1006.34(d)(3)(viii).
256 For
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5809
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).258 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.
The Bureau proposed
§ 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.259
The Bureau received a variety of
comments in response to proposed
§ 1006.34(c)(3)(i)’s incorporation of the
validation period end date.260 On the
one hand, an industry trade group and
a group of consumer advocate
commenters supported the inclusion,
asserting the validation period end date
would provide certainty to consumers
about the timeframe within which to
exercise their verification rights.
However, other commenters opposed
the inclusion because, if delivery of a
validation notice is delayed and the
consumer receives the notice later than
the debt collector presumed, the
validation period end date would be
inaccurate. Commenters suggested this
could pose legal risk to debt collectors.
To address this concern, an industry
commenter recommended that the
Bureau modify proposed
§ 1006.34(c)(3)(i) to replace the
validation period end date with a
generic statement that a consumer may
request verification within 30 days after
receiving the validation notice.
258 See
15 U.S.C. 1692g(a)(4).
FR 23274, 23343, 23404 (May 21, 2019).
260 The discussion under the ‘‘Model Validation
Notice’’ heading in the section-by-section analysis
of § 1006.34(d)(2) provides details about how the
statement required by § 1006.34(c)(3)(i) is disclosed
on the model validation notice.
259 84
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Some commenters, including
consumer advocate commenters and an
industry trade group, stated that
disclosing the validation period end
date might leave consumers with the
false impression that they could not
raise concerns about a debt after the
validation period expires. A group of
academic commenters argued that a
study suggested that a significant
number of consumers believed that, if
they did not dispute a debt during the
validation period, they would be unable
to assert later that they did not owe the
debt.261 Similarly, an industry
commenter stated that disclosing the
validation period end date might
dissuade consumers from making
verification requests after that date even
though debt collectors sometimes honor
such requests. To address this potential
misunderstanding, some commenters
recommended that the final rule require
debt collectors to inform consumers that
they can raise concerns about a debt
after the validation period end date.
Commenters also addressed the
Bureau’s proposal to require debt
collectors to disclose FDCPA section
809(b)’s collections pause. Federal
government agency staff and a group of
consumer advocate commenters
supported the collections pause
disclosure. However, industry
commenters stated that the disclosure
would be burdensome because it would
encourage consumers to dispute the
debt for the purpose of delaying or
avoiding debt collection. According to
an industry commenter, consumers do
not need to be informed about FDCPA
section 809(b)’s collections pause
because debt collectors are aware of it
and observe it.
The Bureau determines that
consumers will benefit from
§ 1006.34(c)(3)(i)’s disclosure of the
validation period end date. As
discussed in the proposal, the validation
period end date is an integral feature of
consumers’ dispute right. Among other
things, the validation period end date
will provide certainty to consumers
about the timeframe provided by the
FDCPA to exercise their verification
rights.
The Bureau disagrees that a validation
period end date that is inaccurate
because a validation notice was delayed
will present significant legal risk to debt
261 Jeff Sovern & Kate Walton, Are Validation
Notices Valid? An Empirical Evaluation of
Consumer Understanding of Debt Collection
Validation Notices, 70 SMU L. Rev. 63, 128 (2017)
(‘‘Our study indicated that more than a third of the
respondents believed that if they failed to meet the
thirty-day deadline, they would either have to pay
a debt they did not owe or would not be able to
argue in court that they didn’t owe the debt.’’).
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collectors. Final § 1006.34(b)(5) and
comment 34(b)(5)–1 provide that, for
purposes of determining the end of the
validation period, a debt collector who
provides the validation information in
writing or electronically may assume
that a consumer receives the validation
information on any date that is at least
five business days after the debt
collector provides it. If a debt collector
calculates the validation period end
date in accordance with this
presumption, the debt collector will not
violate the FDCPA or its implementing
Regulation F, even if, as final comment
34(b)(5)–1 clarifies, the consumer
receives the validation notice later than
the debt collector assumed. Further, the
Bureau determines that a generic
statement that a consumer may request
verification within 30 days after
receiving the validation notice is not an
adequate substitute for disclosing the
validation period end date. Such a
generic statement could leave many
consumers unsure about when the
validation period ends. For example,
consumers might receive a validation
notice in the mail but not open it
immediately, or they might open it and
return to it later without keeping track
of how much time has passed. In these
and similar scenarios, consumers would
not be able to determine the validation
period end date.
Regarding commenters’ suggestion
that the Bureau require debt collectors
to inform consumers that they can raise
concerns about a debt after the
validation period end date, the Bureau
concludes that it is not necessary to
require such a disclosure. FDCPA
section 809(a) requires specific
consumer disclosures, including
statements about the consumer’s rights
within 30 days of receipt of the notice,
but does not require any additional
statement addressing consumer actions
after the expiration of that period. The
Bureau determines that a specific end
date will not increase consumer
confusion more than general language
such as ‘‘within 30 days.’’ The Bureau’s
testing shows that, while some
confusion does occur, about 40 percent
of participants said they could still
dispute the debt after the validation
period end date.262 Of the remaining 60
percent of participants, about 40 percent
were unclear what would happen if they
wrote to dispute the debt, and only
about 20 percent specifically said that
262 See November 2020 Qualitative Testing
Report, supra note 34, at 13. Similarly, the Bureau’s
prior testing suggested that ‘‘[o]verall, participants’
comments suggest that they understood the
difference between writing before the specified date
[and] writing after that date.’’ FMG Usability
Report, supra note 28, at 56.
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they could not write to dispute the
debt.263 When asked whether the debt
collector would be required to send
information saying they owe the debt if
they wrote to dispute after the
validation period end date, a small
majority of consumers assumed that the
debt collector would be required to do
so.264 Thus, although consumers may
not be certain of the effect of writing to
dispute the debt after the validation
period end date, the Bureau’s testing
indicates that a sizeable majority of
consumers would not be inhibited about
raising general concerns about the debt
after the validation notice end date. As
discussed above, the final rule’s
enhanced and plain-language
disclosures should improve overall
consumer understanding and empower
consumers to respond, should they
choose, to debt collectors. The Bureau
therefore declines to require as part of
the validation information an explicit
statement informing consumers that
they may continue to raise concerns
about the debt after the validation
period end date.
The Bureau also determines that
§ 1006.34(c)(3)(i) should not omit the
collections pause disclosure. As the
proposal noted, consumer testing
indicates that knowing about the
collections pause was important to
consumers and would encourage them
to exercise their dispute right if they
questioned a debt’s validity.265 Debt
collectors have not provided evidence to
support the premise that a significant
number of consumers exercise their
FDCPA section 809 verification rights
solely to evade or delay paying debts
that they owe. Absent such evidence,
the Bureau declines to conclude that
consumers will exercise their rights for
such purposes. Further, regardless of
whether debt collectors are aware of and
comply with FDCPA section 809(b)’s
collections pause requirement, the
Bureau concludes that consumers will
benefit from this disclosure because it
will provide them with more complete
information about the actions that debt
collectors must take if consumers notify
them that the debt is disputed.
For all of these reasons, the Bureau is
finalizing § 1006.34(c)(3)(i) as proposed,
with minor wording changes to clarify
the content of the required disclosure,
including by specifying that the
consumer must notify the debt collector
in writing ‘‘on or before’’ the end of the
validation period, as opposed to
263 Id.
264 Id.
at 13–14.
Cognitive Report, supra note 27, at 30;
see also FMG Summary Report, supra note 29, at
25.
265 FMG
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‘‘before’’ the end of the validation
period, as proposed.266
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 from the current creditor.267
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. The Bureau
proposed § 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.268
Some industry and industry trade
group commenters recommended that
the Bureau not finalize proposed
§ 1006.34(c)(3)(ii).269 Some commenters
stated that the validation information
need not include a statement informing
consumers of their right to request
original-creditor information because,
under the Bureau’s rule, the validation
information will include the creditor as
of the itemization date and, according to
the commenters, that creditor and the
original creditor often will be the same.
Relatedly, some commenters suggested
that, because the validation information
will include the names of the
itemization-date creditor and the
current creditor, debt collectors should
be permitted to omit the statement
informing consumers of their right to
request original-creditor information if
the original creditor is the same as
either of those creditors.270
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266 The
model validation notice uses the term
‘‘by’’ instead of ‘‘on or before’’ for plain language
purposes.
267 See 15 U.S.C. 1692g(a)(5).
268 84 FR 23274, 23343, 23404 (May 21, 2019).
269 See the ‘‘Model Validation Notice’’ discussion
in the section-by-section analysis of § 1006.34(d)(2)
for additional details about how the statement
required by § 1006.34(c)(3)(ii) is disclosed on the
model validation notice.
270 As an alternative to complying with
§ 1006.34(c)(3)(ii), an industry trade group
commenter recommended that debt collectors be
permitted to proactively disclose the originalcreditor information that a consumer would receive
in response to an FDCPA section 809(b) request.
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Some commenters recommended that
the Bureau modify proposed
§ 1006.34(c)(3)(ii) to omit the validation
period end date and the collections
pause disclosures. These comments
were substantially similar to comments
discussed in the section-by-section
analysis of § 1006.34(c)(3)(i).
After considering the feedback, the
Bureau has determined to finalize
§ 1006.34(c)(3)(ii). FDCPA section
809(a)(5) expressly requires debt
collectors to include in the validation
information a statement that, upon the
consumer’s written request within 30
days after receipt of the validation
information, the debt collector will
provide the consumer with the name
and address of the original creditor, if
different from the current creditor. The
Bureau proposed § 1006.34(c)(3)(ii) to
implement that requirement and to
clarify the content of the disclosures for
debt collectors. The Bureau did not
propose an exception to this disclosure
requirement if the original creditor and
the current creditor are the same and
therefore does not have information
regarding the costs or benefits of
finalizing such an exception. To the
extent that commenters were concerned
about the burden of responding to
original-creditor information requests
when the original creditor and the
current creditor are the same, the
Bureau is finalizing a special rule for
that scenario in § 1006.38(c)(2).271 For
these reasons, the Bureau is finalizing
§ 1006.34(c)(3)(ii) as proposed, with
minor wording changes to clarify the
content of the required disclosure,
including by specifying that the
consumer must notify the debt collector
in writing ‘‘on or before’’ the end date
of the validation period, as opposed to
‘‘before’’ the end of the validation
period, as proposed.272
The Bureau declines to omit the
validation period end date and the
collections pause disclosures from
§ 1006.34(c)(3)(ii) for the same reasons
discussed in the section-by-section
analysis of § 1006.34(c)(3)(i).
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
This comment is addressed in the section-bysection analysis of § 1006.38.
271 See the section-by-section analysis of
§ 1006.38(c)(2).
272 The model validation notice uses the term
‘‘by’’ instead of ‘‘on or before’’ for plain language
purposes.
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5811
to be valid.273 The Bureau proposed
§ 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.274
At the time of the proposal, courts in
various jurisdictions had reached
different conclusions about whether
FDCPA section 809(a)(3) requires debt
collectors to recognize oral disputes
about the validity of a debt.275 These
differing decisions principally arose
from the fact that, whereas FDCPA
section 809(a)(4) and (5) explicitly state
that a consumer must notify a debt
collector in writing, FDCPA section
809(a)(3) does not refer to a writing
requirement. In the absence of an
express writing requirement in FDCPA
section 809(a)(3), the majority of circuit
courts that considered the issue had
determined that a consumer’s oral
dispute triggers certain FDCPA
protections, including, for example,
FDCPA section 810’s payment
application requirement.276 Consistent
with this majority position, and
pursuant to its authority to implement
and interpret FDCPA section 809(a)(3)
as well as its authority under DoddFrank Act section 1032(a), the Bureau
proposed to interpret FDCPA section
809(a)(3) to allow oral disputes.277
Industry commenters, industry trade
group commenters, and a group of
academic commenters supported the
Bureau’s proposed interpretation that
FDCPA section 809(a)(3) permits
273 15
U.S.C. 1692g(a)(3).
FR 23274, 23343–44, 23404 (May 21, 2019).
275 Compare Clark v. Absolute Collection Serv.,
Inc., 741 F.3d 487, 490 (4th Cir. 2014) (per curiam)
(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.’’).
276 FDCPA section 810 is implemented by
§ 1006.30(c). See 85 FR 76734, 76843 (Nov. 30,
2020); see also Camacho, 430 F.3d at 1081–82
(holding that oral disputes trigger certain FDCPA
protections, including under FDCPA sections 807(8)
and 810).
277 After the proposal was published, the circuit
split was resolved. In Riccio v. Sentry Credit, Inc.,
the Third Circuit sitting en banc overruled its prior
decision and determined that FDCPA section
809(a)(3) does not require a dispute to be in writing.
Riccio v. Sentry Credit, Inc., 954 F.3d 582, 594 (3d
Cir. 2020) (en banc) (‘‘In short, we conclude that
debt collection notices sent under § 1692g need not
require that disputes be expressed in writing. In
doing so, we overrule Graziano’s contrary
holding.’’).
274 84
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consumers to dispute the validity of a
debt orally or in writing.
Several industry and industry trade
group commenters expressed concerns
about how proposed § 1006.34(c)(3)(iii)
was disclosed on the proposed model
validation notice, perceiving a tension
between the regulatory text and the
proposed model notice text.
Specifically, whereas the proposed
model validation notice stated that a
consumer may ‘‘call or write’’ to dispute
all or part of the debt, proposed
§ 1006.34(c)(3)(iii) did not specify the
manner in which a consumer must
contact the debt collector and instead
used the general term ‘‘contact.’’
As proposed, the Bureau determines
that FDCPA section 809(a)(3) permits
both oral and written disputes. The
Bureau agrees with every circuit court
that has addressed this issue and
interprets the absence of a reference to
a writing requirement in FDCPA section
809(a)(3) to mean that a writing is not
required. Further, commenters overall
supported this interpretation.
The Bureau declines to modify how
§ 1006.34(c)(3)(iii) is phrased on the
model validation notice. The Bureau
developed the phrase ‘‘call or write’’ for
comprehension purposes. The model
notice’s language is intended to be plain
language and consumer-friendly and
was validated through multiple rounds
of qualitative and quantitative consumer
testing.278 Regulatory text and the
model notice language reflecting that
regulatory text need not be identical in
every case. For instance, if consumers
may not understand a requirement as
described in regulatory text, it is
appropriate to express that requirement
in plain language in consumer
disclosures.279
For these reasons, the Bureau is
finalizing § 1006.34(c)(3)(iii) as
proposed, with minor wording changes
to clarify the content of the required
disclosure, including by specifying that
the consumer must notify the debt
collector in writing ‘‘on or before’’ the
end of the validation period, rather than
‘‘before’’ the end of the validation
period, as proposed.280
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34(c)(3)(iv)
Dodd-Frank Act section 1032(a)
permits the Bureau to prescribe rules to
ensure that the features of any consumer
part III.C.
the ‘‘Model Validation Notice’’ discussion
in the section-by-section analysis of § 1006.34(d)(2)
for additional details about how the statement
required by § 1006.34(c)(3)(iii) is disclosed on the
model validation notice.
280 The model validation notice uses the term
‘‘by’’ instead of ‘‘on or before’’ for plain language
purposes.
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.
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 proposed
§ 1006.34(c)(3)(iv) to provide that, if a
debt collector is collecting a consumer
financial product or service debt, as
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.
Commenters generally agreed that
consumers would benefit from
information about additional
protections available to consumers
experiencing debt collection. However,
commenters disagreed about the best
way to provide that information.
A large number of consumer advocate
and academic commenters
recommended that, rather than a
statement that additional information is
available on the Bureau’s website, the
Bureau should require debt collectors to
provide consumers, along with the
validation notice, a reference document
describing consumer protections in debt
collection, similar to the document that
the Bureau developed prior to the
SBREFA process.281 Commenters stated
that a reference document would be
more useful to consumers than a
statement appearing on a validation
notice. Further, some such commenters
stated that proposed § 1006.34(c)(3)(iv)
would not help consumers without
internet access who are unable to visit
the Bureau’s website.
Consumer advocate commenters and a
group of academics also stated that, if
the Bureau does not require a reference
document, the Bureau should revise
proposed § 1006.34(c)(3)(iv) to require
debt collectors to include a web address
that directs consumers to a Bureau page
dedicated to consumer protections in
debt collection, instead of to the
Bureau’s general website landing
page.282 Other commenters stated that
278 See
279 See
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281 For additional detail about information that
the Bureau considered including in the reference
document, see appendix G of the Small Business
Review Panel Outline, supra note 39.
282 Also, in response to proposed
§ 1006.34(d)(4)(ii), a consumer advocate commenter
recommended that the Bureau permit debt
collectors to embed a hyperlink that directs
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requiring consumers to click on a
hyperlink if the validation notice is
delivered electronically would create
procedural hurdles that reduce
consumer follow through and would
pose security risks to consumers.
At least one industry trade group
commenter disagreed and supported
proposed § 1006.34(c)(3)(iv) on the
grounds that including a reference
document with the validation notice
would overwhelm consumers.
For the reasons discussed below, the
Bureau is finalizing § 1006.34(c)(3)(iv)
as proposed with a revision in response
to feedback.
The Bureau declines to require debt
collectors to provide consumers a
reference document describing
consumer protections in debt collection.
Because the Bureau did not propose
such a requirement, the Bureau did not
receive robust feedback in response to
the proposal about what such a required
form should look like and how a
requirement to provide it might operate.
Further, the Bureau expects that most
consumers will receive the disclosure
referring to the Bureau’s website and
will be able to access the website; most
consumers use the internet and have
experience navigating to websites.283
The Bureau determines that
consumers would benefit from being
directed to a page dedicated to
consumer protections in debt collection
instead of the Bureau’s website landing
page. Accordingly, the Bureau is
modifying § 1006.34(c)(3)(iv) to
specifically reference the web page
www.cfpb.gov/debt-collection instead of
the Bureau’s general landing page. The
Bureau is also making a conforming
change to how the statement described
in § 1006.34(c)(3)(iv) is disclosed on the
model validation notice.
The Bureau determines that
consumers will not face significant
security risks when accessing the
Bureau’s website. The vast majority of
validation notices today are delivered
by mail, so an active hyperlink is not
possible. In the case of electronic
communications, the Bureau recognizes
that active hyperlinks can present
security concerns to consumers,
including, among other things, phishing
consumers to the Bureau’s website address
described in proposed § 1006.34(c)(3)(iv). As
discussed in the section-by-section analysis of
§ 1006.34(d)(4)(ii), the Bureau is adopting this
recommendation to permit debt collectors to
include a hyperlink without losing the safe harbor
in § 1006.34(d)(2).
283 For example, a Pew Research Center study in
2019 found that 90 percent of U.S. adults use the
internet. See Pew Research Ctr., Internet/Broadband
Fact Sheet, https://www.pewresearch.org/internet/
fact-sheet/internet-broadband/#who-uses-theinternet (last visited Dec. 1, 2020).
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risks.284 But the Bureau is not requiring
debt collectors to include an active
hyperlink to the Bureau’s website in
validation notices. In other words, even
if the validation information is provided
electronically, § 1006.34(c)(3)(iv) only
requires that the text ‘‘www.cfpb.gov/
debt-collection’’ be displayed in the
information. As discussed in the
section-by-section analysis of
§ 1006.34(d)(4)(ii), a debt collector is
permitted, but not required, to include
an active hyperlink to the Bureau’s
website. This is because hyperlinks are
a common feature of electronic
commercial communications. A
validation notice that includes a
hyperlink to the Bureau’s website may
be safe and convenient for a consumer.
This would particularly be the case if
the debt collector had prior contact with
the consumer and the consumer
recognizes that the validation notice
was sent by a familiar source. If a
consumer is unfamiliar with the debt
collector or otherwise has concerns
about clicking on an active hyperlink,
the consumer could choose, rather than
clicking on the hyperlink, to navigate
independently to the Bureau’s website
to obtain more information about
consumer protections in debt collection.
Accordingly, the Bureau is finalizing
§ 1006.34(c)(3)(iv) to provide that, if a
debt collector is collecting debt related
to a consumer financial product or
service as defined in § 1006.2(f),
validation information includes a
statement that informs the consumer
that additional information regarding
consumer protections in debt collection
is available on the Bureau’s website at
www.cfpb.gov/debt-collection.
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34(c)(3)(v)
Proposed § 1006.34(c)(4) provided
that validation information includes
information that a consumer can use to
take certain actions, including disputing
a debt or requesting original-creditor
information.285 As discussed in the
section-by-section analysis of
§ 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 originalcreditor information. Under § 1006.38,
this writing requirement is satisfied if a
consumer provides a dispute or request
284 See, e.g., Fed. Trade Comm’n, How to
Recognize and Avoid Phishing Scams (May 2019),
https://www.consumer.ftc.gov/articles/howrecognize-and-avoid-phishing-scams (last visited
Dec. 1, 2020).
285 Proposed § 1006.34(c)(4) set forth required
consumer-response information. Proposed
§ 1006.34(d)(3)(iii)(B) and (vi)(B) set forth certain
other consumer-response information related to
payment requests and requests for Spanishlanguage validation notices.
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for original-creditor information 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.286 Thus, debt
collectors are 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 proposed § 1006.34(c)(3)(v) to
provide that validation information
includes a statement explaining how a
consumer can take the actions described
in proposed § 1006.34(c)(4) and (d)(3),
as applicable, electronically, if the debt
collector sends a validation notice
electronically.
Proposed comment 34(c)(3)(v)–1
explained that a debt collector may
provide the information described in
§ 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).287
Proposed comment 34(c)(3)(v)–1 also
clarified 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.
An industry commenter and an
industry trade group commenter
supported proposed § 1006.34(c)(3)(v)
because it would inform consumers
about alternative methods to contact
debt collectors and would increase the
likelihood that consumers would engage
with debt collectors. However, another
industry commenter objected to the
proposal because, the commenter
argued, allowing consumers to exercise
verification rights electronically would
encourage consumers to submit
286 See the section-by-section analysis of
§ 1006.38 and comment 38–1.
287 On the model validation notice, this phrase
appears as ‘‘We accept such requests
electronically.’’ This wording deviates from the
regulatory text due to space considerations and the
context of surrounding disclosures.
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verification requests for the purpose of
delaying or avoiding paying a debt.
The Bureau determines that requiring
debt collectors who provide validation
notices electronically to include
statements on the validation notice
explaining how consumers can dispute
the debt or request original-creditor
information electronically will benefit
consumers by facilitating their ability to
exercise those verification rights
electronically. The Bureau agrees that
such disclosures will increase the
likelihood of engagement between
consumers and debt collectors but does
not agree that they will encourage
consumers to submit disputes or
original-creditor-information requests to
delay or avoid paying the debt. As
discussed in the section-by-section
analysis of § 1006.34(c)(3)(i),
commenters have not provided evidence
demonstrating that a significant number
of consumers exercise their verification
rights with the principal purpose of
avoiding paying debts that they owe.
Absent such evidence, the Bureau
declines to conclude that consumers
will exercise verification rights for this
purpose.
Accordingly, the Bureau is finalizing
§ 1006.34(c)(3)(v) and its related
commentary largely as proposed, except
that the final rule does not require debt
collectors who provide validation
notices electronically to include
statements stating how consumers can
take the actions described in
§ 1006.34(d)(3) (i.e., responding to a
payment prompt (§ 1006.34(d)(3)(iii)) or
requesting a Spanish-language
translation (§ 1006.34(d)(3)(vi)))
electronically.
The Bureau notes that
§ 1006.34(d)(3)(vi)(A) affirmatively
permits a debt collector to include
supplemental information in Spanish
specifying how a consumer may request
a Spanish-language validation notice,
and such information could include
how the consumer may do so
electronically. In addition, as discussed
at the outset of the section-by-section
analysis of § 1006.34, the Bureau is not
finalizing the proposed requirement that
all validation notices must be
substantially similar to the model
validation notice in order to avoid
violating the rule. Therefore, under the
final rule, a debt collector who chooses
to include either or both of the optional
payment disclosures in
§ 1006.34(d)(3)(iii) is not prohibited by
Regulation F from including a statement
about how the consumer can make a
payment electronically (although
including such a statement will take the
debt collector out of the safe harbor in
§ 1006.34(d)(2)). The Bureau is
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finalizing § 1006.34(c)(3)(v) pursuant to
its authority to interpret FDCPA section
809(a) and (b), as well as its authority
under Dodd-Frank Act section 1032(a).
rendered ineffective merely because a
consumer opts out of future electronic
communications pursuant to the
instructions in § 1006.6(e).
34(c)(3)(vi)
34(c)(4) Consumer-Response
Information
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The Bureau proposed
§ 1006.34(c)(3)(vi) to provide that, for a
validation notice delivered in the body
of an email pursuant to procedures set
forth in the proposal, validation
information includes the opt-out
statement required by § 1006.6(e).288
Proposed comment 34(c)(3)(vi)–1
clarified certain details, including that
the requirement would not apply in the
case of validation notices delivered by
hyperlink and that electronic delivery of
a validation notice is not rendered
ineffective if a consumer opts out of
future electronic communications
pursuant to § 1006.6(e).
Although no commenters objected to
proposed § 1006.34(c)(3)(vi), the Bureau
is not finalizing it. The Bureau has
determined that it is not necessary to
require debt collectors to include the
§ 1006.6(e) opt-out instructions on
validation notices sent electronically
because § 1006.6(e) itself already
requires those instructions in every
electronic communication or
communication attempt, which will
includes every electronic
communication transmitting a
validation notice. Thus,
§ 1006.34(c)(3)(vi) would be redundant.
A debt collector who sends a
validation notice electronically may
provide the § 1006.6(e) disclosure in the
electronic communication outside of the
validation notice. A debt collector who
provides the model validation notice
electronically will not lose the safe
harbor described in § 1006.34(d)(2) by
including the § 1006.6(e) disclosure in
the electronic communication outside
the model notice. Accordingly, the
Bureau determines that the § 1006.6(e)
opt-out disclosure is not necessary to
include as validation information.
Although the Bureau is not finalizing
proposed § 1006.34(c)(3)(vi), the Bureau
reaffirms the clarification in proposed
comment 34(c)(3)(vi)–1 that electronic
delivery of a validation notice is not
288 As finalized in the November 2020 Final Rule,
§ 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 a reasonable
and simple method by which the consumer can opt
out of further electronic communications or
attempts to communicate by the debt collector to
that address or telephone number. See 85 FR 76734,
76890 (Nov. 30, 2020).
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FDCPA section 809(b) contains
certain requirements that a debt
collector must satisfy if a consumer
exercises the consumer’s right to
dispute the validity of the debt or
request 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. 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 the
debt collector obtains and mails such
information to the consumer. 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 right to dispute the
debt or request original-creditor
information, which the Bureau
collectively refers to as ‘‘verification
rights.’’
The Bureau proposed § 1006.34(c)(4)
to require a consumer-response
information section to help consumers
exercise their FDCPA section 809(b)
verification rights.289 Specifically,
proposed § 1006.34(c)(4) provided that
required validation information
includes certain consumer-response
information situated next to prompts
that consumers could use to indicate
that they want to take action or make a
request. The proposed information,
which is discussed in the section-bysection analysis of § 1006.34(c)(4)(i)
through (iii), included 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.290 Proposed § 1006.34(c)(4)
289 84
FR 23275, 23404 (May 21, 2019).
discussed in the section-by-section analysis
of § 1006.34(d)(3), proposed § 1006.34(d)(3)(iii)(B)
and (vi)(B) provided that a debt collector also could
include a payment disclosure and Spanish-language
290 As
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provided 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 proposed
§ 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:’’.
As shown on the proposed model
validation notice, the consumerresponse information section appeared
as a tear-off portion of the form.
Proposed comment 34(c)(4)–1 clarified
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 shown on
the model validation notice.
A group of academic commenters
expressed general support for proposed
§ 1006.34(c)(4). However, some industry
commenters objected to the proposed
consumer-response information section.
According to a depository institution,
the proposed consumer- response
information formatted as a tear-off is an
obsolete approach because physical
mail is increasingly less relevant as
consumers prefer electronic
communications. An industry
commenter stated that the proposed
consumer-response information section
would encourage consumers to
communicate through mail, which is
more expensive and time-intensive than
other communication methods, such as
email.
Several commenters raised concerns
about proposed § 1006.34(c)(4)’s use of
the heading ‘‘How do you want to
respond?’’ A group of State Attorneys
General and at least one industry
commenter stated that consumers may
incorrectly infer from this phrase that
they must use the consumer-response
information section to respond to a debt
collector. Some commenters suggested
that this phrase created the false
impression that consumers must engage
with the debt collector, even if they
prefer not to. To address this concern,
consumer advocate commenters and a
group of State Attorneys General
recommended that the consumerresponse information section include
‘‘Do Nothing’’ as a response option.
Some industry trade group
commenters objected to proposed
§ 1006.34(c)(4) being formatted for use
with a return envelope. According to
these commenters, some debt collectors
do not include return envelopes with
validation notice request disclosure as consumerresponse information.
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validation notices and instituting such a
practice would entail significant costs.
However, a consumer group commenter
disagreed and stated that the Bureau
should require debt collectors to include
a return envelope with prepaid postage
to facilitate use of the proposed
consumer-response information section.
After considering comments, the
Bureau is adopting § 1006.34(c)(4) with
minor wording changes to conform to
changes in § 1006.34(d).
The Bureau acknowledges that
electronic communications are
increasingly prevalent in society at
large; however, most debt collectors do
not presently communicate with
consumers electronically, particularly to
provide validation notices.291 Further,
many consumers still prefer to
communicate with debt collectors via
mail instead of email or other electronic
media.292 Given communication
practices in the debt collection industry
and consumer preferences, the Bureau
determines that formatting the model
validation notice consumer-response
information section as a tear-off so that
a consumer can return that portion of
the form by mail if the consumer so
chooses will benefit both debt collectors
and consumers. Thus, if debt collectors
opt not to format the consumer-response
information section as a tear-off, the
§ 1006.34(d)(2) safe harbor will not
apply to their validation notices.
The Bureau concludes that the
heading ‘‘How do you want to
respond?’’ likely will not lead
consumers to believe that they must
respond to the debt collector or use the
consumer-response information section
to do so. Consumer testing indicated
that consumers paid relatively little
attention to this heading.293 Further,
consumers generally grasped the
291 See
85 FR 76734, 76852 (Nov. 30, 2020).
to the CFPB Debt Collection
Consumer Survey, 71 percent of consumers
preferred to be contacted by a debt collector by
mail. Only 12 percent of consumers preferred email.
Bureau of Consumer Fin. Prot., Consumer
Experience with Debt Collection: Findings from
CFPB’s Survey of Consumer Views on Debt, at 29–
30 (Jan. 12, 2017), https://files.consumerfinance.gov/
f/documents/201701_cfpb_Debt-Collection-SurveyReport.pdf (CFPB Debt Collection Consumer
Survey).
293 ‘‘The ‘You Have Rights’ and ‘How do you want
to respond to this notice?’ sections had a
comparatively low number of fixations (i.e., a
testing participant’s eyes resting on a piece of
information) compared to other parts of the notice.
These two sections were often discussed during the
interview as being important so the fewer number
of fixations suggests that this information might
have been easy to read and comprehend.
Participants also commented that these sections
only needed to be scanned, further suggesting that
fewer fixations on this section might have been due
to ease of processing the information rather than a
disinterest in the information. See FMG Usability
Report, supra note 28, at 7.
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292 According
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consequences of not responding to a
validation notice.294 These findings
suggest that the heading will not induce
otherwise unwilling consumers to
engage with debt collectors. This
conclusion is bolstered by findings from
the Bureau’s most recent qualitative
consumer testing. The Bureau’s
consumer testing suggests that
consumers understand that they have
the option of not engaging with a debt
collector in response to a validation
notice.295 This testing also indicates that
consumers understand that, if they
choose to communicate with a debt
collector, they do not have to use the
consumer-response information section
to do so.296 The Bureau therefore
determines that it is unnecessary to
include a ‘‘Do Nothing’’ response
option, as some commenters suggested.
The consumer-response information
section should be formatted for use with
a return envelope. The fact that the
consumer-response information
established by § 1006.34(c)(4) is
formatted on the model validation
notice for use with a return envelope
does not require debt collectors to
include return envelopes with
validation notices, even if they use the
model notice.
Accordingly, the Bureau is finalizing
§ 1006.34(c)(4) with minor wording
changes to conform to changes in
§ 1006.34(d). The Bureau also is
finalizing § 1006.34(c)(4)(i) through (iii)
and their related commentary with
certain modifications that are discussed
in the section-by-section analysis below.
The Bureau is finalizing
§ 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 is also
finalizing § 1006.34(c)(4) pursuant to its
authority under section 1032(a) of the
Dodd-Frank Act, on the basis that the
information in § 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
consumer-response information will
help to ensure that the features of debt
collection are fully, accurately, and
294 See
id. at 83–84.
asked about whether they were legally
required respond to the model validation notice,
approximately 90 percent of participants reported
that they were not. See November 2020 Qualitative
Testing Report, supra note 34, at 11.
296 During testing, participants generally
understood that they could dispute the debt by
telephone, electronically, or writing with or without
the ‘‘tear-off.’’ See id. at 15.
295 When
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5815
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.297 Proposed § 1006.34(c)(4)(i)
provided 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.298 Proposed § 1006.34(c)(4)(i),
which was designed to work in tandem
with § 1006.34(c)(3)(i),299 provided that
consumer-response information
includes the following four statements,
listed in the following order, using the
following phrasing or substantially
similar phrasing, 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).’’
A group of academic commenters and
some consumer advocate commenters
supported the dispute prompts
described in proposed § 1006.34(c)(4)(i).
The academic commenters stated that
the prompts would facilitate consumer
disputes because consumers are
accustomed to using forms with
prompts, such as drop-down menus in
online transactions. According to these
commenters, the Bureau should
facilitate consumer disputes given the
low consumer literacy levels in the
United States—particularly among
consumers with limited English
proficiency (LEP consumers)—and the
FDCPA’s least-sophisticated-consumer
standard.300 These commenters stated
297 15
U.S.C. 1692g(a)(4).
FR 23274, 23404–05 (May 21, 2019).
299 As finalized, § 1006.34(c)(3)(i) provides that
validation information includes the date the debt
collector will consider the end date of the
validation period and a statement that, if the
consumer notifies the debt collector in writing on
or before that date 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.
300 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.’’)
(citations and some internal quotation marks
omitted); Clomon v. Jackson, 988 F.2d 1314, 1319
(2d Cir. 1993) (‘‘To serve the purposes of the
consumer-protection laws, courts have attempted to
articulate a standard for evaluating deceptiveness
298 84
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that facilitating disputes will also
benefit industry because consumer
disputes may lead to questionable or
invalid debts being removed from the
market.
Other commenters objected to
proposed § 1006.34(c)(4)(i). Industry
trade group commenters stated that the
proposed dispute prompts would
increase dispute volume and,
consequently, debt collectors would
incur additional costs responding to
disputes. Industry commenters stated
that higher dispute volumes would
overwhelm debt collectors, making it
difficult to identify and process valid
disputes. Industry and industry trade
group commenters stated that the
proposed dispute prompts would lead
consumers to believe that they had to
dispute the debt, even if they recognized
the debt as valid. Industry and industry
trade groups argued that streamlining
the dispute process would encourage
frivolous disputes. One industry trade
group stated that requiring a lawyer
engaged in debt collection to include
the proposed dispute prompts on a
validation notice would constitute
providing legal advice to unrepresented
persons, which is a violation of attorney
rules of professional conduct.
Industry and industry trade group
commenters stated the proposed dispute
prompts would not solicit enough
information for debt collectors to
evaluate disputes. According to
commenters, the proposed dispute
prompts are too general and would
result in generic disputes that would
increase compliance costs, frustrate
dispute investigation, undermine
consumer communication, and increase
litigation risk. To address these
concerns, commenters recommended
modifications to proposed
§ 1006.34(c)(4)(i). Some commenters
suggested that the validation notice
provide additional space where a
consumer could include additional
dispute detail, update contact
information, or provide communication
preferences. Other commenters
recommended replacing the proposed
dispute prompts with narrative
instructions that solicit dispute detail
and supporting documentation.
As discussed in the section-by-section
analysis of § 1006.34(c)(2)(i),
commenters stated that some debt
collectors receive payments and other
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.’’).
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correspondence, including disputes, at
separate addresses. Industry
commenters stated that proposed
§ 1006.34(c)(4)(i) would effectively
combine a dispute form with a payment
coupon. According to commenters, a
consumer’s dispute may not be
processed in a timely fashion if a
consumer returns a consumer-response
information form with a dispute to a
dedicated payment address.
Several consumer advocate
commenters recommended combining
the proposed dispute prompts into a
single prompt. According to these
commenters, a single dispute prompt
would be appropriate because the
FDCPA does not require a consumer to
specify a reason for a dispute and a
consumer may make unintentional
admissions against their interest by
providing details.
Some commenters suggested
additional dispute-related prompts.
Consumer advocate commenters
recommended prompts for debts
discharged in bankruptcy, debts
resulting from identity theft, and debts
that were previously paid or settled.
Industry commenters urged the Bureau
to add a general account inquiry
prompt. According to one industry
commenter, consumers with an account
inquiry may perceive that they have no
alternative but to select a dispute
prompt if proposed § 1006.34(c)(4)(i)
does not include a general account
inquiry prompt.
An industry commenter asked for
additional guidance about how the
proposed dispute prompts should be
formatted when validation information
is provided on a website.
Consistent with the rationale
discussed in the proposal and for the
following reasons, the Bureau is
adopting proposed § 1006.34(c)(4)(i).
The Bureau determines that
§ 1006.34(c)(4)(i) will help consumers
exercise their FDCPA section 809
dispute rights, in part because prompts
are a common feature in written and
electronic communications and most
consumers are familiar with the
concept. The Bureau determines that
facilitating consumer disputes under
FDCPA section 809 is beneficial,
particularly for less sophisticated
consumers. Further, to the extent
consumer disputes help remove invalid
debts from circulation, § 1006.34(c)(4)(i)
will improve the efficiency of debt
markets.
It is also not clear that finalizing the
dispute prompts will result in a
significant increase in consumer
disputes compared to current dispute
rates. Section 1006.34(c)(2) will require
debt collectors to disclose more
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information about the debt and will
help consumers recognize debts they
owe. Thus, § 1006.34(c)(2) may reduce
the number of disputes arising from lack
of consumer recognition.
The Bureau disagrees that
§ 1006.34(c)(4)(i) will make it more
difficult for debt collectors to identify
and process valid disputes. As noted
above, § 1006.34(c)(2) should reduce the
number of disputes arising from lack of
consumer recognition. Therefore, the
disputes debt collectors receive will be
more likely to reflect problems with the
underlying debt. Further,
§ 1006.34(c)(4)(i)’s dispute prompts—
including § 1006.34(c)(4)(i)(D)’s freeform dispute prompt—may help
consumers articulate and provide more
detailed information about the nature of
their disputes. Thus, debt collectors
may better understand the nature of a
consumer’s dispute and be able to
respond more efficiently than if
consumers had provided generic
disputes.
Further, dispute prompts likely will
not lead consumers to believe that they
must dispute the debt. The Bureau’s
consumer testing indicates that
consumers who receive a validation
notice understand that they are not
required to dispute a debt.301 Further,
the Bureau disagrees that streamlining
the dispute process will significantly
increase the frequency of frivolous
disputes. As discussed in the sectionby-section analysis of § 1006.34(c)(3)(i)
and (v), debt collectors have not
provided evidence that supports the
premise that a significant number of
consumers exercise their FDCPA section
809 verification rights solely to evade or
avoid paying debts that they owe.
Absent such evidence, the Bureau
declines to conclude that consumers
will dispute for such purposes.
The Bureau determines that requiring
debt collectors who are attorneys to
include dispute prompts in the
consumer-response information will not
cause those debt collectors to violate the
professional rule of conduct against
providing legal advice to an
unrepresented person.302 The FDCPA
301 During one round of testing, approximately 50
percent of participants stated that they would
attempt to ‘‘confirm’’ a debt in response to receiving
a validation notice. Participants stated that they
would do so by, for example, contacting either the
creditor or the debt collector. Participants did not
report that they would dispute solely for the
purposes of confirming the details of the debt. See
November 2020 Qualitative Testing Report, supra
note 34, at 11.
302 See Am. Bar Ass’n, Model Rules of
Professional Conduct, Rule 4.3: Dealing with
Unrepresented Person https://
www.americanbar.org/groups/professional_
responsibility/publications/model_
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requires all debt collectors, including
debt collectors who are attorneys, to
include in the validation information
statements relating to the consumer’s
right to dispute the debt. The dispute
prompt merely provides consumers a
simple way to exercise that right if the
consumer so chooses; it does not advise
the consumer whether to do so. In
addition, the commenter that raised this
concern cited no case law, legal
interpretation, or comparable evidence
to support the proposition that
including the dispute prompt will be
problematic.
The Bureau is not modifying
§ 1006.34(c)(4)(i) to provide additional
space for consumers to provide dispute
details or to replace the dispute prompts
with narrative instructions. As
discussed above, the Bureau finds that
it is unlikely that § 1006.34(c)(4)(i) will
increase generic dispute volume. On the
contrary, the dispute prompts—
including the free-form dispute prompt
in § 1006.34(c)(4)(i)(D)—will provide
debt collectors with more detailed
dispute information than they receive in
many cases today. Further, the free-form
dispute prompt informs consumers that
they can provide additional information
on the reverse of the consumerresponse-information section (which is
formatted as a tear-off on the model
validation notice) or on a separate page.
Thus, there is no need to provide
additional space for dispute detail on
the validation notice itself.
Section 1006.34(c)(4)(i) will not lead
to disputes being misdirected to
dedicated payment addresses. As
discussed in the section-by-section
analysis of § 1006.34(c)(4)(iii), the debt
collector must disclose in the consumerresponse information section the same
mailing address disclosed pursuant to
§ 1006.34(c)(2)(i), which is the mailing
address where the debt collector accepts
disputes and requests for originalcreditor information.
The Bureau declines to structure
§ 1006.34(c)(4)(i) as a single dispute
prompt. As discussed above, the dispute
prompts are designed to help consumers
articulate, and debt collectors better
understand, the nature of a consumer’s
dispute and respond more efficiently
than if consumers had provided generic
disputes. Reformulating
§ 1006.34(c)(4)(i) as a single prompt
would undermine this goal. Meanwhile,
the dispute prompts described in
§ 1006.34(c)(4)(i) do not contain
individualized information that could
reasonably result in a consumer making
of_professional_conduct/rule_4_3_dealing_with_
unrepresented_person/ (last visited Dec. 2, 2020).
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an unintentional admission against their
interest.
The Bureau declines to adopt
additional dispute-related prompts.
Additional prompts for debts discharged
in bankruptcy, debts resulting from
identity theft, and debts that were
previously paid or settled are, in the
aggregate, not feasible and would likely
overwhelm consumers. Further, the
Bureau believes the dispute prompts in
§ 1006.34(c)(4)(i)(B) (this is not my debt)
and (C) (the amount is wrong)
essentially capture these scenarios.
The Bureau also declines to add a
general account inquiry prompt distinct
from the dispute prompt, as suggested
by some commenters who argued that
consumers would use the dispute
prompts to obtain general information.
The Bureau’s testing has shown that
consumers generally understand that
their response options are not limited to
selecting a dispute prompt and that
disputing the debt is not the appropriate
method to raise a general question about
the account.303
The Bureau declines to provide
additional guidance about formatting
the dispute prompts if validation
information is provided on a website.
As discussed in the November 2020
Final Rule, the Bureau did not finalize
several proposed interventions related
to electronic delivery of required
notices, including proposed alternative
procedures for providing the validation
information on a secure website
(proposed § 1006.42(c)(2)(ii)).304
Because the Bureau is not addressing
electronic delivery more broadly, the
Bureau declines here to provide
guidance about disclosing validation
information on websites. However, as
discussed in the section-by-section
analysis of § 1006.34(d)(2), in contrast to
the proposal, debt collectors are not
required to use the model validation
notice or a substantially similar form.
Accordingly, the Bureau is finalizing
proposed § 1006.34(c)(4)(i) pursuant to
its authority to implement and interpret
FDCPA section 809, as well as its
authority under Dodd-Frank Act section
1032(a).
34(c)(4)(ii) Original-Creditor
Information Prompt
FDCPA section 809(a)(5) requires a
debt collector to disclose to consumers
303 During usability testing, when participants
were asked what they could do if they did not think
they owed the debt, ‘‘all participants understood
that they had options for contacting the debt
collector to dispute the debt,’’ which included
calling and writing. FMG Usability Report, supra
note 28, at 48. See also November 2020 Qualitative
Testing Report, supra note 34, at 11 (discussion in
‘‘Response to the model validation notice’’ section).
304 85 FR 76734, 76850–55 (Nov. 30, 2020).
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their right under FDCPA section 809(b)
to request the name and address of the
original creditor, if different from the
current creditor.305 Proposed
§ 1006.34(c)(4)(ii) provided 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.306
Proposed § 1006.34(c)(4)(ii) was
intended to work in tandem with
proposed § 1006.34(c)(3)(ii).307 The
Bureau received no comments
specifically addressing proposed
§ 1006.34(c)(4)(ii) and is finalizing it as
proposed.
34(c)(4)(iii)
FDCPA section 809(b) assumes that a
consumer has the ability to write to a
debt collector to exercise the consumer’s
verification rights.308 Requiring a debt
collector to include mailing addresses
for the consumer and the debt collector,
along with the consumer-response
information described in
§ 1006.34(c)(4)(i) and (ii), may facilitate
a consumer’s ability to exercise the
consumer’s verification rights. The
Bureau proposed § 1006.34(c)(4)(iii) to
provide that consumer-response
information includes mailing addresses
for the consumer and the debt
collector.309
An industry trade group stated that
some debt collectors use vendors to
receive and process mail from
consumers. According to this
commenter, the Bureau should permit a
debt collector to disclose the address at
which a debt collector receives mail,
even if that address is not the debt
collector’s physical address.
The Bureau is finalizing
§ 1006.34(c)(4)(iii) with a clarifying
revision that addresses the commenter’s
request regarding letter vendor mailing
addresses. The Bureau is revising
§ 1006.34(c)(4)(iii) to provide that the
mailing addresses disclosed for the
consumer and the debt collector in the
consumer-response information must
include the debt collector’s and the
305 15
U.S.C. 1692g(a)(5).
FR 23274, 23405 (May 21, 2019).
307 As finalized, § 1006.34(c)(3)(ii) provides that
validation information includes the date that the
debt collector will consider the end date of the
validation period and a statement that, if the
consumer requests in writing on or before that date
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.
308 See 15 U.S.C. 1692g(b).
309 84 FR 23274, 23405 (May 21, 2019).
306 84
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consumer’s names and mailing
addresses as disclosed pursuant to
§ 1006.34(c)(2)(i) and (ii). In turn, the
Bureau notes that final § 1006.34(c)(2)(i)
and comment 34(c)(2)(i)–2 permit debt
collectors to disclose a vendor’s mailing
address, if that is an address at which
the debt collector accepts disputes and
requests for original-creditor
information. Thus, under the final rule,
a debt collector may include a vendor’s
address in the consumer-response
information if that is the address that
the debt collector discloses pursuant to
§ 1006.34(c)(2)(i).
The Bureau notes that final
§ 1006.34(c)(2)(i) and comment
34(c)(2)(i)–1 permit a debt collector to
disclose its trade name or DBA, instead
of its legal name. Thus, under the final
rule, a debt collector must disclose its
trade name or DBA in the consumerresponse information if that is the name
that the debt collector discloses
pursuant to § 1006.34(c)(2)(i).
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.310 As discussed
in the section-by-section analysis of
§ 1006.34(c)(2)(vi) through (viii), the
Bureau interprets FDCPA section
809(a)(1) to require debt collectors to
disclose three pieces of itemizationrelated 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.
For certain residential mortgage debt
covered by TILA, as implemented by
Regulation Z, 12 CFR 1026, 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 understands that most
residential mortgage debt is subject to
this requirement, although exceptions
exist.311 The Bureau further
understands that a consumer is
310 15
U.S.C. 1692g(a)(1).
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 exempt from the
periodic statement requirement.
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provided with such a periodic statement
every billing cycle, even if a loan is
transferred between servicers. Pursuant
to 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 proposal stated 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).312
Proposed § 1006.34(c)(5) therefore
provided 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 provided 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 referred
to that periodic statement in the
validation notice. Proposed comment
34(c)(5)–1 provided examples clarifying
how debt collectors could comply with
§ 1006.34(c)(5). Consistent with the
proposal’s rationale, and for the reasons
discussed below, the Bureau is adopting
§ 1006.34(c)(5) and its related
commentary with a substantive
modification and a clarification.
Some commenters recommended that
the Bureau expand proposed
§ 1006.34(c)(5) to cover additional debt
types. An industry trade group
commenter stated that the Bureau
should revise proposed § 1006.34(c)(5)
to apply to all residential mortgage debt,
including to transactions that are
exempt from § 1026.41(b)’s periodic
statement requirement, such as
mortgage loans with certain consumers
in bankruptcy. As discussed in detail in
the section-by-section analysis of
§ 1006.34(c)(2)(viii), the Bureau received
feedback that its proposed itemization
would be incompatible with the account
characteristics of debts in bankruptcy.
Thus, this commenter suggested that the
Bureau should revise proposed
§ 1006.34(c)(5) to permit a debt collector
to reference the consumer’s bankruptcy
case and the filed or pending proof of
claim instead of providing the
itemization-related disclosures required
by § 1006.34(c)(2). Other industry trade
group commenters variously
recommended that the special rule
extend to reverse mortgages structured
312 84
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as open-end credit, home-equity lines of
credit, and credit cards.
A consumer advocate commenter
recommended that the Bureau revise
proposed § 1006.34(c)(5) to apply only
to debts that are currently subject to
Regulation Z, 12 CFR 1026.41, to reduce
the likelihood that a debt collector
provides an outdated periodic
statement. According to the commenter,
TILA coverage is fluid and a significant
amount of time can elapse between
when the creditor provides a last
periodic statement and when the debt
collector provides a validation notice.
This commenter recommended that the
Bureau revise proposed § 1006.34(c)(5)
to provide that the previous periodic
statement must have been provided no
more than 31 days before the validation
notice is sent. The commenter also
recommended that, if any entity other
than the current servicer provided the
most recent periodic statement, the debt
collector must conduct a reasonable
investigation to verify the accuracy of
the prior entity’s periodic statement or
prepare its own periodic statement.
The Bureau declines to expand
§ 1006.34(c)(5) to cover additional debt
types. For certain residential mortgage
debt, the final rule permits debt
collectors to provide a periodic
statement that was provided under 12
CFR 1026.41(d)(3) in lieu of the
information described in final
§ 1006.34(c)(2)(vi) through (viii) because
those periodic statement disclosures are
functionally equivalent to, and as useful
for the consumer as, that itemization
information. This special rule is not
appropriate for the additional debt types
recommended by commenters because
those debt types are not subject to
prescriptive disclosure regimes, such as
Regulation Z. The Bureau doubts that
disclosures used for those other debt
types relate to information that is
functionally equivalent to, or as useful
as, the information § 1006.34(c)(2)(vi)
through (viii) requires. For instance,
mortgage loans with certain consumers
in bankruptcy are exempt from
§ 1026.41(b)’s periodic statement
requirement.313 With respect to debts in
bankruptcy in general, the Bankruptcy
Code does not prescribe disclosure
requirements for proofs of claim that are
comparable to Regulation Z, 12 CFR
1026.41(d)(3). As discussed in the
section-by-section analysis of
§ 1006.34(c)(2)(ix), reverse mortgages are
not subject to prescriptive regulatory
requirements for periodic statements.
The periodic statement requirement in
12 CFR 1026.41(b) does not cover openend consumer credit transactions,
313 See
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including home-equity lines of credit.314
With respect to credit card debt, no
special accommodation is necessary as
debt collectors can readily disclose the
itemization information pursuant to
§ 1006.34(c)(2)(vi) through (viii).
The Bureau determines that
§ 1006.34(c)(5) should apply only to
debts that are currently subject to
Regulation Z, 12 CFR 1026.41.
Modifying the proposal to this effect is
appropriate to reduce the likelihood that
a debt collector provides an outdated
periodic statement, which may not
provide information that is functionally
equivalent to, or as useful as, the
information described in
§ 1006.34(c)(2)(vi) through (viii). The
Bureau therefore is revising proposed
§ 1006.34(c)(5) and its related
commentary to provide that the special
rule only applies to residential mortgage
debt if a periodic statement is required
under Regulation Z, 12 CFR 1026.41, at
the time a debt collector provides the
validation notice.315
Accordingly, the Bureau is finalizing
§ 1006.34(c)(5) as described above and is
finalizing comment 34(c)(5)–1 with
minor revisions for clarity and
consistency with provisions of the final
rule.
34(d) Form of Validation Information
34(d)(1) In General
The Bureau proposed
§ 1006.34(d)(1)(i) to require that the
validation information described in
§ 1006.34(c) be conveyed in a clear and
conspicuous manner. The Bureau
reasoned that FDCPA section 809(a)’s
required disclosures would be
ineffective unless a debt collector
disclosed them in a manner that was
readily understandable to consumers.316
The Bureau received no comments
specifically addressing proposed
§ 1006.34(d)(1)(i). The Bureau therefore
is finalizing it largely as proposed but
renumbered as § 1006.34(d)(1) 317 and
with a wording change solely for
consistency with final § 1006.34(c). The
Bureau adopts § 1006.34(d)(1) to
314 See
12 CFR 1026.41(a)(1).
§ 1006.34(d)(2)(ii), a debt collector who
uses the model validation notice and who also uses
the special rule for certain residential mortgage debt
under § 1006.34(c)(5) receives a safe harbor for use
of the model notice except with respect to the
disclosures that appear on the separate page.
316 84 FR 23274, 23348 (May 21, 2019). Section
1006.34(b)(1) defines clear and conspicuous, and
the Bureau responded to comments on that
definition in the section-by-section analysis of
§ 1006.34(b)(1).
317 As discussed under the heading Proposed
Provision Not Finalized in this section-by-section
analysis, the Bureau is not finalizing proposed
§ 1006.34(d)(1)(ii) and therefore is finalizing
proposed § 1006.34(d)(1)(i) as § 1006.34(d)(1).
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315 Under
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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 adopts § 1006.34(d)(1)
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
finalizes 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.
Proposed Provision Not Finalized
As noted at the outset of the sectionby-section analysis of § 1006.34, the
Bureau proposed that debt collectors
could use the model validation notice to
comply with the disclosure
requirements proposed in
§ 1006.34(a)(1)(i) and (d)(1).318 In turn,
the Bureau proposed § 1006.34(d)(1)(ii)
to require that, if provided in a
validation notice, the content, format,
and placement of the validation
information in § 1006.34(c) and the
optional disclosures in § 1006.34(d)(3)
must be substantially similar to the
model validation notice. Proposed
comment 34(d)(1)(ii)–1 explained that a
debt collector could make certain
changes as long as the resulting
disclosures were substantially similar to
the model validation notice, and it
provided an example of a change that
debt collectors may make to the
validation notice if the consumer is
deceased.
While some industry, industry trade
group, and consumer advocate
commenters supported proposed
§ 1006.34(d)(1)(ii), other industry and
industry trade group commenters raised
concerns that the proposed model
validation notice would not
accommodate all debt types and debt
collection practices, suggesting that
some debt collectors therefore would be
unable to comply with proposed
§ 1006.34(d)(1)(ii). At least two
commenters, including a debt buyer
specializing in medical debt, stated that
the proposed model validation notice
was not well-suited for non-financial
debts, such as medical debts. A number
of commenters objected to the proposal
because it would not allow debt
collectors to combine multiple debts in
a single validation notice or place
318 As discussed in the section-by-section analysis
of § 1006.34(d)(1), the Bureau proposed
§ 1006.34(d)(1)(i) to require that required validation
information be provided in a clear and conspicuous
manner.
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5819
multiple validation notices in one
envelope. Commenters asked the Bureau
to modify proposed § 1006.34(d)(1)(ii) to
provide debt collectors more flexibility
to customize validation notices to
accommodate their business practices
and the types of debts they collect.
As discussed in the section-by-section
analysis of § 1006.34(d)(2), the Bureau
has determined that a model validation
notice will benefit consumers and
industry. However, based in part on
feedback from commenters, the Bureau
also has determined that proposed
§ 1006.34(d)(1)(ii) was overly
prescriptive. Proposed
§ 1006.34(d)(1)(ii) would have required
any validation notice provided by a debt
collector to be substantially similar to
the model validation notice. Such a
requirement could cause some debt
collectors to face undue compliance
challenges depending on their business
practices and the types of debts they
collect.
For this reason, the Bureau is not
finalizing proposed § 1006.34(d)(1)(ii)
and its related commentary. Instead, as
discussed in the section-by-section
analysis of § 1006.34(d)(2), the Bureau is
adopting a more flexible framework in
which debt collectors need not use
either the model validation notice,
specified variations of the model notice,
or a substantially similar form, but debt
collectors who do so will receive a safe
harbor for compliance with the
information and form requirements of
§ 1006.34(c) and (d)(1).319 This flexible
framework is more consistent with
model form safe harbors in other
consumer financial regulations.320 The
Bureau determines that this new
framework will accommodate industry
without significantly increasing risks to
consumers because the Bureau believes
it is likely that, if possible, debt
collectors will use the model validation
notice, specified variations of the model
notice, or a substantially similar form to
receive the compliance safe harbor. The
Bureau notes that a debt collector who
provides the validation information in a
form that is not substantially similar
either to the model validation notice or
to a specified variation of the model
notice also is subject to the FDCPA
section 807 prohibition on false or
misleading representations and the
FDCPA section 809(b) prohibition on
overshadowing.
319 The Bureau is relocating and repurposing
some of the proposed text of § 1006.34(d)(1)(ii) and
comment 34(d)(1)(ii)–1 to § 1006.34(d)(2). See the
section-by-section analysis of § 1006.34(d)(2).
320 15 U.S.C. 1601 et seq.
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34(d)(2) Safe Harbor
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As discussed, the Bureau proposed
§ 1006.34(d)(2) to provide, pursuant to
its authority under Dodd-Frank Act
section 1032(b), that a debt collector
who uses the model validation complies
with the disclosure requirements of
§ 1006.34(a)(1)(i) and (d)(1).321 Proposed
comment 34(d)(2)–1 provided certain
details regarding use of the model
validation notice. Under proposed
§ 1006.34(d)(2) and as explained in
proposed comment 34(d)(2)–1, although
use of the model validation notice was
not required, debt collectors would have
received a safe harbor for compliance
only if they used the model validation
notice. Under proposed § 1006.34(d)(2),
debt collectors would not have received
a safe harbor if they used a form that
was substantially similar to the model
validation notice.
As discussed below, the Bureau is
finalizing proposed § 1006.34(d)(2) and
comment 34(d)(2)–1 with significant
revisions to, among other things,
provide that debt collectors may obtain
a safe harbor for compliance with the
validation information disclosure
requirements by using either the model
validation notice, specified variations of
the model notice, or a substantially
similar form. The Bureau is finalizing
new commentary to provide additional
details regarding the revised safe harbor
framework.
Industry and industry trade group
commenters overall supported
providing a safe harbor to debt
collectors who use the model validation
notice. An industry and an industry
trade group commenter stated that a safe
harbor would reduce frivolous litigation
and compliance costs. An industry
commenter stated that not requiring
debt collectors to use the model
validation notice would help to ensure
that debt collectors can provide
validation notices in a manner
consistent with their business practices
and the debt types they collect.
Some industry commenters asked the
Bureau to specify what optional
disclosures could be added to the model
notice. A number of industry and
industry trade group commenters also
asked the Bureau to further clarify what
changes debt collectors could make to
321 84 FR 23274, 23405 (May 21, 2019). As
discussed elsewhere in part V, proposed
§ 1006.34(a)(1)(i) provided that debt collectors must
send validation notices containing the information
described in proposed § 1006.34(c) to consumers in
a manner permitted by § 1006.42 (i.e., in a manner
reasonably expected to provide actual notice and in
a form that the consumer may keep and access
later). And proposed § 1006.34(d)(1) provided that
debt collectors must provide such validation
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the model validation notice and still
receive the safe harbor.
Relatedly, some industry and industry
trade group commenters asked the
Bureau to clarify the meaning of
‘‘substantially similar,’’ and two
industry trade group commenters
recommended that the Bureau adopt
Regulation Z’s definition of
substantially similar. Some industry and
industry trade group commenters
recommended that the Bureau expand
§ 1006.34(d)(2) to provide that debt
collectors who use the model validation
notice comply with FDCPA section
807’s prohibition on false or misleading
statements and FDCPA section 809(b)’s
overshadowing prohibition.322
A group of consumer advocate
commenters stated that proposed
§ 1006.34(d)(2) was too broad.
Specifically, according to the
commenter, the safe harbor’s crossreference to § 1006.34(a)(1)(i) was
overbroad because simply using the
model validation notice does not mean
that the debt collector sent the
validation notice in an initial
communication or within five days of
the initial communication as required
by § 1006.34(a)(1)(i). This commenter
recommended that the Bureau remove
the reference to § 1006.34(a)(1)(i) from
§ 1006.34(d)(2).
After considering this feedback, and
to clarify each of the ways in which a
debt collector may receive a safe harbor
for compliance with the final rule’s
validation information disclosure
requirements, the Bureau is finalizing
§ 1006.34(d)(2) and its related
commentary with significant revisions,
as follows.
34(d)(2)(i) In General
First, the Bureau is finalizing
§ 1006.34(d)(2)(i) to provide that, as
proposed, a debt collector who uses the
model validation notice receives a safe
harbor for compliance with the final
rule’s validation information disclosure
requirements. The Bureau determines
that a safe harbor is appropriate because
the model validation notice will
effectively disclose information required
by § 1006.34(c), and the safe harbor will
incentivize debt collectors to use the
model notice.
The Bureau agrees that the
§ 1006.34(d)(2) safe harbor should not
cover delivery of the validation notice.
The Bureau recognizes the risk that a
322 See 15 U.S.C. 1692e; see also 15 U.S.C.
1692g(b) (‘‘Any collection activities and
communication during the 30-day period may not
overshadow or be inconsistent with the disclosure
of the consumer’s right to dispute the debt or
request the name and address of the original
creditor.’’).
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debt collector could deliver the model
validation notice in an ineffective
manner and that, as a result, the notice
would be delayed or never received by
the consumer. The Bureau does not
intend § 1006.34(d)(2) to provide a safe
harbor in such a scenario. For this
reason, the Bureau is finalizing
§ 1006.34(d)(2)(i) to specify that the safe
harbor for use of the model notice
covers only compliance with the
information and form requirements of
final § 1006.34(c) and (d)(1).
In response to comments requesting
clarity about the use of optional
disclosures on the model notice, the
Bureau is finalizing § 1006.34(d)(2)(i) to
squarely address how the safe harbor
applies with respect to the
§ 1006.34(d)(3) optional disclosures.323
First, the Bureau clarifies, as was
intended in the proposal, that a debt
collector may include any or all of the
§ 1006.34(d)(3) optional disclosures
without losing the safe harbor pursuant
to § 1006.34(d)(2). Specifically, final
§ 1006.34(d)(2)(i) provides that the
model validation notice contains the
validation information required by
§ 1006.34(c) and certain optional
disclosures permitted by
§ 1006.34(d)(3). Section 1006.34(d)(2)(i)
further provides that a debt collector
who uses the model validation notice
complies with the information and form
requirements of § 1006.34(c) and (d)(1),
including if the debt collector: Omits
any or all of the optional disclosures
shown on the model notice (see
§ 1006.34(d)(2)(i)(A)); or adds any or all
of the optional disclosures described in
§ 1006.34(d)(3) that are not shown on
the model notice (see
§ 1006.34(d)(2)(i)(B)), provided that any
such optional disclosures are no more
prominent than any of the required
validation information.324
323 Proposed § 1006.34(d)(3) specified that a debt
collector who used the model validation notice
could include any of the optional disclosures along
with the validation information without losing the
§ 1006.34(d)(2) safe harbor for compliance.
324 The model validation notice includes the
following optional disclosures permitted by
§ 1006.34(d)(3), each of which is described in more
detail in the section-by-section analysis below: (1)
Debt collector telephone contact information (see
§ 1006.34(d)(3)(i)); (2) reference code (see
§ 1006.34(d)(3)(ii)); (3) payment disclosures (see
§ 1006.34(d)(3)(iii)); (4) a statement referring to
disclosures made under applicable law on the
reverse of the validation notice (see
§ 1006.34(d)(3)(iv)(A)); (5) debt collector’s website
(see § 1006.34(d)(3)(v)(A)); (6) statement explaining
how a consumer can dispute the debt or request
original-creditor information electronically (see
§ 1006.34(d)(3)(v)(B)); (7) Spanish-language
translation disclosures (see § 1006.34(d)(3)(vi)); (8)
merchant brand information (see
§ 1006.34(d)(3)(vii)); and (9) for debt not related to
a consumer financial product or service, the
information specified in § 1006.34(c)(2)(iii) or
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The requirement that any
§ 1006.34(d)(3) optional disclosures that
are added to the model validation notice
be no more prominent than any of the
validation information is designed to
ensure that any such optional
disclosures do not overload consumers
with information or distract them from
the required validation information. A
debt collector who chooses to include
one or more of the § 1006.34(d)(3)
optional disclosures that do not appear
on the model validation notice, but who
violates the no-more-prominent
requirement, loses the safe harbor under
§ 1006.34(d)(2) and may violate
§ 1006.34 depending on the facts and
circumstances.
As discussed in the section-by-section
analysis of § 1006.34(c)(1), a consumer
advocate commenter asked the Bureau
to clarify what version of the FDCPA
section 807(11) disclosure should
appear on the validation notice: The
longer, initial disclosure described in
§ 1006.18(e)(1) or the shorter,
subsequent disclosure described in
§ 1006.18(e)(2). The model validation
notice includes the disclosure required
by § 1006.18(e)(1). The Bureau is
adopting new comment 34(d)(2)(i)–1 to
clarify that a debt collector who uses the
model notice to provide a validation
notice as described in
§ 1006.34(a)(1)(i)(B)—i.e., a debt
collector who provides the validation
notice within five days of the initial
communication—may replace the
disclosure required by § 1006.18(e)(1)
with the disclosure required by
§ 1006.18(e)(2) without losing the safe
harbor provided by use of the model
notice. Comment 34(d)(2)(i)–1 also
refers to comment 34(c)(1)–1 for further
guidance related to providing the
disclosure required by § 1006.18(e) on a
validation notice.
The Bureau declines to extend the
§ 1006.34(d)(2) safe harbor to cover
compliance with FDCPA section 807’s
prohibition on false or misleading
statements. A debt collector who uses
the model validation notice is still
capable of making false or misleading
statements to consumers in the notice.
For example, a debt collector using the
(c)(3)(iv) (i.e., name of the creditor to whom the
debt was owed on the itemization date and Bureau’s
debt collection website, respectively) (see
§ 1006.34(d)(3)(viii)). The model validation notice
does not include the following optional disclosures
permitted by § 1006.34(d)(3): (1) Time-barred debt
disclosures made under applicable law on the front
of the validation notice (see § 1006.34(d)(3)(iv)(B));
(2) debt collector email address (see
§ 1006.34(d)(3)(v)(A)); and (3) affinity brand or
facility name information (but, as noted above,
merchant brand information is shown on the model
notice in the same location) (see
§ 1006.34(d)(3)(vii)).
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model validation notice could include
false or misleading information about
the debt, such as an inflated current
amount of the debt.
However, the Bureau agrees that debt
collectors who use the model validation
notice should have a safe harbor for
compliance with FDCPA section
809(b)’s overshadowing prohibition.
The Bureau provides a safe harbor to
that effect in § 1006.38(b). The sectionby-section analysis of § 1006.38(b)
discusses this change in further detail.
34(d)(2)(ii) Certain Disclosures on a
Separate Page
To conform with modifications in
other sections of the Rule that permit
debt collectors to make certain
itemization-related disclosures on
separate pages, the Bureau is finalizing
new § 1006.34(d)(2)(ii). As discussed in
the section-by-section analysis of
§ 1006.34(c)(2)(viii), when disclosing
the itemization of the current amount of
the debt, a debt collector has the option
of disclosing that itemization on a
separate page. As discussed in the
section-by-section analysis of
§ 1006.34(c)(5), the final rule establishes
a special rule for certain residential
mortgage debt that permits a debt
collector, subject to certain conditions,
to provide a periodic statement under
Regulation Z, 12 CFR 1026.41, instead
of the itemization-related validation
information required by
§ 1006.34(c)(2)(vi) through (viii).
Section 1006.34(d)(2)(ii) establishes
how these provisions interact with the
safe harbor provided by use of the
model notice. Specifically,
§ 1006.34(d)(2)(ii) establishes that a debt
collector who uses the model validation
notice and makes certain disclosures on
a separate page pursuant to
§ 1006.34(c)(2)(viii) or (5) may still
receive a safe harbor for use of the
model notice except with respect to the
disclosures that appear on the separate
page.
34(d)(2)(iii) Substantially Similar Form
As discussed in the section-by-section
analysis of § 1006.34(d)(1), the Bureau
has determined that debt collectors
should receive a safe harbor for the
information and form requirements of
§ 1006.34(c) and (d)(1) if they use a form
that is substantially similar to the model
validation notice. The Bureau
determines that, so long as a form is
substantially similar to the model
notice, the validation information
disclosures will remain effective; the
Bureau therefore is finalizing
§ 1006.34(d)(2) to provide this flexibility
for debt collectors.
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For this reason, final
§ 1006.34(d)(2)(iii) provides that a debt
collector who uses the model validation
notice as described in § 1006.34(d)(2)(i)
or (ii) may make changes to the form
and retain a safe harbor for compliance
with the information and form
requirements of § 1006.34(c) and (d)(1),
provided that the form remains
substantially similar to the model
notice. (As discussed elsewhere in this
Notice, a debt collector may comply
with the requirements in § 1006.34(c)
and (d)(1) without using the model
validation notice.)
Final comment 34(d)(2)(iii)–1
provides details regarding the meaning
of substantially similar, as requested by
commenters, including examples of
permissible changes. The Bureau
believes that these are differences that
may be useful to debt collectors and
consumers and will not increase the risk
of consumer harm.
One permissible change relates to
deceased consumers. Comment
34(d)(2)(iii)–1 incorporates proposed
comment 34(d)(1)(ii)–1, which
discussed changes that debt collectors
could make if the consumer were
deceased. The Bureau proposed
comment 34(d)(1)(ii)–1 to explain 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
the model notice. Proposed comment
34(d)(1)(ii)–1 also provided an example
of a change that debt collectors may
make to the model validation notice if
the consumer is deceased.
The Bureau explained that, although
the model 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 proposed model validation notice
stated that ‘‘you owe’’ the debt collector.
While nothing in the proposal would
have prohibited a debt collector from
including a cover letter to explain the
nature of the validation notice,
proposed comment 34(d)(1)(ii)–1 also
clarified that a debt collector could
modify inapplicable language in the
validation notice that could suggest that
the recipient of the notice was liable for
the debt. For example, if a debt collector
sent a validation notice to a person
authorized to act on behalf of the
deceased consumer’s estate, and if that
person was not liable for the debt, the
debt collector could use the deceased
consumer’s name instead of ‘‘you.’’
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The Bureau received a few comments
on proposed comment 34(d)(1)(ii)–1.
One trade group commenter
recommended that the Bureau allow
debt collectors to replace second-person
pronouns with references to the estate,
such as ‘‘the estate’s bill.’’ A group of
consumer advocates stated that,
although the comment’s example would
be appropriate in certain circumstances,
the Bureau should provide an entirely
separate model validation notice for
decedent debt because, these
commenters believed, debt collectors
would be unlikely to diverge from the
model notice. Two trade group
commenters also asked the Bureau to
create a second model validation notice
for decedent debt.
The Bureau is incorporating proposed
comment 34(d)(1)(ii)–1 into comment
34(d)(2)(iii)–1, which clarifies that a
debt collector may make changes to the
model validation notice and retain the
safe harbor provided by use of the
model notice. Because the example
regarding decedent debt is illustrative,
nothing in comment 34(d)(2)(iii)–1
prohibits a debt collector from making
other substantially similar
modifications, such as referring to the
estate rather than ‘‘you,’’ while still
retaining the safe harbor. As explained
elsewhere in this section-by-section
analysis, the Bureau declines to create
separate model forms for certain types
of debt. The Bureau has modified the
model-form-safe-harbor framework
under § 1006.34(d)(2) to afford debt
collectors more flexibility to customize
validation information to accommodate
their business practices and the types of
debts they collect. Within identified
limits, debt collectors may make
changes to the model validation notice
and still meet the standard for a safe
harbor under § 1006.34(d)(2).
Comment 34(d)(2)(iii)–1 also includes
four new examples of other permissible
changes: Relocating the consumerresponse information required by
§ 1006.34(c)(4) to facilitate mailing;
adding barcodes or QR codes, as long as
the inclusion of such items does not
violate § 1006.38(b); adding the date the
form is generated; and embedding
hyperlinks, if delivering the form
electronically, which was proposed in
comment 34(d)(2)–1.
The Bureau clarifies that, if a debt
collector includes disclosures other than
(1) the required validation information,
(2) any optional disclosures described in
§ 1006.34(d)(3), or (3) any disclosures
that, if included, still leave the form
substantially similar in substance,
clarity, and meaningful sequence to the
model notice, then the safe harbor does
not apply with respect to the entirety of
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the validation notice. Except as
described in § 1006.34(d)(2)(ii), the
Bureau has determined not to apply the
safe harbor on a partial (i.e., disclosureby-disclosure) basis because it is not
clear how disclosures other than those
referenced above would interact with
the validation information.325 Final
comment 34(d)(2)–1 clarifies that a debt
collector who provides a validation
notice that is neither a notice described
in § 1006.34(d)(2)(i) or (ii), nor a
substantially similar notice as described
in § 1006.34(d)(2)(iii), does not receive a
safe harbor for compliance with the
information and form requirements of
§ 1006.34(c) and (d)(1). The Bureau
notes that a debt collector who adds
disclosures to the model validation
notice that are not referenced above
nevertheless may be able to comply
with the requirements in § 1006.34(c)
and (d)(1), § 1006.38(b)(1), and other
requirements of the FDCPA and this
final rule.
Model Validation Notice
While the majority of industry
commenters who commented on the
topic supported the idea of a model
form, some criticized the design of the
proposed model validation notice. At
least two industry commenters stated
that the proposed model notice
contained too much content and would
overwhelm consumers. One commenter
criticized the proposed model notice for
departing from the prevailing industry
design for validation notices. A number
of identical or nearly identical
comments suggested that consumers
would confuse the proposed model
notice for a government document, such
as an IRS notice, but did not explain
what in particular about the model
notice they believed would cause such
consumer confusion.
The Bureau’s findings do not support
the conclusions that the model notice
contains too much content or will
overwhelm consumers. The model
validation notice was developed and
validated over multiple rounds of
consumer testing that support its
efficacy and comprehensibility. The fact
that the model validation notice departs
from prevailing industry design is
intended. As the proposal noted, many
validation notices used today are
confusing and lack sufficient
325 As
described in § 1006.34(d)(2)(ii), a debt
collector who includes certain itemization-related
disclosures on a separate page in the same
communication with the validation notice, and who
includes on the front of the notice the required
statement referring to those disclosures, receives a
safe harbor for compliance with the information
and form requirements of § 1006.34(c) and (d)(1)
except with respect to the disclosures that appear
on the separate page.
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information to help consumers
recognize their debts or exercise their
FDCPA verification rights.326 With the
model validation notice, the Bureau has
developed an improved validation
notice that benefits both consumers and
debt collectors. In quantitative testing,
the model validation notice consistently
performed better than or equal to a
‘‘status quo’’ notice designed to
resemble validation notices that some
debt collectors use today.327 The Bureau
also disagrees that the model validation
notice resembles a government
document; the form clearly discloses
that it is from a debt collector, not the
government.
A number of consumer advocate and
academic commenters asserted that the
proposed model notice was not
adequately tested. Some of these
commenters stated that the Bureau’s
testing included too few participants to
generate valid conclusions about the
proposed model notice’s efficacy or to
evaluate the comprehension of
consumers, particularly of the least
sophisticated consumers. For instance, a
consumer advocate commenter
expressed concern that only 60
consumers were included in the
cognitive and usability testing
rounds.328 Likewise, an academic
commenter stated that the Bureau’s
consumer testing focused too heavily on
observing what testing participants
looked at on the model notice (based on
the use of eye tracking techniques) at
the expense of testing participants’
comprehension of the notice. Another
commenter stated that the Bureau
should have tested more diverse groups,
including consumers with limited
English proficiency, students, older
consumers, and consumers from more
diverse socioeconomic backgrounds.
Some consumer advocate and academic
commenters recommended that the
Bureau field test the proposed model
notice with consumers with real debts.
A consumer advocate expressed concern
about the performance of certain aspects
of the proposed model notice in
quantitative testing, noting in particular
that approximately 40 percent of
respondents who received the model
notice failed to identify the correct
entity the consumer should pay.329
326 See
84 FR 23274, 23338 (May 21, 2019).
Quantitative Testing Report, supra note
31, at 13–16.
328 See FMG Summary Report, supra note 29, at
5–7.
329 Several comments in response to the May
2019 proposal also criticized the consumer testing
as being outdated because, when that proposal was
published, the most recent testing had occurred in
2016. However, the Bureau does not find any reason
to believe that consumer understanding of the
327 CFPB
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The Bureau disagrees that the model
notice was not adequately tested. The
model validation notice was developed
and validated over multiple rounds of
testing between 2014 and 2020, and the
Bureau determines that these multiple
rounds of testing were sufficient to
assess the model validation notice’s
efficacy and comprehensibility. Further,
the Bureau disagrees that its testing
focused on eye-tracking at the expense
of comprehension testing as consumer
comprehension of the model validation
notice was assessed in three rounds of
testing. The Bureau’s testing used eyetracking in conjunction with consumer
responses to inform its conclusions.
The Bureau disagrees that it did not
sample sufficiently diverse groups. The
Bureau selected respondents with the
goal of developing diverse testing pools
that would serve as a proxy for the
population at large. For example, in one
round of usability testing, participants
reflected a range of demographic
characteristics broken down by race and
ethnicity, household income, education
level, and employment status.330 With
respect to criticism that the Bureau did
not ‘‘field test’’ the model validation
notice, testing the form with consumers
with real debts would have been
impractical. Regarding comments that
the model validation notice did not
perform well during the quantitative
testing round, the Bureau disagrees. As
noted above, in that testing round, the
model validation notice consistently
performed better than or equal to the
status quo notice, including on the
question of to whom the consumer
should send a payment.331
Commenters provided feedback on
specific aspects of the proposed
validation notice, including the notice’s
disclosure of the FDCPA section
809(a)(4) dispute right. As discussed,
§ 1006.34(c)(3)(i), which implements
FDCPA section 809(a)(4), requires debt
collectors to: (1) Disclose the date the
debt collector will consider the end date
of the validation period; and (2) state
that, if the consumer notifies the debt
collector in writing on or before that
date that the debt, or any portion of the
model notice has changed since 2016, and the
commenters did not provide any evidence to
support such a claim. Moreover, since the May 2019
proposal, the Bureau has conducted two additional
testing rounds.
330 FMG Usability Report, supra note 28, at 85–
87.
331 In response to the question ‘‘According to the
notice, if Person A wanted to make a payment on
the debt, who should he or she sent the payment
to?’’ approximately 60 percent of consumers who
received the model validation notice answered
correctly compared to approximately 40 percent of
consumers who received a status quo notice. CFPB
Quantitative Testing Report, supra note 31, at 14.
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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
verification of the debt or a copy of a
judgment. The proposed model notice
showed this disclosure as: ‘‘Call or write
to us by November 12, 2019, to dispute
all or part of the debt . . . . If you write
to us by November 12, 2019, we must
stop collection on any amount you
dispute until we send you information
that shows you owe the debt.’’
Some commenters criticized the
phrase ‘‘shows you owe the debt.’’
Industry and industry trade group
commenters stated that ‘‘shows you owe
the debt’’ would require debt collectors
to prove that consumers owe the debt.
According to these commenters, this
would modify the verification standard
established by FDCPA section 809 and
expose debt collectors to increased
litigation risk.332 Thus, these
commenters recommended that the
Bureau revise the proposed model
notice to mirror the FDCPA’s statutory
text.333 In contrast, a group of academic
commenters stated that the verification
standard established by case law is more
robust than the phrase ‘‘shows you owe
the debt’’ suggests.334 These
commenters expressed concerns that the
proposed model notice would diminish
the FDCPA’s verification standard.
The Bureau is not changing the final
model validation notice’s disclosure of
the FDCPA section 809(a)(4) dispute
right. The Bureau does not intend to
modify FDCPA section 809’s
verification standard and disagrees that
the phrase ‘‘shows you owe the debt’’
has that effect. ‘‘Shows you owe the
332 An industry commenter stated that courts
define verification narrowly and have not imposed
a duty upon debt collectors to establish that a debt
is owed. See Walton v. EOS CCA, 885 F.3d 1024,
1027–28 (7th Cir. 2018) (‘‘The verification assures
the consumer that the creditor actually made the
demand the debt collector said it did and equips the
consumer to evaluate the validity of the creditor’s
claim. It would be both burdensome and
significantly beyond the Act’s purpose to interpret
§ 1692g as requiring a debt collector to undertake
an investigation into whether the creditor is
actually entitled to the money it seeks.’’); Haddad
v. Alexander, Zelmanski, Danner & Fioritto, 758
F.3d 777 (6th Cir. 2014); Dunham v. Portfolio
Recovery Assocs., 663 F.3d 997, 1003 (8th Cir. 2001)
(citing Chaudhry v. Gallerizzo, 174 F.3d 394 (4th
Cir. 1999)).
333 For instance, one commenter recommended
that the model notice should state ‘‘verifies the
amount of the debt claimed’’ instead of ‘‘shows you
owe the debt.’’
334 In Haddad, the court wrote that a verifying
debt collector ‘‘should provide the date and nature
of the transaction that led to the debt, such as a
purchase on a particular date, a missed rental
payment for a specific month, a fee for a particular
service provided at a specified time, or a fine for
a particular offense assessed on a certain date.’’ 758
F.3d at 786.
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debt’’ is a plain-language phrase that the
Bureau is adopting to improve
consumer understanding. This
rulemaking does not interpret what
constitutes verification under FDCPA
section 809.
The Bureau received comments on the
model notice’s description of the
dispute rights under FDCPA section
809(a)(3) and (4). Under FDCPA section
809(a)(3), disputes can be made orally or
in writing, which the proposed model
notice showed in part as: ‘‘Call or write
to us by November 12, 2019, to dispute
all or part of the debt.’’ However, under
FDCPA section 809(a)(4) and (b),
requests for verification must be made
in writing to have effect under the
statute.335 An academic commenter and
at least two consumer advocates
expressed concern that the proposed
model notice’s description of these
dispute rights was too nuanced, and
consumers would not understand that
they must write to request verification.
To address this concern, a commenter
recommended that the Bureau revise the
model notice to state, ‘‘Call us to
dispute. But if you do call, we may not
be required to send information that
shows you owe the debt.’’ 336 An
industry trade group expressed
uncertainty about why the proposed
model notice used the phrase ‘‘call or
write’’ as opposed to ‘‘write’’ in
different sentences.
The Bureau acknowledges that the
dispute rights under FDCPA section
809(a)(3) and (4) may not be intuitive to
some consumers. Nevertheless, the
Bureau settled on the current phrasing
in the model validation notice to
emphasize the validation period end
date as opposed to the actions—i.e.,
calling or writing—that a consumer may
take. In general, the model validation
notice has tested well. The Bureau is
concerned that revising or adding
content to clarify the consequences of
writing versus calling may undermine
the overall efficacy of the form. Further,
this clarification would be unnecessary
in many cases. The Bureau expects that
many consumers will visit the Bureau’s
website for more detailed information
335 While FDCPA section 809 requires a debt
collector to honor only written verification requests,
the Bureau understands that some debt collectors
honor both written and non-written verification
requests. Nothing in the FDCPA, the November
2020 Final Rule, or this rule prevents such debt
collectors from continuing to do so.
336 This recommendation is based on phrasing
that the Bureau adopted for usability testing. As
noted in the usability testing report, consumers who
reviewed validation notices using this phrasing
‘‘exhibited less confusion’’ about the distinction
between how a debt collector would be required to
respond when receiving a dispute in writing or by
telephone. See FMG Usability Report, supra note
28, at 55–56.
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regarding consumer protections in debt
collection.337 However, to provide
further clarity, the Bureau has
reformatted how these dispute rights
appear on the model validation notice.
Specifically, the dispute rights now
appear in separate bullets with bolded
text for comprehension purposes.
Commenters provided feedback on
the proposed model validation notice’s
original-creditor-information request
disclosure pursuant to FDCPA section
809(a)(5). Section 1006.34(c)(3)(ii),
which implements this provision,
requires debt collectors to disclose the
date the debt collector will consider the
end date of the validation period and a
statement that, if the consumer requests
in writing on or before that date 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
proposed model notice showed this
disclosure as: ‘‘Write to ask for the name
and address of the original creditor. If
you write by November 12, 2019, we
will stop collection until we send you
that information.’’ An industry
commenter stated that, by omitting the
phrase ‘‘if different from the current
creditor,’’ the proposed model notice
would compel debt collectors to
respond to original-creditor-information
requests, even if the current creditor is
the original creditor. A consumer
advocate supported the omission,
arguing that debt collectors should be
required to respond to all originalcreditor-information requests, even if
the current creditor and the original
creditor are the same.
The Bureau concludes that the model
validation notice should include the
statutory phrase ‘‘if different from the
current creditor’’ when disclosing the
original-creditor-information request
right. Thus, as finalized, the model
validation notice includes the phrase ‘‘if
different from the current creditor.’’
Further, as discussed below, the Bureau
is finalizing new § 1006.38(c)(2), which
sets forth an alternative procedure that
a debt collector may use to respond to
a consumer’s request for originalcreditor information when the original
creditor is the same as the current
creditor.
337 If the debt collector is collecting debt related
to a consumer financial product or service as
defined in § 1006.34.2(f), a statement that informs
the consumer that additional information regarding
consumer protections in debt collection is available
on the Bureau’s website is required under
§ 1006.34(c)(3)(iv). If the debt collector is collecting
debt other than debt related to a consumer financial
product or service, such a statement is optional
under § 1006.34(d)(3)(viii).
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Commenters recommended two other
modifications to the proposed model
notice. To emphasize the distinction
between the debt collector and the
creditor, an industry trade group
commenter suggested that the Bureau
revise the proposed model notice to
emphasize that ‘‘North South Group is
a debt collector, not a creditor.’’
Another industry trade group stated that
the model notice should incorporate
account information into the miniMiranda disclosure, which would
frontload information that would help
consumers recognize alleged debts and
thereby reduce the number of disputes
debt collectors receive. An industry
trade group commenter stated that the
proposed model notice is not properly
formatted for standard mailing
envelopes. According to the commenter,
§ 1006.34(c)(4)’s consumer-response
information section will not fit a
standard glassine window return
envelope.
The Bureau declines other
recommendations to modify the model
validation notice. The Bureau declines
to specify that North South Group is
‘‘not a creditor,’’ as consumer testing
indicates that consumers generally have
a functional understanding that North
South Group is a debt collector.338 The
Bureau declines to modify the debt
collection disclosure required by
FDCPA section 807(11) and § 1006.18(e)
as finalized in the November 2020 Final
Rule. The Bureau concludes that
combining this statutory disclosure with
account information would undermine
its clarity and purpose. The Bureau
declines to modify the model notice in
response to feedback that the form is not
properly formatted for standard mailing
envelopes. Comment 34(d)(2)(iii)–1
clarifies that debt collectors may
relocate the consumer-response
information required by § 1006.34(c)(4)
to facilitate mailing without losing the
safe harbor provided by § 1006.34(d)(2).
Thus, the Bureau determines that debt
collectors will be able to format the form
for mailing.
Various commenters requested that
the Bureau publish additional model
validation notices to address specific
scenarios. Several consumer advocate
commenters urged the Bureau to
translate the model notice into other
languages, including Spanish. An
industry trade group commenter
recommended that the Bureau develop
a model notice that debt collectors
could use with consumers who are not
obligated on the debt, such as heirs,
successors in interest, and consumers
whose debts were discharged in
bankruptcy. An industry commenter
recommended that the Bureau create a
model notice that omits all optional
disclosures.
The Bureau declines to create
additional model validation notice
forms. As discussed earlier in this
section-by-section analysis, the Bureau
has modified the model-form-safeharbor framework under § 1006.34(d)(2)
to afford debt collectors more flexibility
to customize validation information to
accommodate their business practices
and the types of debts they collect.
Within identified limits, debt collectors
may make changes to the model
validation notice and still meet the
standard for a safe harbor under
§ 1006.34(d)(2).
The Bureau is making an additional
change to the model validation notice in
response to testing. The statement
required by § 1006.34(c)(3)(iv) informs
the consumer that additional
information regarding consumer
protections in debt collection is
available on the Bureau’s website. The
Bureau’s most recent consumer testing
indicated that a small number of
participants who used the model
validation notice were uncertain about
where to find more information about
consumers’ protections in debt
collection.339 In response to this
finding, the Bureau is modifying how
the statement required by
§ 1006.34(c)(3)(iv) appears on the model
validation notice to further emphasize
this disclosure and the Bureau’s website
address.
338 During November 2020 usability testing, 98
percent of participants correctly identified North
South Group as the correct party to send payments
to. Further, participants generally understood that
they could dispute the debt with North South
Group. See November 2020 Qualitative Testing
Report, supra note 34, at 15.
339 During the most recent round of qualitative
testing, a few participants stated that they were
unsure how to learn more about debt collection in
general. For example, one participant was unable to
find the statement required by § 1006.34(c)(3)(iv) on
the model notice. See November 2020 Qualitative
Testing Report, supra note 34, at 13.
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34(d)(3) Optional Disclosures
Proposed § 1006.34(d)(3) provided
that a debt collector could include the
optional information described in
§ 1006.34(d)(3)(i) through (vi) when
providing the validation information.
The Bureau received no comments
specifically addressing the language in
proposed § 1006.34(d)(3). Commenters
did suggest a variety of optional
disclosures to add to § 1006.34(d)(3),
such as barcodes or QR codes, the date
a validation notice was created and sent,
disclosures required by government
creditors, and a disclosure notifying the
consumer if the debt collector will
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record telephone calls. Some of these
suggested disclosures are permissible
changes to the model notice under
§ 1006.34(d)(2)(iii) 340 or optional
disclosures under § 1006.34(d)(3), and
debt collectors can choose to make other
suggested disclosures without safe
harbor protection.
The Bureau is finalizing
§ 1006.34(d)(3) largely as proposed but
with minor technical revisions for
clarity and with one substantive
revision to clarify that a debt collector
who includes any of the optional
disclosures receives the safe harbor
described in § 1006.34(d)(2), provided
that the debt collector otherwise uses
the model validation notice or a
variation of the model notice as
described in § 1006.34(d)(2). This
revision harmonizes § 1006.34(d)(3)
with certain revisions to § 1006.34(d)(2)
in the final rule.341
The Bureau is finalizing
§ 1006.34(d)(3) and the related
provisions of § 1006.34(d)(2), including
each of the optional disclosures that
§ 1006.34(d)(3) permits debt collectors
to provide, 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. The Bureau also is finalizing
§ 1006.34(d)(3) and the optional
disclosures 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.
34(d)(3)(i) Telephone Contact
Information
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Proposed § 1006.34(d)(3)(i) provided
that a debt collector could include,
along with the validation information,
the debt collector’s telephone contact
information, including telephone
number and the times that the debt
collector accepts consumer telephone
calls.
Two industry trade group commenters
supported permitting debt collectors to
disclose telephone contact information,
with one such commenter noting that it
would facilitate communication with
consumers, and the other noting that
some State laws require debt collectors
to disclose telephone contact
340 See comment 34(d)(2)(iii)–1 (examples of
permissible changes to the model notice include (1)
adding barcodes or QR codes as long as their
inclusion does not violate § 1006.38(b), and (2)
adding the date the form is generated).
341 See the section-by-section analysis of
§ 1006.34(d)(2)(i), particularly the discussion of
new § 1006.34(d)(2)(i)(A) and (B), which refers to
the optional disclosures.
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information. A group of consumer
advocate commenters recommended
that the Bureau make telephone contact
information a mandatory disclosure.
The Bureau determines that debt
collectors should be permitted to
include their telephone contact
information along with the validation
information. Section 1006.34(d)(3)(i)
will accommodate debt collectors who
choose to communicate with consumers
by telephone or who are required to
disclose telephone contact information
by applicable State law. The Bureau
declines to make telephone contact
information a mandatory disclosure
because, while many debt collectors
likely will provide telephone contact
information, either by choice or because
of a State-law requirement, some debt
collectors may not need or want to do
so. In such cases, consumers can use
other contact information required in
the validation information to contact the
debt collector. For these reasons, the
Bureau is finalizing § 1006.34(d)(3)(i)
largely as proposed, except that the
Bureau is finalizing the clarification that
telephone contact information may
include, for example, a telephone
number as well as the times that the
debt collector accepts consumer
telephone calls, as new comment
34(d)(3)(i)–1, rather than in the
regulation text as proposed.
34(d)(3)(ii) Reference Code
Many debt collectors include
reference codes on validation notices for
administrative purposes. The Bureau
proposed § 1006.34(d)(3)(ii) to
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. One industry commenter
asked the Bureau to create a safe harbor
for debt collectors to use an account
number as a reference code, if that
number is labeled as a reference code.
The Bureau determines that creating
such a safe harbor is unnecessary
because debt collectors may use any
number they choose as a reference
code.342 The Bureau therefore is
finalizing § 1006.34(d)(3)(ii) as
proposed.
34(d)(3)(iii) Payment Disclosures
The Bureau proposed in
§ 1006.34(d)(3)(iii) to allow debt
collectors to include certain payment
342 Although § 1006.34(d)(3)(ii) permits debt
collectors to use any number they choose as a
reference code, debt collectors may be prohibited
from using certain numbers by other applicable
laws, such as privacy or data security rules or
regulations.
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5825
disclosures along with the validation
information, provided that such
disclosures were no more prominent
than any of the validation information.
Proposed § 1006.34(d)(3)(iii)(A)
provided that a debt collector could
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) provided that a
debt collector could include in the
consumer-response information section
described in 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 for a
consumer to write in a payment amount.
As discussed below, the Bureau is
finalizing § 1006.34(d)(3)(iii) largely as
proposed, but with certain revisions for
clarity and consistency with other
provisions in the final rule.
Industry and industry trade group
commenters supported permitting debt
collectors to include optional payment
disclosures. One industry trade group
stated that the proposed optional
payment disclosures were appropriate
because they would not violate FDCPA
section 809(b)’s overshadowing
prohibition.
Consumer advocate commenters
generally objected to proposed
§ 1006.34(d)(3)(iii). A number of these
commenters stated that consumers may
perceive the payment disclosures as
threatening, may misconstrue the
disclosures as stating that consumers
must make a payment to exercise their
FDCPA dispute right, or may be
confused about whether a payment is in
their interest. Some commenters stated
that the proposed disclosures could lead
consumers to make payments that they
might not otherwise have made, which
some commenters noted could cause
consumers to inadvertently revive
previously time-barred debts. These
commenters asked the Bureau not to
finalize proposed § 1006.34(d)(3)(iii).
Some commenters suggested revisions
to the proposed optional payment
disclosures. Industry and industry trade
group commenters recommended that
the Bureau make the proposed optional
payment disclosures more prominent.
For example, some commenters
suggested that the proposed optional
payment disclosures be placed at the
top of the consumer-response
information section. An industry
commenter recommended that the
model validation notice include
additional optional payment
disclosures. Industry trade group
commenters recommended that the
Bureau permit debt collectors to include
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instructions about how a consumer
could make a payment by telephone,
website, or alternative payment
methods, such as debit card or ACH.
Based on the concerns noted above
about potential consumer
misunderstanding of the payment
disclosures, a group of consumer
advocate commenters urged the Bureau
to amend the validation notice to
segregate the payment disclosures from
the other disclosures and to eliminate
the payment prompt on the consumer
response form.
For the reasons discussed in the
proposal, the Bureau determines that
the proposed optional payment
disclosures facilitate payments that 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. In addition, 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.343 The
Bureau also has determined that the
optional payment disclosures do not
overshadow, and are not inconsistent
with, consumers’ verification rights
pursuant to FDCPA section 809(b).344
Further, the Bureau’s testing found
that the model validation notice, which
was tested with the optional payment
disclosures, was not threatening or
intimidating.345 The Bureau disagrees
that consumers will believe mistakenly
that they must make a payment to
exercise their verification rights. As the
proposal noted, 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.346 The
Bureau determines that inclusion of the
neutral, non-threatening optional
payment disclosures will not confuse
343 See
84 FR 23274, 23350 (May 21, 2019).
example, during consumer testing,
participants reported a variety of actions they
thought they could take, and approximately 50
percent of respondents said they would confirm the
debt is accurate before responding. Similarly,
participants who received the model validation
notice, which included the optional payment
disclosures, generally understood from the notice
how they could dispute the debt. See November
2020 Qualitative Testing Report, supra note 34, at
11, 15.
345 Participants with prior debt collection
experience observed that the model notice was
‘‘different’’ than other validation notices they had
received because the notice did not include
threatening or intimidating language. See November
2020 Qualitative Testing Report, supra note 34, at
10.
346 FMG Usability Report, supra note 28, at 59–
61.
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344 For
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consumers about whether making a
payment is in their best interest. For the
same reasons, the Bureau declines the
suggestion to segregate the payment
disclosures from the other disclosures
and to eliminate the payment prompt on
the consumer response form.
The Bureau declines
recommendations to permit debt
collectors to emphasize or highlight the
payment option disclosures. Making the
payment disclosures more prominent, as
some industry commenters suggested,
would reduce the efficacy of the model
validation notice and risk
overshadowing the validation
information in violation of FDCPA
section 809(b). The Bureau also
determines that the optional payment
disclosures in § 1006.34(d)(3)(iii)(A) and
(B) are sufficient to facilitate
payments 347 and that additional
prominence for the payment disclosures
is not justified. The Bureau also
declines to permit debt collectors to
include specific instructions about other
payment methods. Section
1006.34(d)(3)(iii)(A) permits debt
collectors to invite consumers to contact
them about payment options, and debt
collectors have the ability to provide
information about alternative payment
methods in subsequent
communications.
For these reasons, this Bureau is
finalizing § 1006.34(d)(3)(iii) largely as
proposed but with several revisions for
clarity and for consistency with other
provisions in the final rule. First, the
Bureau is deleting the sentences that
specified that the optional payment
disclosures in both
§ 1006.34(d)(3)(iii)(A) and (B) must be
no more prominent than any of the
validation information. These deleted
sentences are unnecessary in view of
revisions to the final rule in
§ 1006.34(d)(2) that apply to all of the
optional disclosures, which makes the
deleted sentences redundant.348 In
addition, the Bureau is adding language
347 During usability testing, participants
expressed an understanding that one purpose of the
model validation notice was to solicit payment on
a debt. When asked about their payment options
based on the model validation notice,
approximately 80 percent of participants stated that
they would contact the debt collector by telephone,
website, email, or write to explore payment options.
See November 2020 Qualitative Testing Report,
supra note 34, at 10,12.
348 Final § 1006.34(d)(2)(i) states that certain
optional disclosures permitted by § 1006.34(d)(3)
are contained on the model notice; those optional
disclosures satisfy the requirement to be no more
prominent than any validation information. Final
§ 1006.34(d)(2)(i)(B) also permits inclusion of the
optional disclosures described by § 1006.34(d)(3)
that are not included on the model notice so long
as they are no more prominent than any validation
information; see the section-by-section analysis of
§ 1006.34(d)(2)(i) for more detail.
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to clarify that a debt collector may
choose to include either of the optional
payment disclosures, or both of them.
Lastly, the Bureau is finalizing
§ 1006.34(d)(3)(iii)(B) to clarify that the
optional payment disclosure must
appear ‘‘below’’ (rather than merely
‘‘with’’) the consumer-response
information required by
§ 1006.34(c)(4)(i) and (ii).
Accordingly, final § 1006.34(d)(3)(iii)
provides that debt collectors may
include either or both of the following
payment disclosures: (1) The statement,
‘‘Contact us about your payment
options,’’ using that phrase or a
substantially similar phrase; and (2)
below the consumer-response
information required by
§ 1006.34(c)(4)(i) and (ii), the statement,
‘‘I enclosed this amount,’’ using that
phrase or a substantially similar phrase,
payment instructions after that
statement, and a prompt.
34(d)(3)(iv) Disclosures Under
Applicable Law
Some States require specific
disclosures to appear on validation
notices. To enable debt collectors to
comply with both § 1006.34(a)(1) and
disclosure requirements under other
applicable law, the Bureau proposed
§ 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
provided 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.
For the reasons discussed below, the
Bureau is adopting proposed
§ 1006.34(d)(3)(iv) with revisions,
including the addition of new regulatory
text subsections and commentary.
A number of industry and industry
trade group commenters stated that the
Bureau’s proposal regarding disclosures
required by other applicable law would
either conflict with or not accommodate
such disclosures. Commenters stated
that some States require disclosures to
appear on the front of a validation
notice.349 To address such concerns,
349 Although these commenters cited various
State laws requiring disclosures, they primarily
referred to State laws requiring time-barred debt
disclosures and revival disclosures. For example,
one industry trade group commenter noted that
Massachusetts, New Mexico, and New York State
and City require disclosures about time-barred debt
and revival that specifically or practically must
appear on the front page of the validation notice.
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commenters recommended that the
Bureau allow debt collectors to include
required State law disclosures on the
front of the validation notice. One
commenter, an industry trade group,
urged the Bureau to allow for formatting
flexibility for such State law disclosures
while still affording safe harbor
protection. At least one commenter
suggested that the Bureau preempt State
laws that require disclosures on the
front of a validation notice.
The Bureau determines that,
particularly with the changes to the
model validation notice discussed in the
section-by-section analysis, final
§ 1006.34(d)(3)(iv) generally will
accommodate disclosures required by
other applicable law.350 As noted above,
a few States require time-barred debt
disclosures to appear on the front of a
validation notice; time-barred debt
disclosures are discussed further below.
The Bureau is not aware that States
specifically require any other
disclosures to appear on the front of the
validation notice; as such, the Bureau
concludes that disclosures specifically
required by applicable law, other than
in those few instances relating to timebarred debt, can be accommodated on
the reverse of the validation notice. The
Bureau also is not aware of font size,
prominence, or placement requirements
established by State or other applicable
law that final § 1006.34(d)(3)(iv) will not
accommodate, as discussed further
below. Further, the statement that
§ 1006.34(d)(3)(iv) permits on the front
of a validation notice is consistent with
State laws that require statements on the
front of the notice.351 The Bureau will
350 As discussed in the section-by-section analysis
of § 1006.34(d)(2), the final rule permits a debt
collector who uses the model validation notice,
specified variations of the model notice, or a
substantially similar form to receive a safe harbor.
Moreover, as discussed below in this section-bysection analysis of § 1006.34(d)(3)(iv), the Bureau is
modifying how the statement required by
§ 1006.34(d)(3)(iv) is disclosed on the model
validation notice to mirror language on a disclosure
required under Wisconsin law.
351 See, e.g., Colo. Rev. Stat. sec. 12–14–105(3)(c)
(‘‘In its initial written communication to a
consumer, a collection agency shall include the
following statement: ‘For information about the
Colorado Fair Debt Collection Practices Act, see
www.ago.state.co.us/cadc/cadcmain.cfm.’ If the
notification is placed on the back of the written
communication, there shall be a statement on the
front notifying the consumer of such fact.’’); Wis.
Admin. Code DFI-Bkg sec. 74.13 (‘‘Unless the initial
communication is written and contains the
following notice or the debtor has paid the debt, a
licensee shall send the debtor the following notice
within 5 days after the initial communication with
a debtor: ‘This collection agency is licensed by the
Division of Banking in the Wisconsin Department
of Financial Institutions, www.wdfi.org.’ . . . here
the notice required by sub. (1) is printed on the
reverse side of any collection notice or validation
sent by the licensee, the front of such notice shall
bear the following statement in not less than 8 point
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continue to monitor whether disclosures
required by other applicable law are
inconsistent or conflict with § 1006.34
or Regulation F generally, and if such an
inconsistency or conflict is identified,
the Bureau will endeavor to take action
to address it. The Bureau also reiterates
that, unlike the proposal, the final rule
does not require the validation notice to
be substantially similar to the model
validation notice; thus, if
§ 1006.34(d)(3)(iv) does not
accommodate a disclosure required
under State or other applicable law,
then debt collectors can provide such a
disclosure without necessarily violating
the rule, but they would lose the
§ 1006.34(d)(2) safe harbor.
The Bureau has revised
§ 1006.34(d)(3)(iv) in response to
feedback and for clarity. Final
§ 1006.34(d)(3)(iv)(A) provides that the
debt collector may include, on the
reverse of the validation notice, any
disclosures that are specifically required
by, or that provide safe harbors under,
applicable law and, if any such
disclosures are included, a statement on
the front of the validation notice
referring to those disclosures. Final
comment 34(d)(3)(iv)(A)–1 clarifies that
disclosures permitted by
§ 1006.34(d)(3)(iv)(A) include, for
example, specific disclosures required
by Federal, State, or municipal statutes
or regulations, and specific disclosures
required by judicial or administrative
decisions or orders, including
administrative consent orders. The
comment also describes how such
disclosures could include, for example,
time-barred debt disclosures and
disclosures that the current amount of
the debt may increase or vary due to
interest, fees, or other charges, provided
that such disclosures are specifically
required by applicable law.
The Bureau has revised
§ 1006.34(d)(3)(iv) and its
accompanying commentary from the
proposal to clarify the disclosures that
are permitted by § 1006.34(d)(3)(iv).
Specifically, the revisions clarify that
the provision applies if a debt collector
must comply with a specific disclosure
requirement under Federal, State, or
local law, or under a judicial or
administrative decision or order. As
such, the Bureau emphasizes that this
provision is not intended to capture
circumstances in which a debt collector
is not providing a disclosure that is
required under a specific law, decision,
or order, but rather the debt collector is
providing a disclosure to try to comply
with a more general legal requirement.
type: ‘‘Notice: See Reverse Side for Important
Information.’’).
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For example, if the debt collector were
to add language to the validation notice
to try to avoid a finding of an unfair,
deceptive, or abusive practice under
Dodd-Frank Act section 1031 or the
FDCPA, that is not an optional
disclosure covered by
§ 1006.34(d)(3)(iv). Debt collectors are
not precluded from making such
disclosures, but they will not receive the
safe harbor under § 1006.34(d)(2).
The Bureau has made modifications
to the final rule, moreover, to provide
additional flexibility with respect to
time-barred debt disclosures, in
response to feedback to the proposal.
Under new § 1006.34(d)(3)(iv)(B),352 if a
debt collector is collecting time-barred
debt, the debt collector may include on
the front of the validation notice any
time-barred debt disclosure that is
specifically required by, or that provides
a safe harbor under, applicable law,
provided that applicable law specifies
the content of the disclosure.353 New
comment 34(d)(3)(iv)(B)–1 clarifies that,
for example, if applicable State law
requires a debt collector who is
collecting time-barred debt to disclose
to the consumer that the law limits how
long a consumer can be sued on a debt
and that the debt collector cannot or
will not sue the consumer to collect it,
the debt collector may include that
disclosure on the front of the validation
notice. New comment 34(d)(3)(iv)(B)–1
also includes a cross-reference to the
definition of time-barred debt under
§ 1006.26(a)(2) and clarifies that, for
purposes of § 1006.34(d)(3)(iv)(B), timebarred debt disclosures may include
disclosures about revival of debt
collectors’ right to bring a legal action to
enforce the debt. The Bureau concludes
that providing additional flexibility to
debt collectors to make these optional
disclosures either on the front or reverse
of the validation notice is warranted in
view of circumstances in which it may
be difficult to discern under applicable
State or local law whether time-barred
debt disclosures must appear on the
front of a validation notice. Moreover,
the Bureau is finalizing
§ 1006.34(d)(3)(iv)(B) in view of the
352 To permit this additional flexibility for timebarred debt disclosures as distinguished from other
disclosures made under applicable law, the final
rule has re-numbered proposed § 1006.34(d)(3)(iv),
which would have specified that the applicable law
disclosures are placed on the reverse side of the
validation notice only, as § 1006.34(d)(3)(iv)(A).
353 As with other disclosures required by or
providing safe harbors under applicable law, debt
collectors can also make the time-barred debt
disclosures on the reverse of the validation notice
pursuant to § 1006.34(d)(3)(iv)(A). See comment
34(d)(3)(iv)(A)–1, which gives an example of a timebarred debt disclosure as a disclosure permitted by
§ 1006.34(d)(3)(iv)(A).
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Bureau’s decision not to finalize a
requirement for debt collectors to
provide disclosures relating to timebarred debt or revival laws, described in
more detail in the section-by-section
analysis of § 1006.26.
The Bureau received feedback about
modifying the scope of proposed
§ 1006.34(d)(3)(iv). An industry trade
group commenter stated that the Bureau
should limit § 1006.34(d)(3)(iv) to State
laws and exclude disclosures required
by judicial decisions or orders.
According to the commenter, courts
should not be permitted to dictate nonstandard disclosures that would limit
the efficacy of the model validation
notice and result in validation notices
that vary by jurisdiction. This
commenter asserted that permitting
courts to vary the model validation
notice would be inconsistent with the
framework in other consumer financial
laws and regulations, such as TILA and
Regulation Z, which do not permit
courts to add disclosures to model
forms. A group of consumer advocate
commenters asked the Bureau to
prohibit debt collectors from including
disclosures that are permitted, but not
required, by applicable law, because
including all possible disclosures would
overwhelm consumers. On the other
hand, an industry trade group
commenter asked the Bureau to allow
debt collectors to include such
disclosures.
The Bureau determines that
§ 1006.34(d)(3)(iv) should cover
disclosures required pursuant to judicial
or administrative decisions or orders,
including administrative consent orders.
Permitting disclosures required by
judicial or administrative decisions or
orders to appear, like any State-lawrequired disclosures, on the reverse of a
validation notice will neither
undermine the efficacy of the model
validation notice nor create validation
notices that significantly vary by
jurisdiction, other than on the reverse of
the notice. Further, the Bureau
concludes that permitting judicially
mandated disclosures to appear on
validation notices is not inconsistent
with other consumer financial laws, as
some commenters suggested. For
instance, the Bureau understands that
nothing in TILA and its implementing
Regulation Z prohibit, as those
commenters appeared to believe,
creditors from making disclosures
required pursuant to judicial orders or
decisions. As noted above, final
comment 34(d)(3)(iv)(A)–1 clarifies that
the disclosures permitted by
§ 1006.34(d)(3)(iv) include specific
disclosures required by judicial
decisions or orders.
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In response to feedback, the Bureau
also is finalizing § 1006.34(d)(3)(iv)(A)
and comment 34(d)(3)(iv)(A)–1 to
permit debt collectors to include
disclosures that provide safe harbors
under applicable law without losing the
safe harbor for compliance under
§ 1006.34(d)(2). Such disclosures can
mitigate legal risks for debt collectors
and reduce the potential for consumer
harm.354 On the other hand, the Bureau
declines to allow debt collectors to
include disclosures on the validation
notice that are merely permitted by
other applicable law and still retain the
safe harbor.355 Such disclosures may be
irrelevant to consumers, and their
inclusion on the validation notice may
overwhelm consumers or overshadow
more relevant disclosures. Nevertheless,
as noted elsewhere, a debt collector who
included such a disclosure would not
necessarily violate Regulation F; that
debt collector would, however, be
outside the safe harbor for compliance.
Some commenters suggested that the
Bureau revise the text and placement of
the § 1006.34(d)(3)(iv) disclosure that
appeared on the model validation
notice. An industry trade group
commenter noted that Wisconsin law
allows disclosures on the reverse of the
notice but requires the statement,
‘‘Notice: See Reverse Side for Important
Information.’’ A group of consumer
advocate commenters suggested that
disclosures required by applicable law
should be separately labeled as
‘‘Disclosures Required by Your State’’
and ‘‘Disclosures Required by Local
Federal Courts.’’
Relatedly, some commenters noted
that some State laws include specific
prominence or font size requirements
for validation notice disclosures. A
comment letter from two associations of
State regulatory agencies expressed
concerns that proposed
§ 1006.34(d)(3)(iv), as disclosed on the
model validation notice, was not
sufficiently prominent. In particular,
these commenters objected that the
statement about disclosures required by
applicable law appeared below the
§ 1006.34(d)(3)(iii)(A) payment
disclosure.
In response to feedback, the Bureau is
including a new comment
354 Avila, 817 F.3d at 76 (adopting the safe harbor
approach for debt collectors disclosing the amount
of the debt when the balance may increase due to
interest and fees adopted in Miller v. McCalla,
Raymer, Padrick, Cobb, Nichols, & Clark, LLC, 214
F.3d 872, 876 (7th Cir. 2000)).
355 As discussed earlier in this section-by-section
analysis, § 1006.34(d)(3)(iv) has been revised in the
final rule to clarify that the optional disclosures are
those that are ‘‘specifically’’ required by applicable
law or that provide a safe harbor under applicable
law.
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34(d)(3)(iv)(A)–2 to clarify how the
disclosure described in
§ 1006.34(d)(3)(iv)(A) may appear
depending on the delivery mechanism.
The comment clarifies that, if a debt
collector includes disclosures pursuant
to § 1006.34(d)(3)(iv)(A), the debt
collector must include a statement on
the front of the validation notice
referring to those disclosures; and a debt
collector may comply with the
requirement to refer to the disclosures
by including on the front of the
validation notice the statement, ‘‘Notice:
See reverse side for important
information,’’ or a substantially similar
statement. The comment further notes
that if, as permitted by comment
34(d)(3)(iv)(A)–1, a debt collector places
the disclosures below the content of the
validation notice, the debt collector may
comply with the requirement to refer to
the disclosures by stating, ‘‘Notice: See
below for important information,’’ or a
substantially similar statement.
In response to feedback, the Bureau is
also modifying how the statement
required by § 1006.34(d)(3)(iv) is
disclosed on the model validation
notice. Specifically, the
§ 1006.34(d)(3)(iv) statement appears on
the final model notice as: ‘‘Notice: See
Reverse Side for Important
Information.’’ 356 The Bureau finds that
this phrase is clearer, more
conspicuous, and more likely to
encourage consumer action than the
proposed phrase, ‘‘Review state law
disclosures on reverse side, if
applicable.’’ Finally, the Bureau
declines the suggestion to require debt
collectors to label which disclosures are
included pursuant to State law and
which are included pursuant to judicial
orders and decisions. That distinction
likely makes little practical difference to
consumers.
The Bureau also determines that the
§ 1006.34(d)(3)(iv) disclosure should be
more prominent than in the proposed
model validation notice, in part to
account for the fact noted by some
commenters that disclosures required by
other applicable law may have
prominence requirements, including
clear and conspicuous requirements.
The Bureau therefore has modified the
model validation notice to further
emphasize the § 1006.34(d)(3)(iv)
disclosure. Specifically, in contrast to
the proposed model validation notice,
on which the disclosure appeared in
regular font in the middle of a list of
other disclosures, the disclosure appears
on the final model validation notice
356 The Bureau based this statement on a
Wisconsin disclosure requirement. See Wis. Admin.
Code DFI-Bkg sec. 74.13.
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underlined and in bold font and
separated from other disclosures.
Commenters sought additional
guidance about what constitutes the
‘‘reverse side’’ of the validation notice.
Two industry trade group commenters
recommended that the Bureau interpret
‘‘reverse side’’ as synonymous with
‘‘next page’’ to allow debt collectors to
use a second page to provide disclosures
required by other applicable law.
Relatedly, one commenter stated that
requiring a debt collector to print on
both sides of a validation notice would
increase costs. Two associations of State
regulatory agencies asked the Bureau to
clarify where State law disclosures
should be placed on validation notices
delivered electronically, since
disclosures delivered electronically will
not have a reverse side.
The Bureau recognizes that the
meaning of ‘‘on the reverse’’ may vary
by delivery method and format and that
clarification is warranted, particularly
as to validation notices delivered
electronically. As such, the Bureau is
adopting new comment 34(d)(3)(iv)(A)–
1, which clarifies, in relevant part, that
if a debt collector provides a validation
notice in the body of an email, the debt
collector may, in lieu of including the
disclosures permitted by
§ 1006.34(d)(3)(iv)(A) on the reverse of
the validation notice, include them in
the same communication below the
content of the validation notice.
Furthermore, as discussed above,
comment 34(d)(3)(iv)(A)–2 notes that, if
a debt collector places the disclosures
below the content of the validation
notice, the debt collector may comply
with the requirement to refer to the
disclosures by including the statement,
‘‘Notice: See below for important
information,’’ or a substantially similar
statement. These commentary
provisions, therefore, address
circumstances in which the validation
notice is delivered in the body of an
email.
The Bureau declines to permit debt
collectors to place disclosures required
by other applicable law on a second
page while maintaining the
§ 1006.34(d)(2) safe harbor, as some
commenters requested. In
§ 1006.34(d)(2)(ii), the Bureau specifies
two narrow circumstances in which
debt collectors are permitted to include
validation information on a second page
because such information, presented on
a second page, is likely to benefit
consumers.357 And, in both cases, if a
357 Final
§ 1006.34(d)(2)(ii) allows a second page
for debt collectors to provide information that
would otherwise be provided in a relatively
abbreviated itemization of the debt (i.e., itemization
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debt collector includes the disclosures
on a second page, the debt collector
loses the § 1006.34(d)(2) safe harbor
with respect to the second page. The
Bureau determines that it is
unwarranted to provide a safe harbor
that would be more expansive both in
scope and protection than the other
targeted exceptions to debt collectors
providing other applicable law
disclosures on a second page. The
Bureau notes that debt collectors may
include such disclosures on a second
page without necessarily violating the
rule.
The Bureau is making one additional
change not in response to comments.
Section 1006.34(d)(3)(iv)(A) provides, in
relevant part, that disclosures made
under § 1006.34(d)(3)(iv) must not
appear directly on the reverse of the
consumer-response information
required by § 1006.34(c)(4), which
appears on the front of the notice. This
revision is included to ensure that debt
collectors who choose to make the
optional disclosures under
§ 1006.34(d)(3)(iv) do not provide the
disclosures in a place where the
disclosures would be returned with the
consumer-response information.
The Bureau notes that if, as permitted
by § 1006.34(d)(3)(iv), a debt collector
includes on the front of a validation
notice the required statement regarding
disclosures under other applicable law
(i.e., ‘‘Notice: See reverse side for
important information’’), the debt
collector must actually place such
disclosures on the reverse. Conversely,
a debt collector may not include
disclosures under other applicable law
on the reverse of a validation notice
without including the statement about
those disclosures on the front of the
validation notice. The Bureau intended
this effect when it proposed
§ 1006.34(d)(3)(iv) and notes it here for
clarity.
Accordingly, the Bureau is finalizing
§ 1006.34(d)(3)(iv) and its related
commentary with both substantive
revisions and minor wording changes.
34(d)(3)(v) Information About
Electronic Communications
Proposed § 1006.34(d)(3)(v) provided
that debt collectors could include
certain information about electronic
communications along with the
validation information. First, proposed
§ 1006.34(d)(3)(v)(A) provided that a
debt collector could include the debt
collector’s website and email address.
on a second page and for the special rule regarding
certain residential mortgage debt). This narrow
exception allows the debt collector to potentially
provide significantly more information to the
consumer on a second page.
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5829
Second, proposed § 1006.34(d)(3)(v)(B)
provided that a debt collector could
include, for validation information not
provided electronically, the statement
described in § 1006.34(c)(3)(v)
explaining how a consumer could take
the actions described in § 1006.34(c)(4)
and § 1006.34(d)(3) electronically.358
One industry commenter supported
proposed § 1006.34(d)(3)(v), and the
Bureau is finalizing it as proposed, with
technical revisions to reflect conforming
changes to final § 1006.34(c)(3)(v). For
example, final § 1006.34(d)(3)(v)(B) no
longer contains a reference to
§ 1006.34(d)(3) because final
§ 1006.34(c)(3)(v) itself no longer refers
to § 1006.34(d)(3).359
34(d)(3)(vi) Spanish-Language
Translation Disclosures
Proposed § 1006.34(d)(3)(vi) provided
that a debt collector could include,
along with the validation information,
optional Spanish-language disclosures
that consumers could use to request a
Spanish-language validation notice. The
proposal stated that Spanish-speaking
LEP consumers 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.360 The proposal
stated that debt collectors may wish to
provide validation information in
Spanish, as doing so may facilitate their
communications with consumers.
Consumer advocate commenters
generally supported permitting debt
collectors to provide certain Spanishlanguage disclosures along with the
validation information. Some consumer
advocate commenters recommended
that the Bureau also require debt
collectors to provide the disclosures
described in proposed
§ 1006.34(d)(3)(vi). A group of consumer
advocate commenters urged the Bureau
to require a debt collector to send a
translated validation notice if the debt
collector receives a request from a
consumer seeking information in the
358 Proposed § 1006.34(c)(3)(v) provided that such
a statement was required validation information for
validation notices provided electronically.
359 As discussed in the section-by-section analysis
of § 1006.34(c)(3)(v), the final rule does not require
debt collectors who provide validation notices
electronically to include statements explaining how
consumers can take the actions described in
§ 1006.34(d)(3) electronically.
360 Spanish speakers represent the second-largest
language group in the United States after English
speakers. As of 2016, 40 million residents in the
United States ages 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.
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consumer’s preferred language,
including a request received using the
proposed tear off portion of the
validation notice.
An industry commenter supported
proposed § 1006.34(d)(3)(vi) on the
understanding that the Spanishlanguage disclosures would be optional.
According to the commenter, requiring
debt collectors to provide foreign
language disclosures would entail
significant costs. An industry
commenter and an industry trade group
commenter asked the Bureau to clarify
whether providing the proposed
§ 1006.34(d)(3)(vi) disclosures would
obligate a debt collector to provide
future communications in Spanish to
the consumer. Some commenters raised
questions about whether the validation
period would be paused when a
consumer requests a Spanish-language
translation of the validation notice and
then restart when it is received, with a
local government commenter supporting
such a revision in the final rule.
The Bureau declines to make the
Spanish-language disclosures described
in § 1006.34(d)(3)(vi) mandatory. A
requirement to provide the
§ 1006.34(d)(3)(vi) disclosures, standing
alone, would not be overly burdensome
because the translation language is
precisely described in the regulation
and is also included on the model
validation notice. However, the content
of those disclosures means that
mandating them would effectively
compel debt collectors to provide
translated validation notices to certain
consumers (i.e., consumers who
respond to the § 1006.34(d)(3)(vi)
disclosures by requesting a Spanishlanguage validation notice).361 As
discussed in the proposal, the Bureau
did not propose to require debt
collectors to provide translated
validation notices because of the
associated costs of such a
requirement,362 and the Bureau is
declining to finalize such a requirement
in this final rule.363
A debt collector who provides the
optional disclosure described in
§ 1006.34(d)(3)(vi) must honor a
consumer’s request for a translated
validation notice or risk violating
FDCPA section 807. However, the
proposal did not expressly state that the
debt collector would be obligated to
provide the Spanish-language
translation of the validation notice in
this circumstance. The proposal only
implied such an obligation. To make the
361 15
U.S.C. 1692e.
FR 23274, 23352 (May 21, 2019).
363 See the section-by-section analysis of
§ 1006.34(e).
362 84
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rule clearer, the Bureau is finalizing a
new § 1006.34(e)(2), which provides
that a debt collector who includes in the
validation information either or both of
the optional disclosures described in
§ 1006.34(d)(3)(vi), and who thereafter
receives a request from the consumer for
a Spanish-language validation notice,
must provide the consumer a validation
notice completely and accurately
translated into Spanish.364 The Bureau
clarifies that, other than with respect to
§ 1006.34(e)(2), nothing in the rule
obligates a debt collector to provide
future communications in Spanish
solely because the debt collector
provided a disclosure described in
§ 1006.34(d)(3)(vi) in Spanish.
Regarding the commenters who asked
for clarification about, or supported,
restarting the validation period when
the consumer requests a Spanishlanguage validation notice, the Bureau
declines to mandate such a change but
notes that debt collectors who
voluntarily restart the validation period
after providing a copy of the Spanishlanguage validation notice following the
consumer’s request do not violate the
FDCPA or Regulation F.
For these reasons, the Bureau is
finalizing § 1006.34(d)(3)(vi) largely as
proposed but with a revision to clarify
that a debt collector may include either
of the optional Spanish-language
translation disclosures, or both of them.
34(d)(3)(vi)(A)
Proposed § 1006.34(d)(3)(vi)(A)
provided that a debt collector could
include a statement in Spanish
informing a consumer that the consumer
could request a Spanish-language
validation notice. Specifically, the
Bureau proposed in
§ 1006.34(d)(3)(vi)(A) to permit 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.’’ The
proposal clarified that a debt collector
who provided this optional disclosure
could also include supplemental
information in Spanish specifying how
a consumer could request a Spanishlanguage validation notice. Proposed
comment 34(d)(3)(vi)(A)–1 explained
that, for example, a debt collector could
provide a statement in Spanish that a
consumer could request a Spanishlanguage validation notice by telephone
or email.
Consumer advocate commenters
supported the Spanish-language
364 Id.
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disclosure described in proposed
§ 1006.34(d)(3)(vi)(A). The Bureau
received no other comments specifically
addressing the disclosure. Accordingly,
the Bureau is finalizing
§ 1006.34(d)(3)(vi)(A) and its related
commentary as proposed, with only
minor wording changes.
34(d)(3)(vi)(B)
Proposed § 1006.34(d)(3)(vi)(B)
provided that debt collectors could
include in the consumer-response
information section of the validation
notice a statement in Spanish that a
consumer could use to request a
Spanish-language validation notice.
Specifically, the Bureau proposed in
§ 1006.34(d)(3)(vi)(B) to permit debt
collectors 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 have
required this statement to be next to a
prompt that the consumer could use to
request a Spanish-language validation
notice.
Consumer advocate commenters
generally supported the Spanishlanguage disclosure described in
proposed § 1006.34(d)(3)(vi)(B).
However, a group of consumer advocate
commenters stated that the Spanish
translation in proposed
§ 1006.34(d)(3)(vi)(B) was inaccurate.
Specifically, the commenters stated that
the correct Spanish translation of
‘‘form’’ is ‘‘formulario,’’ not ‘‘forma.’’
The word ‘‘forma’’ appeared in both
proposed § 1006.34(d)(3)(vi)(B) and in
the sample disclosure on the proposed
model validation notice. The Bureau
finds that ‘‘formulario,’’ not ‘‘forma,’’ is
the correct Spanish translation of
‘‘form.’’ The Bureau also finds that, for
gender agreement, § 1006.34(d)(3)(vi)(B)
should read ‘‘este formulario,’’ not ‘‘esta
formulario.’’
The Bureau is finalizing
§ 1006.34(d)(3)(vi)(B), its related
commentary, and the disclosure on the
model validation notice as proposed,
but with revisions to correct the
translation errors and with other, minor
wording changes for consistency with
other provisions of the final rule.
34(d)(3)(vii)
The Bureau proposed
§ 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. Proposed comment
34(c)(2)(iii)–1 provided an example of
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merchant brand information that the
Bureau initially determined would be
available to a debt collector and that,
therefore, would be required on a
validation notice.
For the reasons discussed below, the
Bureau is not finalizing
§ 1006.34(c)(2)(iii) and its related
commentary. Instead, the Bureau is
restructuring and renumbering proposed
§ 1006.34(c)(2)(iii) as a new optional
disclosure under § 1006.34(d)(3)(vii),
which permits, but does not require,
debt collectors to disclose the merchant
brand, affinity brand, or facility name, if
any, associated with the debt (and does
not limit the optional disclosure to
credit card debt).
Industry, industry trade group, and
consumer advocate commenters
uniformly agreed that, if available,
merchant brand information may help
consumers recognize debts. For
example, consumer advocate
commenters stated that, in the case of a
store-branded credit card, a consumer
may not associate the debt with the
original creditor (often a bank) and may
be more likely to recognize the
merchant, whose name appears on the
credit card. A group of consumer
advocate commenters asserted that such
information was important, impliedly
suggesting that the Bureau require its
disclosure as part of the validation
information.
Although supportive of the proposed
disclosure in principle, some industry
trade group commenters asked the
Bureau to clarify the circumstances in
which merchant brand information
would be deemed available. According
to these commenters, whether merchant
brand information is available may be
unclear because it is not always
identifiable in a consumer’s file or a
creditor may not have provided it. One
industry trade group commenter stated
that the proposed provision requiring
disclosure of merchant brand
information for credit cards as part of
the validation information would better
serve consumers and reduce compliance
costs if the provision included broader
categories than merchant brand names
and was an optional, rather than
mandatory, disclosure.
The Bureau received other comments
about expanding the scope of proposed
§ 1006.34(c)(2)(iii). An industry trade
group commenter recommended that
§ 1006.34(c)(2)(iii) also encompass
affinity brand information (e.g., the
name of a college). Other commenters
recommended that debt collectors be
permitted or required to disclose the
facility name associated with a medical
debt (e.g., the name of a hospital).
According to commenters, a consumer
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may be more likely to recognize a
facility where treatment was provided
than the healthcare service provider that
is the creditor. A group of consumer
advocate commenters noted that
increasingly a hospital name may act as
a brand for an umbrella of service
providers and thus should be treated in
the same manner as a merchant brand.
The Bureau determines that merchant
brand information may help consumers
recognize debts. However, the Bureau
agrees with the feedback that whether
merchant brand information is available
may not always be clear to a debt
collector. This ambiguity is particularly
likely with respect to debts that have
been sold or transferred multiple times.
Furthermore, not all creditors will have
an associated merchant brand, at least
one that is distinct from the creditor
name.
Accordingly, in lieu of finalizing the
requirement in proposed
§ 1006.34(c)(2)(iii), the Bureau is
adopting new § 1006.34(d)(3)(vii),
which permits, rather than requires,
debt collectors to disclose the merchant
brand information, if any, associated
with a debt. By making merchant brand
an optional disclosure, the Bureau
eliminates a source of potential
ambiguity that could expose debt
collectors to legal risk. In addition,
notwithstanding this modification, the
Bureau concludes that debt collectors
will be incentivized to provide
merchant brand information if it is
available. Commenters uniformly agreed
that merchant brand information helps
consumers recognize debts.365 Thus,
debt collectors likely will benefit from
including merchant brand information if
possible. Providing merchant brand
information will also benefit consumers
by allowing them to more easily identify
debts, determine whether they owe
them, and avoid the confusion resulting
from seeing a validation notice with an
unfamiliar name (which potentially
leads to the consumer ignoring the
notice).
The Bureau finds that affinity brand
information and facility name
information also may help consumers
recognize debts they owe. Whereas a
merchant brand can be generally
understood as the labelling or branding
of a commercial entity, such as a retail
store, an affinity brand may reflect the
labelling or branding of an entity that is
not necessarily commercial but one with
which the consumer has a relationship.
For example, a higher education
365 See 84 FR 23274, 23340 (May 21, 2019) (citing
the Bureau’s consumer focus group findings that
indicate consumers use merchant brands to
recognize credit card debts).
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5831
institution (e.g., ‘‘College of Columbia’’)
or a charity may be associated with a
consumer financial product (e.g., a
credit card provided by ‘‘ABC Bank’’) as
an affinity brand. See comment
34(d)(3)(vii)–2. Moreover, facility name
information (e.g., ‘‘ABC Hospital’’) may
prove more recognizable to consumers
with respect to a medical debt than the
name of, for example, the physicians
group or laboratory that is the actual
creditor (particularly if the consumer
has one appointment or procedure at
one facility that results in multiple bills
from multiple providers). See comment
34(d)(3)(vii)–3. Thus,
§ 1006.34(d)(3)(vii) also permits debt
collectors to disclose an affinity brand
or a facility name, if any, associated
with a debt.366
For these reasons, the Bureau is
finalizing § 1006.34(d)(3)(vii) to provide
that, along with the validation
information, debt collectors may
disclose the merchant brand, affinity
brand, or facility name, if any,
associated with a debt. The Bureau also
is adopting new comments 34(d)(3)(vii)–
1 through –3 to provide examples of a
merchant brand, an affinity brand, and
a facility name, respectively.
34(d)(3)(viii)
The Bureau is finalizing
§ 1006.34(d)(3)(viii) to provide that,
although it is not required, a debt
collector who is collecting debt not
related to a consumer financial product
or service may disclose certain
additional information without losing
the safe harbor provided by
§ 1006.34(d)(2) (assuming the debt
collector otherwise satisfies the
conditions for the safe harbor).
Specifically, § 1006.34(d)(3)(viii)
provides that, if a debt collector is
collecting debt other than debt related to
a consumer financial product or service
as defined in § 1006.2(f), the debt
collector may disclose: (1) The name of
the creditor to whom the debt was owed
on the itemization date (i.e., the
information specified in
§ 1006.34(c)(2)(iii)); or (2) a statement
that informs the consumer that
additional information regarding
consumer protections in debt collection
is available on the Bureau’s website at
www.cfpb.gov/debt-collection (i.e., the
information specified in
§ 1006.34(c)(3)(iv)). The Bureau
determines that receipt of this
366 Although § 1006.34(d)(3)(vii) permits debt
collectors to disclose the facility name associated
with a medical debt along with the validation
information, debt collectors may be prohibited from
doing so by other applicable laws, such as
healthcare privacy rules or regulations.
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34(d)(4) Validation Notices Delivered
Electronically
As discussed in the proposal and in
the November 2020 Final Rule,
promoting electronic communications
may benefit consumers and debt
collectors.367 As also discussed in the
proposal, allowing debt collectors to
make certain formatting modifications
to validation notices delivered
electronically may help consumers
exercise their verification rights under
FDCPA section 809 and may facilitate a
debt collector’s ability to process and
understand a consumer’s response to
such an electronically delivered
validation notice. Proposed
§ 1006.34(d)(4) therefore provided
several modifications, discussed in the
section-by-section analysis of
§ 1006.34(d)(4)(i) and (ii) below, that a
debt collector could make, at its option,
to the formatting of a validation notice
delivered electronically.
An industry trade group commenter
expressed support for proposed
§ 1006.34(d)(4)’s facilitation of
validation notices delivered
electronically. The Bureau received no
other comments specifically addressing
proposed § 1006.34(d). Accordingly, the
Bureau is finalizing § 1006.34(d)(4) with
only minor wording changes.
The Bureau is finalizing
§ 1006.34(d)(4) to implement and
interpret FDCPA section 809(b) by
establishing formatting requirements
that facilitate the consumer’s right to
dispute a debt and request originalcreditor 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 is finalizing
§ 1006.34(d)(4) 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.
34(d)(4)(i) Prompts
Proposed § 1006.34(d)(4)(i) provided
that a debt collector delivering a
validation notice electronically
pursuant to § 1006.42 could display any
prompt required by § 1006.34(c)(4)(i) or
(ii) or (d)(3)(iii)(B) or (vi)(B) as a fillable
field.368
One industry trade group commenter
supported proposed § 1006.34(d)(4)(i).
According to the commenter, if a
367 See
84 FR 23274, 23351 (May 21, 2019); 85 FR
76734, 76755 (Nov. 30, 2020).
368 84 FR 23274, 23405 (May 21, 2019).
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validation notice is delivered by email,
a debt collector should be permitted to
format the prompts in the consumerresponse information section so that the
debt collector receives an email if a
consumer selects them. Another
industry trade group commenter asked
the Bureau to clarify whether a fillable
field includes a checkbox.
A consumer advocate commenter
raised concerns about permitting a debt
collector to format the payment prompt
described in § 1006.34(d)(3)(iii)(B) as a
fillable field. According to the
commenter, scammers could
impersonate legitimate debt collectors
and attempt to convince consumers to
make payments on fraudulent debts
using the payment prompts. The
commenter urged the Bureau to evaluate
the security risks associated with
fillable payment prompts and consider
other approaches.
The Bureau determines that allowing
a debt collector to design a validation
notice delivered electronically to
include fillable prompts will benefit
consumers and industry by making it
easier for consumers to exercise their
verification rights, make a payment, or
request a Spanish-language translation
of the notice. The Bureau does not find
that permitting a debt collector to format
the payment prompt described in
§ 1006.34(d)(3)(iii)(B) as a fillable field
entails substantial security risks. The
Bureau acknowledges that, in general,
electronic communications present
certain security risks to consumers.
However, the Bureau finds that these
general risks do not justify preventing
debt collectors from including in
electronic communications common
design modifications, such as prompts,
that are convenient to consumers. Thus,
the Bureau declines to limit the ability
of legitimate debt collectors to include
on validation notices a common design
modification that will benefit
consumers.369
Accordingly, the Bureau is finalizing
§ 1006.34(d)(4)(i) largely as proposed,
with only minor wording changes for
consistency with other provisions in the
final rule.
34(d)(4)(ii) Hyperlinks
Proposed § 1006.34(d)(4)(ii) provided
that a debt collector delivering a
validation notice electronically could
embed hyperlinks in the validation
notice that, when clicked, would
connect consumers to the debt
collector’s website or permit consumers
369 With respect to the comment about whether a
fillable field includes a checkbox, the Bureau
confirms that a fillable field may appear as an
unmarked checkbox that a consumer can select.
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to dispute a debt or request originalcreditor information.
Industry trade group commenters
supported proposed § 1006.34(d)(4)(ii).
For example, a commenter stated that
hyperlinks are an important feature
used to reduce the complexity of email
and text messages while allowing
readers to access important information.
A consumer advocate commenter
recommended that the Bureau also
permit debt collectors to embed a
hyperlink that connects consumers to
the Bureau’s website address described
in § 1006.34(c)(3)(iv).
The Bureau determines that
hyperlinks are a formatting modification
that may benefit consumers and debt
collectors if included in validation
notices that are delivered electronically.
And the Bureau agrees that debt
collectors should be permitted to
include a hyperlink that connects
consumers to the Bureau’s website
address described in § 1006.34(c)(3)(iv).
Accordingly, the Bureau is finalizing
§ 1006.34(d)(4)(ii) to provide that debt
collectors may embed hyperlinks that,
when clicked, connect consumers to the
debt collector’s website, connect
consumers to the Bureau’s debt
collection website as disclosed pursuant
to § 1006.34(c)(3)(iv), or permit
consumers to dispute the debt or request
original-creditor information.
34(e) Translation Into Other Languages
The Bureau proposed § 1006.34(e) to
provide that a debt collector could send
a consumer a validation notice
completely and accurately translated
into any language if the debt collector
also sent an English-language validation
notice that satisfied § 1006.34(a)(1).
Proposed § 1006.34(e) also provided
that, if a debt collector already provided
a consumer an English-language
validation notice that satisfied
§ 1006.34(a)(1) and subsequently
provided the consumer a validation
notice translated into any other
language, the debt collector would not
need to provide an additional copy of
the English-language notice. Proposed
comment 34(e)–1 clarified that the
language of a validation notice obtained
from the Bureau’s website would be
considered a complete and accurate
translation, although debt collectors
would be permitted to use other
validation notice translations if they
were accurate and complete.
Industry and industry trade group
commenters supported proposed
§ 1006.34(e) and its optional approach
to providing validation notices
translated into other languages. An
industry trade group commenter stated
that this approach was appropriate
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because some debt collectors may not
have the resources to conduct
collections activities in languages other
than English. Other industry trade group
commenters stated that requiring debt
collectors to provide validation notices
in other languages would be
burdensome and costly. An industry
trade group commenter stated that, if a
debt collector provided a validation
notice in another language, a consumer
would expect the debt collector to
communicate in that language.
According to this commenter, if the debt
collector was unable to do so, this
unfulfilled expectation would frustrate
consumers and expose debt collectors to
litigation risk.
Other commenters, including
consumer advocates, legal aid providers,
and faith groups, recommended that
debt collectors be required to provide
non-English validation notices to LEP
consumers. According to these
commenters, LEP consumers tend to
experience poverty at much greater
rates, face significant challenges
navigating the debt collection process,
and are often subject to harassment and
deception. Commenters stated that
English-language validation notices
would not enable LEP consumers to
understand their rights in debt
collection or to take appropriate action
if they did not believe that they owed
a debt. Commenters cited demographic
statistics showing the growing
population of LEP consumers,
particularly in certain localities. A
consumer advocate commenter stated
that case law suggests that a debt
collector’s failure to provide a nonEnglish validation notice to an LEP
consumer may violate the FDCPA.370
To address these concerns, these
commenters suggested various
mandatory frameworks that would
require debt collectors to provide
translated validation notices to
consumers. These suggested alternative
frameworks included requiring debt
collectors to provide a translated
validation notice: (1) In Spanish and
located on the back of every Englishlanguage validation notice; (2) with
every English-language validation notice
370 The commenter cited, for example, Evory v.
RJM Acquisitions Funding LLC, 505 F.3d 769, 774
(7th Cir. 2007). However, the Bureau disagrees with
the commenter’s premise that this opinion and the
others it cited imply a general requirement under
the FDCPA to provide translated notices to all
Spanish-speaking LEP consumers. The Bureau
believes, instead, that those holdings were
dependent on the facts of those cases. For example,
Evory discussed in dicta a hypothetical in which a
debt collector targeted vulnerable Spanish-speaking
LEP consumers with English-language validation
notices, 505 F.3d at 774, but that particular scenario
involved targeting, which is beyond the scope of
§ 1006.34(e).
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if the debt collector knows or should
know the consumer has another
language preference; (3) if the original
transaction or the debt collector’s prior
communication was conducted in a
foreign language; (4) upon a consumer’s
request; (5) if the debt collector received
information in the file from the creditor
or a prior debt collector indicating the
consumer’s non-English language
preference; or (6) if and when the debt
collector at a later point communicates
with the consumer in a foreign
language. In some cases, commenters
framed these interventions as narrow or
measured. A group of consumer
advocates also urged the Bureau to make
available on its website Spanishtranslated validation notices as well as
translations in the next seven most
common languages spoken by LEP
consumers in the United States.
The Bureau determines that LEP
consumers may benefit from translated
validation notices. Further, some debt
collectors may want to provide
translated validation notices to LEP
consumers, if doing so is consistent
with their business practices.
The Bureau, however, declines
commenters’ requests to require debt
collectors to provide a Spanish-language
translation to all consumers on the back
of every English-language validation
notice or a translated notice to
consumers in other languages if the debt
collector knows or should know the
consumer has a different language
preference. As discussed in the
proposal,371 these types of mandatory
approaches would result in significant,
industry-wide costs on both an upfront
(implementation) basis and an ongoing
basis, especially for smaller debt
collectors and in connection with
translations of the validation notice in
languages whose use is not prevalent in
the United States.372 The Bureau
acknowledges that some LEP consumers
may experience particular challenges in
the debt collection process. However,
commenters did not provide
information about the costs and benefits
of requiring debt collectors to provide
translated validation notices to all
consumers, regardless of whether the
consumer requests the translation, that
persuades the Bureau that such
mandatory requirements are justified.
The Bureau, as stated above, recognizes
the benefits of providing translated
disclosures to consumers. However, the
Bureau concludes that the approach in
the proposal, supplemented by certain
changes in the final rule, strikes a better
371 See also the section-by-section analysis of
§ 1006.34(d)(3)(vi).
372 See 84 FR 23274, 23352 (May 21, 2019).
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5833
balance than a mandatory requirement.
The final rule permits debt collectors to
provide disclosures carrying safe harbor
protection that notify and encourage
consumers to request a Spanishlanguage translation of the validation
notice or additional information in
Spanish, which can assist the largest
group of LEP consumers in the United
States by a wide margin compared to
other languages. At the same time, the
final rule does not require debt
collectors to provide all consumers with
translated validation notices, whether in
Spanish or other languages, and
irrespective of whether the consumers
request it or speak a language that is
uncommon among LEP consumers in
the United States.
Regarding the request by a group of
consumer advocate commenters that the
Bureau translate the validation notice
into Spanish and seven other languages
and deem the Bureau translations as
complete and accurate, the Bureau plans
to make available on its website, prior
to the effective date of the final rule, a
Spanish-language translation of the
validation notice, and it will consider
taking such action in the future with
respect to one or more of the other
languages cited by these commenters
following implementation of the final
rule.
The Bureau also declines to
implement the other mandatory
approaches suggested by consumer
advocate, faith group, and legal aid
provider commenters. As discussed
above, these commenters suggested a
variety of interventions, such as
requiring the debt collector provide the
translated notice in circumstances in
which the consumer had expressed a
language preference to a prior debt
collector or the creditor and that
preference is noted in the file for the
debt, or in which, at a later point in the
process, the consumer communicates in
a foreign language.
The Bureau disagrees with some
commenters’ characterization of these
interventions as targeted or narrow in
scope, as each suggestion would entail
a mandatory requirement with
associated upfront and ongoing costs
and complexity (which would be
compounded if more than one or even
all of these interventions were adopted
collectively). In some cases, these
suggested interventions are beyond the
scope of the proposal. As to others, the
Bureau concludes that the costs of such
interventions to debt collectors,
particularly smaller entities, would not
outweigh the benefits to consumers
because they would add undue
complexity to the rule from an
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operational, compliance, and
supervisory perspective.
For these reasons, the Bureau declines
to adopt a final rule that requires debt
collectors to provide translated
validation notices. Nevertheless,
because the Bureau determines that, as
discussed in the proposal, LEP
consumers may benefit from receiving
translated validation notices, the Bureau
is finalizing § 1006.34(e) to clarify how
debt collectors may provide such
notices if they choose. The Bureau is
finalizing proposed § 1006.34(e) as
§ 1006.34(e)(1), with certain revisions
and organizational changes for clarity;
no substantive change is intended.
Furthermore, as discussed in the
section-by-section analysis of
§ 1006.34(d)(3)(vi), the Bureau is
finalizing new § 1006.34(e)(2) to provide
that, if a debt collector includes in the
validation information either or both of
the optional disclosures notifying a
consumer that the consumer can request
a copy of the validation notice in
Spanish, the debt collector must provide
the consumer a Spanish-language
validation notice if the consumer
requests one. The Bureau intended this
result in the proposal and is including
§ 1006.34(e)(2) for clarity and in
response to feedback. Finally, the
Bureau is finalizing comment 34(e)–1
with revisions to conform to the
revisions and organizational changes
made to § 1006.34(e); no substantive
change is intended.
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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.
The Bureau proposed § 1006.38 to
implement and interpret FDCPA section
809(b) and (c), and the Bureau finalized
the majority of proposed § 1006.38 in
the November 2020 Final Rule.373 The
Bureau now is finalizing the remainder
of proposed § 1006.38 as follows.
Comment 38–1
The Bureau proposed comment 38–2
(renumbered in the November 2020
Final Rule as comment 38–1) to set forth
examples of written and electronic
communications consumers can use in
373 85 FR 76734, 74843–48, 76893 (Nov. 30,
2020).
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disputing the debt or requesting the
name and address of the original
creditor.374 The second proposed
example, proposed comment 38–2.ii,
would have clarified that a consumer
could return to the debt collector the
consumer-response form that proposed
§ 1006.34(c)(4)(i) would have required
to appear on the validation notice and
indicate on the form a dispute or
request. The Bureau received no
comments on proposed comment 38–
2.ii.375 The Bureau did not finalize
proposed comment 38–2.ii in the
November 2020 Final Rule because the
Bureau did not finalize § 1006.34 as part
of that final rule. The Bureau now is
finalizing comment 38–2.ii as proposed,
renumbered as comment 38–1.ii, except
that the Bureau is correcting a
typographical error in the proposed
comment such that the final comment
cross references § 1006.34(c)(4) rather
than § 1006.34(c)(4)(i).
Comment 38–3
The Bureau proposed comment 38–1
(renumbered in this final rule as
comment 38–3) to clarify the
applicability of § 1006.38 in the
decedent debt context. Proposed
comment 38–1 would have clarified
that, if the consumer has not previously
disputed the debt or requested the name
and address of the original creditor,
then a person who is authorized to act
on behalf of the deceased consumer’s
estate operates as the consumer for
purposes of § 1006.38. Proposed
comment 38–1 also would have clarified
that, if a person who is authorized to act
on behalf of the deceased consumer’s
estate 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), respectively,
would require the debt collector to cease
collection of the debt until the debt
collector has responded to that request
or dispute.
For the reasons discussed in the
section-by-section analysis of
§ 1006.2(e), the Bureau is interpreting
the term consumer to mean any natural
person, whether living or deceased, who
is obligated or allegedly obligated to pay
any debt. 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 is adopting commentary
clarifying how this definition operates
in the decedent debt context, including
374 84
FR 23274, 23353 (May 21, 2019).
Bureau addressed comments received on
other aspects of proposed comment 38–2 in the
November 2020 Final Rule. 85 FR 76734, 76843–44
(Nov. 30, 2020).
375 The
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debt collectors’ obligations for providing
the validation information and
responding to disputes and requests for
original-creditor information.
Accordingly, the Bureau is finalizing
comment 38–1 as proposed, renumbered
as comment 38–3 in this final rule.
38(a) Definitions
38(a)(2) Validation Period
The Bureau proposed in
§ 1006.38(a)(2) to provide that the term
validation period as used in § 1006.38
has the same meaning given to it in
proposed § 1006.34(b)(5).376 Because the
Bureau did not finalize § 1006.34 in the
November 2020 Final Rule, the Bureau
finalized the definition in
§ 1006.38(a)(2) with revised wording to
refer to the 30-day period described in
FDCPA section 809 as defined by
Regulation F.377 The Bureau noted that
it might, as part of this final rule, revise
the definition of validation period as
finalized in the November 2020 Final
Rule to cross-reference any definition of
that term that the Bureau adopts in this
final rule. As discussed in the sectionby-section analysis of § 1006.34(b)(5),
the Bureau is finalizing the definition of
validation period.378 Therefore, the
Bureau is making a technical change
revising § 1006.38(a)(2), as finalized in
the November 2020 Final Rule, to
provide 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 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.379 The Bureau proposed in
376 84
FR 23274, 23353 (May 21, 2019).
FR 76734, 76844, 76893 (Nov. 30, 2020).
378 The Bureau addresses comments received
regarding the definition of validation period in the
section-by-section analysis of § 1006.34(b)(5).
379 This language was added to the FDCPA by the
Financial Services Regulatory Relief Act of 2006,
Public Law 109–351, sec. 802(c), 120 Stat. 1966,
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 debt
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
377 85
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§ 1006.38(b) to implement this
prohibition and generally restate the
relevant statutory language, with only
minor changes for style and clarity.380
As the Bureau discussed in the
November 2020 Final Rule,381 the
Bureau received a few substantive
comments addressing proposed
§ 1006.38(b). Two industry commenters
requested that the final rule define the
term ‘‘overshadowing.’’ These
commenters observed that debt
collectors’ communications of
validation information almost always
expressly advise the consumer of the
right to dispute the debt and to request
the name and address of the original
creditor. These commenters asserted
that overshadowing claims are
nonetheless some of the most common
allegations in FDCPA lawsuits. These
commenters also requested clarity as to
whether the safe harbor in proposed
§ 1006.34(d)(2) for debt collectors who
use the model validation notice also
would provide a safe harbor for
compliance with the overshadowing
prohibition in proposed § 1006.38(b).
One industry commenter requested that
the final rule clarify that credit reporting
during the validation period does not
constitute overshadowing.382
In the November 2020 Final Rule, the
Bureau finalized proposed § 1006.38(b)
as § 1006.38(b)(1) and reserved
§ 1006.38(b)(2).383 As noted above,
proposed § 1006.38(b) generally restated
the relevant statutory language, with
only minor changes for style and clarity,
and § 1006.38(b)(1) in the November
2020 Final Rule did the same. In the
November 2020 Final Rule, the Bureau
stated that it expected to address, as part
of this final rule, the comments it
received requesting further clarity about
the safe harbor provided by
§ 1006.34(d)(2), and the Bureau reserved
§ 1006.38(b)(2) for that purpose.384
After considering the comments, the
Bureau is finalizing in § 1006.38(b)(2) a
safe harbor from the prohibition in
§ 1006.38(b)(1) against
overshadowing.385 Section 1006.38(b)(2)
consumer’s right to dispute the debt specified by
[s]ection 809(a)’’).
380 84 FR 23274, 23353–54 (May 21, 2019).
381 85 FR 76734, 76844 (Nov. 30, 2020).
382 In addition, one industry commenter stated
that it generally agreed with proposed § 1006.38,
and a group of consumer advocates that addressed
proposed § 1006.38(b) did not object to the
proposal.
383 85 FR 76734, 76844, 76893 (Nov. 30, 2020).
384 Id.
385 Accordingly, the heading for final
§ 1006.38(b)(2) refers to the safe harbor, and the
Bureau is revising: (1) The heading for
§ 1006.38(b)(1) as finalized in the November 2020
Final Rule to clarify that that paragraph relates to
the overshadowing prohibition; and (2)
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provides that a debt collector who uses
Model Form B–1 in appendix B of this
part in a manner described in
§ 1006.34(d)(2) has not thereby violated
§ 1006.38(b)(1). Therefore, a debt
collector who uses Model Form B–1 in
appendix B to Regulation F, specified
variations of the model notice, or a
substantially similar form, has not
thereby violated § 1006.38(b)(1). The
safe harbor protects only the use of the
model validation notice to comply with
the information and form requirements
of § 1006.34(c) and (d)(1). If a debt
collector uses the model validation
notice as described in § 1006.34(d)(2)
and conducts other collection activities
during the validation period, the debt
collector does not receive a safe harbor
for those other collection activities. A
debt collector also does not receive a
safe harbor for the manner in which a
model validation notice is provided,
such as the envelope in which a model
validation notice is provided.
The Bureau declines to otherwise
define the term ‘‘overshadow’’ or to
clarify whether other collection
activities during the validation period
either violate or comply with the
prohibition in final § 1006.38(b)(1). The
Bureau finds that the safe harbor in
§ 1006.38(b)(2) provides sufficient
clarity for debt collectors.
38(c) Requests for Original-Creditor
Information
FDCPA section 809(a)(5) states that
the validation information a debt
collector provides to a consumer must
include a statement that, upon the
consumer’s written request within the
30-day validation period, the debt
collector will provide the consumer
with the name and address of the
original creditor, if different from the
current creditor. 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
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. The Bureau proposed in
§ 1006.38(c) to implement this
prohibition and generally restate the
relevant statutory language.
As the Bureau discussed in the
November 2020 Final Rule, the Bureau
received a number of comments
addressing proposed § 1006.38(c).386
§ 1006.38(b)(1) to omit a reference to the fact that
the Bureau may provide in this part a safe harbor
for debt collectors when they use certain Bureauapproved disclosures because the Bureau is
providing that safe harbor in this final rule.
386 85 FR 76734, 76844–45 (Nov. 30, 2020).
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5835
Three industry commenters requested
that the final rule provide that, if a debt
collector’s communication of the
validation information to a consumer
identifies the original creditor, the debt
collector need not give the consumer the
option of requesting original-creditor
information from the debt collector.
These commenters stated that, if the
original creditor has already been
identified to a consumer, it would be
confusing to the consumer to provide
the option to request the name and
address of the original creditor. Further,
they stated, consumers could use
unnecessary requests for originalcreditor information as a tactic to delay
or avoid collection. One industry
commenter requested that the final rule
clarify that a debt collector is not
required to include original-creditor
information in its communication of
validation information to a consumer.
This commenter stated that lawsuits are
often filed alleging that a debt collector
has violated the FDCPA by not
identifying the original creditor in the
validation information.
Several commenters recommended
that the Bureau define ‘‘original
creditor’’ to mean the creditor at the
time of charge off. According to an
industry trade group, this definition
would be consistent with other laws,
including the Uniform Rules for New
York State Trial Courts.387 Other
industry and industry trade group
commenters stated that this definition
would be appropriate for older debts
because a consumer may no longer
recognize the original creditor,
particularly if an account has been sold.
An industry trade group suggested that
defining ‘‘original creditor’’ as the
creditor at the time of charge off may
resolve some compliance challenges in
the retail installment sales context.
According to the commenter, in retail
installment sales, the original creditor is
the retail seller, not the entity that
ultimately buys the contract, and retailseller information may not be readily
available to the debt collector or helpful
to the consumer.
A group of consumer advocate
commenters who addressed proposed
§ 1006.38(c) generally noted the
importance of original-creditor
information to consumers in helping
them recognize the debt in question.
One commenter stated that the rule
387 ‘‘Original creditor means the financial
institution that owned the consumer credit account
at the time the account was charged off, even if that
financial institution did not originate the account.
Charged-off consumer debt means a consumer debt
that has been removed from an original creditor’s
books as an asset and treated as a loss or expense.’’
22 NYCRR 208.14–a(a)(2).
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should require debt collectors to
identify the original creditor in the
validation information.388
In the November 2020 Final Rule, the
Bureau finalized proposed § 1006.38(c)
as § 1006.38(c)(1) and reserved
§ 1006.38(c)(2).389 As noted above,
proposed § 1006.38(c) generally restated
the relevant statutory language, and
§ 1006.38(c)(1) in the November 2020
Final Rule did the same.390 In the
November 2020 Final Rule, the Bureau
stated that it expected to address, as part
of this final rule, how a debt collector
may respond to a request for originalcreditor information if the original
creditor is the same as the current
creditor, and the Bureau reserved
§ 1006.38(c)(2) for that purpose.391 The
Bureau also noted that it would respond
in this final rule to the comments asking
the Bureau to define the term original
creditor.
The Bureau has determined that a
debt collector’s communication of the
validation information must include
disclosure of the option to request
original-creditor information. As noted
above, FDCPA section 809(a)(5) states
that the validation information must
include ‘‘a statement that, upon the
consumer’s written request within the
thirty-day period, the debt collector will
provide the consumer with the name
and address of the original creditor, if
different from the current creditor.’’ 392
Because FDCPA section 809(a) requires
the validation information to include
disclosure of the consumer’s right to
request original-creditor information,
the Bureau finds that consumer
confusion would result if the final rule
were to permit a debt collector not to
respond to a consumer’s timely request
for that information if the original
creditor is the same as the current
creditor. Further, FDCPA section 809(b)
states that ‘‘[a]ny collection activities
and communication during the 30-day
period may not overshadow or be
inconsistent with the disclosure of the
consumer’s right to dispute the debt or
request the name and address of the
original creditor.’’ 393 The Bureau
388 Consumer advocates also addressed the
proposal’s provisions regarding electronic delivery
of original-creditor information (and other
information) in proposed § 1006.42. These
comments regarding electronic delivery were
addressed in the November 2020 Final Rule. Id. at
76848.
389 Id. at 76893.
390 While this final rule republishes in
§ 1006.38(c) some of the text of § 1006.38(c)(1) as
finalized in the November 2020 Final Rule, this
final rule makes no change to the substance of
§ 1006.38(c)(1) from what the Bureau finalized in
the November 2020 Final Rule.
391 85 FR 76734, 76845 n.557 (Nov. 30, 2020).
392 15 U.S.C. 1692g(a)(5).
393 15 U.S.C. 1692g(b) (emphasis added).
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therefore has determined to require a
debt collector to respond to a
consumer’s request for original-creditor
information if the original creditor is the
same as the current creditor.
However, the Bureau also has
determined that FDCPA section
809(a)(5) and (b) permits a debt collector
to respond differently to the consumer’s
request for original-creditor information
when the original creditor is the same
as the current creditor. Specifically, the
Bureau has determined that FDCPA
section 809(b), when read together with
FDCPA section 809(a)(5), requires the
debt collector to provide the name and
address of the original creditor to the
consumer only if the original creditor is
different from the current creditor.
Accordingly, the Bureau is finalizing
new § 1006.38(c)(2) to set forth an
alternative procedure that a debt
collector may use to respond to a
consumer’s request for original-creditor
information if the original creditor is the
same as the current creditor.
Specifically, if a debt collector receives
a request for the name and address of
the original creditor submitted by the
consumer in writing within the
validation period, the special rule set
forth in § 1006.38(c)(2) provides that the
debt collector must cease collection of
the debt until the debt collector
reasonably determines that the original
creditor is the same as the current
creditor and either (i) notifies the
consumer in writing or electronically in
the manner required by § 1006.42 that
the original creditor is the same as the
current creditor and refers the consumer
to the debt collector’s earlier provision
of the validation information or (ii)
satisfies § 1006.38(c)(1).
Under the final rule, a debt collector
is not required to use the alternative
procedure in § 1006.38(c)(2); a debt
collector can always comply with the
rule by complying with § 1006.38(c)(1).
By adopting the § 1006.38(c)(2)
alternative procedure, the Bureau strikes
the best balance between providing debt
collectors with a less burdensome
method of responding to consumer
requests for original-creditor
information and protecting consumers.
The Bureau adopts the alternative
procedure in § 1006.38(c)(2) as an
interpretation of FDCPA section
809(a)(5) and (b), and pursuant to its
authority under FDCPA section 814(d).
In particular, § 1006.38(c)(2) is an
interpretation of what it means for a
debt collector, pursuant to FDCPA
section 809(b), to ‘‘obtain[ ] . . . the
name and address of the original
creditor’’ and send that information to
the consumer when, pursuant to FDCPA
section 809(a)(5), the debt collector
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already provided the name of the
current creditor to the consumer within
the validation information (as required
by FDCPA section 809(a)(2) and
§ 1006.34(c)(2)(v)) and the original
creditor is not different from the current
creditor. If the original creditor is the
same as the current creditor, the Bureau
interprets FDCPA section 809(b)’s
requirement to provide original-creditor
information to the consumer to mean
that a debt collector must cease
collection of the debt until the debt
collector either provides the name and
address of the original creditor to the
consumer in compliance with
§ 1006.38(c)(1) or, in compliance with
§ 1006.38(c)(2), notifies the consumer in
writing or electronically in the manner
required by § 1006.42 that the original
creditor is the same as the current
creditor and refers the consumer to the
debt collector’s earlier provision of the
validation information.
The Bureau declines to require all
debt collectors to include the name of
the original creditor in the validation
information because the Bureau believes
such a requirement is not necessary or
warranted. The statute prescribes a
method for a consumer to obtain this
information upon request. Further, the
Bureau interprets FDCPA section
809(a)(2) as requiring debt collectors to
disclose in the validation information
the name of the current creditor; i.e.,
‘‘the name of the creditor to whom the
debt is owed.’’
The Bureau declines to define
‘‘original creditor’’ in the manner
commenters suggested. Although the
definition suggested by commenters
might be accurate for some debts, it is
not clear to the Bureau that the
suggested definition would be accurate
for all debts. The Bureau did not
propose such a definition and the
Bureau does not have sufficient
information to develop and include a
definition of ‘‘original creditor’’ in the
rule.
Taking into consideration the
provisions of FDCPA section 809(a) and
(b), the final rule provides debt
collectors an alternative response
procedure, described above, when the
original creditor—which in many cases
will be the creditor as of the itemization
date—is the same as the current
creditor. The alternative procedure
permits debt collectors to respond to
some consumer requests for originalcreditor information in a less
burdensome way, while also protecting
consumers. Therefore, the Bureau
believes that defining original creditor
in the final rule is unnecessary and
unwarranted.
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Section 1006.42
Disclosures
Sending Required
Subpart C—Reserved
Subpart D—Miscellaneous
42(a) Sending Required Disclosures
Section 1006.100
42(a)(2) Exceptions
100(a) In General
Section 1006.100(a), as finalized in
the November 2020 Final Rule, requires
a debt collector to retain records that are
evidence of compliance or noncompliance with the FDCPA and
Regulation F. The Bureau proposed
comment 100–1 to clarify that, for
purposes of § 1006.100(a), evidence of
compliance includes, among other
things, copies of documents provided by
the debt collector to the consumer in
accordance with the requirements of
proposed § 1006.34.400 Because the
Bureau did not finalize § 1006.34 in the
November 2020 Final Rule, the Bureau
finalized comment 100(a)–1 to include,
as an example of evidence of
compliance, copies of documents
provided by the debt collector to the
consumer in accordance with FDCPA
section 809(a), as implemented by
Bureau regulation.401 Because the
Bureau now is finalizing § 1006.34, the
Bureau is making a technical change
revising comment 100(a)–1 to include,
as an example of evidence of
compliance, copies of documents
provided by the debt collector to the
consumer in accordance with § 1006.34,
as originally proposed. The Bureau
addressed comments received regarding
proposed comment 100–1 in the
section-by-section analysis of
§ 1006.100(a) and comment 100(a)–1 in
the November 2020 Final Rule.402
The Bureau proposed in
§ 1006.42(a)(2) to provide 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 was included on a
notice required by § 1006.34(a)(1)(i) or
§ 1006.38(c) or (d)(2).394 Because the
Bureau did not finalize § 1006.34 in the
November 2020 Final Rule, the Bureau
finalized § 1006.42(a)(2) with a
reference to the notice required by
FDCPA section 809(a), as implemented
by Regulation F, in lieu of a reference
to the notice required by
§ 1006.34(a)(1)(i).395 Because the Bureau
is now finalizing § 1006.34, the Bureau
is making a technical change revising
§ 1006.42(a)(2) to refer to the notice
required by § 1006.34(a)(1)(i), as
originally proposed. The Bureau
addressed comments received regarding
proposed § 1006.42(a)(2) in the sectionby-section analysis of § 1006.42(a)(2) in
the November 2020 Final Rule.396
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42(b) Requirements for Certain
Disclosures Sent Electronically
Proposed § 1006.42(b)(1) generally
would have required a debt collector
who provided the validation notice
described in § 1006.34(a)(1)(i)(B)
electronically to do so in accordance
with section 101(c) of the E–SIGN
Act.397 Because the Bureau did not
finalize § 1006.34 in the November 2020
Final Rule, the Bureau finalized
§ 1006.42(b) with a reference to the
notice required by FDCPA section
809(a), as implemented by Regulation F,
in lieu of a reference to the validation
notice described in
§ 1006.34(a)(1)(i)(B).398 Because the
Bureau is now finalizing § 1006.34, the
Bureau is making a technical change
revising § 1006.42(b) to refer to the
validation notice required by
§ 1006.34(a)(1)(i)(B), as originally
proposed. The Bureau addressed
comments received regarding proposed
§ 1006.42(b)(1) in the section-by-section
analysis of § 1006.42(b) in the November
2020 Final Rule.399
FR 23274, 23357–59 (May 21, 2019).
FR 76734, 76893 (Nov. 30, 2020).
396 Id. at 76850–51.
397 84 FR 23274, 23356–57 (May 21, 2019).
398 85 FR 76734, 76893 (Nov. 30, 2020).
399 Id. at 76850–51.
Record Retention
Section 1006.104 Relation to State
Laws
FDCPA section 816 provides that the
FDCPA does not annul, alter, or affect,
or exempt any person subject to the
provisions of the FDCPA 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
FDCPA, 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 FDCPA if the protection such
law affords any consumer is greater than
the protection provided by the
FDCPA.403 The November 2020 Final
Rule finalized § 1006.104 to implement
FDCPA section 816.404
Proposed comment 104–1 clarified
that a disclosure required by applicable
394 84
395 85
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400 84
FR 23274, 23367 (May 21, 2019).
FR 76734, 76907 (Nov. 30, 2020).
402 Id. at 76858 n.600.
403 15 U.S.C. 1692n.
404 85 FR 76734 at 76860 (Nov. 30, 2020).
State law that describes additional
protections under State law does not
contradict the requirements of the
FDCPA or the corresponding provisions
of Regulation F.405 In the November
2020 Final Rule, the Bureau indicated
that it was not finalizing proposed
comment 104–1 as part of that rule and
would determine whether and how to
finalize the comment as part of this final
rule.406
As discussed in the November 2020
Final Rule, some commenters asked the
Bureau to clarify how proposed
comment 104–1 would interact with
State law disclosure requirements.407
According to these commenters, the
proposed commentary did not track
FDCPA section 816’s statutory language
and therefore would be susceptible to
competing interpretations. These
commenters expressed concern that
proposed comment 104–1 could be
interpreted to mean that § 1006.104
would preempt State law disclosure
requirements that afford the same
protections as the FDCPA and the
corresponding provisions of Regulation
F. These commenters opposed such an
interpretation as inconsistent with
FDCPA section 816.
With proposed comment 104–1, the
Bureau did not intend to communicate
that § 1006.104 would preempt
disclosures required by State law that
describe State laws that afford the same
protections as the FDCPA and the
corresponding provisions of Regulation
F. To mitigate the risk that the proposed
commentary could be interpreted in this
manner, the Bureau is modifying
proposed comment 104–1 to more
closely track FDCPA section 816’s
statutory language.
Accordingly, the Bureau is finalizing
comment 104–1 to clarify that the
FDCPA and the corresponding
provisions of Regulation F do not annul,
alter, or affect, or exempt any person
subject to these requirements from
complying with a disclosure
requirement under applicable State law
that describes additional protections
under State law that are not inconsistent
with the FDCPA and Regulation F. In
addition, comment 104–1 clarifies that a
disclosure required by State law is not
inconsistent with the FDCPA or
Regulation F if the disclosure describes
a protection such law affords any
consumer that is greater than the
protection provided by the FDCPA or
Regulation F.
401 85
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5837
405 84
406 85
FR 23274, 23368 (May 21, 2019).
FR 76734, 76860 (Nov. 30, 2020).
407 Id.
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VI. Effective Date
As discussed in the November 2020
Final Rule, the Bureau proposed an
implementation period of one year after
publication of the final rule in the
Federal Register.408 The Bureau
received several comments on the
proposed effective date. As noted in the
November 2020 Final Rule, a few
industry commenters supported the
proposed effective date, stating that a
one-year implementation period would
provide debt collectors with enough
time to comply with the rule. Two other
industry commenters supported an 18month and a 24-month implementation
period, respectively, arguing that it
would take longer than one year to
update policies and procedures, train
employees, and make programming
changes necessary to come into
compliance. A government commenter
encouraged the Bureau to provide small
entities more than one year to comply,
if such entities were not exempted from
the rule altogether. Several industry
commenters asked the Bureau to clarify
that a debt collector is permitted to
comply with all or part of the final rule
before the effective date.
The Bureau considered those
comments in finalizing the November
2020 Final Rule and determined that
that final rule would take effect one year
after publication in the Federal
Register. The Bureau determined that
the revisions made to the proposal and
discussed in that Final Rule would
permit debt collectors to meet that
effective date. The Bureau also
recognized that all stakeholders might
benefit if the November 2020 Final Rule
and this final rule had the same
effective date.
As noted in part III, the November
2020 Final Rule was published in the
Federal Register on November 30, 2020
and will take effect on November 30,
2021. The Bureau concludes that all
stakeholders will benefit if the
November 2020 Final Rule and this final
rule have the same effective date. The
Bureau also determines that setting the
effective date for this final rule as
November 30, 2021, consistent with the
effective date of the November 2020
Final Rule, will provide debt collectors
nearly one year, and therefore sufficient
time, to come into compliance with this
final rule.
The Bureau notes that debt collectors
may, but are not required to, comply
with the final rule’s requirements and
prohibitions before the effective date.
Until that date, the FDCPA and other
applicable law continue to govern the
408 85 FR 76734, 76863 (Nov. 30, 2020); see also
84 FR 23274, 23276 (May 21, 2019).
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conduct of FDCPA debt collectors.
Similarly, to the extent the final rule
establishes a safe harbor from liability
for certain conduct or a presumption
that certain conduct complies with or
violates the rule, those safe harbors and
presumptions are not effective until the
final rule’s effective date.
VII. Dodd-Frank Act Section 1022(b)
Analysis
A. Overview
In developing the final rule, the
Bureau has considered the potential
benefits, costs, and impacts as required
by section 1022(b)(2)(A) of the DoddFrank Act.409
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.410 Certain provisions
of the FDCPA may help mitigate such
409 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 and
services; the impact of the rule on insured
depository institutions and insured credit unions
with less than $10 billion 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.
410 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
521–25 (Oxford U. Press 2014) (discussing potential
sources of market failure and potential problems
with some of those arguments). See also Erik Durbin
& Charles Romeo, The Economics of Debt
Collection: With attention to the issue of salience
of collections at the time credit is granted, Journal
of Credit Risk (Sept. 4, 2020) (discussing how rules
that limit debt collection affect consumer welfare
when debt collection is not salient to consumers
when they borrow).
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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.411 Because of
this, policies that increase protections
for consumers with debts in collection
involve a tradeoff between the benefits
of protections for those 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 final rule will 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.412 However, as
discussed below, it is not clear based on
the information available to the Bureau
whether the net effect of the final rule
will be to make it more costly or less
costly for debt collectors to recover
unpaid amounts, and therefore not clear
whether the rule will tend to increase or
decrease the supply of credit. The final
rule will 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 8,000 to
12,000 lawsuits under the FDCPA each
year, some of which involve issues on
411 See Thomas A. Durkin et al., Consumer Credit
and the American Economy 521–25 (Oxford U.
Press 2014) (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 final rule
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).
411 See 15 U.S.C. 1692(e).
412 See id.
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which the law is unclear.413 The
number of disputes settled without
litigation has likely been much
greater.414 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 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.415
This final rule relating to disclosures
could make debt collection either more
or less costly in ways that are difficult
to predict. For example, the validation
notice requirements will 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 do not understand the basis
for the alleged amount due. At the same
time, the final rule’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 requirements could
either increase or decrease debt
collector and consumer costs depending
on the net effect on dispute rates.
In developing the final 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.
413 See WebRecon LLC, WebRecon Stats for Dec
2019 & Year in Review, https://webrecon.com/
webrecon-stats-for-dec-2019-and-year-in-reviewhow-did-your-favorite-statutes-fare/ (last visited
Dec. 1, 2020). 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.
414 Some debt collectors have reported that they
receive approximately 10 demand letters from
attorneys asserting a violation of the FDCPA for
each lawsuit filed. See Small Business Review
Panel Outline, supra note 39, at 69 n.105.
415 For example, as discussed further below, 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.
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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 final rule (provisions),
which include:
1. Time-barred debt: Prohibiting suits
and threats of suit.
2. Notice for validation of debts.
3. Required actions prior to furnishing
information.
C. Data Limitations and Quantification
of Benefits, Costs, and Impacts
The discussion in this part VII 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 Survey of Consumer Views on
Debt, which provided the first
comprehensive and nationally
representative data on consumers’
experiences and preferences related to
debt collection.416 In addition, the
Bureau relies on its Consumer Credit
Panel (CCP) to understand potential
benefits and costs to consumers of the
rule.417 To better understand potential
effects of the rule on industry, the
Bureau has engaged in significant
outreach to industry, including through
the CFPB Debt Collection Operations
Study.418 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 for the
topics covered by the final rule; many
of those proposals are included in the
final rule.419
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 final rule.
The Bureau makes every attempt to
provide reasonable estimates of the
potential benefits and costs to
consumers and covered persons of this
final rule given available data. However,
available data sources generally do not
permit the Bureau to quantify, in dollar
terms, how particular provisions will
affect consumers. With respect to
416 See CFPB Debt Collection Consumer Survey,
supra note 292.
417 For more information about Bureau data
sources, see Bureau of Consumer Fin. Prot., Sources
and uses of data at the Bureau of Consumer
Financial Protection (Sept. 26, 2018), https://
www.consumerfinance.gov/data-research/researchreports/sources-and-uses-data-bureau-consumerfinancial-protection/.
418 See CFPB Debt Collection Operations Study,
supra note 37.
419 See Small Business Review Panel Report,
supra note 40.
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5839
industry impacts, much of the Bureau’s
existing data come from qualitative
input from debt collectors and other
entities that operate in the debt
collection market rather than from
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 final 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
requested additional data or studies that
could help quantify the benefits and
costs to consumers and covered persons
of the May 2019 Proposed Rule and the
February 2020 Proposed Rule. The
Bureau summarizes comments on this
subject below, but few comments
explicitly addressed quantifying the
costs and benefits of the rule or
provided additional data or studies.
Comments on the benefits and costs of
the rule are also discussed in part V
above.
D. Baseline for Analysis
In evaluating the potential benefits,
costs, and impacts of the final rule, the
Bureau takes as a baseline 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 by
courts and law enforcement agencies,
other Federal laws, and the rules and
statutory requirements promulgated by
the States.420 In the consideration of
potential benefits, costs, and impacts
below, the Bureau discusses its
understanding of practices in the debt
collection market under this baseline
and how those practices are likely to
change under the final rule.
Until the creation of the Bureau, no
Federal agency was given the authority
to write substantive regulations
implementing the FDCPA, meaning that
420 These requirements, and the specificity of the
requirements, may vary depending upon the
jurisdiction in which the collection occurs. This
baseline does not include any potential impacts of
the November 2020 Final Rule, however. The
November 2020 Final Rule included a separate
Dodd-Frank Act Section 1022(b) analysis, and that
rule’s provisions do not go into effect until
November 30, 2021.
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many of the FDCPA’s requirements are
subject to interpretations in court
decisions that are not always consistent
or do not always definitely resolve an
issue, 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 final 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.
The Bureau received no comments
regarding its choice of baseline for its
section 1022(b) analysis.
E. Goals of the Rule
The final rule is intended to 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. To these
ends, an important goal of the rule is to
benefit both consumers and debt
collectors by increasing clarity and
certainty about what the FDCPA
prohibits and requires, which could
improve compliance with the FDCPA
while reducing unnecessary litigation
regarding the FDCPA’s requirements.
As discussed in part V and in this part
VII, other goals of the rule’s provisions
regarding validation information
include providing more information to
consumers about their debts, which may
help consumers determine whether a
debt is theirs and whether the reported
amount owed is accurate and may
reduce unnecessary disputes. The
validation information is also intended
to help consumers to know their rights
and be able to exercise them, including
by disputing a debt. In addition, the
model validation notice 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.
The rule’s provision requiring debt
collectors to take certain actions prior to
furnishing information about a debt to a
consumer reporting agency is intended
to increase the likelihood that
consumers learn about an alleged debt
before furnishing occurs, giving them an
opportunity to resolve the debt or
dispute it if appropriate.
The rule’s provision prohibiting debt
collectors from suing or threatening to
sue on time-barred debts is intended to
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mitigate the consumer harms that can
result from such actions, including
causing some consumers to pay or
prioritize time-barred debts over other
debts in the mistaken belief that doing
so is necessary to avoid litigation or
adverse judgments, when in fact
consumers have meritorious defenses
based on the statute of limitations.
F. Coverage of the Rule
The final rule applies to debt
collectors as defined in the FDCPA and
§ 1006.2(i) of the November 2020 Final
Rule. Creditors that collect on debts
they own generally will not be affected
directly by the final rule because they
typically are not debt collectors for
purposes of the FDCPA. Creditors,
however, may experience indirect
effects if debt collectors’ costs increase
and if those costs are passed on to
creditors.
G. Potential Benefits and Costs to
Consumers and Covered Persons
The Bureau discusses the benefits and
costs of the rule to consumers and
covered persons (generally FDCPA debt
collectors) in detail below.421 The
Bureau believes that an important
benefit of many of the 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
provisions discussed below.
1. Time-Barred Debt: Prohibiting Suits
and Threats of Suit
Section 1006.26(b) prohibits a debt
collector from suing or threatening to
sue a consumer to collect a time-barred
debt.
As discussed in part V above,
multiple courts have held that the
FDCPA prohibits suits and threats of
suit on time-barred debt. The Bureau
understands that most debt collectors do
421 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.
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not knowingly sue or threaten to sue
consumers to collect time-barred debts.
Although the final rule applies a strict
liability standard to this prohibition,
under which debt collectors may be
liable for suits or threats of suit even if
they do not know that the debt is timebarred, the Bureau believes that debt
collectors have multiple ways of
managing such risk including, but not
limited to, confirming that the statute of
limitations has not expired before
bringing or threatening to bring a legal
action or, if a debt collector is unable to
make such a determination, refraining
from bringing or threatening to bring a
legal action while, in most States,
continuing with non-litigation
collection activities. Therefore, the
Bureau does not expect this provision of
the rule to have a significant effect on
most debt collectors.
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 sue or threaten to sue on timebarred debts as a strategy to elicit
payment.422 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 would expect
repayment rates to drop after the statute
of limitations expires, and that drop
might be made more significant by the
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 statute of limitations.
To do so, the Bureau used data from its
Consumer Credit Panel (CCP), which
contains information from one of the
422 The final rule may also increase costs to
covered persons to the extent that debt collectors
who currently sue or threaten to sue to collect timebarred debt increase their efforts to determine
whether or not a debt is time barred. As discussed
above in part V, The Bureau recognizes that, in
most jurisdictions, expiration of the statute of
limitations provides the consumer with an
affirmative defense to liability, but it does not bar
a debt collector from bringing suit. As such, some
debt collectors who sue or threaten to sue on older
debts may currently expend less time and effort
verifying the time-barred status of a debt than they
will under the final rule.
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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 a consumer’s credit record
until they either showed some record of
payment or disappeared from the credit
record. 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. The Bureau
assumed this starting date because there
was no other date in the available data
on which to reasonably base 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
of information to the CRA 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.
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. The figure shows
that the probability of a collections
tradeline showing evidence of payment
declines steadily for at least a year
leading up to the estimated expiration of
the statute of limitations and continues
to decline at roughly the same rate
afterwards. Thus, while the probability
of payment declines over time, the
reduced ability of debt collectors 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 knowingly
sue or threaten to sue on time-barred
debt, this suggests that the provision
would be unlikely to cause any further
reduction in the rate of repayment on
time-barred debt.
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.
2. Notice for Validation of Debts
exceptions, a debt collector must
provide a consumer the validation
information described in § 1006.34(c).
Section 1006.34(c) implements FDCPA
section 809(a)’s content requirements
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Section 1006.34 implements and
interprets FDCPA section 809(a), (b), (d),
and (e). Specifically, § 1006.34(a)
provides that, subject to certain
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and specifies that validation
information includes certain
information about the debt and the
consumer’s protections with respect to
debt collection that debt collectors do
not currently provide to consumers.
Section 1006.34(d) sets forth a general
requirement that such information be
clear and conspicuous. Section
1006.34(d) also provides safe harbors for
using the model validation notice,
specified variations of the model notice,
or a substantially similar form, and
permits the inclusion of certain optional
information. Section 1006.34(e)
affirmatively permits debt collectors to
provide validation notices translated
into other languages and requires debt
collectors who offer to provide
consumers translated notices to provide
them to consumers who request them.
Potential benefits and costs to
consumers. The required validation
information may benefit consumers in
four ways. First, the disclosures will
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 will
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 will
include consumer-response information
that should make it easier for consumers
to take certain actions, including
disputing a debt. Finally, the model
validation notice form is intended to
provide information to consumers in a
more plain-language and visually
appealing format, making it more likely
that consumers will 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 assessing 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 (e.g., the current amount of
the debt and the name of the current
creditor). This information may not be
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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, make a payment on 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 validation information under the
final rule will include more specific
details about the debt, such as the debt’s
account number and an itemization of
the debt. The Bureau has determined
that this information will 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 this 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 additional information 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 validation notice saves
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 validation information. The
Bureau’s Debt Collection Consumer
Survey suggests that the required
validation information would likely be
helpful in recognizing a debt.
Specifically, when asked how helpful
various pieces of information would be
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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.423 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.424
To quantify the benefits of the
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.425 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.426 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. (Some
consumers reported more than one of
these issues). Taken together, more than
half of 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 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
423 CFPB Debt Collection Consumer Survey, supra
note 292.
424 FMG Focus Group Report, supra note 26, at
15–16.
425 See CFPB Debt Collection Consumer Survey,
supra note 292, at 13, 40–41.
426 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 the consumer is
contacted by a debt collector.
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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 half of consumers who questioned
a debt about which the creditor or debt
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 required
clear-and-conspicuous statement of the
dispute right could benefit these
consumers by making them aware of
their right to dispute and informing
them how to 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 required consumerresponse information could reduce
these impediments to disputing debts
that consumers believe are in error.
Specifically, the consumer-response
information will provide a clear means
of disputing a debt in a way that triggers
the protections provided by the FDCPA
and this rule. Furthermore, the
convenience of the consumer-response
information, which is formatted on the
model validation notice as a tear-off
with prompts for various actions, 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.427 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 on their
credit reports.
Additionally, the consumer-response
information includes an option to
427 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 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.
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request information about the original
creditor. Original-creditor information
may help consumers in determining
whether the debt is theirs.
The Bureau has tested 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 about how to
act with regard to the debt. The Bureau
therefore 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).428 However,
there is some indication that consumers
tend to not read certain types of
standard-form disclosures.429 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.430 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 model validation notice. To
increase both consumer engagement
with and comprehension of the
validation information, the Bureau
designed the model notice to be visually
engaging. The notice uses plain
language wherever possible and
conforms to recommendations the
Securities and Exchange Commission
(SEC) set forth in its plain English
handbook.431 To reduce the perceived
complexity of the information, the form
uses a clear hierarchy of information
through positioning in a columnar
format, varying type size, and boldfaced type for subsection headings. It
428 FMG
Summary Report, supra note 29.
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.
430 FMG Cognitive Report, supra note 27.
431 See Sec. & Exchange Comm’n, A Plain English
Handbook (Aug. 1998), https://www.sec.gov/pdf/
handbook.pdf.
429 See,
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uses shading to highlight the amount
due and plain language rather than
technical terms. Usability testing
analyzing eye-tracking suggests that
participants were able to locate relevant
information on the form, with most
participants able to quickly locate their
account number and the contact
information of the creditor.432 The
information presented in the form is
also concise, presenting consumers with
a manageable amount of information
about the debt and what they can do in
response to the information. This is
important, as the perceived and actual
cost to a consumer of reading a
disclosure increases with the amount of
information provided.433
A number of consumer advocate and
academic commenters asserted that the
proposed model notice was not
adequately tested. Some of these
commenters stated that the Bureau’s
testing included too few participants to
generate valid conclusions about the
proposed model notice’s efficacy or to
evaluate the comprehension of
consumers, particularly of the least
sophisticated consumers. For instance, a
consumer advocate expressed concern
that only 60 consumers were included
in the cognitive and usability testing
rounds.434 Likewise, an academic
commenter stated that the Bureau’s
consumer testing focused too heavily on
observing what testing participants
looked at on the model notice (based on
the use of eye tracking techniques) at
the expense of testing participants’
comprehension of the notice. Another
commenter stated that the Bureau
should have tested more diverse groups,
including consumers with limited
English proficiency, students, older
consumers, and consumers from more
diverse socioeconomic backgrounds.
Some consumer advocate and academic
commenters recommended that the
Bureau field test the proposed model
notice with consumers with real debts.
A consumer advocate expressed concern
about the performance of certain aspects
of the proposed model notice in
quantitative testing, noting in particular
that approximately 40 percent of
respondents who received the model
432 FMG
Summary Report, supra note 29.
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).
434 See FMG Summary Report, supra note 29, at
5–7.
433 The
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notice failed to identify the correct
entity the consumer should pay.435
The Bureau disagrees that the model
validation notice was not adequately
tested. The model validation notice was
developed and validated over multiple
rounds of testing between 2014 and
2020, and the Bureau determines that
these multiple rounds of testing were
sufficient to assess the model validation
notice’s efficacy and comprehensibility.
Further, the Bureau disagrees that its
testing focused on eye-tracking at the
expense of comprehension testing as
consumer comprehension of the model
validation notice was assessed in three
rounds of testing. The Bureau’s testing
used eye-tracking in conjunction with
consumer responses to inform its
conclusions.
The Bureau disagrees that it did not
sample sufficiently diverse groups. The
Bureau selected respondents with the
goal of developing diverse testing pools
that would serve as a proxy for the
population at large. For example, in one
round of usability testing, participants
reflected a range of demographic
characteristics broken down by race and
ethnicity, household income, education
level, and employment status.436 With
respect to the criticism that the Bureau
did not ‘‘field test’’ the model validation
notice, testing the form with consumers
with real debts would have been
impractical.
Regarding comments that the model
validation notice did not perform well
during the quantitative testing round,
the Bureau disagrees. As noted above, in
that testing round, the model validation
notice consistently performed better
than or equal to the status quo notice,
including on the question of to whom
the consumer should send a
payment.437 Additionally, the Bureau
conducted qualitative follow-up testing
of the model notice in October 2020. In
this testing 88 percent of respondents
reported that the notice was either ‘‘very
435 Several comments in response to the May
2019 proposal also criticized the consumer testing
as being outdated because, when that proposal was
published, the most recent testing had occurred in
2016. However, the Bureau does not find any reason
to believe that consumer understanding of the
model notice has changed since 2016, and the
commenters did not provide any evidence to
support such a claim. Moreover, since the May 2019
proposal, the Bureau has conducted two additional
testing rounds.
436 FMG Usability Report, supra note 28, at 85–
87.
437 In response to the question ‘‘According to the
notice, if Person A wanted to make a payment on
the debt, who should he or she sent the payment
to?’’ approximately 60 percent of consumers who
received the model validation notice answered
correctly compared to approximately 40 percent of
consumers who received a status quo notice. CFPB
Quantitative Testing Report, supra note 31, at 14.
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easy’’ or ‘‘easy’’ to understand.438
Between 71 percent and 100 percent of
participants responded correctly to 14
different comprehension questions.
Although some participants expressed
confusion about a few aspects of the
notice, the initial reactions to the notice
were that information was clear and the
available actions were obvious.
In summary, the Bureau’s testing
establishes that consumers will benefit
from the use of the model notice
compared to the baseline of status quo
validation notices.
The Bureau expects consumers to
experience few costs as a result of the
provision.
Potential benefits to covered persons.
The provision provides debt collectors
with a safe harbor if they use the model
validation notice, specified variations of
the model notice, or a substantially
similar form to meet the requirements in
§ 1006.34(c). 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.439
The Bureau expects a significant
number of debt collectors will use the
model notice, specified variations of the
model notice, or a substantially similar
form and, therefore, will face
significantly reduced litigation risk
when providing validation notices
because they will receive the safe
harbor. This will benefit debt collectors
directly, by reducing litigation costs
related to validation notices. The
provision’s requirements to provide
specific information about the debt and
about a consumer’s protections in debt
collection could also indirectly benefit
debt collectors by adding information to
validation notices that would be helpful
to consumers but that debt collectors
currently do not include for fear that it
would increase litigation risk. The
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 validation information includes
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 Bureau’s complaint data suggest
that the information currently included
in validation notices is often not
sufficient for consumers to identify a
438 See
id. at 16.
Small Business Review Panel Report,
supra note 40, at 22.
439 See
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debt or whether the amount owed is
correct. 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 required by
the FDCPA.440 The form will
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 the amount
owed as identified on a validation
notice, how many consumers would
better recognize the debt if they received
the required validation information, and
how consumers would act in response
to 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 concluding that
the required validation information will
be helpful to consumers and, therefore,
beneficial for debt collectors.
The 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 the 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.441 Respondents said
that disputes took the longest amount of
time to resolve if the basis of the dispute
440 See Small Business Review Panel Report,
supra note 40, 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).
441 CFPB Debt Collection Operations Study, supra
note 37, at 31.
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was unclear or if the consumer said the
debt was not theirs.442
One commenter noted that 40 percent
of disputes at their debt collection
agency are non-generic and generally
resolvable. This commenter asserted
that the tear offs on the model
validation notice will make these nongeneric disputes less informative. An
industry commenter noted that 99.4
percent of accounts it received were not
disputed. Of the 0.6 percent that are
disputed, 80 percent are accurate once
more information is gathered. Given
this, the commenter argued that
providing consumers itemized
statements for medical bills, which can
run into many pages, is unnecessary.
The Bureau does not have a basis to
estimate how much the validation
information might affect dispute rates.
As an illustration of potential cost
savings if dispute rates fall, if the
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,443 the
overall number of annual disputes
would fall by 1.4 million. Assuming
time to process each dispute of 0.375
hours, the overall savings to industry
would be estimated at 525,000 personhours, or approximately 250 full-time
equivalents. Assuming labor costs for
debt collectors of $22 per hour,444 this
would represent industry cost savings of
about $11.5 million.
The validation notice 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 validation information
will generally affect the content of
existing disclosures debt collectors are
sending rather than require debt
collectors to send entirely new
disclosures. Nonetheless, debt collectors
will incur certain costs to comply with
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442 Id.
443 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.
444 This assumes an hourly wage of $15 and taxes,
benefits, and incentives of $7 per hour. See CFPB
Debt Collection Operations Study, supra note 37, at
17 (reporting estimated debt collector wages
between $10 and $20 per hour plus incentives).
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the form. 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 provision will require debt
collectors to reformat their validation
notices to accommodate the validation
information requirements. The Bureau
expects that any one-time costs to debt
collectors of reformatting the validation
notice will be relatively small,
particularly for debt collectors who rely
on vendors, because the Bureau expects
that most vendors will provide an
updated notice at no additional cost.445
The Bureau understands from its
outreach that many covered persons
currently use vendors to provide
validation notices.446 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 given that the final rule likely
will require more extensive changes to
validation notices than vendors
typically make today).447 Debt collectors
and vendors will 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 will be mitigated somewhat by the
availability of a model notice.
The validation information will
require debt collectors to provide
certain additional information about the
debt, which will 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 final validation
information. However, some
respondents to the Debt Collection
Operations Study reported that they do
not receive from creditors information
about post-default interest, fees,
payments, and credits.448 These debt
collectors will 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.449
At least one industry commenter
asserted that one-time compliance costs
445 See
id. at 33.
the Operations Study, over 85 percent of
debt collectors surveyed by the Bureau reported
using letter vendors. Id. at 32.
447 Id. at 33.
448 In the Bureau’s Operations Study, 52 of 58
respondents reported receiving itemization of postcharge-off fees on at least some of their accounts.
Id. at 23.
449 Id. at 26.
446 In
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5845
would be significantly higher than
$1,000, at least for collectors of medical
debt. This commenter estimated costs of
between $22,000 and $31,000 for
implementation. The commenter noted
that, for collectors of medical debt, an
itemization of charges requires
information about payments by the
consumer’s health insurance, increasing
the complexity and cost of tracking the
necessary information. The Bureau
acknowledges that costs may be higher
for some debt collectors. However, the
Bureau’s estimate is based on responses
to the CFPB Debt Collection Operations
Study, more than half of which came
from debt collectors of medical debt. As
such, the Bureau believes that, on
average, its estimate of less than $1,000
in one-time costs is reasonable.
If debt collectors adjust their systems
to produce notices including the new
validation information, the Bureau does
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.450 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.
However, the Bureau’s understanding is
that most creditors, including medical
providers, do track this information, and
many debt collectors already provide
this information on validation notices.
Further, debt collectors are already
450 One industry trade group estimated that an
itemization requirement would cost $600 million in
professional fees to conduct legal analyses of
HIPAA compliance for medical debt, $30 million
for one-time system reprogramming for debt
collectors, and $3 billion for one-time system
reprogramming for creditors. The proposal allegedly
would also result in billions of dollars in ongoing
support costs and uncompensated medical care
because, according to the commenter, the proposed
requirement, if adopted, would increase the risks
that hospitals might be unable to use debt
collectors. As discussed in part V, the itemization
requirement should not raise issues of HIPAA
compliance that would require creditors to engage
legal counsel in order to provide the required
information, as HIPAA privacy regulations
explicitly permit disclosure where required by law.
While some one-time costs will be required so that
collection and billing systems can incorporate the
data needed to comply with the requirement, as
discussed in this section, the Bureau understands
that the required changes would not be far outside
the scope of normal adjustments to billing and
collection systems and does not have reason to
believe the changes would be so expensive as to
prevent hospitals from using debt collectors. The
final rule permits debt collectors to use the date of
the last statement or invoice provided to the
consumer by a creditor as the itemization date. If
providing a debt collector with itemization
information were prohibitively expensive for a
medical provider, such providers could avoid these
costs by simply issuing a statement to the
consumer.
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required to disclose an itemization for
some types of debt in at least one
jurisdiction, New York State.451
In addition, as discussed in the
section-by-section analysis of
§ 1006.34(b)(3), the final rule’s
itemization date definition permits debt
collectors to select an itemization date
that is feasible for the type of debt in
collection and the information debt
collectors receive. And
§ 1006.34(c)(2)(viii) requires itemization
of fees, interest, and credits only
subsequent to the selected itemization
date. Thus, for example, if a debt
collector selects the last statement date
as the itemization date under
§ 1006.34(b)(3), and if the creditor has
recently issued a statement to the
consumer, the debt collector need only
obtain and provide to the consumer an
itemization with fees, interest, and
credits subsequent to that last statement
date. And, as discussed in the sectionby-section analysis of § 1006.34(d)(2), a
debt collector may provide the
itemization on a separate page and
retain the safe harbor for the rest of the
validation notice.
Industry commenters asserted that
there would be additional printing and
mailing costs of the provision due to the
tear-off portion of the model notice,
which is formatted for use with a return
envelope. The commenters argued that
many debt collectors do not currently
include return envelopes with their
validation notices and that including a
return envelope would increase mailing
costs. The Bureau disagrees that this
would be a cost of the rule, as the rule
does not require including a return
envelope with a mailed validation
notice, the format of the tear-off portion
notwithstanding. Given that it is not
required, the Bureau expects that debt
collectors will only begin including
return envelopes if they find, in their
own analysis, that the benefit exceeds
the additional costs.
Several commenters discussed the
potential for ongoing costs of providing
the new validation information. One
industry commenter expressed concern
about the availability of the information
required on the model validation notice
for medical debt, as the commenter
451 See 23 NYCRR 1.2(b) (requiring debt collectors
to provide an itemized accounting of the debt
within five days after the initial communication
with a consumer in connection with the collection
of certain types of charged-off debt, such as credit
card debt). The fact that debt collectors subject to
New York’s requirements continue to operate and
send validation notices in New York suggests that,
although the itemization requirement may impose
one-time adjustment costs on some creditors and
debt collectors, ongoing costs are not prohibitive, at
least for the types of debts for which New York has
required itemization.
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believed that the only available
itemization date permitted by the
proposal for these debts would be date
of service (i.e., the transaction date), and
the commenter stated that date of
service was currently only available
from 17.2 percent of its clients. Another
industry commenter noted that there
would be costs associated with
providing updated itemization dates for
a debt that transfers between debt
collectors.
Industry trade association
commenters noted that there would be
costs to creditors of providing the fields
to debt collectors and that not all of the
required fields are necessarily tracked
by all creditors currently, particularly
credit unions. The Bureau
acknowledges that the FDCPA and this
final rule may create indirect costs for
creditors that use debt collectors,
because the costs to debt collectors of
complying with FDCPA requirements
may be passed on to creditors and
because debt collectors must receive
certain information about debts in order
to comply with FDCPA requirements.
The information available to the Bureau
does not suggest that any indirect costs
to creditors of this provision will be
large.
Further, one industry commenter
asserted that the itemization
requirement could competitively harm
collectors of medical debt. This
commenter asserted that medical care
providers are currently unable to
provide the required itemization
information, and rather than incurring
costs to provide this information, would
switch to using debt collectors who do
not comply with the law. This would
put compliant debt collectors at a
competitive disadvantage. As noted
above, the Bureau acknowledges that
the provision may affect the costs to
creditors, including medical care
providers, of using FDCPA debt
collectors, because creditors must
provide debt collectors with the
necessary information for the validation
notice. It is also possible that in some
cases a less sophisticated creditor may
employ a debt collector who does not
attempt to comply with the rule.
However, the Bureau finds it unlikely
that this provision of the rule would
lead to widespread non-compliance, at
the expense of debt collectors who
comply with the requirements of the
rule. The Bureau, the FTC, and other
Federal and State law enforcement
agencies have and will continue to
maintain vigorous enforcement of the
FDCPA.452 Any debt collector who
452 See, e.g., Bureau of Consumer Fin. Prot.,
CFPB, FTC, State, and Federal Law Enforcement
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obtained enough business through noncompliance with the rule to do material
harm to debt collectors who comply
with the rule would be likely to attract
enforcement action from regulators.
Moreover, the risk of reputational harm
is likely to deter some medical
providers from intentionally employing
debt collectors who knowingly do not
comply with the rule.
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 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 consumerresponse 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 will be provided, this could
increase the number of consumers who
dispute or request original-creditor
information. Similarly, some industry
commenters argued that the tear-off
portion of the model notice would make
disputes easier, resulting in more
disputes. The overall impact on dispute
rates is unclear.
Any increases in dispute rates would
not 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 validation information would be
unlikely to cause such consumers to
dispute rather than pay.453 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
Partners Announce Nationwide Crackdown on
Phantom and Abusive Debt Collection (Sept. 29,
2020), https://www.consumerfinance.gov/about-us/
newsroom/cfpb-ftc-state-and-federal-lawenforcement-partners-announce-nationwidecrackdown-phantom-and-abusive-debt-collection.
453 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 credit reporting
concerns, 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.
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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.454
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.455
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
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.
These debt collectors presumably
believe that the increase in revenues
from sending them to these consumers
exceeds the costs of doing so. To the
extent sending such notices is already
prevalent, it would limit the consumer
454 CFPB Debt Collection Operations Study, supra
note 37, 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.
455 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.
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benefits of a provision that requires
Spanish-language translations as well as
the costs to debt collectors of such a
provision, although there would still be
costs associated with ensuring that such
disclosures were made as required by
regulation.
Consumer advocate and academic
commenters argued that the Bureau
should have required that the validation
notice be in the language of the original
transaction, including languages other
than English or Spanish. The
commenters noted that procedural
hurdles, such as a mismatch between
the consumers’ primary language and
the language of a disclosure, can have
large effects on behavior. The Bureau
notes that this alternative would impose
significantly greater costs on debt
collectors than the final rule, as they
would need to maintain versions of the
model notice for each such language. At
the same time, the marginal benefit to
consumers of the alternative suggested
by commenters would be smaller, as
fewer consumers communicate in
languages other than English and
Spanish.
3. Required Actions Prior to Furnishing
Information
Section 1006.30(a)(1) prohibits a debt
collector from furnishing information to
a consumer reporting agency (CRA)
about a debt before taking specific
actions to contact the consumer about
that debt. A debt collector can satisfy
this requirement by: (i) Speaking to the
consumer about the debt in person or by
telephone; or (ii) placing a letter in the
mail or sending an electronic message to
the consumer about the debt and
waiting a reasonable period of time to
receive a notice of undeliverability,
provided certain other conditions are
satisfied. A validation notice is one type
of letter or electronic communication
debt collectors can use to satisfy
§ 1006.30(a)(1)(ii).
Potential benefits and costs to
consumers. The final rule will help
consumers to learn about an alleged
debt before a debt collector furnishes
adverse information to a CRA. If
consumers believe that the information
is incorrect, 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
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5847
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 final rule, the Bureau
would need to know: (1) How frequently
consumers are unaware that debt
collectors furnished information about
their debts to CRAs but would become
aware of it if debt collectors informed
consumers prior to furnishing
information; and (2) the benefit to these
consumers of becoming aware they had
a debt in collections.
In many cases, consumers will not be
affected by the provision because many
debt collectors already take one of the
actions required by the final rule before
furnishing information to CRAs. Many
other consumers will not be affected by
the provision because not all debt
collectors furnish information to CRAs
about the 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 collection.456 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).457 The
Bureau does not have representative
data to estimate how often consumers
would be affected by the provision, but
the evidence suggests that a relatively
small share of debt collectors furnish
information to CRAs before providing a
validation notice or taking one of the
other actions required by the final rule.
If, for example, debt collectors sent
456 See CFPB Debt Collection Operations Study,
supra note 37, at 28. One large industry commenter,
which does furnish to the CRAs, also confirmed
that it almost always mails a validation notice
before furnishing. To comply with the final rule,
these debt collectors would also need to wait a
reasonable period of time to allow for notifications
of non-delivery, and only furnish if they don’t
receive such notifications. The Bureau does not
have information as to how many of these debt
collectors currently take these additional steps.
However, the Bureau expects that taking these
additional steps would impose minimal costs on
debt collectors that do not already take them.
457 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. Id. During the meeting of the SBREFA
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.
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validation notices for an additional five
percent of debts in collection, the
provision could result in up to
approximately seven million additional
validation notices sent each year
(assuming that no debt collectors would
cease furnishing in response to the
provision).458
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. This can be
particularly important if the information
about the debt is inaccurate because in
those cases consumers who learn of the
alleged debt can dispute the debt under
the FDCPA or dispute the item of
information under the FCRA. By
informing consumers about the
collection item before it is furnished to
a CRA, the final rule will 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.459 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
make 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.460
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,461 in some cases information in
credit files about unpaid debts can have
458 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 an
average of approximately 2.8 notices during the
year.
459 Fed. Trade Comm’n, Report to Congress under
Section 319 of the Fair and Accurate Credit
Transactions Act of 2003, (Dec. 2012) https://
www.ftc.gov/sites/default/files/documents/reports/
section-319-fair-and-accurate-credit-transactionsact-2003-fifth-interim-federal-trade-commission/
130211factareport.pdf (FTC Report to Congress).
460 CFPB Debt Collection Consumer Survey, supra
note 292, at 24.
461 See FTC Report to Congress, supra note 459,
at 43.
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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,
they can have substantial effects for
some consumers, with an average
reduction in credit score of more than
41 points for super-prime consumers.462
In some circumstances, these changes
could lead to higher interest rates for
consumers or denial of credit,
particularly for borrowers with
otherwise high credit scores.
Potential benefits and costs to covered
persons. The final rule will affect the
practices of debt collectors who
sometimes furnish information about
consumers’ debts to CRAs before taking
one of the required actions under the
final rule. The Bureau understands that
most debt collectors mail validation
notices to consumers shortly after they
receive the accounts for collections and
before they furnish information on those
accounts. These debt collectors either
already would be in compliance with
the final rule or could come into
compliance with minimal additional
cost.463 Forty-five out of 58 debt
collectors responding to the Bureau’s
Operations Study said that they furnish
information to CRAs.464 Of these
respondents, all but three said that they
send a validation notice upon account
placement, such that the final rule’s
requirement would be satisfied as long
as the debt collectors also wait a
reasonable period of time to allow for
notifications of non-delivery, and only
furnish if they do not receive such
notifications. These debt collectors will
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. Debt collectors that
do not currently wait a reasonable
462 See
Brian Bucks et al., Bureau of Consumer
Fin. Prot., Collection of Telecommunication Debt,
https://files.consumerfinance.gov/f/documents/
bcfp_consumer-credit-trends_collectiontelecommunications-debt_082018.pdf (Aug. 2018).
463 In the Operations Study, 53 of 58 respondents
said that they send a validation notice shortly after
debt placement. CFPB Debt Collection Operations
Study, supra note 37, at 28. To comply with the
final rule, these debt collectors would also need to
wait a reasonable period of time to allow for
notifications of non-delivery, accept non-delivery
notifications and only furnish if they don’t receive
such notifications. The Bureau does not have
information as to how many of these debt collectors
currently take these additional steps. However, the
Bureau expects that taking these additional steps
would impose minimal costs on debt collectors that
do not already take them.
464 Id. at 19.
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period of time prior to furnishing to
allow for notifications of non-delivery,
accept non-delivery notifications, and
only furnish if they do not receive such
notifications would need to adopt these
practices, but the Bureau expects this
would impose minimal ongoing
operational costs. Other debt collectors
do not furnish information to CRAs at
all and will not be affected by the
requirement.
Debt collectors who furnish
information to CRAs prior to
communicating with consumers but
provide validation notices to consumers
only after they have been in contact
with consumers will need to change
their practices and would face increased
costs as a result of the final rule.
Because these debt collectors are
already required to provide validation
notices to consumers (unless validation
information is provided in an initial
communication or the debt has been
paid), the Bureau expects that many
already have systems in place for
sending notices and will not face onetime compliance costs greater than those
of other debt collectors.465 However,
these debt collectors will face ongoing
costs from sending validation notices to
more consumers than they otherwise
would, at an estimated cost of $0.50 to
$0.80 per debt if sent by mail.466 To the
extent debt collectors take advantage of
opportunities to send validation notices
electronically, the marginal cost of
sending each notice is likely to be
approximately zero. Alternatively, these
debt collectors could cease furnishing
information to CRAs until after they
take the specific steps identified in the
final rule, which could impact the
effectiveness of their collection
efforts.467 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.
465 Debt collectors who do not currently have
systems in place for sending notices will face onetime compliance costs to implement those systems.
466 See CFPB Debt Collection Operations Study,
supra note 37, at 32–33. One small entity
representative on the Bureau’s SBREFA 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. A small industry commenter
asserted that mailing costs were significantly higher
than $0.50–$0.80 per debt but did not provide an
alternative figure.
467 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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Commenters noted several specific
situations in which the proposed
provision could, in the commenters’
view, unduly burden debt collectors.
One small industry commenter raised
the concern that a bad address, which
occurs in 15 percent of accounts at their
agency, would stop collections. Another
industry commenter noted that 3
percent of its notices are returned as
undeliverable and argued that
attempting to deliver a validation notice
should count as a communication and
thus allow furnishing. Another industry
commenter noted that some States are
‘‘closed’’ in the sense that debt
collectors based in other States are not
allowed to deliver notices into those
States. This commenter was concerned
that the proposed provision would not
allow furnishing of information about
consumers in those States and argued
that this will reduce credit report
accuracy. A joint comment by an
industry commenter and CRA argued
that the proposed provision would be
particularly problematic in the check
verification space. The commenter
noted that, in the case of bad checks, the
debt collector generally does not have
the consumer’s address or telephone
number and cannot communicate with
the consumer directly. In these cases,
the debt collector would report the bad
check to a check verification CRA, but
this could be prohibited under the
proposed provision. The commenter
argued that the proposed provision
could undermine the reliability of the
check payment system by making it
impossible to track check fraud, among
other things.
The Bureau agrees with some of the
commenters with respect to these
additional costs and has revised the
final rule from the proposal to reduce or
eliminate these costs. In particular, the
Bureau has revised § 1006.30(a) to
specify that, if a debt collector places a
letter in the mail or sends an electronic
message to the consumer about the debt,
the debt collector must wait a
reasonable period of time (with a safe
harbor for waiting 14 consecutive days)
before furnishing information about the
debt to a CRA and, during that period,
permit receipt of, and monitor for,
notifications of undeliverability for mail
and electronic messages. A debt
collector who places a letter in the mail
or sends an electronic message, does not
receive a notice of undeliverability
during that period, and furnishes
information to a consumer reporting
agency after the period ends has not
violated the rule even if the debt
collector subsequently receives a notice
of undeliverability. Section
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1006.30(a)(2) of the final rule also
specifies that § 1006.30(a)(1) does not
apply to the furnishing of information
about a debt to a specialty check
verification CRA. The Bureau believes
these changes will reduce or eliminate
many of the costs cited by the
commenters.
H. Potential Reduction of Access by
Consumers to Consumer Financial
Products and Services
Economic theory indicates that it is
possible for changes in debt collection
rules, such as those contained in this
final rule, to affect consumers’ access to
credit. Under economic theory, 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 and expected
payments will decrease. If this final rule
addressing disclosures were to increase
collection costs or reduce revenue
collected from delinquent debt, then
this would reduce the return to lending,
which in theory could lead lenders to
increase the cost of lending, restrict
availability of credit, or both.
As discussed in the November 2020
Final Rule, the Bureau has considered
the available empirical data and
research on the effect of State debt
collection laws on the price and
availability of credit.468 That research
shows that State debt collection laws
affect the price and availability of credit
in ways that theory would predict, but
that effects are relatively small even for
changes in State laws that are likely
more significant than the provisions in
this final rule.469 In light of that
research and the CCP analysis above,
the Bureau concludes that the
provisions in this final rule are unlikely
to cause any significant reduction in
access to consumer credit.
I. Potential Specific Impacts of the 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 under the final rule.
Creditors could experience indirect
effects from the final rule to the extent
they hire FDCPA debt collectors or sell
debt in default to such debt collectors.
468 See
84 FR 23274, 23389–91 (May 21, 2019).
example, one study found that additional
State regulations on debt collectors’ conduct caused
the rate at which a credit inquiry led to a successful
account opening to decline by less than 0.02
percentage points off a base rate of about 43
percent. See id. at 23389–90.
469 For
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5849
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 debt collectors to collect
uncollected 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 did not receive any comments
on this issue with respect to the
provisions in this final rule.
2. Impact of the Final Rule on
Consumers in Rural Areas
Consumers in rural areas may
experience benefits from the final 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
debt collectors.
The Bureau requested interested
parties to provide data, research results,
and other factual information on the
impact of the proposed rule on
consumers in rural areas, but the Bureau
did not receive any comments on this
subject.
VIII. Final Regulatory Flexibility Act
Analysis
The Regulatory Flexibility Act (RFA)
generally requires an agency to conduct
an Initial Regulatory Flexibility
Analysis (IRFA) and a Final Regulatory
Flexibility Analysis (FRFA) of any rule
subject to notice-and-comment
rulemaking requirements.470 Section
604(a) of the RFA sets forth the required
elements of the FRFA. Section 604(a)(1)
requires a statement of the objectives of,
and the legal basis for, the rule.471
Section 604(a)(2) requires a statement of
the significant issues raised by the
public comments in response to the
initial regulatory flexibility analysis, a
statement of the assessment of the
agency of such issues, and a statement
of any changes made in the proposed
rule as a result of such comments.
Section 604(a)(3) requires the response
of the agency to any comments filed by
the Chief Counsel for Advocacy of the
Small Business Administration in
response to the proposed rule and a
detailed statement of any change made
to the proposed rule in the final rule as
a result of the comments. Section
604(a)(4) requires a description of and,
470 5
471 5
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where feasible, an estimate of the
number of small entities to which the
rule will apply.472 Section 604(a)(5)
requires a description of the projected
reporting, recordkeeping, and other
compliance requirements of the 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.473
Section 604(a)(6) requires a description
of any significant alternatives to the rule
that accomplish the stated objectives of
applicable statutes and that minimize
any significant economic impact of the
rule on small entities.474 Finally, section
604(a)(7) requires a description of the
steps the agency has taken to minimize
any additional cost of credit for small
entities.475
A. Statement of the Objectives of, and
Legal Basis for, the Final Rule
As discussed in part IV, the Bureau
issues this rule pursuant to its authority
under the FDCPA and the Dodd-Frank
Act. The objectives of the final rule are
to clarify and implement the FDCPA’s
provisions 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.476 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 is requiring consumer
disclosure requirements to provide
greater clarity for both consumers and
industry participants as to the
information debt collectors must
provide consumers to comply with the
law. The Bureau intends that these
clarifications will help to eliminate
abusive debt collection practices and
ensure that debt collectors who refrain
472 5
U.S.C. 604(a)(4).
U.S.C. 604(a)(5).
474 5 U.S.C. 604(a)(6).
475 Id.
476 See 15 U.S.C. 1692(e).
from abusive debt collection practices
are not competitively disadvantaged.477
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.478 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.’’ 479
‘‘Federal consumer financial law’’
includes title X of the Dodd-Frank Act
and the FDCPA. The legal basis for the
final rule is discussed in detail in the
legal authority analysis in part IV and in
the section-by-section analysis in part V.
B. Significant Issues Raised by the
Public Comments in Response to the
Initial Regulatory Flexibility Analysis
The Bureau received comments on the
IRFA from the Acting Chief Counsel for
Advocacy of the Small Business
Administration, which are discussed in
the next section. The Bureau did not
receive other comments that referenced
the IRFA specifically; however, several
commenters did raise issues about the
burdens of the proposed rule’s
provisions, and the Bureau’s response to
these issues is discussed in parts V and
VII above and in this part below.
C. Response to Any Comments Filed by
the Chief Counsel for Advocacy of the
Small Business Administration
The Acting Chief Counsel for
Advocacy of the Small Business
Administration filed a public comment
letter on the May 2019 proposed rule
that discusses both the IRFA and certain
of the proposed requirements (the ‘‘first
SBA letter’’). The Acting Chief Counsel
for Advocacy of the Small Business
Administration also filed a public
comment letter on the February 2020
supplemental proposed rule that
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477 See
id.
U.S.C. 1692l(d).
479 12 U.S.C. 5512(a).
478 15
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discusses both the IRFA and the
proposed requirements (the ‘‘second
SBA letter’’). This section first responds
to comments on the IRFA and then
responds to the substantive comments
on the proposed rule’s provisions.
The first SBA letter notes that the
proposed rule could impose costs to
read and understand the rule and to
train employees in new practices. The
Bureau had discussed these costs in the
context of some specific provisions but
has added a more general discussion of
these costs to section E of the FRFA,
below.
The first SBA letter also notes that the
Bureau claims some provisions will
cause no significant impact because
those provisions are already part of debt
collectors’ business practices, and
argues that the Bureau should clarify
what the benefit of such provisions is to
consumers if they will not change debt
collector practices. As discussed in part
V above and the section 1022(b)(2)
analysis of the proposed rule, the
Bureau believes that, by clarifying the
FDCPA’s requirements, the rule will
benefit both consumers and debt
collectors, including small entities.
Many market participants have
identified a need for greater clarity in
interpreting many of the FDCPA’s
provisions. For example, a trade group
commenter emphasized that ambiguities
in the FDCPA lead to unnecessary and
costly litigation. The Bureau believes
that there is a benefit to providing
additional clarity about the FDCPA’s
requirements even where the vast
majority of debt collectors follow
practices that meet those requirements.
The additional clarity helps those debt
collectors to avoid unnecessary
litigation and to have confidence in
what practices do and do not violate the
FDCPA. The additional clarity also
makes it easier to establish when less
scrupulous debt collectors have violated
the statute and to hold them
accountable, which benefits consumers
as well as debt collectors who do
comply with the law.
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The first SBA letter points out that the
proposed rule’s Paperwork Reduction
Act (PRA) section estimates 1,029,500
burden hours and argues that this could
translate into millions of dollars in
recordkeeping and reporting costs. Most
of this burden is not attributable to the
rule itself but rather to the requirements
of the FDCPA. As discussed in the
supporting statement accompanying the
Bureau’s information collection request,
the PRA estimates include the burden
not only of complying with the new
requirements introduced by the final
rule but also of complying with the
FDCPA itself. These burdens had not
previously been accounted for under the
PRA. Thus, the large majority of the
estimated burden hours represent the
burden of complying with existing
FDCPA provisions that exist
independent of the rule, in particular
the requirement to provide a validation
notice under § 809(a) of the FDCPA and
the requirement to respond to consumer
disputes under § 809(b) of the FDCPA.
There are, of course, burdens associated
with other information collections that
are being introduced or modified by the
final rule, and those burdens are
discussed in this FRFA as well as in the
supporting statement.
The SBA letters also expressed several
concerns about specific provisions of
the proposed rule and recommended
changes to those provisions. These
concerns and recommendations, and the
Bureau’s response, are discussed in the
section-by-section analysis of the
relevant provisions in part V above.
D. Description and, Where Feasible,
Provision of an Estimate of the Number
of Small Entities to Which the Final
Rule Will Apply
As discussed in the Small Business
Review Panel Report, for the purposes
of assessing the impacts of this final rule
on small entities, ‘‘small entities’’ is
defined in the RFA to include small
businesses, small nonprofit
organizations, and small government
jurisdictions.480 A ‘‘small business’’ is
determined by application of SBA
regulations in reference to the North
American Industry Classification
System (NAICS) classifications and size
standards.481 Under such standards, the
5851
Small Business Review Panel (Panel)
identified four categories of small
entities that may be subject to the final
rule: Collection agencies (NAICS
561440) with annual receipts at or
below the SBA size standard (currently
$16.5 million), debt buyers (NAICS
522298) with annual receipts at or
below the size standard (currently $41.5
million), collection law firms (NAICS
541110) with annual receipts at or
below the size standard (currently $12
million), and servicers who acquire
accounts in default. These servicers
include depository institutions (NAICS
522110, 522120, and 522130) with
assets at or below the size standard
(currently $600 million) or nondepository institutions (NAICS 522390)
with annual receipts at or below the size
standard (currently $22 million). The
Panel did not meet with small nonprofit
organizations or small government
jurisdictions.482
The following table provides the
Bureau’s estimate of the number and
types of entities that may be affected by
the final rule:
TABLE 1—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).
$16.5 million in annual receipts ................
$41.5 million in annual receipts ................
$12.0 million in annual receipts ................
$600 million in annual receipts for depository institutions; $22.0 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.’’ 483 According to the Census
Bureau, in 2012 (the most recent year
for which detailed data are available),
there were approximately 4,000
collection agencies with paid employees
480 5
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Estimated
total number
of debt
collectors
within
category
U.S.C. 601(6).
current SBA size standards are found on
SBA’s website, https://www.sba.gov/content/tablesmall-business-size-standards.
482 Small Business Review Panel Report, supra
note 40, at 29.
483 As defined by the U.S. Census Bureau,
collection agencies include entities that collect only
commercial debt, and the proposed rule would
apply only to debt collectors of consumer debt.
However, the Bureau understands that relatively
481 The
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9,000
330
1,000
700
Estimated
number of
small-entity
debt
collectors
within
category
8,800
300
950
200
in the United States. Of these, the
Bureau estimates that 3,800 collection
agencies have $16.5 million or less in
annual receipts and are therefore small
entities.484 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.485 Many debt buyers—
particularly those that are small
entities—also collect debt on behalf of
other debt owners.486
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
few collection agencies collect only commercial
debt.
484 The U.S. 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.
485 The Receivables Management Association, the
largest trade group for debt buyers, states that it has
approximately 300 debt buyer members and
believes that 90 percent of debt buyers are current
members.
486 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 U.S.
Census Bureau under ‘‘all other nondepository
credit intermediation’’ (NAICS Code 522298).
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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.487
Loan servicers. Loan servicers would
be covered by the final rule if they are
covered by the FDCPA because, among
other things, they acquire the right to
service loans already in default.488 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 final rule are
small.489
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E. Projected Reporting, Recordkeeping,
and Other Compliance Requirements of
the 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 final rule will not impose new
reporting or recordkeeping
requirements, but it will impose new
compliance requirements on small
entities subject to the rule.490 The
requirements and the costs associated
with them are discussed below. In
addition to the specific costs discussed
below, all small entities will incur costs
to read the rule and incorporate its
provisions into their policies and
487 The primary trade association for collection
attorneys, the National Creditors Bar Association
(NCBA), 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 NCBA
members and that a similar fraction of non-member
law firms are small entities.
488 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 final rule.
489 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.
490 While the final rule does not include new
recordkeeping requirements, the Bureau notes that,
by introducing a new compliance requirement, the
rule may increase the cost of complying with
recordkeeping requirements of the November 2020
Final Rule. This is because debt collectors would
need to retain evidence of compliance with any
additional compliance requirement.
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procedures, and small entities with
employees will need to train employees
in new policies and procedures. The
extent of training required will depend
on debt collectors’ existing practices
and on the roles performed by
individual employees. Debt collectors
employ an estimated 123,000
workers.491 If, on average, the rule
required an additional hour of training
for each of these employees, at an
average cost of $22 per hour, the total
training cost would be approximately
$2,700,000.492
In evaluating the potential impacts of
the rule on small entities, the Bureau
takes as a baseline conduct in 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 by
courts and law enforcement agencies,
other Federal laws, and the rules and
statutory requirements promulgated by
the States. This baseline represents the
status quo from which the impacts of
this rule will be evaluated.
The Bureau requested that interested
parties provide data and quantitative
analysis of the benefits, costs, or
impacts of the proposed rule on small
entities but did not receive any
comments on this subject.
The Bureau believes that, except
where otherwise noted, the impacts
discussed in part VII would apply to
small entities to the same extent as to
larger entities.
F. Description of Any Significant
Alternatives to the Rule That
Accomplish the Stated Objectives of the
Applicable Statutes and Minimize Any
Significant Economic Impact of the Rule
on Small Entities
Section 604(a)(6) of the RFA requires
the Bureau to describe in the FRFA any
significant alternatives to the rule that
accomplish the stated objectives of
applicable statutes and that minimize
any significant economic impact of the
rule on small entities.493 In developing
the 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
491 2020
FDCPA Annual Report, supra note 12, at
7.
492 The estimated hourly cost is based on an
estimated wage of $15 per hour and taxes, benefits,
and incentives of $7 per hour. See CFPB Debt
Collection Operations Study, supra note 37, at 17
(describing estimated debt collector wages ranging
from $10 to $20 per hour).
493 5 U.S.C. 604(a)(6).
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the Dodd-Frank Act while minimizing
the impact of the rule on small entities.
Some of these alternatives are discussed
in part V, above.
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.494 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 of 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 the
proposals under consideration would
affect the cost of credit to small entities.
During the SBREFA process, several
small entity representatives said that the
proposals under consideration at that
time, which included time-barred debt
disclosures among several other
proposals, 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.
The Bureau believes that the
disclosures in the final rule will have
little impact on the cost of credit to
small entities. The Bureau does
recognize that consumer credit could
become more expensive and less
available as a result of requirements that
restrict the collection of debt; however,
the Bureau does not anticipate that the
requirements of this final rule will have
any significant impact on the cost or
availability of consumer credit. Many
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small entities affected by the disclosures
in the final 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.
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IX. Paperwork Reduction Act
Under the Paperwork Reduction Act
of 1995 (PRA),495 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
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 final rule amends 12 CFR part
1006 (Regulation F), which implements
the FDCPA. The Bureau’s OMB control
number for Regulation F is 3170–0056;
it expires April 30, 2022. This final rule
along with the November 2020 Final
Rule would revise the information
collection requirements contained in
Regulation F that OMB has approved
under that OMB control number.
Under the final rule, the Bureau
requires two information collection
requirements in Regulation F beyond
those required by the November 2020
Final Rule:
1. Validation notices (final rule
§ 1006.34).
2. Communication with consumers
prior to furnishing information (final
rule § 1006.30(a)).
These information collections are
required to provide benefits for
consumers and will be mandatory.
Because the Bureau does not collect any
information, no issue of confidentiality
arises. The likely respondents are for495 44
U.S.C. 3501 et seq.
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profit businesses that are FDCPA debt
collectors.
The collections of information
contained in this rule, and identified as
such, as well as the information
collections contained in the November
2020 final rule have been submitted to
OMB for review under section 3507(d)
of the PRA. A complete description of
the information collection requirement,
including the burden estimate methods,
is provided in the information
collection request (ICR) supporting
statement that the Bureau has submitted
to OMB under the requirements of the
PRA. The Bureau will publish a separate
notice in the Federal Register when
these information collections have been
approved by OMB.
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.
Estimated Number of Respondents:
12,027.496
Estimated Total Annual Burden
Hours: 881,000.
The Bureau has a continuing interest
in the public’s opinion of its collections
of information. At any time, comments
regarding the burden estimate, or any
other aspect of the information
collection, including suggestions for
reducing the burden, may be sent to the
Consumer Financial Protection Bureau
(Attention: PRA Office), 1700 G Street
NW, Washington, DC 20552, or by email
to CFPB_PRA@cfpb.gov.
Where applicable, the Bureau will
display the control number assigned by
496 The Bureau shares enforcement authority
under the FDCPA with the Federal Trade
Commission. To avoid double-counting, the Bureau
allocates to itself half of the estimated paperwork
burden under the final rule by dividing the burden
hours even between the agencies. However, since
the Bureau has joint authority over the respondents
themselves, the Bureau retains the entity count of
all affected respondents as shown above.
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OMB to any documents associated with
any information collection requirements
adopted in this rule.
X. Congressional Review Act
Pursuant to the Congressional Review
Act,497 the Bureau will submit a report
containing this rule and other required
information to the U.S. Senate, the U.S.
House of Representatives, and the
Comptroller General of the United
States at least 60 days prior to the rule’s
published effective date. The Office of
Information and Regulatory Affairs has
designated this rule as a ‘‘major rule’’ as
defined by 5 U.S.C. 804(2).
XI. Signing Authority
The Director of the Bureau, Kathleen
L. Kraninger, having reviewed and
approved this document, is delegating
the authority to electronically sign this
document to Grace Feola, a Bureau
Federal Register Liaison, for purposes of
publication in the Federal Register.
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 is further amending Regulation
F, 12 CFR part 1006, as revised on
November 30, 2020, at 85 FR 76734,
effective November 30, 2021, as set forth
below:
PART 1006—DEBT COLLECTION
PRACTICES (REGULATION F)
1. The authority citation for part 1006
continues to read as follows:
■
Authority: 12 U.S.C. 5512, 5514(b), 5532;
15 U.S.C. 1692l(d), 1692o, 7004.
Subpart A—General
2. Section 1006.1 is amended by
adding paragraph (c)(2) to read as
follows:
■
§ 1006.1
Authority, purpose, and coverage.
*
*
*
*
*
(c) * * *
(2) Section 1006.34(c)(2)(iii) and
(c)(3)(iv) applies to debt collectors only
when they are collecting debt related to
a consumer financial product or service
as defined in § 1006.2(f).
■ 3. Section 1006.2 is amended by
revising paragraph (e) and adding
paragraph (f) to read as follows:
§ 1006.2
*
*
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*
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(e) Consumer means any natural
person, whether living or deceased,
obligated or allegedly obligated to pay
any debt. For purposes of § 1006.6, the
term consumer includes the persons
described in § 1006.6(a).
(f) Consumer financial product or
service has the same meaning given to
it in section 1002(5) of the Dodd-Frank
Act (12 U.S.C. 5481(5)).
*
*
*
*
*
Subpart B—Rules for FDCPA Debt
Collectors
§ 1006.34
4. Section 1006.26 is added to read as
follows:
■
§ 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) Legal actions and threats of legal
actions prohibited. A debt collector
must not bring or threaten to bring a
legal action against a consumer to
collect a time-barred debt. This
paragraph (b) does not apply to proofs
of claim filed in connection with a
bankruptcy proceeding.
■ 5. Section 1006.30 is amended by
adding paragraph (a) to read as follows:
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§ 1006.30
Other prohibited practices.
(a) Required actions prior to
furnishing information—(1) In general.
Except as provided in paragraph (a)(2)
of this section, 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 about a debt
before the debt collector:
(i) Speaks to the consumer about the
debt in person or by telephone; or
(ii) Places a letter in the mail or sends
an electronic message to the consumer
about the debt and waits a reasonable
period of time to receive a notice of
undeliverability. During the reasonable
period, the debt collector must permit
receipt of, and monitor for, notifications
of undeliverability from
communications providers. If the debt
collector receives such a notification
during the reasonable period, the debt
collector must not furnish information
about the debt to a consumer reporting
agency until the debt collector
otherwise satisfies this paragraph (a)(1).
(2) Special rule—information
furnished to certain specialty consumer
reporting agencies. Paragraph (a)(1) of
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this section does not apply to a debt
collector’s furnishing of information
about a debt to a nationwide specialty
consumer reporting agency that
compiles and maintains information on
a consumer’s check writing history, as
described in section 603(x)(3) of the Fair
Credit Reporting Act (15 U.S.C.
1681a(x)(3)).
*
*
*
*
*
■ 6. Section 1006.34 is added to read as
follows:
Notice for validation of debts.
(a) Validation information required—
(1) In general. Except as provided in
paragraph (a)(2) of this section, a debt
collector must provide a consumer with
the validation information required by
paragraph (c) of this section either:
(i) By sending the consumer a
validation notice in the manner required
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
readily understandable. In the case of
written and electronic disclosures, the
location and type size also must be
readily noticeable and legible to
consumers, although no minimum type
size is mandated. 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.
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(3) Itemization date means any one of
the following five 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 by a creditor;
(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;
(iv) The transaction date, which is the
date of the transaction that gave rise to
the debt; or
(v) The judgment date, which is the
date of a final court judgment that
determines the amount of the debt owed
by the consumer.
(4) Validation notice means a written
or electronic notice that provides the
validation information required by
paragraph (c) of this section.
(5) Validation period means the
period starting on the date that a debt
collector provides the validation
information required by 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 identified in 5 U.S.C.
6103(a), Saturdays, and Sundays) after
the debt collector provides it.
(c) Validation information. Pursuant
to paragraph (a)(1) of this section, a debt
collector must provide the following
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 the
mailing address at which the debt
collector accepts disputes and requests
for original-creditor information.
(ii) The consumer’s name and mailing
address.
(iii) If the debt collector is collecting
a debt related to a consumer financial
product or service as defined in
§ 1006.2(f), the name of the creditor to
whom the debt was owed on the
itemization date.
(iv) The account number, if any,
associated with the debt on the
itemization date, or a truncated version
of that number.
(v) The name of the creditor to whom
the debt currently is owed.
(vi) The itemization date.
(vii) The amount of the debt on the
itemization date.
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(viii) An itemization of the current
amount of the debt reflecting interest,
fees, payments, and credits since the
itemization date. A debt collector may
disclose the itemization on a separate
page provided in the same
communication with a validation
notice, if the debt collector includes on
the validation notice, where the
itemization would have appeared, a
statement referring to that separate page.
(ix) The current amount of the debt.
(3) Information about consumer
protections. (i) The date that the debt
collector will consider the end date of
the validation period and a statement
that, if the consumer notifies the debt
collector in writing on or before that
date 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
verification of the debt or a copy of a
judgment.
(ii) The date that the debt collector
will consider the end date of the
validation period and a statement that,
if the consumer requests in writing on
or before that date 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) The date that the debt collector
will consider the end date of the
validation period and a statement that,
unless the consumer contacts the debt
collector to dispute the validity of the
debt, or any portion of the debt, on or
before that date, the debt collector will
assume that the debt is valid.
(iv) If the debt collector is collecting
debt related to a consumer financial
product or service 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 www.cfpb.gov/debtcollection.
(v) If the debt collector sends the
validation notice electronically, a
statement explaining how a consumer
can, as described in paragraphs (c)(4)(i)
and (ii) of this section, dispute the debt
or request original-creditor information
electronically.
(4) Consumer-response information.
The following information, segregated
from the validation information
required by paragraphs (c)(1) through (3)
of this section and from any optional
information included pursuant to
paragraphs (d)(3)(i) and (ii),
(d)(3)(iii)(A), (d)(3)(iv) and (v),
(d)(3)(vi)(A), and (d)(3)(vii) and (viii) of
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this section, and, if provided on 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
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 are the debt collector’s
and the consumer’s names and mailing
addresses as disclosed pursuant to
§ 1006.34(c)(2)(i) and (ii).
(5) Special rule for certain residential
mortgage debt. For residential mortgage
debt, if a periodic statement is required
under Regulation Z, 12 CFR 1026.41, at
the time a debt collector provides the
validation notice, a debt collector need
not provide the validation information
required by paragraphs (c)(2)(vi)
through (viii) of this section if the debt
collector:
(i) Provides the consumer, in the same
communication with 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) Includes on the validation notice,
where the validation information
required by paragraphs (c)(2)(vi)
through (viii) of this section would have
appeared, a statement referring to that
periodic statement.
(d) Form of validation information—
(1) In general. The validation
information required by paragraph (c) of
this section must be clear and
conspicuous.
(2) Safe harbor—(i) In general. Model
Form B–1 in appendix B to this part
contains the validation information
required by paragraph (c) of this section
and certain optional disclosures
permitted by paragraph (d)(3) of this
section. A debt collector who uses
Model Form B–1 complies with the
information and form requirements of
paragraphs (c) and (d)(1) of this section,
including if the debt collector:
(A) Omits any or all of the optional
disclosures shown on Model Form B–1;
or
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(B) Adds any or all of the optional
disclosures described in paragraph
(d)(3) of this section that are not shown
on Model Form B–1, provided that any
such optional disclosures are no more
prominent than any of the validation
information required by paragraph (c) of
this section.
(ii) Certain disclosures on a separate
page. A debt collector who uses Model
Form B–1 as described in paragraph
(d)(2)(i) of this section and who,
pursuant to paragraph (c)(2)(viii) or
(c)(5) of this section, includes certain
disclosures on a separate page in the
same communication with the
validation notice and, on the notice, the
required statement referring to those
disclosures, receives a safe harbor for
compliance with the information and
form requirements of paragraphs (c) and
(d)(1) of this section except with respect
to the disclosures on the separate page.
(iii) Substantially similar form. A debt
collector who uses Model Form B–1 as
described in paragraph (d)(2)(i) or (ii) of
this section may make changes to the
form and retain a safe harbor for
compliance with the information and
form requirements of paragraphs (c) and
(d)(1) of this section provided that the
form remains substantially similar to
Model Form B–1.
(3) Optional disclosures. A debt
collector may include any of the
following information when providing
the validation information required by
paragraph (c) of this section. A debt
collector who includes any of the
following information receives the safe
harbor described in paragraph (d)(2) of
this section, provided that the debt
collector otherwise uses Model Form B–
1 in appendix B to this part, or a
variation of Model Form B–1, as
described in paragraph (d)(2) of this
section.
(i) Telephone contact information.
The debt collector’s telephone contact
information.
(ii) Reference code. A number or code
that the debt collector uses to identify
the debt or the consumer.
(iii) Payment disclosures. Either or
both of the following phrases:
(A) The statement, ‘‘Contact us about
your payment options.’’, using that
phrase or a substantially similar phrase;
and
(B) Below the consumer-response
information required by paragraphs
(c)(4)(i) and (ii) 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.
(iv) Disclosures under applicable
law—(A) Disclosures on the reverse of
the validation notice. On the reverse of
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the validation notice, any disclosures
that are specifically required by, or that
provide safe harbors under, applicable
law and, if any such disclosures are
included, a statement on the front of the
validation notice referring to those
disclosures. Any such disclosures must
not appear directly on the reverse of the
consumer-response information
required by paragraph (c)(4) of this
section.
(B) Disclosures on the front of the
validation notice. If a debt collector is
collecting time-barred debt, on the front
of the validation notice below the
disclosure required by paragraph
(c)(2)(ix) of this section, any time-barred
debt disclosure that is specifically
required by, or that provides a safe
harbor under, applicable law, provided
that applicable law specifies the content
of the disclosure.
(v) Information about electronic
communications. The following
information:
(A) The debt collector’s website and
email address.
(B) If the validation information is not
provided electronically, a statement
explaining how a consumer can, as
described in paragraphs (c)(4)(i) and (ii)
of this section, dispute the debt or
request original-creditor information
electronically.
(vi) Spanish-language translation
disclosures. Either or both of the
following disclosures regarding a
consumer’s ability to request a Spanishlanguage 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 this 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 required by paragraph (c)(4)
of this section, the statement ‘‘Quiero
este formulario 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.
(vii) The merchant brand, affinity
brand, or facility name, if any,
associated with the debt.
(viii) If a debt collector is collecting
debt other than debt related to a
consumer financial product or service as
defined in § 1006.2(f), the information
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specified in paragraph (c)(2)(iii) or
(c)(3)(iv) of this section.
(4) Validation notices delivered
electronically. If a debt collector
delivers a validation notice
electronically, a debt collector may, at
its option, format the validation notice
as follows:
(i) Prompts. Any prompt required by
paragraph (c)(4)(i) or (ii) or paragraph
(d)(3)(iii)(B) or (d)(3)(vi)(B) of this
section may be displayed electronically
as a fillable field.
(ii) Hyperlinks. Hyperlinks may be
embedded that, when clicked:
(A) Connect a consumer to the debt
collector’s website;
(B) Connect a consumer to the
Bureau’s debt collection website as
disclosed pursuant to paragraph
(c)(3)(iv) of this section; or
(C) Permit a consumer to respond to
the dispute and original-creditor
information prompts required by
paragraphs (c)(4)(i) and (ii) of this
section.
(e) Translation into other languages—
(1) In general. A debt collector may send
a consumer a validation notice
completely and accurately translated
into any language if the debt collector:
(i) Sends the consumer an Englishlanguage validation notice in the same
communication as the translated
validation notice; or
(ii) Previously provided the consumer
an English-language validation notice,
in which case the debt collector need
not send the consumer an Englishlanguage validation notice in the same
communication as the translated
validation notice.
(2) Spanish-language validation
notice—requirement to provide after
optional disclosure. A debt collector
who includes in the validation
information either or both of the
optional disclosures described in
paragraph (d)(3)(vi) of this section, and
who thereafter receives a request from
the consumer for a Spanish-language
validation notice, must provide the
consumer a validation notice
completely and accurately translated
into Spanish.
■ 7. Section 1006.38 is amended by
revising paragraphs (a)(2), (b), and (c) to
read as follows:
§ 1006.38 Disputes and requests for
original-creditor information.
(a) * * *
(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—(1) Prohibition. During the
validation period, a debt collector must
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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.
(2) Safe harbor. A debt collector who
uses Model Form B–1 in appendix B to
this part in a manner described in
§ 1006.34(d)(2) has not thereby violated
paragraph (b)(1) of this section.
(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:
(1) In general. Sends the name and
address of the original creditor to the
consumer in writing or electronically in
the manner required by § 1006.42; or
(2) Special rule if the current creditor
and the original creditor are the same.
In lieu of taking the actions described in
paragraph (c)(1) of this section,
reasonably determines that the original
creditor is the same as the current
creditor, notifies the consumer of that
fact in writing or electronically in the
manner required by § 1006.42, and
refers the consumer to the validation
information previously provided
pursuant to § 1006.34(a)(1).
*
*
*
*
*
■ 8. Section 1006.42 is amended by
revising paragraphs (a)(2) and (b) to read
as follows:
§ 1006.42
Sending required disclosures.
(a) * * *
(2) Exceptions. A debt collector need
not comply with paragraph (a)(1) of this
section when sending 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).
(b) Requirements for certain
disclosures sent electronically. To
comply with paragraph (a) of this
section, a debt collector who sends the
notice required by § 1006.34(a)(1)(i)(B),
or the disclosures described in
§ 1006.38(c) or (d)(2)(i), electronically
must do so 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)).
■ 9. Appendix B to part 1006 is added
to read as follows:
Appendix B to Part 1006—Model Forms
B–1 Model Form for Validation Notice
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d. Under Section 1006.100—Record
Retention, 100(a) In general, including
the heading, is revised.
■ e. Section 1006.104—Relation to State
Laws is added.
The additions and revisions read as
follows:
■
10. In supplement I to part 1006:
a. Under Section 1006.30—Other
Prohibited Practices, the headings 30(a)
Required actions prior to furnishing
information, and 30(a)(1) In general,
and paragraphs 1 and 2 are added.
■ b. Section 1006.34—Notice for
Validation of Debts is added.
■ c. Under Section 1006.38—Disputes
and Requests for Original-Creditor
Information, the introductory text before
38(a) Definitions is revised.
■
■
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Interpretations
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Subpart B—Rules for FDCPA Debt
Collectors
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Section 1006.30—Other Prohibited
Practices
30(a) Required actions prior to
furnishing information.
30(a)(1) In general.
1. About the debt. Section
1006.30(a)(1) provides, in relevant part,
that a debt collector must not furnish to
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a consumer reporting agency, as defined
in section 603(f) of the Fair Credit
Reporting Act (15 U.S.C. 1681a(f)),
information about a debt before taking
one of the actions described in
§ 1006.30(a)(1)(i) or (ii). Each of the
actions includes conveying information
‘‘about the debt’’ to the consumer. The
validation information required by
§ 1006.34(c), including such information
if provided in a validation notice, is
information ‘‘about the debt.’’
2. Reasonable period of time. Section
1006.30(a)(1)(ii) provides, in relevant
part, that a debt collector who places a
letter about a debt in the mail, or who
sends an electronic message about a
debt to the consumer, must wait a
reasonable period of time to receive a
notice of undeliverability before
furnishing information about the debt to
a consumer reporting agency. The
reasonable period of time begins on the
date that the debt collector places the
letter in the mail or sends the electronic
message. A period of 14 consecutive
days after the date that the debt
collector places a letter in the mail or
sends an electronic message is a
reasonable period of time.
3. Notices of undeliverability. Section
1006.30(a)(1)(ii) provides, in relevant
part, that, if a debt collector who places
a letter about a debt in the mail, or who
sends an electronic message about a
debt to the consumer, receives a notice
of undeliverability during the
reasonable period of time, the debt
collector must not furnish information
about the debt to a consumer reporting
agency until the debt collector
otherwise satisfies paragraph (a)(1) of
this section. A debt collector who does
not receive a notice of undeliverability
during the reasonable period and who
thereafter furnishes information about
the debt to a consumer reporting agency
does not violate paragraph (a)(1) of this
section even if the debt collector
subsequently receives a notice of
undeliverability. The following
examples illustrate the rule:
i. Assume that, on May 1, a debt
collector mails the consumer a
validation notice as described in
§ 1006.34(a)(1)(i)(A). On May 10, the
debt collector receives a notice of
undeliverability and, without taking any
additional action described in
§ 1006.30(a)(1), subsequently furnishes
information regarding the debt to a
consumer reporting agency. The debt
collector has violated § 1006.30(a)(1).
ii. Assume that, on May 1, a debt
collector mails the consumer a
validation notice as described in
§ 1006.34(a)(1)(i)(A). On May 10, the
debt collector receives a notice of
undeliverability. On May 11, the debt
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collector mails the consumer another
validation notice as described in
§ 1006.34(a)(1)(i)(A). From May 11 to
May 24, the debt collector permits
receipt of, monitors for, and does not
receive, a notice of undeliverability and
thereafter furnishes information
regarding the debt to a consumer
reporting agency. The debt collector has
not violated § 1006.30(a)(1).
iii. Assume that, on May 1, a debt
collector mails the consumer a
validation notice as described in
§ 1006.34(a)(1)(i)(A). From May 1 to
May 14, the debt collector permits
receipt of, monitors for, and does not
receive, a notice of undeliverability and
thereafter furnishes information
regarding the debt to a consumer
reporting agency. After furnishing the
information, the debt collector receives
a notice of undeliverability. The debt
collector has not violated § 1006.30(a)(1)
and, without taking any further action,
may furnish additional information
about the debt to a consumer reporting
agency.
*
*
*
*
*
Section 1006.34—Notice for Validation
of Debts
34(a) Validation information required.
34(a)(1) In general.
1. Deceased consumers. Section
1006.34(a)(1) generally requires a debt
collector to provide the validation
information required by § 1006.34(c)
either by sending the consumer a
validation notice in the manner required
by § 1006.42, 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)(2) Initial communication.
1. Bankruptcy proofs of claim. Section
1006.34(b)(2) defines initial
communication and states that the term
does not include a communication in
the form of a formal pleading in a civil
action. A proof of claim that a debt
collector files in a bankruptcy
proceeding in accordance with the
requirements of the United States
Bankruptcy Code (Title 11 of the U.S.
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Code) is a communication in the form
of a formal pleading in a civil action and
therefore is not an initial
communication for purposes of
§ 1006.34.
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
five reference dates for which a debt
collector can ascertain the amount of the
debt. The reference dates are the last
statement date, the charge-off date, the
last payment date, the transaction date,
and the judgment 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 debt in a
communication with a consumer, the
debt collector must use that reference
date for that debt consistently when
providing the information required by
§ 1006.34(c) 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)(iv), 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)(vii).
2. Subsequent debt collectors. When
selecting an itemization date pursuant
to § 1006.34(b)(3), a debt collector may
use a different reference date than a
prior debt collector who attempted to
collect the debt.
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 by a creditor.
For purposes of § 1006.34(b)(3)(i), the
last statement may be provided by a
creditor or a third party acting on the
creditor’s behalf, including a creditor’s
service provider. However, a statement
or invoice provided by a debt collector
is not a last statement for purposes of
§ 1006.34(b)(3)(i), unless the debt
collector is also a creditor.
Paragraph 34(b)(3)(iii).
1. Last payment date. Under
§ 1006.34(b)(3)(iii), the last payment
date is the date the last payment was
applied to the debt. A third-party
payment applied to the debt, such as a
payment from an auto repossession
agent or an insurance company, can be
a last payment for purposes of
§ 1006.34(b)(3)(iii).
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.
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The transaction date is the date that the
good or service that gave rise to the debt
was provided or made available to the
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 may have more than
one transaction date. This could occur,
for example, 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 the debt collector
must use whichever transaction date is
selected consistently, as described in
comment 34(b)(3)–1.
34(b)(5) Validation period.
1. Assumed receipt of validation
information. 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(c)
and ending 30 days after the consumer
receives or is assumed to receive it.
Section 1006.34(c)(3)(i) through (iii)
requires statements that specify the end
date of the validation period. If a debt
collector provides the validation
information in writing or electronically,
then, at the time that the debt collector
calculates the validation period end
date, the debt collector will know only
the date on which the consumer is
assumed to receive the validation
information. In such cases, the debt
collector may use that date to calculate
the validation period end date even if
the debt collector later learns that the
consumer received the validation
information on a different date.
2. Updated 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 required by § 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
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§ 1006.34(c)(3) disclosures is 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)(1) Debt collector communication
disclosure.
1. Statement required by § 1006.18(e).
Section 1006.34(c)(1) provides that
validation information includes the
statement required by § 1006.18(e).
Section 1006.18(e)(1) requires a debt
collector to disclose in its initial
communication that the debt collector is
attempting to collect a debt and that any
information obtained will be used for
that purpose. Section 1006.18(e)(2)
requires a debt collector to disclose in
each subsequent communication that
the communication is from a debt
collector. A debt collector who provides
a validation notice as described in
§ 1006.34(a)(1)(i)(A) complies with
§ 1006.34(c)(1) by providing on the
validation notice the disclosure required
by § 1006.18(e)(1). A debt collector who
provides a validation notice as
described in § 1006.34(a)(1)(i)(B)
complies with § 1006.34(c)(1) by
providing either the disclosure required
by § 1006.18(e)(1) or the disclosure
required by § 1006.18(e)(2). The
following example illustrates the rule:
i. ABC debt collector has an initial
communication with the consumer by
telephone. Within five days of that
initial communication, ABC debt
collector sends the consumer a
validation notice using Model Form
B–1 in appendix B to this part. ABC
debt collector has complied with
§ 1006.34(c)(1) even though Model Form
B–1 includes the disclosure described in
§ 1006.18(e)(1) rather than the
disclosure described in § 1006.18(e)(2).
34(c)(2) Information about the debt.
Paragraph 34(c)(2)(i).
1. Debt collector’s name. Section
1006.34(c)(2)(i) provides, in part, that
validation information includes the debt
collector’s name. A debt collector may
disclose its trade or doing-business-as
name, instead of its legal name.
2. Debt collector’s mailing address.
Section 1006.34(c)(2)(i) provides, in
part, that validation information
includes the mailing address at which
the debt collector accepts disputes and
requests for original-creditor
information. A debt collector may
disclose a vendor’s mailing address, if
that is an address at which the debt
collector accepts disputes and requests
for original-creditor information.
Paragraph 34(c)(2)(ii).
1. Consumer’s name. Section
1006.34(c)(2)(ii) provides, in part, that
validation information includes the
consumer’s name. To satisfy the
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requirement to provide this validation
information, a debt collector must
disclose the version of the consumer’s
name that the debt collector reasonably
determines is the most complete and
accurate version of the name about
which the debt collector has knowledge.
A debt collector does not disclose the
most complete and accurate version of
the consumer’s name if the debt
collector omits known name
information in a manner that creates a
false, misleading, or confusing
impression about the consumer’s
identity. For example, assume the
creditor provides the consumer’s first
name, middle name, last name, and
name suffix to the debt collector. In this
scenario, the debt collector would
reasonably determine that the most
complete and accurate version of the
consumer’s name about which the debt
collector has knowledge includes the
first name, middle name, last name, and
name suffix. If the debt collector omits
any of this information, the debt
collector has not satisfied the
requirement to provide the consumer’s
name pursuant to § 1006.34(c)(2)(ii).
Paragraph 34(c)(2)(iii).
1. Creditor’s name. Section
1006.34(c)(2)(iii) provides that, if a debt
collector is collecting debt related to a
consumer financial product or service as
defined in § 1006.2(f), validation
information includes the name of the
creditor to whom the debt was owed on
the itemization date. Pursuant to
§ 1006.34(c)(2)(iii), a debt collector may
disclose this creditor’s trade or doingbusiness-as name, instead of its legal
name.
Paragraph 34(c)(2)(iv).
1. Account number truncation.
Section 1006.34(c)(2)(iv) provides that
validation information includes the
account number, if any, 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 are provided.
Paragraph 34(c)(2)(v).
1. Creditor’s name. Section
1006.34(c)(2)(v) provides that validation
information includes the name of the
creditor to whom the debt currently is
owed. A debt collector may disclose this
creditor’s trade or doing-business-as
name, instead of its legal name.
Paragraph 34(c)(2)(vii).
1. Amount of the debt on the
itemization date. Section
1006.34(c)(2)(vii) provides that
validation information includes the
amount of the debt on the itemization
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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)(viii).
1. Itemization of the debt. Section
1006.34(c)(2)(viii) provides that
validation information includes an
itemization of the current amount of the
debt reflecting interest, fees, payments,
and credits since the itemization date. If
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,’’
‘‘none,’’ or may state that no interest,
fees, payments, or credits have been
assessed or applied to the debt; a debt
collector may not leave a required field
blank.
2. Itemization required by other
applicable law. If a debt collector is
required by other applicable law to
provide an itemization of the current
amount of the debt with the validation
information, the debt collector may
comply with § 1006.34(c)(2)(viii) by
disclosing the itemization required by
other applicable law in lieu of the
itemization described in
§ 1006.34(c)(2)(viii), if the itemization
required by other applicable law is
substantially similar to the itemization
that appears on Model Form B–1 in
appendix B to this part.
3. Itemization on a separate page.
Section 1006.34(c)(2)(viii) provides that
a debt collector may disclose the
itemization of the current amount of the
debt on a separate page provided in the
same communication with a validation
notice if the debt collector includes on
the validation notice, where the
itemization would have appeared, a
statement referring to that separate page.
A debt collector may comply with the
requirement to refer to the separate page
by, for example, including on the
validation notice the statement, ‘‘See the
enclosed separate page for an
itemization of the debt,’’ situated next to
the information about the current
amount of the debt required by
§ 1006.34(c)(2)(ix).
4. Debt collectors collecting multiple
debts. A debt collector who combines
multiple debts on a single validation
notice complies with
§ 1006.34(c)(2)(viii) by disclosing either
a single, cumulative itemization on the
validation notice or a separate
itemization of each debt on a separate
page or pages provided in the same
communication as the validation notice.
Paragraph 34(c)(2)(ix).
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1. Current amount of the debt. Section
1006.34(c)(2)(ix) 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.
2. Debt collectors collecting multiple
debts. A debt collector who combines
multiple debts on a single validation
notice complies with § 1006.34(c)(2)(ix)
by disclosing on the validation notice a
single cumulative figure that is the sum
of the current amount of all the debts.
34(c)(3) Information about consumer
protections.
Paragraph 34(c)(3)(v).
1. Electronic communication media.
Section 1006.34(c)(3)(v) provides that, if
the debt collector provides the
validation notice electronically,
validation information includes a
statement explaining how a consumer
can, as described in paragraphs (c)(4)(i)
and (ii) of this section, dispute the debt
or request original-creditor information
electronically. A debt collector may
provide the information required by
§ 1006.34(c)(3)(v) by including the
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 required to provide
information regarding only one of these
media but may provide information on
any additional media.
34(c)(4) Consumer-response
information.
1. Prompts. If the validation
information is provided in writing or
electronically, a prompt required by
§ 1006.34(c)(4) may be formatted as a
checkbox as in Model Form B–1 in
appendix B to this part.
34(c)(5) Special rule for certain
residential mortgage debt.
1. In general. Section 1006.34(c)(5)
provides that, for residential mortgage
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debt, if a periodic statement is required
under Regulation Z, 12 CFR 1026.41, at
the time a debt collector provides the
validation notice, a debt collector need
not provide the validation information
required by § 1006.34(c)(2)(vi) through
(viii) if the debt collector provides the
consumer, in the same communication
with 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
includes on the validation notice, where
the validation information required by
paragraphs (c)(2)(vi) through (viii) of
this section would have appeared, a
statement referring to that periodic
statement. A debt collector may comply
with the requirement to refer to the
periodic statement in the validation
notice by, for example, including on the
validation notice the statement, ‘‘See the
enclosed periodic statement for an
itemization of the debt.’’
34(d) Form of validation information.
34(d)(2) Safe harbor.
1. In general. A debt collector who
provides a validation notice that is
neither a notice described in
§ 1006.34(d)(2)(i) or (ii), nor a
substantially similar notice as described
in § 1006.34(d)(2)(iii), does not receive a
safe harbor for compliance with the
information and form requirements of
§ 1006.34(c) and (d)(1).
34(d)(2)(i) In general.
1. Disclosure required by § 1006.18(e).
Section 1006.18(e)(1) requires a debt
collector to disclose in its initial
communication that the debt collector is
attempting to collect a debt and that any
information obtained will be used for
that purpose. Section 1006.18(e)(2)
requires a debt collector to disclose in
each subsequent communication that
the communication is from a debt
collector. Model Form B–1 in appendix
B to this part includes the disclosure
required by § 1006.18(e)(1). A debt
collector who uses Model Form B–1 to
provide a validation notice as described
in § 1006.34(a)(1)(i)(B) may replace the
disclosure required by § 1006.18(e)(1)
with the disclosure required by
§ 1006.18(e)(2) without losing the safe
harbor described in § 1006.34(d)(2). See
comment 34(c)(1)–1 for further guidance
related to providing the disclosure
required by § 1006.18(e) on a validation
notice.
34(d)(2)(iii) Substantially similar
form.
1. Substantially similar form.
Pursuant to § 1006.34(d)(2)(iii), a debt
collector who uses Model Form B–1 as
described in § 1006.34(d)(2)(i) may
make changes to the form and retain the
safe harbor for compliance with the
information and form requirements of
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§ 1006.34(c) and (d)(1) provided that the
form remains substantially similar in
substance, clarity, and meaningful
sequence to Model Form B–1.
Permissible 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’’;
ii. Relocating the consumer-response
information required by § 1006.34(c)(4)
to facilitate mailing;
iii. Adding barcodes or QR codes, as
long as the inclusion of such items does
not violate § 1006.38(b);
iv. Adding the date the form is
generated; and
v. Embedding hyperlinks, if
delivering the form electronically.
34(d)(3) Optional disclosures.
34(d)(3)(i) Telephone contact
information.
1. In general. Section 1006.34(d)(3)(i)
permits a debt collector to include
telephone contact information.
Telephone contact information may
include, for example, a telephone
number as well as the times that the
debt collector accepts consumer
telephone calls.
34(d)(3)(iv) Disclosures under
applicable law.
34(d)(3)(iv)(A) Disclosures on the
reverse of the validation notice.
1. In general. Section
1006.34(d)(3)(iv)(A) permits, in relevant
part, a debt collector to include on the
reverse of the validation notice any
disclosures that are specifically required
by, or that provide safe harbors under,
applicable law. If a debt collector
provides a validation notice in the body
of an email, the debt collector may, in
lieu of including the disclosures
permitted by § 1006.34(d)(3)(iv)(A) on
the reverse of the validation notice,
include them in the same
communication below the content of the
validation notice. Disclosures permitted
by § 1006.34(d)(3)(iv)(A) include, for
example, specific disclosures required
by Federal, State, or municipal statutes
or regulations, and specific disclosures
required by judicial or administrative
decisions or orders, including
administrative consent orders. Such
disclosures could include, for example,
time-barred debt disclosures and
disclosures that the current amount of
the debt may increase or vary due to
interest, fees, or other charges, provided
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that such disclosures are specifically
required by applicable law.
2. Statement referring to disclosures.
If a debt collector includes disclosures
pursuant to § 1006.34(d)(3)(iv)(A), the
debt collector must include a statement
on the front of the validation notice
referring to those disclosures. A debt
collector may comply with the
requirement to refer to the disclosures
by including on the front of the
validation notice the statement, ‘‘Notice:
See reverse side for important
information,’’ or a substantially similar
statement. If, as permitted by comment
34(d)(3)(iv)(A)–1, a debt collector places
the disclosures below the content of the
validation notice, the debt collector may
comply with the requirement to refer to
the disclosures by stating, ‘‘Notice: See
below for important information,’’ or a
substantially similar statement.
34(d)(3)(iv)(B) Disclosures on the front
of the validation notice.
1. In general. Section
1006.34(d)(3)(iv)(B) provides, in
relevant part that, if a debt collector is
collecting time-barred debt, the debt
collector may include on the front of the
validation notice any time-barred debt
disclosure that is specifically required
by, or that provides a safe harbor under,
applicable law, provided that applicable
law specifies the content of the
disclosure. For example, if applicable
State law requires a debt collector who
is collecting time-barred debt to disclose
to the consumer that the law limits how
long a consumer can be sued on a debt
and that the debt collector cannot or
will not sue the consumer to collect it,
the debt collector may include that
disclosure on the front of the validation
notice. See § 1006.26(a)(2) for the
definition of time-barred debt. For
purposes of § 1006.34(d)(3)(iv)(B), timebarred debt disclosures may include
disclosures about revival of debt
collectors’ right to bring a legal action to
enforce the debt.
34(d)(3)(vi) Spanish-language
translation disclosures.
Paragraph 34(d)(3)(vi)(A).
1. Supplemental information in
Spanish. 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 Spanishlanguage validation notice by telephone
or email, if the debt collector accepts
consumer requests through those
communication media.
Paragraph 34(d)(3)(vii).
1. Merchant brand. Section
1006.34(d)(3)(vii) permits a debt
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5861
collector to include the merchant brand,
if any, associated with debt. 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. ‘‘XYZ Store’’ is the merchant
brand.
2. Affinity brand. Section
1006.34(d)(3)(vii) permits a debt
collector to include the affinity brand, if
any, associated with the debt. 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 the logo for the College
of Columbia appears on the credit card.
‘‘College of Columbia’’ is the affinity
brand.
3. Facility name. Section
1006.34(d)(3)(vii) permits a debt
collector to include the facility name, if
any, associated with the debt. For
example, assume that a debt collector is
attempting to collect a consumer’s
medical debt. The medical debt relates
to a treatment that the consumer
received at ABC Hospital. ‘‘ABC
Hospital’’ is the facility name.
34(e) Translation into other
languages.
1. Safe harbor for complete and
accurate translation. Section 1006.34(e)
provides, among other things, that, if a
debt collector sends a consumer a
validation notice translated into a
language other than English, the
translation must be complete and
accurate. The language of a validation
notice that a debt collector obtains from
the Bureau’s website is considered a
complete and accurate translation. Debt
collectors are permitted to use other
validation notice translations if they are
complete and accurate.
Section 1006.38—Disputes and Requests
for Original-Creditor Information
1. 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) requires to appear on the
validation notice and indicates on the
form the dispute or request;
iii. Provides the dispute or request to
the debt collector using a medium of
electronic communication through
which the debt collector accepts
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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. Deceased consumers. 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.
*
*
*
*
*
Subpart D—Miscellaneous
Section 1006.100—Record Retention
*
*
*
*
100(a) In general.
1. Records that evidence compliance.
Section 1006.100(a) provides, in part,
that a debt collector must retain records
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*
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that are evidence of compliance or
noncompliance with the FDCPA and
this part. Thus, under § 1006.100(a), a
debt collector must retain records that
evidence that the debt collector
performed the actions and made the
disclosures required by the FDCPA and
this part, as well as records that
evidence that the debt collector
refrained from conduct prohibited by
the FDCPA and this part. If a record is
of a type that could evidence
compliance or noncompliance
depending on the conduct of the debt
collector that is revealed within the
record, then the record is one that is
evidence of compliance or
noncompliance, and the debt collector
must retain it. Such records include, but
are not limited to, records that evidence
that the debt collector’s
communications and attempts to
communicate in connection with the
collection of a debt complied (or did not
comply) with the FDCPA and this part.
For example, a debt collector must
retain:
i. Telephone call logs as evidence of
compliance or noncompliance with the
prohibition against harassing telephone
calls in § 1006.14(b)(1); and
ii. Copies of documents provided to
consumers as evidence that the debt
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collector provided the information
required by §§ 1006.34 and 1006.38 and
met the delivery requirements of
§ 1006.42.
*
*
*
*
*
Section 1006.104—Relation to State
Laws
1. State law disclosure requirements.
The Act and the corresponding
provisions of Regulation F do not annul,
alter, or affect, or exempt any person
subject to these requirements from
complying with a disclosure
requirement under applicable State law
that describes additional protections
under State law that are not inconsistent
with the Act and Regulation F. A
disclosure required by State law is not
inconsistent with the FDCPA or
Regulation F if the disclosure describes
a protection that such law affords any
consumer that is greater than the
protection provided by the FDCPA or
Regulation F.
Dated: December 18, 2020.
Grace Feola,
Federal Register Liaison, Bureau of Consumer
Financial Protection.
[FR Doc. 2020–28422 Filed 1–15–21; 8:45 am]
BILLING CODE 4810–AM–P
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Agencies
[Federal Register Volume 86, Number 11 (Tuesday, January 19, 2021)]
[Rules and Regulations]
[Pages 5766-5862]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28422]
[[Page 5765]]
Vol. 86
Tuesday,
No. 11
January 19, 2021
Part VIII
Bureau of Consumer Financial Protection
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12 CFR Part 1006
Debt Collection Practices (Regulation F); Final Rule
Federal Register / Vol. 86 , No. 11 / Tuesday, January 19, 2021 /
Rules and Regulations
[[Page 5766]]
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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: Final rule; official interpretation.
-----------------------------------------------------------------------
SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is
issuing this final rule to revise Regulation F, which implements the
Fair Debt Collection Practices Act (FDCPA). The final rule governs
certain activities by debt collectors, as that term is defined in the
FDCPA. Among other things, the final rule clarifies the information
that a debt collector must provide to a consumer at the outset of debt
collection communications, prohibits debt collectors from bringing or
threatening to bring a legal action against a consumer to collect a
time-barred debt, and requires debt collectors to take certain actions
before furnishing information about a consumer's debt to a consumer
reporting agency.
DATES: This rule is effective on November 30, 2021.
FOR FURTHER INFORMATION CONTACT: Joel Singerman, Counsel, or Dania
Ayoubi, Joseph Baressi, Seth Caffrey, Brandy Hood, David Jacobs,
Courtney Jean, Adam Mayle, Kristin McPartland, Michael Silver, 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 Final Rule
The Bureau is finalizing amendments to Regulation F, 12 CFR part
1006, which implements the FDCPA.\1\ The amendments prescribe Federal
rules governing the activities of debt collectors, as that term is
defined in the FDCPA (debt collectors or FDCPA debt collectors). The
final rule clarifies the information that a debt collector must provide
to a consumer at the outset of debt collection communications and
provides a model validation notice containing such information. The
final rule also addresses consumer protection concerns related to
passive collections (i.e., the practice of furnishing information about
a debt to a consumer reporting agency before communicating with the
consumer about the debt) and the collection of debt that is beyond the
statute of limitations (i.e., time-barred debt). On November 30, 2020,
the Bureau published a final rule in the Federal Register that focused
on debt collection communications and related practices by debt
collectors (November 2020 Final Rule). The November 2020 Final Rule
reserved certain sections of Regulation F in anticipation of this final
rule.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 1692 et seq.
---------------------------------------------------------------------------
As discussed in the November 2020 Final Rule, 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.\2\ The statute was a response to ``abundant
evidence of the use of abusive, deceptive, and unfair debt collection
practices by many debt collectors.'' \3\ 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.'' \4\
---------------------------------------------------------------------------
\2\ 15 U.S.C. 1692(e).
\3\ 15 U.S.C. 1692(a).
\4\ Id.
---------------------------------------------------------------------------
The FDCPA established specific consumer protections, enabling
consumers to establish controls on when and how debt collectors contact
them, establishing privacy protections surrounding the collection of
debts, and protecting consumers from certain collection practices. The
FDCPA also established broad consumer protections, prohibiting
harassment or abuse, false or misleading representations, and unfair
practices. In the Dodd-Frank Wall Street Reform and Consumer Protection
Act (Dodd-Frank Act), Congress provided the Bureau with authority under
the FDCPA to prescribe substantive rules with respect to the collection
of debts by debt collectors. The Bureau issues this final rule, like
the November 2020 Final Rule, to implement and interpret the FDCPA.
A. Coverage and Organization of the Final Rule
The final rule is based primarily on the Bureau's authority to
issue rules to implement the FDCPA and, consequently, covers debt
collectors, as that term is defined in the FDCPA.
As revised in the November 2020 Final Rule, Regulation F contains
four subparts. Subpart A contains generally applicable provisions, such
as definitions that apply throughout the regulation. Subpart B contains
rules for FDCPA debt collectors. Subpart C is reserved for any future
debt collection rulemakings. Subpart D contains certain miscellaneous
provisions. This final rule adds additional provisions in subparts A,
B, and D.
B. Scope of the Final Rule
FDCPA section 809(a) requires that a debt collector send a written
notice containing certain information about the debt and actions the
consumer may take in response (the validation notice) to a consumer
within five days of the initial communication, unless such validation
information was provided in the initial communication or the consumer
has paid the debt.\5\ The final rule clarifies the information about
the debt and the consumer's rights with respect to the debt that a debt
collector must provide to a consumer at the outset of debt collection
communications, including (if applicable) on a validation notice. The
final rule also requires a debt collector to provide prompts that a
consumer can use to dispute the debt, request information about the
original creditor, or take certain other actions. The final rule
provides a safe harbor for compliance with these disclosure
requirements for debt collectors who use the model validation notice or
certain variations of the notice.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 1692g(a).
---------------------------------------------------------------------------
The final rule also prohibits a debt collector from suing or
threatening to sue a consumer to collect time-barred debt. In addition,
the final rule prohibits a debt collector from furnishing information
about a debt to a consumer reporting agency before engaging in specific
outreach to the consumer about the debt. The final rule also addresses
certain other disclosure-focused provisions, such as clarifying how a
debt collector may respond to a consumer's request for original-
creditor information if the original creditor is the same as the
current creditor. Additionally, the final rule interprets the
definition of consumer under the FDCPA to include deceased natural
persons and, relatedly, provides that, if a debt collector knows or
should know that the a consumer is deceased, and the debt collector has
not previously provided the validation information to the deceased
consumer, the debt collector must provide that information to a person
who is authorized to act on behalf of the deceased consumer's estate.
[[Page 5767]]
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. Other times, a debt arises from a
consumer's use of an open-end line of credit, 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
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.\6\ 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.\7\
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\6\ See Bureau of Consumer Fin. Prot., Fair Debt Collection
Practices Act: CFPB Annual Report 2013, at 9 (Mar. 20, 2013),
https://www.consumerfinance.gov/data-research/research-reports/annual-report-on-the-fair-debt-collection-practices-act/ (2013 FDCPA
Annual Report).
\7\ See id.
---------------------------------------------------------------------------
The November 2020 Final Rule provides an extensive overview of the
debt collection market (including the roles of creditors, third-party
debt collectors, debt buyers, and a variety of service providers in the
market), methods of debt collection, and consumer protection concerns
in debt collection.\8\ Below the Bureau summarizes information
regarding debt collection methods and consumer protection concerns
specifically related to the topics addressed in this final rule.
---------------------------------------------------------------------------
\8\ See 85 FR 76734, 76735-37 (Nov. 30, 2020).
---------------------------------------------------------------------------
B. Debt Collection Methods
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 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. 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.
As already noted, 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 includes: (1) Certain details about the debt, such as the
amount of the debt and the name of the creditor to whom the debt is
owed; and (2) a description of consumer protections, such as the
consumer's rights to dispute the debt and to request information about
the original creditor. A debt collector may send a validation notice
containing the required information as the initial communication to the
consumer or send the required information in a validation notice within
five days after the initial communication. Currently, validation
notices include little or no information about the debt beyond the
information specifically listed in FDCPA section 809(a). This
information may not be sufficient for the consumer to recognize the
debt, particularly if, for example, the amount owed has changed over
time due to interest, fees, payment, or credits, or if the debt
collector has changed since an original collection attempt.
A 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 engage in active debt collection
efforts by affirmatively locating and contacting consumers, some debt
collectors collecting relatively small debts--such as many medical,
utility, and telecommunications debts--report the debts to consumer
reporting agencies and then wait for consumers to contact them after
discovering the debts on their consumer reports.\9\
---------------------------------------------------------------------------
\9\ Bureau of Consumer Fin. Prot., Consumer Credit Reports: A
Study of Medical and Non-Medical Collections, at 35-36 (Dec. 2014),
https://files.consumerfinance.gov/f/201412_cfpb_reports_consumer-credit-medical-and-non-medical-collections.pdf (CFPB Medical Debt
Report).
---------------------------------------------------------------------------
As discussed in the November 2020 Final Rule, a debt owner may also
try to recover on a debt through litigation.\10\ And debt collectors
sometimes attempt to collect debt for which the applicable statute of
limitations has expired. The length of the limitations period for debt
collection claims usually varies by State and debt type; most
limitations periods are between three and six years, although some are
as long as 15 years. Currently, in most States, expiration of the
statute of limitations, if raised by the consumer as an affirmative
defense, precludes the debt collector from recovering on the debt
through litigation, but it does not extinguish the debt itself. If the
debt is not extinguished, a debt collector may use non-litigation
means, such as letters and telephone calls, to collect a time-barred
debt, as long as those means do not violate the FDCPA or other
laws.\11\
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\10\ See 85 FR 76735, 76736 (Nov. 30, 2020).
\11\ See 85 FR 12672, 12672-73 (Mar. 3, 2020).
---------------------------------------------------------------------------
C. Consumer Protection Concerns
As discussed in the November 2020 Final Rule, each year consumers
submit tens of thousands of complaints about debt collection to Federal
regulators.\12\ A significant proportion of those complaints involve
debts that consumers believe they do not owe, which may be because the
debt is being collected in error or because the consumer does not
recognize the debt. Consumers also file thousands of private actions
each year against debt collectors who allegedly have violated the
FDCPA, including many cases alleging violations related to the
validation notice. Since the Bureau began operations in 2011, it has
brought numerous debt collection
[[Page 5768]]
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.\13\ In many of these
cases, the Bureau has obtained 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 Federal Trade Commission
(FTC) and State regulators also have brought numerous additional
actions against debt collectors for violating Federal and State debt
collection and consumer protection laws.
---------------------------------------------------------------------------
\12\ See, e.g., Bureau of Consumer Fin. Prot., Fair Debt
Collection Practices Act: CFPB Annual Report 2020, at 13 (Mar.
2020), https://files.consumerfinance.gov/f/documents/cfpb_fdcpa_annual-report-congress_03-2020.pdf (2020 FDCPA Annual
Report); Fed. Trade Comm'n, 2019 Consumer Sentinel Network Databook,
at 7 (Jan. 2020), https://www.ftc.gov/system/files/documents/reports/consumer-sentinel-network-data-book-2019/consumer_sentinel_network_data_book_2019.pdf; Bureau of Consumer
Fin. Prot., Fair Debt Collection Practices Act: CFPB Annual Report
2019, at 15-16 (Mar. 2019), https://files.consumerfinance.gov/f/documents/cfpb_fdcpa_annual-report-congress_03-2019.pdf (2019 FDCPA
Annual Report); 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; Bureau of Consumer
Fin. Prot., Fair Debt Collection Practices Act: CFPB Annual Report
2018, at 14-15 (Mar. 2018), https://files.consumerfinance.gov/f/documents/cfpb_fdcpa_annual-report-congress_03-2018.pdf (2018 FDCPA
Annual Report); 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
(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.
\13\ See, e.g., Stipulated Final Judgment and Consent Order,
Consumer Fin. Prot. Bureau v. Encore Capital Grp., Inc., 3:20-cv-
01750 (S.D. Cal. Oct. 15, 2020), https://www.courtlistener.com/recap/gov.uscourts.casd.686719/gov.uscourts.casd.686719.5.1.pdf;
Consent Order, In re Asset Recovery Assocs., 2019-BCFP-0009 (Aug.
28, 2019), https://www.consumerfinance.gov/documents/7938/cfpb_asset-recovery-associates_consent-order_2019-08.pdf; Consent
Order, In re Encore Capital Grp., Inc., 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.
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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.\14\ When Congress enacted the FDCPA in 1977, it found that
``[e]xisting laws and procedures for redressing . . . injuries [were]
inadequate to protect consumers.'' \15\ 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.'' \16\
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\14\ 15 U.S.C. 45.
\15\ 15 U.S.C. 1692(b).
\16\ 15 U.S.C. 1692(a).
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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.'' \17\ 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.
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\17\ 15 U.S.C. 1692(e).
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The FDCPA, in general, applies to debt collectors as that term is
defined under the statute. As discussed further in the section-by-
section analysis of Sec. 1006.2(i) of the November 2020 Final Rule,
the FDCPA 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). FDCPA section 803(6) also sets forth several exclusions from
the general definition.
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
have developed since 1977. 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.'' \18\
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\18\ FDCPA section 814(d), 15 U.S.C. 1692l(d).
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III. Summary of the Rulemaking Process
A. The November 2020 Final Rule
The Bureau issued the November 2020 Final Rule to finalize certain
provisions of the proposed rule that the Bureau published in the
Federal Register on May 21, 2019, to amend Regulation F.\19\
Specifically, the November 2020 Final Rule primarily addressed debt
collection communications and related practices by debt collectors. The
November 2020 Final Rule reserved certain sections of Regulation F in
anticipation of this final rule.
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\19\ See 84 FR 23274 (May 21, 2019).
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B. The 2019 Proposal and 2020 Supplemental Proposal
As noted, on May 21, 2019, the Bureau published a proposed rule
(the May 2019 proposal or proposal) in the Federal Register to amend
Regulation F.\20\ The proposal provided a 90-day comment period that
would have closed on August 19, 2019. To allow interested persons more
time to consider and submit their comments, the Bureau issued an
extension of the comment period until September 18, 2019.\21\ In
response to the May 2019 proposal, the Bureau received more than 14,000
comments from consumers, consumer groups, members of Congress, other
government agencies, creditors, debt collectors, industry trade
associations, and others. As discussed below, the Bureau has considered
those comments in deciding to issue this final rule.
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\20\ Id.
\21\ 84 FR 37806 (Aug. 2, 2019).
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As relevant to this final rule, in the May 2019 proposal, the
Bureau proposed to implement and interpret FDCPA section 809(a) and (b)
regarding the information that debt collectors must provide to
consumers at the outset of debt collection communications and debt
collectors' obligations to respond to consumers' disputes and requests
for original-creditor information, including if the consumer obligated
or allegedly obligated to pay the debt has died. The Bureau also
proposed to prohibit debt collectors from bringing or threatening 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. And the Bureau
proposed to prohibit debt collectors from furnishing information
regarding a debt to a consumer reporting agency before communicating
with the consumer about the debt.
On February 21, 2020, the Bureau released a supplemental notice of
proposed rulemaking to amend Regulation F to require debt collectors to
make certain disclosures when collecting time-barred debts (the
February 2020 proposal).\22\ The February 2020 proposal provided a 60-
day comment period that would have closed on May 4, 2020. To allow
interested persons more time to consider and submit their comments, the
Bureau issued two extensions of the comment period, the first until
June 5, 2020, and the second until August 4,
[[Page 5769]]
2020.\23\ In response to the February 2020 proposal, the Bureau
received approximately 90 comments from consumers, consumer groups,
members of Congress, other government agencies, creditors, debt
collectors, industry trade associations, and others. As discussed
below, the Bureau has considered those comments in adopting this final
rule.
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\22\ See 85 FR 12672 (Mar. 3, 2020).
\23\ See 85 FR 17299 (Mar. 27, 2020) (first extension); 85 FR
30890 (May 21, 2020) (second extension).
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C. Consumer Testing
The Bureau has undertaken two rounds of qualitative disclosure
testing and one round of quantitative disclosure testing, all of which
have informed this final rule.
First, as discussed in more detail in the May 2019 proposal, the
Bureau in 2014 contracted with a third-party vendor, Fors Marsh Group
(FMG), to assist with developing, and to conduct qualitative consumer
testing of the model validation notice.\24\ This initial qualitative
testing included focus group testing, cognitive testing, and usability
testing conducted by FMG.\25\ Through the testing, the Bureau sought
insight into consumers' understanding of debt collection protections
and how consumers would interact with the forms if the forms were
incorporated into a final rule. Specific findings from the consumer
testing are discussed in more detail in part V where relevant. In
conjunction with the release of the May 2019 proposal, the Bureau made
available a report prepared by FMG regarding the focus group
testing,\26\ the cognitive testing,\27\ the usability testing,\28\ and
a report prepared by FMG summarizing the focus group testing, cognitive
testing, and usability testing.\29\
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\24\ The Bureau also tested a statement of consumer rights
disclosure, but the Bureau decided not to propose to require debt
collectors to provide such a disclosure to consumers. Instead, the
Bureau proposed in the May 2019 proposal to require certain debt
collectors to provide with the validation information 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 Sec. 1006.34(c)(3)(iv). Because the Bureau did
not propose to require debt collectors to provide consumers with a
statement of consumer rights disclosure, the Bureau did not
summarize testing related to that disclosure in the May 2019
proposal.
\25\ See 84 FR 23274, 23279 (May 21, 2019).
\26\ 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 (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.
\27\ See generally Fors Marsh Grp., Debt Collection Cognitive
Interviews (n.d.), https://files.consumerfinance.gov/f/documents/cfpb_debt-collection_fmg-cognitive-report.pdf (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.
\28\ 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 (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.
\29\ 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 (FMG Summary Report).
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Second, to obtain additional information about consumer
comprehension and decision-making in response to sample debt collection
disclosures relating to time-barred debt, in 2017 the Bureau contracted
with ICF International, Inc. (ICF) to conduct a web survey of
approximately 8,000 individuals possessing a broad range of demographic
characteristics.\30\ This quantitative testing concluded in late
September 2019, and, in conjunction with the release of the February
2020 proposal, the Bureau \31\ and ICF \32\ published detailed reports
summarizing the testing methodology and results. The February 2020
proposal provides an extensive overview of the quantitative
testing.\33\
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\30\ OMB approved the Bureau's request to conduct the survey on
May 7, 2019. See Office of Information & Regulatory Affairs, Office
of Mgmt. & Budget, ICR--OIRA Conclusion, https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=201902-3170-001# (last visited Feb. 18,
2020).
\31\ See Bureau of Consumer Fin. Prot., Disclosure of Time-
Barred Debt and Revival: Findings from the CFPB's Quantitative
Disclosure Testing (Feb. 2020), https://files.consumerfinance.gov/f/documents/cfpb_debt-collection-quantitative-disclosure-testing_report.pdf (CFPB Quantitative Testing Report).
\32\ See ICF Int'l, Inc., Quantitative Survey Testing of Model
Disclosure Clauses and Forms for Debt Collection: Methodology Report
(Jan. 21, 2020), https://files.consumerfinance.gov/f/documents/cfpb_icf_debt-survey_methodology-report.pdf.
\33\ See 85 FR 12672, 12676-77 (Mar. 3, 2020).
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Third, to further evaluate the effectiveness of the model
validation notice, the Bureau contracted with FMG again in 2019 to
conduct an additional round of qualitative testing. Because of the
COVID-19 pandemic, FMG conducted this consumer testing by telephone,
completing 51 one-on-one usability interviews between October 5 and
October 15, 2020. The qualitative testing showed, among other things,
that 80 percent of participants shared positive initial reactions to
the model validation notice and indicated that the information in the
notice was clear and available actions were obvious. In addition, 88
percent of participants rated the overall model validation notice as
``very easy'' or ``easy'' to understand, and no participants rated the
notice as ``difficult'' or ``very difficult'' to understand. Finally,
77 percent of participants answered correctly over 90 percent of the
time when, after reviewing the notice, they were asked to answer
certain questions about information included on the notice. In
conjunction with release of this final rule, the Bureau is making
available a report prepared by FMG regarding the qualitative
testing.\34\
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\34\ See generally Fors Marsh Grp., Consumer Financial
Protection Bureau (CFPB) Usability Testing Report: Model Validation
Notice (Nov. 20, 2020), https://files.consumerfinance.gov/f/documents/cfpb_model-validation-notice_report_2020-12.pdf (November
2020 Qualitative Testing Report).
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D. Other Outreach \35\
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\35\ The preamble to the May 2019 proposal includes a more
thorough discussion of the outreach the Bureau conducted prior to
issuing the proposal. See 84 FR 23274, 23278-80 (May 21, 2019).
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In November 2013, the Bureau began the rulemaking process with the
publication of an Advance Notice of Proposed Rulemaking (ANPRM)
regarding debt collection.\36\ As discussed in the May 2019 proposal,
the ANPRM sought information about a wide variety of both first- and
third-party debt collection practices. The Bureau received more than
23,000 comments in response to the ANPRM, which the Bureau considered
when developing the proposals.
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\36\ 78 FR 67848 (Nov. 12, 2013).
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To better understand the operational costs of debt collection
firms, including law firms, the Bureau also 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).\37\
The Operations Study focused on understanding how debt collection firms
obtain information about delinquent consumer accounts and attempt to
collect on those accounts.
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\37\ 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 (CFPB
Debt Collection Operations Study).
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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
[[Page 5770]]
the Office of Management and Budget (OMB).\38\ 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),\39\ 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 gathered information from the small
entity representatives and made findings and recommendations regarding
the potential compliance costs and other impacts on those entities of
the proposals under consideration. 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.\40\ The Bureau considered these findings and recommendations in
preparing the proposals and this final rule.
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\38\ 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. 857 (1996) (as amended by the Small Business and Work
Opportunity Act of 2007, Public Law. 110-28, tit. VIII, subtit. C,
sec. 8302, 121 Stat. 204 (2007)).
\39\ 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 28, 2016),
https://files.consumerfinance.gov/f/documents/20160727_cfpb_Outline_of_proposals.pdf (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.
\40\ 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 (Small Business Review Panel Report).
---------------------------------------------------------------------------
The Bureau has also met on many occasions with various
stakeholders, including consumer advocates, 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 \41\ and its Request for Information
Regarding the Bureau's Inherited Regulations and Inherited Rulemaking
Authorities; \42\ the Bureau considered these comments in developing
the proposals and this final rule. In addition, the Bureau has engaged
in general outreach, speaking at consumer advocate and industry events
and visiting consumer organizations and industry stakeholders. The
Bureau has provided other regulators with information about the
proposals and this final rule, has sought their input, and has received
feedback that has helped the Bureau to prepare this final rule.
---------------------------------------------------------------------------
\41\ 83 FR 12286 (Mar. 21, 2018).
\42\ 83 FR 12881 (Mar. 26, 2018).
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Under the Dodd-Frank Act, the Bureau is required to conduct an
assessment of significant rules within five years of the rule's
effective date. The Bureau anticipates that this final rule may be
significant and therefore may require an assessment within five years
of the rule's effective date. The Bureau is preparing now for this
possible assessment. Specifically, the Bureau is considering how best
to obtain information now to serve as a baseline for evaluation of the
costs, benefits, and other effects of the final rule. The Bureau
expects to collect data and other information from consumers, debt
collectors, and other stakeholders to understand whether the rule is
achieving its goals under the FDCPA and the Dodd-Frank Act, and to help
the Bureau measure the costs and benefits of the rule. Topics of data
collection could include: whether consumers are better able to identify
a debt when receiving validation information after the rule compared to
before the rule; whether debt collectors are receiving higher or lower
rates of consumer disputes after the rule compared to before the rule;
whether greater clarity about FDCPA requirements helps reduce
litigation related to the validation notice after the rule compared to
before the rule; and costs of the rule, both anticipated and
unexpected, for consumers or for industry. The Bureau expects to
conduct outreach in 2021 to explore how best to obtain such data,
including potentially through surveying consumers or firms or by
collecting operational data.
IV. Legal Authority
The Bureau is issuing this final rule primarily 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.\43\ 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.'' \44\ 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.\45\ ``Federal consumer financial
law'' includes title X of the Dodd-Frank Act and the FDCPA.\46\ No
provisions in this final rule are based on section 1031 of the Dodd-
Frank Act.\47\
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\43\ 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 rulemaking authority to the Bureau, no agency had authority
to issue substantive rules with respect to the collection of debts
by debt collectors under the FDCPA, but 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
provisions, are discussed in part V.
\44\ 12 U.S.C. 5512(a).
\45\ 12 U.S.C. 5512(b)(1).
\46\ 12 U.S.C. 5481(12)(H), (14).
\47\ The Bureau proposed to rely on its Dodd-Frank Act section
1031 authority (relating to unfair, deceptive, or abusive acts or
practices in connection with consumer financial products or
services) to support two interventions in the May 2019 proposal. The
Bureau has not finalized any provisions of this final rule (or, as
discussed in the November 2020 Final Rule, of that final rule),
pursuant to its authority under Dodd-Frank Act section 1031.
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These and other authorities are discussed in greater detail in
parts IV.A through C below. Part IV.A discusses the Bureau's authority
under sections 806 through 808 of the FDCPA. Parts IV.B through C
discuss the Bureau's relevant authorities under the Dodd-Frank Act.
A. FDCPA Sections 806 Through 808
As discussed in part V, the Bureau is finalizing several
provisions, in whole or in part, pursuant to its authority to interpret
FDCPA sections 806 through 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.
The November 2020 Final Rule provides an overview of how the Bureau
interprets 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
[[Page 5771]]
debt.'' \48\ Then, ``[w]ithout limiting the general application of the
foregoing,'' it lists six examples of conduct that violate that
section.\49\ 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.'' \50\ Then, ``[w]ithout limiting the general application of the
foregoing,'' section 807 lists 16 examples of conduct that violate that
section.\51\ Finally, FDCPA section 808 prohibits a debt collector from
``us[ing] unfair or unconscionable means to collect or attempt to
collect any debt.'' \52\ Then, ``[w]ithout limiting the general
application of the foregoing,'' FDCPA section 808 lists eight examples
of conduct that violate that section.\53\ Consistent with the approach
in the November 2020 Final Rule \54\ and as proposed in the May 2019
proposal,\55\ 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
decisions.\56\
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\48\ 15 U.S.C. 1692d.
\49\ 15 U.S.C. 1692d(1)-(6).
\50\ 15 U.S.C. 1692e.
\51\ 15 U.S.C. 1692e(1)-(16).
\52\ 15 U.S.C. 1692f.
\53\ 15 U.S.C. 1692f(1)-(8).
\54\ See 85 FR 76734, 76738 (Nov. 30, 2020).
\55\ 84 FR 23274, 23281-82 (May 21, 2019).
\56\ Where the Bureau prescribes 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.
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In particular, the Bureau notes that, 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,\57\ as are opinions by courts that have
addressed this issue.\58\ Accordingly, the Bureau may interpret the
general provisions of FDCPA sections 806 to 808 to prohibit conduct
that the specific examples in FDCPA sections 806 through 808 do not
address if the conduct violates the general prohibitions. In addition,
the Bureau uses the specific examples to inform its understanding of
the general prohibitions. The Bureau also interprets FDCPA sections 806
through 808 in light of the significant body of existing court
decisions interpreting those sections, including, where applicable,
cases discussing the collection of time-barred debt.\59\ Finally,
consistent with the majority of courts, the Bureau interprets FDCPA
sections 806 through 808 to incorporate an objective,
``unsophisticated'' or ``least sophisticated'' consumer standard.\60\
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\57\ See, e.g., S. Rep. No. 382, 95th Cong., 1st Sess. 2, 4
(1977), reprinted in 1977 U.S.C.C.A.N. 1695, 1698 (S. Rep. 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).
\58\ 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.'').
\59\ Id. See, e.g., Holzman v. Malcolm S. Gerald & Assocs., 920
F.3d 1264 (11th Cir. 2019); Tatis v. Allied Interstate, LLC, 882
F.3d 422 (3d Cir. 2018); Pantoja v. Portfolio Recovery Assocs., LLC,
852 F.3d 679 (7th Cir. 2017), cert. denied, 138 S. Ct. 736 (2018);
Daugherty v. Convergent Outsourcing Inc., 836 F.3d 507 (5th Cir.
2016); Buchanan v. Northland Grp., Inc., 776 F.3d 393 (6th Cir.
2015); McMahon v. LVNV Funding, LLC, 744 F.3d 1010, 1020 (7th Cir.
2014).
\60\ 85 FR 76734, 76740 (Nov. 30, 2020); 84 FR 23274, 23282-83
(May 21, 2019).
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B. 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.'' \61\ 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.
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.'' \62\ The Bureau
is finalizing Sec. Sec. 1006.34 and 1006.38 based in part on its
authority under Dodd-Frank Act section 1032.
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\61\ 12 U.S.C. 5532(a).
\62\ 12 U.S.C. 5532(c).
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C. Other Authorities Under the Dodd-Frank Act
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.'' \63\ ``Federal consumer financial
laws'' include the FDCPA and title X of the Dodd-Frank Act.\64\ 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).\65\ See part VII for a
discussion of the Bureau's standards for rulemaking under Dodd-Frank
Act section 1022(b)(2).
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\63\ 12 U.S.C. 5512(b)(1).
\64\ 12 U.S.C. 5481(14).
\65\ 12 U.S.C. 5512(b)(2).
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V. Section-by-Section Analysis
Subpart A--General
Section 1006.1 Authority, Purpose, and Coverage
1(c) Coverage
In the November 2020 Final Rule, the Bureau adopted Sec.
1006.1(c)(1) to specify that, except as provided in Sec. 1006.108 and
appendix A, Regulation F 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)).\66\ The Bureau also noted that
it was not finalizing, as part of the November 2020 Final Rule,
proposed Sec. 1006.1(c)(2), which provided that certain provisions of
Regulation F applied to debt collectors only when they were collecting
consumer financial product or service debt, as defined in Sec.
1006.2(f). The Bureau explained that it was not finalizing Sec.
1006.1(c)(2) as part of the November 2020 Final Rule because all of the
provisions of that final rule apply to debt collectors as defined in
Sec. 1006.2(i). The Bureau nevertheless reserved Sec. 1006.1(c)(2) so
that the Bureau could clarify which provisions of this final rule, if
any, apply to debt collectors only if they are collecting debt related
to a consumer financial product or service.
---------------------------------------------------------------------------
\66\ 85 FR 76734, 76742 (Nov. 30, 2020).
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For the reasons discussed in the section-by-section analysis of
Sec. 1006.34, two provisions of that section (Sec. 1006.34(c)(2)(iii)
and (3)(iv)) apply to debt collectors only if they are collecting debt
related to a consumer
[[Page 5772]]
financial produce or service as defined in Sec. 1006.2(f). Therefore,
the Bureau is finalizing Sec. 1006.1(c)(2) to provide that certain
provisions of Regulation F apply to debt collectors only if they are
collecting debt related to a consumer financial product or service as
defined in Sec. 1006.2(f), and to specify that those provisions are
Sec. 1006.34(c)(2)(iii) and (3)(iv).
Section 1006.2 Definitions
2(e) Consumer
FDCPA section 803(3) defines a consumer as any natural person
obligated or allegedly obligated to pay any debt.\67\ The Bureau
proposed Sec. 1006.2(e) to implement this definition and to interpret
it to include a deceased natural person who is obligated or allegedly
obligated to pay a debt.\68\ The Bureau explained that this
interpretation would ensure that individuals trying to resolve a
deceased consumer's debts have the same legal right to receive the
validation notice, and to dispute the debt and request information
about the original creditor, as the deceased consumer would have had.
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\67\ 15 U.S.C. 1692a(3).
\68\ See 84 FR 23274, 23288 (May 21, 2019).
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As the Bureau noted in the November 2020 Final Rule, the Bureau
received a number of comments regarding its proposal to interpret the
term consumer to include deceased natural persons. The Bureau also
noted that it had proposed that interpretation, in large part, to
facilitate delivery of validation notices under proposed Sec. 1006.34
if the consumer obligated, or allegedly obligated, on the debt has
died. Further, the Bureau noted that it planned to address comments
received regarding that interpretation, and to determine whether to
finalize that interpretation, as part of this final rule. Thus, as
finalized in the November 2020 Final Rule, Sec. 1006.2(e) provides
that the term consumer means any natural person obligated or allegedly
obligated to pay any debt.\69\ The Bureau now addresses comments
received regarding its proposal to interpret the definition to include
deceased natural persons.
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\69\ For the reasons discussed in the November 2020 Final Rule,
Sec. 1006.2(e) as finalized in that rule also provides that, for
purposes of Sec. 1006.6, the term consumer includes the persons
described in Sec. 1006.6(a). To account for any revisions adopted
in this final rule, it also specifies that the Bureau may further
define the term in Regulation F to clarify its application when the
consumer is deceased. See 85 FR 76734, 76744-45, 76888 (Nov. 30,
2020).
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Several commenters supported the Bureau's proposed interpretation.
One industry commenter stated that, in the decedent debt context, the
person acting on behalf of a deceased consumer's estate should have the
same rights regarding validation notices and disputes as the consumer
would have had if the consumer were still living. Another industry
commenter reported that many debt collectors currently attempt to treat
deceased consumers as ``consumers'' under the FDCPA and explained that
the proposal would provide additional clarity that would benefit both
consumers and debt collectors in resolving the debts of deceased
consumers. A group of consumer advocates supported clarifying the
rights of executors, administrators, and personal representatives
regarding validation notices and disputes. However, as discussed below,
these consumer advocate commenters opposed the proposed interpretation
and suggested a different way to address the issue.
Other commenters opposed interpreting the term consumer to include
deceased natural persons who are obligated or allegedly obligated to
pay a debt. One industry commenter asserted that the proposed
interpretation would serve no purpose because deceased consumers lacked
privacy interests. A trade group commenter stated that no evidence of
confusion existed in the decedent debt context, and that the Bureau's
interpretation would expand the class of individuals entitled to sue
debt collectors for violations of the FDCPA and the final rule.
Finally, a group of consumer advocates suggested that the Bureau's
interpretation was unnecessary because proposed comments 34(a)(1)-1 and
38-1 would clarify that a person who is authorized to act on behalf of
the deceased consumer's estate operates as the consumer for purposes of
Sec. Sec. 1006.34(a)(1) and 1006.38.\70\ These commenters also stated
that, if the Bureau were attempting to change the class of individuals
who may bring civil actions against debt collectors, the FDCPA already
allows any ``person'' to bring such claims.
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\70\ See the section-by-section analyses of Sec. Sec. 1006.34
and 1006.38.
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For the reasons discussed below, the Bureau is revising Sec.
1006.2(e), as set forth in the November 2020 Final Rule, to clarify
that the definition of consumer includes deceased natural persons. As
explained in the May 2019 proposal, 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).\71\ Because the definition of
consumer in FDCPA section 803(3) is silent with respect to deceased
consumers, other FDCPA provisions that refer to a debt collector's
obligations to a consumer lack clarity in the decedent debt context.
For example, FDCPA provisions requiring debt collectors to provide
validation information, and to respond to disputes and requests for
original-creditor information, do not address situations in which the
person obligated or allegedly obligated to pay the debt is deceased.
Uncertainty surrounding these provisions increases the risk of consumer
harm in the decedent debt context. Specifically, without validation
information and an opportunity to dispute the debt, individuals trying
to resolve debts in a deceased consumer's estate will lack information
needed to determine whether they are being asked to pay the right debt,
in the right amount, and to the right debt collector, and,
consequently, whether they should assert dispute rights.
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\71\ See 84 FR 23274, 23288 (May 21, 2019).
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Accordingly, to increase clarity and to decrease the risk of
consumer harm, the Bureau is revising Sec. 1006.2(e) to provide that
the term consumer means any natural person, whether living or deceased,
obligated or allegedly obligated to pay any debt. The Bureau also is
revising Sec. 1006.2(e) to delete the statement that the Bureau may
further define the term to clarify its application when the consumer is
deceased, since this final rule contains that further definition.\72\
Relatedly, the Bureau is finalizing the commentary to Sec. Sec.
1006.34(a)(1) and 1006.38 that clarifies 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 Sec. Sec. 1006.34(a)(1) and 1006.38.
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\72\ In the proposal, the Bureau explained that its
interpretation was ``consistent with a modern trend in the law that
favors recognizing, as a default, the continued existence of a
natural person after death.'' 84 FR 23274, 23288 (May 21, 2019).
Consumer advocates pointed out that the authority cited for this
proposition comes from contexts other than the FDCPA. But these
commenters do not explain why this fact undermines the existence of
the trend described by the Bureau.
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Regarding the comment that deceased consumers have no privacy
rights, the Bureau disagrees. In its Policy Statement on Decedent Debt,
the FTC prohibited debt collectors from openly referring to a deceased
consumer's debts in communications with third parties, instead adopting
an approach that ``balance[d] the legitimate needs of the collector
with the privacy interests of
[[Page 5773]]
the decedent.'' \73\ In the November 2020 Final Rule, the Bureau took a
similar approach regarding location communications for decedent
debt.\74\
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\73\ Fed. Trade Comm'n, Statement of Policy Regarding
Communications in Connection with the Collection of Decedents' Debts
at 44921 (July 27, 2011), https://www.ftc.gov/sites/default/files/documents/federal_register_notices/statement-policy-regarding-communications-connection-collection-decedents-debts-policy-statement/110720fdcpa.pdf (FTC Policy Statement on Decedent Debt).
\74\ See 85 FR 76734, 76797-00, 76890, 76900 (Nov. 30, 2020).
---------------------------------------------------------------------------
Moreover, interpreting the term consumer in Sec. 1006.2(e) to
include deceased natural persons is supported by more than concern for
a decedent's privacy; it also clarifies debt collector's obligations to
a consumer and, in turn, to those authorized to act on the consumer's
behalf, if the consumer has died. This includes clarifying a debt
collector's obligations under the FDCPA's provisions, as implemented in
this final rule and in the November 2020 Final Rule, regarding
validation information and disputes and requests for original-creditor
information, which help to ensure that consumers are not paying the
wrong debt, in the wrong amount, to the wrong debt collector.
This interpretation also clarifies the application of Sec.
1006.22(f)(4), which the Bureau adopted in the November 2020 Final Rule
to prohibit debt collectors from communicating or attempting to
communicate with a person in connection with the collection of a debt
through a social media platform if the communication or attempt to
communicate is viewable by the general public or the person's social
media contacts.\75\ In adopting that provision, the Bureau discussed
that a consumer advocate commenter had stated that the Bureau should
broaden the prohibition to apply to deceased consumers, such that debt
collectors would be prohibited from posting publicly about a deceased
consumer's alleged debt on the consumer's social media page. The
consumer advocate commenter stated that a debt collector's only reason
for doing so would be to pressure surviving relatives to pay the debt,
either to protect the deceased consumer's reputation or out of a sense
of moral obligation.\76\
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\75\ See id. at 76836-39, 76892.
\76\ See id. at 76836-39.
---------------------------------------------------------------------------
In finalizing Sec. 1006.22(f)(4) in the November 2020 Final Rule,
Bureau noted that the prohibition applied to communications and
attempts to communicate with ``a person,'' and that person, as defined
in Sec. 1006.2(k), includes a consumer. The Bureau again noted that it
had received a number of comments regarding its proposal to interpret
the term consumer to include deceased natural persons and that it would
address such comments in this final rule. In determining to revise
Sec. 1006.2(e) to include a deceased natural person who is obligated
or allegedly obligated to pay a debt, the Bureau thus also clarifies
that the prohibition in Sec. 1006.22(f)(4) includes deceased
consumers.
The Bureau disagrees with the industry commenter that there is no
evidence of confusion about the definition of consumer in the decedent
debt context. As explained above, the FDCPA's current lack of clarity
in the decedent debt context creates uncertainty in several situations
arising during the collection of debts belonging to deceased consumers.
Therefore, the Bureau determines that additional clarity will improve
the debt collection system for all parties.
Nor does Sec. 1006.2(e) expand the class of potential plaintiffs
who may bring suit under the FDCPA and Regulation F, as an industry
commenter alleged. The civil liability provision of the FDCPA already
creates liability for violations committed against any person.\77\ As
noted in the proposal, the trend in the law has been to recognize, as a
default, the continued existence of a natural person after death for
purposes of bringing civil actions, particularly for remedial statutes
like the FDCPA.\78\ This commenter did not explain how the Bureau's
interpretation would result in a lawsuit by someone other than a
``person'' under the statute.
---------------------------------------------------------------------------
\77\ 15 U.S.C. 1692k.
\78\ See 84 FR 23274, 23288 (May 21, 2019).
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Finally, the Bureau disagrees, as suggested by certain commenters,
that the commentary to Sec. Sec. 1006.34(a)(1) and 1006.38 (final
comments 34(a)(1)-1 and 38-3) provide adequate clarity without
interpreting the term consumer to include deceased natural persons. In
fact, interpreting the term consumer to include deceased natural
persons is a necessary predicate to provide that the persons identified
in those comments operate as the consumer for purposes of the
requirements relating to validation information, disputes, and requests
for original-creditor information.
Commenters raised additional issues related to Sec. 1006.2(e). A
few industry commenters suggested that the Bureau's proposed
interpretation was inconsistent with the Bureau's mortgage servicing
rules regarding successors in interest. One trade group commenter
stated that allowing any individual authorized to act on behalf of a
deceased consumer's estate to meet Regulation F's definition of
consumer under Sec. 1006.2(e) will complicate and potentially impede
the existing successor in interest process under Regulations X and Z.
The commenter explained that, under proposed comment 34(a)(1)-1,
mortgage servicers who are also debt collectors under Regulation F
would have to send validation information to the person authorized to
act on behalf of the deceased consumer's estate but would not be able
to send foreclosure-related disclosures required under State law to the
same person, unless that person had assumed ownership of the
obligation. The commenter also suggested that, under proposed comment
38-1, debt collectors would be required to focus resources on verifying
the identify of an individual asserting to be a person authorized to
act on behalf of the deceased consumer's estate, which would take away
from legitimate efforts to respond to disputes and requests for
original-creditor information.
Another trade group commenter stated that the clarification in
proposed comment 34(a)(1)-1 to send the validation notice to the person
authorized to act on behalf of the deceased consumer's estate if the
debt collector knows or should know that the consumer is deceased
would, unlike the Bureau's mortgage servicing rules, appear to create
an affirmative obligation for mortgage servicers to track down
information about potential successors in interest and cloud
requirements for mortgage servicers under Regulation X. For this
reason, a third trade group commenter suggested that, if a required
notice must be sent and no individual has come forward as a potential
or confirmed successor in interest, the Bureau should permit mortgage
servicers to address a validation notice to the deceased consumer or
``the estate of'' the deceased consumer rather than require a search
for an individual to whom to address the notice.
As the Bureau has previously explained, while many mortgage
servicers are not subject to the FDCPA, mortgage servicers that
acquired a mortgage loan at the time that it was in default may be
subject to the FDCPA with respect to that mortgage loan.\79\ As
discussed below, the Bureau concludes that including a deceased natural
person who is obligated or allegedly obligated to pay a debt within the
definition of consumer under Sec. 1006.2(e) is not inconsistent with
the Bureau's mortgage servicing rules on successors in interest.
[[Page 5774]]
Although one commenter asserted that finalizing this definition as
proposed would complicate and potentially impede the existing successor
in interest process, the commenter failed to explain why that would be
the case and the Bureau does not believe that to be the case.
---------------------------------------------------------------------------
\79\ See 85 FR 76734, 76758 (Nov. 30, 2020); 81 FR 71977, 71978
(Oct. 19, 2016).
---------------------------------------------------------------------------
Regarding delivery of validation information, as discussed below,
comment 34(a)(1)-1 clarifies that, if a debt collector knows or should
know that a consumer is deceased, and if the debt collector has not
previously provided the validation information to the deceased
consumer, then in such circumstances, to comply with Sec.
1006.34(a)(1), a debt collector must provide the validation information
to an individual whom the debt collector identifies by name and who is
authorized to act on behalf of the deceased consumer's estate.\80\ A
person who is authorized to act on behalf of a deceased consumer's
estate may include the executor, administrator, or personal
representative. However, as discussed in the November 2020 Final Rule,
for purposes of Regulations X and Z, a successor in interest is, in
general, a person to whom 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, is transferred under specified circumstances including,
for example, after a consumer's death or as part of a divorce.\81\
Therefore, a person who is authorized to act on behalf of a deceased
consumer's estate for purposes of Regulation F may or may not also be a
successor in interest under Regulations X and Z, depending on whether
an ownership interest in a property securing a mortgage loan or a
dwelling securing a closed-end consumer credit transaction is
transferred to that person under the circumstances specified in
Regulations X and Z.\82\
---------------------------------------------------------------------------
\80\ See the section-by-section analysis of Sec. 1006.34(a)(1).
\81\ See 85 FR 76734, 76758-59 (Nov. 30, 2020). See also 12 CFR
1024.31, 1026.2(a)(27)(i). A confirmed successor in interest, in
turn, means a successor in interest once a mortgage servicer has
confirmed the successor in interest's identity and ownership
interest in the property that secures the mortgage loan or in the
dwelling. See 12 CFR 1024.31, 1026.2(a)(27)(ii).
\82\ 12 CFR 1024.31, 1026.2(a)(27).
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Comment 34(a)(1)-1 provides debt collectors clarity regarding to
whom the validation information must be provided in the narrow
circumstance in which the debt collector knows or should know that a
consumer is deceased and the debt collector has not previously provided
the validation information to the deceased consumer. According to the
comment, under these circumstances, a debt collector who is collecting
the debt of a deceased consumer must determine who is authorized to act
on behalf of a deceased consumer's estate. These efforts, however, do
not create an affirmative obligation under the Bureau's mortgage
servicing rule for a mortgage servicer that is subject to the FDCPA
with respect to a mortgage loan to seek out potential successors in
interest within the meaning of the mortgage servicing rules. Under the
mortgage servicing rules, a mortgage servicer is not required to
conduct a search for potential successors in interest if the mortgage
servicer has not received actual notice of their existence.\83\ If, in
the course of determining who is authorized to act on behalf of a
deceased consumer's estate for purposes of Sec. 1006.34(a)(1), a
mortgage servicer receives actual notice of the existence of a
potential successor in interest, the mortgage servicer must, as
required under Regulation X, maintain policies and procedures
reasonably designed to ensure that the servicer can retain this
information and promptly facilitate communication with the potential
successor in interest.\84\ However, because a mortgage servicer that is
subject to the FDCPA with respect to a mortgage loan may comply with
both this final rule and the applicable successor in interest
provisions under Regulations X and Z, the Bureau concludes there is no
conflict with the mortgage servicing rules. Additionally, nothing in
this final rule is intended to alter the successor in interest
provisions in Regulations X and Z or to impose additional requirements
under Regulations X and Z.
---------------------------------------------------------------------------
\83\ 12 CFR 1024.38(b)(1)(vi); comment 38(b)(1)(vi)-1.
\84\ Id. The general servicing policies, procedures, and
requirements in 12 CFR 1024.38 do not apply to a mortgage servicer
that qualifies as a small servicer pursuant to 12 CFR 1026.41(e).
See 12 CFR 1024.30(b)(1).
---------------------------------------------------------------------------
In response to the commenter's concern regarding the burdens under
comment 38-1 of determining who is authorized to act on behalf of a
deceased consumer's estate before responding to a dispute or request
for original-creditor information, the potential burdens associated
with responding to such incoming disputes and requests will be
significantly reduced once a debt collector has procedures in place to
make that threshold determination or has already made that
determination for purposes of providing the validation information as
described in comment 34(a)(1)-1.
The Bureau declines to adopt the suggestion to allow mortgage
servicers to address a validation notice to the deceased consumer or to
``the estate of'' the deceased consumer. As discussed in the proposal,
the Bureau shares the view of the FTC, which stated in its Policy
Statement on Decedent Debt that individuals who lack the authority to
resolve the estate but who wish to be helpful are likely to open
communications addressed to the decedent's estate, or to an unnamed
executor or administrator, which makes such communications
insufficiently targeted to a consumer with whom the debt collector may
generally discuss the debt.\85\ The Bureau, therefore, shares the view
of the FTC that ``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.'' \86\
Accordingly, comment 34(a)(1)-1 specifies that 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.
---------------------------------------------------------------------------
\85\ See 84 FR 23274, 23334 (May 21, 2019).
\86\ FTC Policy Statement on Decedent Debt, supra note 73, at
44920.
---------------------------------------------------------------------------
A group of consumer advocates stated that certain other provisions
of the Bureau's proposal, such as Sec. 1006.14(e)'s prohibition on
publishing lists of consumers who allegedly refuse to pay debts and
Sec. 1006.18(b)(1)(iv)'s prohibition on falsely representing or
implying that the consumer committed any crime or other conduct in
order to disgrace the consumer, should apply to deceased consumers.
But, these commenters claimed, other provisions, like Sec.
1006.6(b)(1)'s restrictions on communicating at inconvenient times or
places, were nonsensical as applied to deceased consumers. Therefore,
these commenters argued, the Bureau's interpretation in proposed Sec.
1006.2(e) was overbroad.
The Bureau acknowledges that there may be certain provisions in the
November 2020 Final Rule and in this final rule that refer to a
consumer that simply will be inapplicable in the context of a deceased
consumer.\87\ Nevertheless, as consumer advocates acknowledged, other
provisions that
[[Page 5775]]
refer to a consumer will apply to deceased consumers. For example, as
discussed above, interpreting the term consumer in Sec. 1006.2(e) to
include deceased natural persons means that, as applied to Sec.
1006.22(f)(4), debt collectors are prohibited from posting publicly
about a deceased consumer's alleged debt on a deceased consumer's
public-facing social media page. In situations that are currently
unclear, such as delivery of validation information, the final rule
adopts commentary clarifying debt collectors' obligations.
---------------------------------------------------------------------------
\87\ For example, Sec. 1006.6(b) restricts, among other things,
the times at which debt collectors can communicate or attempt to
communicate with consumers. See 85 FR 76734, 76889 (Nov. 30, 2020).
To the extent that ``communicate'' includes having a conversation,
the Bureau believes it is obvious that this prohibition is simply
inapplicable in the case of a deceased consumer (but does apply to
having a conversation with the executor or administrator of the
consumer's estate).
---------------------------------------------------------------------------
This group of consumer advocates also recommended that the Bureau
require debt collectors to provide a validation notice to the person
authorized to act on behalf of the deceased consumer's estate even if
validation information already was provided to the consumer. These
commenters also asked the Bureau to provide that the validation period
starts from the date the person authorized to act on behalf of the
deceased consumer's estate receives the validation notice, and to
require debt collectors to respond to disputes and requests for
original-creditor information submitted by this person, even if a
response already was provided to the consumer. The Bureau declines to
adopt these suggestions because the Bureau finds that, in the scenario
described, the debt collector has already satisfied the debt
collector's obligations to the consumer as set forth in FDCPA section
809 and Sec. Sec. 1006.34 and 1006.38. Depending on the facts, the
debt collector could be required to provide a validation notice or
dispute response to the person authorized to act on behalf of the
deceased consumer's estate,\88\ but the Bureau declines to require debt
collectors to do so in all cases. Nevertheless, the Bureau notes that
debt collectors who voluntarily provide validation notices after a
consumer dies (as some industry commenters reported is done), and who,
in doing so, start a new validation period, do not thereby violate the
FDCPA or Regulation F.
---------------------------------------------------------------------------
\88\ See the section-by-section analysis of Sec. 1006.34(b)(5).
---------------------------------------------------------------------------
For the reasons discussed above, 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 is finalizing Sec.
1006.2(e) as proposed 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.
2(f) Consumer Financial Product or Service
As discussed in the November 2020 Final Rule, the Bureau proposed
Sec. 1006.2(f) to define consumer financial product or service debt to
mean any debt related to any consumer financial product or service, as
consumer financial product or service is defined in section 1002(5) of
the Dodd-Frank Act.\89\ As also discussed in the November 2020 Final
Rule, the Bureau did not finalize Sec. 1006.2(f) as part of that
rulemaking because the Bureau did not finalize in that rulemaking any
provisions for which the definition in proposed Sec. 1006.2(f) would
have been relevant.
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\89\ 85 FR 76734, 76745 (Nov. 30, 2020).
---------------------------------------------------------------------------
For the reasons discussed in the section-by-section analyses of
Sec. Sec. 1006.1(c) and 1006.34, the Bureau is adopting in this final
rule two provisions (Sec. 1006.34(c)(2)(iii) and (3)(iv)) that apply
to debt collectors only if they are collecting debt related to a
consumer financial product or service. This includes, for example, debt
collectors collecting debts related to consumer mortgage loans or
credit cards.\90\ To facilitate compliance with those provisions, the
Bureau is adopting Sec. 1006.2(f) to provide that consumer financial
product or service has the meaning in section 1002(5) of the Dodd-Frank
Act (12 U.S.C. 5481(5)).
---------------------------------------------------------------------------
\90\ See 84 FR 23274, 23286 (May 21, 2019).
---------------------------------------------------------------------------
The Bureau notes that it originally proposed Sec. 1006.2(f) to
define the term ``consumer financial product or service debt.''
However, because the relevant defined term in the Dodd-Frank Act is
``consumer financial product or service,'' and because certain
commenters observed that including two definitions of the term ``debt''
in the rule would be confusing, the Bureau is finalizing Sec.
1006.2(f) to provide that the defined term in the rule is ``consumer
financial product or service'' and that the term has the same meaning
given to it in section 1002(5) of the Dodd-Frank Act.
Subpart B--Rules for FDCPA Debt Collectors
Section 1006.26 Collection of Time-Barred Debts
The May 2019 proposal and the February 2020 proposal both addressed
the collection of time-barred debt. In the May 2019 proposal, the
Bureau proposed to define several terms (proposed Sec. 1006.26(a)) and
to prohibit debt collectors from bringing or threatening to bring legal
actions against consumers to collect certain time-barred debts
(proposed Sec. 1006.26(b)). In the February 2020 proposal, the Bureau
proposed to require debt collectors to provide disclosures if
collecting certain time-barred debts (proposed Sec. 1006.26(c)). The
February 2020 proposal also included model language and forms that debt
collectors could use to comply with the proposed disclosure
requirements. In the November 2020 Final Rule, the Bureau noted that it
planned to address its proposals regarding time-barred debt in this
final rule, and the Bureau reserved Sec. 1006.26 for that purpose.
After considering the comments received in response to both the May
2019 and February 2020 proposals, the Bureau is now finalizing proposed
Sec. 1006.26(a) and (b) with modifications as described below. The
Bureau is not finalizing proposed Sec. 1006.26(c).
26(a) Definitions
Proposed Sec. 1006.26(a) defined two terms not defined in the
FDCPA: Statute of limitations and time-barred debt. The Bureau proposed
to define these terms to facilitate compliance with proposed Sec.
1006.26(b) and (c). As discussed below, the Bureau is finalizing Sec.
1006.26(a) as proposed. The Bureau is finalizing Sec. 1006.26(a)
pursuant to its authority under FDCPA section 814(d) to prescribe rules
with respect to the collection of debts by debt collectors.
26(a)(1) Statute of Limitations
Proposed Sec. 1006.26(a)(1) defined 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.\91\
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\91\ See 84 FR 23274, 23327-28 (May 21, 2019).
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Statutes of limitation, which typically are established by State
law, provide time limits for bringing suit on legal claims. As the
Bureau explained in the May 2019 proposal, statutes of limitation serve
several purposes.\92\ First, statutes of limitations advance a
defendant's interest in repose. That is, they reflect a legislative
judgment that it is ``unjust to fail to put the adversary on notice to
defend within a specified period of time.'' \93\ Second, statutes of
limitations eliminate stale claims. That is, they protect defendants
and the courts from having to deal with cases in which ``the search for
truth may be seriously impaired by the loss of evidence, whether by
death or disappearance of witnesses, fading
[[Page 5776]]
memories, disappearance of documents, or otherwise.'' \94\ Third,
statutes of limitations provide ``certainty about a plaintiff's
opportunity for recovery and a defendant's potential liabilities.''
\95\ For debt collection claims, the length of the applicable statute
of limitations often varies by State and, within each State, by debt
type. Although most statutes of limitations applicable to debt
collection claims are between three and six years, some are as long as
15 years.
---------------------------------------------------------------------------
\92\ See generally Rotella v. Wood, 528 U.S. 549, 555 (2000)
(identifying ``the basic policies of all limitations provisions'' as
``repose, elimination of stale claims, and certainty'').
\93\ United States v. Kubrick, 444 U.S. 111, 117 (1979).
\94\ Id.
\95\ Young v. United States, 535 U.S. 43, 47 (2002) (quoting
Rotella, 528 U.S. at 555).
---------------------------------------------------------------------------
Several commenters addressed proposed Sec. 1006.26(a)(1). One
industry commenter confirmed that the proposed definition of statute of
limitations comported with debt collectors' understanding of the term.
A number of other industry commenters requested that the Bureau modify
the definition to account for the fact that it can be challenging to
determine the applicable statute of limitations in certain
circumstances. For example, two industry commenters requested that the
Bureau clarify that, in determining the applicable statute of
limitations, a debt collector need only conduct a reasonable
investigation based on objectively ascertainable facts, and that a debt
collector would only be charged with knowing that the statute of
limitations has expired if the law is clearly established. The
commenters also requested that the Bureau more specifically define
certain elements of the term statute of limitations to lessen the
burden on debt collectors of determining whether a debt is time barred.
For example, they suggested defining ``applicable law'' as the law of
the jurisdiction where the consumer resides or is believed to reside at
the time collections begin, or the law of the jurisdiction in which the
consumer signed any underlying contract. Commenters suggested that
these changes would make it easier for a debt collector to determine
the statute of limitations applicable to a particular debt while
protecting a debt collector from liability when it is difficult
determine the exact date on which a debt becomes time barred.
The Bureau is finalizing Sec. 1006.26(a)(1) as proposed. As
industry commenters confirmed, the definition of statute of limitations
in Sec. 1006.26(a)(1) is consistent with debt collectors'
understanding of the term. The Bureau declines to modify the definition
to identify the type of investigation a debt collector must or should
undertake to ascertain the applicable statute of limitations. The
Bureau also declines to define the term ``applicable law'' in the
manner requested by commenters. The Bureau recognizes that, in some
cases, it can be challenging and costly for a debt collector to
determine what statute of limitations applies to a legal action against
the consumer to collect a particular debt, and that, in some cases, the
commenters' suggestions could reduce those challenges and costs. The
Bureau declines, however, to address the challenges and costs
associated with determining whether a debt is time barred by modifying
the definition of statute of limitations, a term with a meaning widely
understood by debt collectors, or by defining new terms. Comments
relating to the difficulty of determining whether a debt is time barred
are discussed further in the section-by-section analysis of Sec.
1006.26(b).
26(a)(2) Time-Barred Debt
Proposed Sec. 1006.26(a)(2) defined the term time-barred debt to
mean a debt for which the applicable statute of limitations has
expired.\96\
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\96\ See 84 FR 23274, 23328 (May 21, 2019).
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As the Bureau explained in the May 2019 proposal, 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.\97\ Others do so to assess whether they can sue to
collect the debt, which may affect their collection strategy. In
addition, the information that debt buyers generally receive when
bidding on and purchasing debts, and the information that other debt
collectors generally receive at placement, may allow them to determine
whether the applicable statute of limitations has expired.\98\
---------------------------------------------------------------------------
\97\ 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).
\98\ See Fed. Trade Comm'n, The Structure and Practices of the
Debt Buying Industry, at 49 (Jan. 2013), https://www.ftc.gov/sites/default/files/documents/reports/structure-and-practices-debt-buying-industry/debtbuyingreport.pdf (FTC Debt Buying Report) (``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.''). Similarly, the majority of respondents to the
Bureau's Debt Collection Operations Study reported always or often
receiving certain information and documentation that may be relevant
to determining whether a debt is time barred, such as debt balance
at charge off, account agreement documentation, and billing
statements. See CFPB Debt Collection Operations Study, supra note
37, at 23.
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Several commenters addressed proposed Sec. 1006.26(a)(2). An
industry commenter confirmed that the proposed definition comported
with debt collectors' understanding of the term. Two other industry
commenters expressed concern that the term time-barred debt may imply
that a debt collector has no right at all to collect the debt, whereas
in most jurisdictions a debt's time-barred status only limits the debt
collector's right to recover on the debt through a lawsuit. Several
industry commenters expressed concern that the proposal seemed to
contemplate that a debt is a single amount that becomes time barred at
a single moment in time and noted that not all debts operate in that
manner. For example, these commenters stated that an installment loan
could become time barred on a rolling basis depending on when each
installment was due. In addition, according to some commenters, a legal
action to collect a debt may be based on more than one legal theory or
involve more than one cause of action, and each theory or cause of
action may be subject to a different statute of limitations. Similarly,
according to some commenters, certain secured debts may be subject to
more than one method of suit and more than one statute of limitations.
For example, these commenters asserted, in some States a mortgagee may
choose whether to pursue a remedy at law on the note, a remedy in
equity on the mortgage, or both, and the statute of limitations
applicable to these claims may differ. Relatedly, one industry
commenter asked the Bureau to clarify that debt collectors are not
prohibited from taking legal action to enforce a lien even if a claim
on the underlying obligation is time barred. Alternatively, the
commenter asked the Bureau to clarify that the requirements of proposed
Sec. 1006.26 would apply only when all causes of action associated
with the underlying note and with the security instrument are time
barred.\99\
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\99\ Another commenter seeking clarification on the scope of
proposed Sec. 1006.26(b) asserted that in rem enforcement of a
security instrument is not inherently debt collection. The Bureau
notes that Sec. 1006.26, like the rest of this final rule, applies
only to FDCPA debt collectors. The Supreme Court recently held that
a business engaged in no more than nonjudicial foreclosure
proceedings is not an FDCPA debt collector, except for the limited
purpose of FDCPA section 808(6). See Obduskey v. McCarthy & Holthus
LLP, 139 S. Ct. 1029 (2019). FDCPA section 808(6) specifically
prohibits taking or threatening to take any nonjudicial action in
certain circumstances, such as where there is no present right to
possession through an enforceable security instrument.
---------------------------------------------------------------------------
The Bureau is finalizing Sec. 1006.26(a)(2) as proposed. As
industry commenters confirmed, the definition of time-barred debt in
Sec. 1006.26(a)(2) is consistent with debt collectors'
[[Page 5777]]
understanding of the term. In response to commenters' concerns that the
term time-barred debt might imply that a debt collector has no right to
collect the debt, the Bureau notes that, in most jurisdictions, as
commenters observed and as is discussed in the section-by-section
analysis of Sec. 1006.26(b), a debt is not extinguished when the
statute of limitations expires. Rather, in these jurisdictions, a debt
collector still may collect the debt using non-litigation means, such
as telephone calls and letters, and the Bureau's use of the term time-
barred debt neither changes that fact nor is meant to imply otherwise.
With respect to industry commenters' concern about debts for which
multiple statutes of limitation may be relevant, the Bureau notes that
a debt is a time-barred debt under Sec. 1006.26(a)(2) if the
applicable statute of limitations has expired. The applicable statute
of limitations depends on the specific legal action the debt collector
takes or represents that it will take. For some debts, such as certain
installment loans and secured debts, it may be the case that one claim
associated with a debt is time barred while another claim associated
with the debt is not. In such a case, the prohibitions in Sec.
1006.26(b) apply to the time-barred claim only.
26(b) Legal Actions and Threats of Legal Actions Prohibited
The Bureau proposed Sec. 1006.26(b) to prohibit a debt collector
from bringing or threatening 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.\100\ In response to comments, the Bureau is
finalizing proposed Sec. 1006.26(b) with two principal changes. First,
the Bureau is not adopting the proposed knows-or-should-know standard;
instead, a debt collector may violate final Sec. 1006.26(b) even if
the debt collector neither knew nor should have known that a debt was
time barred. Second, consistent with the Supreme Court's decision in
Midland Funding, LLC v. Johnson, the final rule clarifies that the
prohibitions in Sec. 1006.26(b) do not apply to proofs of claim filed
in bankruptcy proceedings.\101\
---------------------------------------------------------------------------
\100\ See 84 FR 23274, 23328-29 (May 21, 2019).
\101\ 137 S. Ct. 1407 (2017).
---------------------------------------------------------------------------
Prohibitions
As the Bureau explained in the May 2019 proposal, in most States
the 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.\102\ 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 if the
consumer proves the expiration of the statute of limitations as an
affirmative defense, the court will dismiss the suit.
---------------------------------------------------------------------------
\102\ See generally Midland Funding, LLC v. Johnson, 137 S. Ct.
1407, 1411-12 (2017) (noting that under ``the law of many States . .
. a creditor has the right to payment of a debt even after the
limitations period expires,'' and collecting State laws). In
Mississippi and Wisconsin, however, 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.'').
---------------------------------------------------------------------------
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 avoid
litigation. In some jurisdictions, a consumer's payment on or
acknowledgement of a debt can revive the debt collector's right to sue
for the entire amount, opening the consumer to new legal
liability.\103\ Similarly, suits on time-barred debts may lead to
judgments against consumers on claims for which those consumers had
meritorious defenses, including defenses based on the statute of
limitations. Few consumers who are 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.\104\
---------------------------------------------------------------------------
\103\ Revival extinguishes the consumer's right to raise the
expiration of the statute of limitations as an affirmative defense
to litigation; that is, it revives the debt collector's right to sue
to collect the debt. Although State revival laws vary, there are
generally several circumstances in which revival occurs. First, in
some States, a consumer's partial payment on a time-barred debt
revives the debt collector's right to sue. Second, in some States, a
consumer's written acknowledgement of a time-barred debt revives the
debt collector's right to sue. Third, a consumer's oral
acknowledgement of a time-barred debt may revive the debt
collector's right to sue in some States. See, e.g., Lima v. Schmidt,
595 So. 2d 624, 631 (La. 1992) (``Our courts have consistently held
that renunciation must be clear, direct, and absolute and manifested
by words or actions of the party in whose favor prescription has
run.'') (citations omitted); 22 Tenn. Pract. Contract Law and
Practice Sec. 12:88 (rev. Aug. 2020) (``[T]he defendant may revive
a plaintiff's remedy that has been barred by the statute of
limitations. This event can occur either when the defendant
expressly promises to pay a debt or when the defendant acknowledges
the debt and expresses a willingness to pay it . . . . The
expression of a defendant's willingness to pay might be implied from
the words or action of a debtor . . . .'') (citations and internal
quotation marks omitted).
\104\ See FTC Debt Buying Report, supra note 98, 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 37, at 18 (observing that respondents reported obtaining
default judgments in 60 to 90 percent of their filed suits); cf.
Kimber v. Fed. Fin. Corp., 668 F. Supp. 1480, 1478 (M.D. Ala. 1987)
(``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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Consumer and consumer advocate commenters generally supported the
prohibitions in proposed Sec. 1006.26(b). Many of these commenters
also argued that, to prevent deception, the Bureau should prohibit the
collection of time-barred debt altogether, even though the Bureau did
not propose such a prohibition in the May 2019 proposal or the February
2020 proposal. The Bureau certainly supports measures to prevent
deception because of the harm it causes to consumers. However, the
Bureau concludes that is not necessary to ban the collection of time-
barred debt to prevent potential deception. As discussed in the
February 2020 proposal, the Bureau's quantitative testing generally
indicates that disclosures, in certain situations, can be effective in
curing the potential deception associated with the collection of time-
barred debt.\105\ The Bureau concludes that a prohibition on the
collection of time-barred debt would impose significant burden on debt
collectors to identify such debts and would decrease the value of time-
barred debts to little or nothing; a debt has little or no value if the
owner cannot collect the debt either in litigation or outside of
litigation. The Bureau declines to impose such extraordinarily large
costs because much less costly measures--namely, disclosures--can be
[[Page 5778]]
effective in preventing potential deception.
---------------------------------------------------------------------------
\105\ See 85 FR 12672, 12677-79 (Mar. 3, 2020).
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Moreover, the Bureau emphasizes that prohibiting the collection of
time-barred debt when doing so is unnecessary to prevent potential
deception is inconsistent with the First Amendment limitations on the
Bureau's authority to ban commercial speech. Courts have held that a
debt collector who asks a consumer to pay a debt is engaging in
commercial speech.\106\ Prohibiting the collection of time-barred debt
therefore would restrict commercial speech. The Supreme Court has held
that restrictions on commercial speech are permissible when they: (1)
Are supported by a substantial government interest; (2) directly
advance that interest; and (3) are no more extensive than necessary to
serve that interest.\107\ If the potential deception associated with
the collection of time-barred debt can be cured by a disclosure, then
prohibiting the collection of time-barred debt would impose a
restriction that is more extensive than necessary.\108\ As noted above,
the Bureau's quantitative testing generally indicates that, in certain
situations involving the collection of time-barred debt, disclosures
can be effective in curing potential deception. Therefore, the Bureau
declines to finalize a prohibition on the collection of time-barred
debt.
---------------------------------------------------------------------------
\106\ See, e.g., ACA Int'l v. Healey, 457 F. Supp. 3d 17, 25-26
(D. Mass. 2020); Stover v. Fingerhut Direct Mktg., 709 F. Supp. 2d
473, 479 (S.D. W.Va. 2009).
\107\ See Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n,
447 U.S. 557, 566 (1980).
\108\ In re R.M.J., 455 U.S. 191, 203 (1982); see also Pearson
v. Shalala, 164 F.3d 650 (D.C. Cir. 1999).
---------------------------------------------------------------------------
In addition to consumers and consumer advocates, several industry
commenters, Federal agency staff, and one local government commenter
expressed support for the proposed prohibitions. Commenters who
supported the proposed prohibitions asserted that suits and threats of
suit on time-barred debts may induce consumers to make payments they
otherwise would not make. Some consumer advocate commenters noted that
these payments can revive the debt collector's right to sue in certain
jurisdictions. Additionally, consumer advocate commenters asserted that
consumers often assume that the mere filing of a lawsuit means that
they owe the debt, that the amount owed is accurately stated, and that
the debt collector has the legal right to collect the debt, whereas in
fact the debt collector may lack support for its claims. These
commenters also asserted that consumers generally lack the knowledge
and resources to defend their rights in court, and, as a consequence,
many claims result in default judgments on debts that were not legally
enforceable. Consumer advocate commenters also provided anecdotes and
pointed to recent enforcement actions to show that debt collectors
continue to sue and threaten to sue on time-barred debt.\109\ One
industry commenter who supported elements of proposed Sec. 1006.26(b)
acknowledged that proposed Sec. 1006.26(b) is consistent with long-
standing FDCPA case law.
---------------------------------------------------------------------------
\109\ See, e.g., Consent Order ]] 65-69, In re Encore Capital
Grp., Inc., No. 2015-CFPB-0022 (Sept. 9, 2015), https://files.consumerfinance.gov/f/201509_cfpb_consent-order-encore-capital-group.pdf; Consent Order ]] 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; see also Complaint ]] 30-35, Bureau of
Consumer Fin. Prot. v. Encore Capital Grp., Inc., No. 2020CV1750
(S.D. Cal. Sept. 8, 2020), https://www.consumerfinance.gov/documents/9167/cfpb_encore-capital-group-et-al_complaint_2020-08.pdf.
---------------------------------------------------------------------------
Several industry commenters who opposed proposed Sec. 1006.26(b)
argued that the Bureau should not prohibit suits and threats of suit on
time-barred debt because, in most jurisdictions, expiration of the
statute of limitations does not prohibit a debt collector from bringing
suit but rather provides the consumer with an affirmative defense to
liability. According to these commenters, proposed Sec. 1006.26(b)
would effectively preempt State affirmative defense laws by making
expiration of the statute of limitations a total bar to suit, thereby
interfering with debt collectors' right to legal recourse under State
law. Relatedly, an industry commenter argued that State courts are
capable of addressing situations in which a debt collector sues to
collect a time-barred debt, including by dismissing the debt
collector's claim and awarding sanctions if appropriate. Another
industry commenter asserted that consumers should be responsible for
tracking the legal obligations associated with their debts, and that it
would be unduly burdensome to require debt collectors to determine
whether a debt is time barred, particularly for debt collectors who are
small businesses.
Some industry commenters argued that the Bureau lacks the authority
to prohibit suits and threats of suit on time-barred debts. For
example, several industry commenters argued that proposed Sec.
1006.26(b) exceeds the Bureau's authority because, in their view,
nothing in the FDCPA permits the Bureau to preempt State laws relating
to debt collection or access to courts or establishes a Federal role in
determining State law defenses. Similarly, one industry commenter
asserted that proposed Sec. 1006.26(b) contradicts the Federal Rules
of Civil Procedure and State-law equivalents and abridges a debt
collector's right to petition the courts. The commenter pointed to
Federal Rule of Civil Procedure 11, pursuant to which an attorney's
claims, defenses, and other legal contentions must be warranted by
existing law or by a nonfrivolous argument for extending, modifying, or
reversing existing law or for establishing new law. According to this
commenter, the proposed prohibitions conflict with Rule 11 and its
equivalents by discouraging debt collectors from filing legitimate
lawsuits that argue in good faith for the modification or reversal of
existing law.
Final Sec. 1006.26(b) prohibits a debt collector from bringing or
threatening to bring a legal action against a consumer to collect a
time-barred debt. A debt collector who sues or threatens to sue a
consumer to collect a time-barred debt explicitly or implicitly
misrepresents to the consumer that the debt is legally enforceable, and
that misrepresentation is material to consumers because it may affect
their conduct with regard to the collection of that debt, including
whether to pay it.\110\ The Bureau's consumer testing suggests that
consumers often are uncertain about their rights concerning time-barred
debt.\111\ Consumers sued or threatened with suit on a time-barred debt
generally do not recognize that the debt is time barred, that time-
barred debts are unenforceable in court, or that they must raise the
expiration of the statute of limitations as an affirmative defense.
---------------------------------------------------------------------------
\110\ 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.'').
\111\ See FMG Focus Group Report, supra note 26, at 9-10; FMG
Cognitive Report, supra note 27, at 36-37; FMG Summary Report, supra
note 29, at 35-36; see also Fed. Trade Comm'n, Repairing a Broken
System: Protecting Consumers in Debt Collection Litigation and
Arbitration at iii, 26 (July 2010), https://www.ftc.gov/sites/default/files/documents/reports/federal-trade-commission-bureau-consumer-protection-staff-report-repairing-broken-system-protecting/debtcollectionreport.pdf (FTC Litigation Report).
---------------------------------------------------------------------------
The prohibitions in final Sec. 1006.26(b) generally are consistent
with the current state of the law. 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.\112\ The FTC
[[Page 5779]]
also has concluded that the FDCPA bars actual and threatened suits on
time-barred debt.\113\ In addition, the prohibitions in final Sec.
1006.26(b) generally are consistent with current industry practice. For
example, a number of industry commenters stated they do not sue or
threaten to sue on time-barred debt as a matter of policy, and one
trade group commenter stated that it requires its members to refrain
from suing or threatening to sue on time-barred debts.
---------------------------------------------------------------------------
\112\ 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) (per curiam); Goins v. JBC & Assocs.,
P.C., 352 F. Supp. 2d 262, 273 (D. Conn. 2005); Kimber, 668 F. Supp.
at 1487-89.
\113\ FTC Litigation Report, supra note 111, at 23.
---------------------------------------------------------------------------
The Bureau recognizes that, in most jurisdictions, expiration of
the statute of limitations provides the consumer with an affirmative
defense to liability, but it does not bar a debt collector from
bringing suit. The Bureau concludes, however, that consumers are
unlikely to know whether the applicable statute of limitations has
expired or that the expiration of the statute of limitations provides
an affirmative defense. Suits and threats of suit on time-barred debts
therefore imply to the least sophisticated consumer not simply that the
debt collector may sue or has sued the consumer but also that the debt
collector's claim is legally enforceable. For time-barred debts, this
is misleading because expiration of the statute of limitations provides
the consumer with a complete defense.\114\ Accordingly, the Bureau
concludes that bringing or threatening to bring a legal action to
collect a time-barred debt is a deceptive practice under FDCPA section
807 even if expiration of the statute of limitations is an affirmative
defense rather than a categorical bar to suit.
---------------------------------------------------------------------------
\114\ See, e.g., Goins, 352 F. Supp. 2d at 272 (holding that,
although the statute of limitations is an affirmative defense,
threatening to bring suit on time-barred debt ``can at best be
described as a `misleading' representation, in violation of Sec.
1692e,'' because the statute of limitations is a complete defense to
any suit).
---------------------------------------------------------------------------
As explained below, the Bureau is finalizing Sec. 1006.26(b) as an
interpretation of FDCPA section 807's prohibition on deception; such an
interpretation is squarely within the Bureau's authority under FDCPA
section 814(d) to prescribe rules with respect to the collection of
debts by debt collectors. Contrary to commenters' claims, Sec.
1006.26(b) does not preempt State laws relating to when a debt
collector may bring a lawsuit in State court. Rather, it provides that
a debt collector who sues or threatens to sue a consumer to collect a
time-barred debt violates the FDCPA even if applicable State law
permits the suit. In addition, contrary to commenters' assertions,
Sec. 1006.26(b) does not exceed the Bureau's authority by regulating
access to the courts or litigation activities. Debt collectors have
repeatedly argued that they cannot be held liable under the FDCPA for
actions taken in litigation because, for example, the United States
Constitution allows debt collectors to petition the courts, or because
the Federal Rules of Civil Procedure (or their State equivalents) allow
debt collectors to argue for the modification or reversal of existing
law. Many courts have rejected such arguments, generally reasoning that
the FDCPA unquestionably applies to litigation activities.\115\ The
fact that expiration of a State's statute of limitations may not
extinguish a debt under State law or bar a lawsuit in State court
unless an affirmative defense is raised and proven does not render the
FDCPA's prohibition on using deceptive or misleading representations or
means in debt collection inapplicable. There is nothing unusual about
the proposition that some behavior permitted by State law may
nevertheless violate Federal law. Moreover, nothing in Sec. 1006.26(b)
prohibits a debt collector from bringing a legal action against a
consumer in which the debt collector argues for an extension,
modification, or reversal of existing law or the establishment of new
law--including a legal action in which the debt collector argues that a
debt is not time barred. Debt collectors remain free to do so. But a
debt collector who brings such an action may violate Sec. 1006.26(b)
if a court ultimately determines that the debt was time barred.
---------------------------------------------------------------------------
\115\ See, e.g., Aguilar v. LVNV Funding LLC, No. 2:19-cv-105,
2019 WL 3369706, at *3-4 (M.D. Fla. July 26, 2019); Tobing v. Parker
McCay, P.A., No. 3:17-cv-00474, 2018 WL 2002799, at *9 (D.N.J. Apr.
30, 2018); Consumer Fin. Prot. Bureau v. Frederick J. Hanna &
Assocs., P.C., 114 F. Supp. 3d 1342, 1359-61 (N.D. Ga. 2015);
Johnson v. Riddle, 305 F.3d 1107, 1118 (10th Cir. 2002).
---------------------------------------------------------------------------
Liability Standard
Proposed Sec. 1006.26(b) would have prohibited a debt collector
from bringing or threatening to bring a legal action against a consumer
to collect a time-barred debt only if the debt collector knew or should
have known the debt was time barred.
In proposing a knows-or-should-know standard, the Bureau explained
that determining whether a debt is time barred may involve analyzing
which State law applies, which statute of limitations applies, when the
statute of limitations began to run, and whether the statute of
limitations has been tolled or reset. In many cases, a debt collector
will know, or will be able to 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, such as if the case law in a State is unclear as to
which statute of limitations applies to a particular type of debt. The
proposed knows-or-should-know standard was meant to address this
concern by not imposing liability on a debt collector if it had no way
of knowing that a particular debt was time barred. But the Bureau also
acknowledged that it sometimes may be difficult to determine whether a
knows-or-should-know standard has been met. Such uncertainty could
increase litigation costs and make it difficult for consumers and
government agencies to bring actions against debt collectors. To
address this concern, the Bureau sought comment on 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.
Industry commenters generally did not support a strict liability
standard. These commenters generally agreed that it can be difficult
for a debt collector to determine whether a debt is time barred and
asserted that holding debt collectors strictly liable for good faith
errors would be unduly harsh. These commenters stated, for example,
that determining the applicable statute of limitations and whether it
has expired may require analyzing a variety of factual and legal
questions specific to the debt, and that, in many cases, a debt
collector may reach the wrong conclusion even after undertaking a
reasonable investigation and analysis. Industry commenters asserted
that debt collectors may be unable to reliably determine the statute of
limitations before filing suit because the law is unclear, because some
information relevant to the analysis may be unavailable, or both. Some
industry commenters also asserted that the analysis may change over
time. For example, according to these commenters, a consumer's decision
to move to a different State after signing a loan agreement could
affect a debt collector's analysis of which State law applies and
whether the statute of limitations has been tolled. As another example,
an industry commenter stated that, in certain jurisdictions, the
statute of limitations applicable to mortgage debt is in flux because
of unprecedented access by consumers to loss mitigation and an increase
in bankruptcy filings in
[[Page 5780]]
the wake of the foreclosure crisis. Several industry commenters also
expressed concern that debt collectors who are not attorneys may have
particular difficulty making an accurate time-barred debt
determination. For these reasons, industry commenters asserted that a
strict liability standard, which would leave no room for error, would
expose debt collectors to liability even though it would be challenging
or very costly in many circumstances to determine if a debt is time
barred.
Some industry commenters supported the proposed knows-or-should-
know standard. These commenters generally asserted that the proposed
standard would help debt collectors avoid liability for good-faith
mistakes in determining whether a debt is time barred--something
industry commenters argued is important given the complexity and
uncertainty of certain time-barred debt analyses. One industry
commenter asserted that the proposed standard also would adequately
protect consumers from harm. However, several industry commenters who
expressed general support for the proposed standard also asked the
Bureau to provide additional guidance, including examples of
circumstances in which a debt collector neither knows nor should know
that a debt is time barred.
Not all industry commenters supported the proposed knows-or-should-
know standard. Some industry commenters argued that the proposed
standard was vague and subjective and could increase litigation risk
rather than mitigating it. Other industry commenters asked the Bureau
to clarify that the knows-or-should-know standard depends on the
specific understanding and sophistication of the particular debt
collector. They asserted, for example, that what an attorney debt
collector knows or should know about a debt's time-barred status may
differ from what a non-attorney debt collector knows or should know.
Some industry commenters who opposed the proposed knows-or-should-
know standard offered alternative standards. For example, several
industry commenters recommended that the Bureau finalize a reasonable
investigation standard such that a debt collector who sued or
threatened to sue to collect a time-barred debt would not be liable if
the debt collector undertook a reasonable investigation before doing
so. Similarly, some industry commenters argued that a debt collector
who acts in good faith should not be liable for suits and threats of
suit on time-barred debts. Other industry commenters suggested that the
Bureau finalize a liability standard akin to qualified immunity such
that a debt collector who sued or threatened to sue to collect a time-
barred debt would not be liable unless the applicable statute of
limitations was clearly established. Other industry commenters
suggested that the Bureau finalize an actual knowledge standard such
that a debt collector who sued or threatened to sue on a time-barred
debt would be liable only if the debt collector knew the debt was time
barred.
Some commenters suggested that the Bureau finalize various safe
harbors for debt collectors. For example, industry commenters
recommended safe harbors for debt collectors collecting debts of a
certain age and for debt collectors who rely on information provided by
the creditor. Other industry commenters suggested that a debt collector
who maintains and follows reasonable procedures for determining whether
a debt is time barred should receive a safe harbor from liability in
the event that the debt collector inadvertently sues or threatens to
sue on a time-barred debt. One industry commenter requested that the
Bureau specifically confirm that FDCPA section 813(c)'s bona fide error
defense would apply to violations of Sec. 1006.26(b).
Other commenters, including consumers, consumer advocates,
academics, some members of Congress, a group of State Attorneys
General, and several local governments, urged the Bureau to adopt a
strict liability standard. Although some of these commenters
acknowledged that determining whether a debt is time barred can be
complicated,\116\ others argued that determining whether a debt is time
barred is relatively straightforward in most cases. One commenter
suggested that, if the Bureau finalizes the proposed knows-or-should-
know standard, the Bureau should clarify that in most cases a debt
collector will know (or should know) whether the statute of limitations
has run because in most cases debt collectors have the necessary
information to make the determination.
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\116\ A group of academic commenters challenged the Bureau's
assertion that debt buyers generally receive enough information to
determine whether a debt is time barred. These commenters noted that
fewer than half of respondents to the Bureau's industry survey
reported receiving account agreement documentation or billing
statements, information that the commenters believed would help a
debt collector calculate the applicable statute of limitations and
whether it has expired.
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Some consumer advocate commenters who argued for a strict liability
standard stated that it would incentivize debt collectors to determine
whether a debt is time barred before threatening or filing suit. Some
consumer advocate commenters suggested that this would help reduce the
consumer protection risks associated with the collection of time-barred
debt, including the risk that consumers may be unable to adequately
protect their rights in court and the risk that consumers may make a
payment on the debt under the misimpression that the debt is legally
enforceable, which could revive the debt collector's right to sue. Some
commenters expressed concern that the proposed knows-or-should-know
standard would not adequately incentivize debt collectors to determine
the time-barred status of debts. Around two dozen members of Congress
asserted that finalizing a knows-or-should-know standard without
additional protections could encourage willful ignorance on the part of
a debt collector about the time-barred status of a debt. A group of
State Attorneys General and some consumer advocate commenters similarly
argued that a knows-or-should-know standard would promote willful
ignorance by debt collectors.
A number of commenters, including consumer advocate commenters and
a group of State Attorneys General, advocated a strict liability
standard because, in their view, debt collectors generally have more
resources and expertise and better access to information than
consumers. These commenters generally asserted that it would often be
difficult for a consumer to establish that a debt was time barred and
that the debt collector knew or should have known that fact.
Many of these commenters also argued that the proposed knows-or-
should-know standard was inconsistent with the FDCPA (which some
commenters described as a strict liability statute) and with FDCPA
section 807's prohibition on deception (which does not include a
knowledge element). Some commenters pointed out that, because FDCPA
section 813(c) provides debt collectors with a bona fide error defense
to liability in certain circumstances, a strict liability standard
would not expose debt collectors to undue liability. Commenters also
argued that the proposed knows-or-should-know standard was inconsistent
with case law imposing or implying a strict liability standard when
evaluating claims that a debt collector sued or threatened to sue to
collect a time-barred debt. Several commenters agreed with the Bureau
that a strict liability standard generally would reduce ambiguity and
be easier to enforce than the proposed knows-or-should-know standard.
Federal government agency staff encouraged the Bureau to consider
[[Page 5781]]
further whether a knows-or-should-know standard would place an
unnecessary burden on law enforcement agencies.
The Bureau is not finalizing the proposed knows-or-should-know
standard and is instead finalizing a strict liability standard.
Although determining whether a debt is time barred can be challenging
or costly in certain circumstances, the Bureau concludes that the
proposed knows-or-should-know standard is generally inconsistent with
FDCPA section 807, which does not include an exception or exclusion for
debt collectors whose deceptive statements are unintentional or for
whom ensuring that a statement is not deceptive is burdensome.\117\ The
Bureau also concludes that a strict liability standard is more
consistent with FDCPA section 807's prohibition on deception, as well
as case law imposing or implying such a standard when evaluating claims
under FDCPA section 807 generally and claims related to suits and
threats of suit on time-barred debt specifically.\118\
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\117\ For the same reasons, the Bureau concludes that the
alternative standards proposed by industry commenters--including,
for example, an actual knowledge standard, a reasonable-
investigation standard, or a clearly-established-law standard--are
generally inconsistent with FDCPA section 807.
\118\ See, e.g., Pantoja, v. Portfolio Recovery Assocs., LLC,
852 F.3d 679, 683 (7th Cir. 2017); Buchanan v. Northland Grp., Inc.,
776 F.3d 393, 399 (6th Cir. 2015); Phillips v. Asset Acceptance,
LLC, 736 F.3d 1076, 1083-84 (7th Cir. 2013); Clark v. Capital Credit
& Collection Servs., 460 F.3d 1162, 1176 (9th Cir. 2006); Gearing v.
Check Brokerage Corp., 233 F.3d 469, 472 (7th Cir. 2000).
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Moreover, the Bureau notes that a knows-or-should-know standard
could, in some circumstances, shift the risk that a claim is deceptive
from debt collectors to consumers. As explained above, suits and
threats of suit on time-barred debt can cause consumer harm. In a case
in which it is difficult or costly to determine whether a debt is time
barred, a knows-or-should-know standard could allow debt collectors to
avoid liability for causing such harm. In other consumer protection
contexts, courts and the FTC have recognized that an advertiser who
makes an unsubstantiated claim may be liable for deception even if the
cost of substantiating the claim is high or prohibitively
expensive.\119\ The Bureau's decision to finalize a strict liability
standard is generally consistent with this principle.
---------------------------------------------------------------------------
\119\ See, e.g., POM Wonderful, LLC v. FTC, 777 F.3d 478, 497
(D.C. Cir. 2015) (``We acknowledge that RCTs [i.e., randomized
clinical trials] may be costly. . . . Yet if the cost of an RCT
proves prohibitive, petitioners can choose to specify a lower level
of substantiation for their claims. As the Commission observed, the
need for RCTs is driven by the claims petitioners have chosen to
make.'') (internal brackets and quotation marks omitted); In re POM
Wonderful LLC, 2013 WL 268926, at *50 (F.T.C. Jan. 16, 2013)
(rejecting argument that an advertiser may ``make particular claims
that go beyond the substantiation it possesses and then ask the
Commission to excuse the inadequacy of its support by asserting that
[the] advertiser did the best it could because the proper
substantiation for the actual claim would be too expensive''); In re
Kroger Co., 98 F.T.C. 639, 737 (1981) (``Where the demands of the
purse require such compromises, the advertiser must generally limit
the claims it makes for its data or make appropriate disclosures to
insure proper consumer understanding of the survey's results.'').
---------------------------------------------------------------------------
The Bureau emphasizes that, although a strict liability standard
might create some risk for debt collectors if a debt's time-barred
status is unclear, debt collectors have multiple ways to manage such
risk. In particular, a debt collector can avoid liability under Sec.
1006.26(b) by confirming that the statute of limitations has not
expired before bringing or threatening to bring a legal action.
Similarly, a debt collector who is ultimately unable to determine with
certainty whether a debt is time barred can avoid liability under Sec.
1006.26(b) by refraining from bringing or threatening to bring a legal
action while, in most States, continuing with non-litigation collection
activities. Moreover, a debt collector who brings or threatens to bring
a legal action against a consumer to collect a time-barred debt may,
depending upon the reason for the debt collector's error, have a
defense to civil liability under FDCPA section 813 if the debt
collector shows by a preponderance of evidence that the violation was
not intentional and resulted from a bona fide error notwithstanding the
maintenance of procedures reasonably adapted to avoid any such
error.\120\ For these reasons, the Bureau concludes that finalizing a
strict liability standard under Sec. 1006.26(b) does not pose an undue
risk of liability for debt collectors, even in cases in which a debt
collector is unable to determine with certainty whether a debt is time
barred.
---------------------------------------------------------------------------
\120\ See Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich
LPA, 559 U.S. 573 (2010) (holding that bona fide error defense is
not available when FDCPA violation arises from a debt collector's
mistaken interpretation of FDCPA's legal requirements but noting
that bona fide error defense is available when FDCPA violation
arises from certain other types of errors).
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Requests for Clarification
Several commenters asked the Bureau to clarify the scope of
proposed Sec. 1006.26(b)'s prohibitions.\121\ Two industry commenters
suggested that the term ``legal action'' is unclear and could be
interpreted to encompass any action in any court of law or equity.
These commenters suggested replacing ``legal action'' with ``lawsuit,''
asserting that, although ``legal action'' and ``lawsuit'' have
overlapping meanings, ``lawsuit'' has a narrower connotation that
excludes certain legal actions, such as bankruptcy proceedings.
Alternatively, these commenters argued that, if the Bureau declines to
change the term legal action, the prohibitions in proposed Sec.
1006.26(b) should be adjusted to specifically exclude certain types of
legal actions, such as garnishment actions, probate actions, and the
filing of proofs of claim in bankruptcy proceedings.\122\ Another
commenter asked the Bureau to clarify that, for purposes of proposed
Sec. 1006.26(b), the term ``legal action'' does not include ``non-
original complaints,'' such as amended complaints, supplemental
complaints, complaints re-filed after a prior dismissal without
prejudice, post-judgment court filings, or post-judgment communications
(such as executions or garnishments).
---------------------------------------------------------------------------
\121\ Commenters also asked the Bureau to adopt a number of
interventions that the Bureau did not propose, such as a prohibition
on revival and a prohibition on perpetual tolling, which commenters
asserted prevents a statute of limitations from ever expiring in
certain circumstances. The Bureau did not propose these
interventions and it is not finalizing them.
\122\ A consumer advocate commenter argued that the rule should
expressly prohibit filing a bankruptcy proof of claim to recover a
time-barred debt.
---------------------------------------------------------------------------
Final Sec. 1006.26(b) uses the term ``legal action.'' In Midland
Funding, LLC v. Johnson, the Supreme Court held that filing a proof of
claim on a time-barred debt in a bankruptcy proceeding does not violate
the FDCPA sections 807 or 808.\123\ Consistent with Midland, the final
rule clarifies that Sec. 1006.26(b) does not prohibit the filing of
proofs of claim in a bankruptcy proceeding. The Bureau does not see a
basis to categorically exclude other types of legal actions, such as
garnishment and probate actions, from the prohibitions in Sec.
1006.26(b). No other section of the FDCPA pertaining to legal actions
contains a similar exclusion, and the commenters did not explain why
they believe an exclusion is merited here.
---------------------------------------------------------------------------
\123\ 137 S. Ct. 1407 (2017).
---------------------------------------------------------------------------
At least one industry commenter asked the Bureau to clarify the
types of actions and statements that qualify as a threat of legal
action or that could be interpreted by a consumer as a threat of legal
action. The Bureau declines to do so at this time. Whether a particular
action or statement constitutes a threat of legal action depends on the
facts and circumstances of the particular case. Nevertheless, the
Bureau notes that Sec. 1006.26(b) prohibits not only explicit
[[Page 5782]]
threats of legal action but also implicit ones.
For the reasons discussed above, the Bureau is finalizing Sec.
1006.26(b), which provides that a debt collector must not bring or
threaten to bring a legal action against a consumer to collect a time-
barred debt. Section 1006.26(b) also states that these prohibitions do
not apply to proofs of claim filed in connection with a bankruptcy
proceeding. The Bureau is finalizing Sec. 1006.26(b) as an
interpretation of FDCPA section 807. 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 time-barred
debts because such suits and threats of suit explicitly or implicitly
misrepresent, and 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.\124\ The Bureau's interpretation of FDCPA section 807 is
generally consistent with well-established case law holding that suits
and threats of suits on time-barred debt violate FDCPA section
807.\125\
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\124\ A consumer advocate commenter requested that the Bureau
clarify that a debt collector who brings or threatens to bring a
legal action against a consumer to collect a time-barred debt also
violates the Dodd-Frank Act. The Bureau is finalizing Sec.
1006.26(b) as an interpretation of FDCPA section 807 only.
\125\ 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.
---------------------------------------------------------------------------
Proposed Provision Not Finalized
In the February 2020 proposal, the Bureau proposed to require a
debt collector collecting a debt that the debt collector knows or
should know is a time-barred debt to provide time-barred debt
disclosures and, if applicable, revival disclosures (proposed Sec.
1006.26(c)(1) and (2)).\126\ The Bureau proposed to require these
disclosures in the debt collector's initial communication with the
consumer, on any validation notice, and in certain situations if the
debt became time barred during collections. The February 2020 proposal
also included, among other things, model forms and language a debt
collector could have used to comply with the proposed disclosure
requirements (proposed Model Forms B-4 through B-7), and it provided a
safe harbor to a debt collector who used the model forms or language
(proposed Sec. 1006.26(c)(3)). In support of proposed Sec.
1006.26(c), the Bureau cited, among other things, the results of its
quantitative testing survey.\127\
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\126\ Specifically, proposed Sec. 1006.26(c)(1) would have
required a debt collector collecting a debt that the debt collector
knows or should know is a time-barred debt to disclose (i) that the
law limits how long a consumer can be sued for a debt and that,
because of the age of the debt, the debt collector will not sue the
consumer to collect it; and (ii) if, under applicable law, the debt
collector's right to bring a legal action against the consumer can
be revived, then the fact that revival can occur and the
circumstances in which it can occur. 85 FR 12672, 12696 (Mar. 3,
2020).
\127\ See id. at 12678-79.
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Although some commenters expressed general support for the idea of
addressing the risk of deception associated with the collection of
time-barred debts by requiring time-barred debt and revival
disclosures, many commenters opposed the Bureau's specific proposal.
According to industry commenters, the proposal would have imposed a
significant burden on debt collectors by requiring them to conduct
time-barred debt and revival analyses for each debt in collection.
These commenters also reported that they would face a significant risk
of liability given uncertainty about the statute of limitations and
revival law in at least some States. Industry commenters stated that
most debt collectors lack the legal training to determine whether a
debt is time barred or the circumstances in which it can be revived. To
comply with the disclosure requirements, these commenters asserted that
debt collectors would need to engage an attorney or otherwise incur
substantial costs. Industry commenters particularly objected to
imposing these costs on debt collectors who never sue to collect debts,
or never sue to collect revived debts. Industry commenters also raised
concerns about being required to respond to legal questions from
consumers as a result of providing the disclosures.
Among consumer, consumer advocate, academic, and State Attorneys
General commenters who opposed the Bureau's proposal, many doubted that
disclosures can effectively convey information about topics as
complicated and unfamiliar to consumers as time-barred debt and
revival. These commenters also raised concerns about the Bureau's
proposed model disclosures, characterizing them as confusing, vague,
and ineffective--particularly for the least sophisticated
consumer.\128\ Some consumer advocate commenters also expressed concern
about the accuracy of the proposed disclosures and the frequency with
which the Bureau proposed to require them. These commenters urged the
Bureau to reconsider or significantly revise the proposal.
---------------------------------------------------------------------------
\128\ Courts have applied an objective standard of an
``unsophisticated'' or ``least sophisticated'' consumer to claims
brought under FDCPA section 807. Jensen v. Pressler & Pressler, 791
F.3d 413, 419 (3d Cir. 2015) (``The standard is an objective one,
meaning that the specific plaintiff need not prove that she was
actually confused or misled, only that the objective least
sophisticated debtor would be.''); 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) (per curiam) (same). This standard ``protects the consumer who
is uninformed, naive, or trusting, yet it admits an objective
element of reasonableness.'' Gammon v. GC Servs. Ltd. P'ship, 27
F.3d 1254, 1257 (7th Cir. 1994). As discussed in part IV, the Bureau
interprets FDCPA sections 807 to incorporate an objective,
``unsophisticated'' or ``least sophisticated'' consumer standard.
---------------------------------------------------------------------------
Given industry commenters' concerns about the burden on debt
collectors of the Bureau's specific proposal, and consumer advocate
commenters' concerns about whether the Bureau's specific proposal would
effectively cure consumer deception, the Bureau has decided not to
finalize proposed Sec. 1006.26(c). In deciding not to finalize
proposed Sec. 1006.26(c), the Bureau determines only that the specific
disclosure requirements described in the February 2020 proposal may not
sufficiently accommodate the concerns raised by different stakeholders.
However, the Bureau concludes, as discussed in the February 2020
proposal, that, in many circumstances, disclosures can effectively cure
the potential deception associated with the collection of time-barred
debt.
Finally, the Bureau emphasizes that the FDCPA, the November 2020
Final Rule, and this final rule nevertheless apply to debt collectors'
activities involving the collection of time-barred debts, including
debt collectors' communications when collecting such debts.
Accordingly, a debt collector may not use any false, deceptive, or
misleading representation or means in connection with the collection of
a time-barred debt. Nor may a debt collector use unfair or
unconscionable means to collect or attempt to collect a time-barred
debt. Depending on the circumstances associated with the collection of
a specific time-barred debt, a debt collector may decide that, to avoid
violating the FDCPA and the final
[[Page 5783]]
rule, the debt collector needs to disclose information to consumers
about the debt collector's ability to sue and the possibility of
revival and, in that case, the debt collector may do so.
Section 1006.30 Other Prohibited Practices
30(a) Required Actions Prior to Furnishing Information
The Bureau proposed in Sec. 1006.30(a) to prohibit so-called
passive collections, i.e., the practice of a debt collector furnishing
to a consumer reporting agency, as defined in section 603(f) of the
Fair Credit Reporting Act (FCRA),\129\ information regarding a debt
before communicating with the consumer about the debt. The Bureau
proposed 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; pursuant to its authority to interpret FDCPA section
806, which 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; and pursuant to its
authority to interpret FDCPA section 808, which prohibits a debt
collector from using 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.\130\
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\129\ 15 U.S.C. 1681a(f).
\130\ 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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For the reasons discussed below, the Bureau is: (1) Finalizing
Sec. 1006.30(a) as Sec. 1006.30(a)(1), with changes to specify the
required actions that a debt collector generally must take before
furnishing information to a consumer reporting agency; and (2)
finalizing in Sec. 1006.30(a)(2) a special rule for information
furnished to certain specialty consumer reporting agencies.
30(a)(1) In General
The Bureau received comments on proposed Sec. 1006.30(a) from
consumer advocates and individuals, nonprofits, industry commenters,
and government agencies. Many commenters supported the proposed
prohibition on passive collections. A consumer group emphasized the
consumer harms identified in the proposal and agreed that, because with
passive collections a consumer does not know a debt is in collection,
the practice can cause a consumer's credit score to decrease, increase
the cost of future credit for the consumer, make it more difficult for
a consumer to obtain affordable housing, and jeopardize some job
opportunities, all without the consumer's knowledge. Three government
commenters also supported the proposed prohibition; one of them
reported receiving consumer complaints regarding passive collections.
An industry commenter supporting the proposal noted that the commenter
provides consumers with a 90-day grace period before furnishing
information to consumer reporting agencies.
A number of comments, primarily from industry or industry trade
groups, opposed the prohibition or suggested changes or clarifications.
Two industry trade groups and a law firm commenter argued that proposed
Sec. 1006.30(a) should not be finalized because it conflicts with the
FCRA, including section 623(a)(7), which requires certain financial
institutions to provide written notice to customers if they furnish
negative information to a consumer reporting agency, and section
623(a)(5), which requires furnishers to provide certain information
about a reported delinquency to the consumer reporting agency no later
than 90 days after furnishing information.\131\ Other industry
commenters argued that the proposal would encourage consumers to ignore
communications, provide inaccurate forwarding information to the
creditor, or falsely mark mail as undeliverable to avoid having
collection items furnished to consumer reporting agencies. In addition,
several industry commenters stated that locating consumers for certain
debts, such as medical debt, telecommunications debt, or rental debt,
is costly and may not be justified for small amounts. If debt
collectors cannot passively collect these debts, the commenters argued,
then the debts are effectively uncollectible. One industry trade group
similarly argued that passive collections benefits consumers who
otherwise cannot be located, rather than harming them, because the
collection item on their credit report will provide them contact
information for the debt collector, which the consumer can then use to
make payment arrangements.
---------------------------------------------------------------------------
\131\ 15 U.S.C. 1681s-2(a)(5) and (7).
---------------------------------------------------------------------------
A number of commenters suggested changing or clarifying the
proposed requirement to ``communicate'' before furnishing information
to a consumer reporting agency. Some urged the Bureau to adopt a
stricter requirement, such as by requiring written notice to the
consumer before reporting, mandating specific disclosure language,
imposing across-the-board waiting periods before reporting, or
prohibiting indirect communications. Others expressed concern that the
proposal would impose more stringent communication requirements than
the FDCPA otherwise requires and asked the Bureau to relax the
proposal, such as by clarifying that proof of receipt of a
communication is not required, by allowing debt collectors to satisfy
the proposed requirement by leaving limited-content messages (as
defined in Sec. 1006.2(j) of the November 2020 Final Rule), or by
permitting debt collectors to presume receipt of a communication after
a waiting period expires.
After considering all of the comments, the Bureau is finalizing
proposed Sec. 1006.30(a) and its related commentary with substantial
revisions, as follows.
Subject to Sec. 1006.30(a)(2) (discussed below), final Sec.
1006.30(a)(1) requires a debt collector to take certain actions before
furnishing information about a debt to a consumer reporting agency, as
defined in section 603(f) of the FCRA. Specifically, the debt collector
must either: (1) Speak to the consumer about the debt in person or by
telephone, or (2) place a letter in the mail or send an electronic
message to the consumer about the debt and wait a reasonable period of
time to receive a notice of undeliverability. During the reasonable
period, the debt collector must permit receipt of, and monitor for,
notifications of undeliverability from communications providers. If the
debt collector receives such a notification during the reasonable
period, the debt collector must not furnish information about the debt
to a consumer reporting agency until the debt collector otherwise
satisfies Sec. 1006.30(a)(1). The Bureau is finalizing commentary to
clarify these requirements as discussed below.
The Bureau finalizes the requirements under Sec. 1006.30(a)(1) to
address consumer harms that may arise if a debt collector furnishes
information about a debt to a consumer reporting agency without first
informing the consumer about the debt. As discussed in the proposal,
consumers who have not been informed about the debt are likely to be
unaware that they have a debt in
[[Page 5784]]
collection unless they obtain and review their consumer report. In
turn, many consumers may not obtain 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 feel pressure to pay
debts that they otherwise would dispute, including debts they do not
owe, or may face the denial of an application, a higher interest rate,
or other negative consequences.
In addition, as discussed in the proposal, debt collectors may
attempt to collect debts passively if the expected return from that
technique exceeds the cost of attempting to collect the debt by
communicating with consumers.\132\ The Bureau understands that imposing
a requirement intended to inform the consumer about a debt before
furnishing information about a debt to consumer reporting agencies will
increase costs for debt collectors who do not currently attempt to do
so. However, passive collection practices can harm consumers for the
reasons discussed above. The Bureau has determined that the final rule
best balances debt collectors' cost concerns with protections for
consumers against the harms imposed by passive collection practices.
Final Sec. 1006.30(a)(1) gives a debt collector flexibility to contact
consumers in a variety of ways, including in person, by telephone, by
mail, or by electronic message.\133\ This gives debt collectors
flexibility to contact the consumer in a manner that works best for
their operations, and debt collectors need not confirm receipt of mail
or electronic messages.
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\132\ 84 FR 23274, 23330 (May 21, 2019).
\133\ Because medical offices, telecommunications companies, and
rental offices typically have contact information for their
customers, and because a variety of options to verify and forward
mail to a consumer's new address exist, a debt collector of such
debts should be able to satisfy Sec. 1006.30(a)'s requirements
without incurring significant costs.
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Although proposed Sec. 1006.30(a) used the term ``communicate,''
the proposal did not clearly specify a debt collector's obligations if
the debt collector learned after furnishing information to a consumer
reporting agency that no communication actually occurred (because,
e.g., the communication was sent by mail to the consumer's current
address but the debt collector later received a notification that the
letter was not delivered). Some commenters raised concerns that the
proposal's use of the term ``communicate'' could be construed to
require debt collectors to confirm a consumer's receipt of the
information before furnishing information about a debt to a consumer
reporting agency.
To respond to such comments, and because the proposal was designed
to increase the likelihood that consumers would learn that a debt
attributed to them is in collection but was not intended to be a
broader limitation on furnishing valid information about debts to
consumer reporting agencies, the Bureau finalizes specific requirements
a debt collector must take before furnishing. The actions specified in
the final rule are ones that increase the likelihood that a consumer
will learn about a debt before a debt collector begins furnishing
information about that debt to a consumer reporting agency. For this
reason, after a debt collector has complied with Sec. 1006.30(a)(1)
and furnished information to a consumer reporting agency, the debt
collector may furnish additional information with respect to that debt
without having to repeat the actions specified in Sec. 1006.30(a)(1).
Accordingly, the Bureau does not incorporate a receipt requirement in
final Sec. 1006.30(a)(1) and, instead of using the term
``communicate,'' sets forth the specific actions that a debt collector
must take before furnishing.
The Bureau has also determined that final Sec. 1006.30(a)(1) does
not conflict with FCRA section 623(a)(7) or (5) because those
provisions have different requirements and goals than Sec.
1006.30(a)(1). FCRA section 623(a)(7) applies only to ``financial
institutions'' as defined in FCRA section 603(t), which will cover few,
if any, FDCPA debt collectors. Final Sec. 1006.30(a)(1) does not
prevent debt collectors from complying with the FCRA, and the FCRA does
not prevent debt collectors from complying with final Sec.
1006.30(a)(1).\134\ The FCRA also does not state that it is the
exclusive Federal law governing credit reporting and, indeed, the FDCPA
also references a debt collector's interactions with consumer reporting
agencies.\135\
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\134\ For example, FCRA section 623(a)(7) requires certain
financial institutions that furnish negative information to a
consumer reporting agency, as defined in FCRA section 603(p), to
provide a written notice to consumers prior to, or no later than 30
days after, furnishing the negative information. A financial
institution that is required to provide a written notice under FCRA
section 623(a)(7) and that is also acting as an FDCPA debt collector
could comply with both requirements by, for example, placing a
letter in the mail to the consumer that contains sufficient
information to satisfy both requirements before furnishing
information to a consumer reporting agency.
\135\ See, e.g., 15 U.S.C. 1692c(b), 1692d(3).
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Because final Sec. 1006.30(a)(1) clearly describes the specific
actions that a debt collector must take before furnishing information
about a debt to a consumer reporting agency, a debt collector may
ensure compliance with the final rule based on the debt collector's own
actions, such as by placing a letter about the debt in the mail to the
consumer and waiting a reasonable period of time to receive a notice of
undeliverability. Therefore, the final rule also resolves concerns
about consumers avoiding a debt collector's communications to prevent
the debt collector from furnishing information to a consumer reporting
agency.
The final rule specifies in Sec. 1006.30(a)(1)(i) and (ii) the
methods by which a debt collector may meet its obligation to take
certain actions before furnishing information about a debt to a
consumer reporting agency. All of the methods require that information
``about the debt'' be conveyed to the consumer. Although the final rule
does not specify the particular information required to meet the
``about the debt'' requirement, the final rule adds comment 30(a)(1)-1
to clarify that the validation information required by Sec.
1006.34(c), including such information if provided in a validation
notice, is information ``about the debt.''
Under Sec. 1006.30(a)(1), information about a debt must be
transmitted ``to the consumer'' as defined in Sec. 1006.2(e). A debt
collector who sends information about the debt that reaches a
``consumer'' as defined in Sec. 1006.6(a), which includes additional
persons,\136\ may not have communicated with the consumer as defined in
Sec. 1006.2(e).
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\136\ For purposes of Sec. 1006.6(a), the term ``consumer''
also includes the consumer's spouse, parent (if the consumer is a
minor), legal guardian, executor or administrator of the consumer's
estate, if the consumer is deceased, and a confirmed successor in
interest. See 85 FR 76734, 76889 (Nov. 30, 2020).
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The Bureau notes that, in taking any of the actions specified in
Sec. 1006.30(a)(1), a debt collector must comply with the FDCPA and
the November 2020 Final Rule, including the prohibition on
communicating, in connection with the collection of any debt, with a
third party.\137\
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\137\ A debt collector sending an email or text message who uses
the procedures provided for in Sec. 1006.6(d)(4) or (5) as
finalized in the November 2020 Final Rule does not violate the
prohibition on third-party disclosure under Sec. 1006.6(d)(1).
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Proposed comment 30(a)-1 provided clarifications regarding the term
``communicate'' in proposed Sec. 1006.30(a)(1). Because final Sec.
1006.30(a)(1) does not use the term ``communicate'' and instead states
the specific actions the debt collector must take before furnishing
information about a debt to a consumer reporting agency, proposed
comment 30(a)-1 is no longer
[[Page 5785]]
necessary and the Bureau is not finalizing it.
The final rule specifies in Sec. 1006.30(a)(1)(ii) that a debt
collector who places a letter in the mail or sends an electronic
message to the consumer about the debt to satisfy Sec. 1006.30(a)(1)
must wait a reasonable period of time to receive a notice of
undeliverability before furnishing information about a debt to a
consumer reporting agency. New comment 30(a)(1)-2 clarifies that the
reasonable period of time begins on the date that the debt collector
places the letter in the mail or sends the electronic message. Comment
30(a)(1)-2 also provides a safe harbor for waiting a reasonable period
of time by clarifying that a period of 14 consecutive days after the
date that the debt collector places a letter in the mail or sends an
electronic message is a reasonable period of time.
Comment 30(a)(1)-3 clarifies that a debt collector who places a
letter in the mail or sends an electronic message to the consumer about
the debt to satisfy Sec. 1006.30(a)(1) and does not receive a notice
of undeliverability during the reasonable period of time, and who
thereafter furnishes information about the debt to a consumer reporting
agency, does not violate Sec. 1006.30(a)(1) even if the debt collector
subsequently receives a notice of undeliverability. Comment 30(a)(1)-3
also provides three examples illustrating this requirement.
The Bureau determines that these provisions clarify the proposal
with respect to pre-furnishing outreach by mail or electronic message
and provide protection for consumers.\138\ The Bureau understands that
the U.S. Postal Service typically notifies senders of most
undeliverable-as-addressed mail within 14 days. The amount of time it
takes a communications provider to return a notice of undeliverability
with respect to electronic messages is less clear. While an
undeliverability notice is typically received soon after sending an
electronic message, the Bureau understands that the time for receiving
a notice of undeliverability with respect to such electronic messages
may vary by provider, and the Bureau does not have sufficient
information to determine a uniform time period for electronic messages.
Nevertheless, the Bureau has no reason to believe that notices of
undeliverability are typically received more than 14 days after an
electronic message is sent. Therefore, the Bureau is finalizing the
same safe harbor time period (i.e., 14 consecutive days) for electronic
messages as for mailed letters.\139\ The Bureau may consider revising
the safe harbor for electronic messages in the future based on actual
stakeholder experience with this provision.
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\138\ The Bureau does not impose a similar period when a debt
collector speaks to a consumer about the debt in person or by
telephone because these scenarios do not have the potential for an
equivalent undeliverable notice outcome.
\139\ The Bureau notes that the 14-consecutive-day period is a
safe harbor. To comply with the rule, a debt collector only needs to
wait a ``reasonable period of time'' to receive a notice of
undeliverability. Therefore, a debt collector who shows that the
debt collector waited a reasonable time period to receive notices of
undeliverability for electronic messages may be able to satisfy the
requirements of the final rule without waiting 14 days.
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The Bureau recognizes that the final rule may result in instances
in which debt collectors furnish information about a debt to a consumer
reporting agency even though the consumer has not been made aware of
the collection item, either because the mail or electronic message is
returned as undeliverable after the reasonable period has passed or is
not received but is also not returned. These consumers will not have
the same opportunity to receive a message about their debt as those
consumers for whom the mail or electronic message is delivered.
Nevertheless, the Bureau determines that establishing a requirement
that debt collectors wait a reasonable period of time after placing a
letter in the mail or sending an electronic message provides sufficient
consumer protection without unduly prohibiting a debt collector from
furnishing information about a valid debt to a consumer reporting
agency.
The Bureau declines commenters' other suggestions, such as those to
require communications in writing, dictate specific language, apply
longer waiting periods (e.g., 180 days), or establish other safe
harbors because the suggestions are unnecessary to achieve the purpose
of the passive collections ban. For example, requiring written
communications and specific disclosure language is unnecessary to put
the consumer on notice that a debt is in collections. Additional safe
harbors are unnecessary and unwarranted at this time because the final
rule clarifies the specific actions that must occur before furnishing
information to a consumer reporting agency.
30(a)(2) Special Rule--Information Furnished to Certain Specialty
Consumer Reporting Agencies
The Bureau did not propose a special rule regarding furnishing to
specialty consumer reporting agencies. An industry commenter and a
consumer reporting agency argued in a joint comment that the final rule
should exempt from Sec. 1006.30(a) information furnished to certain
nationwide specialty consumer reporting agencies described in FCRA
section 603(x)(3), i.e., consumer reporting agencies that maintain and
compile files on consumers on a nationwide basis relating to check
writing history (``check verification consumer reporting agencies'').
The commenters explained that merchants use check verification
consumer reporting agencies to determine whether they should accept a
particular check. When a merchant seeks check verification information,
the check verification consumer reporting agency issues a check
verification report with a code that will indicate if the check appears
acceptable, the check is potentially fraudulent, or the checking
account is likely overdrawn. These inquiries are usually completed in
real time, while a transaction is occurring in a checkout lane or in
remote retailing. The commenters expressed concern that proposed Sec.
1006.30(a) would degrade the timely content of check verification
reports issued by check verification consumer reporting agencies
because debt collectors would be required to delay or refrain from
reporting altogether, which would undermine the accuracy of check
verification reports and reduce the willingness of merchants to accept
checks.
The commenters argued that the current system benefits consumers by
alerting them to potential fraud or that their account may be
overdrawn. Requiring contact before furnishing information would harm
these consumers because the fraud or overdrawn status of the account
may never be detected and, thus, consumers may not be alerted to
potential fraud or may unknowingly continue writing checks on an
overdrawn account. Further, the commenters stated that these
requirements could harm consumers by decreasing the number of merchants
that accept checks or increasing prices at merchants who continue to
accept checks.
The commenters also expressly recognized the harm that can occur if
a debt unexpectedly appears on a credit-related consumer reporting
agency report if the consumer is applying for credit, a job, or rental
housing, and cannot move forward with the transaction. However, they
noted that check verification reporting does not present comparable
risk of harm because (1) such reports are used to determine whether a
particular check should be accepted, not to evaluate a consumer's
creditworthiness for credit, a job, or rental housing; and (2) any harm
caused by refusal to accept a
[[Page 5786]]
check is outweighed by benefits, including alerting the consumer to
potential fraud and preventing them from incurring additional overdraft
or non-sufficient funds fees.
After carefully considering the comment, the Bureau has determined
that Sec. 1006.30(a) should not apply to a debt collector's furnishing
of information about a debt to a check verification consumer reporting
agency. The Bureau finds that a debt collector's furnishing of
information about a debt to a check verification consumer reporting
agency before engaging in outreach to the consumer about the debt is
unlikely to undermine the ability of consumers to decide whether to pay
debts in the same manner as the furnishing of information about debts
to other consumer reporting agencies. As a result, the Bureau has not
found that furnishing information about a debt to a check verification
consumer reporting agency before engaging in outreach to the consumer
about the debt constitutes conduct that may have the natural
consequence of harassment, oppression, or abuse in violation of FDCPA
section 806, or that is an unfair or unconscionable means to collect or
attempt to collect a debt under FDCPA section 808.
Immediate and frequent reporting appears to be a critical aspect of
check verification consumer reporting, and it appears that imposing a
requirement that debt collectors inform consumers about debts before
furnishing information to those check verification consumer reporting
agencies would require significant operational changes and could
significantly reduce the effectiveness of those reports. This is unlike
credit-related reporting, which typically involves less immediate
furnishing. The Bureau also finds that the consumer harm that Sec.
1006.30(a)(1) is designed to address is not present for check
verification consumer reporting because these reports are unlikely to
be used in making credit, employment, or rental housing decisions.
While consumers could also be harmed if they are unaware of checking
account report items, the harm of reducing the effectiveness of the
check verification system, including the potential harm to consumers if
checks are accepted by fewer merchants, outweighs the benefits of
requiring communication before furnishing. In addition, the immediacy
of the current check verification system provides countervailing
benefits to consumers who are alerted to potential fraud or to
discontinue writing checks on an overdrawn account. Further, a special
rule for check verification consumer reporting agencies is consistent
with several State laws regulating passive collections.\140\ For these
reasons, the Bureau concludes that furnishing of information to a check
verification consumer reporting agency before engaging in outreach to
the consumer does not raise concerns under FDCPA sections 806 and 808
similar to furnishing to other types of consumer reporting agencies.
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\140\ Colo. Rev. Stat. sec. 12-14-108 limits when ``debt
collectors'' may furnish information to a consumer reporting agency,
but exempts checks, negotiable instruments, or credit card drafts.
California and Utah also limit when information can be furnished to
a consumer reporting agency, but those laws only apply to
``creditors.'' Cal. Civ. Code sec. 1785.26; Utah Code sec. 70C-7-
107.
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Therefore, the final rule adds Sec. 1006.30(a)(2) to state that
Sec. 1006.30(a)(1) does not apply to a debt collector's furnishing of
information about a debt to a nationwide specialty consumer reporting
agency that compiles and maintains information on a consumer's check
writing history, as described in FCRA section 603(x)(3).\141\
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\141\ If and to the extent a check verification consumer
reporting agency compiles and maintains other types of information
specified in FCRA section 603(x) (e.g., residential or tenant
history), the special rule in Sec. 1006.30(a)(2) does not apply
with respect to a debt collector's furnishing of that information to
the check verification consumer reporting agency.
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For the reasons discussed above, the Bureau is adopting final 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. The Bureau is also adopting final Sec. 1006.30(a) pursuant
to its authority to interpret FDCPA section 806, which 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, and FDCPA section 808, which prohibits a debt
collector from using unfair or unconscionable means to collect or
attempt to collect any debt.
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.\142\ 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 and receive verification of the debt and to request
information about the original creditor. When this validation
information is provided in writing, the document containing the
information is commonly referred to as a ``validation notice.''
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\142\ See 15 U.S.C. 1692g(a).
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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 FDCPA, 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.'' \143\ Congress provided the Bureau with
rulemaking authority in 2010 apparently to address continuing
inadequacies around validation information and verification, among
other things.\144\ In addition, debt collectors have sought
clarification about how to provide information consistent with the
FDCPA, noting, for instance, that a significant number of lawsuits are
filed each year alleging deficiencies in their validation notices.
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\143\ S. Rep. No. 382, supra note 57; 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).
\144\ See S. Rep. 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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For these reasons, the Bureau proposed 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. As
discussed in more detail below, the Bureau is finalizing Sec. 1006.34
with modifications in response to feedback and for clarity and
consistency with other provisions in this final rule and the November
2020 Final Rule.
Final Sec. 1006.34(a) sets forth the general requirement to
provide validation information and describes how such information may
be provided on a validation notice. Section 1006.34(b) sets forth
definitions for purposes of Sec. 1006.34. Section 1006.34(c) sets
forth the validation information, and Sec. 1006.34(d) sets forth a
general requirement that such information be clear and conspicuous.
Section 1006.34(d) also provides safe harbors for use of Model Form B-1
in appendix B to Regulation F, specified variations of the model
notice, or a
[[Page 5787]]
substantially similar form, and describes optional disclosures that
debt collectors may, but are not required to, provide with the
validation information.\145\ Section 1006.34(e) affirmatively permits
debt collectors to provide validation notices translated into other
languages and requires debt collectors who offer to provide consumers
translated notices to provide them to consumers who request them.
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\145\ The Bureau proposed a model validation notice as Model
Form B-3. The Bureau is finalizing that form, with revisions, as
Model Form B-1. This Notice refers to proposed Model Form B-3 as the
``proposed model validation notice'' or the ``proposed model
notice'' and final Model Form B-1 as the ``model validation notice''
or ``model notice.'' This Notice uses the phrase ``specified
variations of the model notice'' to refer to the specifically
enumerated versions of the model notice that receive a safe harbor
pursuant to Sec. 1006.34(d)(2)(i) and (ii) (i.e., notices that are
the same as, or substantially similar to, the model notice but for:
Omitting some or all of the optional disclosures that appear on the
model notice; including optional disclosures that do not appear on
the model notice; or including certain disclosures on a separate
page as permitted by Sec. 1006.34(c)(2)(viii) and (5)).
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As discussed in further detail in the section-by-section analysis
of Sec. 1006.34(d), the Bureau proposed to require that validation
notices must be the same as, or substantially similar to, the proposed
model validation notice. The Bureau is not finalizing that requirement.
Instead, the final rule provides certain safe harbors for compliance
with the information and form requirements in Sec. 1006.34(c) and
(d)(1) for debt collectors who use the model validation notice,
specified variations of the model notice, or a substantially similar
notice.
34(a) Validation Information Required
34(a)(1) In General
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 the validation information, unless that
information is contained in the initial communication or the consumer
has paid the debt. The Bureau proposed Sec. 1006.34(a)(1) to implement
and interpret this general requirement.\146\ Specifically, proposed
Sec. 1006.34(a)(1) provided that, subject to a limited exception for
if a consumer has already paid a debt, a debt collector must provide a
consumer the required validation information either: (1) By sending the
consumer a validation notice (i.e., a written or electronic notice)
\147\ in the manner permitted by Sec. 1006.42 \148\ in the initial
communication with the consumer in connection with the collection of
the debt (proposed Sec. 1006.34(a)(1)(i)(A)) or within five days of
that initial communication (proposed Sec. 1006.34(a)(1)(i)(B)); or (2)
by providing the validation information orally in the initial
communication (proposed Sec. 1006.34(a)(1)(ii)).\149\ As discussed
below, the Bureau is adopting Sec. 1006.34(a)(1) with certain minor
revisions.
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\146\ See 84 FR 23274, 23333-34 (May 21, 2019).
\147\ Proposed Sec. 1006.34(b)(4) defined a validation notice
as any written or electronic notice that provides the validation
information described in Sec. 1006.34(c).
\148\ As finalized, Sec. 1006.42 generally requires debt
collectors to send written disclosures in a manner that is
reasonably expected to provide actual notice, and in a form that the
consumer may keep and access later. 85 FR 76734, 76893 (Nov. 30,
2020).
\149\ Proposed Sec. 1006.34(b)(2) provided 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.
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Some commenters recommended that the Bureau modify proposed Sec.
1006.34(a)(1) generally. Some consumer advocate commenters stated that
the Bureau should require debt collectors to provide non-electronic,
written validation notices to all consumers. According to at least one
commenter, the Bureau should require a written validation notice even
if a debt collector also provides the validation information
electronically. Another consumer advocate commenter asked the Bureau to
require debt collectors to provide a consumer a validation notice in
every communication.
The Bureau declines to require debt collectors to always provide
written, non-electronic validation notices to consumers. For the
reasons set forth in the November 2020 Final Rule, the Bureau
interprets FDCPA section 809(a) as not requiring that the notice of
debt be provided in writing when it is contained in the initial
communication.\150\ Moreover, if FDCPA section 809(a) does require that
the notice of debt be provided in writing--i.e., if the validation
information is not contained within the initial communication--nothing
in the FDCPA prohibits a debt collector from providing the required
written validation notice electronically in accordance with the
consumer-consent provisions of section 101(c) of the E-SIGN Act. In
turn, if a statute (here, the FDCPA) requires a written disclosure, the
E-SIGN Act's consumer-consent provisions specify requirements pursuant
to which debt collectors may send the required written disclosures
electronically. Accordingly, pursuant to Sec. 1006.42, a debt
collector may send the validation notice electronically under Sec.
1006.34(a)(1)(i)(A) (i.e., within the initial communication) if the
debt collector complies with Sec. 1006.42(a)(1), which requires that
the debt collector send the notice in a manner that is reasonably
expected to provide actual notice, and in a form that the consumer may
keep and access later. A debt collector may send the validation notice
electronically under Sec. 1006.34(a)(1)(i)(B) (i.e., not within the
initial communication) if the debt collector complies with Sec.
1006.42(a)(1) and also complies with Sec. 1006.42(b), which requires
that the debt collector send the notice in accordance with section
101(c) of the E-SIGN Act. The Bureau concludes that, if debt collectors
send validation notices electronically as described above, there is a
reasonable likelihood that consumers will receive and be able to retain
the notices.
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\150\ 85 FR 76734, 76854 (Nov. 30, 2020).
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The Bureau determines, therefore, that it is unnecessary and
unwarranted to impose the burden on debt collectors that would result
from a requirement to always provide the validation notice in written,
non-electronic form; to provide a validation notice in written form
even if the debt collector also provides the validation notice
electronically; or to provide a validation notice or validation
information with every consumer communication.\151\ Such requirements
would go beyond the FDCPA's provisions and would be unduly burdensome
on debt collectors, because, as stated above, the Bureau concludes that
the Regulation F provisions that the Bureau is adopting provide
sufficient consumer protection. Accordingly, the Bureau does not impose
such requirements.
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\151\ The Bureau additionally notes that, if a statute (here,
FDCPA section 809(a)) requires a written disclosure, E-SIGN Act
section 104(c)(1) states that Federal agencies' authority to
interpret E-SIGN Act section 101 (including the consumer-consent
provisions in E-SIGN Act section 101(c)) does not include the
``authority to impose or reimpose any requirement that a record be
in a tangible printed or paper form.'' See 15 U.S.C. 7004(c)(1).
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The Bureau received few comments specifically about proposed Sec.
1006.34(a)(1)(i). Commenters who provided feedback supported the
Bureau's proposal. Thus, the Bureau is adopting Sec. 1006.34(a)(1)(i)
largely as proposed.
A large number of commenters responded to the clarification in
proposed Sec. 1006.34(a)(1)(ii) that debt collectors may provide
validation information orally in the initial communication. Commenters,
including most consumer advocates who addressed the topic, urged the
Bureau to
[[Page 5788]]
prohibit debt collectors from providing validation information orally.
These commenters stated that debt collectors could not effectively
convey orally to consumers the amount of validation information that
the Bureau proposed.\152\ Commenters argued that, if validation
information were conveyed orally, a consumer would be unable to review
the information at a later time, unless the consumer transcribed or
recorded the communication with the debt collector. Commenters stated
that this dynamic would place an unreasonable burden on consumers and
would be atypical compared to other consumer law disclosure regimes,
which mandate that required notices be provided in written form. At
least one commenter stated that oral delivery would be incompatible
with the formatting requirements in proposed Sec. 1006.34(d).
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\152\ Proposed Sec. 1006.34(c) described the validation
information that proposed Sec. 1006.34(a)(1) would have required
debt collectors to provide. As discussed in the section-by-section
analysis of Sec. 1006.34(c), the final rule requires debt
collectors to provide up to 18 items of validation information.
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On the other hand, some industry commenters supported the Bureau's
clarification that debt collectors may provide validation information
orally. These commenters asked the Bureau to provide additional
guidance about oral delivery of validation information, including, for
example, specific content for an oral notice, such as a script.
As proposed, the Bureau is finalizing the provision in Sec.
1006.34(a)(1)(ii) that debt collectors may provide the required
validation information orally in the initial communication. The Bureau
agrees that there may be significant challenges to conveying the
required validation information orally.\153\ Nevertheless, FDCPA
section 809(a) does not prohibit oral delivery. FDCPA section 809(a)
states that the required validation information may be ``contained in
the initial communication'' and that a written notice is mandatory only
if that required information is not contained in the initial
communication. Further, FDCPA section 807(11) indicates that the
initial communication may be oral.\154\ Accordingly, the Bureau
concludes that the most reasonable interpretation of FDCPA sections
809(a) and 807(11) is that the FDCPA permits the required validation
information to be conveyed orally if it is contained in the initial
communication.
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\153\ Section 1006.34(c) requires a significant amount of
validation information that debt collectors may not currently
include in the validation information they provide to consumers. It
might be difficult for a debt collector to convey all of the
required information orally, particularly in an initial
communication, which is the only context in which a debt collector
could comply with its legal obligation by providing the validation
information orally. Further, real-time communications with consumers
are unpredictable. Accordingly, even if the required components of
the validation information are contained in the oral communication,
the debt collector might not convey them in a way that meets the
requirements of the regulation; for example, as commenters noted the
debt collector might not convey the required information clearly and
conspicuously.
\154\ See 15 U.S.C. 1692e(11).
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Moreover, debt collectors providing validation information orally
will not be able to use the model validation notice and therefore will
not receive a safe harbor for compliance under Sec. 1006.34(d)(2). The
Bureau declines to provide additional guidance about oral delivery of
validation information. The Bureau is not aware of debt collectors
providing validation information orally today, and, for the reasons
discussed, the Bureau believes they will be unlikely to do so in the
future. As a result, the Bureau concludes that such additional guidance
is not necessary or warranted at this time.
The Bureau proposed comment 34(a)(1)-1 to clarify the provision of
validation notices if the consumer is deceased. Proposed comment
34(a)(1)-1 explained 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 validation
information under Sec. 1006.34(a)(1). Under proposed comment 34(a)(1)-
1, a debt collector attempting to collect a debt from a deceased
consumer's estate generally would provide the validation information to
the named person who is authorized to act on behalf of the deceased
consumer's estate, if the debt collector had not already provided that
information to the consumer.
As discussed in the section-by-section analysis of Sec. 1006.2(e),
the Bureau is interpreting the term consumer to mean any natural
person, whether living or deceased, who is obligated or allegedly
obligated to pay any debt. And the Bureau is adopting commentary
clarifying how this definition operates in the decedent debt context,
including with respect to debt collectors' obligations to provide the
validation information and respond to disputes and requests for
original-creditor information. Accordingly, the Bureau is finalizing
comment 34(a)(1)-1 as proposed.
For all of 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 is finalizing Sec. 1006.34(a)(1)
to implement and interpret the FDCPA section 809(a) requirement that
debt collectors provide validation information to consumers.
34(a)(2) Exception
FDCPA section 809(a) contains a limited exception that provides
that, if required validation information is not contained in the
initial communication, a debt collector need not send the consumer a
written validation notice within five days of that communication if the
consumer has paid the debt prior to the time that the notice is
required to be sent. The Bureau proposed in Sec. 1006.34(a)(2) to
implement this exception by providing that a debt collector who
otherwise would be required to send a validation notice pursuant to
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 Sec. 1006.34(a)(1)(i)(B) would
require the validation notice to be sent. Proposed Sec. 1006.34(a)(2)
generally restated the statute, except for minor changes for
organization and clarity.\155\
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\155\ See 84 FR 23274, 23334-35 (May 21, 2019).
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At least two consumer advocate commenters recommended that debt
collectors be required to provide a validation notice even if a
consumer has already paid the debt. According to these commenters, some
consumers, including seniors, will pay a debt that they do not owe or
recognize because they ``pay first and ask questions later.'' These
commenters suggested that validation information would help such
consumers assess after the fact whether they paid a debt that they
owed. An industry trade group commenter stated that, for open-end
credit, a debt collector should be permitted to satisfy Sec.
1006.34(a)(1) by providing a periodic statement pursuant to Regulation
Z, 12 CFR 1026.7, because periodic statements disclose sufficient
account information to consumers.
The Bureau declines to require debt collectors to provide a
validation notice if a consumer has already paid the debt. FDCPA
section 809(a) explicitly provides that a debt collector is not
required to send the validation notice if the consumer has paid the
debt, and the Bureau has determined that it is neither necessary nor
warranted to adopt a rule requiring otherwise.
The Bureau also declines to adopt recommendations to include an
exception to Sec. 1006.34(a)(1) for open-
[[Page 5789]]
end credit, because a periodic statement provided in accordance with
Regulation Z, 12 CFR 1026.7, is not an adequate substitute for the
validation information. While such a periodic statement discloses some
information about the debt, it typically does not disclose other
information required under the final rule, such as the information
about consumer protections required by FDCPA section 809(a)(3) through
(5) and the corresponding provisions of final Sec. 1006.34.
Accordingly, pursuant to its authority under FDCPA section 814(d)
to prescribe rules with respect to the collection of debts by debt
collectors, and to implement and interpret FDCPA section 809(a), the
Bureau is finalizing Sec. 1006.34(a)(2) as proposed.
34(b) Definitions
To facilitate compliance with Sec. 1006.34, proposed Sec.
1006.34(b) defined several terms that appear throughout the section. As
discussed below, the Bureau is finalizing those definitions and related
commentary with certain modifications in response to feedback.
Consistent with the proposal, unless noted otherwise below, the Bureau
is finalizing the 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
The Bureau proposed Sec. 1006.34(b)(1) 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, for example, Regulation E, subpart
B (Remittance Transfers).\156\ Proposed Sec. 1006.34(b)(1) thus
provided that disclosures are clear and conspicuous if they are readily
understandable. The proposal provided that, in the case of written and
electronic disclosures, the location and type size also must be readily
noticeable to consumers and that, in the case of oral disclosures, the
disclosures must be given at a volume and speed sufficient for a
consumer to hear and comprehend them.\157\ For the reasons discussed
below, the Bureau is adopting Sec. 1006.34(b)(1) largely as proposed
but with minor modifications for clarity and in response to feedback.
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\156\ See 12 CFR 1005.31(a)(1), comment 31(a)(1)-1.
\157\ See 84 FR 23274, 23335 (May 21, 2019).
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An industry commenter objected to the clear and conspicuous
definition in proposed Sec. 1006.34(b)(1). This commenter stated that
a clear-and-conspicuous requirement is unnecessary in the debt
collection context because consumers have an ongoing relationship with
debt collectors, and a consumer therefore has the ability to ask a debt
collector to explain a particular disclosure or communication if the
consumer does not understand it.
Other commenters asked the Bureau to clarify the proposed
definition. For instance, industry trade group and consumer advocate
commenters offered various suggestions for specific font size or
disclosure placement requirements. At least one industry commenter
suggested that the Bureau explain how proposed Sec. 1006.34(b)(1)
would interact with State disclosure laws, which may have their own
clear-and-conspicuous standards that dictate font size or disclosure
placement. An industry trade group commenter asked the Bureau to
provide additional guidance about oral delivery of the validation
information because, in the commenter's view, the proposal that oral
communications be ``given at a volume and speed sufficient for a
consumer to hear and comprehend them'' was ambiguous.
The Bureau disagrees that ongoing relationships between debt
collectors and consumers make a clear and conspicuous definition
unnecessary or unwarranted in the debt collection context. Consumer
financial services laws and their implementing regulations commonly
include standards for clear and conspicuous disclosures provided in the
context of ongoing customer and business relationships between
consumers and consumer financial services providers.\158\ Additionally,
validation information is provided at the outset of collection
communications. If a consumer chooses not to engage with the debt
collector, no ongoing communications will be established.
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\158\ See, e.g., 12 CFR 1026.5(a)(1)(i) (disclosures for open-
end credit) and 12 CFR 1026.17(a)(1) (disclosures for closed-end
credit). Moreover, a consumer does not typically get to choose which
debt collector collects the consumer's debt, whereas a consumer does
choose his or her financial services providers. Further, some
customer relationships between consumers and debt collectors may be
of shorter duration than customer relationships between consumers
and other types of consumer financial services providers. These
factors suggest that a standard for clear and conspicuous
disclosures may be even more important in the debt collection
context than in other consumer financial services contexts.
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The Bureau declines to further clarify the clear and conspicuous
definition in Sec. 1006.34(b)(1) by, for example, dictating font sizes
or requirements regarding disclosure placement as requested by some
commenters. Different debt collectors may design their communications
in different ways, and the Bureau does not believe it is necessary or
warranted to specify such details, as long as the disclosure satisfies
the clear and conspicuous standard. In addition, the definition is
consistent with, and provides the same level of specificity as,
standards in some other consumer financial services laws and their
implementing regulations, including but not limited to the Bureau's
Remittance Transfers rule,\159\ which do not specify font size or
disclosure placement requirements. Moreover, the Bureau concludes that
the lack of more prescriptive guidance will not impose material burden
on debt collectors. As discussed in the section-by-section analysis of
Sec. 1006.34(d)(2), a debt collector who uses the model validation
notice, specified variations of the model notice, or a substantially
similar form, receives a safe harbor for the information requirements
in Sec. 1006.34(c) and for the clear-and-conspicuous requirement in
Sec. 1006.34(d)(1). Because debt collectors may use the model
validation notice, specified variations of the model notice, or a
substantially similar form if providing validation notices, debt
collectors need not incur significant expenses ascertaining what meets
the clear-and-conspicuous standard. Nevertheless, the final rule does
clarify that, in the case of written and electronic disclosures,
although no minimum font size is required, the location and type size
must be both readily noticeable and legible to consumers.\160\
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\159\ See 12 CFR 1005.31(a)(1), comment 31(a)(1)-1. See also,
e.g., the general disclosure requirements for open-end and closed-
end credit in, respectively, 12 CFR 1026.5(a)(1) and 1026.17(a)(1)
and their commentary.
\160\ The section-by-section analysis of Sec. 1006.38(b)(2)
discusses a new safe harbor from the overshadowing prohibition in
Sec. 1006.38(b)(1) for a debt collector who uses the model
validation notice.
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The Bureau declines to revise Sec. 1006.34(b)(1) to clarify how
the definition of clear and conspicuous interrelates with State
disclosure laws. A debt collector can comply with both Sec.
1006.34(b)(1) and State disclosure requirements that specify font size
or disclosure placement. With respect to font size, the Bureau
concludes, in general, that debt collectors satisfying State-law
minimum-font-size requirements will also satisfy the standard in Sec.
1006.34(b)(1) for a type size that is readily noticeable and legible to
consumers. With respect to disclosure placement, as discussed in the
section-by-section analysis of
[[Page 5790]]
Sec. 1006.34(d)(3)(iv), a debt collector may place disclosures
specifically required under other applicable law, which includes
disclosures specifically required by State law, on the reverse (or, in
certain specified circumstances, on the front) of the validation
notice. The Bureau believes that Sec. 1006.34(d)(3)(iv) will permit
debt collectors to provide State law disclosures in a manner that is
clear and conspicuous under applicable law.
The Bureau also declines to further clarify the meaning of clear
and conspicuous in the context of oral delivery of validation
information. The Bureau determines that the proposed and final
regulatory text is sufficiently clear and that the final rule will not
impose an undue burden on debt collectors, particularly in light of the
Bureau's expectation that few, if any, oral disclosures will be
provided.
For the reasons discussed above, the Bureau is finalizing Sec.
1006.34(b)(1) to provide that clear and conspicuous means readily
understandable and that, in the case of written and electronic
disclosures, the location and type size also must be readily noticeable
and legible to consumers, although no minimum type size is mandated.
Final Sec. 1006.34(b)(1) also provides that oral disclosures must be
given at a volume and speed sufficient for the consumer to hear and
comprehend them.
34(b)(2) Initial Communication
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.\161\ FDCPA section
809(d) and (e) identifies particular communications that are not
initial communications for purposes of FDCPA section 809(a) and that
therefore do not trigger the validation notice requirement.\162\
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.
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\161\ See 15 U.S.C. 1692a(2). The November 2020 Final Rule
implemented this definition in Sec. 1006.2(d). 85 FR 76734, 76888
(Nov. 30, 2020).
\162\ See 15 U.S.C. 1692g(d), (e).
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The Bureau proposed Sec. 1006.34(b)(2) to implement FDCPA section
809(a), (d), and (e) by defining the term initial communication. The
proposed definition largely restated the FDCPA and defined initial
communication as 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).\163\
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\163\ See 84 FR 23274, 23335 (May 21, 2019).
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An industry trade group recommended a bankruptcy-specific exception
to the definition of initial communication for debt collectors
collecting debts owed by consumers in bankruptcy. The commenter
expressed concern that certain actions by a debt collector in the
context of a consumer's bankruptcy proceeding, in particular filing a
proof of claim, may be construed to be an initial communication and
therefore trigger the FDCPA section 809(a) validation notice
requirement.\164\ Additionally, according to the commenter, content on
the validation notice, including the debt collection communication
disclosure required by FDCPA section 807(11), could be construed as a
demand for payment that violates the automatic stay provisions of the
United States Bankruptcy Code (Bankruptcy Code) \165\ or, if the
consumer has been relieved of personal liability, the discharge
injunction.\166\ According to the commenter, some courts have opined
that a debt collector would face an irreconcilable conflict between
complying with the FDCPA and the Bankruptcy Code if the debt collector
were required to provide a validation notice to a consumer in
bankruptcy.\167\
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\164\ To receive a distribution from a bankruptcy estate, a
creditor generally must file with the bankruptcy court a proof of
claim, which includes details about an alleged debt or interest. See
Fed. R. Bankr. P. 3002.
\165\ See 11 U.S.C. 362.
\166\ A debtor's bankruptcy petition operates as an automatic
stay that, among other things, prohibits ``any act to collect,
assess, or recover a claim against the debtor that arose before the
commencement of the case.'' 11 U.S.C. 362(a)(6). When a debtor's
liability is discharged through bankruptcy, the discharge ``operates
as an injunction against the commencement or continuation of an
action, the employment of process, or an act, to collect, recover or
offset any such debt as a personal liability of the debtor, whether
or not discharge of such debt is waived.'' 11 U.S.C. 524(a)(2).
\167\ See, e.g., In re Chaussee, 399 B.R. 225, 238 (B.A.P. 9th
Cir. 2008) (``In our opinion, the debt validation provisions
required by the FDCPA clearly conflict with the claims processing
procedures contemplated by the [Bankruptcy] Code and Rules.'').
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The Bureau has determined to interpret the term initial
communication not to include proofs of claim filed in bankruptcy
proceedings. Courts have reached different conclusions about whether
the FDCPA conflicts with the Bankruptcy Code.\168\ The Bureau is
unaware of any case definitively holding that a proof of claim is an
initial communication and that a debt collector therefore must provide
a validation notice after filing a proof of claim. On the other hand,
some courts have held that proofs of claim are not initial
communications because, under FDCPA section 809(d), they are
communications in the form of a formal pleading in a civil action.\169\
Further, the Bureau has decided to permit a debt collector to file a
proof of claim in a bankruptcy proceeding as required by the Bankruptcy
Code without thereby triggering the debt collector's obligation to
provide a validation notice under the FDCPA, because the Bureau finds
it unlikely that consumer harm will result if a consumer does not
receive a validation notice subsequent to a proof of claim in
bankruptcy. The bankruptcy proof-of-claim form is filed under penalty
of perjury, and a person who files a fraudulent claim could be fined up
to $500,000, imprisoned for up to 5 years, or both.\170\ Thus, the
Bureau concludes that bankruptcy proof-of-claim forms generally are
likely to contain accurate information about the debt.
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\168\ See Walls v. Wells Fargo Bank, 276 F.3d 502, 511 (9th Cir.
2002) (holding that the Bankruptcy Code precludes application of
FDCPA requirements in bankruptcy cases); Chaussee, 399 B.R. at 239
(same); contra Simon v. FIA Card Servs., N.A., 732 F.3d 259, 274 (3d
Cir. 2013) (stating that when ``FDCPA claims arise from
communications a debt collector sends a bankruptcy debtor in a
pending bankruptcy proceeding, and the communications are alleged to
violate the Bankruptcy Code or Rules, there is no categorical
preclusion of the FDCPA claims'').
\169\ See Simon, 732 F.3d at 273; Townsend v. Quantum3 Grp.,
LLC, 535 B.R. 415, 423 (M.D. Fla. 2015); In re Brimmage, 523 B.R.
134, 141-42 (Bankr. N.D. Ill. 2015).
\170\ The official bankruptcy proof-of-claim form is available
here: https://www.uscourts.gov/forms/bankruptcy-forms/proof-claim-0.
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Accordingly, to provide clarity for debt collectors while
maintaining protections for consumers, the Bureau is interpreting the
term initial
[[Page 5791]]
communication not to include proofs of claim filed in bankruptcy.
Specifically, the Bureau is adopting new comment 34(b)(2)-1, which
clarifies that a proof of claim that a debt collector files in a
bankruptcy proceeding in accordance with the requirements of the
Bankruptcy Code is a communication in the form of a formal pleading in
a civil action and therefore is not an initial communication for
purposes of Sec. 1006.34. The Bureau adopts this comment as an
interpretation of the phrase ``[a] communication in the form of a
formal pleading in a civil action'' in FDCPA section 809(d). The Bureau
interprets that phrase to include a proof of claim that a debt
collector files in a bankruptcy proceeding in accordance with the
requirements of the Bankruptcy Code.
The Bureau acknowledges that other scenarios may exist in which a
debt collector communicates with a consumer in bankruptcy and
subsequently may be required to provide a validation notice. To the
extent that debt collectors do provide validation notices to consumers
in bankruptcy, Sec. 1006.34(a)(1) implements an existing FDCPA
disclosure requirement and does not create a new tension between the
FDCPA and the Bankruptcy Code. In addition, nothing in the final rule
requires debt collectors to include payment requests in the validation
information; instead, payment requests are optional disclosures that
Sec. 1006.34(d)(3)(iii) permits debt collectors to include along with
the validation information. Consequently, a debt collector concerned
that a payment request would violate the Bankruptcy Code's automatic
stay or discharge injunction is not required to include a payment
request and, additionally, could use the model validation notice,
specified variations of the model notice, or a substantially similar
form, without a payment request and receive a safe harbor under Sec.
1006.34(d)(2).
An industry trade group recommended that the Bureau exclude from
the Sec. 1006.34(b)(2) definition of initial communication the notice
of transfer of loan servicing required by Regulation X.\171\ According
to the commenter, after an FDCPA-covered mortgage debt is transferred
and a consumer receives a servicing transfer notice, the transferee may
not have received all the information necessary to send a validation
notice within the five-day timeframe required by FDCPA section 809(a).
For this reason, the commenter suggested that Regulation X servicing
transfer notices should not trigger the validation information
requirement.
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\171\ Generally, under Regulation X, each transferor servicer
and transferee servicer of any mortgage loan shall provide to the
borrower a notice of transfer for any assignment, sale, or transfer
of the servicing of the mortgage loan. 12 CFR 1024.33(b)(1).
Generally, the transferor servicer shall provide the notice of
transfer to the borrower not less than 15 days before the effective
date of the transfer of the servicing of the mortgage loan. The
transferee servicer shall provide the notice of transfer to the
borrower not more than 15 days after the effective date of the
transfer. The transferor and transferee servicers may provide a
single notice, in which case the notice shall be provided not less
than 15 days before the effective date of the transfer of the
servicing of the mortgage loan. 12 CFR 1024.33(b)(3)(i).
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The Bureau declines to interpret the term initial communication to
exclude servicing transfer notices required by Regulation X. Section
1006.34(b)(2) largely mirrors existing language in FDCPA sections
803(2) and 809(a), (d), and (e) and does not impose new substantive
requirements or obligations on covered entities. As discussed in the
section-by-section analysis of Sec. 1006.34(c), Regulation F will
result in validation notices containing more information about the debt
than they typically do today, but that information is, generally,
either routine account information that owners of debts currently
provide to debt collectors or that owners of debts can include without
significant additional expense. Although the commenter argues that
there may be timing considerations unique to mortgage servicing
transfer notices, the Bureau determines that such timing concerns do
not warrant an exception that would deem a mortgage servicing transfer
notice, even one that does convey information, directly or indirectly,
regarding the debt to the consumer to be excluded from the definition
of an ``initial communication.''
Other commenters asked the Bureau to clarify whether a consumer-
initiated communication, such as a consumer visiting a debt collector's
website or a consumer leaving a voicemail with a debt collector, would
constitute an initial communication under proposed Sec. 1006.34(b)(2).
The Bureau notes that, under Sec. 1006.34(b)(2), for an initial
communication to occur, a debt collector must ``convey[ ] information,
directly or indirectly, regarding the debt. . . .'' Section
1006.34(b)(2) is clear that, if a debt collector conveys no
information, directly or indirectly, regarding the debt, an initial
communication has not occurred and, consequently, the validation notice
requirement has not been triggered. Thus, a consumer's voicemail left
with a debt collector generally would not qualify as an initial
communication. Similarly, an initial communication generally would not
include a consumer's visit to a debt collector's website, unless during
that visit the debt collector conveyed information regarding the
consumer's specific debt.\172\
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\172\ For example, a debt collector potentially could convey
information regarding the debt during a consumer's visit to a
website through a website chat feature.
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For the reasons discussed above, the Bureau is finalizing Sec.
1006.34(b)(2) largely as proposed but with a revision to clarify that
proofs of claim filed in bankruptcy proceedings are not initial
communications.
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.\173\ The Bureau proposed in
Sec. 1006.34(c)(2)(vii) through (ix) to interpret the phrase ``amount
of the debt'' to mean that debt collectors must disclose the amount of
the debt as of a particular ``itemization date.'' \174\ To facilitate
compliance with proposed Sec. 1006.34(c)(2), the Bureau proposed Sec.
1006.34(b)(3) to define itemization date as one of four reference dates
for which a debt collector can ascertain the amount of the debt. The
proposed reference dates were the last statement date, the charge-off
date, the last payment date, and the transaction date.\175\
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\173\ See 15 U.S.C. 1692g(a)(1).
\174\ Proposed Sec. 1006.34(c)(2)(vii) and (viii) would have
required 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 have required 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, which have been renumbered in the
final rule, see the section-by-section analysis of Sec.
1006.34(c)(2)(vi) through (viii).
\175\ See 84 FR 23274, 23335-37 (May 21, 2019). The reference
dates were set forth in proposed Sec. 1006.34(b)(3)(i) through (iv)
and are discussed in the section-by-section analysis of those
paragraphs below.
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The proposed definition of itemization date was 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 was intended
to include dates for which debt collectors typically may receive
account information from debt owners and that, therefore, debt
[[Page 5792]]
collectors would be able to use to provide the disclosures proposed in
Sec. 1006.34(c)(viii) and (ix).
Proposed comment 34(b)(3)-1 explained that a debt collector could
select any of the four reference dates as the itemization date. Once a
debt collector used one of the reference dates for a specific debt in a
communication with a consumer, however, the debt collector would be
required to use that reference date for that debt consistently when
providing disclosures pursuant to Sec. 1006.34 to that consumer.
For the reasons discussed below, the Bureau is adopting Sec.
1006.34(b)(3) and its related commentary largely as proposed but with
minor wording changes and to include an additional reference date in
response to feedback: The judgment date. The Bureau also is adopting
new comment 34(b)(3)-2, which provides that a debt collector may use a
different reference date than a prior debt collector used for the same
debt.
Some industry commenters supported the itemization date definition
in proposed Sec. 1006.34(b)(3). At least two industry commenters
supported providing debt collectors with a choice of several reference
dates because a debt collector might not be able ascertain the amount
of the debt on a single reference date. According to an industry trade
group commenter, the proposed reference dates would provide adequate
flexibility, as a creditor's information systems will have recorded at
least one of those dates for any given debt. Another industry trade
group commenter stated that the proposal's standardization of account
information would allow debt collectors to build better internal
procedures and improve consumer communication practices. An industry
commenter stated that proposed Sec. 1006.34(b)(3) would require
significant client education and information technology investment but
ultimately concluded that the framework was feasible.
Other commenters objected to proposed Sec. 1006.34(b)(3). An
industry commenter stated that creditors may provide debt collectors
information about multiple reference dates. According to this
commenter, analyzing creditor records to identify and organize account
information as of a single reference date would be complicated, costly,
and increase the likelihood of validation notice errors. A group of
consumer advocate commenters stated that, instead of permitting debt
collectors to choose between reference dates, Sec. 1006.34(b)(3)
should define the itemization date as a single reference date supported
by consumer testing.
The Bureau determines that Sec. 1006.34(b)(3) will facilitate
compliance with the itemization date-related requirements in final
Sec. 1006.34(c)(2)(vi) through (viii). Account information available
to debt collectors may vary by debt type because some account
information is not universally tracked or used across product markets.
To facilitate the ability of debt collectors across debt markets to
comply with Regulation F, the final rule permits debt collectors to
determine the itemization date by selecting from one of five reference
dates for which they can ascertain the amount of the debt.
The Bureau finds that this framework will not result in undue
industry burden. Debt collectors today routinely analyze and organize
account information included in files from creditors when creditors
place accounts for collection. Debt collectors should be able to use or
build on these existing functions to select an itemization date based
on the definition in Sec. 1006.34(b)(3). Therefore, even if creditors
provide or retain account information based on multiple reference
dates, debt collectors should not face substantial new costs or
litigation risks from complying with Sec. 1006.34(b)(3).
The Bureau declines consumer advocates' suggestion to specify a
single reference date. As discussed in the proposal, the Bureau
considered requiring debt collectors to provide an itemization of the
debt based on a single reference date but rejected that approach
because of the infeasibility of identifying a single reference date
that applies to all debt types across all relevant markets.\176\ The
group of consumer advocate commenters that recommended a single
reference date did not suggest or provide evidence that it would be
feasible to identify a single date that would be appropriate for all
types of debt. The Bureau also declines to exercise its discretion to
conduct consumer testing to attempt to determine an optimal itemization
date for debt collectors to use within each debt collection market
(e.g., mortgage debt, credit card debt, student loan debt, medical
debt, and so on). The Bureau determines that such testing is not
necessary or warranted, because the Bureau finds that debt collectors'
use of any one of the five itemization dates set forth in Sec.
1006.34(b)(3) should correspond, in most cases, to events in the debt's
history that consumers may recall or be able to verify with records.
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\176\ See 84 FR 23274, 23336 (May 21, 2019).
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In the proposal, the Bureau requested comment on whether the
itemization date should be structured as a prescriptive ordering of
reference dates, such as a hierarchy that would permit a debt collector
to use a date listed later in the hierarchy only if the debt collector
did not have information about any dates earlier in the hierarchy.
Industry and industry trade group commenters generally favored the
proposed flexible approach. According to commenters, a prescriptive
ordering would significantly increase costs and litigation risk for
debt collectors. As noted above, consumer advocates expressed concern
that the proposed approach would result in disclosure of itemization
dates that are not meaningful to consumers and urged the Bureau to use
consumer testing to determine a date that would be meaningful.
The Bureau agrees that a prescriptive ordering could impose undue
costs and litigation risks for debt collectors. In addition, as
discussed below in the section-by-section analysis of Sec.
1006.34(b)(3)(i) through (v), each reference date may be meaningful to
consumers because it corresponds to a notable event in the debt's
history that consumers may recall or be able to verify with records.
Because each reference date may be meaningful to a consumer, and
because each reference date may be more or less meaningful to the
consumer than one of the other reference dates depending on the
circumstances surrounding the debt, there may not be a benefit to
consumers if the Bureau were to structure the dates as a hierarchy. The
Bureau therefore declines to adopt a prescriptive ordering of the
reference dates.
Some commenters who did not object to the proposed itemization date
framework in principle either raised concerns that the proposed
reference dates would not accommodate debts in all product markets or
recommended additional reference dates. At least one industry trade
group commenter asked the Bureau to clarify what reference date debt
collectors should use for debts in bankruptcy. An industry commenter
stated that the proposal might not accommodate a debt a consumer owes
to a government, such as a tax debt. According to this commenter,
although the FDCPA does not cover many debts consumers owe to
governments,\177\ some debt collectors who collect debts on behalf of
Federal government agencies are legally or contractually obliged to
[[Page 5793]]
abide by the FDCPA.\178\ This commenter stated that the proposed
reference dates might not accommodate tax debt because, in some
instances, it will be the case that no previous statement was provided,
no prior payment was made, and there was no transaction per se between
the consumer and the government creditor.
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\177\ FDCPA section 803(5) defines a ``debt'' as any obligation
arising out of a transaction ``primarily for personal, family, or
household purposes.'' 15 U.S.C. 1692a(5). According to the
commenter, a debt a consumer owes to a government in many cases does
not meet this definition.
\178\ For example, debt collectors who collect on behalf of the
Internal Revenue Service under a ``qualified tax collection
contract'' generally are required by statute to comply with the
FDCPA. See 26 U.S.C. 6306(g) (``The provisions of the [FDCPA] shall
apply to any qualified tax collection contract, except to the extent
superseded by section 6304, section 7602(c), or by any other
provision of this title.'').
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According to another commenter, an additional reference date for
student loan debt is necessary because debt collectors collecting
Federal student loans do not receive any of the proposed reference
dates at the time of placement. Some commenters suggested that the
Bureau permit debt collectors to use the date of default as defined by
the Higher Education Act of 1965; commenters argued that this date is a
widely used reference date in the student loan market.\179\ By
contrast, an FTC commissioner urged the Bureau not to use the Higher
Education Act's definition of default and instead to use the date a
student loan borrower becomes 90 days past due.
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\179\ The Higher Education Act defines ``default'' as ``the
failure of a borrower . . . to make an installment payment when due,
or to meet other terms of the promissory note, the Act, or
regulations as applicable, if the Secretary or guaranty agency finds
it reasonable to conclude that the borrower and endorser, if any, no
longer intend to honor the obligation to repay, provided that this
failure persists for--(1) 270 days for a loan repayable in monthly
installments; or (2) 330 days for a loan repayable in less frequent
installments.'' 34 CFR 682.200(b).
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In addition, an industry commenter recommended that Sec.
1006.34(b)(3) incorporate: (1) The date a creditor places a debt with
the debt collector, or (2) the date the debt collector provides
validation information to the consumer. Another industry commenter
suggested that Sec. 1006.34(b)(3) incorporate the date of a previously
obtained court judgment.
The Bureau determines that Sec. 1006.34(b)(3)--in conjunction with
the five reference dates described in Sec. 1006.34(b)(3)(i) through
(v)--provides adequate flexibility for debts in all product markets,
including for debts in bankruptcy. A debt collector may choose which of
the five reference dates to use based on the facts and circumstances
surrounding the history of the debt--e.g., whether a creditor provided
statements, whether the consumer made payments--and the information
available to the debt collector.
With respect to which reference date a debt collector should use to
itemize a tax obligation a consumer owes to a government, the date the
tax was assessed may be a transaction date for tax debt, as discussed
in the section-by-section analysis of Sec. 1006.34(b)(3)(iv). In
addition, a date on which the government provided a written invoice or
tax bill may constitute a last statement date for tax debt under Sec.
1006.34(b)(3)(i).
The Bureau determines that a reference date specific to student
loan debt is unnecessary and unwarranted because the reference dates in
Sec. 1006.34(b)(3) are sufficient. For virtually any student loan
debt, there will be a last statement date as described in Sec.
1006.34(b)(3)(i), a last payment date as described in Sec.
1006.34(b)(3)(ii), or a transaction date as described in Sec.
1006.34(b)(3)(iv). For many student loan debts, all three reference
dates will exist.
The Bureau also declines to incorporate into Sec. 1006.34(b)(3)
the date of placement or the date the debt collector provides the
validation notice. From a consumer's perspective, these dates do not
correspond to notable events in a debt's history that the consumer may
recall or be able to verify. As noted above, however, in response to
feedback, the Bureau is adding a new reference date called the
``judgment date,'' which is the date of a final court judgment that
determines the amount of the debt owed by the consumer. The judgment
date is discussed in the section-by-section analysis of final Sec.
1006.34(b)(3)(v).
With respect to the Bureau's request for comment about whether a
subsequent debt collector should be permitted to use a different
itemization date than a prior debt collector used for the same debt,
industry and industry trade group commenters generally agreed that
requiring debt collectors to use the same reference date as a prior
collector would be burdensome and impractical. These commenters stated
that debt collectors would be unable to ensure compliance with such a
requirement because a creditor might not disclose the reference date
that a prior debt collector used. By contrast, an academic and a
consumer advocate commenter stated that a debt collector should be
required to use the same itemization date the prior debt collector used
because a consumer may not be able to assess the amount owed if the
subsequent debt collector uses a different reference date.
The final rule permits a debt collector to use a different
itemization date than a prior debt collector used for the same debt.
The availability of account information, including about a prior debt
collector's activities, to a subsequent debt collector depends on the
creditor or debt buyer who places the debt with the subsequent debt
collector. If the creditor or debt buyer does not provide the
previously used itemization date, the subsequent debt collector may be
unable to determine that date, and therefore fail to comply with a
requirement to use it. It is conceivable that, were the rule to require
use of the same itemization date previously used, debt collectors and
creditors could begin to structure their contracts and processes to
enable creditors and debt collectors to transfer a previously used
itemization date. However, establishing such contracts and processes
would likely impose costs on creditors and debt collectors,\180\ and
those costs would likely be passed on to consumers. Further, the Bureau
finds that the costs are not warranted because permitting a subsequent
debt collector to use a different itemization date will maintain
protections for consumers, as long as the debt collector uses one of
the five itemization dates specified in the rule. As stated above, the
Bureau finds that the five itemization dates are all dates that should
result in reasonably meaningful and recognizable debt amounts for
consumers. Accordingly, the Bureau is adopting new comment 34(b)(3)-2
to clarify that, when selecting an itemization date pursuant to Sec.
1006.34(b)(3), a debt collector may use a different reference date than
a prior debt collector who attempted to collect the debt.
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\180\ In order for the contractual framework and processes to
achieve the desired result of a creditor passing the previously used
itemization date to the current debt collector, creditors would have
to structure contracts to require the previous debt collectors to
pass back to the creditors the previously used itemization dates so
that the creditors, in turn, can pass them on to the current debt
collectors. Developing and implementing such contractual provisions
and processes across the debt collection industry would likely
impose potentially significant costs.
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For the reasons set forth above, the Bureau is finalizing Sec.
1006.34(b)(3) and its related commentary with minor wording changes and
to include a new reference date, the judgment date, in Sec.
1006.34(b)(3)(v). In addition, the Bureau is adopting new comment
34(b)(3)-2 to explain that a debt collector may use a different
reference date than a prior debt collector. The Bureau is finalizing
Sec. 1006.34(b)(3) and Sec. 1006.34(b)(3)(i) through (v), discussed
below, 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
[[Page 5794]]
authority under Dodd-Frank Act section 1032(a) 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)
The Bureau proposed in Sec. 1006.34(b)(3)(i) to permit debt
collectors to use as the itemization date the date of the last periodic
statement or written account statement or invoice provided to the
consumer. Proposed comment 34(b)(3)(i)-1 explained 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).
Commenters disagreed about whether the Bureau should adopt the last
statement date as a permissible reference date. Several industry and
industry trade group commenters supported the proposal, stating that,
for some debts, the last statement date is readily available to debt
collectors and recognizable to consumers. Some commenters stated that,
even when creditors do not initially provide periodic statements to
debt collectors, such statements are available upon request. However,
some consumer advocate commenters stated that the last statement date
may not be meaningful to some consumers and may not help them recognize
a debt. For example, a commenter stated that a creditor may send
duplicates of the same periodic statement or invoice to a consumer
multiple times, even when the balance is changing due to interest or
fees. In this scenario, the commenter said, the last statement a
consumer received would not reflect the actual amount owed and would
not be helpful to the consumer.
At least two commenters stated that a validation notice provided by
a prior debt collector should not constitute a last statement for
purposes of Sec. 1006.34(b)(3)(i). According to a consumer advocate
commenter, the date of a prior validation notice will not be meaningful
to consumers and, consequently, an itemization as of that date will not
help consumers recognize an alleged debt. An industry trade group
commenter advised against relying on a validation notice provided by a
prior debt collector because creditors generally do not provide
previously sent validation notices to subsequent debt collectors.
The Bureau determines that the last statement date may be used as a
reference date. Many creditors or third parties acting on a creditor's
behalf routinely provide consumers with account statements, such as
periodic statements or invoices. If a consumer has received an account
statement from a creditor, the consumer either may recognize the date
that they last received a statement or may be able to verify that date
in their records.\181\ Further, last statement information is often
readily available to debt collectors, as debt collectors frequently
receive, or have the ability to request, last statement information or
records from creditors.
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\181\ This is likely to be true even if the consumer has
received a duplicative statement as the last statement. In that
scenario, under Sec. 1006.34(c)(2)(vii), which requires a debt
collector to disclose the amount of the debt on the itemization
date, the debt amount that the debt collector discloses to the
consumer must be the debt amount as of that last statement date.
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The Bureau determines that only a last statement or invoice
provided to a consumer by a creditor, as opposed to a statement, such
as a validation notice, provided by a debt collector, should serve as a
basis for a last statement date as defined in Sec. 1006.34(b)(3)(i)
because consumers may be more likely to recall or be able to verify a
statement sent by a creditor than by a debt collector. This may be true
even if a creditor issues a statement after the debt has gone into
collection. Under Sec. 1006.34(b)(3)(i), such a new statement may
serve as the last statement for purposes of the itemization date.
For these reasons, the Bureau is finalizing Sec. 1006.34(b)(3)(i)
and its related commentary with revisions to provide that only a
statement or invoice provided by a creditor qualifies as a last
statement for purposes of Sec. 1006.34(b)(3)(i). Specifically, the
Bureau is revising Sec. 1006.34(b)(3)(i) to state that the last
statement date is the date of the last periodic statement or written
account statement or invoice provided to the consumer by a creditor.
The Bureau also is revising comment 34(b)(3)(i)-1 to provide that a
statement or invoice provided by a debt collector is not a last
statement for purposes of Sec. 1006.34(b)(3)(i), unless the debt
collector is also a creditor.
34(b)(3)(ii)
The Bureau proposed in Sec. 1006.34(b)(3)(ii) to permit debt
collectors to use the date that the debt was charged off as the
itemization date.
An industry trade group and an industry commenter supported the use
of the charge-off date, particularly for debts associated with open-end
credit, such as credit cards. The commenters stated that charge off is
a regulated Federal standard for consumer credit \182\ and would be a
reliable reference date for itemization-related disclosures in some
circumstances. An industry trade group commenter stated that creditors
frequently provide debt collectors account information as of the
charge-off date. Commenters stated that consumers may recognize the
amount due as of the charge-off date because some creditors provide
charge-off statements that reflect the charge-off balance and, they
said, consumers have the ability to review these charge-off statements.
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\182\ 65 FR 36903 (June 12, 2000); Off. of the Comptroller of
the Currency, Bulletin 2000-20, Uniform Retail Credit Classification
and Account Management Policy (June 20, 2000).
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Other commenters objected to including the charge-off date as a
permissible reference date. An industry commenter stated that not all
creditors maintain account information as of the charge-off date or
communicate that information to debt collectors at placement. Consumer
advocates and at least two industry trade group commenters stated that,
although the charge-off date may be widely used for some financial
products, it may not resonate with consumers or help them recognize a
debt because consumers might not know the charge-off date.\183\
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\183\ An individual commenter requested clarification whether,
for medical debt, the date of charge off is the date a creditor
places the account for collection. The Bureau is not aware that such
a definition is commonly used.
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The Bureau determines that the charge-off date may be used as a
reference date. Creditors frequently provide account information as of
the charge-off date for various types of debts, including credit card
debt, to debt collectors. The Bureau acknowledges that not all
creditors maintain account information as of the charge-off date or
provide such information to debt collectors, but the charge-off date is
only one of five reference dates specified in the final rule. Further,
account information at charge off is readily available to a
sufficiently large number of debt collectors--including collectors of
credit card debt--to justify its adoption as a reference date. In
addition, while consumers might not know the specific charge-off date,
they may, in fact, recognize account information as of approximately
the charge-off date because charge off often occurs at around the time
the creditor provided a last account statement. Further, as noted by
commenters, some creditors may provide consumers with charge-off
statements that reflect the balance as of the charge-off date.
Accordingly, the Bureau is finalizing Sec. 1006.34(b)(3)(ii) as
proposed.
[[Page 5795]]
34(b)(3)(iii)
The Bureau proposed in Sec. 1006.34(b)(3)(iii) to permit debt
collectors to use the date the last payment was applied to the debt as
the itemization date.
Industry and consumer advocate commenters generally supported
proposed Sec. 1006.34(b)(3)(iii). These commenters agreed that account
information as of the last payment date is readily available to debt
collectors and recognizable to consumers. According to one consumer
advocate, a consumer may have a general idea of when a bill was last
paid, especially if the consumer's delinquency was related to a
significant life event, such as a job loss, a divorce, or an illness.
Accordingly, the Bureau determines that the last payment date as
defined in Sec. 1006.34(b)(3)(iii) is an appropriate reference date.
Commenters asked the Bureau to clarify whether a third-party
payment could serve as the basis for the last payment date. For
example, several trade group commenters stated that, if a consumer's
car is repossessed, the sale of the collateral may be applied to the
consumer's balance after receipt of the consumer's last payment.
Another commenter raised the possibility of third-party payments and
insurance adjustments in the medical debt context. A group of consumer
advocates recommended that only a payment from a consumer to a creditor
should serve as the basis for a last payment date. According to this
commenter, a last consumer payment to a prior debt collector may not be
significant or recognizable to a consumer.
The Bureau determines that third-party payments may serve as the
basis for the last payment date under Sec. 1006.34(b)(3)(iii). The
Bureau finds that the date of a third-party payment on the debt, such
as a payment from an auto repossession agent or an insurance company,
may be meaningful to a consumer because such payments may be
accompanied by a notice to the consumer, and therefore the consumer
could recognize or verify with records the date of such payments.
The Bureau also determines that a consumer's payment to a prior
debt collector may serve as the last payment date. The Bureau finds
that consumers are at least as likely to recognize or be able to verify
with records the status of the debt as of the consumer's last payment
to a prior debt collector as consumers are able to recognize or verify
an earlier (perhaps much earlier) payment to the creditor, particularly
if the debt has been outstanding for a long time.
For these reasons, the Bureau is finalizing Sec.
1006.34(b)(3)(iii) as proposed to provide that the last payment date is
the date the last payment was applied to the debt. The Bureau also is
adopting new comment 34(b)(3)(iii)-1, which clarifies that a third-
party payment applied to the debt, such as a payment from an auto
repossession agent or an insurance company, can be a last payment for
purposes of Sec. 1006.34(b)(3)(iii).
34(b)(3)(iv)
The Bureau proposed in Sec. 1006.34(b)(3)(iv) to permit debt
collectors to use as the itemization date the date of the transaction
that gave rise to the debt. Proposed comment 34(b)(3)(iv)-1 explained
that the transaction date is the date that a creditor provided, or made
available, a good or service to a consumer, and it included examples of
transaction dates. The comment also explained 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.
A number of commenters, including consumer advocates, industry
trade groups, and at least one industry commenter, supported including
the transaction date in the itemization date definition. According to
several commenters, consumers likely would recognize the transaction
date as defined by proposed Sec. 1006.34(b)(3)(iv). At least one
commenter stated that creditors provide account information as of the
transaction date for some debt types.
With respect to proposed comment 34(b)(3)(iv)-1, a consumer
advocate commenter stated that, if a debt has more than one potential
transaction date, the debt collector should not be permitted to choose
which date to use as the transaction date for purposes of Sec.
1006.34(b)(3)(iv). The commenter urged the Bureau to develop a
prescriptive standard for identifying the appropriate transaction date
for scenarios where multiple transaction dates exist.
Several commenters also stated that determining the transaction
date may be problematic in some circumstances. For example, a consumer
advocate commenter explained that, while determining the transaction
date is straightforward with one-time transactions, identifying the
transaction date may be more difficult with respect to contracts for
ongoing services, such as gym memberships, cellular telephone
contracts, or lawn care service contracts. In addition, an industry
commenter stated that medical providers may combine multiple dates of
service into one account or use family billing that combines separate
bills for family members into one account. The commenter suggested
that, if an account in collection reflects services on multiple dates
or for multiple individuals, identifying a transaction date may be
difficult for the debt collector.
The Bureau finds that, for some debts, creditors may provide debt
collectors with account information related to the transaction date. In
addition, consumers may recognize the amount of a debt on the
transaction date, which may be reflected on a copy of a contract or a
bill provided by a creditor. For this reason, the Bureau is finalizing
Sec. 1006.34(b)(3)(iv) as proposed to provide that the transaction
date, which is the date of the transaction that gave rise to the debt,
can be the itemization date for purposes of Sec. 1006.34(b)(3).
As commenters noted, various dates may serve as potential
transaction dates under Sec. 1006.34(b)(3)(iv). For example, potential
transaction dates may include the date a service or good was provided
to a consumer or the date that a consumer signed a contract for a
service or good. In the case of a consumer's tax debt, the date a
government assessed the tax may be a transaction date for purposes of
Sec. 1006.34(b)(3)(iv).\184\ Nevertheless, the Bureau declines to
adopt a prescriptive standard for identifying the only transaction date
debt collectors may use. Both the contract date and the service date
are significant dates that may resonate with a consumer. Because the
consumer may recognize the amount of the debt on those dates, the
Bureau finds that either date may serve as the transaction date.
Further, the Bureau determines that developing a more prescriptive
standard that would apply to all debt types is not feasible. For this
reason, the Bureau is finalizing comment 34(b)(3)(iv)-1, with minor
changes for clarity, to provide that, if a debt has more than one
transaction date, a debt collector may use any such date as the
transaction date, but the debt collector must use whichever date the
debt collector selects consistently, as described in comment 34(b)(3)-
1. Comment 34(b)(3)(iv)-1 also addresses concerns regarding identifying
the transaction date for medical debt that includes services on
[[Page 5796]]
multiple dates or for multiple individuals.\185\
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\184\ See the discussion of tax debts in the introductory
section-by-section analysis of Sec. 1006.34(b)(3).
\185\ Because of differences between various debt types and the
particular facts and circumstances of any given transaction, Sec.
1006.34(b)(3)(iv) provides debt collectors flexibility when
selecting a transaction date. However, if the total amount of a debt
in collection includes amounts incurred on different dates of
service, the Bureau believes that, even though Sec.
1006.34(b)(3)(iv) does not require it, debt collectors generally
will select the last date of service as the transaction date. This
date may be most recognizable to consumers. Further, disclosing
itemization-related information as of the last date, as opposed to
an earlier date, likely would be easier for a debt collector.
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The Bureau recognizes that the transaction date may be difficult to
determine in some circumstances. However, under the framework in Sec.
1006.34(b)(3) for determining the itemization date, the transaction
date is one of five reference dates from which a debt collector may
choose. Section 1006.34(b)(3) does not require a debt collector to use
the transaction date as the reference date for itemization-related
disclosures. If a debt collector cannot determine the transaction date,
the debt collector may use another reference date.
34(b)(3)(v)
As discussed above, the proposed definition of itemization date
included four reference dates. In response to the proposed definition,
an industry commenter suggested that the Bureau add a fifth date--the
date of a court judgment. The Bureau has determined to adopt this
recommendation. As a general matter, debt collectors will know if a
court judgment against a consumer exists and consumers are likely to
recognize the date of a court judgment against them or be able to
verify the date with records. Further, the amount of the debt as of the
date of a court judgment is verifiable as it will have been
memorialized in court records. Accordingly, the Bureau is finalizing
Sec. 1006.34(b)(3)(v) to permit debt collectors to use as the
itemization date the judgment date, which is the date of a final court
judgment that determines the amount of the debt owed by the consumer.
34(b)(4) Validation Notice
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 specified information (i.e., validation
information), unless that information is contained in the initial
communication or the consumer has paid the debt. Debt collectors and
others commonly refer to the written notice required by FDCPA section
809(a) as a ``validation notice'' or a ``g notice.'' The Bureau
proposed in Sec. 1006.34(b)(4) to define validation notice to mean a
written or electronic notice that provides the validation information
described in Sec. 1006.34(c).\186\ The Bureau received no comments
regarding proposed Sec. 1006.34(b)(4) and is finalizing it with a
minor wording change for consistency with final Sec. 1006.34(c).
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\186\ See 84 FR 23274, 23337 (May 21, 2019).
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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.\187\ 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. Similarly,
if a consumer requests the name and address of the original creditor in
writing within 30 days of receiving the validation information, the
debt collector must cease collection of the debt until the debt
collector obtains and mails such information to the consumer. FDCPA
section 809(b) also prohibits a debt collector, during the 30-day
period for written disputes and original-creditor information requests,
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.''
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\187\ 15 U.S.C. 1692g(b).
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As described in the section-by-section analysis of Sec.
1006.34(c)(3)(i) through (iii), the Bureau proposed to require debt
collectors to disclose to a consumer the date certain on which the
consumer's verification rights under FDCPA section 809(b) expire. To
facilitate compliance with that proposed requirement, proposed Sec.
1006.34(b)(5) defined 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.\188\ To clarify how to calculate the end of the validation
period--including how debt collectors may disclose a period that
provides consumers additional time beyond the required 30 days to
exercise their validation rights--proposed Sec. 1006.34(b)(5) provided
that a debt collector may assume that a consumer receives the
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 comment 34(b)(5)-1 clarified 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.
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\188\ 84 FR 23274, 23337-38 (May 21, 2019).
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For the reasons discussed below, the Bureau is finalizing proposed
Sec. 1006.34(b)(5) and proposed comment 34(b)(5)-1 (which is
renumbered as comment 34(b)(5)-2) with minor wording changes for
clarity and consistency with other provisions of Regulation F. The
Bureau is adopting new comment 34(b)(5)-1 to illustrate how a debt
collector may calculate the end of the validation period before sending
the validation notice.
A number of commenters, including industry commenters, supported
proposed Sec. 1006.34(b)(5). According to several commenters, the
proposed definition is consistent with current industry practices. For
example, with respect to the proposed five-day delivery timing
assumption, industry commenters stated that debt collectors generally
assume that a consumer receives a validation notice five to eight days
after mailing. Consumer advocate commenters objected to the proposed
definition, stating that debt collectors should be obligated to honor
consumer verification requests at any time, not only during the
validation period.
Some commenters recommended lengthening the proposed five-day
delivery timing assumption. A consumer advocate commenter and an
industry trade group commenter suggested that the validation period
definition should assume that the consumer receives the validation
notice seven days after the debt collector mails it to account for
delays or bulk mail delivery.\189\ Another trade group
[[Page 5797]]
commenter recommended a fixed ten-day assumption that omits
consideration of weekends and holidays.
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\189\ United States Postal Service (USPS) delivery times for
Standard Mail, commonly referred to as bulk mail, are typically
longer than delivery times for first-class mail. For example, based
on the USPS Originating Service Standards, bulk mail originated in
Washington, DC takes six days to reach New York City, seven days to
reach Denver, and nine days to reach Seattle. By contrast, first-
class mail from Washington, DC reaches New York City in two days and
Denver and Seattle in three days. See U.S. Postal Serv., Service
Standards Maps, https://postalpro.usps.com/ppro-tools/service-standards-maps (last visited Nov. 16, 2020).
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Other commenters recommended shortening the delivery timing
assumption. For example, an industry trade group commenter recommended
that the Bureau eliminate the assumption entirely and clarify that the
validation period commences upon mailing of a validation notice. Other
industry commenters urged the Bureau to shorten the assumption for
near-instantaneous communication methods, such as electronic or oral
delivery. In contrast, at least two industry trade groups commenters
and a consumer advocate commenter recommended a uniform validation
period across delivery methods. According to an industry trade group
commenter, if the validation period is not the same for all delivery
methods, consumers may be confused if they receive validation notices
through different delivery methods with different due dates.
After considering this feedback, the Bureau determines that a
validation period definition will facilitate debt collectors'
compliance with the requirement in Sec. 1006.34(c)(3) to disclose to a
consumer the date certain on which the consumer's FDCPA section 809(b)
verification rights expire. The Bureau declines, as requested by
consumer advocate commenters, to require a debt collector to comply
with a verification request that a consumer submits after the 30-day
period provided by the statute has expired. FDCPA section 809(b)
establishes a 30-day period for consumers to exercise their
verification rights.\190\
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\190\ Although the FDCPA and this implementing regulation do not
require a debt collector to provide verification after the
validation period expires, a debt collector nevertheless may choose
to do so. The Bureau has received feedback from debt collectors and
at least one industry trade group that many debt collectors respond
to disputes with verification, and to original-creditor-information
requests, after the validation period has expired.
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The Bureau also declines to modify the length of the five-day
delivery timing assumption. The Bureau proposed Sec. 1006.34(b)(5) on
the basis that a consumer typically receives a validation notice no
more than five days (excluding legal public holidays, Saturdays, and
Sundays) after the debt collector provides the notice. Based on its
market monitoring activities, the Bureau understands that debt
collectors typically send consumer communications by first-class mail,
which generally is delivered in three business days or less.\191\ The
Bureau is unaware that debt collectors typically use bulk mail to
deliver validation notices, and commenters offered no evidence
otherwise. For these reasons, the Bureau declines to extend the five-
day delivery timing assumption.
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\191\ See U.S. Postal Serv., Service Standards Maps, https://postalpro.usps.com/ppro-tools/service-standards-maps (last visited
Dec. 1, 2020).
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The Bureau also declines to shorten the validation period's five-
day delivery timing assumption. The FDCPA's 30-day validation period
begins to run when the consumer receives the validation
information.\192\ If the 30-day clock began to run upon the debt
collector's mailing of the validation notice, as some commenters
suggested, the consumer would be deprived of the full 30-day period
provided by the FDCPA to respond to the notice. Further, the Bureau
declines to shorten the length of the validation period for validation
information provided by communication methods such as electronic
delivery. A delivery timing assumption that varied by delivery method
could pose compliance challenges and incentivize use of one
communication method over another. Therefore, as proposed, the five-day
delivery timing assumption applies uniformly to all validation
information delivery methods.
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\192\ FDCPA section 809(a)(3) requires the validation notice to
include ``a statement that unless the consumer, within thirty days
after receipt of the notice, disputes the validity of the debt, or
any portion thereof, the debt will be assumed to be valid by the
debt collector.'' 15 U.S.C. 1692g(a)(3) (emphasis added).
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A group of consumer advocates asked the Bureau to define the
validation period based solely on when the consumer is assumed to
receive the validation information. In other words, this commenter
requested that the rule not permit the date that a consumer actually
received the validation notice to serve as the basis of the validation
period. According to this commenter, relying solely on the date that
the consumer is assumed to receive the information would prevent
confusion if the date the consumer received the notice and the date the
debt collector assumed the consumer received it are different.
The Bureau declines to adopt this suggestion. The FDCPA's 30-day
validation period begins to run when the consumer receives the
validation information. Nevertheless, the Bureau determines that, at
least in certain contexts, the date that the consumer is assumed to
receive the validation notice is the only date information that a debt
collector will have at the time the validation information is
generated. Specifically, a debt collector who sends a written or
electronic validation notice will not know, at the time the notice is
generated, the date on which the consumer will receive the notice and,
therefore, must be able to use the date of assumed receipt to calculate
the validation period end date. The Bureau is adding new comment
34(b)(5)-1 to clarify that, in such circumstances, debt collectors may
rely on the date of assumed receipt, even if they learn after sending
the notice that the consumer received the validation information on a
different date.
Several industry and industry trade group commenters expressed
concern about the use of the term ``legal public holiday'' in proposed
Sec. 1006.34(b)(5). According to these commenters, legal public
holidays may include State and local holidays that the debt collector
is not aware of and cannot reasonably ascertain. In response to these
concerns, and consistent with Sec. 1006.22(c)(1) in the November 2020
Final Rule,\193\ the Bureau is revising Sec. 1006.34(b)(5) to provide
that a debt collector may assume that a consumer receives the
validation information on any date that is at least five days
(excluding legal public holidays identified in 5 U.S.C. 6103(a),
Saturdays, and Sundays) after the debt collector provides it.
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\193\ 85 FR 76734, 76833-34, 76892 (Nov. 30, 2020).
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Several industry commenters asked the Bureau to clarify whether a
debt collector must receive a consumer's verification request before
the validation period end date, or whether the consumer need only send
the request by the validation period end date for the request to be
effective. The Bureau determines that a consumer's verification
request--whether an original-creditor information request or a
dispute--is effective if the consumer sends or submits the request
within the 30-day period established in Sec. 1006.34(b)(5), even if
the debt collector does not receive the request until after the 30-day
period. In specifying requirements for debt collectors' responses to
consumers' verification requests, Sec. 1006.38(c) and (d)(2) of the
Bureau's November 2020 Final Rule implemented FDCPA section 809(b) by
providing that, upon receipt of an original-creditor information
request (Sec. 1006.38(c)) or a dispute (Sec. 1006.38(d)(2))
``submitted by the consumer in writing within the validation period, a
debt collector must cease collection of the debt . . . .'' (emphasis
added). The Bureau determines that a consumer's original-
[[Page 5798]]
creditor information request or dispute has been ``submitted by the
consumer'' for purposes of Sec. 1006.38(c) and (d)(2) if the consumer
sends or submits the request within the 30-day period established in
Sec. 1006.34(b)(5), even if the debt collector does not receive the
request until after the 30-day period.
For the reasons discussed above, the Bureau is adopting Sec.
1006.34(b)(5) to provide that validation period means the period
starting on the date that a debt collector provides the validation
information and ending 30 days after the consumer receives or is
assumed to receive it. Section 1006.34(b)(5) also specifies that a debt
collector may assume that a consumer receives the validation
information on any date that is at least five days (excluding legal
public holidays identified in 5 U.S.C. 6103(a) (i.e., federally
recognized public holidays), Saturdays, and Sundays) after the debt
collector provides it.
Proposed comment 34(b)(5)-1 clarified 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.
At least two industry trade group commenters stated that proposed
comment 34(b)(5)-1 was consistent with current industry practice.
According to these commenters, if a validation notice is returned as
undeliverable, debt collectors typically send a new validation notice
and provide a new period for consumers to exercise their verification
rights. A law firm commenter asked the Bureau to provide additional
guidance on a debt collector's duties if a validation notice is
returned as undeliverable after the validation period has expired.
The Bureau concludes based on feedback received and its own market-
monitoring, supervision, and enforcement experience that proposed
comment 34(b)(5)-1 is consistent with existing industry practice and
therefore is adopting it largely as proposed but renumbered as comment
34(b)(5)-2. If a validation notice is returned as undeliverable after
the validation period has expired and the debt collector sends a
subsequent notice, then, as stated in the comment, 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.
34(c) Validation Information
Proposed Sec. 1006.34(c) set forth the validation information that
proposed Sec. 1006.34(a)(1) would have required debt collectors to
disclose. The validation information consisted 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. Each of those categories is addressed separately in the
section-by-section analysis of Sec. 1006.34(c)(1) through (4).
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.\194\ A debt collector must also
disclose in each subsequent communication that the communication is
from a debt collector. 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.\195\
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\194\ See 15 U.S.C. 1692e(11).
\195\ See, e.g., Dorsey v. Morgan, 760 F. Supp. 509 (D. Md.
1991).
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The Bureau proposed to implement the FDCPA section 807(11)
disclosures in Sec. 1006.18(e).\196\ In turn, the Bureau proposed in
Sec. 1006.34(c)(1) that the Sec. 1006.18(e) disclosure is required
validation information. The Bureau finalized Sec. 1006.18(e) in the
November 2020 Final Rule.\197\ Section 1006.18(e)(1) requires a debt
collector to disclose in its initial communication that the debt
collector is attempting to collect a debt and that any information
obtained will be used for that purpose. Section 1006.18(e)(2) requires
a debt collector to disclose in each subsequent communication that the
communication is from a debt collector.
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\196\ See 84 FR 23274, 23322-23, 23402 (May 21, 2019).
\197\ See 85 FR 76734, 76830-31, 76891-92 (Nov. 30, 2020).
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At least one industry trade group supported proposed Sec.
1006.34(c)(1)'s cross-reference to the FDCPA section 807(11)
requirement. A consumer advocate commenter asked the Bureau to clarify
what version of the FDCPA section 807(11) disclosure should appear on
the validation notice: The longer, initial disclosure described in
Sec. 1006.18(e)(1) or the shorter, subsequent disclosure described in
Sec. 1006.18(e)(2).
The Bureau is adopting new comment 34(c)(1)-1 to clarify that a
debt collector who provides the validation notice required by Sec.
1006.34(a)(1)(i)(A)--i.e., a debt collector who provides the validation
notice in the initial communication--complies with Sec. 1006.34(c)(1)
by providing the disclosure described in Sec. 1006.18(e)(1). The
disclosure described in Sec. 1006.18(e)(1) is broader than, and
incorporates the content of, the disclosure described in Sec.
1006.18(e)(2). Accordingly, new comment 34(c)(1)-1 also clarifies that
a debt collector who provides the validation notice required by Sec.
1006.34(a)(1)(i)(B)--i.e., a debt collector who provides the validation
notice within five days of the initial communication--complies with
Sec. 1006.34(c)(1) by providing either the disclosure required by
Sec. 1006.18(e)(1) or the disclosure required by Sec.
1006.18(e)(2).\198\ The Bureau determines that this clarification will
facilitate compliance, encourage use of the model validation notice,
and protect consumers.
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\198\ The model validation notice includes the disclosure
required by Sec. 1006.18(e)(1). As explained in the section-by-
section analysis of Sec. 1006.34(d)(2), new comment 34(d)(2)(i)-1
clarifies that a debt collector who uses the model notice to provide
a validation notice as described in Sec. 1006.34(a)(1)(i)(B) may
replace the disclosure required by Sec. 1006.18(e)(1) with the
disclosure required by Sec. 1006.18(e)(2) without losing the safe
harbor provided by use of the model notice.
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The consumer advocate commenter also recommended that the Bureau
require every validation notice to include a Spanish translation of the
FDCPA section 807(11) disclosure to assist Spanish-speaking consumers.
The Bureau declines to do so. Mandating that every debt collector
provide a Spanish translation of the disclosure is unnecessary for the
majority of consumers, who are not Spanish speakers. Further, a
mandatory translation could undermine the effectiveness of the other
validation information disclosures. Moreover, the November 2020 Final
Rule contained a targeted language access intervention on this topic.
Pursuant to Sec. 1006.18(e)(4) in that rule, debt collectors will be
required to make the FDCPA section 807(11) disclosure in the same
language or languages used for the rest of the communication in which
the disclosures are conveyed. Thus, if a debt collector provides a
consumer a
[[Page 5799]]
validation notice in Spanish pursuant to Sec. 1006.34(e), the debt
collector must include on that notice a Spanish translation of the
FDCPA section 807(11) disclosure.
Accordingly, the Bureau is finalizing Sec. 1006.34(c)(1) as
proposed and is finalizing new comment 34(c)(1)-1 as described above.
34(c)(2) Information About the Debt
Proposed Sec. 1006.34(c)(2) specified that certain information
about the debt and the parties related to the debt was required
validation information.\199\ The section-by-section analysis of
proposed Sec. 1006.34(c)(2)(i) through (x) discussed the specific
items of information, which were designed to help consumers recognize
debts and included existing disclosures. The Bureau addresses comments
related to specific disclosures in the section-by-section analysis of
Sec. 1006.34(c)(2)(i) through (x). In this section-by-section
analysis, the Bureau addresses comments related to Sec. 1006.34(c)(2)
more generally.
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\199\ 84 FR 23274, 23338-42, 23404 (May 21, 2019). Proposed
Sec. 1006.34(c)(5) set forth a special rule for information about
the debt for certain residential mortgage debt.
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Some commenters supported proposed Sec. 1006.34(c)(2). A consumer
advocate and a municipal government commenter stated that the proposed
validation information would help consumers determine whether they owe
a debt. A group of State Attorneys General stated that consumers today
do not consistently receive the information they need to identify
debts. According to these commenters, consumers routinely submit
complaints that they do not recognize the debts or creditors disclosed
on validation notices. An industry trade group stated that it would be
feasible for debt collectors to disclose the proposed information
because debt buyers routinely obtain such information at purchase.
Other commenters objected to proposed Sec. 1006.34(c)(2) and
suggested that consumers do not need information beyond what the FDCPA
expressly requires. An industry trade group stated, without providing
verifiable evidence, that most debts are valid and asserted that less
than one-half of 1 percent of debts lack a contractual basis or are
miscalculated. According to this commenter, the small number of debts
that are problematic can be resolved by consumers invoking their FDCPA
verification rights.
Other commenters who objected to proposed Sec. 1006.34(c)(2) cited
industry burden. For example, one industry commenter stated that
requiring debt collectors to disclose the proposed information about
the debt and parties related to the debt would increase costs for debt
collectors as well as for creditors. Another industry commenter
suggested that proposed Sec. 1006.34(c)(2) was not feasible because
debt collectors rely on creditors for account information and records.
According to this commenter, if creditors did not provide the
information, debt collectors would be unable to comply with Sec.
1006.34(c)(2).
Some commenters stated that the information proposed Sec.
1006.34(c)(2) would require might confuse consumers and questioned
whether it was supported by the Bureau's consumer testing.
Some commenters recommended that the Bureau revise proposed Sec.
1006.34(c)(2) to require additional validation information. Federal
government agency staff, a group of State Attorneys General, and a
government commenter suggested that the name of the original creditor
and the date of the original transaction should be required validation
information. A group of State Attorneys General suggested that the
Bureau require debt collectors to provide information about the debt as
of the charge-off date. Two associations representing State regulatory
agencies recommended that the Bureau require disclosure of a debt
collector's State license or registration number, such as the
Nationwide Multi-State Licensing System identification. According to
these commenters, requiring debt collectors to disclose license or
registration information would assist regulators examining for
compliance with State debt collection laws. In addition, a consumer
advocate, an industry trade group, and an industry commenter
recommended that, for medical debt, validation information should
include the facility name associated with the debt. According to these
commenters, a consumer may be more likely to recognize a facility where
treatment was provided than the name of the physician or healthcare
provider to whom the consumer owes the debt.
After considering the feedback, the Bureau has determined to
finalize Sec. 1006.34(c)(2). The Bureau determines that validation
notices in use today frequently lack sufficient information about the
debt and the parties related to the debt, and this lack of information
undermines the ability of consumers to determine whether they owe an
alleged debt. This conclusion is consistent with feedback from Federal
and State government commenters, including the FTC and a group of State
Attorneys General. The Bureau's testing also supports this
conclusion.\200\
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\200\ Certain information that Bureau qualitative testing
indicates helps 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. See FMG Cognitive
Report, supra note 27, at 8-11.
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The Bureau determines that requiring debt collectors to disclose
the information about the debt and parties related to the debt in Sec.
1006.34(c)(2) is necessary. Industry commenters did not support their
claims about the relative infrequency of problematic debts with
verifiable evidence.\201\ In addition, a group of State Attorneys
General stated that consumers routinely complain that they do not
recognize debts being collected, and the Bureau's complaint statistics
indicate similar concerns about debts among consumers.\202\ Thus, the
Bureau is finalizing Sec. 1006.34(c)(2) to require information about
the debt and parties related to the debt.
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\201\ Even assuming one commenter's claim that only one-half of
1 percent of debts lack a contractual basis or are miscalculated,
this error rate would impact hundreds of thousands of consumers
annually. As the proposal noted, 49 million consumers are contacted
by debt collectors every year. See 84 FR 23274, 23382 n.656 (May 21,
2019). If one-half of 1 percent of these consumers received
validation notices for debts they did not owe, 245,000 consumers
could be impacted.
\202\ The most common debt collection complaint received by the
Bureau continues to be about attempts to collect a debt that the
consumer reports is not owed. See 2020 FDCPA Annual Report, supra
note 12, at 14. Consumers may report that a debt is not owed for a
variety of reasons including, but not limited to, that the debt is
being collected in error or that the consumer does not recognize the
debt.
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The Bureau also determines that Sec. 1006.34(c)(2) will not impose
undue industry burden. As discussed in part VII, while Sec.
1006.34(c)(2) may increase some costs for debt collectors, as well as
cause some indirect costs for creditors, the Bureau does not expect
these costs to be substantial. The Bureau disagrees that a significant
number of debt collectors will be unable to comply with Sec.
1006.34(c)(2). The Bureau acknowledges that debt collectors depend on
creditors to provide account information and that creditors will not be
required by the final rule to provide the information that Sec.
1006.34(c)(2) will require. Notwithstanding this fact, the Bureau has
received feedback that many creditors today make available much of the
information mandated by Sec. 1006.34(c)(2). To the extent that
creditors do not already provide debt collectors with this information,
the Bureau determines that creditors will be incentivized to do so
after Sec. 1006.34(c)(2)'s effective date because the debt collectors
they hire or sell debts to will be unable to legally collect without
it.
[[Page 5800]]
The Bureau determines that the information required by Sec.
1006.34(c)(2) will not confuse consumers. As discussed in part III.C,
the Bureau has validated the model validation notice and the validation
information contained therein through four rounds of consumer testing.
The Bureau declines the recommendation to add certain disclosures
to Sec. 1006.34(c)(2). First, the Bureau declines to require the name
of the original creditor and the date of the original transaction.
Requiring this additional information on validation notices may
overwhelm consumers, may be repetitive, or may otherwise not add to
consumer understanding because the validation information already
includes items such as the debt collector's name (Sec.
1006.34(c)(2)(i)), the name of the creditor to whom the debt was owed
on the itemization date (Sec. 1006.34(c)(2)(iii)), and the name of the
creditor to whom debt is currently owed (Sec. 1006.34(c)(2)(v)).
The Bureau also declines to tie information disclosure requirements
to the date that a debt was charged off because charge off is not
relevant to all debt types. However, as discussed in the section-by-
section analysis of Sec. 1006.34(b)(3)(ii), a debt collector may use
the charge-off date as the itemization date, in which case consumers
will receive information about the amount of the date as of the charge-
off date, as well as information about interest, fees, payments, and
credits since that date.\203\
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\203\ See the section-by-section analysis of Sec.
1006.34(c)(2)(vii) and (viii).
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The Bureau also declines to require a debt collector to disclose a
State license or registration number. If a debt collector is
specifically required by applicable law to disclose such information, a
debt collector may do so as an optional disclosure under final Sec.
1006.34(d)(3)(iv)(A).
The Bureau does agree that a facility name associated with a debt
may be helpful to consumers in the medical debt context. The Bureau is
not modifying Sec. 1006.34(c)(2) to require this information, but
final Sec. 1006.34(d)(3)(vii) permits debt collectors to include
facility name as an optional disclosure.
Accordingly, as noted above, the Bureau is finalizing Sec.
1006.34(c)(2) to require debt collectors to provide certain information
about the debt and the parties related to the debt. Except with respect
to final Sec. 1006.34(c)(2)(iii), the Bureau is finalizing 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. In addition, except with
respect to final Sec. 1006.34(c)(2)(v) and (ix), the Bureau is
finalizing 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.
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.\204\ FDCPA section 809(a)(3) through (5), in turn, requires debt
collectors to disclose how consumers may exercise their verification
rights. The proposal stated that 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.\205\ Proposed
Sec. 1006.34(c)(2)(i) therefore provided that the debt collector's
name and mailing address are required validation information.
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\204\ 15 U.S.C. 1692g(b).
\205\ 84 FR 23274, 23339, 23404 (May 21, 2019).
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Industry and industry trade group commenters recommended various
revisions to proposed Sec. 1006.34(c)(2)(i). First, some industry
trade group commenters suggested that the Bureau permit a debt
collector to disclose a trade name or doing-business-as name (DBA), in
lieu of the debt collector's legal name. According to these commenters,
because a debt collector may not use its legal name when communicating
with consumers, a consumer may be more likely to recognize the debt
collector's trade name or DBA.
Next, one industry trade group commenter recommended that the
Bureau permit a debt collector to disclose a vendor's mailing address
because some debt collectors do not receive mail from consumers at
their office locations and instead use letter vendors.
Finally, some industry and industry trade group commenters
recommended that the Bureau permit debt collectors to disclose multiple
addresses. Some of these commenters stated that debt collectors may use
separate addresses for payments and other correspondence, including
disputes. For example, an industry trade group stated that some clients
of debt collectors, including the Department of Education, do not
permit debt collectors to receive payments at their office locations
and instead require debt collectors to direct payments to a
``lockbox,'' which is a post office box administered by a third party
for the receipt of payments.
A consumer advocate asked the Bureau to modify proposed Sec.
1006.34(c)(2)(i) to require debt collectors to also disclose a
telephone number, an email address, and any other method the debt
collector uses for consumer communications.
After considering the feedback, the Bureau is adopting Sec.
1006.34(c)(2)(i) with a revision for clarity and is also adopting two
new comments to incorporate certain suggestions made by commenters.
As noted, some commenters suggested that debt collectors who use
multiple mailing addresses be permitted to include more than one
mailing address as validation information. The Bureau declines to
affirmatively permit the use of more than one mailing address as
validation information. As discussed in the proposal, the purpose of
validation information is to facilitate a consumer's exercise of their
rights in debt collection, namely, the right to dispute the debt or to
request original-creditor information. Accordingly, the mailing address
included in the validation information must be an address at which the
debt collector accepts disputes and original-creditor information
requests. The Bureau is revising Sec. 1006.34(c)(2)(i) to
affirmatively state this requirement. If a debt collector only accepts
payments at a different address than the address at which it accepts
disputes and original-creditor information requests, the Bureau notes
that the debt collector need not include payment disclosures with the
validation information; they are optional disclosures under Sec.
1006.34(d)(3)(iii).\206\ Moreover, if a debt collector omits the
optional payment disclosures, the validation
[[Page 5801]]
notice will continue to contain contact information for the debt
collector, including, at the debt collector's option, the debt
collector's telephone number pursuant to Sec. 1006.34(d)(3)(i), should
the consumer wish to reach out for payment information or to make a
payment.
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\206\ The Bureau also notes that nothing in Regulation F
prevents a debt collector from using a different mailing address in
communications that do not contain the validation information. For
example, if a debt collector accepts payments at a different
address, the payment address may be included in a separate
communication seeking payment. Additionally, as noted at the outset
of the section-by-section analysis of Sec. 1006.34, the Bureau is
not finalizing the proposed requirement that all validation notices
be substantially similar to the Bureau's model validation notice.
Therefore, a debt collector may include a separate payment address
on a validation notice, but a debt collector who does so will not
receive safe harbors pursuant to Sec. Sec. 1006.34(d)(2) and
1006.38(b)(2) and must otherwise comply with the FDCPA and
Regulation F.
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The Bureau is also adopting new comment 34(c)(2)(i)-1 to clarify
that a debt collector may disclose the debt collector's trade name or
DBA in lieu of the debt collector's legal name. The Bureau observes
that, in some cases, a debt collector's trade name or DBA may be more
recognizable to consumers than the debt collector's legal name. The
Bureau therefore determines that a debt collector may use its trade
name or DBA when communicating with consumers. However, when disclosing
a trade name or DBA, the debt collector may not do so in a manner that
violates the FDCPA section 807 prohibition on false or misleading
representations. For example, a debt collector may violate the FDCPA
and this final rule if the debt collector discloses a trade name or DBA
that falsely represents or implies that the debt collector is an
attorney, when that is not the case.\207\
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\207\ See 15 U.S.C. 1692e(3).
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Second, the Bureau is adopting new comment 34(c)(2)(i)-2 to clarify
that a debt collector may disclose a vendor's mailing address, if that
is an address at which the debt collector accepts disputes and requests
for original-creditor information. As one commenter observed, some debt
collectors may use a vendor to receive mail from consumers. The Bureau
is finalizing comment 34(c)(2)(i)-2 to accommodate this business
practice.
The Bureau declines to adopt the recommendation of some commenters
to require debt collectors to disclose other contact methods, including
a telephone number or an email address. The FDCPA does not require debt
collectors to communicate by telephone or email. However, as noted,
Sec. 1006.34(d)(3)(i) permits a debt collector to disclose the debt
collector's telephone number. Likewise, Sec. 1006.34(d)(3)(v)(A),
permits a debt collector to disclose the debt collector's website and
email address.
34(c)(2)(ii)
FDCPA section 809(a) requires debt collectors to disclose
information about the debt that helps consumers identify the debt and
facilitates resolution of the debt. The proposal stated that, like the
information FDCPA section 809(a) expressly requires, 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.\208\ The Bureau therefore
proposed Sec. 1006.34(c)(2)(ii) to provide that the consumer's name
and mailing address is required validation information. As discussed
below, proposed comment 34(c)(2)(ii)-1 clarified the meaning of the
term ``consumer's name.''
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\208\ 84 FR 23274, 23339 (May 21, 2019).
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A consumer advocate and an industry trade group expressed overall
support for the proposed provision. The consumer advocate stated that
consumer name information would help a consumer identify an alleged
debt. The consumer advocate also stated that complete name
information--such as a first name, middle name, last name, and suffix--
would help consumers determine whether a debt collector is seeking a
different consumer with a similar name. According to the industry trade
group, it would be unreasonable for a debt collector to omit known name
information. For the reasons discussed in the proposal, the Bureau is
finalizing Sec. 1006.34(c)(2)(ii) as proposed.
Proposed comment 34(c)(2)(ii)-1 clarified 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 explained 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 and provided an example.
Some commenters raised concerns about proposed comment
34(c)(2)(ii)-1. A number of industry and industry trade group
commenters objected to the statement that debt collectors would be
required to determine the most complete version of the name about which
the debt collector has knowledge, whether obtained from the creditor or
another source. These commenters stated that the reference to ``another
source'' was ambiguous and would create litigation risk and compel debt
collectors to conduct open-ended research about a consumer's name.
Several commenters urged the Bureau to omit the reference to ``another
source.''
The Bureau is finalizing comment 34(c)(2)-1 with revisions in
response to feedback and for clarity. First, the Bureau is deleting the
phrase ``whether obtained from the creditor or another source.'' This
phrase is unnecessary as it does not alter the fundamental expectation
that a debt collector will disclose the most complete and accurate name
about which the debt collector has knowledge. In addition, the Bureau
determines that the reference to ``another source'' is ambiguous and
may create unjustified litigation risk and industry burden.
Second, the Bureau is revising the comment to clarify that a debt
collector must reasonably determine ``the most complete and accurate
version'' of a consumer's name. The Bureau intended that a debt
collector would be required to disclose ``accurate'' consumer name
information, but proposed comment 34(c)(2)-1 only referred to ``the
most complete version'' of the consumer's name. Finally, the Bureau has
elaborated on the example of a debt collector omitting a consumer's
name information.
34(c)(2)(iii) \209\
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\209\ Proposed Sec. 1006.34(c)(2)(iii) generally provided that
the merchant brand, if any, associated with a credit card debt was
required validation information. The Bureau is finalizing merchant
brand information as an optional disclosure. See the section-by-
section analysis of Sec. 1006.34(d)(3)(vii). The Bureau therefore
is finalizing proposed Sec. 1006.34(c)(2)(iv) through (x) as Sec.
1006.34(c)(2)(iii) through (ix).
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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.\210\ As the
proposal stated, if 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 than the name of the creditor as of the itemization date.
Proposed Sec. 1006.34(c)(2)(iv) provided that, if a debt collector is
collecting a consumer financial product or service debt (as that term
was defined in proposed Sec. 1006.2(f)), the name of the creditor to
whom the debt was owed on the itemization date is required validation
information.\211\ For the reasons discussed below, the Bureau is
finalizing proposed Sec. 1006.34(c)(2)(iv) with minor wording changes
and renumbered as Sec. 1006.34(c)(2)(iii), and is adopting new comment
34(c)(2)(iii)-1 to clarify that a debt collector may disclose the trade
name or DBA of the creditor to whom the debt was owed on the
itemization date.
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\210\ See 15 U.S.C. 1692g(a)(2). See the section-by-section
analysis of Sec. 1006.34(c)(2)(v).
\211\ 84 FR 23274, 23404 (May 21, 2019).
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[[Page 5802]]
An industry trade group commenter expressed support for requiring
debt collectors to disclose the creditor to whom the debt was owed on
the itemization date but asked the Bureau to clarify that a debt
collector may disclose this creditor's trade name or DBA, as opposed to
its legal name, which a consumer may not recognize.
A consumer advocate objected to the proposal because a consumer may
not recognize the creditor to whom the debt was owed on the itemization
date. According to the commenter, in some cases, the itemization date
may have occurred years after the debt was incurred. And, particularly
if the debt was transferred before the itemization date, the consumer
may not recognize the creditor as of that date. As an alternative, the
commenter suggested that a debt collector be required to disclose the
name of the original creditor.
As discussed in the section-by-section analysis of Sec.
1006.34(c)(2)(i), an entity's trade name or DBA may be more
recognizable to consumers than an entity's legal name. It may be
appropriate for a debt collector to disclose a creditor's trade name or
DBA, in lieu of the creditor's legal name, when communicating with
consumers. Thus, the Bureau is adopting new comment 34(c)(2)(iii)-1 to
clarify that a debt collector may disclose as validation information
the trade name or DBA of the creditor to whom the debt was owed on the
itemization date.
The Bureau declines to require a debt collector to disclose the
name of the original creditor as validation information under Sec.
1006.34(c). FDCPA section 809(a)(5) and (b) require a debt collector to
provide the name and address of the original creditor in response to a
consumer request. While the Bureau acknowledges that, in some cases, a
consumer may not recognize the creditor to whom the debt was owed on
the itemization date, this information will still benefit some
consumers. For an older debt or a debt that has been transferred,
consumers may be more likely to recognize the creditor as of the
itemization date than the current creditor.
Accordingly, the Bureau is finalizing Sec. 1006.34(c)(2)(iii) to
provide that, if the debt collector is collecting debt related to a
consumer financial product or service as defined in Sec. 1006.2(f),
the name of the creditor to whom the debt was owed on the itemization
date is required validation information. In addition, the Bureau is
finalizing comment 34(c)(2)(iii)-1 to clarify that a debt collector may
disclose the trade name or DBA of the creditor to whom the debt was
owed on the itemization date.
34(c)(2)(iv)
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.'' \212\ 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, to help consumers identify debts. According to the proposal, an
account number associated with a debt on the itemization date may be
integral information that a consumer uses to identify the debt.\213\
The Bureau proposed Sec. 1006.34(c)(2)(v) to provide that the account
number, if any, associated with the debt on the itemization date, or a
truncated version of that number, is required validation information.
Proposed comment 34(c)(2)(v)-1 explained that a debt collector may
truncate an account number provided that the account number remains
recognizable. For the reasons discussed below, the Bureau is adopting
proposed Sec. 1006.34(c)(2)(v), renumbered as Sec. 1006.34(c)(2)(iv),
and its related commentary with minor wording changes.
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\212\ S. Rep. No. 382, supra note 57, at 4.
\213\ 84 FR 23274, 23340 (May 21, 2019).
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Industry commenters, a consumer advocate, and a group of State
Attorneys General, expressed overall support for proposed Sec.
1006.34(c)(2)(v). However, one industry commenter recommended that the
Bureau exempt debt collectors collecting residential mortgage debt from
the requirement to disclose an account number. According to the
commenter, the account number for a residential mortgage that has had a
servicing transfer may not be the current account number, which might
confuse consumers.
The Bureau concludes that an account number associated with a debt
on the itemization date may help some consumers recognize the debt. The
Bureau declines to adopt the recommendation to exempt debt collectors
collecting residential mortgage debt from disclosing an account number.
As discussed in the section-by-section analysis of Sec. 1006.34(b)(3),
the Bureau has determined that the reference dates that a debt
collector may use to determine the itemization date may be meaningful
to consumers because they correspond to a notable event in the debt's
history that consumers may recall or be able to verify with records. By
extension, the Bureau determines that an account number associated with
a debt as of one of those dates will also likely resonate with a
consumer, even if it is not the current account number.
Accordingly, the Bureau is finalizing Sec. 1006.34(c)(2)(iv) and
its related commentary largely as proposed, with only minor wording
changes to the commentary for clarity. No substantive change is
intended.
34(c)(2)(v)
FDCPA section 809(a)(2) requires debt collectors to disclose to
consumers the name of the creditor to whom the debt is owed.\214\ 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.\215\ The Bureau proposed Sec. 1006.34(c)(2)(vi) to provide
that the name of the current creditor is required validation
information. For the reasons discussed below, the Bureau is finalizing
the proposal, renumbered as Sec. 1006.34(c)(2)(v), and is adopting new
comment 34(c)(2)(v)-1 to clarify that a debt collector may disclose the
trade name or DBA of the creditor to whom the debt is currently owed,
instead of its legal name.
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\214\ See 15 U.S.C. 1692g(a)(2).
\215\ 84 FR 23274, 23341 (May 21, 2019).
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The Bureau received no comments specifically addressing proposed
Sec. 1006.34(c)(2)(vi) and is finalizing it as proposed but renumbered
as Sec. 1006.34(c)(2)(v). An industry trade group commenter
recommended that the Bureau permit debt collectors to disclose, along
with the required validation information, all current and past
creditors associated with the debt. According to the commenter, some
creditors, such as healthcare and financial services providers, may
have multiple sub-entities with different corporate names. This
commenter suggested that disclosing more names of creditors will
increase the likelihood that a consumer will recognize one of them.
The Bureau declines to adopt this recommendation. Disclosing all
current and past creditors along with the validation information could
overwhelm and confuse consumers.\216\ Thus, as discussed in the
section-by-section analysis of Sec. 1006.34(c), the Bureau is
requiring debt collectors to
[[Page 5803]]
disclose as validation information only two creditors: The creditor to
whom the debt was owed on the itemization date (Sec.
1006.34(c)(2)(iii)) and the creditor to whom the debt is currently owed
(Sec. 1006.34(c)(2)(v)). Nothing in the final rule prohibits a debt
collector from including the name of another creditor on a validation
notice, but a debt collector who does so will not receive the Sec.
1006.34(d)(2) safe harbor and will risk not complying with the
requirements of Sec. 1006.34, including the Sec. 1006.34(b)(1) clear
and conspicuous standard.
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\216\ During one round of cognitive testing, participants were
shown disclosure language that included a list of prior creditors.
Confusion was observed when participants tried to explain the
difference between prior and current creditors. The unclear
relationship between creditors was highlighted when participants
attempted to identify the creditor that currently owned the debt.
See FMG Cognitive Report, supra note 27, at 3-4.
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As discussed in the section-by-section analysis of Sec.
1006.34(c)(2)(i) and (iii), the Bureau is finalizing new comments
34(c)(2)(i)-1 and 34(c)(2)(iii)-1 to clarify that a debt collector may
disclose an entity's trade name or DBA, instead of its legal name. The
Bureau concludes that it is also appropriate to permit a debt collector
to disclose the trade name or DBA of a current creditor. Thus, the
Bureau is adopting new comment 34(c)(2)(v)-1 to clarify that a debt
collector may disclose the trade name or a DBA of the creditor to whom
the debt is currently owed, instead of its legal name.
34(c)(2)(vi)
FDCPA section 809(a)(1) requires debt collectors to disclose to
consumers the amount of the debt.\217\ In Sec. 1006.34(c)(2)(viii),
the Bureau proposed 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 required validation
information.\218\ Consistent with proposed Sec. 1006.34(c)(2)(viii),
the Bureau proposed Sec. 1006.34(c)(2)(vii) to provide that the
itemization date, as defined in Sec. 1006.34(b)(3), also is required
validation information. For the reasons discussed below, the Bureau is
finalizing Sec. 1006.34(c)(2)(vii) as proposed but renumbered as Sec.
1006.34(c)(2)(vi).
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\217\ See 15 U.S.C. 1692g(a)(1).
\218\ 84 FR 23274, 23341 (May 21, 2019).
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Several commenters, including an industry commenter, an industry
trade group commenter, and a group of consumer advocates, stated that
the itemization date may not be meaningful to consumers or help them
recognize debts, if disclosed without an explanation of its relevance.
These commenters, along with Federal government agency staff,
recommended requiring debt collectors to disclose with the itemization
date a statement explaining which reference date the debt collector
used to determine that date.\219\
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\219\ As discussed in the section-by-section analysis of Sec.
1006.34(b)(3), the Bureau defines itemization date to mean one of
five reference dates for which a debt collector can ascertain the
amount of the debt.
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The Bureau declines to adopt this recommendation. As discussed in
the section-by-section analysis of Sec. 1006.34(b)(3), the Bureau
determines that the reference dates that a debt collector may use to
determine the itemization date have a significant likelihood of being
meaningful to consumers because they correspond to notable events in a
debt's history that consumers may recall or be able to verify with
records. Because each of the reference dates may be meaningful to
consumers, the Bureau determines that no additional disclosure
explaining their relevance is necessary. Moreover, the Bureau
determines that an additional disclosure explaining the reference date
may confuse or overwhelm some consumers. While a debt collector likely
could describe some reference dates (e.g., a last statement date) in a
straightforward manner, other reference dates (e.g., the charge-off
date and the transaction date) do not lend themselves to a succinct
explanation. That is because some reference dates reflect financial
concepts that are inherently complex (i.e., charge off) or that could
vary by debt type and the facts and circumstances surrounding a
particular debt (i.e., transaction dates). For such reference dates, a
statement explaining their relevance could distract or confuse
consumers, thereby undermining the efficacy of the other validation
information.
34(c)(2)(vii)
As noted, FDCPA section 809(a)(1) requires debt collectors to
disclose to consumers the amount of the debt. As discussed in the
proposal, 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. As also discussed in the proposal,
consumers may recognize the amount of the debt as of the itemization
date (as the Bureau proposed to define that term in Sec.
1006.34(b)(3)). 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 proposed to interpret FDCPA section
809(a)(1), and to use its authority under Dodd-Frank Act section
1032(a), to provide in proposed Sec. 1006.34(c)(2)(viii) that the
amount of the debt on the itemization date is required validation
information.\220\ Proposed comment 34(c)(2)(viii)-1 explained that this
amount includes any fees, interest, or other charges owed as of the
itemization date.
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\220\ 84 FR 23274, 23341 (May 21, 2019). As proposed, the Bureau
is finalizing Sec. 1006.34(c)(2)(ix) (renumbered from proposed
Sec. 1006.34(c)(2)(x)) separately to provide that the current
amount of the debt also is required validation information.
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An industry commenter questioned whether proposed Sec.
1006.34(c)(2)(viii) would significantly improve consumer understanding.
According to the commenter, if a debt collector determines the
itemization date based on the last statement date pursuant to Sec.
1006.34(b)(3)(i), and if the debt is placed for collection shortly
after the last statement was provided, the current amount of the debt
(which the Bureau proposed as a separate item of required validation
information) and the amount of the debt on the itemization date would
be approximately the same. The commenter stated that, in this scenario,
disclosing the amount of the debt on the itemization date would not
benefit the consumer.
The Bureau acknowledges that, for a given debt, the amount owed on
the itemization date and the current amount of the debt may be similar
or even the same. However, as discussed below in the section-by-section
analysis of final Sec. 1006.34(c)(2)(viii), even in these cases, the
itemization of the debt will still be required, and, as clarified in
final comment 34(c)(2)(viii)-1, the itemization (if the amounts are the
same) will show $0 in interest, fees, payments, and credits. As such,
it should be clear to the consumer why the two amounts are the same. In
many other cases, these amounts will differ, sometimes substantially.
In these cases, the amount of the debt on the itemization date will
help consumers recognize or evaluate the debt.
For these reasons, the Bureau is finalizing Sec.
1006.34(c)(2)(viii) and its related commentary as proposed but
renumbered as Sec. 1006.34(c)(2)(vii).
34(c)(2)(viii)
As noted, FDCPA section 809(a)(1) requires a debt collector to
disclose to consumers the amount of the debt. As discussed, the Bureau
proposed 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
[[Page 5804]]
provided).\221\ In conjunction with the amount of the debt on the
itemization date and the current amount of the debt, the Bureau
proposed 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 required
validation information. Proposed comment 34(c)(2)(ix)-1 clarified how
debt collectors could disclose that no interest, fees, payments, or
credits were assessed or applied to a debt.
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\221\ 84 FR 23274, 23341 (May 21, 2019).
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For the reasons discussed below, the Bureau is finalizing the
proposal, renumbered as Sec. 1006.34(c)(2)(viii), with revisions to
permit debt collectors to disclose the itemization on a separate page
provided in the same communication with a validation notice, if the
debt collector includes on the validation notice, where the itemization
would have appeared, a statement referring to that separate page. The
Bureau also is finalizing comment 34(c)(2)(ix)-1 with a substantive
modification and renumbered as comment 34(c)(2)(viii)-1, and is
adopting new comments 34(c)(2)(viii)-2 through-4 to clarify other
aspects of final Sec. 1006.34(c)(2)(viii).
Commenters offered differing opinions regarding proposed Sec.
1006.34(c)(2)(ix). A group of State Attorneys General, Federal
government agency staff, consumer advocate commenters, some industry
trade group commenters, and at least one industry commenter supported
the proposed provision. These commenters generally agreed that an
itemization of the debt would help consumers recognize an alleged debt
and understand how the debt had evolved over time due to interest,
fees, payments, and credits. Further, the Bureau received feedback that
the proposal was consistent with some industry practice. For instance,
a commenter noted an industry certification standard that, during the
sales of certain debt types, requires debt buyers to obtain or provide
the unpaid balance due on the account, with a breakdown of the post-
charge-off balance, interest, fees, payments, and credits or
adjustments.\222\
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\222\ See Receivables Mgmt. Ass'n Int'l, Receivables Management
Certification Program, at 41-45 (Mar. 1, 2020), https://rmaintl.org/RMCP (last visited Dec. 9, 2020).
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The majority of industry and industry trade group commenters
objected to proposed Sec. 1006.34(c)(2)(ix). Some such commenters
stated that the proposed itemization requirement would be burdensome.
According to several industry commenters, debt collectors would either
have to manually access itemization information in creditor files or
implement costly information technology solutions to comply with the
proposed requirement. Some industry commenters, industry trade groups,
and the SBA argued that the proposed requirement would impose burdens
on creditors. Commenters stated that some creditors may not maintain
all of the itemization information that the proposal would require or
do not typically provide itemization information at placement and that
to do so would involve significant expense. Some commenters speculated
that, to avoid such costs, creditors might refer fewer accounts for
collection or file more collections lawsuits against consumers. The
SBA, an industry trade group, and industry commenters argued that
compliance costs could be onerous for smaller creditors and debt
collectors. For the most part, commenters offered qualitative
assessments of industry burden, but one industry trade group did
estimate that proposed Sec. 1006.34(c)(2)(ix) would impose billions of
dollars in compliance costs on industry.\223\
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\223\ One industry trade group estimated that an itemization
requirement would cost $600 million in professional fees to conduct
legal analyses of HIPAA compliance for medical debt, $30 million for
one-time system reprogramming for debt collectors, and $3 billion
for one-time system reprogramming for creditors. The proposal
allegedly would also result in billions of dollars in ongoing
support costs and uncompensated medical care because, according to
the commenter, the proposed requirement, if adopted, would increase
the risks that hospitals might be unable to use debt collectors.
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Some commenters stated that proposed Sec. 1006.34(c)(2)(ix) is
unnecessary or unhelpful. Multiple industry commenters asserted that an
itemization is superfluous because consumers can exercise their FDCPA
section 809 verification rights to receive more account information if
desired. With respect to medical debt, an industry trade group stated
that proposed Sec. 1006.34(c)(2)(ix) is unnecessary because the
Internal Revenue Service (IRS) requires non-profit hospitals to send
letters with itemized information to consumers, and health insurance
companies routinely mail to responsible parties ``Explanation of
Benefits'' documents that provide details about coverage, payments, and
co-pays. Some commenters expressed concern that proposed Sec.
1006.34(c)(2)(ix) could increase legal risk for debt collectors if the
itemization information confused consumers. At least one industry
commenter stated that the Bureau's consumer testing did not support
proposed Sec. 1006.34(c)(2)(ix) because the testing did not involve
actual consumers assessing debts in a real-world setting.
A few industry commenters objected to proposed Sec.
1006.34(c)(2)(ix) because the FDCPA does not expressly require an
itemization of the current amount of the debt.
Some industry and industry trade group commenters objected to
proposed Sec. 1006.34(c)(2)(ix) because the itemization that appears
on the model validation notice is formatted for a single debt.
According to commenters, the proposal would not accommodate debt
collectors who combine multiple debts in a single validation notice.
Several commenters stated that not permitting debt collectors to
include multiple debts in one validation notice would dramatically
increase the volume of mail sent to consumers and would require
consumers to exercise their verification rights for each individual
debt in the event that a consumer has a global dispute. Industry and
industry trade group commenters stated that the inability to combine
multiple debts would be particularly challenging for medical debt
collectors. According to some commenters, healthcare providers
routinely combine multiple debts, in part because they utilize family
billing, which involves combining the separate bills for family members
of a primary insured party. Commenters stated that itemizations for
medical debt may be further complicated by the fact that healthcare
providers typically do not maintain a rolling total of charges for a
general service and instead individually bill for each good or service
provided. At least one trade group stated that student loan debt
presents comparable itemization-related challenges because student loan
debt may be provided through multiple disbursements with separate
account numbers.
An industry trade group suggested that proposed Sec.
1006.34(c)(2)(ix) would not accommodate debts in bankruptcy. According
to the commenter, the proposal did not have the specificity necessary
to account for how the Bankruptcy Code permits a debtor to cure pre-
bankruptcy defaults over the term of the bankruptcy plan while
maintaining regular post-bankruptcy payments. In addition, the
commenter argued, the proposal would not accommodate the nuances that
arise in the context of certain bankruptcy scenarios, such as a
cramdown plan or a lien strip.\224\
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\224\ Pursuant to 11 U.S.C. 1322(b)(5), a bankruptcy court may
change the underlying terms of a debt, which is referred to as a
``cramdown.'' Pursuant to 11 U.S.C. 1322(c)(2), a secured claim can
be converted to an unsecured claim, which is referred to as a ``lien
strip.''
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[[Page 5805]]
With regard to medical debt, industry commenters, an industry trade
group, and the SBA stated that healthcare providers might violate the
Health Insurance Portability and Accountability Act of 1996 (HIPAA)
\225\ Privacy Rule if they provided the proposed itemization.\226\
According to these commenters, proposed Sec. 1006.34(c)(2)(ix) would
require debt collectors to disclose more information than the minimum
necessary for treatment of the patient, payment of the bill, or
healthcare operations, in violation of HIPAA.
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\225\ Public Law 104-191, 110 Stat. 1936 (1996).
\226\ 45 CFR part 160 and part 164 subparts A and E.
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Commenters recommended various modifications to proposed Sec.
1006.34(c)(2)(ix). Industry and industry trade group commenters
suggested that debt collectors should not need to comply with proposed
Sec. 1006.34(c)(2)(ix) if interest and fees are not charged on an
account.\227\ An industry commenter stated that debt collectors should
be permitted to indicate ``U'' for ``unknown'' or ``unavailable'' in
fields for which a creditor did not provide the relevant information.
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\227\ In addition, an industry trade group suggested that debt
collectors should not be required to comply with the itemization
requirement for pre-charge-off debts, particularly if periodic
statements continue to be provided. The Bureau notes that, in many
cases, a person collecting a debt that was not in default at the
time it was obtained by such person will not be a debt collector
subject to the FDCPA or Regulation F. See FDCPA section
803(6)(F)(iii), 15 U.S.C. 1692a(6)(F)(iii).
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Several commenters asked the Bureau to clarify the proposal. An
industry commenter asked how a debt collector could disclose third-
party payments or insurance adjustments, particularly in the context of
medical debt. An industry trade group sought additional guidance about
how to disclose balance increases that are not caused by interest or
fees, such as a balance increase caused by a returned payment. Noting
the existence of validation notice itemization requirements imposed by
other applicable law, such as New York State regulations, two industry
trade groups requested guidance about how a debt collector should
simultaneously comply with those requirements and proposed Sec.
1006.34(c)(2)(ix).\228\
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\228\ See 23 NYCRR 1.2(b)(2).
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With respect to the Bureau's request for comment about whether the
proposed itemization should be more detailed--for example, by
reflecting each fee charged and each payment received--or whether
certain itemization categories should be combined as proposed, industry
commenters suggested that the Bureau not deviate from the proposal. For
instance, a commenter stated that, in the context of medical debts,
listing all payments and credits individually could result in multiple
additional pages because of the number of third-party payments. In
contrast, citing the Bureau's consumer testing, an academic commenter
argued that the itemization should be more detailed because consumers
prefer to see penalties and fees broken down into individual
charges.\229\
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\229\ FMG Summary Report, supra note 29.
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After considering these comments, and for the reasons discussed
below, the Bureau is adopting the proposed requirement, renumbered as
Sec. 1006.34(c)(2)(viii), with revisions to provide that validation
information includes an itemization of the current amount of the debt
reflecting interest, fees, payments, and credits since the itemization
date. Final Sec. 1006.34(c)(2)(viii) further provides that a debt
collector may disclose the itemization on a separate page provided in
the same communication with a validation notice, if the debt collector
includes on the validation notice, where the itemization would have
appeared, a statement referring to that separate page.
The Bureau determines that an itemization of the debt will help a
significant number of consumers recognize whether they owe a debt and
evaluate whether the debt is accurate, because the itemization will
disclose how the amount may have changed over time due, for example, to
interest, fees, payments, and credits that have been assessed or
applied to the debt.
The Bureau determines that Sec. 1006.34(c)(2)(viii) will not
create undue industry burden in light of modifications made in response
to comments.\230\ The Bureau acknowledges that complying with the
itemization requirement may result in some additional costs to debt
collectors, particularly if they do not currently provide itemization
information at placement or on validation notices, as well as in some
indirect costs to creditors. However, the Bureau concludes that these
costs will not substantially impact companies' business operations
because the final rule provides sufficient flexibility to debt
collectors to tailor the itemization to specific business practices and
types of debt. Accordingly, the Bureau does not conclude, as some
commenters suggested, that the itemization requirement will result in
creditors referring significantly fewer accounts for collections or
filing more lawsuits against consumers.\231\
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\230\ For example, as noted in the section-by-section analysis
of Sec. 1006.34(b)(3)(i), a creditor or a third-party servicer
acting on the creditor's behalf may issue a statement even after the
debt has gone into collection. In that case, under Sec.
1006.34(b)(3)(i), that new statement may serve as the last statement
for purposes of the itemization date.
\231\ An industry trade group cited an article to suggest that
collection lawsuits nearly doubled in New York City since 2015
because of New York State's debt collection rules, which mandate an
itemization. See Yuka Hayashi, Debt Collectors Wage a Comeback, Wall
Street Journal (July 5, 2019). The Bureau notes that the article did
not cite a connection between higher rates of lawsuits and the
itemization requirement. Instead, the article discussed the
phenomenon of increasing lawsuits nationwide, including in States
like Texas, which had not recently introduced a significant debt
collection rule.
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Although several commenters stated that the required itemization
information may not be available for every debt, the Bureau notes that
the itemization of the debt is based on the type of routine account
information that debt collectors typically provide in response to
consumer verification requests and that, as such, debt collectors
should be able to obtain such information to comply with the final
rule. While some debt collectors do not currently provide this itemized
information at the outset of collection communications, providing such
itemization information to consumers already is considered a best
practice in some segments of the debt buying industry, including for
credit card debt and student loan debt.\232\ Further, debt collectors
are already required to disclose an itemization for some types of debt
in at least one jurisdiction, New York State.\233\
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\232\ See Receivables Mgmt. Ass'n Int'l, Receivables Management
Certification Program, at 41-45 (Mar. 1, 2020), https://rmaintl.org/RMCP (last visited Dec. 9, 2020).
\233\ See 23 NYCRR 1.2(b) (requiring debt collectors to provide
an itemized accounting of the debt within five days after the
initial communication with a consumer in connection with the
collection of certain types of charged-off debt, such as credit card
debt).
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In addition, as discussed in the section-by-section analysis of
Sec. 1006.34(b)(3), the final rule's itemization date definition
permits debt collectors to select an itemization date that is feasible
for the type of debt in collection and the information debt collectors
receive. And Sec. 1006.34(c)(2)(viii) requires itemization of fees,
interest, and credits only subsequent to the selected itemization date.
Thus, for example, if a debt collector selects the last statement date
as the itemization date under Sec. 1006.34(b)(3), and if the creditor
has
[[Page 5806]]
recently issued a statement to the consumer, the debt collector need
only obtain and provide to the consumer an itemization with fees,
interest, and credits subsequent to that last statement date. And, as
discussed in the section-by-section analysis of Sec. 1006.34(d)(2), a
debt collector may provide the itemization on a separate page and
retain the safe harbor for the rest of the validation notice. For all
of these reasons, the Bureau concludes that the final rule will not
impose undue burdens on debt collectors and will provide consumers with
useful information. The Bureau will monitor whether the itemization
date definition, including the last statement date definition, meets
these goals.
The Bureau disagrees that Sec. 1006.34(c)(2)(viii) is unnecessary
or unhelpful. The verification rights afforded by FDCPA section 809 are
an important statutory protection; however, they do not serve the same
purpose or provide an adequate substitute to the itemization of the
debt that Sec. 1006.34(c)(2)(viii) will require. The Bureau disagrees
that an itemization of the current amount of the debt is unnecessary
for medical debt, as some commenters argued. Although some non-profit
hospitals or insurance companies may provide itemization information to
some consumers, commenters did not suggest, and the Bureau is not aware
of other evidence indicating, that all consumers with medical debt
receive itemization information such that Sec. 1006.34(c)(2)(viii)
would be unnecessary. The Bureau also disagrees with comments that an
itemization will confuse consumers. As the proposal noted, the Bureau's
qualitative consumer testing indicates that an itemization improves
consumer understanding about the debt.\234\
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\234\ See 84 FR 23274, 23341 (May 21, 2019); FMG Usability
Report, supra note 28, at 16-19.
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The Bureau also disagrees that the FDCPA's not expressly requiring
an itemization is a sufficient reason for the Bureau not to require it
by rule. The Bureau proposed and is finalizing the itemization
requirement pursuant to its authority to interpret FDCPA section
809(a), as well as pursuant to its authority under Dodd-Frank Act
section 1032(a) to prescribe rules to ensure that the features of debt
collection are fully, accurately, and effectively disclosed to
consumers.
The Bureau is revising Sec. 1006.34(c)(2)(viii) to permit debt
collectors to disclose the itemization on a separate page.\235\ The
itemization that appears on the model validation notice may not
accommodate all debt types in every instance. Some debt collectors may
have legitimate reasons to combine multiple debts on a single
validation notice. This may be the case with respect to medical debt
(for instance, owing to healthcare provider billing practices) and
student loan debt (because consumers may receive loans through multiple
disbursements with separate account numbers). As finalized, Sec.
1006.34(c)(2)(viii) states that a debt collector may disclose the
itemization on a separate page provided in the same communication with
a validation notice, if the debt collector includes on the validation
notice, where the itemization would have appeared, a statement
referring to that separate page.\236\ New comment 34(c)(2)(viii)-3
clarifies that a debt collector may comply with the requirement to
refer to the separate page by, for example, including on the validation
notice the statement, ``See the enclosed separate page 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)(ix).\237\
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\235\ Under Sec. 1006.34(d)(2)(ii), a debt collector who
otherwise uses the model validation notice or a substantially
similar form, but who provides the itemization of the current amount
of the debt on separate page, receives a safe harbor for compliance
with the information and form requirements of Sec. 1006.34(c) and
(d)(1) except with respect to the itemization that appears on the
separate page.
\236\ For example, when delivering a validation notice by mail,
a debt collector may include the separate itemization in the same
envelope as the validation notice. Similarly, when delivering a
validation notice electronically, a debt collector may include the
separate itemization in the same email as the validation notice.
\237\ Section 1006.34(d)(2)(iii) establishes that a debt
collector who uses the model validation notice and who provides an
itemization on a separate page receives a safe harbor for compliance
with the information and form requirements of Sec. 1006.34(c) and
(d)(1), except with respect to the disclosures that appear on the
separate page.
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The Bureau is making an additional change to Sec.
1006.34(c)(2)(viii). As finalized, Sec. 1006.34(c)(2)(viii) omits the
proposed language that an itemization must be ``in a tabular format.''
The Bureau determined that it is unnecessary and unwarranted to mandate
the use of a tabular format because, if the itemization information is
provided on a separate page or orally, using a tabular format may be
impractical or infeasible and, if the itemization information is
provided on a validation notice, debt collectors likely will use the
tabular format shown on the model notice such that they may receive a
safe harbor for compliance with the information and form requirements
of Sec. 1006.34(c) and (d)(1).
To accommodate debt collectors who wish to combine multiple debts
on a single validation notice, the Bureau is adopting new comment
34(c)(2)(viii)-4 to clarify that a debt collector who combines multiple
debts on a single validation notice complies with Sec.
1006.34(c)(2)(viii) by disclosing either a single, cumulative
itemization on the validation notice or a separate itemization of each
debt on a separate page or pages provided in the same communication as
the validation notice.\238\
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\238\ Relatedly, as discussed in the section-by-section analysis
of Sec. 1006.34(c)(2)(ix), the Bureau is adopting new comment
34(c)(2)(ix)-2 to clarify that a debt collector who combines
multiple debts on a single validation notice complies with Sec.
1006.34(c)(2)(ix)'s requirement to disclose the ``current amount of
the debt'' by disclosing on the validation notice a single,
cumulative figure that is the sum of the current amount of all the
debts.
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The Bureau concludes that the itemization requirement will not
cause healthcare providers or debt collectors to violate the HIPAA
Privacy Rule. HHS staff has advised the Bureau that the HIPAA Privacy
Rule generally permits covered entities to disclose protected health
information required by applicable law.\239\ Because disclosure of
itemization information will be necessary to comply with Sec.
1006.34(c)(2)(viii), this guidance indicates that the HIPAA Privacy
Rule will permit its disclosure.
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\239\ See 45 CFR 164.512(a)(1) (``A covered entity may use or
disclose protected health information to the extent that such use or
disclosure is required by law and the use or disclosure complies
with and is limited to the relevant requirements of such law.'');
see also U.S. Dep't of Health & Human Servs., Does the HIPAA Privacy
Rule prevent health plans and providers from using debt collection
agencies? Does the Privacy Rule conflict with the Fair Debt
Collection Practices Act?, https://www.hhs.gov/hipaa/for-professionals/faq/268/does-the-hipaa-privacy-rule-prevent-health-care-providers-from-using-debt-collection-agencies/ (last
visited Dec. 1, 2020) (noting that the HIPAA Privacy Rule permits
healthcare providers to provide the minimum necessary patient
information to debt collectors for the purpose of receiving
payment).
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The Bureau declines to modify Sec. 1006.34(c)(2)(viii) as
commenters otherwise recommended. An itemization, even if no interest
and fees have been assessed or charged on an account, remains relevant
information about the debt. Further, complying with Sec.
1006.34(c)(2)(viii) if no interest and fees have been assessed or
charged is relatively straightforward, and comment 34(c)(2)(viii)-1
clarifies how debt collectors may do so.
However, the Bureau is finalizing proposed comment 34(c)(2)(viii)-1
with a modification to delete language stating that debt collectors may
indicate ``N/A'' in a required field when no interest, fees, payments,
or creditors have been
[[Page 5807]]
assessed or applied to the account because different consumers may
interpret ``N/A'' differently. For example, some consumers might
understand it as indicating ``not available,'' and others might
construe it as meaning ``not applicable.'' To eliminate this potential
ambiguity, the Bureau is revising comment 34(c)(2)(viii)-1 to provide
that a debt collector may indicate that the value of a required field
is ``0,'' ``none,'' or may state that no interest, fees, payments, or
credits have been assessed or applied to the debt. The Bureau also is
revising the comment to clarify, as was intended in the proposal, that
a debt collector may not leave a required field blank.
The Bureau declines the recommendation that debt collectors be
permitted to indicate ``U'' for ``unknown'' or ``unavailable'' in the
itemization if a creditor did not provide the relevant information.
Allowing debt collectors to omit specific itemization information in
this manner could incentivize debt collectors to avoid receiving it,
thereby undermining the effectiveness of Sec. 1006.34(c)(2)(viii).
Debt collectors sought clarification as to how they should comply
with Sec. 1006.34(c)(2)(viii) in various scenarios. Depending on the
facts and circumstances, a third-party payment or insurance adjustment
may be disclosed as a ``payment'' or a ``credit'' in the itemization.
Also depending on the facts and circumstances, a payment that is
returned may be omitted from the itemization provided that the payment
and the return offset each other, and provided that the amount of the
debt owed on the itemization date pursuant to Sec. 1006.34(c)(2)(vii)
and the current amount of the debt pursuant to Sec. 1006.34(c)(2)(ix)
are accurately disclosed.
Regarding Sec. 1006.34(c)(2)(viii)'s interaction with itemization
requirements in other applicable law, the Bureau is finalizing new
comment 34(c)(2)(viii)-2, which states that, if a debt collector is
required by other applicable law to provide an itemization of the
current amount of the debt with the validation information, the debt
collector may comply with Sec. 1006.34(c)(2)(viii) by disclosing the
itemization required by other applicable law in lieu of the itemization
described in Sec. 1006.34(c)(2)(viii), if the itemization required by
other applicable law is substantially similar to the itemization that
appears on the model validation notice. The Bureau is aware of only one
jurisdiction that requires debt collectors to provide an itemization
with the validation information, and that itemization is substantially
similar to the itemization required by Sec. 1006.34(c)(2)(viii).\240\
Further, consumers likely would not benefit--and, in fact, may be
disadvantaged--by receiving multiple itemizations with the validation
information. For instance, although a debt collector could include both
the itemization required by Sec. 1006.34(c)(2)(viii) on the front of a
validation notice, and, on the reverse, an itemization specifically
required by other applicable law (as an optional disclosure pursuant to
Sec. 1006.34(d)(3)(iv)), a consumer would be unlikely to benefit from
receiving two itemizations. In addition, permitting debt collectors to
simultaneously satisfy the Bureau's itemization requirement and a
substantially similar requirement under other applicable law with one
itemization avoids burdening debt collectors with the costs of creating
redundant disclosures.
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\240\ See 23 NYCRR 1.2(b)(2).
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The Bureau determines that the itemization of the current amount of
the debt should not be more detailed (e.g., it should not include a
detailed list of all payments). The itemization that appears on the
model validation notice has been validated through four rounds of
consumer testing and is effective, and the Bureau agrees with
commenters who observed that a detailed disclosure of, for example, all
payments could be overwhelming and not logistically feasible.
For all of these reasons, the Bureau is finalizing proposed Sec.
1006.34(c)(2)(ix), renumbered as Sec. 1006.34(c)(2)(viii), to provide
that required validation information includes an itemization of the
current amount of the debt reflecting interest, fees, payments, and
credits since the itemization date. Final Sec. 1006.34(c)(2)(viii)
also provides that a debt collector may disclose the itemization on a
separate page provided in the same communication with a validation
notice if the debt collector includes on the validation notice, where
the itemization would have appeared, a statement referring to that
separate page. The Bureau is finalizing comment 34(c)(2)(ix)-1 with
revisions and renumbered as comment 34(c)(2)(viii)-1 and is adding
comments 34(c)(2)(viii)-2 through -4 to clarify various aspects of
final Sec. 1006.34(c)(2)(viii), as discussed above. The Bureau is
finalizing Sec. 1006.34(c)(2)(viii) and its related commentary
pursuant to its authority to interpret FDCPA section 809(a), as well as
its authority under Dodd-Frank Act section 1032(a).
34(c)(2)(ix)
FDCPA section 809(a)(1) requires debt collectors to disclose to
consumers the amount of the debt. Proposed Sec. 1006.34(c)(2)(x)
provided that the current amount of the debt is required validation
information.\241\ Proposed comment 34(c)(2)(x)-1 explained that, for
residential mortgage debt subject to Regulation Z, 12 CFR 1026.41, a
debt collector could 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.
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\241\ 84 FR 23274, 23342, 23415 (May 21, 2019).
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Some commenters raised concerns about how proposed Sec.
1006.34(c)(2)(x) would disclose the current amount of the debt.
Industry and industry trade group commenters stated that, if interest
and fees are increasing, the current amount of the debt that appears on
a validation notice may no longer be accurate by the time the consumer
receives the notice. Some commenters stated that some State laws and
court decisions require debt collectors to disclose if the current
amount of the debt may change due to interest and fees.\242\ To address
these concerns, industry and industry trade group commenters suggested
that the Bureau should either develop a stand-alone increasing-
interest-and-fee disclosure or structure Sec. 1006.34(c)(2)(x) to
permit debt collectors to disclose that the itemized current amount of
the debt may increase or decrease.\243\
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\242\ See Avila v. Riexinger & Assocs., LLC, 817 F.3d 72, 76 (2d
Cir. 2016) (holding that 15 U.S.C. 1692e requires debt collectors to
disclose if the amount of a debt may increase due to interest and
fees).
\243\ A trade group commenter recommended the following dynamic
balance disclosure: ``As of the date of this letter, the balance due
on the account is . Because interest, fees, and/or other
charges may change the total owed from day to day, the amount due on
the day you pay may be greater. If you pay the amount shown above,
an adjustment may be necessary after we receive your payment, in
which event you may be informed of any other amount due.''
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An industry trade group stated that disclosing the current amount
of the debt as proposed would present challenges for some reverse
mortgage debt because that amount might differ from the amount
disclosed in monthly statements.\244\ The commenter
[[Page 5808]]
recommended that, to avoid potential confusion in the context of
reverse mortgage debt, a debt collector should be permitted to provide
the last monthly account statement in lieu of disclosing the current
amount of the debt.
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\244\ The Bureau understands that, for some reverse mortgages,
including Home Equity Conversion Mortgages insured by the FHA, when
the reverse mortgage is due and payable, the amount due from the
borrower may not be the amount of outstanding debt because these
reverse mortgages are non-recourse loans and a borrower will never
owe more than a portion of the appraised value of the home. See 24
CFR 206.125.
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A group of consumer advocates recommended that, for residential
mortgage debt, the Bureau should require debt collectors to disclose
the current amount of the total unpaid balance owed as well as the
arrearage owed. According to this commenter, the arrearage owed is
important information because, in many jurisdictions, homeowners in
default can pay the arrearage to stop a foreclosure and reinstate a
mortgage.
After considering these comments, the Bureau is finalizing Sec.
1006.34(c)(2)(x) as proposed but renumbered as Sec. 1006.34(c)(2)(ix).
In addition, the Bureau is finalizing comment 34(c)(2)(x)-1 as proposed
and is adopting new comment 34(c)(2)(ix)-2 to clarify how a debt
collector who combines multiple debts on a single validation notice
complies with Sec. 1006.34(c)(2)(ix).
With respect to interest and fee accrual when disclosing the
current amount of the debt, the Bureau declines to incorporate an
increasing-interest-or-fee disclosure or to structure the current
amount of the debt as a dynamic balance in Sec. 1006.34(c)(2)(ix). The
Bureau notes, however, that comment 34(c)(2)(ix)-1 (proposed as comment
34(c)(2)(x)-1) clarifies that the current amount of the debt is the
amount of the debt as of the date that the validation information is
provided. Therefore, a debt collector satisfies the requirement in
Sec. 1006.34(c)(2)(ix) without providing a dynamic balance or
increasing-interest-or-fee disclosure. Additionally, as discussed in
the section-by-section analysis of Sec. 1006.34(d)(3)(iv), the final
rule affirmatively permits debt collectors to include along with the
required validation information other disclosures specifically required
by applicable law. As such, debt collectors may include a disclosure
pursuant to a judicial decision or order that the current amount of the
debt may increase or vary due to interest, fees, or other charges. This
modification addresses the challenges debt collectors face related to
interest and fee accrual in disclosing the current amount of the debt.
The Bureau declines to permit debt collectors collecting reverse
mortgage debt to include a last monthly account statement in place of
disclosing the current amount of the debt. Unlike the special rule for
certain residential mortgage debt discussed in the section-by-section
analysis of Sec. 1006.34(c)(5), reverse mortgages are not generally
subject to a separate disclosure requirement, such as 12 CFR
1026.41(b)'s periodic statement requirement, that is functionally
equivalent to, or as useful to consumers as, certain disclosures
required by Sec. 1006.34(c)(2). Reverse mortgages generally are exempt
from providing periodic statements under the Truth in Lending Act
(TILA) \245\ and its implementing Regulation Z.\246\ While reverse
mortgages may be subject to a monthly statement requirement that would
require entities to disclose the ``total outstanding loan balance,''
this regulatory requirement is not as prescriptive as the Bureau's
periodic statement requirement for other residential mortgage
debt.\247\ Thus, the Bureau determines that a last monthly statement
for a reverse mortgage debt is not an adequate substitute for Sec.
1006.34(c)(2)(ix).
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\245\ 15 U.S.C. 1601 et seq.
\246\ See 12 CFR 1026.41(e)(1).
\247\ The regulation provides: ``The mortgagee shall provide to
the borrower a monthly statement regarding the activity of the
mortgage for each month, as well as for the calendar year. The
statement shall summarize the total principal amount which has been
paid to the borrower under the mortgage during that calendar year,
the MIP paid to the Commissioner and charged to the borrower, the
total amount of deferred interest added to the outstanding loan
balance, the total outstanding loan balance, and the current
principal limit. The mortgagee shall include an accounting of all
payments for property charges. The statement shall be provided to
the borrower monthly until the mortgage is paid in full by the
borrower. The mortgagee shall provide the borrower with a new
payment plan every time it recalculates monthly payments or the
payment option is changed. The statements shall be in a format
acceptable to the Commissioner.'' See 24 CFR 206.203(a).
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The Bureau declines to require debt collectors to separately
disclose an arrearage owed for residential mortgage debt. Because the
Bureau did not propose this disclosure, it lacks the benefit of public
comment and concludes that additional information, including through
public comment, would be advisable before adopting any such
interpretation. However, the Bureau notes that a debt collector who
utilizes the special rule for certain residential mortgage debt
described in Sec. 1006.34(c)(5) to comply with Sec. 1006.34(c)(2)(vi)
through (viii) will provide a periodic statement that may disclose such
information.\248\ Although a mortgage servicer is not required to use
the special rule for certain residential mortgage debt, a mortgage
servicer who does so and who otherwise uses the model validation notice
or a substantially similar form receives a safe harbor for compliance
pursuant to Sec. 1006.34(d)(2)(ii). The Bureau therefore expects that,
in many circumstances, a debt collector who is also a mortgage servicer
that is required to provide periodic statements under Regulation Z, 12
CFR 1026.41 will disclose arrearage information.
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\248\ 12 CFR 1026.41(d)(8)(vi) requires a periodic statement to
include, if the consumer is more than 45 days delinquent, the total
payment amount needed to bring the account current.
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As noted in the section-by-section analysis of Sec.
1006.34(c)(2)(viii), industry commenters requested further guidance
about how to combine multiple debts on a single validation notice. The
Bureau is adopting new comment 34(c)(2)(ix)-2 to clarify that a debt
collector who combines multiple debts on a single validation notice
complies with Sec. 1006.34(c)(2)(ix) by disclosing on the validation
notice a single, cumulative figure that is the sum of the current
amount of all the debts.
Proposed Provision Not Finalized
As discussed in the section-by-section analysis of Sec.
1006.26(c), in the February 2020 proposal, the Bureau proposed to
require debt collectors collecting time-barred debt to include time-
barred debt and revival disclosures on the validation notice.\249\
Proposed Sec. 1006.34(c)(2)(xi) provided that validation information
included those disclosures, as applicable, if the debt collector
determined after a reasonable investigation that such disclosures were
required by Sec. 1006.26(c).\250\ For the reasons discussed in the
section-by-section analysis of Sec. 1006.26(c), the Bureau is not
finalizing the proposed time-barred debt disclosure requirements and,
accordingly, the Bureau is not finalizing proposed Sec.
1006.34(c)(2)(xi). However, as discussed in the section-by-section
analysis of Sec. 1006.34(d)(3)(iv)(B), any disclosures relating to
time-barred debt that are specifically required by applicable law or
that provide safe harbors under applicable law are optional disclosures
that the final rule affirmatively permits debt collectors to include on
the validation notice.
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\249\ See 85 FR 12672 (Mar. 3, 2020).
\250\ Id. at 12685, 12696.
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34(c)(3) Information About Consumer Protections
The disclosures in FDCPA section 809(a) help consumers to determine
if a particular debt is theirs and to facilitate action in response to
the receipt of validation information. However, as the proposal stated,
debt collectors typically disclose only the information that FDCPA
section 809(a) specifically references and provide the FDCPA section
809 information using statutory
[[Page 5809]]
language, rather than plain language that consumers can more easily
comprehend.\251\ To address these concerns, proposed Sec.
1006.34(c)(3) provided that certain information about a consumer's
rights with respect to debt collection is required validation
information. This information, which is discussed in the section-by-
section analysis of Sec. 1006.34(c)(3)(i) through (vi) below, included
disclosures specifically referenced in FDCPA section 809(a)(4) and (5),
as well as additional disclosures intended to help consumers understand
their debt collection rights.\252\
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\251\ 84 FR 23274, 23342 (May 21, 2019).
\252\ See 15 U.S.C. 1692g(a)(4) and (5).
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Commenters generally supported requiring debt collectors to
disclose information about a consumer's rights with respect to debt
collection. Federal government agency staff and a consumer advocate
commenter stated that proposed Sec. 1006.34(c)(3) would improve
consumers' understanding of their rights in debt collection. Some
industry and industry trade group commenters supported using plain
language disclosures to explain consumer protections in debt
collection.
Some commenters recommended that the Bureau require additional
disclosures about consumers' rights with respect to debt collection.
Federal government agency staff, a group of 28 State Attorneys General,
and a number of consumer advocate commenters recommended that debt
collectors be required to disclose the FDCPA section 805(c) cease
communication right.\253\ A State regulatory agency recommended that
the Bureau require debt collectors to disclose that a consumer's
failure to act or to dispute a debt may have credit reporting
implications. This commenter also recommended that Sec. 1006.34(c)(3)
require debt collectors to disclose how consumers may obtain an annual
credit report, which consumers are entitled to under the FCRA and its
implementing Regulation V.\254\
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\253\ In the November 2020 Final Rule, the Bureau finalized
Sec. 1006.6(c)(1) to implement FDCPA section 805(c) and to provide
that, ``if a consumer notifies a debt collector in writing that the
consumer refuses to pay a debt or that the consumer wants the debt
collector to cease further communication with the consumer, the debt
collector must not communicate or attempt to communicate further
with the consumer with respect to such debt.'' 85 FR 76734, 78889
(Nov. 30, 2020).
\254\ See 15 U.S.C. 1681j(a); 12 CFR 1022.136.
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The Bureau determines, as discussed in the proposal, that consumers
will benefit from receiving additional information about their rights
in debt collection and from plain language disclosures rather than
disclosures that parrot the FDCPA's statutory text.\255\ The Bureau
therefore is adopting Sec. 1006.34(c)(3). Specifically, as discussed
further in the section-by-section analysis below, the Bureau is
adopting Sec. 1006.34(c)(3)(i) through (v) and its related commentary
with minor modifications, but is not finalizing proposed Sec.
1006.34(c)(3)(vi), which addressed the opt-out notice required by Sec.
1006.6(e) for electronic communications or attempts to communicate.
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\255\ 84 FR 23274, 23342 (May 21, 2019).
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The Bureau declines to require additional disclosures about
consumer protections in debt collection, as some commenters suggested.
In particular, the Bureau concludes that, although consumers may
benefit from understanding the rights the commenters discussed, those
rights are not sufficiently related to the purposes of FDCPA section
809--i.e., helping consumers to determine if a debt is theirs and to
facilitate action in response to the receipt of validation
information--to require debt collectors to include them as validation
information.\256\ In addition, as discussed in the section-by-section
analysis of Sec. 1006.34(c)(3)(iv), the final rule generally requires
debt collectors to include a statement that informs consumers that
additional information regarding consumer protections in debt
collection is available on the Bureau's website, with a link to the
information.\257\ The Bureau's website will disclose more information
about consumer protections in debt collection, including about the
cease communication right.
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\256\ For example, when Congress established the cease
communication right pursuant to FDCPA section 805(c), Congress did
not require its disclosure pursuant to FDCPA section 809. The Bureau
concludes that was intentional. Thus, the Bureau declines to include
the cease communication right as validation information that debt
collectors must disclose.
\257\ Section 1006.34(c)(3)(iv) requires debt collectors to
include the disclosure if they are collecting debt related to a
consumer financial product or service, as defined in Sec.
1006.2(f). Otherwise, debt collectors can optionally include the
disclosure under Sec. 1006.34(d)(3)(viii).
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The Bureau is finalizing 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 is finalizing 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.
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).\258\ 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.
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\258\ See 15 U.S.C. 1692g(a)(4).
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The Bureau proposed 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.\259\
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\259\ 84 FR 23274, 23343, 23404 (May 21, 2019).
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The Bureau received a variety of comments in response to proposed
Sec. 1006.34(c)(3)(i)'s incorporation of the validation period end
date.\260\ On the one hand, an industry trade group and a group of
consumer advocate commenters supported the inclusion, asserting the
validation period end date would provide certainty to consumers about
the timeframe within which to exercise their verification rights.
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\260\ The discussion under the ``Model Validation Notice''
heading in the section-by-section analysis of Sec. 1006.34(d)(2)
provides details about how the statement required by Sec.
1006.34(c)(3)(i) is disclosed on the model validation notice.
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However, other commenters opposed the inclusion because, if
delivery of a validation notice is delayed and the consumer receives
the notice later than the debt collector presumed, the validation
period end date would be inaccurate. Commenters suggested this could
pose legal risk to debt collectors. To address this concern, an
industry commenter recommended that the Bureau modify proposed Sec.
1006.34(c)(3)(i) to replace the validation period end date with a
generic statement that a consumer may request verification within 30
days after receiving the validation notice.
[[Page 5810]]
Some commenters, including consumer advocate commenters and an
industry trade group, stated that disclosing the validation period end
date might leave consumers with the false impression that they could
not raise concerns about a debt after the validation period expires. A
group of academic commenters argued that a study suggested that a
significant number of consumers believed that, if they did not dispute
a debt during the validation period, they would be unable to assert
later that they did not owe the debt.\261\ Similarly, an industry
commenter stated that disclosing the validation period end date might
dissuade consumers from making verification requests after that date
even though debt collectors sometimes honor such requests. To address
this potential misunderstanding, some commenters recommended that the
final rule require debt collectors to inform consumers that they can
raise concerns about a debt after the validation period end date.
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\261\ Jeff Sovern & Kate Walton, Are Validation Notices Valid?
An Empirical Evaluation of Consumer Understanding of Debt Collection
Validation Notices, 70 SMU L. Rev. 63, 128 (2017) (``Our study
indicated that more than a third of the respondents believed that if
they failed to meet the thirty-day deadline, they would either have
to pay a debt they did not owe or would not be able to argue in
court that they didn't owe the debt.'').
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Commenters also addressed the Bureau's proposal to require debt
collectors to disclose FDCPA section 809(b)'s collections pause.
Federal government agency staff and a group of consumer advocate
commenters supported the collections pause disclosure. However,
industry commenters stated that the disclosure would be burdensome
because it would encourage consumers to dispute the debt for the
purpose of delaying or avoiding debt collection. According to an
industry commenter, consumers do not need to be informed about FDCPA
section 809(b)'s collections pause because debt collectors are aware of
it and observe it.
The Bureau determines that consumers will benefit from Sec.
1006.34(c)(3)(i)'s disclosure of the validation period end date. As
discussed in the proposal, the validation period end date is an
integral feature of consumers' dispute right. Among other things, the
validation period end date will provide certainty to consumers about
the timeframe provided by the FDCPA to exercise their verification
rights.
The Bureau disagrees that a validation period end date that is
inaccurate because a validation notice was delayed will present
significant legal risk to debt collectors. Final Sec. 1006.34(b)(5)
and comment 34(b)(5)-1 provide that, for purposes of determining the
end of the validation period, a debt collector who provides the
validation information in writing or electronically may assume that a
consumer receives the validation information on any date that is at
least five business days after the debt collector provides it. If a
debt collector calculates the validation period end date in accordance
with this presumption, the debt collector will not violate the FDCPA or
its implementing Regulation F, even if, as final comment 34(b)(5)-1
clarifies, the consumer receives the validation notice later than the
debt collector assumed. Further, the Bureau determines that a generic
statement that a consumer may request verification within 30 days after
receiving the validation notice is not an adequate substitute for
disclosing the validation period end date. Such a generic statement
could leave many consumers unsure about when the validation period
ends. For example, consumers might receive a validation notice in the
mail but not open it immediately, or they might open it and return to
it later without keeping track of how much time has passed. In these
and similar scenarios, consumers would not be able to determine the
validation period end date.
Regarding commenters' suggestion that the Bureau require debt
collectors to inform consumers that they can raise concerns about a
debt after the validation period end date, the Bureau concludes that it
is not necessary to require such a disclosure. FDCPA section 809(a)
requires specific consumer disclosures, including statements about the
consumer's rights within 30 days of receipt of the notice, but does not
require any additional statement addressing consumer actions after the
expiration of that period. The Bureau determines that a specific end
date will not increase consumer confusion more than general language
such as ``within 30 days.'' The Bureau's testing shows that, while some
confusion does occur, about 40 percent of participants said they could
still dispute the debt after the validation period end date.\262\ Of
the remaining 60 percent of participants, about 40 percent were unclear
what would happen if they wrote to dispute the debt, and only about 20
percent specifically said that they could not write to dispute the
debt.\263\ When asked whether the debt collector would be required to
send information saying they owe the debt if they wrote to dispute
after the validation period end date, a small majority of consumers
assumed that the debt collector would be required to do so.\264\ Thus,
although consumers may not be certain of the effect of writing to
dispute the debt after the validation period end date, the Bureau's
testing indicates that a sizeable majority of consumers would not be
inhibited about raising general concerns about the debt after the
validation notice end date. As discussed above, the final rule's
enhanced and plain-language disclosures should improve overall consumer
understanding and empower consumers to respond, should they choose, to
debt collectors. The Bureau therefore declines to require as part of
the validation information an explicit statement informing consumers
that they may continue to raise concerns about the debt after the
validation period end date.
---------------------------------------------------------------------------
\262\ See November 2020 Qualitative Testing Report, supra note
34, at 13. Similarly, the Bureau's prior testing suggested that
``[o]verall, participants' comments suggest that they understood the
difference between writing before the specified date [and] writing
after that date.'' FMG Usability Report, supra note 28, at 56.
\263\ Id.
\264\ Id. at 13-14.
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The Bureau also determines that Sec. 1006.34(c)(3)(i) should not
omit the collections pause disclosure. As the proposal noted, consumer
testing indicates that knowing about the collections pause was
important to consumers and would encourage them to exercise their
dispute right if they questioned a debt's validity.\265\ Debt
collectors have not provided evidence to support the premise that a
significant number of consumers exercise their FDCPA section 809
verification rights solely to evade or delay paying debts that they
owe. Absent such evidence, the Bureau declines to conclude that
consumers will exercise their rights for such purposes. Further,
regardless of whether debt collectors are aware of and comply with
FDCPA section 809(b)'s collections pause requirement, the Bureau
concludes that consumers will benefit from this disclosure because it
will provide them with more complete information about the actions that
debt collectors must take if consumers notify them that the debt is
disputed.
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\265\ FMG Cognitive Report, supra note 27, at 30; see also FMG
Summary Report, supra note 29, at 25.
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For all of these reasons, the Bureau is finalizing Sec.
1006.34(c)(3)(i) as proposed, with minor wording changes to clarify the
content of the required disclosure, including by specifying that the
consumer must notify the debt collector in writing ``on or before'' the
end of the validation period, as opposed to
[[Page 5811]]
``before'' the end of the validation period, as proposed.\266\
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\266\ The model validation notice uses the term ``by'' instead
of ``on or before'' for plain language purposes.
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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 from the current creditor.\267\
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. The Bureau proposed 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.\268\
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\267\ See 15 U.S.C. 1692g(a)(5).
\268\ 84 FR 23274, 23343, 23404 (May 21, 2019).
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Some industry and industry trade group commenters recommended that
the Bureau not finalize proposed Sec. 1006.34(c)(3)(ii).\269\ Some
commenters stated that the validation information need not include a
statement informing consumers of their right to request original-
creditor information because, under the Bureau's rule, the validation
information will include the creditor as of the itemization date and,
according to the commenters, that creditor and the original creditor
often will be the same. Relatedly, some commenters suggested that,
because the validation information will include the names of the
itemization-date creditor and the current creditor, debt collectors
should be permitted to omit the statement informing consumers of their
right to request original-creditor information if the original creditor
is the same as either of those creditors.\270\
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\269\ See the ``Model Validation Notice'' discussion in the
section-by-section analysis of Sec. 1006.34(d)(2) for additional
details about how the statement required by Sec. 1006.34(c)(3)(ii)
is disclosed on the model validation notice.
\270\ As an alternative to complying with Sec.
1006.34(c)(3)(ii), an industry trade group commenter recommended
that debt collectors be permitted to proactively disclose the
original-creditor information that a consumer would receive in
response to an FDCPA section 809(b) request. This comment is
addressed in the section-by-section analysis of Sec. 1006.38.
---------------------------------------------------------------------------
Some commenters recommended that the Bureau modify proposed Sec.
1006.34(c)(3)(ii) to omit the validation period end date and the
collections pause disclosures. These comments were substantially
similar to comments discussed in the section-by-section analysis of
Sec. 1006.34(c)(3)(i).
After considering the feedback, the Bureau has determined to
finalize Sec. 1006.34(c)(3)(ii). FDCPA section 809(a)(5) expressly
requires debt collectors to include in the validation information a
statement that, upon the consumer's written request within 30 days
after receipt of the validation information, the debt collector will
provide the consumer with the name and address of the original
creditor, if different from the current creditor. The Bureau proposed
Sec. 1006.34(c)(3)(ii) to implement that requirement and to clarify
the content of the disclosures for debt collectors. The Bureau did not
propose an exception to this disclosure requirement if the original
creditor and the current creditor are the same and therefore does not
have information regarding the costs or benefits of finalizing such an
exception. To the extent that commenters were concerned about the
burden of responding to original-creditor information requests when the
original creditor and the current creditor are the same, the Bureau is
finalizing a special rule for that scenario in Sec.
1006.38(c)(2).\271\ For these reasons, the Bureau is finalizing Sec.
1006.34(c)(3)(ii) as proposed, with minor wording changes to clarify
the content of the required disclosure, including by specifying that
the consumer must notify the debt collector in writing ``on or before''
the end date of the validation period, as opposed to ``before'' the end
of the validation period, as proposed.\272\
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\271\ See the section-by-section analysis of Sec.
1006.38(c)(2).
\272\ The model validation notice uses the term ``by'' instead
of ``on or before'' for plain language purposes.
---------------------------------------------------------------------------
The Bureau declines to omit the validation period end date and the
collections pause disclosures from Sec. 1006.34(c)(3)(ii) for the same
reasons discussed in the section-by-section analysis of Sec.
1006.34(c)(3)(i).
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.\273\ The Bureau proposed
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.\274\
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\273\ 15 U.S.C. 1692g(a)(3).
\274\ 84 FR 23274, 23343-44, 23404 (May 21, 2019).
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At the time of the proposal, courts in various jurisdictions had
reached different conclusions about whether FDCPA section 809(a)(3)
requires debt collectors to recognize oral disputes about the validity
of a debt.\275\ These differing decisions principally arose from the
fact that, whereas FDCPA section 809(a)(4) and (5) explicitly state
that a consumer must notify a debt collector in writing, FDCPA section
809(a)(3) does not refer to a writing requirement. In the absence of an
express writing requirement in FDCPA section 809(a)(3), the majority of
circuit courts that considered the issue had determined that a
consumer's oral dispute triggers certain FDCPA protections, including,
for example, FDCPA section 810's payment application requirement.\276\
Consistent with this majority position, 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 proposed to
interpret FDCPA section 809(a)(3) to allow oral disputes.\277\
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\275\ Compare Clark v. Absolute Collection Serv., Inc., 741 F.3d
487, 490 (4th Cir. 2014) (per curiam) (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.'').
\276\ FDCPA section 810 is implemented by Sec. 1006.30(c). See
85 FR 76734, 76843 (Nov. 30, 2020); see also Camacho, 430 F.3d at
1081-82 (holding that oral disputes trigger certain FDCPA
protections, including under FDCPA sections 807(8) and 810).
\277\ After the proposal was published, the circuit split was
resolved. In Riccio v. Sentry Credit, Inc., the Third Circuit
sitting en banc overruled its prior decision and determined that
FDCPA section 809(a)(3) does not require a dispute to be in writing.
Riccio v. Sentry Credit, Inc., 954 F.3d 582, 594 (3d Cir. 2020) (en
banc) (``In short, we conclude that debt collection notices sent
under Sec. 1692g need not require that disputes be expressed in
writing. In doing so, we overrule Graziano's contrary holding.'').
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Industry commenters, industry trade group commenters, and a group
of academic commenters supported the Bureau's proposed interpretation
that FDCPA section 809(a)(3) permits
[[Page 5812]]
consumers to dispute the validity of a debt orally or in writing.
Several industry and industry trade group commenters expressed
concerns about how proposed Sec. 1006.34(c)(3)(iii) was disclosed on
the proposed model validation notice, perceiving a tension between the
regulatory text and the proposed model notice text. Specifically,
whereas the proposed model validation notice stated that a consumer may
``call or write'' to dispute all or part of the debt, proposed Sec.
1006.34(c)(3)(iii) did not specify the manner in which a consumer must
contact the debt collector and instead used the general term
``contact.''
As proposed, the Bureau determines that FDCPA section 809(a)(3)
permits both oral and written disputes. The Bureau agrees with every
circuit court that has addressed this issue and interprets the absence
of a reference to a writing requirement in FDCPA section 809(a)(3) to
mean that a writing is not required. Further, commenters overall
supported this interpretation.
The Bureau declines to modify how Sec. 1006.34(c)(3)(iii) is
phrased on the model validation notice. The Bureau developed the phrase
``call or write'' for comprehension purposes. The model notice's
language is intended to be plain language and consumer-friendly and was
validated through multiple rounds of qualitative and quantitative
consumer testing.\278\ Regulatory text and the model notice language
reflecting that regulatory text need not be identical in every case.
For instance, if consumers may not understand a requirement as
described in regulatory text, it is appropriate to express that
requirement in plain language in consumer disclosures.\279\
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\278\ See part III.C.
\279\ See the ``Model Validation Notice'' discussion in the
section-by-section analysis of Sec. 1006.34(d)(2) for additional
details about how the statement required by Sec. 1006.34(c)(3)(iii)
is disclosed on the model validation notice.
---------------------------------------------------------------------------
For these reasons, the Bureau is finalizing Sec.
1006.34(c)(3)(iii) as proposed, with minor wording changes to clarify
the content of the required disclosure, including by specifying that
the consumer must notify the debt collector in writing ``on or before''
the end of the validation period, rather than ``before'' the end of the
validation period, as proposed.\280\
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\280\ The model validation notice uses the term ``by'' instead
of ``on or before'' for plain language purposes.
---------------------------------------------------------------------------
34(c)(3)(iv)
Dodd-Frank Act section 1032(a) permits the Bureau to 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. 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 proposed
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.
Commenters generally agreed that consumers would benefit from
information about additional protections available to consumers
experiencing debt collection. However, commenters disagreed about the
best way to provide that information.
A large number of consumer advocate and academic commenters
recommended that, rather than a statement that additional information
is available on the Bureau's website, the Bureau should require debt
collectors to provide consumers, along with the validation notice, a
reference document describing consumer protections in debt collection,
similar to the document that the Bureau developed prior to the SBREFA
process.\281\ Commenters stated that a reference document would be more
useful to consumers than a statement appearing on a validation notice.
Further, some such commenters stated that proposed Sec.
1006.34(c)(3)(iv) would not help consumers without internet access who
are unable to visit the Bureau's website.
---------------------------------------------------------------------------
\281\ For additional detail about information that the Bureau
considered including in the reference document, see appendix G of
the Small Business Review Panel Outline, supra note 39.
---------------------------------------------------------------------------
Consumer advocate commenters and a group of academics also stated
that, if the Bureau does not require a reference document, the Bureau
should revise proposed Sec. 1006.34(c)(3)(iv) to require debt
collectors to include a web address that directs consumers to a Bureau
page dedicated to consumer protections in debt collection, instead of
to the Bureau's general website landing page.\282\ Other commenters
stated that requiring consumers to click on a hyperlink if the
validation notice is delivered electronically would create procedural
hurdles that reduce consumer follow through and would pose security
risks to consumers.
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\282\ Also, in response to proposed Sec. 1006.34(d)(4)(ii), a
consumer advocate commenter recommended that the Bureau permit debt
collectors to embed a hyperlink that directs consumers to the
Bureau's website address described in proposed Sec.
1006.34(c)(3)(iv). As discussed in the section-by-section analysis
of Sec. 1006.34(d)(4)(ii), the Bureau is adopting this
recommendation to permit debt collectors to include a hyperlink
without losing the safe harbor in Sec. 1006.34(d)(2).
---------------------------------------------------------------------------
At least one industry trade group commenter disagreed and supported
proposed Sec. 1006.34(c)(3)(iv) on the grounds that including a
reference document with the validation notice would overwhelm
consumers.
For the reasons discussed below, the Bureau is finalizing Sec.
1006.34(c)(3)(iv) as proposed with a revision in response to feedback.
The Bureau declines to require debt collectors to provide consumers
a reference document describing consumer protections in debt
collection. Because the Bureau did not propose such a requirement, the
Bureau did not receive robust feedback in response to the proposal
about what such a required form should look like and how a requirement
to provide it might operate. Further, the Bureau expects that most
consumers will receive the disclosure referring to the Bureau's website
and will be able to access the website; most consumers use the internet
and have experience navigating to websites.\283\
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\283\ For example, a Pew Research Center study in 2019 found
that 90 percent of U.S. adults use the internet. See Pew Research
Ctr., Internet/Broadband Fact Sheet, https://www.pewresearch.org/internet/fact-sheet/internet-broadband/#who-uses-the-internet (last
visited Dec. 1, 2020).
---------------------------------------------------------------------------
The Bureau determines that consumers would benefit from being
directed to a page dedicated to consumer protections in debt collection
instead of the Bureau's website landing page. Accordingly, the Bureau
is modifying Sec. 1006.34(c)(3)(iv) to specifically reference the web
page www.cfpb.gov/debt-collection instead of the Bureau's general
landing page. The Bureau is also making a conforming change to how the
statement described in Sec. 1006.34(c)(3)(iv) is disclosed on the
model validation notice.
The Bureau determines that consumers will not face significant
security risks when accessing the Bureau's website. The vast majority
of validation notices today are delivered by mail, so an active
hyperlink is not possible. In the case of electronic communications,
the Bureau recognizes that active hyperlinks can present security
concerns to consumers, including, among other things, phishing
[[Page 5813]]
risks.\284\ But the Bureau is not requiring debt collectors to include
an active hyperlink to the Bureau's website in validation notices. In
other words, even if the validation information is provided
electronically, Sec. 1006.34(c)(3)(iv) only requires that the text
``www.cfpb.gov/debt-collection'' be displayed in the information. As
discussed in the section-by-section analysis of Sec.
1006.34(d)(4)(ii), a debt collector is permitted, but not required, to
include an active hyperlink to the Bureau's website. This is because
hyperlinks are a common feature of electronic commercial
communications. A validation notice that includes a hyperlink to the
Bureau's website may be safe and convenient for a consumer. This would
particularly be the case if the debt collector had prior contact with
the consumer and the consumer recognizes that the validation notice was
sent by a familiar source. If a consumer is unfamiliar with the debt
collector or otherwise has concerns about clicking on an active
hyperlink, the consumer could choose, rather than clicking on the
hyperlink, to navigate independently to the Bureau's website to obtain
more information about consumer protections in debt collection.
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\284\ See, e.g., Fed. Trade Comm'n, How to Recognize and Avoid
Phishing Scams (May 2019), https://www.consumer.ftc.gov/articles/how-recognize-and-avoid-phishing-scams (last visited Dec. 1, 2020).
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Accordingly, the Bureau is finalizing Sec. 1006.34(c)(3)(iv) to
provide that, if a debt collector is collecting debt related to a
consumer financial product or service as defined in Sec. 1006.2(f),
validation information includes a statement that informs the consumer
that additional information regarding consumer protections in debt
collection is available on the Bureau's website at www.cfpb.gov/debt-collection.
34(c)(3)(v)
Proposed Sec. 1006.34(c)(4) provided that validation information
includes information that a consumer can use to take certain actions,
including disputing a debt or requesting original-creditor
information.\285\ As discussed in the section-by-section analysis of
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. Under Sec. 1006.38, this
writing requirement is satisfied if a consumer provides a dispute or
request for original-creditor information 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.\286\ Thus, debt collectors are 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
proposed Sec. 1006.34(c)(3)(v) to provide that validation information
includes a statement explaining how a consumer can take the actions
described in proposed Sec. 1006.34(c)(4) and (d)(3), as applicable,
electronically, if the debt collector sends a validation notice
electronically.
---------------------------------------------------------------------------
\285\ Proposed Sec. 1006.34(c)(4) set forth required consumer-
response information. Proposed Sec. 1006.34(d)(3)(iii)(B) and
(vi)(B) set forth certain other consumer-response information
related to payment requests and requests for Spanish-language
validation notices.
\286\ See the section-by-section analysis of Sec. 1006.38 and
comment 38-1.
---------------------------------------------------------------------------
Proposed comment 34(c)(3)(v)-1 explained that a debt collector may
provide the information described in 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).\287\ Proposed comment 34(c)(3)(v)-1 also clarified
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.
---------------------------------------------------------------------------
\287\ On the model validation notice, this phrase appears as
``We accept such requests electronically.'' This wording deviates
from the regulatory text due to space considerations and the context
of surrounding disclosures.
---------------------------------------------------------------------------
An industry commenter and an industry trade group commenter
supported proposed Sec. 1006.34(c)(3)(v) because it would inform
consumers about alternative methods to contact debt collectors and
would increase the likelihood that consumers would engage with debt
collectors. However, another industry commenter objected to the
proposal because, the commenter argued, allowing consumers to exercise
verification rights electronically would encourage consumers to submit
verification requests for the purpose of delaying or avoiding paying a
debt.
The Bureau determines that requiring debt collectors who provide
validation notices electronically to include statements on the
validation notice explaining how consumers can dispute the debt or
request original-creditor information electronically will benefit
consumers by facilitating their ability to exercise those verification
rights electronically. The Bureau agrees that such disclosures will
increase the likelihood of engagement between consumers and debt
collectors but does not agree that they will encourage consumers to
submit disputes or original-creditor-information requests to delay or
avoid paying the debt. As discussed in the section-by-section analysis
of Sec. 1006.34(c)(3)(i), commenters have not provided evidence
demonstrating that a significant number of consumers exercise their
verification rights with the principal purpose of avoiding paying debts
that they owe. Absent such evidence, the Bureau declines to conclude
that consumers will exercise verification rights for this purpose.
Accordingly, the Bureau is finalizing Sec. 1006.34(c)(3)(v) and
its related commentary largely as proposed, except that the final rule
does not require debt collectors who provide validation notices
electronically to include statements stating how consumers can take the
actions described in Sec. 1006.34(d)(3) (i.e., responding to a payment
prompt (Sec. 1006.34(d)(3)(iii)) or requesting a Spanish-language
translation (Sec. 1006.34(d)(3)(vi))) electronically.
The Bureau notes that Sec. 1006.34(d)(3)(vi)(A) affirmatively
permits a debt collector to include supplemental information in Spanish
specifying how a consumer may request a Spanish-language validation
notice, and such information could include how the consumer may do so
electronically. In addition, as discussed at the outset of the section-
by-section analysis of Sec. 1006.34, the Bureau is not finalizing the
proposed requirement that all validation notices must be substantially
similar to the model validation notice in order to avoid violating the
rule. Therefore, under the final rule, a debt collector who chooses to
include either or both of the optional payment disclosures in Sec.
1006.34(d)(3)(iii) is not prohibited by Regulation F from including a
statement about how the consumer can make a payment electronically
(although including such a statement will take the debt collector out
of the safe harbor in Sec. 1006.34(d)(2)). The Bureau is
[[Page 5814]]
finalizing Sec. 1006.34(c)(3)(v) pursuant to its authority to
interpret FDCPA section 809(a) and (b), as well as its authority under
Dodd-Frank Act section 1032(a).
34(c)(3)(vi)
The Bureau proposed Sec. 1006.34(c)(3)(vi) to provide that, for a
validation notice delivered in the body of an email pursuant to
procedures set forth in the proposal, validation information includes
the opt-out statement required by Sec. 1006.6(e).\288\ Proposed
comment 34(c)(3)(vi)-1 clarified certain details, including that the
requirement would not apply in the case of validation notices delivered
by hyperlink and that electronic delivery of a validation notice is not
rendered ineffective if a consumer opts out of future electronic
communications pursuant to Sec. 1006.6(e).
---------------------------------------------------------------------------
\288\ As finalized in the November 2020 Final Rule, Sec.
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 a reasonable and simple method by
which the consumer can opt out of further electronic communications
or attempts to communicate by the debt collector to that address or
telephone number. See 85 FR 76734, 76890 (Nov. 30, 2020).
---------------------------------------------------------------------------
Although no commenters objected to proposed Sec.
1006.34(c)(3)(vi), the Bureau is not finalizing it. The Bureau has
determined that it is not necessary to require debt collectors to
include the Sec. 1006.6(e) opt-out instructions on validation notices
sent electronically because Sec. 1006.6(e) itself already requires
those instructions in every electronic communication or communication
attempt, which will includes every electronic communication
transmitting a validation notice. Thus, Sec. 1006.34(c)(3)(vi) would
be redundant.
A debt collector who sends a validation notice electronically may
provide the Sec. 1006.6(e) disclosure in the electronic communication
outside of the validation notice. A debt collector who provides the
model validation notice electronically will not lose the safe harbor
described in Sec. 1006.34(d)(2) by including the Sec. 1006.6(e)
disclosure in the electronic communication outside the model notice.
Accordingly, the Bureau determines that the Sec. 1006.6(e) opt-out
disclosure is not necessary to include as validation information.
Although the Bureau is not finalizing proposed Sec. 1006.34(c)(3)(vi),
the Bureau reaffirms the clarification in proposed comment
34(c)(3)(vi)-1 that electronic delivery of a validation notice is not
rendered ineffective merely because a consumer opts out of future
electronic communications pursuant to the instructions in Sec.
1006.6(e).
34(c)(4) Consumer-Response Information
FDCPA section 809(b) contains certain requirements that a debt
collector must satisfy if a consumer exercises the consumer's right to
dispute the validity of the debt or request 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. 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 the debt collector
obtains and mails such information to the consumer. 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 right to dispute the debt or request original-
creditor information, which the Bureau collectively refers to as
``verification rights.''
The Bureau proposed Sec. 1006.34(c)(4) to require a consumer-
response information section to help consumers exercise their FDCPA
section 809(b) verification rights.\289\ Specifically, proposed Sec.
1006.34(c)(4) provided that required validation information includes
certain consumer-response information situated next to prompts that
consumers could use to indicate that they want to take action or make a
request. The proposed information, which is discussed in the section-
by-section analysis of Sec. 1006.34(c)(4)(i) through (iii), included
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.\290\ Proposed Sec. 1006.34(c)(4) provided 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 proposed 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:''. As shown on the proposed model validation
notice, the consumer-response information section appeared as a tear-
off portion of the form. Proposed comment 34(c)(4)-1 clarified 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 shown on the model validation notice.
---------------------------------------------------------------------------
\289\ 84 FR 23275, 23404 (May 21, 2019).
\290\ As discussed in the section-by-section analysis of Sec.
1006.34(d)(3), proposed Sec. 1006.34(d)(3)(iii)(B) and (vi)(B)
provided that a debt collector also could include a payment
disclosure and Spanish-language validation notice request disclosure
as consumer-response information.
---------------------------------------------------------------------------
A group of academic commenters expressed general support for
proposed Sec. 1006.34(c)(4). However, some industry commenters
objected to the proposed consumer-response information section.
According to a depository institution, the proposed consumer- response
information formatted as a tear-off is an obsolete approach because
physical mail is increasingly less relevant as consumers prefer
electronic communications. An industry commenter stated that the
proposed consumer-response information section would encourage
consumers to communicate through mail, which is more expensive and
time-intensive than other communication methods, such as email.
Several commenters raised concerns about proposed Sec.
1006.34(c)(4)'s use of the heading ``How do you want to respond?'' A
group of State Attorneys General and at least one industry commenter
stated that consumers may incorrectly infer from this phrase that they
must use the consumer-response information section to respond to a debt
collector. Some commenters suggested that this phrase created the false
impression that consumers must engage with the debt collector, even if
they prefer not to. To address this concern, consumer advocate
commenters and a group of State Attorneys General recommended that the
consumer-response information section include ``Do Nothing'' as a
response option.
Some industry trade group commenters objected to proposed Sec.
1006.34(c)(4) being formatted for use with a return envelope. According
to these commenters, some debt collectors do not include return
envelopes with
[[Page 5815]]
validation notices and instituting such a practice would entail
significant costs. However, a consumer group commenter disagreed and
stated that the Bureau should require debt collectors to include a
return envelope with prepaid postage to facilitate use of the proposed
consumer-response information section.
After considering comments, the Bureau is adopting Sec.
1006.34(c)(4) with minor wording changes to conform to changes in Sec.
1006.34(d).
The Bureau acknowledges that electronic communications are
increasingly prevalent in society at large; however, most debt
collectors do not presently communicate with consumers electronically,
particularly to provide validation notices.\291\ Further, many
consumers still prefer to communicate with debt collectors via mail
instead of email or other electronic media.\292\ Given communication
practices in the debt collection industry and consumer preferences, the
Bureau determines that formatting the model validation notice consumer-
response information section as a tear-off so that a consumer can
return that portion of the form by mail if the consumer so chooses will
benefit both debt collectors and consumers. Thus, if debt collectors
opt not to format the consumer-response information section as a tear-
off, the Sec. 1006.34(d)(2) safe harbor will not apply to their
validation notices.
---------------------------------------------------------------------------
\291\ See 85 FR 76734, 76852 (Nov. 30, 2020).
\292\ According to the CFPB Debt Collection Consumer Survey, 71
percent of consumers preferred to be contacted by a debt collector
by mail. Only 12 percent of consumers preferred email. Bureau of
Consumer Fin. Prot., Consumer Experience with Debt Collection:
Findings from CFPB's Survey of Consumer Views on Debt, at 29-30
(Jan. 12, 2017), https://files.consumerfinance.gov/f/documents/201701_cfpb_Debt-Collection-Survey-Report.pdf (CFPB Debt Collection
Consumer Survey).
---------------------------------------------------------------------------
The Bureau concludes that the heading ``How do you want to
respond?'' likely will not lead consumers to believe that they must
respond to the debt collector or use the consumer-response information
section to do so. Consumer testing indicated that consumers paid
relatively little attention to this heading.\293\ Further, consumers
generally grasped the consequences of not responding to a validation
notice.\294\ These findings suggest that the heading will not induce
otherwise unwilling consumers to engage with debt collectors. This
conclusion is bolstered by findings from the Bureau's most recent
qualitative consumer testing. The Bureau's consumer testing suggests
that consumers understand that they have the option of not engaging
with a debt collector in response to a validation notice.\295\ This
testing also indicates that consumers understand that, if they choose
to communicate with a debt collector, they do not have to use the
consumer-response information section to do so.\296\ The Bureau
therefore determines that it is unnecessary to include a ``Do Nothing''
response option, as some commenters suggested.
---------------------------------------------------------------------------
\293\ ``The `You Have Rights' and `How do you want to respond to
this notice?' sections had a comparatively low number of fixations
(i.e., a testing participant's eyes resting on a piece of
information) compared to other parts of the notice. These two
sections were often discussed during the interview as being
important so the fewer number of fixations suggests that this
information might have been easy to read and comprehend.
Participants also commented that these sections only needed to be
scanned, further suggesting that fewer fixations on this section
might have been due to ease of processing the information rather
than a disinterest in the information. See FMG Usability Report,
supra note 28, at 7.
\294\ See id. at 83-84.
\295\ When asked about whether they were legally required
respond to the model validation notice, approximately 90 percent of
participants reported that they were not. See November 2020
Qualitative Testing Report, supra note 34, at 11.
\296\ During testing, participants generally understood that
they could dispute the debt by telephone, electronically, or writing
with or without the ``tear-off.'' See id. at 15.
---------------------------------------------------------------------------
The consumer-response information section should be formatted for
use with a return envelope. The fact that the consumer-response
information established by Sec. 1006.34(c)(4) is formatted on the
model validation notice for use with a return envelope does not require
debt collectors to include return envelopes with validation notices,
even if they use the model notice.
Accordingly, the Bureau is finalizing Sec. 1006.34(c)(4) with
minor wording changes to conform to changes in Sec. 1006.34(d). The
Bureau also is finalizing Sec. 1006.34(c)(4)(i) through (iii) and
their related commentary with certain modifications that are discussed
in the section-by-section analysis below.
The Bureau is finalizing 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 is also finalizing 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 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 consumer-
response information will 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.\297\ Proposed Sec. 1006.34(c)(4)(i) provided 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.\298\ Proposed Sec.
1006.34(c)(4)(i), which was designed to work in tandem with Sec.
1006.34(c)(3)(i),\299\ provided that consumer-response information
includes the following four statements, listed in the following order,
using the following phrasing or substantially similar phrasing, 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).''
---------------------------------------------------------------------------
\297\ 15 U.S.C. 1692g(a)(4).
\298\ 84 FR 23274, 23404-05 (May 21, 2019).
\299\ As finalized, Sec. 1006.34(c)(3)(i) provides that
validation information includes the date the debt collector will
consider the end date of the validation period and a statement that,
if the consumer notifies the debt collector in writing on or before
that date 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.
---------------------------------------------------------------------------
A group of academic commenters and some consumer advocate
commenters supported the dispute prompts described in proposed Sec.
1006.34(c)(4)(i). The academic commenters stated that the prompts would
facilitate consumer disputes because consumers are accustomed to using
forms with prompts, such as drop-down menus in online transactions.
According to these commenters, the Bureau should facilitate consumer
disputes given the low consumer literacy levels in the United States--
particularly among consumers with limited English proficiency (LEP
consumers)--and the FDCPA's least-sophisticated-consumer standard.\300\
These commenters stated
[[Page 5816]]
that facilitating disputes will also benefit industry because consumer
disputes may lead to questionable or invalid debts being removed from
the market.
---------------------------------------------------------------------------
\300\ 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.'') (citations and
some internal quotation marks omitted); Clomon v. Jackson, 988 F.2d
1314, 1319 (2d Cir. 1993) (``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.'').
---------------------------------------------------------------------------
Other commenters objected to proposed Sec. 1006.34(c)(4)(i).
Industry trade group commenters stated that the proposed dispute
prompts would increase dispute volume and, consequently, debt
collectors would incur additional costs responding to disputes.
Industry commenters stated that higher dispute volumes would overwhelm
debt collectors, making it difficult to identify and process valid
disputes. Industry and industry trade group commenters stated that the
proposed dispute prompts would lead consumers to believe that they had
to dispute the debt, even if they recognized the debt as valid.
Industry and industry trade groups argued that streamlining the dispute
process would encourage frivolous disputes. One industry trade group
stated that requiring a lawyer engaged in debt collection to include
the proposed dispute prompts on a validation notice would constitute
providing legal advice to unrepresented persons, which is a violation
of attorney rules of professional conduct.
Industry and industry trade group commenters stated the proposed
dispute prompts would not solicit enough information for debt
collectors to evaluate disputes. According to commenters, the proposed
dispute prompts are too general and would result in generic disputes
that would increase compliance costs, frustrate dispute investigation,
undermine consumer communication, and increase litigation risk. To
address these concerns, commenters recommended modifications to
proposed Sec. 1006.34(c)(4)(i). Some commenters suggested that the
validation notice provide additional space where a consumer could
include additional dispute detail, update contact information, or
provide communication preferences. Other commenters recommended
replacing the proposed dispute prompts with narrative instructions that
solicit dispute detail and supporting documentation.
As discussed in the section-by-section analysis of Sec.
1006.34(c)(2)(i), commenters stated that some debt collectors receive
payments and other correspondence, including disputes, at separate
addresses. Industry commenters stated that proposed Sec.
1006.34(c)(4)(i) would effectively combine a dispute form with a
payment coupon. According to commenters, a consumer's dispute may not
be processed in a timely fashion if a consumer returns a consumer-
response information form with a dispute to a dedicated payment
address.
Several consumer advocate commenters recommended combining the
proposed dispute prompts into a single prompt. According to these
commenters, a single dispute prompt would be appropriate because the
FDCPA does not require a consumer to specify a reason for a dispute and
a consumer may make unintentional admissions against their interest by
providing details.
Some commenters suggested additional dispute-related prompts.
Consumer advocate commenters recommended prompts for debts discharged
in bankruptcy, debts resulting from identity theft, and debts that were
previously paid or settled. Industry commenters urged the Bureau to add
a general account inquiry prompt. According to one industry commenter,
consumers with an account inquiry may perceive that they have no
alternative but to select a dispute prompt if proposed Sec.
1006.34(c)(4)(i) does not include a general account inquiry prompt.
An industry commenter asked for additional guidance about how the
proposed dispute prompts should be formatted when validation
information is provided on a website.
Consistent with the rationale discussed in the proposal and for the
following reasons, the Bureau is adopting proposed Sec.
1006.34(c)(4)(i).
The Bureau determines that Sec. 1006.34(c)(4)(i) will help
consumers exercise their FDCPA section 809 dispute rights, in part
because prompts are a common feature in written and electronic
communications and most consumers are familiar with the concept. The
Bureau determines that facilitating consumer disputes under FDCPA
section 809 is beneficial, particularly for less sophisticated
consumers. Further, to the extent consumer disputes help remove invalid
debts from circulation, Sec. 1006.34(c)(4)(i) will improve the
efficiency of debt markets.
It is also not clear that finalizing the dispute prompts will
result in a significant increase in consumer disputes compared to
current dispute rates. Section 1006.34(c)(2) will require debt
collectors to disclose more information about the debt and will help
consumers recognize debts they owe. Thus, Sec. 1006.34(c)(2) may
reduce the number of disputes arising from lack of consumer
recognition.
The Bureau disagrees that Sec. 1006.34(c)(4)(i) will make it more
difficult for debt collectors to identify and process valid disputes.
As noted above, Sec. 1006.34(c)(2) should reduce the number of
disputes arising from lack of consumer recognition. Therefore, the
disputes debt collectors receive will be more likely to reflect
problems with the underlying debt. Further, Sec. 1006.34(c)(4)(i)'s
dispute prompts--including Sec. 1006.34(c)(4)(i)(D)'s free-form
dispute prompt--may help consumers articulate and provide more detailed
information about the nature of their disputes. Thus, debt collectors
may better understand the nature of a consumer's dispute and be able to
respond more efficiently than if consumers had provided generic
disputes.
Further, dispute prompts likely will not lead consumers to believe
that they must dispute the debt. The Bureau's consumer testing
indicates that consumers who receive a validation notice understand
that they are not required to dispute a debt.\301\ Further, the Bureau
disagrees that streamlining the dispute process will significantly
increase the frequency of frivolous disputes. As discussed in the
section-by-section analysis of Sec. 1006.34(c)(3)(i) and (v), debt
collectors have not provided evidence that supports the premise that a
significant number of consumers exercise their FDCPA section 809
verification rights solely to evade or avoid paying debts that they
owe. Absent such evidence, the Bureau declines to conclude that
consumers will dispute for such purposes.
---------------------------------------------------------------------------
\301\ During one round of testing, approximately 50 percent of
participants stated that they would attempt to ``confirm'' a debt in
response to receiving a validation notice. Participants stated that
they would do so by, for example, contacting either the creditor or
the debt collector. Participants did not report that they would
dispute solely for the purposes of confirming the details of the
debt. See November 2020 Qualitative Testing Report, supra note 34,
at 11.
---------------------------------------------------------------------------
The Bureau determines that requiring debt collectors who are
attorneys to include dispute prompts in the consumer-response
information will not cause those debt collectors to violate the
professional rule of conduct against providing legal advice to an
unrepresented person.\302\ The FDCPA
[[Page 5817]]
requires all debt collectors, including debt collectors who are
attorneys, to include in the validation information statements relating
to the consumer's right to dispute the debt. The dispute prompt merely
provides consumers a simple way to exercise that right if the consumer
so chooses; it does not advise the consumer whether to do so. In
addition, the commenter that raised this concern cited no case law,
legal interpretation, or comparable evidence to support the proposition
that including the dispute prompt will be problematic.
---------------------------------------------------------------------------
\302\ See Am. Bar Ass'n, Model Rules of Professional Conduct,
Rule 4.3: Dealing with Unrepresented Person https://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/rule_4_3_dealing_with_unrepresented_person/ (last visited Dec. 2,
2020).
---------------------------------------------------------------------------
The Bureau is not modifying Sec. 1006.34(c)(4)(i) to provide
additional space for consumers to provide dispute details or to replace
the dispute prompts with narrative instructions. As discussed above,
the Bureau finds that it is unlikely that Sec. 1006.34(c)(4)(i) will
increase generic dispute volume. On the contrary, the dispute prompts--
including the free-form dispute prompt in Sec. 1006.34(c)(4)(i)(D)--
will provide debt collectors with more detailed dispute information
than they receive in many cases today. Further, the free-form dispute
prompt informs consumers that they can provide additional information
on the reverse of the consumer-response-information section (which is
formatted as a tear-off on the model validation notice) or on a
separate page. Thus, there is no need to provide additional space for
dispute detail on the validation notice itself.
Section 1006.34(c)(4)(i) will not lead to disputes being
misdirected to dedicated payment addresses. As discussed in the
section-by-section analysis of Sec. 1006.34(c)(4)(iii), the debt
collector must disclose in the consumer-response information section
the same mailing address disclosed pursuant to Sec. 1006.34(c)(2)(i),
which is the mailing address where the debt collector accepts disputes
and requests for original-creditor information.
The Bureau declines to structure Sec. 1006.34(c)(4)(i) as a single
dispute prompt. As discussed above, the dispute prompts are designed to
help consumers articulate, and debt collectors better understand, the
nature of a consumer's dispute and respond more efficiently than if
consumers had provided generic disputes. Reformulating Sec.
1006.34(c)(4)(i) as a single prompt would undermine this goal.
Meanwhile, the dispute prompts described in Sec. 1006.34(c)(4)(i) do
not contain individualized information that could reasonably result in
a consumer making an unintentional admission against their interest.
The Bureau declines to adopt additional dispute-related prompts.
Additional prompts for debts discharged in bankruptcy, debts resulting
from identity theft, and debts that were previously paid or settled
are, in the aggregate, not feasible and would likely overwhelm
consumers. Further, the Bureau believes the dispute prompts in Sec.
1006.34(c)(4)(i)(B) (this is not my debt) and (C) (the amount is wrong)
essentially capture these scenarios.
The Bureau also declines to add a general account inquiry prompt
distinct from the dispute prompt, as suggested by some commenters who
argued that consumers would use the dispute prompts to obtain general
information. The Bureau's testing has shown that consumers generally
understand that their response options are not limited to selecting a
dispute prompt and that disputing the debt is not the appropriate
method to raise a general question about the account.\303\
---------------------------------------------------------------------------
\303\ During usability testing, when participants were asked
what they could do if they did not think they owed the debt, ``all
participants understood that they had options for contacting the
debt collector to dispute the debt,'' which included calling and
writing. FMG Usability Report, supra note 28, at 48. See also
November 2020 Qualitative Testing Report, supra note 34, at 11
(discussion in ``Response to the model validation notice'' section).
---------------------------------------------------------------------------
The Bureau declines to provide additional guidance about formatting
the dispute prompts if validation information is provided on a website.
As discussed in the November 2020 Final Rule, the Bureau did not
finalize several proposed interventions related to electronic delivery
of required notices, including proposed alternative procedures for
providing the validation information on a secure website (proposed
Sec. 1006.42(c)(2)(ii)).\304\ Because the Bureau is not addressing
electronic delivery more broadly, the Bureau declines here to provide
guidance about disclosing validation information on websites. However,
as discussed in the section-by-section analysis of Sec. 1006.34(d)(2),
in contrast to the proposal, debt collectors are not required to use
the model validation notice or a substantially similar form.
---------------------------------------------------------------------------
\304\ 85 FR 76734, 76850-55 (Nov. 30, 2020).
---------------------------------------------------------------------------
Accordingly, the Bureau is finalizing proposed Sec.
1006.34(c)(4)(i) pursuant to its authority to implement and interpret
FDCPA section 809, as well as its authority under Dodd-Frank Act
section 1032(a).
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.\305\ Proposed Sec. 1006.34(c)(4)(ii) provided 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.\306\ Proposed Sec.
1006.34(c)(4)(ii) was intended to work in tandem with proposed Sec.
1006.34(c)(3)(ii).\307\ The Bureau received no comments specifically
addressing proposed Sec. 1006.34(c)(4)(ii) and is finalizing it as
proposed.
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\305\ 15 U.S.C. 1692g(a)(5).
\306\ 84 FR 23274, 23405 (May 21, 2019).
\307\ As finalized, Sec. 1006.34(c)(3)(ii) provides that
validation information includes the date that the debt collector
will consider the end date of the validation period and a statement
that, if the consumer requests in writing on or before that date 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.
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34(c)(4)(iii)
FDCPA section 809(b) assumes that a consumer has the ability to
write to a debt collector to exercise the consumer's verification
rights.\308\ Requiring a debt collector to include mailing addresses
for the consumer and the debt collector, along with the consumer-
response information described in Sec. 1006.34(c)(4)(i) and (ii), may
facilitate a consumer's ability to exercise the consumer's verification
rights. The Bureau proposed Sec. 1006.34(c)(4)(iii) to provide that
consumer-response information includes mailing addresses for the
consumer and the debt collector.\309\
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\308\ See 15 U.S.C. 1692g(b).
\309\ 84 FR 23274, 23405 (May 21, 2019).
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An industry trade group stated that some debt collectors use
vendors to receive and process mail from consumers. According to this
commenter, the Bureau should permit a debt collector to disclose the
address at which a debt collector receives mail, even if that address
is not the debt collector's physical address.
The Bureau is finalizing Sec. 1006.34(c)(4)(iii) with a clarifying
revision that addresses the commenter's request regarding letter vendor
mailing addresses. The Bureau is revising Sec. 1006.34(c)(4)(iii) to
provide that the mailing addresses disclosed for the consumer and the
debt collector in the consumer-response information must include the
debt collector's and the
[[Page 5818]]
consumer's names and mailing addresses as disclosed pursuant to Sec.
1006.34(c)(2)(i) and (ii). In turn, the Bureau notes that final Sec.
1006.34(c)(2)(i) and comment 34(c)(2)(i)-2 permit debt collectors to
disclose a vendor's mailing address, if that is an address at which the
debt collector accepts disputes and requests for original-creditor
information. Thus, under the final rule, a debt collector may include a
vendor's address in the consumer-response information if that is the
address that the debt collector discloses pursuant to Sec.
1006.34(c)(2)(i).
The Bureau notes that final Sec. 1006.34(c)(2)(i) and comment
34(c)(2)(i)-1 permit a debt collector to disclose its trade name or
DBA, instead of its legal name. Thus, under the final rule, a debt
collector must disclose its trade name or DBA in the consumer-response
information if that is the name that the debt collector discloses
pursuant to Sec. 1006.34(c)(2)(i).
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.\310\ As discussed in the section-by-
section analysis of Sec. 1006.34(c)(2)(vi) through (viii), 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.
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\310\ 15 U.S.C. 1692g(a)(1).
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For certain residential mortgage debt covered by TILA, as
implemented by Regulation Z, 12 CFR 1026, 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 understands that most residential mortgage debt is subject to
this requirement, although exceptions exist.\311\ The Bureau further
understands that a consumer is provided with such a periodic statement
every billing cycle, even if a loan is transferred between servicers.
Pursuant to 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 proposal stated 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).\312\
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\311\ 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 exempt from the periodic statement
requirement.
\312\ 84 FR 23274, 23348 (May 21, 2019).
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Proposed Sec. 1006.34(c)(5) therefore provided 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 provided 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 referred to that periodic statement in the validation
notice. Proposed comment 34(c)(5)-1 provided examples clarifying how
debt collectors could comply with Sec. 1006.34(c)(5). Consistent with
the proposal's rationale, and for the reasons discussed below, the
Bureau is adopting Sec. 1006.34(c)(5) and its related commentary with
a substantive modification and a clarification.
Some commenters recommended that the Bureau expand proposed Sec.
1006.34(c)(5) to cover additional debt types. An industry trade group
commenter stated that the Bureau should revise proposed Sec.
1006.34(c)(5) to apply to all residential mortgage debt, including to
transactions that are exempt from Sec. 1026.41(b)'s periodic statement
requirement, such as mortgage loans with certain consumers in
bankruptcy. As discussed in detail in the section-by-section analysis
of Sec. 1006.34(c)(2)(viii), the Bureau received feedback that its
proposed itemization would be incompatible with the account
characteristics of debts in bankruptcy. Thus, this commenter suggested
that the Bureau should revise proposed Sec. 1006.34(c)(5) to permit a
debt collector to reference the consumer's bankruptcy case and the
filed or pending proof of claim instead of providing the itemization-
related disclosures required by Sec. 1006.34(c)(2). Other industry
trade group commenters variously recommended that the special rule
extend to reverse mortgages structured as open-end credit, home-equity
lines of credit, and credit cards.
A consumer advocate commenter recommended that the Bureau revise
proposed Sec. 1006.34(c)(5) to apply only to debts that are currently
subject to Regulation Z, 12 CFR 1026.41, to reduce the likelihood that
a debt collector provides an outdated periodic statement. According to
the commenter, TILA coverage is fluid and a significant amount of time
can elapse between when the creditor provides a last periodic statement
and when the debt collector provides a validation notice. This
commenter recommended that the Bureau revise proposed Sec.
1006.34(c)(5) to provide that the previous periodic statement must have
been provided no more than 31 days before the validation notice is
sent. The commenter also recommended that, if any entity other than the
current servicer provided the most recent periodic statement, the debt
collector must conduct a reasonable investigation to verify the
accuracy of the prior entity's periodic statement or prepare its own
periodic statement.
The Bureau declines to expand Sec. 1006.34(c)(5) to cover
additional debt types. For certain residential mortgage debt, the final
rule permits debt collectors to provide a periodic statement that was
provided under 12 CFR 1026.41(d)(3) in lieu of the information
described in final Sec. 1006.34(c)(2)(vi) through (viii) because those
periodic statement disclosures are functionally equivalent to, and as
useful for the consumer as, that itemization information. This special
rule is not appropriate for the additional debt types recommended by
commenters because those debt types are not subject to prescriptive
disclosure regimes, such as Regulation Z. The Bureau doubts that
disclosures used for those other debt types relate to information that
is functionally equivalent to, or as useful as, the information Sec.
1006.34(c)(2)(vi) through (viii) requires. For instance, mortgage loans
with certain consumers in bankruptcy are exempt from Sec. 1026.41(b)'s
periodic statement requirement.\313\ With respect to debts in
bankruptcy in general, the Bankruptcy Code does not prescribe
disclosure requirements for proofs of claim that are comparable to
Regulation Z, 12 CFR 1026.41(d)(3). As discussed in the section-by-
section analysis of Sec. 1006.34(c)(2)(ix), reverse mortgages are not
subject to prescriptive regulatory requirements for periodic
statements. The periodic statement requirement in 12 CFR 1026.41(b)
does not cover open-end consumer credit transactions,
[[Page 5819]]
including home-equity lines of credit.\314\ With respect to credit card
debt, no special accommodation is necessary as debt collectors can
readily disclose the itemization information pursuant to Sec.
1006.34(c)(2)(vi) through (viii).
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\313\ See 12 CFR 1026.41(e).
\314\ See 12 CFR 1026.41(a)(1).
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The Bureau determines that Sec. 1006.34(c)(5) should apply only to
debts that are currently subject to Regulation Z, 12 CFR 1026.41.
Modifying the proposal to this effect is appropriate to reduce the
likelihood that a debt collector provides an outdated periodic
statement, which may not provide information that is functionally
equivalent to, or as useful as, the information described in Sec.
1006.34(c)(2)(vi) through (viii). The Bureau therefore is revising
proposed Sec. 1006.34(c)(5) and its related commentary to provide that
the special rule only applies to residential mortgage debt if a
periodic statement is required under Regulation Z, 12 CFR 1026.41, at
the time a debt collector provides the validation notice.\315\
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\315\ Under Sec. 1006.34(d)(2)(ii), a debt collector who uses
the model validation notice and who also uses the special rule for
certain residential mortgage debt under Sec. 1006.34(c)(5) receives
a safe harbor for use of the model notice except with respect to the
disclosures that appear on the separate page.
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Accordingly, the Bureau is finalizing Sec. 1006.34(c)(5) as
described above and is finalizing comment 34(c)(5)-1 with minor
revisions for clarity and consistency with provisions of the final
rule.
34(d) Form of Validation Information
34(d)(1) In General
The Bureau proposed Sec. 1006.34(d)(1)(i) to require that the
validation information described in Sec. 1006.34(c) be conveyed in a
clear and conspicuous manner. The Bureau reasoned that FDCPA section
809(a)'s required disclosures would be ineffective unless a debt
collector disclosed them in a manner that was readily understandable to
consumers.\316\ The Bureau received no comments specifically addressing
proposed Sec. 1006.34(d)(1)(i). The Bureau therefore is finalizing it
largely as proposed but renumbered as Sec. 1006.34(d)(1) \317\ and
with a wording change solely for consistency with final Sec.
1006.34(c). The Bureau adopts Sec. 1006.34(d)(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 also adopts Sec. 1006.34(d)(1)
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 finalizes 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.
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\316\ 84 FR 23274, 23348 (May 21, 2019). Section 1006.34(b)(1)
defines clear and conspicuous, and the Bureau responded to comments
on that definition in the section-by-section analysis of Sec.
1006.34(b)(1).
\317\ As discussed under the heading Proposed Provision Not
Finalized in this section-by-section analysis, the Bureau is not
finalizing proposed Sec. 1006.34(d)(1)(ii) and therefore is
finalizing proposed Sec. 1006.34(d)(1)(i) as Sec. 1006.34(d)(1).
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Proposed Provision Not Finalized
As noted at the outset of the section-by-section analysis of Sec.
1006.34, the Bureau proposed that debt collectors could use the model
validation notice to comply with the disclosure requirements proposed
in Sec. 1006.34(a)(1)(i) and (d)(1).\318\ In turn, the Bureau proposed
Sec. 1006.34(d)(1)(ii) to require that, if provided in a validation
notice, the content, format, and placement of the validation
information in Sec. 1006.34(c) and the optional disclosures in Sec.
1006.34(d)(3) must be substantially similar to the model validation
notice. Proposed comment 34(d)(1)(ii)-1 explained that a debt collector
could make certain changes as long as the resulting disclosures were
substantially similar to the model validation notice, and it provided
an example of a change that debt collectors may make to the validation
notice if the consumer is deceased.
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\318\ As discussed in the section-by-section analysis of Sec.
1006.34(d)(1), the Bureau proposed Sec. 1006.34(d)(1)(i) to require
that required validation information be provided in a clear and
conspicuous manner.
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While some industry, industry trade group, and consumer advocate
commenters supported proposed Sec. 1006.34(d)(1)(ii), other industry
and industry trade group commenters raised concerns that the proposed
model validation notice would not accommodate all debt types and debt
collection practices, suggesting that some debt collectors therefore
would be unable to comply with proposed Sec. 1006.34(d)(1)(ii). At
least two commenters, including a debt buyer specializing in medical
debt, stated that the proposed model validation notice was not well-
suited for non-financial debts, such as medical debts. A number of
commenters objected to the proposal because it would not allow debt
collectors to combine multiple debts in a single validation notice or
place multiple validation notices in one envelope. Commenters asked the
Bureau to modify proposed Sec. 1006.34(d)(1)(ii) to provide debt
collectors more flexibility to customize validation notices to
accommodate their business practices and the types of debts they
collect.
As discussed in the section-by-section analysis of Sec.
1006.34(d)(2), the Bureau has determined that a model validation notice
will benefit consumers and industry. However, based in part on feedback
from commenters, the Bureau also has determined that proposed Sec.
1006.34(d)(1)(ii) was overly prescriptive. Proposed Sec.
1006.34(d)(1)(ii) would have required any validation notice provided by
a debt collector to be substantially similar to the model validation
notice. Such a requirement could cause some debt collectors to face
undue compliance challenges depending on their business practices and
the types of debts they collect.
For this reason, the Bureau is not finalizing proposed Sec.
1006.34(d)(1)(ii) and its related commentary. Instead, as discussed in
the section-by-section analysis of Sec. 1006.34(d)(2), the Bureau is
adopting a more flexible framework in which debt collectors need not
use either the model validation notice, specified variations of the
model notice, or a substantially similar form, but debt collectors who
do so will receive a safe harbor for compliance with the information
and form requirements of Sec. 1006.34(c) and (d)(1).\319\ This
flexible framework is more consistent with model form safe harbors in
other consumer financial regulations.\320\ The Bureau determines that
this new framework will accommodate industry without significantly
increasing risks to consumers because the Bureau believes it is likely
that, if possible, debt collectors will use the model validation
notice, specified variations of the model notice, or a substantially
similar form to receive the compliance safe harbor. The Bureau notes
that a debt collector who provides the validation information in a form
that is not substantially similar either to the model validation notice
or to a specified variation of the model notice also is subject to the
FDCPA section 807 prohibition on false or misleading representations
and the FDCPA section 809(b) prohibition on overshadowing.
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\319\ The Bureau is relocating and repurposing some of the
proposed text of Sec. 1006.34(d)(1)(ii) and comment 34(d)(1)(ii)-1
to Sec. 1006.34(d)(2). See the section-by-section analysis of Sec.
1006.34(d)(2).
\320\ 15 U.S.C. 1601 et seq.
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[[Page 5820]]
34(d)(2) Safe Harbor
As discussed, the Bureau proposed Sec. 1006.34(d)(2) to provide,
pursuant to its authority under Dodd-Frank Act section 1032(b), that a
debt collector who uses the model validation complies with the
disclosure requirements of Sec. 1006.34(a)(1)(i) and (d)(1).\321\
Proposed comment 34(d)(2)-1 provided certain details regarding use of
the model validation notice. Under proposed Sec. 1006.34(d)(2) and as
explained in proposed comment 34(d)(2)-1, although use of the model
validation notice was not required, debt collectors would have received
a safe harbor for compliance only if they used the model validation
notice. Under proposed Sec. 1006.34(d)(2), debt collectors would not
have received a safe harbor if they used a form that was substantially
similar to the model validation notice.
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\321\ 84 FR 23274, 23405 (May 21, 2019). As discussed elsewhere
in part V, proposed Sec. 1006.34(a)(1)(i) provided that debt
collectors must send validation notices containing the information
described in proposed Sec. 1006.34(c) to consumers in a manner
permitted by Sec. 1006.42 (i.e., in a manner reasonably expected to
provide actual notice and in a form that the consumer may keep and
access later). And proposed Sec. 1006.34(d)(1) provided that debt
collectors must provide such validation information clearly and
conspicuously.
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As discussed below, the Bureau is finalizing proposed Sec.
1006.34(d)(2) and comment 34(d)(2)-1 with significant revisions to,
among other things, provide that debt collectors may obtain a safe
harbor for compliance with the validation information disclosure
requirements by using either the model validation notice, specified
variations of the model notice, or a substantially similar form. The
Bureau is finalizing new commentary to provide additional details
regarding the revised safe harbor framework.
Industry and industry trade group commenters overall supported
providing a safe harbor to debt collectors who use the model validation
notice. An industry and an industry trade group commenter stated that a
safe harbor would reduce frivolous litigation and compliance costs. An
industry commenter stated that not requiring debt collectors to use the
model validation notice would help to ensure that debt collectors can
provide validation notices in a manner consistent with their business
practices and the debt types they collect.
Some industry commenters asked the Bureau to specify what optional
disclosures could be added to the model notice. A number of industry
and industry trade group commenters also asked the Bureau to further
clarify what changes debt collectors could make to the model validation
notice and still receive the safe harbor.
Relatedly, some industry and industry trade group commenters asked
the Bureau to clarify the meaning of ``substantially similar,'' and two
industry trade group commenters recommended that the Bureau adopt
Regulation Z's definition of substantially similar. Some industry and
industry trade group commenters recommended that the Bureau expand
Sec. 1006.34(d)(2) to provide that debt collectors who use the model
validation notice comply with FDCPA section 807's prohibition on false
or misleading statements and FDCPA section 809(b)'s overshadowing
prohibition.\322\
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\322\ See 15 U.S.C. 1692e; see also 15 U.S.C. 1692g(b) (``Any
collection activities and communication during the 30-day period may
not overshadow or be inconsistent with the disclosure of the
consumer's right to dispute the debt or request the name and address
of the original creditor.'').
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A group of consumer advocate commenters stated that proposed Sec.
1006.34(d)(2) was too broad. Specifically, according to the commenter,
the safe harbor's cross-reference to Sec. 1006.34(a)(1)(i) was
overbroad because simply using the model validation notice does not
mean that the debt collector sent the validation notice in an initial
communication or within five days of the initial communication as
required by Sec. 1006.34(a)(1)(i). This commenter recommended that the
Bureau remove the reference to Sec. 1006.34(a)(1)(i) from Sec.
1006.34(d)(2).
After considering this feedback, and to clarify each of the ways in
which a debt collector may receive a safe harbor for compliance with
the final rule's validation information disclosure requirements, the
Bureau is finalizing Sec. 1006.34(d)(2) and its related commentary
with significant revisions, as follows.
34(d)(2)(i) In General
First, the Bureau is finalizing Sec. 1006.34(d)(2)(i) to provide
that, as proposed, a debt collector who uses the model validation
notice receives a safe harbor for compliance with the final rule's
validation information disclosure requirements. The Bureau determines
that a safe harbor is appropriate because the model validation notice
will effectively disclose information required by Sec. 1006.34(c), and
the safe harbor will incentivize debt collectors to use the model
notice.
The Bureau agrees that the Sec. 1006.34(d)(2) safe harbor should
not cover delivery of the validation notice. The Bureau recognizes the
risk that a debt collector could deliver the model validation notice in
an ineffective manner and that, as a result, the notice would be
delayed or never received by the consumer. The Bureau does not intend
Sec. 1006.34(d)(2) to provide a safe harbor in such a scenario. For
this reason, the Bureau is finalizing Sec. 1006.34(d)(2)(i) to specify
that the safe harbor for use of the model notice covers only compliance
with the information and form requirements of final Sec. 1006.34(c)
and (d)(1).
In response to comments requesting clarity about the use of
optional disclosures on the model notice, the Bureau is finalizing
Sec. 1006.34(d)(2)(i) to squarely address how the safe harbor applies
with respect to the Sec. 1006.34(d)(3) optional disclosures.\323\
First, the Bureau clarifies, as was intended in the proposal, that a
debt collector may include any or all of the Sec. 1006.34(d)(3)
optional disclosures without losing the safe harbor pursuant to Sec.
1006.34(d)(2). Specifically, final Sec. 1006.34(d)(2)(i) provides that
the model validation notice contains the validation information
required by Sec. 1006.34(c) and certain optional disclosures permitted
by Sec. 1006.34(d)(3). Section 1006.34(d)(2)(i) further provides that
a debt collector who uses the model validation notice complies with the
information and form requirements of Sec. 1006.34(c) and (d)(1),
including if the debt collector: Omits any or all of the optional
disclosures shown on the model notice (see Sec. 1006.34(d)(2)(i)(A));
or adds any or all of the optional disclosures described in Sec.
1006.34(d)(3) that are not shown on the model notice (see Sec.
1006.34(d)(2)(i)(B)), provided that any such optional disclosures are
no more prominent than any of the required validation information.\324\
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\323\ Proposed Sec. 1006.34(d)(3) specified that a debt
collector who used the model validation notice could include any of
the optional disclosures along with the validation information
without losing the Sec. 1006.34(d)(2) safe harbor for compliance.
\324\ The model validation notice includes the following
optional disclosures permitted by Sec. 1006.34(d)(3), each of which
is described in more detail in the section-by-section analysis
below: (1) Debt collector telephone contact information (see Sec.
1006.34(d)(3)(i)); (2) reference code (see Sec. 1006.34(d)(3)(ii));
(3) payment disclosures (see Sec. 1006.34(d)(3)(iii)); (4) a
statement referring to disclosures made under applicable law on the
reverse of the validation notice (see Sec. 1006.34(d)(3)(iv)(A));
(5) debt collector's website (see Sec. 1006.34(d)(3)(v)(A)); (6)
statement explaining how a consumer can dispute the debt or request
original-creditor information electronically (see Sec.
1006.34(d)(3)(v)(B)); (7) Spanish-language translation disclosures
(see Sec. 1006.34(d)(3)(vi)); (8) merchant brand information (see
Sec. 1006.34(d)(3)(vii)); and (9) for debt not related to a
consumer financial product or service, the information specified in
Sec. 1006.34(c)(2)(iii) or (c)(3)(iv) (i.e., name of the creditor
to whom the debt was owed on the itemization date and Bureau's debt
collection website, respectively) (see Sec. 1006.34(d)(3)(viii)).
The model validation notice does not include the following optional
disclosures permitted by Sec. 1006.34(d)(3): (1) Time-barred debt
disclosures made under applicable law on the front of the validation
notice (see Sec. 1006.34(d)(3)(iv)(B)); (2) debt collector email
address (see Sec. 1006.34(d)(3)(v)(A)); and (3) affinity brand or
facility name information (but, as noted above, merchant brand
information is shown on the model notice in the same location) (see
Sec. 1006.34(d)(3)(vii)).
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[[Page 5821]]
The requirement that any Sec. 1006.34(d)(3) optional disclosures
that are added to the model validation notice be no more prominent than
any of the validation information is designed to ensure that any such
optional disclosures do not overload consumers with information or
distract them from the required validation information. A debt
collector who chooses to include one or more of the Sec. 1006.34(d)(3)
optional disclosures that do not appear on the model validation notice,
but who violates the no-more-prominent requirement, loses the safe
harbor under Sec. 1006.34(d)(2) and may violate Sec. 1006.34
depending on the facts and circumstances.
As discussed in the section-by-section analysis of Sec.
1006.34(c)(1), a consumer advocate commenter asked the Bureau to
clarify what version of the FDCPA section 807(11) disclosure should
appear on the validation notice: The longer, initial disclosure
described in Sec. 1006.18(e)(1) or the shorter, subsequent disclosure
described in Sec. 1006.18(e)(2). The model validation notice includes
the disclosure required by Sec. 1006.18(e)(1). The Bureau is adopting
new comment 34(d)(2)(i)-1 to clarify that a debt collector who uses the
model notice to provide a validation notice as described in Sec.
1006.34(a)(1)(i)(B)--i.e., a debt collector who provides the validation
notice within five days of the initial communication--may replace the
disclosure required by Sec. 1006.18(e)(1) with the disclosure required
by Sec. 1006.18(e)(2) without losing the safe harbor provided by use
of the model notice. Comment 34(d)(2)(i)-1 also refers to comment
34(c)(1)-1 for further guidance related to providing the disclosure
required by Sec. 1006.18(e) on a validation notice.
The Bureau declines to extend the Sec. 1006.34(d)(2) safe harbor
to cover compliance with FDCPA section 807's prohibition on false or
misleading statements. A debt collector who uses the model validation
notice is still capable of making false or misleading statements to
consumers in the notice. For example, a debt collector using the model
validation notice could include false or misleading information about
the debt, such as an inflated current amount of the debt.
However, the Bureau agrees that debt collectors who use the model
validation notice should have a safe harbor for compliance with FDCPA
section 809(b)'s overshadowing prohibition. The Bureau provides a safe
harbor to that effect in Sec. 1006.38(b). The section-by-section
analysis of Sec. 1006.38(b) discusses this change in further detail.
34(d)(2)(ii) Certain Disclosures on a Separate Page
To conform with modifications in other sections of the Rule that
permit debt collectors to make certain itemization-related disclosures
on separate pages, the Bureau is finalizing new Sec.
1006.34(d)(2)(ii). As discussed in the section-by-section analysis of
Sec. 1006.34(c)(2)(viii), when disclosing the itemization of the
current amount of the debt, a debt collector has the option of
disclosing that itemization on a separate page. As discussed in the
section-by-section analysis of Sec. 1006.34(c)(5), the final rule
establishes a special rule for certain residential mortgage debt that
permits a debt collector, subject to certain conditions, to provide a
periodic statement under Regulation Z, 12 CFR 1026.41, instead of the
itemization-related validation information required by Sec.
1006.34(c)(2)(vi) through (viii).
Section 1006.34(d)(2)(ii) establishes how these provisions interact
with the safe harbor provided by use of the model notice. Specifically,
Sec. 1006.34(d)(2)(ii) establishes that a debt collector who uses the
model validation notice and makes certain disclosures on a separate
page pursuant to Sec. 1006.34(c)(2)(viii) or (5) may still receive a
safe harbor for use of the model notice except with respect to the
disclosures that appear on the separate page.
34(d)(2)(iii) Substantially Similar Form
As discussed in the section-by-section analysis of Sec.
1006.34(d)(1), the Bureau has determined that debt collectors should
receive a safe harbor for the information and form requirements of
Sec. 1006.34(c) and (d)(1) if they use a form that is substantially
similar to the model validation notice. The Bureau determines that, so
long as a form is substantially similar to the model notice, the
validation information disclosures will remain effective; the Bureau
therefore is finalizing Sec. 1006.34(d)(2) to provide this flexibility
for debt collectors.
For this reason, final Sec. 1006.34(d)(2)(iii) provides that a
debt collector who uses the model validation notice as described in
Sec. 1006.34(d)(2)(i) or (ii) may make changes to the form and retain
a safe harbor for compliance with the information and form requirements
of Sec. 1006.34(c) and (d)(1), provided that the form remains
substantially similar to the model notice. (As discussed elsewhere in
this Notice, a debt collector may comply with the requirements in Sec.
1006.34(c) and (d)(1) without using the model validation notice.)
Final comment 34(d)(2)(iii)-1 provides details regarding the
meaning of substantially similar, as requested by commenters, including
examples of permissible changes. The Bureau believes that these are
differences that may be useful to debt collectors and consumers and
will not increase the risk of consumer harm.
One permissible change relates to deceased consumers. Comment
34(d)(2)(iii)-1 incorporates proposed comment 34(d)(1)(ii)-1, which
discussed changes that debt collectors could make if the consumer were
deceased. The Bureau proposed comment 34(d)(1)(ii)-1 to explain 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 the
model notice. Proposed comment 34(d)(1)(ii)-1 also provided an example
of a change that debt collectors may make to the model validation
notice if the consumer is deceased.
The Bureau explained that, although the model 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 proposed model validation notice
stated that ``you owe'' the debt collector. While nothing in the
proposal would have prohibited a debt collector from including a cover
letter to explain the nature of the validation notice, proposed comment
34(d)(1)(ii)-1 also clarified that a debt collector could modify
inapplicable language in the validation notice that could suggest that
the recipient of the notice was liable for the debt. For example, if a
debt collector sent a validation notice to a person authorized to act
on behalf of the deceased consumer's estate, and if that person was not
liable for the debt, the debt collector could use the deceased
consumer's name instead of ``you.''
[[Page 5822]]
The Bureau received a few comments on proposed comment
34(d)(1)(ii)-1. One trade group commenter recommended that the Bureau
allow debt collectors to replace second-person pronouns with references
to the estate, such as ``the estate's bill.'' A group of consumer
advocates stated that, although the comment's example would be
appropriate in certain circumstances, the Bureau should provide an
entirely separate model validation notice for decedent debt because,
these commenters believed, debt collectors would be unlikely to diverge
from the model notice. Two trade group commenters also asked the Bureau
to create a second model validation notice for decedent debt.
The Bureau is incorporating proposed comment 34(d)(1)(ii)-1 into
comment 34(d)(2)(iii)-1, which clarifies that a debt collector may make
changes to the model validation notice and retain the safe harbor
provided by use of the model notice. Because the example regarding
decedent debt is illustrative, nothing in comment 34(d)(2)(iii)-1
prohibits a debt collector from making other substantially similar
modifications, such as referring to the estate rather than ``you,''
while still retaining the safe harbor. As explained elsewhere in this
section-by-section analysis, the Bureau declines to create separate
model forms for certain types of debt. The Bureau has modified the
model-form-safe-harbor framework under Sec. 1006.34(d)(2) to afford
debt collectors more flexibility to customize validation information to
accommodate their business practices and the types of debts they
collect. Within identified limits, debt collectors may make changes to
the model validation notice and still meet the standard for a safe
harbor under Sec. 1006.34(d)(2).
Comment 34(d)(2)(iii)-1 also includes four new examples of other
permissible changes: Relocating the consumer-response information
required by Sec. 1006.34(c)(4) to facilitate mailing; adding barcodes
or QR codes, as long as the inclusion of such items does not violate
Sec. 1006.38(b); adding the date the form is generated; and embedding
hyperlinks, if delivering the form electronically, which was proposed
in comment 34(d)(2)-1.
The Bureau clarifies that, if a debt collector includes disclosures
other than (1) the required validation information, (2) any optional
disclosures described in Sec. 1006.34(d)(3), or (3) any disclosures
that, if included, still leave the form substantially similar in
substance, clarity, and meaningful sequence to the model notice, then
the safe harbor does not apply with respect to the entirety of the
validation notice. Except as described in Sec. 1006.34(d)(2)(ii), the
Bureau has determined not to apply the safe harbor on a partial (i.e.,
disclosure-by-disclosure) basis because it is not clear how disclosures
other than those referenced above would interact with the validation
information.\325\ Final comment 34(d)(2)-1 clarifies that a debt
collector who provides a validation notice that is neither a notice
described in Sec. 1006.34(d)(2)(i) or (ii), nor a substantially
similar notice as described in Sec. 1006.34(d)(2)(iii), does not
receive a safe harbor for compliance with the information and form
requirements of Sec. 1006.34(c) and (d)(1). The Bureau notes that a
debt collector who adds disclosures to the model validation notice that
are not referenced above nevertheless may be able to comply with the
requirements in Sec. 1006.34(c) and (d)(1), Sec. 1006.38(b)(1), and
other requirements of the FDCPA and this final rule.
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\325\ As described in Sec. 1006.34(d)(2)(ii), a debt collector
who includes certain itemization-related disclosures on a separate
page in the same communication with the validation notice, and who
includes on the front of the notice the required statement referring
to those disclosures, receives a safe harbor for compliance with the
information and form requirements of Sec. 1006.34(c) and (d)(1)
except with respect to the disclosures that appear on the separate
page.
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Model Validation Notice
While the majority of industry commenters who commented on the
topic supported the idea of a model form, some criticized the design of
the proposed model validation notice. At least two industry commenters
stated that the proposed model notice contained too much content and
would overwhelm consumers. One commenter criticized the proposed model
notice for departing from the prevailing industry design for validation
notices. A number of identical or nearly identical comments suggested
that consumers would confuse the proposed model notice for a government
document, such as an IRS notice, but did not explain what in particular
about the model notice they believed would cause such consumer
confusion.
The Bureau's findings do not support the conclusions that the model
notice contains too much content or will overwhelm consumers. The model
validation notice was developed and validated over multiple rounds of
consumer testing that support its efficacy and comprehensibility. The
fact that the model validation notice departs from prevailing industry
design is intended. As the proposal noted, many validation notices used
today are confusing and lack sufficient information to help consumers
recognize their debts or exercise their FDCPA verification rights.\326\
With the model validation notice, the Bureau has developed an improved
validation notice that benefits both consumers and debt collectors. In
quantitative testing, the model validation notice consistently
performed better than or equal to a ``status quo'' notice designed to
resemble validation notices that some debt collectors use today.\327\
The Bureau also disagrees that the model validation notice resembles a
government document; the form clearly discloses that it is from a debt
collector, not the government.
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\326\ See 84 FR 23274, 23338 (May 21, 2019).
\327\ CFPB Quantitative Testing Report, supra note 31, at 13-16.
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A number of consumer advocate and academic commenters asserted that
the proposed model notice was not adequately tested. Some of these
commenters stated that the Bureau's testing included too few
participants to generate valid conclusions about the proposed model
notice's efficacy or to evaluate the comprehension of consumers,
particularly of the least sophisticated consumers. For instance, a
consumer advocate commenter expressed concern that only 60 consumers
were included in the cognitive and usability testing rounds.\328\
Likewise, an academic commenter stated that the Bureau's consumer
testing focused too heavily on observing what testing participants
looked at on the model notice (based on the use of eye tracking
techniques) at the expense of testing participants' comprehension of
the notice. Another commenter stated that the Bureau should have tested
more diverse groups, including consumers with limited English
proficiency, students, older consumers, and consumers from more diverse
socioeconomic backgrounds. Some consumer advocate and academic
commenters recommended that the Bureau field test the proposed model
notice with consumers with real debts. A consumer advocate expressed
concern about the performance of certain aspects of the proposed model
notice in quantitative testing, noting in particular that approximately
40 percent of respondents who received the model notice failed to
identify the correct entity the consumer should pay.\329\
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\328\ See FMG Summary Report, supra note 29, at 5-7.
\329\ Several comments in response to the May 2019 proposal also
criticized the consumer testing as being outdated because, when that
proposal was published, the most recent testing had occurred in
2016. However, the Bureau does not find any reason to believe that
consumer understanding of the model notice has changed since 2016,
and the commenters did not provide any evidence to support such a
claim. Moreover, since the May 2019 proposal, the Bureau has
conducted two additional testing rounds.
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[[Page 5823]]
The Bureau disagrees that the model notice was not adequately
tested. The model validation notice was developed and validated over
multiple rounds of testing between 2014 and 2020, and the Bureau
determines that these multiple rounds of testing were sufficient to
assess the model validation notice's efficacy and comprehensibility.
Further, the Bureau disagrees that its testing focused on eye-tracking
at the expense of comprehension testing as consumer comprehension of
the model validation notice was assessed in three rounds of testing.
The Bureau's testing used eye-tracking in conjunction with consumer
responses to inform its conclusions.
The Bureau disagrees that it did not sample sufficiently diverse
groups. The Bureau selected respondents with the goal of developing
diverse testing pools that would serve as a proxy for the population at
large. For example, in one round of usability testing, participants
reflected a range of demographic characteristics broken down by race
and ethnicity, household income, education level, and employment
status.\330\ With respect to criticism that the Bureau did not ``field
test'' the model validation notice, testing the form with consumers
with real debts would have been impractical. Regarding comments that
the model validation notice did not perform well during the
quantitative testing round, the Bureau disagrees. As noted above, in
that testing round, the model validation notice consistently performed
better than or equal to the status quo notice, including on the
question of to whom the consumer should send a payment.\331\
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\330\ FMG Usability Report, supra note 28, at 85-87.
\331\ In response to the question ``According to the notice, if
Person A wanted to make a payment on the debt, who should he or she
sent the payment to?'' approximately 60 percent of consumers who
received the model validation notice answered correctly compared to
approximately 40 percent of consumers who received a status quo
notice. CFPB Quantitative Testing Report, supra note 31, at 14.
---------------------------------------------------------------------------
Commenters provided feedback on specific aspects of the proposed
validation notice, including the notice's disclosure of the FDCPA
section 809(a)(4) dispute right. As discussed, Sec. 1006.34(c)(3)(i),
which implements FDCPA section 809(a)(4), requires debt collectors to:
(1) Disclose the date the debt collector will consider the end date of
the validation period; and (2) state that, if the consumer notifies the
debt collector in writing on or before that date 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 verification of the debt or a
copy of a judgment. The proposed model notice showed this disclosure
as: ``Call or write to us by November 12, 2019, to dispute all or part
of the debt . . . . If you write to us by November 12, 2019, we must
stop collection on any amount you dispute until we send you information
that shows you owe the debt.''
Some commenters criticized the phrase ``shows you owe the debt.''
Industry and industry trade group commenters stated that ``shows you
owe the debt'' would require debt collectors to prove that consumers
owe the debt. According to these commenters, this would modify the
verification standard established by FDCPA section 809 and expose debt
collectors to increased litigation risk.\332\ Thus, these commenters
recommended that the Bureau revise the proposed model notice to mirror
the FDCPA's statutory text.\333\ In contrast, a group of academic
commenters stated that the verification standard established by case
law is more robust than the phrase ``shows you owe the debt''
suggests.\334\ These commenters expressed concerns that the proposed
model notice would diminish the FDCPA's verification standard.
---------------------------------------------------------------------------
\332\ An industry commenter stated that courts define
verification narrowly and have not imposed a duty upon debt
collectors to establish that a debt is owed. See Walton v. EOS CCA,
885 F.3d 1024, 1027-28 (7th Cir. 2018) (``The verification assures
the consumer that the creditor actually made the demand the debt
collector said it did and equips the consumer to evaluate the
validity of the creditor's claim. It would be both burdensome and
significantly beyond the Act's purpose to interpret Sec. 1692g as
requiring a debt collector to undertake an investigation into
whether the creditor is actually entitled to the money it seeks.'');
Haddad v. Alexander, Zelmanski, Danner & Fioritto, 758 F.3d 777 (6th
Cir. 2014); Dunham v. Portfolio Recovery Assocs., 663 F.3d 997, 1003
(8th Cir. 2001) (citing Chaudhry v. Gallerizzo, 174 F.3d 394 (4th
Cir. 1999)).
\333\ For instance, one commenter recommended that the model
notice should state ``verifies the amount of the debt claimed''
instead of ``shows you owe the debt.''
\334\ In Haddad, the court wrote that a verifying debt collector
``should provide the date and nature of the transaction that led to
the debt, such as a purchase on a particular date, a missed rental
payment for a specific month, a fee for a particular service
provided at a specified time, or a fine for a particular offense
assessed on a certain date.'' 758 F.3d at 786.
---------------------------------------------------------------------------
The Bureau is not changing the final model validation notice's
disclosure of the FDCPA section 809(a)(4) dispute right. The Bureau
does not intend to modify FDCPA section 809's verification standard and
disagrees that the phrase ``shows you owe the debt'' has that effect.
``Shows you owe the debt'' is a plain-language phrase that the Bureau
is adopting to improve consumer understanding. This rulemaking does not
interpret what constitutes verification under FDCPA section 809.
The Bureau received comments on the model notice's description of
the dispute rights under FDCPA section 809(a)(3) and (4). Under FDCPA
section 809(a)(3), disputes can be made orally or in writing, which the
proposed model notice showed in part as: ``Call or write to us by
November 12, 2019, to dispute all or part of the debt.'' However, under
FDCPA section 809(a)(4) and (b), requests for verification must be made
in writing to have effect under the statute.\335\ An academic commenter
and at least two consumer advocates expressed concern that the proposed
model notice's description of these dispute rights was too nuanced, and
consumers would not understand that they must write to request
verification. To address this concern, a commenter recommended that the
Bureau revise the model notice to state, ``Call us to dispute. But if
you do call, we may not be required to send information that shows you
owe the debt.'' \336\ An industry trade group expressed uncertainty
about why the proposed model notice used the phrase ``call or write''
as opposed to ``write'' in different sentences.
---------------------------------------------------------------------------
\335\ While FDCPA section 809 requires a debt collector to honor
only written verification requests, the Bureau understands that some
debt collectors honor both written and non-written verification
requests. Nothing in the FDCPA, the November 2020 Final Rule, or
this rule prevents such debt collectors from continuing to do so.
\336\ This recommendation is based on phrasing that the Bureau
adopted for usability testing. As noted in the usability testing
report, consumers who reviewed validation notices using this
phrasing ``exhibited less confusion'' about the distinction between
how a debt collector would be required to respond when receiving a
dispute in writing or by telephone. See FMG Usability Report, supra
note 28, at 55-56.
---------------------------------------------------------------------------
The Bureau acknowledges that the dispute rights under FDCPA section
809(a)(3) and (4) may not be intuitive to some consumers. Nevertheless,
the Bureau settled on the current phrasing in the model validation
notice to emphasize the validation period end date as opposed to the
actions--i.e., calling or writing--that a consumer may take. In
general, the model validation notice has tested well. The Bureau is
concerned that revising or adding content to clarify the consequences
of writing versus calling may undermine the overall efficacy of the
form. Further, this clarification would be unnecessary in many cases.
The Bureau expects that many consumers will visit the Bureau's website
for more detailed information
[[Page 5824]]
regarding consumer protections in debt collection.\337\ However, to
provide further clarity, the Bureau has reformatted how these dispute
rights appear on the model validation notice. Specifically, the dispute
rights now appear in separate bullets with bolded text for
comprehension purposes.
---------------------------------------------------------------------------
\337\ If the debt collector is collecting debt related to a
consumer financial product or service as defined in Sec.
1006.34.2(f), a statement that informs the consumer that additional
information regarding consumer protections in debt collection is
available on the Bureau's website is required under Sec.
1006.34(c)(3)(iv). If the debt collector is collecting debt other
than debt related to a consumer financial product or service, such a
statement is optional under Sec. 1006.34(d)(3)(viii).
---------------------------------------------------------------------------
Commenters provided feedback on the proposed model validation
notice's original-creditor-information request disclosure pursuant to
FDCPA section 809(a)(5). Section 1006.34(c)(3)(ii), which implements
this provision, requires debt collectors to disclose the date the debt
collector will consider the end date of the validation period and a
statement that, if the consumer requests in writing on or before that
date 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 proposed model notice showed this
disclosure as: ``Write to ask for the name and address of the original
creditor. If you write by November 12, 2019, we will stop collection
until we send you that information.'' An industry commenter stated
that, by omitting the phrase ``if different from the current
creditor,'' the proposed model notice would compel debt collectors to
respond to original-creditor-information requests, even if the current
creditor is the original creditor. A consumer advocate supported the
omission, arguing that debt collectors should be required to respond to
all original-creditor-information requests, even if the current
creditor and the original creditor are the same.
The Bureau concludes that the model validation notice should
include the statutory phrase ``if different from the current creditor''
when disclosing the original-creditor-information request right. Thus,
as finalized, the model validation notice includes the phrase ``if
different from the current creditor.'' Further, as discussed below, the
Bureau is finalizing new Sec. 1006.38(c)(2), which sets forth an
alternative procedure that a debt collector may use to respond to a
consumer's request for original-creditor information when the original
creditor is the same as the current creditor.
Commenters recommended two other modifications to the proposed
model notice. To emphasize the distinction between the debt collector
and the creditor, an industry trade group commenter suggested that the
Bureau revise the proposed model notice to emphasize that ``North South
Group is a debt collector, not a creditor.'' Another industry trade
group stated that the model notice should incorporate account
information into the mini-Miranda disclosure, which would frontload
information that would help consumers recognize alleged debts and
thereby reduce the number of disputes debt collectors receive. An
industry trade group commenter stated that the proposed model notice is
not properly formatted for standard mailing envelopes. According to the
commenter, Sec. 1006.34(c)(4)'s consumer-response information section
will not fit a standard glassine window return envelope.
The Bureau declines other recommendations to modify the model
validation notice. The Bureau declines to specify that North South
Group is ``not a creditor,'' as consumer testing indicates that
consumers generally have a functional understanding that North South
Group is a debt collector.\338\ The Bureau declines to modify the debt
collection disclosure required by FDCPA section 807(11) and Sec.
1006.18(e) as finalized in the November 2020 Final Rule. The Bureau
concludes that combining this statutory disclosure with account
information would undermine its clarity and purpose. The Bureau
declines to modify the model notice in response to feedback that the
form is not properly formatted for standard mailing envelopes. Comment
34(d)(2)(iii)-1 clarifies that debt collectors may relocate the
consumer-response information required by Sec. 1006.34(c)(4) to
facilitate mailing without losing the safe harbor provided by Sec.
1006.34(d)(2). Thus, the Bureau determines that debt collectors will be
able to format the form for mailing.
---------------------------------------------------------------------------
\338\ During November 2020 usability testing, 98 percent of
participants correctly identified North South Group as the correct
party to send payments to. Further, participants generally
understood that they could dispute the debt with North South Group.
See November 2020 Qualitative Testing Report, supra note 34, at 15.
---------------------------------------------------------------------------
Various commenters requested that the Bureau publish additional
model validation notices to address specific scenarios. Several
consumer advocate commenters urged the Bureau to translate the model
notice into other languages, including Spanish. An industry trade group
commenter recommended that the Bureau develop a model notice that debt
collectors could use with consumers who are not obligated on the debt,
such as heirs, successors in interest, and consumers whose debts were
discharged in bankruptcy. An industry commenter recommended that the
Bureau create a model notice that omits all optional disclosures.
The Bureau declines to create additional model validation notice
forms. As discussed earlier in this section-by-section analysis, the
Bureau has modified the model-form-safe-harbor framework under Sec.
1006.34(d)(2) to afford debt collectors more flexibility to customize
validation information to accommodate their business practices and the
types of debts they collect. Within identified limits, debt collectors
may make changes to the model validation notice and still meet the
standard for a safe harbor under Sec. 1006.34(d)(2).
The Bureau is making an additional change to the model validation
notice in response to testing. The statement required by Sec.
1006.34(c)(3)(iv) informs the consumer that additional information
regarding consumer protections in debt collection is available on the
Bureau's website. The Bureau's most recent consumer testing indicated
that a small number of participants who used the model validation
notice were uncertain about where to find more information about
consumers' protections in debt collection.\339\ In response to this
finding, the Bureau is modifying how the statement required by Sec.
1006.34(c)(3)(iv) appears on the model validation notice to further
emphasize this disclosure and the Bureau's website address.
---------------------------------------------------------------------------
\339\ During the most recent round of qualitative testing, a few
participants stated that they were unsure how to learn more about
debt collection in general. For example, one participant was unable
to find the statement required by Sec. 1006.34(c)(3)(iv) on the
model notice. See November 2020 Qualitative Testing Report, supra
note 34, at 13.
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34(d)(3) Optional Disclosures
Proposed Sec. 1006.34(d)(3) provided that a debt collector could
include the optional information described in Sec. 1006.34(d)(3)(i)
through (vi) when providing the validation information. The Bureau
received no comments specifically addressing the language in proposed
Sec. 1006.34(d)(3). Commenters did suggest a variety of optional
disclosures to add to Sec. 1006.34(d)(3), such as barcodes or QR
codes, the date a validation notice was created and sent, disclosures
required by government creditors, and a disclosure notifying the
consumer if the debt collector will
[[Page 5825]]
record telephone calls. Some of these suggested disclosures are
permissible changes to the model notice under Sec. 1006.34(d)(2)(iii)
\340\ or optional disclosures under Sec. 1006.34(d)(3), and debt
collectors can choose to make other suggested disclosures without safe
harbor protection.
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\340\ See comment 34(d)(2)(iii)-1 (examples of permissible
changes to the model notice include (1) adding barcodes or QR codes
as long as their inclusion does not violate Sec. 1006.38(b), and
(2) adding the date the form is generated).
---------------------------------------------------------------------------
The Bureau is finalizing Sec. 1006.34(d)(3) largely as proposed
but with minor technical revisions for clarity and with one substantive
revision to clarify that a debt collector who includes any of the
optional disclosures receives the safe harbor described in Sec.
1006.34(d)(2), provided that the debt collector otherwise uses the
model validation notice or a variation of the model notice as described
in Sec. 1006.34(d)(2). This revision harmonizes Sec. 1006.34(d)(3)
with certain revisions to Sec. 1006.34(d)(2) in the final rule.\341\
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\341\ See the section-by-section analysis of Sec.
1006.34(d)(2)(i), particularly the discussion of new Sec.
1006.34(d)(2)(i)(A) and (B), which refers to the optional
disclosures.
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The Bureau is finalizing Sec. 1006.34(d)(3) and the related
provisions of Sec. 1006.34(d)(2), including each of the optional
disclosures that Sec. 1006.34(d)(3) permits debt collectors to
provide, 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. The Bureau also
is finalizing Sec. 1006.34(d)(3) and the optional disclosures 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.
34(d)(3)(i) Telephone Contact Information
Proposed Sec. 1006.34(d)(3)(i) provided that a debt collector
could include, along with the validation information, the debt
collector's telephone contact information, including telephone number
and the times that the debt collector accepts consumer telephone calls.
Two industry trade group commenters supported permitting debt
collectors to disclose telephone contact information, with one such
commenter noting that it would facilitate communication with consumers,
and the other noting that some State laws require debt collectors to
disclose telephone contact information. A group of consumer advocate
commenters recommended that the Bureau make telephone contact
information a mandatory disclosure.
The Bureau determines that debt collectors should be permitted to
include their telephone contact information along with the validation
information. Section 1006.34(d)(3)(i) will accommodate debt collectors
who choose to communicate with consumers by telephone or who are
required to disclose telephone contact information by applicable State
law. The Bureau declines to make telephone contact information a
mandatory disclosure because, while many debt collectors likely will
provide telephone contact information, either by choice or because of a
State-law requirement, some debt collectors may not need or want to do
so. In such cases, consumers can use other contact information required
in the validation information to contact the debt collector. For these
reasons, the Bureau is finalizing Sec. 1006.34(d)(3)(i) largely as
proposed, except that the Bureau is finalizing the clarification that
telephone contact information may include, for example, a telephone
number as well as the times that the debt collector accepts consumer
telephone calls, as new comment 34(d)(3)(i)-1, rather than in the
regulation text as proposed.
34(d)(3)(ii) Reference Code
Many debt collectors include reference codes on validation notices
for administrative purposes. The Bureau proposed Sec.
1006.34(d)(3)(ii) to 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. One industry commenter asked the Bureau to create a safe
harbor for debt collectors to use an account number as a reference
code, if that number is labeled as a reference code. The Bureau
determines that creating such a safe harbor is unnecessary because debt
collectors may use any number they choose as a reference code.\342\ The
Bureau therefore is finalizing Sec. 1006.34(d)(3)(ii) as proposed.
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\342\ Although Sec. 1006.34(d)(3)(ii) permits debt collectors
to use any number they choose as a reference code, debt collectors
may be prohibited from using certain numbers by other applicable
laws, such as privacy or data security rules or regulations.
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34(d)(3)(iii) Payment Disclosures
The Bureau proposed in Sec. 1006.34(d)(3)(iii) to allow debt
collectors to include certain payment disclosures along with the
validation information, provided that such disclosures were no more
prominent than any of the validation information. Proposed Sec.
1006.34(d)(3)(iii)(A) provided that a debt collector could 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) provided that a debt collector
could include in the consumer-response information section described in
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 for a consumer to write
in a payment amount. As discussed below, the Bureau is finalizing Sec.
1006.34(d)(3)(iii) largely as proposed, but with certain revisions for
clarity and consistency with other provisions in the final rule.
Industry and industry trade group commenters supported permitting
debt collectors to include optional payment disclosures. One industry
trade group stated that the proposed optional payment disclosures were
appropriate because they would not violate FDCPA section 809(b)'s
overshadowing prohibition.
Consumer advocate commenters generally objected to proposed Sec.
1006.34(d)(3)(iii). A number of these commenters stated that consumers
may perceive the payment disclosures as threatening, may misconstrue
the disclosures as stating that consumers must make a payment to
exercise their FDCPA dispute right, or may be confused about whether a
payment is in their interest. Some commenters stated that the proposed
disclosures could lead consumers to make payments that they might not
otherwise have made, which some commenters noted could cause consumers
to inadvertently revive previously time-barred debts. These commenters
asked the Bureau not to finalize proposed Sec. 1006.34(d)(3)(iii).
Some commenters suggested revisions to the proposed optional
payment disclosures. Industry and industry trade group commenters
recommended that the Bureau make the proposed optional payment
disclosures more prominent. For example, some commenters suggested that
the proposed optional payment disclosures be placed at the top of the
consumer-response information section. An industry commenter
recommended that the model validation notice include additional
optional payment disclosures. Industry trade group commenters
recommended that the Bureau permit debt collectors to include
[[Page 5826]]
instructions about how a consumer could make a payment by telephone,
website, or alternative payment methods, such as debit card or ACH.
Based on the concerns noted above about potential consumer
misunderstanding of the payment disclosures, a group of consumer
advocate commenters urged the Bureau to amend the validation notice to
segregate the payment disclosures from the other disclosures and to
eliminate the payment prompt on the consumer response form.
For the reasons discussed in the proposal, the Bureau determines
that the proposed optional payment disclosures facilitate payments that
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. In
addition, 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.\343\ The Bureau also has determined that the optional
payment disclosures do not overshadow, and are not inconsistent with,
consumers' verification rights pursuant to FDCPA section 809(b).\344\
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\343\ See 84 FR 23274, 23350 (May 21, 2019).
\344\ For example, during consumer testing, participants
reported a variety of actions they thought they could take, and
approximately 50 percent of respondents said they would confirm the
debt is accurate before responding. Similarly, participants who
received the model validation notice, which included the optional
payment disclosures, generally understood from the notice how they
could dispute the debt. See November 2020 Qualitative Testing
Report, supra note 34, at 11, 15.
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Further, the Bureau's testing found that the model validation
notice, which was tested with the optional payment disclosures, was not
threatening or intimidating.\345\ The Bureau disagrees that consumers
will believe mistakenly that they must make a payment to exercise their
verification rights. As the proposal noted, 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.\346\ The Bureau determines that inclusion of the neutral, non-
threatening optional payment disclosures will not confuse consumers
about whether making a payment is in their best interest. For the same
reasons, the Bureau declines the suggestion to segregate the payment
disclosures from the other disclosures and to eliminate the payment
prompt on the consumer response form.
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\345\ Participants with prior debt collection experience
observed that the model notice was ``different'' than other
validation notices they had received because the notice did not
include threatening or intimidating language. See November 2020
Qualitative Testing Report, supra note 34, at 10.
\346\ FMG Usability Report, supra note 28, at 59-61.
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The Bureau declines recommendations to permit debt collectors to
emphasize or highlight the payment option disclosures. Making the
payment disclosures more prominent, as some industry commenters
suggested, would reduce the efficacy of the model validation notice and
risk overshadowing the validation information in violation of FDCPA
section 809(b). The Bureau also determines that the optional payment
disclosures in Sec. 1006.34(d)(3)(iii)(A) and (B) are sufficient to
facilitate payments \347\ and that additional prominence for the
payment disclosures is not justified. The Bureau also declines to
permit debt collectors to include specific instructions about other
payment methods. Section 1006.34(d)(3)(iii)(A) permits debt collectors
to invite consumers to contact them about payment options, and debt
collectors have the ability to provide information about alternative
payment methods in subsequent communications.
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\347\ During usability testing, participants expressed an
understanding that one purpose of the model validation notice was to
solicit payment on a debt. When asked about their payment options
based on the model validation notice, approximately 80 percent of
participants stated that they would contact the debt collector by
telephone, website, email, or write to explore payment options. See
November 2020 Qualitative Testing Report, supra note 34, at 10,12.
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For these reasons, this Bureau is finalizing Sec.
1006.34(d)(3)(iii) largely as proposed but with several revisions for
clarity and for consistency with other provisions in the final rule.
First, the Bureau is deleting the sentences that specified that the
optional payment disclosures in both Sec. 1006.34(d)(3)(iii)(A) and
(B) must be no more prominent than any of the validation information.
These deleted sentences are unnecessary in view of revisions to the
final rule in Sec. 1006.34(d)(2) that apply to all of the optional
disclosures, which makes the deleted sentences redundant.\348\ In
addition, the Bureau is adding language to clarify that a debt
collector may choose to include either of the optional payment
disclosures, or both of them. Lastly, the Bureau is finalizing Sec.
1006.34(d)(3)(iii)(B) to clarify that the optional payment disclosure
must appear ``below'' (rather than merely ``with'') the consumer-
response information required by Sec. 1006.34(c)(4)(i) and (ii).
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\348\ Final Sec. 1006.34(d)(2)(i) states that certain optional
disclosures permitted by Sec. 1006.34(d)(3) are contained on the
model notice; those optional disclosures satisfy the requirement to
be no more prominent than any validation information. Final Sec.
1006.34(d)(2)(i)(B) also permits inclusion of the optional
disclosures described by Sec. 1006.34(d)(3) that are not included
on the model notice so long as they are no more prominent than any
validation information; see the section-by-section analysis of Sec.
1006.34(d)(2)(i) for more detail.
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Accordingly, final Sec. 1006.34(d)(3)(iii) provides that debt
collectors may include either or both of the following payment
disclosures: (1) The statement, ``Contact us about your payment
options,'' using that phrase or a substantially similar phrase; and (2)
below the consumer-response information required by Sec.
1006.34(c)(4)(i) and (ii), the statement, ``I enclosed this amount,''
using that phrase or a substantially similar phrase, payment
instructions after that statement, and a prompt.
34(d)(3)(iv) Disclosures Under Applicable Law
Some States require specific disclosures to appear on validation
notices. To enable debt collectors to comply with both Sec.
1006.34(a)(1) and disclosure requirements under other applicable law,
the Bureau proposed 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 provided 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. For the
reasons discussed below, the Bureau is adopting proposed Sec.
1006.34(d)(3)(iv) with revisions, including the addition of new
regulatory text subsections and commentary.
A number of industry and industry trade group commenters stated
that the Bureau's proposal regarding disclosures required by other
applicable law would either conflict with or not accommodate such
disclosures. Commenters stated that some States require disclosures to
appear on the front of a validation notice.\349\ To address such
concerns,
[[Page 5827]]
commenters recommended that the Bureau allow debt collectors to include
required State law disclosures on the front of the validation notice.
One commenter, an industry trade group, urged the Bureau to allow for
formatting flexibility for such State law disclosures while still
affording safe harbor protection. At least one commenter suggested that
the Bureau preempt State laws that require disclosures on the front of
a validation notice.
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\349\ Although these commenters cited various State laws
requiring disclosures, they primarily referred to State laws
requiring time-barred debt disclosures and revival disclosures. For
example, one industry trade group commenter noted that
Massachusetts, New Mexico, and New York State and City require
disclosures about time-barred debt and revival that specifically or
practically must appear on the front page of the validation notice.
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The Bureau determines that, particularly with the changes to the
model validation notice discussed in the section-by-section analysis,
final Sec. 1006.34(d)(3)(iv) generally will accommodate disclosures
required by other applicable law.\350\ As noted above, a few States
require time-barred debt disclosures to appear on the front of a
validation notice; time-barred debt disclosures are discussed further
below. The Bureau is not aware that States specifically require any
other disclosures to appear on the front of the validation notice; as
such, the Bureau concludes that disclosures specifically required by
applicable law, other than in those few instances relating to time-
barred debt, can be accommodated on the reverse of the validation
notice. The Bureau also is not aware of font size, prominence, or
placement requirements established by State or other applicable law
that final Sec. 1006.34(d)(3)(iv) will not accommodate, as discussed
further below. Further, the statement that Sec. 1006.34(d)(3)(iv)
permits on the front of a validation notice is consistent with State
laws that require statements on the front of the notice.\351\ The
Bureau will continue to monitor whether disclosures required by other
applicable law are inconsistent or conflict with Sec. 1006.34 or
Regulation F generally, and if such an inconsistency or conflict is
identified, the Bureau will endeavor to take action to address it. The
Bureau also reiterates that, unlike the proposal, the final rule does
not require the validation notice to be substantially similar to the
model validation notice; thus, if Sec. 1006.34(d)(3)(iv) does not
accommodate a disclosure required under State or other applicable law,
then debt collectors can provide such a disclosure without necessarily
violating the rule, but they would lose the Sec. 1006.34(d)(2) safe
harbor.
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\350\ As discussed in the section-by-section analysis of Sec.
1006.34(d)(2), the final rule permits a debt collector who uses the
model validation notice, specified variations of the model notice,
or a substantially similar form to receive a safe harbor. Moreover,
as discussed below in this section-by-section analysis of Sec.
1006.34(d)(3)(iv), the Bureau is modifying how the statement
required by Sec. 1006.34(d)(3)(iv) is disclosed on the model
validation notice to mirror language on a disclosure required under
Wisconsin law.
\351\ See, e.g., Colo. Rev. Stat. sec. 12-14-105(3)(c) (``In its
initial written communication to a consumer, a collection agency
shall include the following statement: `For information about the
Colorado Fair Debt Collection Practices Act, see
www.ago.state.co.us/cadc/cadcmain.cfm.' If the notification is
placed on the back of the written communication, there shall be a
statement on the front notifying the consumer of such fact.''); Wis.
Admin. Code DFI-Bkg sec. 74.13 (``Unless the initial communication
is written and contains the following notice or the debtor has paid
the debt, a licensee shall send the debtor the following notice
within 5 days after the initial communication with a debtor: `This
collection agency is licensed by the Division of Banking in the
Wisconsin Department of Financial Institutions, www.wdfi.org.' . . .
here the notice required by sub. (1) is printed on the reverse side
of any collection notice or validation sent by the licensee, the
front of such notice shall bear the following statement in not less
than 8 point type: ``Notice: See Reverse Side for Important
Information.'').
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The Bureau has revised Sec. 1006.34(d)(3)(iv) in response to
feedback and for clarity. Final Sec. 1006.34(d)(3)(iv)(A) provides
that the debt collector may include, on the reverse of the validation
notice, any disclosures that are specifically required by, or that
provide safe harbors under, applicable law and, if any such disclosures
are included, a statement on the front of the validation notice
referring to those disclosures. Final comment 34(d)(3)(iv)(A)-1
clarifies that disclosures permitted by Sec. 1006.34(d)(3)(iv)(A)
include, for example, specific disclosures required by Federal, State,
or municipal statutes or regulations, and specific disclosures required
by judicial or administrative decisions or orders, including
administrative consent orders. The comment also describes how such
disclosures could include, for example, time-barred debt disclosures
and disclosures that the current amount of the debt may increase or
vary due to interest, fees, or other charges, provided that such
disclosures are specifically required by applicable law.
The Bureau has revised Sec. 1006.34(d)(3)(iv) and its accompanying
commentary from the proposal to clarify the disclosures that are
permitted by Sec. 1006.34(d)(3)(iv). Specifically, the revisions
clarify that the provision applies if a debt collector must comply with
a specific disclosure requirement under Federal, State, or local law,
or under a judicial or administrative decision or order. As such, the
Bureau emphasizes that this provision is not intended to capture
circumstances in which a debt collector is not providing a disclosure
that is required under a specific law, decision, or order, but rather
the debt collector is providing a disclosure to try to comply with a
more general legal requirement. For example, if the debt collector were
to add language to the validation notice to try to avoid a finding of
an unfair, deceptive, or abusive practice under Dodd-Frank Act section
1031 or the FDCPA, that is not an optional disclosure covered by Sec.
1006.34(d)(3)(iv). Debt collectors are not precluded from making such
disclosures, but they will not receive the safe harbor under Sec.
1006.34(d)(2).
The Bureau has made modifications to the final rule, moreover, to
provide additional flexibility with respect to time-barred debt
disclosures, in response to feedback to the proposal. Under new Sec.
1006.34(d)(3)(iv)(B),\352\ if a debt collector is collecting time-
barred debt, the debt collector may include on the front of the
validation notice any time-barred debt disclosure that is specifically
required by, or that provides a safe harbor under, applicable law,
provided that applicable law specifies the content of the
disclosure.\353\ New comment 34(d)(3)(iv)(B)-1 clarifies that, for
example, if applicable State law requires a debt collector who is
collecting time-barred debt to disclose to the consumer that the law
limits how long a consumer can be sued on a debt and that the debt
collector cannot or will not sue the consumer to collect it, the debt
collector may include that disclosure on the front of the validation
notice. New comment 34(d)(3)(iv)(B)-1 also includes a cross-reference
to the definition of time-barred debt under Sec. 1006.26(a)(2) and
clarifies that, for purposes of Sec. 1006.34(d)(3)(iv)(B), time-barred
debt disclosures may include disclosures about revival of debt
collectors' right to bring a legal action to enforce the debt. The
Bureau concludes that providing additional flexibility to debt
collectors to make these optional disclosures either on the front or
reverse of the validation notice is warranted in view of circumstances
in which it may be difficult to discern under applicable State or local
law whether time-barred debt disclosures must appear on the front of a
validation notice. Moreover, the Bureau is finalizing Sec.
1006.34(d)(3)(iv)(B) in view of the
[[Page 5828]]
Bureau's decision not to finalize a requirement for debt collectors to
provide disclosures relating to time-barred debt or revival laws,
described in more detail in the section-by-section analysis of Sec.
1006.26.
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\352\ To permit this additional flexibility for time-barred debt
disclosures as distinguished from other disclosures made under
applicable law, the final rule has re-numbered proposed Sec.
1006.34(d)(3)(iv), which would have specified that the applicable
law disclosures are placed on the reverse side of the validation
notice only, as Sec. 1006.34(d)(3)(iv)(A).
\353\ As with other disclosures required by or providing safe
harbors under applicable law, debt collectors can also make the
time-barred debt disclosures on the reverse of the validation notice
pursuant to Sec. 1006.34(d)(3)(iv)(A). See comment 34(d)(3)(iv)(A)-
1, which gives an example of a time-barred debt disclosure as a
disclosure permitted by Sec. 1006.34(d)(3)(iv)(A).
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The Bureau received feedback about modifying the scope of proposed
Sec. 1006.34(d)(3)(iv). An industry trade group commenter stated that
the Bureau should limit Sec. 1006.34(d)(3)(iv) to State laws and
exclude disclosures required by judicial decisions or orders. According
to the commenter, courts should not be permitted to dictate non-
standard disclosures that would limit the efficacy of the model
validation notice and result in validation notices that vary by
jurisdiction. This commenter asserted that permitting courts to vary
the model validation notice would be inconsistent with the framework in
other consumer financial laws and regulations, such as TILA and
Regulation Z, which do not permit courts to add disclosures to model
forms. A group of consumer advocate commenters asked the Bureau to
prohibit debt collectors from including disclosures that are permitted,
but not required, by applicable law, because including all possible
disclosures would overwhelm consumers. On the other hand, an industry
trade group commenter asked the Bureau to allow debt collectors to
include such disclosures.
The Bureau determines that Sec. 1006.34(d)(3)(iv) should cover
disclosures required pursuant to judicial or administrative decisions
or orders, including administrative consent orders. Permitting
disclosures required by judicial or administrative decisions or orders
to appear, like any State-law-required disclosures, on the reverse of a
validation notice will neither undermine the efficacy of the model
validation notice nor create validation notices that significantly vary
by jurisdiction, other than on the reverse of the notice. Further, the
Bureau concludes that permitting judicially mandated disclosures to
appear on validation notices is not inconsistent with other consumer
financial laws, as some commenters suggested. For instance, the Bureau
understands that nothing in TILA and its implementing Regulation Z
prohibit, as those commenters appeared to believe, creditors from
making disclosures required pursuant to judicial orders or decisions.
As noted above, final comment 34(d)(3)(iv)(A)-1 clarifies that the
disclosures permitted by Sec. 1006.34(d)(3)(iv) include specific
disclosures required by judicial decisions or orders.
In response to feedback, the Bureau also is finalizing Sec.
1006.34(d)(3)(iv)(A) and comment 34(d)(3)(iv)(A)-1 to permit debt
collectors to include disclosures that provide safe harbors under
applicable law without losing the safe harbor for compliance under
Sec. 1006.34(d)(2). Such disclosures can mitigate legal risks for debt
collectors and reduce the potential for consumer harm.\354\ On the
other hand, the Bureau declines to allow debt collectors to include
disclosures on the validation notice that are merely permitted by other
applicable law and still retain the safe harbor.\355\ Such disclosures
may be irrelevant to consumers, and their inclusion on the validation
notice may overwhelm consumers or overshadow more relevant disclosures.
Nevertheless, as noted elsewhere, a debt collector who included such a
disclosure would not necessarily violate Regulation F; that debt
collector would, however, be outside the safe harbor for compliance.
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\354\ Avila, 817 F.3d at 76 (adopting the safe harbor approach
for debt collectors disclosing the amount of the debt when the
balance may increase due to interest and fees adopted in Miller v.
McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, LLC, 214 F.3d 872,
876 (7th Cir. 2000)).
\355\ As discussed earlier in this section-by-section analysis,
Sec. 1006.34(d)(3)(iv) has been revised in the final rule to
clarify that the optional disclosures are those that are
``specifically'' required by applicable law or that provide a safe
harbor under applicable law.
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Some commenters suggested that the Bureau revise the text and
placement of the Sec. 1006.34(d)(3)(iv) disclosure that appeared on
the model validation notice. An industry trade group commenter noted
that Wisconsin law allows disclosures on the reverse of the notice but
requires the statement, ``Notice: See Reverse Side for Important
Information.'' A group of consumer advocate commenters suggested that
disclosures required by applicable law should be separately labeled as
``Disclosures Required by Your State'' and ``Disclosures Required by
Local Federal Courts.''
Relatedly, some commenters noted that some State laws include
specific prominence or font size requirements for validation notice
disclosures. A comment letter from two associations of State regulatory
agencies expressed concerns that proposed Sec. 1006.34(d)(3)(iv), as
disclosed on the model validation notice, was not sufficiently
prominent. In particular, these commenters objected that the statement
about disclosures required by applicable law appeared below the Sec.
1006.34(d)(3)(iii)(A) payment disclosure.
In response to feedback, the Bureau is including a new comment
34(d)(3)(iv)(A)-2 to clarify how the disclosure described in Sec.
1006.34(d)(3)(iv)(A) may appear depending on the delivery mechanism.
The comment clarifies that, if a debt collector includes disclosures
pursuant to Sec. 1006.34(d)(3)(iv)(A), the debt collector must include
a statement on the front of the validation notice referring to those
disclosures; and a debt collector may comply with the requirement to
refer to the disclosures by including on the front of the validation
notice the statement, ``Notice: See reverse side for important
information,'' or a substantially similar statement. The comment
further notes that if, as permitted by comment 34(d)(3)(iv)(A)-1, a
debt collector places the disclosures below the content of the
validation notice, the debt collector may comply with the requirement
to refer to the disclosures by stating, ``Notice: See below for
important information,'' or a substantially similar statement.
In response to feedback, the Bureau is also modifying how the
statement required by Sec. 1006.34(d)(3)(iv) is disclosed on the model
validation notice. Specifically, the Sec. 1006.34(d)(3)(iv) statement
appears on the final model notice as: ``Notice: See Reverse Side for
Important Information.'' \356\ The Bureau finds that this phrase is
clearer, more conspicuous, and more likely to encourage consumer action
than the proposed phrase, ``Review state law disclosures on reverse
side, if applicable.'' Finally, the Bureau declines the suggestion to
require debt collectors to label which disclosures are included
pursuant to State law and which are included pursuant to judicial
orders and decisions. That distinction likely makes little practical
difference to consumers.
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\356\ The Bureau based this statement on a Wisconsin disclosure
requirement. See Wis. Admin. Code DFI-Bkg sec. 74.13.
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The Bureau also determines that the Sec. 1006.34(d)(3)(iv)
disclosure should be more prominent than in the proposed model
validation notice, in part to account for the fact noted by some
commenters that disclosures required by other applicable law may have
prominence requirements, including clear and conspicuous requirements.
The Bureau therefore has modified the model validation notice to
further emphasize the Sec. 1006.34(d)(3)(iv) disclosure. Specifically,
in contrast to the proposed model validation notice, on which the
disclosure appeared in regular font in the middle of a list of other
disclosures, the disclosure appears on the final model validation
notice
[[Page 5829]]
underlined and in bold font and separated from other disclosures.
Commenters sought additional guidance about what constitutes the
``reverse side'' of the validation notice. Two industry trade group
commenters recommended that the Bureau interpret ``reverse side'' as
synonymous with ``next page'' to allow debt collectors to use a second
page to provide disclosures required by other applicable law.
Relatedly, one commenter stated that requiring a debt collector to
print on both sides of a validation notice would increase costs. Two
associations of State regulatory agencies asked the Bureau to clarify
where State law disclosures should be placed on validation notices
delivered electronically, since disclosures delivered electronically
will not have a reverse side.
The Bureau recognizes that the meaning of ``on the reverse'' may
vary by delivery method and format and that clarification is warranted,
particularly as to validation notices delivered electronically. As
such, the Bureau is adopting new comment 34(d)(3)(iv)(A)-1, which
clarifies, in relevant part, that if a debt collector provides a
validation notice in the body of an email, the debt collector may, in
lieu of including the disclosures permitted by Sec.
1006.34(d)(3)(iv)(A) on the reverse of the validation notice, include
them in the same communication below the content of the validation
notice. Furthermore, as discussed above, comment 34(d)(3)(iv)(A)-2
notes that, if a debt collector places the disclosures below the
content of the validation notice, the debt collector may comply with
the requirement to refer to the disclosures by including the statement,
``Notice: See below for important information,'' or a substantially
similar statement. These commentary provisions, therefore, address
circumstances in which the validation notice is delivered in the body
of an email.
The Bureau declines to permit debt collectors to place disclosures
required by other applicable law on a second page while maintaining the
Sec. 1006.34(d)(2) safe harbor, as some commenters requested. In Sec.
1006.34(d)(2)(ii), the Bureau specifies two narrow circumstances in
which debt collectors are permitted to include validation information
on a second page because such information, presented on a second page,
is likely to benefit consumers.\357\ And, in both cases, if a debt
collector includes the disclosures on a second page, the debt collector
loses the Sec. 1006.34(d)(2) safe harbor with respect to the second
page. The Bureau determines that it is unwarranted to provide a safe
harbor that would be more expansive both in scope and protection than
the other targeted exceptions to debt collectors providing other
applicable law disclosures on a second page. The Bureau notes that debt
collectors may include such disclosures on a second page without
necessarily violating the rule.
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\357\ Final Sec. 1006.34(d)(2)(ii) allows a second page for
debt collectors to provide information that would otherwise be
provided in a relatively abbreviated itemization of the debt (i.e.,
itemization on a second page and for the special rule regarding
certain residential mortgage debt). This narrow exception allows the
debt collector to potentially provide significantly more information
to the consumer on a second page.
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The Bureau is making one additional change not in response to
comments. Section 1006.34(d)(3)(iv)(A) provides, in relevant part, that
disclosures made under Sec. 1006.34(d)(3)(iv) must not appear directly
on the reverse of the consumer-response information required by Sec.
1006.34(c)(4), which appears on the front of the notice. This revision
is included to ensure that debt collectors who choose to make the
optional disclosures under Sec. 1006.34(d)(3)(iv) do not provide the
disclosures in a place where the disclosures would be returned with the
consumer-response information.
The Bureau notes that if, as permitted by Sec. 1006.34(d)(3)(iv),
a debt collector includes on the front of a validation notice the
required statement regarding disclosures under other applicable law
(i.e., ``Notice: See reverse side for important information''), the
debt collector must actually place such disclosures on the reverse.
Conversely, a debt collector may not include disclosures under other
applicable law on the reverse of a validation notice without including
the statement about those disclosures on the front of the validation
notice. The Bureau intended this effect when it proposed Sec.
1006.34(d)(3)(iv) and notes it here for clarity.
Accordingly, the Bureau is finalizing Sec. 1006.34(d)(3)(iv) and
its related commentary with both substantive revisions and minor
wording changes.
34(d)(3)(v) Information About Electronic Communications
Proposed Sec. 1006.34(d)(3)(v) provided that debt collectors could
include certain information about electronic communications along with
the validation information. First, proposed Sec. 1006.34(d)(3)(v)(A)
provided that a debt collector could include the debt collector's
website and email address. Second, proposed Sec. 1006.34(d)(3)(v)(B)
provided that a debt collector could include, for validation
information not provided electronically, the statement described in
Sec. 1006.34(c)(3)(v) explaining how a consumer could take the actions
described in Sec. 1006.34(c)(4) and Sec. 1006.34(d)(3)
electronically.\358\ One industry commenter supported proposed Sec.
1006.34(d)(3)(v), and the Bureau is finalizing it as proposed, with
technical revisions to reflect conforming changes to final Sec.
1006.34(c)(3)(v). For example, final Sec. 1006.34(d)(3)(v)(B) no
longer contains a reference to Sec. 1006.34(d)(3) because final Sec.
1006.34(c)(3)(v) itself no longer refers to Sec. 1006.34(d)(3).\359\
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\358\ Proposed Sec. 1006.34(c)(3)(v) provided that such a
statement was required validation information for validation notices
provided electronically.
\359\ As discussed in the section-by-section analysis of Sec.
1006.34(c)(3)(v), the final rule does not require debt collectors
who provide validation notices electronically to include statements
explaining how consumers can take the actions described in Sec.
1006.34(d)(3) electronically.
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34(d)(3)(vi) Spanish-Language Translation Disclosures
Proposed Sec. 1006.34(d)(3)(vi) provided that a debt collector
could include, along with the validation information, optional Spanish-
language disclosures that consumers could use to request a Spanish-
language validation notice. The proposal stated that Spanish-speaking
LEP consumers 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.\360\ The
proposal stated that debt collectors may wish to provide validation
information in Spanish, as doing so may facilitate their communications
with consumers.
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\360\ Spanish speakers represent the second-largest language
group in the United States after English speakers. As of 2016, 40
million residents in the United States ages 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.
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Consumer advocate commenters generally supported permitting debt
collectors to provide certain Spanish-language disclosures along with
the validation information. Some consumer advocate commenters
recommended that the Bureau also require debt collectors to provide the
disclosures described in proposed Sec. 1006.34(d)(3)(vi). A group of
consumer advocate commenters urged the Bureau to require a debt
collector to send a translated validation notice if the debt collector
receives a request from a consumer seeking information in the
[[Page 5830]]
consumer's preferred language, including a request received using the
proposed tear off portion of the validation notice.
An industry commenter supported proposed Sec. 1006.34(d)(3)(vi) on
the understanding that the Spanish-language disclosures would be
optional. According to the commenter, requiring debt collectors to
provide foreign language disclosures would entail significant costs. An
industry commenter and an industry trade group commenter asked the
Bureau to clarify whether providing the proposed Sec.
1006.34(d)(3)(vi) disclosures would obligate a debt collector to
provide future communications in Spanish to the consumer. Some
commenters raised questions about whether the validation period would
be paused when a consumer requests a Spanish-language translation of
the validation notice and then restart when it is received, with a
local government commenter supporting such a revision in the final
rule.
The Bureau declines to make the Spanish-language disclosures
described in Sec. 1006.34(d)(3)(vi) mandatory. A requirement to
provide the Sec. 1006.34(d)(3)(vi) disclosures, standing alone, would
not be overly burdensome because the translation language is precisely
described in the regulation and is also included on the model
validation notice. However, the content of those disclosures means that
mandating them would effectively compel debt collectors to provide
translated validation notices to certain consumers (i.e., consumers who
respond to the Sec. 1006.34(d)(3)(vi) disclosures by requesting a
Spanish-language validation notice).\361\ As discussed in the proposal,
the Bureau did not propose to require debt collectors to provide
translated validation notices because of the associated costs of such a
requirement,\362\ and the Bureau is declining to finalize such a
requirement in this final rule.\363\
---------------------------------------------------------------------------
\361\ 15 U.S.C. 1692e.
\362\ 84 FR 23274, 23352 (May 21, 2019).
\363\ See the section-by-section analysis of Sec. 1006.34(e).
---------------------------------------------------------------------------
A debt collector who provides the optional disclosure described in
Sec. 1006.34(d)(3)(vi) must honor a consumer's request for a
translated validation notice or risk violating FDCPA section 807.
However, the proposal did not expressly state that the debt collector
would be obligated to provide the Spanish-language translation of the
validation notice in this circumstance. The proposal only implied such
an obligation. To make the rule clearer, the Bureau is finalizing a new
Sec. 1006.34(e)(2), which provides that a debt collector who includes
in the validation information either or both of the optional
disclosures described in Sec. 1006.34(d)(3)(vi), and who thereafter
receives a request from the consumer for a Spanish-language validation
notice, must provide the consumer a validation notice completely and
accurately translated into Spanish.\364\ The Bureau clarifies that,
other than with respect to Sec. 1006.34(e)(2), nothing in the rule
obligates a debt collector to provide future communications in Spanish
solely because the debt collector provided a disclosure described in
Sec. 1006.34(d)(3)(vi) in Spanish.
---------------------------------------------------------------------------
\364\ Id.
---------------------------------------------------------------------------
Regarding the commenters who asked for clarification about, or
supported, restarting the validation period when the consumer requests
a Spanish-language validation notice, the Bureau declines to mandate
such a change but notes that debt collectors who voluntarily restart
the validation period after providing a copy of the Spanish-language
validation notice following the consumer's request do not violate the
FDCPA or Regulation F.
For these reasons, the Bureau is finalizing Sec. 1006.34(d)(3)(vi)
largely as proposed but with a revision to clarify that a debt
collector may include either of the optional Spanish-language
translation disclosures, or both of them.
34(d)(3)(vi)(A)
Proposed Sec. 1006.34(d)(3)(vi)(A) provided that a debt collector
could include a statement in Spanish informing a consumer that the
consumer could request a Spanish-language validation notice.
Specifically, the Bureau proposed in Sec. 1006.34(d)(3)(vi)(A) to
permit 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.'' The proposal clarified that a debt collector who provided
this optional disclosure could also include supplemental information in
Spanish specifying how a consumer could request a Spanish-language
validation notice. Proposed comment 34(d)(3)(vi)(A)-1 explained that,
for example, a debt collector could provide a statement in Spanish that
a consumer could request a Spanish-language validation notice by
telephone or email.
Consumer advocate commenters supported the Spanish-language
disclosure described in proposed Sec. 1006.34(d)(3)(vi)(A). The Bureau
received no other comments specifically addressing the disclosure.
Accordingly, the Bureau is finalizing Sec. 1006.34(d)(3)(vi)(A) and
its related commentary as proposed, with only minor wording changes.
34(d)(3)(vi)(B)
Proposed Sec. 1006.34(d)(3)(vi)(B) provided that debt collectors
could include in the consumer-response information section of the
validation notice a statement in Spanish that a consumer could use to
request a Spanish-language validation notice. Specifically, the Bureau
proposed in Sec. 1006.34(d)(3)(vi)(B) to permit debt collectors 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 have required this statement to be next to a
prompt that the consumer could use to request a Spanish-language
validation notice.
Consumer advocate commenters generally supported the Spanish-
language disclosure described in proposed Sec. 1006.34(d)(3)(vi)(B).
However, a group of consumer advocate commenters stated that the
Spanish translation in proposed Sec. 1006.34(d)(3)(vi)(B) was
inaccurate. Specifically, the commenters stated that the correct
Spanish translation of ``form'' is ``formulario,'' not ``forma.'' The
word ``forma'' appeared in both proposed Sec. 1006.34(d)(3)(vi)(B) and
in the sample disclosure on the proposed model validation notice. The
Bureau finds that ``formulario,'' not ``forma,'' is the correct Spanish
translation of ``form.'' The Bureau also finds that, for gender
agreement, Sec. 1006.34(d)(3)(vi)(B) should read ``este formulario,''
not ``esta formulario.''
The Bureau is finalizing Sec. 1006.34(d)(3)(vi)(B), its related
commentary, and the disclosure on the model validation notice as
proposed, but with revisions to correct the translation errors and with
other, minor wording changes for consistency with other provisions of
the final rule.
34(d)(3)(vii)
The Bureau proposed 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. Proposed comment 34(c)(2)(iii)-1
provided an example of
[[Page 5831]]
merchant brand information that the Bureau initially determined would
be available to a debt collector and that, therefore, would be required
on a validation notice.
For the reasons discussed below, the Bureau is not finalizing Sec.
1006.34(c)(2)(iii) and its related commentary. Instead, the Bureau is
restructuring and renumbering proposed Sec. 1006.34(c)(2)(iii) as a
new optional disclosure under Sec. 1006.34(d)(3)(vii), which permits,
but does not require, debt collectors to disclose the merchant brand,
affinity brand, or facility name, if any, associated with the debt (and
does not limit the optional disclosure to credit card debt).
Industry, industry trade group, and consumer advocate commenters
uniformly agreed that, if available, merchant brand information may
help consumers recognize debts. For example, consumer advocate
commenters stated that, in the case of a store-branded credit card, a
consumer may not associate the debt with the original creditor (often a
bank) and may be more likely to recognize the merchant, whose name
appears on the credit card. A group of consumer advocate commenters
asserted that such information was important, impliedly suggesting that
the Bureau require its disclosure as part of the validation
information.
Although supportive of the proposed disclosure in principle, some
industry trade group commenters asked the Bureau to clarify the
circumstances in which merchant brand information would be deemed
available. According to these commenters, whether merchant brand
information is available may be unclear because it is not always
identifiable in a consumer's file or a creditor may not have provided
it. One industry trade group commenter stated that the proposed
provision requiring disclosure of merchant brand information for credit
cards as part of the validation information would better serve
consumers and reduce compliance costs if the provision included broader
categories than merchant brand names and was an optional, rather than
mandatory, disclosure.
The Bureau received other comments about expanding the scope of
proposed Sec. 1006.34(c)(2)(iii). An industry trade group commenter
recommended that Sec. 1006.34(c)(2)(iii) also encompass affinity brand
information (e.g., the name of a college). Other commenters recommended
that debt collectors be permitted or required to disclose the facility
name associated with a medical debt (e.g., the name of a hospital).
According to commenters, a consumer may be more likely to recognize a
facility where treatment was provided than the healthcare service
provider that is the creditor. A group of consumer advocate commenters
noted that increasingly a hospital name may act as a brand for an
umbrella of service providers and thus should be treated in the same
manner as a merchant brand.
The Bureau determines that merchant brand information may help
consumers recognize debts. However, the Bureau agrees with the feedback
that whether merchant brand information is available may not always be
clear to a debt collector. This ambiguity is particularly likely with
respect to debts that have been sold or transferred multiple times.
Furthermore, not all creditors will have an associated merchant brand,
at least one that is distinct from the creditor name.
Accordingly, in lieu of finalizing the requirement in proposed
Sec. 1006.34(c)(2)(iii), the Bureau is adopting new Sec.
1006.34(d)(3)(vii), which permits, rather than requires, debt
collectors to disclose the merchant brand information, if any,
associated with a debt. By making merchant brand an optional
disclosure, the Bureau eliminates a source of potential ambiguity that
could expose debt collectors to legal risk. In addition,
notwithstanding this modification, the Bureau concludes that debt
collectors will be incentivized to provide merchant brand information
if it is available. Commenters uniformly agreed that merchant brand
information helps consumers recognize debts.\365\ Thus, debt collectors
likely will benefit from including merchant brand information if
possible. Providing merchant brand information will also benefit
consumers by allowing them to more easily identify debts, determine
whether they owe them, and avoid the confusion resulting from seeing a
validation notice with an unfamiliar name (which potentially leads to
the consumer ignoring the notice).
---------------------------------------------------------------------------
\365\ See 84 FR 23274, 23340 (May 21, 2019) (citing the Bureau's
consumer focus group findings that indicate consumers use merchant
brands to recognize credit card debts).
---------------------------------------------------------------------------
The Bureau finds that affinity brand information and facility name
information also may help consumers recognize debts they owe. Whereas a
merchant brand can be generally understood as the labelling or branding
of a commercial entity, such as a retail store, an affinity brand may
reflect the labelling or branding of an entity that is not necessarily
commercial but one with which the consumer has a relationship. For
example, a higher education institution (e.g., ``College of Columbia'')
or a charity may be associated with a consumer financial product (e.g.,
a credit card provided by ``ABC Bank'') as an affinity brand. See
comment 34(d)(3)(vii)-2. Moreover, facility name information (e.g.,
``ABC Hospital'') may prove more recognizable to consumers with respect
to a medical debt than the name of, for example, the physicians group
or laboratory that is the actual creditor (particularly if the consumer
has one appointment or procedure at one facility that results in
multiple bills from multiple providers). See comment 34(d)(3)(vii)-3.
Thus, Sec. 1006.34(d)(3)(vii) also permits debt collectors to disclose
an affinity brand or a facility name, if any, associated with a
debt.\366\
---------------------------------------------------------------------------
\366\ Although Sec. 1006.34(d)(3)(vii) permits debt collectors
to disclose the facility name associated with a medical debt along
with the validation information, debt collectors may be prohibited
from doing so by other applicable laws, such as healthcare privacy
rules or regulations.
---------------------------------------------------------------------------
For these reasons, the Bureau is finalizing Sec.
1006.34(d)(3)(vii) to provide that, along with the validation
information, debt collectors may disclose the merchant brand, affinity
brand, or facility name, if any, associated with a debt. The Bureau
also is adopting new comments 34(d)(3)(vii)-1 through -3 to provide
examples of a merchant brand, an affinity brand, and a facility name,
respectively.
34(d)(3)(viii)
The Bureau is finalizing Sec. 1006.34(d)(3)(viii) to provide that,
although it is not required, a debt collector who is collecting debt
not related to a consumer financial product or service may disclose
certain additional information without losing the safe harbor provided
by Sec. 1006.34(d)(2) (assuming the debt collector otherwise satisfies
the conditions for the safe harbor). Specifically, Sec.
1006.34(d)(3)(viii) provides that, if a debt collector is collecting
debt other than debt related to a consumer financial product or service
as defined in Sec. 1006.2(f), the debt collector may disclose: (1) The
name of the creditor to whom the debt was owed on the itemization date
(i.e., the information specified in Sec. 1006.34(c)(2)(iii)); or (2) a
statement that informs the consumer that additional information
regarding consumer protections in debt collection is available on the
Bureau's website at www.cfpb.gov/debt-collection (i.e., the information
specified in Sec. 1006.34(c)(3)(iv)). The Bureau determines that
receipt of this
[[Page 5832]]
information may be helpful for consumers.
34(d)(4) Validation Notices Delivered Electronically
As discussed in the proposal and in the November 2020 Final Rule,
promoting electronic communications may benefit consumers and debt
collectors.\367\ As also discussed in the proposal, allowing debt
collectors to make certain formatting modifications to validation
notices delivered electronically may help consumers exercise their
verification rights under FDCPA section 809 and may facilitate a debt
collector's ability to process and understand a consumer's response to
such an electronically delivered validation notice. Proposed Sec.
1006.34(d)(4) therefore provided several modifications, discussed in
the section-by-section analysis of Sec. 1006.34(d)(4)(i) and (ii)
below, that a debt collector could make, at its option, to the
formatting of a validation notice delivered electronically.
---------------------------------------------------------------------------
\367\ See 84 FR 23274, 23351 (May 21, 2019); 85 FR 76734, 76755
(Nov. 30, 2020).
---------------------------------------------------------------------------
An industry trade group commenter expressed support for proposed
Sec. 1006.34(d)(4)'s facilitation of validation notices delivered
electronically. The Bureau received no other comments specifically
addressing proposed Sec. 1006.34(d). Accordingly, the Bureau is
finalizing Sec. 1006.34(d)(4) with only minor wording changes.
The Bureau is finalizing Sec. 1006.34(d)(4) to implement and
interpret FDCPA section 809(b) by establishing formatting requirements
that facilitate the consumer's right to dispute a debt and 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 is finalizing Sec. 1006.34(d)(4)
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.
34(d)(4)(i) Prompts
Proposed Sec. 1006.34(d)(4)(i) provided that a debt collector
delivering a validation notice electronically pursuant to Sec. 1006.42
could 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.\368\
---------------------------------------------------------------------------
\368\ 84 FR 23274, 23405 (May 21, 2019).
---------------------------------------------------------------------------
One industry trade group commenter supported proposed Sec.
1006.34(d)(4)(i). According to the commenter, if a validation notice is
delivered by email, a debt collector should be permitted to format the
prompts in the consumer-response information section so that the debt
collector receives an email if a consumer selects them. Another
industry trade group commenter asked the Bureau to clarify whether a
fillable field includes a checkbox.
A consumer advocate commenter raised concerns about permitting a
debt collector to format the payment prompt described in Sec.
1006.34(d)(3)(iii)(B) as a fillable field. According to the commenter,
scammers could impersonate legitimate debt collectors and attempt to
convince consumers to make payments on fraudulent debts using the
payment prompts. The commenter urged the Bureau to evaluate the
security risks associated with fillable payment prompts and consider
other approaches.
The Bureau determines that allowing a debt collector to design a
validation notice delivered electronically to include fillable prompts
will benefit consumers and industry by making it easier for consumers
to exercise their verification rights, make a payment, or request a
Spanish-language translation of the notice. The Bureau does not find
that permitting a debt collector to format the payment prompt described
in Sec. 1006.34(d)(3)(iii)(B) as a fillable field entails substantial
security risks. The Bureau acknowledges that, in general, electronic
communications present certain security risks to consumers. However,
the Bureau finds that these general risks do not justify preventing
debt collectors from including in electronic communications common
design modifications, such as prompts, that are convenient to
consumers. Thus, the Bureau declines to limit the ability of legitimate
debt collectors to include on validation notices a common design
modification that will benefit consumers.\369\
---------------------------------------------------------------------------
\369\ With respect to the comment about whether a fillable field
includes a checkbox, the Bureau confirms that a fillable field may
appear as an unmarked checkbox that a consumer can select.
---------------------------------------------------------------------------
Accordingly, the Bureau is finalizing Sec. 1006.34(d)(4)(i)
largely as proposed, with only minor wording changes for consistency
with other provisions in the final rule.
34(d)(4)(ii) Hyperlinks
Proposed Sec. 1006.34(d)(4)(ii) provided that a debt collector
delivering a validation notice electronically could embed hyperlinks in
the validation notice that, when clicked, would connect consumers to
the debt collector's website or permit consumers to dispute a debt or
request original-creditor information.
Industry trade group commenters supported proposed Sec.
1006.34(d)(4)(ii). For example, a commenter stated that hyperlinks are
an important feature used to reduce the complexity of email and text
messages while allowing readers to access important information. A
consumer advocate commenter recommended that the Bureau also permit
debt collectors to embed a hyperlink that connects consumers to the
Bureau's website address described in Sec. 1006.34(c)(3)(iv).
The Bureau determines that hyperlinks are a formatting modification
that may benefit consumers and debt collectors if included in
validation notices that are delivered electronically. And the Bureau
agrees that debt collectors should be permitted to include a hyperlink
that connects consumers to the Bureau's website address described in
Sec. 1006.34(c)(3)(iv). Accordingly, the Bureau is finalizing Sec.
1006.34(d)(4)(ii) to provide that debt collectors may embed hyperlinks
that, when clicked, connect consumers to the debt collector's website,
connect consumers to the Bureau's debt collection website as disclosed
pursuant to Sec. 1006.34(c)(3)(iv), or permit consumers to dispute the
debt or request original-creditor information.
34(e) Translation Into Other Languages
The Bureau proposed Sec. 1006.34(e) to provide that a debt
collector could send a consumer a validation notice completely and
accurately translated into any language if the debt collector also sent
an English-language validation notice that satisfied Sec.
1006.34(a)(1). Proposed Sec. 1006.34(e) also provided that, if a debt
collector already provided a consumer an English-language validation
notice that satisfied Sec. 1006.34(a)(1) and subsequently provided the
consumer a validation notice translated into any other language, the
debt collector would not need to provide an additional copy of the
English-language notice. Proposed comment 34(e)-1 clarified that the
language of a validation notice obtained from the Bureau's website
would be considered a complete and accurate translation, although debt
collectors would be permitted to use other validation notice
translations if they were accurate and complete.
Industry and industry trade group commenters supported proposed
Sec. 1006.34(e) and its optional approach to providing validation
notices translated into other languages. An industry trade group
commenter stated that this approach was appropriate
[[Page 5833]]
because some debt collectors may not have the resources to conduct
collections activities in languages other than English. Other industry
trade group commenters stated that requiring debt collectors to provide
validation notices in other languages would be burdensome and costly.
An industry trade group commenter stated that, if a debt collector
provided a validation notice in another language, a consumer would
expect the debt collector to communicate in that language. According to
this commenter, if the debt collector was unable to do so, this
unfulfilled expectation would frustrate consumers and expose debt
collectors to litigation risk.
Other commenters, including consumer advocates, legal aid
providers, and faith groups, recommended that debt collectors be
required to provide non-English validation notices to LEP consumers.
According to these commenters, LEP consumers tend to experience poverty
at much greater rates, face significant challenges navigating the debt
collection process, and are often subject to harassment and deception.
Commenters stated that English-language validation notices would not
enable LEP consumers to understand their rights in debt collection or
to take appropriate action if they did not believe that they owed a
debt. Commenters cited demographic statistics showing the growing
population of LEP consumers, particularly in certain localities. A
consumer advocate commenter stated that case law suggests that a debt
collector's failure to provide a non-English validation notice to an
LEP consumer may violate the FDCPA.\370\
---------------------------------------------------------------------------
\370\ The commenter cited, for example, Evory v. RJM
Acquisitions Funding LLC, 505 F.3d 769, 774 (7th Cir. 2007).
However, the Bureau disagrees with the commenter's premise that this
opinion and the others it cited imply a general requirement under
the FDCPA to provide translated notices to all Spanish-speaking LEP
consumers. The Bureau believes, instead, that those holdings were
dependent on the facts of those cases. For example, Evory discussed
in dicta a hypothetical in which a debt collector targeted
vulnerable Spanish-speaking LEP consumers with English-language
validation notices, 505 F.3d at 774, but that particular scenario
involved targeting, which is beyond the scope of Sec. 1006.34(e).
---------------------------------------------------------------------------
To address these concerns, these commenters suggested various
mandatory frameworks that would require debt collectors to provide
translated validation notices to consumers. These suggested alternative
frameworks included requiring debt collectors to provide a translated
validation notice: (1) In Spanish and located on the back of every
English-language validation notice; (2) with every English-language
validation notice if the debt collector knows or should know the
consumer has another language preference; (3) if the original
transaction or the debt collector's prior communication was conducted
in a foreign language; (4) upon a consumer's request; (5) if the debt
collector received information in the file from the creditor or a prior
debt collector indicating the consumer's non-English language
preference; or (6) if and when the debt collector at a later point
communicates with the consumer in a foreign language. In some cases,
commenters framed these interventions as narrow or measured. A group of
consumer advocates also urged the Bureau to make available on its
website Spanish-translated validation notices as well as translations
in the next seven most common languages spoken by LEP consumers in the
United States.
The Bureau determines that LEP consumers may benefit from
translated validation notices. Further, some debt collectors may want
to provide translated validation notices to LEP consumers, if doing so
is consistent with their business practices.
The Bureau, however, declines commenters' requests to require debt
collectors to provide a Spanish-language translation to all consumers
on the back of every English-language validation notice or a translated
notice to consumers in other languages if the debt collector knows or
should know the consumer has a different language preference. As
discussed in the proposal,\371\ these types of mandatory approaches
would result in significant, industry-wide costs on both an upfront
(implementation) basis and an ongoing basis, especially for smaller
debt collectors and in connection with translations of the validation
notice in languages whose use is not prevalent in the United
States.\372\ The Bureau acknowledges that some LEP consumers may
experience particular challenges in the debt collection process.
However, commenters did not provide information about the costs and
benefits of requiring debt collectors to provide translated validation
notices to all consumers, regardless of whether the consumer requests
the translation, that persuades the Bureau that such mandatory
requirements are justified. The Bureau, as stated above, recognizes the
benefits of providing translated disclosures to consumers. However, the
Bureau concludes that the approach in the proposal, supplemented by
certain changes in the final rule, strikes a better balance than a
mandatory requirement. The final rule permits debt collectors to
provide disclosures carrying safe harbor protection that notify and
encourage consumers to request a Spanish-language translation of the
validation notice or additional information in Spanish, which can
assist the largest group of LEP consumers in the United States by a
wide margin compared to other languages. At the same time, the final
rule does not require debt collectors to provide all consumers with
translated validation notices, whether in Spanish or other languages,
and irrespective of whether the consumers request it or speak a
language that is uncommon among LEP consumers in the United States.
---------------------------------------------------------------------------
\371\ See also the section-by-section analysis of Sec.
1006.34(d)(3)(vi).
\372\ See 84 FR 23274, 23352 (May 21, 2019).
---------------------------------------------------------------------------
Regarding the request by a group of consumer advocate commenters
that the Bureau translate the validation notice into Spanish and seven
other languages and deem the Bureau translations as complete and
accurate, the Bureau plans to make available on its website, prior to
the effective date of the final rule, a Spanish-language translation of
the validation notice, and it will consider taking such action in the
future with respect to one or more of the other languages cited by
these commenters following implementation of the final rule.
The Bureau also declines to implement the other mandatory
approaches suggested by consumer advocate, faith group, and legal aid
provider commenters. As discussed above, these commenters suggested a
variety of interventions, such as requiring the debt collector provide
the translated notice in circumstances in which the consumer had
expressed a language preference to a prior debt collector or the
creditor and that preference is noted in the file for the debt, or in
which, at a later point in the process, the consumer communicates in a
foreign language.
The Bureau disagrees with some commenters' characterization of
these interventions as targeted or narrow in scope, as each suggestion
would entail a mandatory requirement with associated upfront and
ongoing costs and complexity (which would be compounded if more than
one or even all of these interventions were adopted collectively). In
some cases, these suggested interventions are beyond the scope of the
proposal. As to others, the Bureau concludes that the costs of such
interventions to debt collectors, particularly smaller entities, would
not outweigh the benefits to consumers because they would add undue
complexity to the rule from an
[[Page 5834]]
operational, compliance, and supervisory perspective.
For these reasons, the Bureau declines to adopt a final rule that
requires debt collectors to provide translated validation notices.
Nevertheless, because the Bureau determines that, as discussed in the
proposal, LEP consumers may benefit from receiving translated
validation notices, the Bureau is finalizing Sec. 1006.34(e) to
clarify how debt collectors may provide such notices if they choose.
The Bureau is finalizing proposed Sec. 1006.34(e) as Sec.
1006.34(e)(1), with certain revisions and organizational changes for
clarity; no substantive change is intended. Furthermore, as discussed
in the section-by-section analysis of Sec. 1006.34(d)(3)(vi), the
Bureau is finalizing new Sec. 1006.34(e)(2) to provide that, if a debt
collector includes in the validation information either or both of the
optional disclosures notifying a consumer that the consumer can request
a copy of the validation notice in Spanish, the debt collector must
provide the consumer a Spanish-language validation notice if the
consumer requests one. The Bureau intended this result in the proposal
and is including Sec. 1006.34(e)(2) for clarity and in response to
feedback. Finally, the Bureau is finalizing comment 34(e)-1 with
revisions to conform to the revisions and organizational changes made
to Sec. 1006.34(e); no substantive change is intended.
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. The Bureau proposed Sec. 1006.38 to implement and interpret
FDCPA section 809(b) and (c), and the Bureau finalized the majority of
proposed Sec. 1006.38 in the November 2020 Final Rule.\373\ The Bureau
now is finalizing the remainder of proposed Sec. 1006.38 as follows.
---------------------------------------------------------------------------
\373\ 85 FR 76734, 74843-48, 76893 (Nov. 30, 2020).
---------------------------------------------------------------------------
Comment 38-1
The Bureau proposed comment 38-2 (renumbered in the November 2020
Final Rule as comment 38-1) to set forth examples of written and
electronic communications consumers can use in disputing the debt or
requesting the name and address of the original creditor.\374\ The
second proposed example, proposed comment 38-2.ii, would have clarified
that a consumer could return to the debt collector the consumer-
response form that proposed Sec. 1006.34(c)(4)(i) would have required
to appear on the validation notice and indicate on the form a dispute
or request. The Bureau received no comments on proposed comment 38-
2.ii.\375\ The Bureau did not finalize proposed comment 38-2.ii in the
November 2020 Final Rule because the Bureau did not finalize Sec.
1006.34 as part of that final rule. The Bureau now is finalizing
comment 38-2.ii as proposed, renumbered as comment 38-1.ii, except that
the Bureau is correcting a typographical error in the proposed comment
such that the final comment cross references Sec. 1006.34(c)(4) rather
than Sec. 1006.34(c)(4)(i).
---------------------------------------------------------------------------
\374\ 84 FR 23274, 23353 (May 21, 2019).
\375\ The Bureau addressed comments received on other aspects of
proposed comment 38-2 in the November 2020 Final Rule. 85 FR 76734,
76843-44 (Nov. 30, 2020).
---------------------------------------------------------------------------
Comment 38-3
The Bureau proposed comment 38-1 (renumbered in this final rule as
comment 38-3) to clarify the applicability of Sec. 1006.38 in the
decedent debt context. Proposed comment 38-1 would have clarified that,
if the consumer has not previously disputed the debt or requested the
name and address of the original creditor, then 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. Proposed comment 38-1
also would have clarified that, if a person who is authorized to act on
behalf of the deceased consumer's estate 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), respectively, would require the debt collector to cease
collection of the debt until the debt collector has responded to that
request or dispute.
For the reasons discussed in the section-by-section analysis of
Sec. 1006.2(e), the Bureau is interpreting the term consumer to mean
any natural person, whether living or deceased, who is obligated or
allegedly obligated to pay any debt. 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 is adopting
commentary clarifying how this definition operates in the decedent debt
context, including debt collectors' obligations for providing the
validation information and responding to disputes and requests for
original-creditor information. Accordingly, the Bureau is finalizing
comment 38-1 as proposed, renumbered as comment 38-3 in this final
rule.
38(a) Definitions
38(a)(2) Validation Period
The Bureau proposed in Sec. 1006.38(a)(2) to provide that the term
validation period as used in Sec. 1006.38 has the same meaning given
to it in proposed Sec. 1006.34(b)(5).\376\ Because the Bureau did not
finalize Sec. 1006.34 in the November 2020 Final Rule, the Bureau
finalized the definition in Sec. 1006.38(a)(2) with revised wording to
refer to the 30-day period described in FDCPA section 809 as defined by
Regulation F.\377\ The Bureau noted that it might, as part of this
final rule, revise the definition of validation period as finalized in
the November 2020 Final Rule to cross-reference any definition of that
term that the Bureau adopts in this final rule. As discussed in the
section-by-section analysis of Sec. 1006.34(b)(5), the Bureau is
finalizing the definition of validation period.\378\ Therefore, the
Bureau is making a technical change revising Sec. 1006.38(a)(2), as
finalized in the November 2020 Final Rule, to provide that the term
validation period as used in Sec. 1006.38 has the same meaning given
to it in Sec. 1006.34(b)(5).
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\376\ 84 FR 23274, 23353 (May 21, 2019).
\377\ 85 FR 76734, 76844, 76893 (Nov. 30, 2020).
\378\ The Bureau addresses comments received regarding the
definition of validation period in the section-by-section analysis
of 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 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.\379\ The Bureau proposed in
[[Page 5835]]
Sec. 1006.38(b) to implement this prohibition and generally restate
the relevant statutory language, with only minor changes for style and
clarity.\380\
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\379\ This language was added to the FDCPA by the Financial
Services Regulatory Relief Act of 2006, Public Law 109-351, sec.
802(c), 120 Stat. 1966, 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 debt 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)'').
\380\ 84 FR 23274, 23353-54 (May 21, 2019).
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As the Bureau discussed in the November 2020 Final Rule,\381\ the
Bureau received a few substantive comments addressing proposed Sec.
1006.38(b). Two industry commenters requested that the final rule
define the term ``overshadowing.'' These commenters observed that debt
collectors' communications of validation information almost always
expressly advise the consumer of the right to dispute the debt and to
request the name and address of the original creditor. These commenters
asserted that overshadowing claims are nonetheless some of the most
common allegations in FDCPA lawsuits. These commenters also requested
clarity as to whether the safe harbor in proposed Sec. 1006.34(d)(2)
for debt collectors who use the model validation notice also would
provide a safe harbor for compliance with the overshadowing prohibition
in proposed Sec. 1006.38(b). One industry commenter requested that the
final rule clarify that credit reporting during the validation period
does not constitute overshadowing.\382\
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\381\ 85 FR 76734, 76844 (Nov. 30, 2020).
\382\ In addition, one industry commenter stated that it
generally agreed with proposed Sec. 1006.38, and a group of
consumer advocates that addressed proposed Sec. 1006.38(b) did not
object to the proposal.
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In the November 2020 Final Rule, the Bureau finalized proposed
Sec. 1006.38(b) as Sec. 1006.38(b)(1) and reserved Sec.
1006.38(b)(2).\383\ As noted above, proposed Sec. 1006.38(b) generally
restated the relevant statutory language, with only minor changes for
style and clarity, and Sec. 1006.38(b)(1) in the November 2020 Final
Rule did the same. In the November 2020 Final Rule, the Bureau stated
that it expected to address, as part of this final rule, the comments
it received requesting further clarity about the safe harbor provided
by Sec. 1006.34(d)(2), and the Bureau reserved Sec. 1006.38(b)(2) for
that purpose.\384\
---------------------------------------------------------------------------
\383\ 85 FR 76734, 76844, 76893 (Nov. 30, 2020).
\384\ Id.
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After considering the comments, the Bureau is finalizing in Sec.
1006.38(b)(2) a safe harbor from the prohibition in Sec. 1006.38(b)(1)
against overshadowing.\385\ Section 1006.38(b)(2) provides that a debt
collector who uses Model Form B-1 in appendix B of this part in a
manner described in Sec. 1006.34(d)(2) has not thereby violated Sec.
1006.38(b)(1). Therefore, a debt collector who uses Model Form B-1 in
appendix B to Regulation F, specified variations of the model notice,
or a substantially similar form, has not thereby violated Sec.
1006.38(b)(1). The safe harbor protects only the use of the model
validation notice to comply with the information and form requirements
of Sec. 1006.34(c) and (d)(1). If a debt collector uses the model
validation notice as described in Sec. 1006.34(d)(2) and conducts
other collection activities during the validation period, the debt
collector does not receive a safe harbor for those other collection
activities. A debt collector also does not receive a safe harbor for
the manner in which a model validation notice is provided, such as the
envelope in which a model validation notice is provided.
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\385\ Accordingly, the heading for final Sec. 1006.38(b)(2)
refers to the safe harbor, and the Bureau is revising: (1) The
heading for Sec. 1006.38(b)(1) as finalized in the November 2020
Final Rule to clarify that that paragraph relates to the
overshadowing prohibition; and (2) Sec. 1006.38(b)(1) to omit a
reference to the fact that the Bureau may provide in this part a
safe harbor for debt collectors when they use certain Bureau-
approved disclosures because the Bureau is providing that safe
harbor in this final rule.
---------------------------------------------------------------------------
The Bureau declines to otherwise define the term ``overshadow'' or
to clarify whether other collection activities during the validation
period either violate or comply with the prohibition in final Sec.
1006.38(b)(1). The Bureau finds that the safe harbor in Sec.
1006.38(b)(2) provides sufficient clarity for debt collectors.
38(c) Requests for Original-Creditor Information
FDCPA section 809(a)(5) states that the validation information a
debt collector provides to a consumer must include a statement that,
upon the consumer's written request within the 30-day validation
period, the debt collector will provide the consumer with the name and
address of the original creditor, if different from the current
creditor. 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 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. The
Bureau proposed in Sec. 1006.38(c) to implement this prohibition and
generally restate the relevant statutory language.
As the Bureau discussed in the November 2020 Final Rule, the Bureau
received a number of comments addressing proposed Sec.
1006.38(c).\386\ Three industry commenters requested that the final
rule provide that, if a debt collector's communication of the
validation information to a consumer identifies the original creditor,
the debt collector need not give the consumer the option of requesting
original-creditor information from the debt collector. These commenters
stated that, if the original creditor has already been identified to a
consumer, it would be confusing to the consumer to provide the option
to request the name and address of the original creditor. Further, they
stated, consumers could use unnecessary requests for original-creditor
information as a tactic to delay or avoid collection. One industry
commenter requested that the final rule clarify that a debt collector
is not required to include original-creditor information in its
communication of validation information to a consumer. This commenter
stated that lawsuits are often filed alleging that a debt collector has
violated the FDCPA by not identifying the original creditor in the
validation information.
---------------------------------------------------------------------------
\386\ 85 FR 76734, 76844-45 (Nov. 30, 2020).
---------------------------------------------------------------------------
Several commenters recommended that the Bureau define ``original
creditor'' to mean the creditor at the time of charge off. According to
an industry trade group, this definition would be consistent with other
laws, including the Uniform Rules for New York State Trial Courts.\387\
Other industry and industry trade group commenters stated that this
definition would be appropriate for older debts because a consumer may
no longer recognize the original creditor, particularly if an account
has been sold. An industry trade group suggested that defining
``original creditor'' as the creditor at the time of charge off may
resolve some compliance challenges in the retail installment sales
context. According to the commenter, in retail installment sales, the
original creditor is the retail seller, not the entity that ultimately
buys the contract, and retail-seller information may not be readily
available to the debt collector or helpful to the consumer.
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\387\ ``Original creditor means the financial institution that
owned the consumer credit account at the time the account was
charged off, even if that financial institution did not originate
the account. Charged-off consumer debt means a consumer debt that
has been removed from an original creditor's books as an asset and
treated as a loss or expense.'' 22 NYCRR 208.14-a(a)(2).
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A group of consumer advocate commenters who addressed proposed
Sec. 1006.38(c) generally noted the importance of original-creditor
information to consumers in helping them recognize the debt in
question. One commenter stated that the rule
[[Page 5836]]
should require debt collectors to identify the original creditor in the
validation information.\388\
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\388\ Consumer advocates also addressed the proposal's
provisions regarding electronic delivery of original-creditor
information (and other information) in proposed Sec. 1006.42. These
comments regarding electronic delivery were addressed in the
November 2020 Final Rule. Id. at 76848.
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In the November 2020 Final Rule, the Bureau finalized proposed
Sec. 1006.38(c) as Sec. 1006.38(c)(1) and reserved Sec.
1006.38(c)(2).\389\ As noted above, proposed Sec. 1006.38(c) generally
restated the relevant statutory language, and Sec. 1006.38(c)(1) in
the November 2020 Final Rule did the same.\390\ In the November 2020
Final Rule, the Bureau stated that it expected to address, as part of
this final rule, how a debt collector may respond to a request for
original-creditor information if the original creditor is the same as
the current creditor, and the Bureau reserved Sec. 1006.38(c)(2) for
that purpose.\391\ The Bureau also noted that it would respond in this
final rule to the comments asking the Bureau to define the term
original creditor.
---------------------------------------------------------------------------
\389\ Id. at 76893.
\390\ While this final rule republishes in Sec. 1006.38(c) some
of the text of Sec. 1006.38(c)(1) as finalized in the November 2020
Final Rule, this final rule makes no change to the substance of
Sec. 1006.38(c)(1) from what the Bureau finalized in the November
2020 Final Rule.
\391\ 85 FR 76734, 76845 n.557 (Nov. 30, 2020).
---------------------------------------------------------------------------
The Bureau has determined that a debt collector's communication of
the validation information must include disclosure of the option to
request original-creditor information. As noted above, FDCPA section
809(a)(5) states that the validation information must include ``a
statement that, upon the consumer's written request within the thirty-
day period, the debt collector will provide the consumer with the name
and address of the original creditor, if different from the current
creditor.'' \392\ Because FDCPA section 809(a) requires the validation
information to include disclosure of the consumer's right to request
original-creditor information, the Bureau finds that consumer confusion
would result if the final rule were to permit a debt collector not to
respond to a consumer's timely request for that information if the
original creditor is the same as the current creditor. Further, FDCPA
section 809(b) states that ``[a]ny collection activities and
communication during the 30-day period may not overshadow or be
inconsistent with the disclosure of the consumer's right to dispute the
debt or request the name and address of the original creditor.'' \393\
The Bureau therefore has determined to require a debt collector to
respond to a consumer's request for original-creditor information if
the original creditor is the same as the current creditor.
---------------------------------------------------------------------------
\392\ 15 U.S.C. 1692g(a)(5).
\393\ 15 U.S.C. 1692g(b) (emphasis added).
---------------------------------------------------------------------------
However, the Bureau also has determined that FDCPA section
809(a)(5) and (b) permits a debt collector to respond differently to
the consumer's request for original-creditor information when the
original creditor is the same as the current creditor. Specifically,
the Bureau has determined that FDCPA section 809(b), when read together
with FDCPA section 809(a)(5), requires the debt collector to provide
the name and address of the original creditor to the consumer only if
the original creditor is different from the current creditor.
Accordingly, the Bureau is finalizing new Sec. 1006.38(c)(2) to set
forth an alternative procedure that a debt collector may use to respond
to a consumer's request for original-creditor information if the
original creditor is the same as the current creditor. Specifically, if
a debt collector receives a request for the name and address of the
original creditor submitted by the consumer in writing within the
validation period, the special rule set forth in Sec. 1006.38(c)(2)
provides that the debt collector must cease collection of the debt
until the debt collector reasonably determines that the original
creditor is the same as the current creditor and either (i) notifies
the consumer in writing or electronically in the manner required by
Sec. 1006.42 that the original creditor is the same as the current
creditor and refers the consumer to the debt collector's earlier
provision of the validation information or (ii) satisfies Sec.
1006.38(c)(1).
Under the final rule, a debt collector is not required to use the
alternative procedure in Sec. 1006.38(c)(2); a debt collector can
always comply with the rule by complying with Sec. 1006.38(c)(1). By
adopting the Sec. 1006.38(c)(2) alternative procedure, the Bureau
strikes the best balance between providing debt collectors with a less
burdensome method of responding to consumer requests for original-
creditor information and protecting consumers.
The Bureau adopts the alternative procedure in Sec. 1006.38(c)(2)
as an interpretation of FDCPA section 809(a)(5) and (b), and pursuant
to its authority under FDCPA section 814(d). In particular, Sec.
1006.38(c)(2) is an interpretation of what it means for a debt
collector, pursuant to FDCPA section 809(b), to ``obtain[ ] . . . the
name and address of the original creditor'' and send that information
to the consumer when, pursuant to FDCPA section 809(a)(5), the debt
collector already provided the name of the current creditor to the
consumer within the validation information (as required by FDCPA
section 809(a)(2) and Sec. 1006.34(c)(2)(v)) and the original creditor
is not different from the current creditor. If the original creditor is
the same as the current creditor, the Bureau interprets FDCPA section
809(b)'s requirement to provide original-creditor information to the
consumer to mean that a debt collector must cease collection of the
debt until the debt collector either provides the name and address of
the original creditor to the consumer in compliance with Sec.
1006.38(c)(1) or, in compliance with Sec. 1006.38(c)(2), notifies the
consumer in writing or electronically in the manner required by Sec.
1006.42 that the original creditor is the same as the current creditor
and refers the consumer to the debt collector's earlier provision of
the validation information.
The Bureau declines to require all debt collectors to include the
name of the original creditor in the validation information because the
Bureau believes such a requirement is not necessary or warranted. The
statute prescribes a method for a consumer to obtain this information
upon request. Further, the Bureau interprets FDCPA section 809(a)(2) as
requiring debt collectors to disclose in the validation information the
name of the current creditor; i.e., ``the name of the creditor to whom
the debt is owed.''
The Bureau declines to define ``original creditor'' in the manner
commenters suggested. Although the definition suggested by commenters
might be accurate for some debts, it is not clear to the Bureau that
the suggested definition would be accurate for all debts. The Bureau
did not propose such a definition and the Bureau does not have
sufficient information to develop and include a definition of
``original creditor'' in the rule.
Taking into consideration the provisions of FDCPA section 809(a)
and (b), the final rule provides debt collectors an alternative
response procedure, described above, when the original creditor--which
in many cases will be the creditor as of the itemization date--is the
same as the current creditor. The alternative procedure permits debt
collectors to respond to some consumer requests for original-creditor
information in a less burdensome way, while also protecting consumers.
Therefore, the Bureau believes that defining original creditor in the
final rule is unnecessary and unwarranted.
[[Page 5837]]
Section 1006.42 Sending Required Disclosures
42(a) Sending Required Disclosures
42(a)(2) Exceptions
The Bureau proposed in Sec. 1006.42(a)(2) to provide 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 was included on a notice
required by Sec. 1006.34(a)(1)(i) or Sec. 1006.38(c) or (d)(2).\394\
Because the Bureau did not finalize Sec. 1006.34 in the November 2020
Final Rule, the Bureau finalized Sec. 1006.42(a)(2) with a reference
to the notice required by FDCPA section 809(a), as implemented by
Regulation F, in lieu of a reference to the notice required by Sec.
1006.34(a)(1)(i).\395\ Because the Bureau is now finalizing Sec.
1006.34, the Bureau is making a technical change revising Sec.
1006.42(a)(2) to refer to the notice required by Sec.
1006.34(a)(1)(i), as originally proposed. The Bureau addressed comments
received regarding proposed Sec. 1006.42(a)(2) in the section-by-
section analysis of Sec. 1006.42(a)(2) in the November 2020 Final
Rule.\396\
---------------------------------------------------------------------------
\394\ 84 FR 23274, 23357-59 (May 21, 2019).
\395\ 85 FR 76734, 76893 (Nov. 30, 2020).
\396\ Id. at 76850-51.
---------------------------------------------------------------------------
42(b) Requirements for Certain Disclosures Sent Electronically
Proposed Sec. 1006.42(b)(1) generally would have required a debt
collector who provided the validation notice described in Sec.
1006.34(a)(1)(i)(B) electronically to do so in accordance with section
101(c) of the E-SIGN Act.\397\ Because the Bureau did not finalize
Sec. 1006.34 in the November 2020 Final Rule, the Bureau finalized
Sec. 1006.42(b) with a reference to the notice required by FDCPA
section 809(a), as implemented by Regulation F, in lieu of a reference
to the validation notice described in Sec. 1006.34(a)(1)(i)(B).\398\
Because the Bureau is now finalizing Sec. 1006.34, the Bureau is
making a technical change revising Sec. 1006.42(b) to refer to the
validation notice required by Sec. 1006.34(a)(1)(i)(B), as originally
proposed. The Bureau addressed comments received regarding proposed
Sec. 1006.42(b)(1) in the section-by-section analysis of Sec.
1006.42(b) in the November 2020 Final Rule.\399\
---------------------------------------------------------------------------
\397\ 84 FR 23274, 23356-57 (May 21, 2019).
\398\ 85 FR 76734, 76893 (Nov. 30, 2020).
\399\ Id. at 76850-51.
---------------------------------------------------------------------------
Subpart C--Reserved
Subpart D--Miscellaneous
Section 1006.100 Record Retention
100(a) In General
Section 1006.100(a), as finalized in the November 2020 Final Rule,
requires a debt collector to retain records that are evidence of
compliance or non-compliance with the FDCPA and Regulation F. The
Bureau proposed comment 100-1 to clarify that, for purposes of Sec.
1006.100(a), evidence of compliance includes, among other things,
copies of documents provided by the debt collector to the consumer in
accordance with the requirements of proposed Sec. 1006.34.\400\
Because the Bureau did not finalize Sec. 1006.34 in the November 2020
Final Rule, the Bureau finalized comment 100(a)-1 to include, as an
example of evidence of compliance, copies of documents provided by the
debt collector to the consumer in accordance with FDCPA section 809(a),
as implemented by Bureau regulation.\401\ Because the Bureau now is
finalizing Sec. 1006.34, the Bureau is making a technical change
revising comment 100(a)-1 to include, as an example of evidence of
compliance, copies of documents provided by the debt collector to the
consumer in accordance with Sec. 1006.34, as originally proposed. The
Bureau addressed comments received regarding proposed comment 100-1 in
the section-by-section analysis of Sec. 1006.100(a) and comment
100(a)-1 in the November 2020 Final Rule.\402\
---------------------------------------------------------------------------
\400\ 84 FR 23274, 23367 (May 21, 2019).
\401\ 85 FR 76734, 76907 (Nov. 30, 2020).
\402\ Id. at 76858 n.600.
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Section 1006.104 Relation to State Laws
FDCPA section 816 provides that the FDCPA does not annul, alter, or
affect, or exempt any person subject to the provisions of the FDCPA
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 FDCPA, 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
FDCPA if the protection such law affords any consumer is greater than
the protection provided by the FDCPA.\403\ The November 2020 Final Rule
finalized Sec. 1006.104 to implement FDCPA section 816.\404\
---------------------------------------------------------------------------
\403\ 15 U.S.C. 1692n.
\404\ 85 FR 76734 at 76860 (Nov. 30, 2020).
---------------------------------------------------------------------------
Proposed comment 104-1 clarified that a disclosure required by
applicable State law that describes additional protections under State
law does not contradict the requirements of the FDCPA or the
corresponding provisions of Regulation F.\405\ In the November 2020
Final Rule, the Bureau indicated that it was not finalizing proposed
comment 104-1 as part of that rule and would determine whether and how
to finalize the comment as part of this final rule.\406\
---------------------------------------------------------------------------
\405\ 84 FR 23274, 23368 (May 21, 2019).
\406\ 85 FR 76734, 76860 (Nov. 30, 2020).
---------------------------------------------------------------------------
As discussed in the November 2020 Final Rule, some commenters asked
the Bureau to clarify how proposed comment 104-1 would interact with
State law disclosure requirements.\407\ According to these commenters,
the proposed commentary did not track FDCPA section 816's statutory
language and therefore would be susceptible to competing
interpretations. These commenters expressed concern that proposed
comment 104-1 could be interpreted to mean that Sec. 1006.104 would
preempt State law disclosure requirements that afford the same
protections as the FDCPA and the corresponding provisions of Regulation
F. These commenters opposed such an interpretation as inconsistent with
FDCPA section 816.
---------------------------------------------------------------------------
\407\ Id.
---------------------------------------------------------------------------
With proposed comment 104-1, the Bureau did not intend to
communicate that Sec. 1006.104 would preempt disclosures required by
State law that describe State laws that afford the same protections as
the FDCPA and the corresponding provisions of Regulation F. To mitigate
the risk that the proposed commentary could be interpreted in this
manner, the Bureau is modifying proposed comment 104-1 to more closely
track FDCPA section 816's statutory language.
Accordingly, the Bureau is finalizing comment 104-1 to clarify that
the FDCPA and the corresponding provisions of Regulation F do not
annul, alter, or affect, or exempt any person subject to these
requirements from complying with a disclosure requirement under
applicable State law that describes additional protections under State
law that are not inconsistent with the FDCPA and Regulation F. In
addition, comment 104-1 clarifies that a disclosure required by State
law is not inconsistent with the FDCPA or Regulation F if the
disclosure describes a protection such law affords any consumer that is
greater than the protection provided by the FDCPA or Regulation F.
[[Page 5838]]
VI. Effective Date
As discussed in the November 2020 Final Rule, the Bureau proposed
an implementation period of one year after publication of the final
rule in the Federal Register.\408\ The Bureau received several comments
on the proposed effective date. As noted in the November 2020 Final
Rule, a few industry commenters supported the proposed effective date,
stating that a one-year implementation period would provide debt
collectors with enough time to comply with the rule. Two other industry
commenters supported an 18-month and a 24-month implementation period,
respectively, arguing that it would take longer than one year to update
policies and procedures, train employees, and make programming changes
necessary to come into compliance. A government commenter encouraged
the Bureau to provide small entities more than one year to comply, if
such entities were not exempted from the rule altogether. Several
industry commenters asked the Bureau to clarify that a debt collector
is permitted to comply with all or part of the final rule before the
effective date.
---------------------------------------------------------------------------
\408\ 85 FR 76734, 76863 (Nov. 30, 2020); see also 84 FR 23274,
23276 (May 21, 2019).
---------------------------------------------------------------------------
The Bureau considered those comments in finalizing the November
2020 Final Rule and determined that that final rule would take effect
one year after publication in the Federal Register. The Bureau
determined that the revisions made to the proposal and discussed in
that Final Rule would permit debt collectors to meet that effective
date. The Bureau also recognized that all stakeholders might benefit if
the November 2020 Final Rule and this final rule had the same effective
date.
As noted in part III, the November 2020 Final Rule was published in
the Federal Register on November 30, 2020 and will take effect on
November 30, 2021. The Bureau concludes that all stakeholders will
benefit if the November 2020 Final Rule and this final rule have the
same effective date. The Bureau also determines that setting the
effective date for this final rule as November 30, 2021, consistent
with the effective date of the November 2020 Final Rule, will provide
debt collectors nearly one year, and therefore sufficient time, to come
into compliance with this final rule.
The Bureau notes that debt collectors may, but are not required to,
comply with the final rule's requirements and prohibitions before the
effective date. Until that date, the FDCPA and other applicable law
continue to govern the conduct of FDCPA debt collectors. Similarly, to
the extent the final rule establishes a safe harbor from liability for
certain conduct or a presumption that certain conduct complies with or
violates the rule, those safe harbors and presumptions are not
effective until the final rule's effective date.
VII. Dodd-Frank Act Section 1022(b) Analysis
A. Overview
In developing the final rule, the Bureau has considered the
potential benefits, costs, and impacts as required by section
1022(b)(2)(A) of the Dodd-Frank Act.\409\
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\409\ 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 and services; the impact of
the rule on insured depository institutions and insured credit
unions with less than $10 billion 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.\410\ 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.
---------------------------------------------------------------------------
\410\ 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 521-25 (Oxford U. Press 2014) (discussing potential
sources of market failure and potential problems with some of those
arguments). See also Erik Durbin & Charles Romeo, The Economics of
Debt Collection: With attention to the issue of salience of
collections at the time credit is granted, Journal of Credit Risk
(Sept. 4, 2020) (discussing how rules that limit debt collection
affect consumer welfare when debt collection is not salient to
consumers when they borrow).
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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.\411\
Because of this, policies that increase protections for consumers with
debts in collection involve a tradeoff between the benefits of
protections for those 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.
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\411\ See Thomas A. Durkin et al., Consumer Credit and the
American Economy 521-25 (Oxford U. Press 2014) (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 final rule 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).
\411\ See 15 U.S.C. 1692(e).
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The final rule will 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.\412\
However, as discussed below, it is not clear based on the information
available to the Bureau whether the net effect of the final rule will
be to make it more costly or less costly for debt collectors to recover
unpaid amounts, and therefore not clear whether the rule will tend to
increase or decrease the supply of credit. The final rule will 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 8,000
to 12,000 lawsuits under the FDCPA each year, some of which involve
issues on
[[Page 5839]]
which the law is unclear.\413\ The number of disputes settled without
litigation has likely been much greater.\414\ 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 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.\415\
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\412\ See id.
\413\ See WebRecon LLC, WebRecon Stats for Dec 2019 & Year in
Review, https://webrecon.com/webrecon-stats-for-dec-2019-and-year-in-review-how-did-your-favorite-statutes-fare/ (last visited Dec. 1,
2020). 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.
\414\ Some debt collectors have reported that they receive
approximately 10 demand letters from attorneys asserting a violation
of the FDCPA for each lawsuit filed. See Small Business Review Panel
Outline, supra note 39, at 69 n.105.
\415\ For example, as discussed further below, 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.
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This final rule relating to disclosures could make debt collection
either more or less costly in ways that are difficult to predict. For
example, the validation notice requirements will 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 do not understand the basis
for the alleged amount due. At the same time, the final rule'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 requirements could either increase or decrease debt
collector and consumer costs depending on the net effect on dispute
rates.
In developing the final 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 final
rule (provisions), which include:
1. Time-barred debt: Prohibiting suits and threats of suit.
2. Notice for validation of debts.
3. Required actions prior to furnishing information.
C. Data Limitations and Quantification of Benefits, Costs, and Impacts
The discussion in this part VII 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 Survey of Consumer Views on Debt, which provided the
first comprehensive and nationally representative data on consumers'
experiences and preferences related to debt collection.\416\ In
addition, the Bureau relies on its Consumer Credit Panel (CCP) to
understand potential benefits and costs to consumers of the rule.\417\
To better understand potential effects of the rule on industry, the
Bureau has engaged in significant outreach to industry, including
through the CFPB Debt Collection Operations Study.\418\ 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 for the topics
covered by the final rule; many of those proposals are included in the
final rule.\419\
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\416\ See CFPB Debt Collection Consumer Survey, supra note 292.
\417\ For more information about Bureau data sources, see Bureau
of Consumer Fin. Prot., Sources and uses of data at the Bureau of
Consumer Financial Protection (Sept. 26, 2018), https://www.consumerfinance.gov/data-research/research-reports/sources-and-uses-data-bureau-consumer-financial-protection/.
\418\ See CFPB Debt Collection Operations Study, supra note 37.
\419\ See Small Business Review Panel Report, supra note 40.
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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 final rule. The
Bureau makes every attempt to provide reasonable estimates of the
potential benefits and costs to consumers and covered persons of this
final rule given available data. However, available data sources
generally do not permit the Bureau to quantify, in dollar terms, how
particular 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 the debt
collection market rather than from 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 final 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 requested additional data or studies
that could help quantify the benefits and costs to consumers and
covered persons of the May 2019 Proposed Rule and the February 2020
Proposed Rule. The Bureau summarizes comments on this subject below,
but few comments explicitly addressed quantifying the costs and
benefits of the rule or provided additional data or studies. Comments
on the benefits and costs of the rule are also discussed in part V
above.
D. Baseline for Analysis
In evaluating the potential benefits, costs, and impacts of the
final rule, the Bureau takes as a baseline 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 by courts and law enforcement agencies, other
Federal laws, and the rules and statutory requirements promulgated by
the States.\420\ In the consideration of potential benefits, costs, and
impacts below, the Bureau discusses its understanding of practices in
the debt collection market under this baseline and how those practices
are likely to change under the final rule.
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\420\ These requirements, and the specificity of the
requirements, may vary depending upon the jurisdiction in which the
collection occurs. This baseline does not include any potential
impacts of the November 2020 Final Rule, however. The November 2020
Final Rule included a separate Dodd-Frank Act Section 1022(b)
analysis, and that rule's provisions do not go into effect until
November 30, 2021.
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Until the creation of the Bureau, no Federal agency was given the
authority to write substantive regulations implementing the FDCPA,
meaning that
[[Page 5840]]
many of the FDCPA's requirements are subject to interpretations in
court decisions that are not always consistent or do not always
definitely resolve an issue, 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 final
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.
The Bureau received no comments regarding its choice of baseline
for its section 1022(b) analysis.
E. Goals of the Rule
The final rule is intended to 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. To these ends, an important goal of the rule is to
benefit both consumers and debt collectors by increasing clarity and
certainty about what the FDCPA prohibits and requires, which could
improve compliance with the FDCPA while reducing unnecessary litigation
regarding the FDCPA's requirements.
As discussed in part V and in this part VII, other goals of the
rule's provisions regarding validation information include providing
more information to consumers about their debts, which may help
consumers determine whether a debt is theirs and whether the reported
amount owed is accurate and may reduce unnecessary disputes. The
validation information is also intended to help consumers to know their
rights and be able to exercise them, including by disputing a debt. In
addition, the model validation notice 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.
The rule's provision requiring debt collectors to take certain
actions prior to furnishing information about a debt to a consumer
reporting agency is intended to increase the likelihood that consumers
learn about an alleged debt before furnishing occurs, giving them an
opportunity to resolve the debt or dispute it if appropriate.
The rule's provision prohibiting debt collectors from suing or
threatening to sue on time-barred debts is intended to mitigate the
consumer harms that can result from such actions, including causing
some consumers to pay or prioritize time-barred debts over other debts
in the mistaken belief that doing so is necessary to avoid litigation
or adverse judgments, when in fact consumers have meritorious defenses
based on the statute of limitations.
F. Coverage of the Rule
The final rule applies to debt collectors as defined in the FDCPA
and Sec. 1006.2(i) of the November 2020 Final Rule. Creditors that
collect on debts they own generally will not be affected directly by
the final rule because they typically are not debt collectors for
purposes of the FDCPA. Creditors, however, may experience indirect
effects if debt collectors' costs increase and if those costs are
passed on to creditors.
G. Potential Benefits and Costs to Consumers and Covered Persons
The Bureau discusses the benefits and costs of the rule to
consumers and covered persons (generally FDCPA debt collectors) in
detail below.\421\ The Bureau believes that an important benefit of
many of the 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
provisions discussed below.
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\421\ 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. Time-Barred Debt: Prohibiting Suits and Threats of Suit
Section 1006.26(b) prohibits a debt collector from suing or
threatening to sue a consumer to collect a time-barred debt.
As discussed in part V above, multiple courts have held that the
FDCPA prohibits suits and threats of suit on time-barred debt. The
Bureau understands that most debt collectors do not knowingly sue or
threaten to sue consumers to collect time-barred debts. Although the
final rule applies a strict liability standard to this prohibition,
under which debt collectors may be liable for suits or threats of suit
even if they do not know that the debt is time-barred, the Bureau
believes that debt collectors have multiple ways of managing such risk
including, but not limited to, confirming that the statute of
limitations has not expired before bringing or threatening to bring a
legal action or, if a debt collector is unable to make such a
determination, refraining from bringing or threatening to bring a legal
action while, in most States, continuing with non-litigation collection
activities. Therefore, the Bureau does not expect this provision of the
rule to have a significant effect on most debt collectors.
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 sue or threaten to sue on time-barred debts as a
strategy to elicit payment.\422\ 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 would expect
repayment rates to drop after the statute of limitations expires, and
that drop might be made more significant by the 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.
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\422\ The final rule may also increase costs to covered persons
to the extent that debt collectors who currently sue or threaten to
sue to collect time-barred debt increase their efforts to determine
whether or not a debt is time barred. As discussed above in part V,
The Bureau recognizes that, in most jurisdictions, expiration of the
statute of limitations provides the consumer with an affirmative
defense to liability, but it does not bar a debt collector from
bringing suit. As such, some debt collectors who sue or threaten to
sue on older debts may currently expend less time and effort
verifying the time-barred status of a debt than they will under the
final rule.
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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 statute of limitations. To do so, the Bureau used data from its
Consumer Credit Panel (CCP), which contains information from one of the
[[Page 5841]]
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 a consumer's credit record until they either showed some
record of payment or disappeared from the credit record. 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. The
Bureau assumed this starting date because there was no other date in
the available data on which to reasonably base 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 of information to the CRA 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.
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. The figure shows that the probability of
a collections tradeline showing evidence of payment declines steadily
for at least a year leading up to the estimated expiration of the
statute of limitations and continues to decline at roughly the same
rate afterwards. Thus, while the probability of payment declines over
time, the reduced ability of debt collectors 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 knowingly sue or threaten to sue on time-barred debt, this
suggests that the provision would be unlikely to cause any further
reduction in the rate of repayment on time-barred debt.
[GRAPHIC] [TIFF OMITTED] TR19JA21.027
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.
2. Notice for Validation of Debts
Section 1006.34 implements and interprets FDCPA section 809(a),
(b), (d), and (e). Specifically, 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). Section
1006.34(c) implements FDCPA section 809(a)'s content requirements
[[Page 5842]]
and specifies that validation information includes certain information
about the debt and the consumer's protections with respect to debt
collection that debt collectors do not currently provide to consumers.
Section 1006.34(d) sets forth a general requirement that such
information be clear and conspicuous. Section 1006.34(d) also provides
safe harbors for using the model validation notice, specified
variations of the model notice, or a substantially similar form, and
permits the inclusion of certain optional information. Section
1006.34(e) affirmatively permits debt collectors to provide validation
notices translated into other languages and requires debt collectors
who offer to provide consumers translated notices to provide them to
consumers who request them.
Potential benefits and costs to consumers. The required validation
information may benefit consumers in four ways. First, the disclosures
will 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 will 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 will
include consumer-response information that should make it easier for
consumers to take certain actions, including disputing a debt. Finally,
the model validation notice form is intended to provide information to
consumers in a more plain-language and visually appealing format,
making it more likely that consumers will 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 assessing 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 (e.g.,
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, make a payment on 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 validation information
under the final rule will include more specific details about the debt,
such as the debt's account number and an itemization of the debt. The
Bureau has determined that this information will 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 this
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 additional information 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 validation notice
saves 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 validation information. The Bureau's
Debt Collection Consumer Survey suggests that the required 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.\423\ 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.\424\
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\423\ CFPB Debt Collection Consumer Survey, supra note 292.
\424\ FMG Focus Group Report, supra note 26, at 15-16.
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To quantify the benefits of the 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.\425\ 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.\426\ 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. (Some
consumers reported more than one of these issues). Taken together, more
than half of 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 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
[[Page 5843]]
to dispute based on their perception that either the debt is not theirs
or is wrong.
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\425\ See CFPB Debt Collection Consumer Survey, supra note 292,
at 13, 40-41.
\426\ 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 the consumer is 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 half
of consumers who questioned a debt about which the creditor or debt
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 required clear-
and-conspicuous statement of the dispute right could benefit these
consumers by making them aware of their right to dispute and informing
them how to 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 required consumer-response
information could reduce these impediments to disputing debts that
consumers believe are in error. Specifically, the consumer-response
information will provide a clear means of disputing a debt in a way
that triggers the protections provided by the FDCPA and this rule.
Furthermore, the convenience of the consumer-response information,
which is formatted on the model validation notice as a tear-off with
prompts for various actions, 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.\427\ 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 on their credit reports.
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\427\ 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
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.
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Additionally, the consumer-response information includes an option
to request information about the original creditor. Original-creditor
information may help consumers in determining whether the debt is
theirs.
The Bureau has tested 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 about how to act with regard to the debt. The
Bureau therefore 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).\428\ However,
there is some indication that consumers tend to not read certain types
of standard-form disclosures.\429\ 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.\430\ 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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\428\ FMG Summary Report, supra note 29.
\429\ 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.
\430\ FMG Cognitive Report, supra note 27.
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The Bureau incorporated the findings from this consumer testing in
its design of the model validation notice. To increase both consumer
engagement with and comprehension of the validation information, the
Bureau designed the model notice to be visually engaging. The notice
uses plain language wherever possible and conforms to recommendations
the Securities and Exchange Commission (SEC) set forth in its plain
English handbook.\431\ To reduce the perceived complexity of the
information, the 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 plain language rather than technical terms. Usability testing
analyzing eye-tracking suggests that participants were able to locate
relevant information on the form, with most participants able to
quickly locate their account number and the contact information of the
creditor.\432\ The information presented in the form is also concise,
presenting consumers with a manageable amount of information about the
debt and what they can do in response to the information. This is
important, as the perceived and actual cost to a consumer of reading a
disclosure increases with the amount of information provided.\433\
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\431\ See Sec. & Exchange Comm'n, A Plain English Handbook (Aug.
1998), https://www.sec.gov/pdf/handbook.pdf.
\432\ FMG Summary Report, supra note 29.
\433\ 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).
---------------------------------------------------------------------------
A number of consumer advocate and academic commenters asserted that
the proposed model notice was not adequately tested. Some of these
commenters stated that the Bureau's testing included too few
participants to generate valid conclusions about the proposed model
notice's efficacy or to evaluate the comprehension of consumers,
particularly of the least sophisticated consumers. For instance, a
consumer advocate expressed concern that only 60 consumers were
included in the cognitive and usability testing rounds.\434\ Likewise,
an academic commenter stated that the Bureau's consumer testing focused
too heavily on observing what testing participants looked at on the
model notice (based on the use of eye tracking techniques) at the
expense of testing participants' comprehension of the notice. Another
commenter stated that the Bureau should have tested more diverse
groups, including consumers with limited English proficiency, students,
older consumers, and consumers from more diverse socioeconomic
backgrounds. Some consumer advocate and academic commenters recommended
that the Bureau field test the proposed model notice with consumers
with real debts. A consumer advocate expressed concern about the
performance of certain aspects of the proposed model notice in
quantitative testing, noting in particular that approximately 40
percent of respondents who received the model
[[Page 5844]]
notice failed to identify the correct entity the consumer should
pay.\435\
---------------------------------------------------------------------------
\434\ See FMG Summary Report, supra note 29, at 5-7.
\435\ Several comments in response to the May 2019 proposal also
criticized the consumer testing as being outdated because, when that
proposal was published, the most recent testing had occurred in
2016. However, the Bureau does not find any reason to believe that
consumer understanding of the model notice has changed since 2016,
and the commenters did not provide any evidence to support such a
claim. Moreover, since the May 2019 proposal, the Bureau has
conducted two additional testing rounds.
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The Bureau disagrees that the model validation notice was not
adequately tested. The model validation notice was developed and
validated over multiple rounds of testing between 2014 and 2020, and
the Bureau determines that these multiple rounds of testing were
sufficient to assess the model validation notice's efficacy and
comprehensibility. Further, the Bureau disagrees that its testing
focused on eye-tracking at the expense of comprehension testing as
consumer comprehension of the model validation notice was assessed in
three rounds of testing. The Bureau's testing used eye-tracking in
conjunction with consumer responses to inform its conclusions.
The Bureau disagrees that it did not sample sufficiently diverse
groups. The Bureau selected respondents with the goal of developing
diverse testing pools that would serve as a proxy for the population at
large. For example, in one round of usability testing, participants
reflected a range of demographic characteristics broken down by race
and ethnicity, household income, education level, and employment
status.\436\ With respect to the criticism that the Bureau did not
``field test'' the model validation notice, testing the form with
consumers with real debts would have been impractical.
---------------------------------------------------------------------------
\436\ FMG Usability Report, supra note 28, at 85-87.
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Regarding comments that the model validation notice did not perform
well during the quantitative testing round, the Bureau disagrees. As
noted above, in that testing round, the model validation notice
consistently performed better than or equal to the status quo notice,
including on the question of to whom the consumer should send a
payment.\437\ Additionally, the Bureau conducted qualitative follow-up
testing of the model notice in October 2020. In this testing 88 percent
of respondents reported that the notice was either ``very easy'' or
``easy'' to understand.\438\ Between 71 percent and 100 percent of
participants responded correctly to 14 different comprehension
questions. Although some participants expressed confusion about a few
aspects of the notice, the initial reactions to the notice were that
information was clear and the available actions were obvious.
---------------------------------------------------------------------------
\437\ In response to the question ``According to the notice, if
Person A wanted to make a payment on the debt, who should he or she
sent the payment to?'' approximately 60 percent of consumers who
received the model validation notice answered correctly compared to
approximately 40 percent of consumers who received a status quo
notice. CFPB Quantitative Testing Report, supra note 31, at 14.
\438\ See id. at 16.
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In summary, the Bureau's testing establishes that consumers will
benefit from the use of the model notice compared to the baseline of
status quo validation notices.
The Bureau expects consumers to experience few costs as a result of
the provision.
Potential benefits to covered persons. The provision provides debt
collectors with a safe harbor if they use the model validation notice,
specified variations of the model notice, or a substantially similar
form to meet the requirements in Sec. 1006.34(c). 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.\439\ The Bureau expects a
significant number of debt collectors will use the model notice,
specified variations of the model notice, or a substantially similar
form and, therefore, will face significantly reduced litigation risk
when providing validation notices because they will receive the safe
harbor. This will benefit debt collectors directly, by reducing
litigation costs related to validation notices. The provision's
requirements to provide specific information about the debt and about a
consumer's protections in debt collection could also indirectly benefit
debt collectors by adding information to validation notices that would
be helpful to consumers but that debt collectors currently do not
include for fear that it would increase litigation risk. The 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.
---------------------------------------------------------------------------
\439\ See Small Business Review Panel Report, supra note 40, at
22.
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The validation information includes 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 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. 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 required
by the FDCPA.\440\ The form will 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 the amount owed as identified on a validation notice, how many
consumers would better recognize the debt if they received the required
validation information, and how consumers would act in response to 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 concluding that the required
validation information will be helpful to consumers and, therefore,
beneficial for debt collectors.
---------------------------------------------------------------------------
\440\ See Small Business Review Panel Report, supra note 40, 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).
---------------------------------------------------------------------------
The 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 the
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.\441\ Respondents said that disputes took the longest amount of
time to resolve if the basis of the dispute
[[Page 5845]]
was unclear or if the consumer said the debt was not theirs.\442\
---------------------------------------------------------------------------
\441\ CFPB Debt Collection Operations Study, supra note 37, at
31.
\442\ Id.
---------------------------------------------------------------------------
One commenter noted that 40 percent of disputes at their debt
collection agency are non-generic and generally resolvable. This
commenter asserted that the tear offs on the model validation notice
will make these non-generic disputes less informative. An industry
commenter noted that 99.4 percent of accounts it received were not
disputed. Of the 0.6 percent that are disputed, 80 percent are accurate
once more information is gathered. Given this, the commenter argued
that providing consumers itemized statements for medical bills, which
can run into many pages, is unnecessary.
The Bureau does not have a basis to estimate how much the
validation information might affect dispute rates. As an illustration
of potential cost savings if dispute rates fall, if the 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,\443\ the overall number of annual
disputes would fall by 1.4 million. Assuming 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,\444\ this would represent industry cost savings of about $11.5
million.
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\443\ 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.
\444\ This assumes an hourly wage of $15 and taxes, benefits,
and incentives of $7 per hour. See CFPB Debt Collection Operations
Study, supra note 37, at 17 (reporting estimated debt collector
wages between $10 and $20 per hour plus incentives).
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The validation notice 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
validation information will generally affect the content of existing
disclosures debt collectors are sending rather than require debt
collectors to send entirely new disclosures. Nonetheless, debt
collectors will incur certain costs to comply with the form. 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 provision will require debt collectors to reformat their
validation notices to accommodate the validation information
requirements. The Bureau expects that any one-time costs to debt
collectors of reformatting the validation notice will be relatively
small, particularly for debt collectors who rely on vendors, because
the Bureau expects that most vendors will provide an updated notice at
no additional cost.\445\ The Bureau understands from its outreach that
many covered persons currently use vendors to provide validation
notices.\446\ 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 given that
the final rule likely will require more extensive changes to validation
notices than vendors typically make today).\447\ Debt collectors and
vendors will 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 will be mitigated somewhat by the
availability of a model notice.
---------------------------------------------------------------------------
\445\ See id. at 33.
\446\ In the Operations Study, over 85 percent of debt
collectors surveyed by the Bureau reported using letter vendors. Id.
at 32.
\447\ Id. at 33.
---------------------------------------------------------------------------
The validation information will require debt collectors to provide
certain additional information about the debt, which will 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 final validation information. However, some
respondents to the Debt Collection Operations Study reported that they
do not receive from creditors information about post-default interest,
fees, payments, and credits.\448\ These debt collectors will 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.\449\
---------------------------------------------------------------------------
\448\ In the Bureau's Operations Study, 52 of 58 respondents
reported receiving itemization of post-charge-off fees on at least
some of their accounts. Id. at 23.
\449\ Id. at 26.
---------------------------------------------------------------------------
At least one industry commenter asserted that one-time compliance
costs would be significantly higher than $1,000, at least for
collectors of medical debt. This commenter estimated costs of between
$22,000 and $31,000 for implementation. The commenter noted that, for
collectors of medical debt, an itemization of charges requires
information about payments by the consumer's health insurance,
increasing the complexity and cost of tracking the necessary
information. The Bureau acknowledges that costs may be higher for some
debt collectors. However, the Bureau's estimate is based on responses
to the CFPB Debt Collection Operations Study, more than half of which
came from debt collectors of medical debt. As such, the Bureau believes
that, on average, its estimate of less than $1,000 in one-time costs is
reasonable.
If debt collectors adjust their systems to produce notices
including the new validation information, the Bureau does 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.\450\ 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. However,
the Bureau's understanding is that most creditors, including medical
providers, do track this information, and many debt collectors already
provide this information on validation notices. Further, debt
collectors are already
[[Page 5846]]
required to disclose an itemization for some types of debt in at least
one jurisdiction, New York State.\451\
---------------------------------------------------------------------------
\450\ One industry trade group estimated that an itemization
requirement would cost $600 million in professional fees to conduct
legal analyses of HIPAA compliance for medical debt, $30 million for
one-time system reprogramming for debt collectors, and $3 billion
for one-time system reprogramming for creditors. The proposal
allegedly would also result in billions of dollars in ongoing
support costs and uncompensated medical care because, according to
the commenter, the proposed requirement, if adopted, would increase
the risks that hospitals might be unable to use debt collectors. As
discussed in part V, the itemization requirement should not raise
issues of HIPAA compliance that would require creditors to engage
legal counsel in order to provide the required information, as HIPAA
privacy regulations explicitly permit disclosure where required by
law. While some one-time costs will be required so that collection
and billing systems can incorporate the data needed to comply with
the requirement, as discussed in this section, the Bureau
understands that the required changes would not be far outside the
scope of normal adjustments to billing and collection systems and
does not have reason to believe the changes would be so expensive as
to prevent hospitals from using debt collectors. The final rule
permits debt collectors to use the date of the last statement or
invoice provided to the consumer by a creditor as the itemization
date. If providing a debt collector with itemization information
were prohibitively expensive for a medical provider, such providers
could avoid these costs by simply issuing a statement to the
consumer.
\451\ See 23 NYCRR 1.2(b) (requiring debt collectors to provide
an itemized accounting of the debt within five days after the
initial communication with a consumer in connection with the
collection of certain types of charged-off debt, such as credit card
debt). The fact that debt collectors subject to New York's
requirements continue to operate and send validation notices in New
York suggests that, although the itemization requirement may impose
one-time adjustment costs on some creditors and debt collectors,
ongoing costs are not prohibitive, at least for the types of debts
for which New York has required itemization.
---------------------------------------------------------------------------
In addition, as discussed in the section-by-section analysis of
Sec. 1006.34(b)(3), the final rule's itemization date definition
permits debt collectors to select an itemization date that is feasible
for the type of debt in collection and the information debt collectors
receive. And Sec. 1006.34(c)(2)(viii) requires itemization of fees,
interest, and credits only subsequent to the selected itemization date.
Thus, for example, if a debt collector selects the last statement date
as the itemization date under Sec. 1006.34(b)(3), and if the creditor
has recently issued a statement to the consumer, the debt collector
need only obtain and provide to the consumer an itemization with fees,
interest, and credits subsequent to that last statement date. And, as
discussed in the section-by-section analysis of Sec. 1006.34(d)(2), a
debt collector may provide the itemization on a separate page and
retain the safe harbor for the rest of the validation notice.
Industry commenters asserted that there would be additional
printing and mailing costs of the provision due to the tear-off portion
of the model notice, which is formatted for use with a return envelope.
The commenters argued that many debt collectors do not currently
include return envelopes with their validation notices and that
including a return envelope would increase mailing costs. The Bureau
disagrees that this would be a cost of the rule, as the rule does not
require including a return envelope with a mailed validation notice,
the format of the tear-off portion notwithstanding. Given that it is
not required, the Bureau expects that debt collectors will only begin
including return envelopes if they find, in their own analysis, that
the benefit exceeds the additional costs.
Several commenters discussed the potential for ongoing costs of
providing the new validation information. One industry commenter
expressed concern about the availability of the information required on
the model validation notice for medical debt, as the commenter believed
that the only available itemization date permitted by the proposal for
these debts would be date of service (i.e., the transaction date), and
the commenter stated that date of service was currently only available
from 17.2 percent of its clients. Another industry commenter noted that
there would be costs associated with providing updated itemization
dates for a debt that transfers between debt collectors.
Industry trade association commenters noted that there would be
costs to creditors of providing the fields to debt collectors and that
not all of the required fields are necessarily tracked by all creditors
currently, particularly credit unions. The Bureau acknowledges that the
FDCPA and this final rule may create indirect costs for creditors that
use debt collectors, because the costs to debt collectors of complying
with FDCPA requirements may be passed on to creditors and because debt
collectors must receive certain information about debts in order to
comply with FDCPA requirements. The information available to the Bureau
does not suggest that any indirect costs to creditors of this provision
will be large.
Further, one industry commenter asserted that the itemization
requirement could competitively harm collectors of medical debt. This
commenter asserted that medical care providers are currently unable to
provide the required itemization information, and rather than incurring
costs to provide this information, would switch to using debt
collectors who do not comply with the law. This would put compliant
debt collectors at a competitive disadvantage. As noted above, the
Bureau acknowledges that the provision may affect the costs to
creditors, including medical care providers, of using FDCPA debt
collectors, because creditors must provide debt collectors with the
necessary information for the validation notice. It is also possible
that in some cases a less sophisticated creditor may employ a debt
collector who does not attempt to comply with the rule. However, the
Bureau finds it unlikely that this provision of the rule would lead to
widespread non-compliance, at the expense of debt collectors who comply
with the requirements of the rule. The Bureau, the FTC, and other
Federal and State law enforcement agencies have and will continue to
maintain vigorous enforcement of the FDCPA.\452\ Any debt collector who
obtained enough business through non-compliance with the rule to do
material harm to debt collectors who comply with the rule would be
likely to attract enforcement action from regulators. Moreover, the
risk of reputational harm is likely to deter some medical providers
from intentionally employing debt collectors who knowingly do not
comply with the rule.
---------------------------------------------------------------------------
\452\ See, e.g., Bureau of Consumer Fin. Prot., CFPB, FTC,
State, and Federal Law Enforcement Partners Announce Nationwide
Crackdown on Phantom and Abusive Debt Collection (Sept. 29, 2020),
https://www.consumerfinance.gov/about-us/newsroom/cfpb-ftc-state-and-federal-law-enforcement-partners-announce-nationwide-crackdown-phantom-and-abusive-debt-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
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 will be provided,
this could increase the number of consumers who dispute or request
original-creditor information. Similarly, some industry commenters
argued that the tear-off portion of the model notice would make
disputes easier, resulting in more disputes. The overall impact on
dispute rates is unclear.
Any increases in dispute rates would not 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 validation information
would be unlikely to cause such consumers to dispute rather than
pay.\453\ 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
[[Page 5847]]
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.\454\
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\453\ 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 credit reporting
concerns, 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.
\454\ CFPB Debt Collection Operations Study, supra note 37, 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.
---------------------------------------------------------------------------
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.\455\
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\455\ 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. These debt collectors
presumably believe that the increase in revenues from sending them to
these consumers exceeds the costs of doing so. To the extent sending
such notices is already prevalent, it would limit the consumer benefits
of a provision that requires Spanish-language translations as well as
the costs to debt collectors of such a provision, although there would
still be costs associated with ensuring that such disclosures were made
as required by regulation.
Consumer advocate and academic commenters argued that the Bureau
should have required that the validation notice be in the language of
the original transaction, including languages other than English or
Spanish. The commenters noted that procedural hurdles, such as a
mismatch between the consumers' primary language and the language of a
disclosure, can have large effects on behavior. The Bureau notes that
this alternative would impose significantly greater costs on debt
collectors than the final rule, as they would need to maintain versions
of the model notice for each such language. At the same time, the
marginal benefit to consumers of the alternative suggested by
commenters would be smaller, as fewer consumers communicate in
languages other than English and Spanish.
3. Required Actions Prior to Furnishing Information
Section 1006.30(a)(1) prohibits a debt collector from furnishing
information to a consumer reporting agency (CRA) about a debt before
taking specific actions to contact the consumer about that debt. A debt
collector can satisfy this requirement by: (i) Speaking to the consumer
about the debt in person or by telephone; or (ii) placing a letter in
the mail or sending an electronic message to the consumer about the
debt and waiting a reasonable period of time to receive a notice of
undeliverability, provided certain other conditions are satisfied. A
validation notice is one type of letter or electronic communication
debt collectors can use to satisfy Sec. 1006.30(a)(1)(ii).
Potential benefits and costs to consumers. The final rule will help
consumers to learn about an alleged debt before a debt collector
furnishes adverse information to a CRA. If consumers believe that the
information is incorrect, 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 final rule,
the Bureau would need to know: (1) How frequently consumers are unaware
that debt collectors furnished information about their debts to CRAs
but would become aware of it if debt collectors informed consumers
prior to furnishing information; and (2) the benefit to these consumers
of becoming aware they had a debt in collections.
In many cases, consumers will not be affected by the provision
because many debt collectors already take one of the actions required
by the final rule before furnishing information to CRAs. Many other
consumers will not be affected by the provision because not all debt
collectors furnish information to CRAs about the 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
collection.\456\ 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).\457\ The Bureau
does not have representative data to estimate how often consumers would
be affected by the provision, but the evidence suggests that a
relatively small share of debt collectors furnish information to CRAs
before providing a validation notice or taking one of the other actions
required by the final rule. If, for example, debt collectors sent
[[Page 5848]]
validation notices for an additional five percent of debts in
collection, the provision could result in up to approximately seven
million additional validation notices sent each year (assuming that no
debt collectors would cease furnishing in response to the
provision).\458\
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\456\ See CFPB Debt Collection Operations Study, supra note 37,
at 28. One large industry commenter, which does furnish to the CRAs,
also confirmed that it almost always mails a validation notice
before furnishing. To comply with the final rule, these debt
collectors would also need to wait a reasonable period of time to
allow for notifications of non-delivery, and only furnish if they
don't receive such notifications. The Bureau does not have
information as to how many of these debt collectors currently take
these additional steps. However, the Bureau expects that taking
these additional steps would impose minimal costs on debt collectors
that do not already take them.
\457\ 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. Id. During the meeting of the SBREFA
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.
\458\ 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 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. This can be
particularly important if the information about the debt is inaccurate
because in those cases consumers who learn of the alleged debt can
dispute the debt under the FDCPA or dispute the item of information
under the FCRA. By informing consumers about the collection item before
it is furnished to a CRA, the final rule will 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.\459\ 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 make
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.\460\
---------------------------------------------------------------------------
\459\ Fed. Trade Comm'n, Report to Congress under Section 319 of
the Fair and Accurate Credit Transactions Act of 2003, (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 (FTC Report to
Congress).
\460\ CFPB Debt Collection Consumer Survey, supra note 292, at
24.
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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,\461\ 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, they can have substantial
effects for some consumers, with an average reduction in credit score
of more than 41 points for super-prime consumers.\462\ In some
circumstances, these changes could lead to higher interest rates for
consumers or denial of credit, particularly for borrowers with
otherwise high credit scores.
---------------------------------------------------------------------------
\461\ See FTC Report to Congress, supra note 459, at 43.
\462\ See Brian Bucks et al., Bureau of Consumer Fin. Prot.,
Collection of Telecommunication Debt, https://files.consumerfinance.gov/f/documents/bcfp_consumer-credit-trends_collection-telecommunications-debt_082018.pdf (Aug. 2018).
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Potential benefits and costs to covered persons. The final rule
will affect the practices of debt collectors who sometimes furnish
information about consumers' debts to CRAs before taking one of the
required actions under the final rule. The Bureau understands that most
debt collectors mail validation notices to consumers shortly after they
receive the accounts for collections and before they furnish
information on those accounts. These debt collectors either already
would be in compliance with the final rule or could come into
compliance with minimal additional cost.\463\ Forty-five out of 58 debt
collectors responding to the Bureau's Operations Study said that they
furnish information to CRAs.\464\ Of these respondents, all but three
said that they send a validation notice upon account placement, such
that the final rule's requirement would be satisfied as long as the
debt collectors also wait a reasonable period of time to allow for
notifications of non-delivery, and only furnish if they do not receive
such notifications. These debt collectors will 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. Debt collectors that do not currently wait a
reasonable period of time prior to furnishing to allow for
notifications of non-delivery, accept non-delivery notifications, and
only furnish if they do not receive such notifications would need to
adopt these practices, but the Bureau expects this would impose minimal
ongoing operational costs. Other debt collectors do not furnish
information to CRAs at all and will not be affected by the requirement.
---------------------------------------------------------------------------
\463\ In the Operations Study, 53 of 58 respondents said that
they send a validation notice shortly after debt placement. CFPB
Debt Collection Operations Study, supra note 37, at 28. To comply
with the final rule, these debt collectors would also need to wait a
reasonable period of time to allow for notifications of non-
delivery, accept non-delivery notifications and only furnish if they
don't receive such notifications. The Bureau does not have
information as to how many of these debt collectors currently take
these additional steps. However, the Bureau expects that taking
these additional steps would impose minimal costs on debt collectors
that do not already take them.
\464\ Id. at 19.
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Debt collectors who furnish information to CRAs prior to
communicating with consumers but provide validation notices to
consumers only after they have been in contact with consumers will need
to change their practices and would face increased costs as a result of
the final rule. Because these debt collectors are already required to
provide validation notices to consumers (unless validation information
is provided in an initial communication or the debt has been paid), the
Bureau expects that many already have systems in place for sending
notices and will not face one-time compliance costs greater than those
of other debt collectors.\465\ However, these debt collectors will face
ongoing costs from sending validation notices to more consumers than
they otherwise would, at an estimated cost of $0.50 to $0.80 per debt
if sent by mail.\466\ To the extent debt collectors take advantage of
opportunities to send validation notices electronically, the marginal
cost of sending each notice is likely to be approximately zero.
Alternatively, these debt collectors could cease furnishing information
to CRAs until after they take the specific steps identified in the
final rule, which could impact the effectiveness of their collection
efforts.\467\ 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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\465\ Debt collectors who do not currently have systems in place
for sending notices will face one-time compliance costs to implement
those systems.
\466\ See CFPB Debt Collection Operations Study, supra note 37,
at 32-33. One small entity representative on the Bureau's SBREFA
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. A small
industry commenter asserted that mailing costs were significantly
higher than $0.50-$0.80 per debt but did not provide an alternative
figure.
\467\ 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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[[Page 5849]]
Commenters noted several specific situations in which the proposed
provision could, in the commenters' view, unduly burden debt
collectors. One small industry commenter raised the concern that a bad
address, which occurs in 15 percent of accounts at their agency, would
stop collections. Another industry commenter noted that 3 percent of
its notices are returned as undeliverable and argued that attempting to
deliver a validation notice should count as a communication and thus
allow furnishing. Another industry commenter noted that some States are
``closed'' in the sense that debt collectors based in other States are
not allowed to deliver notices into those States. This commenter was
concerned that the proposed provision would not allow furnishing of
information about consumers in those States and argued that this will
reduce credit report accuracy. A joint comment by an industry commenter
and CRA argued that the proposed provision would be particularly
problematic in the check verification space. The commenter noted that,
in the case of bad checks, the debt collector generally does not have
the consumer's address or telephone number and cannot communicate with
the consumer directly. In these cases, the debt collector would report
the bad check to a check verification CRA, but this could be prohibited
under the proposed provision. The commenter argued that the proposed
provision could undermine the reliability of the check payment system
by making it impossible to track check fraud, among other things.
The Bureau agrees with some of the commenters with respect to these
additional costs and has revised the final rule from the proposal to
reduce or eliminate these costs. In particular, the Bureau has revised
Sec. 1006.30(a) to specify that, if a debt collector places a letter
in the mail or sends an electronic message to the consumer about the
debt, the debt collector must wait a reasonable period of time (with a
safe harbor for waiting 14 consecutive days) before furnishing
information about the debt to a CRA and, during that period, permit
receipt of, and monitor for, notifications of undeliverability for mail
and electronic messages. A debt collector who places a letter in the
mail or sends an electronic message, does not receive a notice of
undeliverability during that period, and furnishes information to a
consumer reporting agency after the period ends has not violated the
rule even if the debt collector subsequently receives a notice of
undeliverability. Section 1006.30(a)(2) of the final rule also
specifies that Sec. 1006.30(a)(1) does not apply to the furnishing of
information about a debt to a specialty check verification CRA. The
Bureau believes these changes will reduce or eliminate many of the
costs cited by the commenters.
H. Potential Reduction of Access by Consumers to Consumer Financial
Products and Services
Economic theory indicates that it is possible for changes in debt
collection rules, such as those contained in this final rule, to affect
consumers' access to credit. Under economic theory, 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 and expected
payments will decrease. If this final rule addressing disclosures were
to increase collection costs or reduce revenue collected from
delinquent debt, then this would reduce the return to lending, which in
theory could lead lenders to increase the cost of lending, restrict
availability of credit, or both.
As discussed in the November 2020 Final Rule, the Bureau has
considered the available empirical data and research on the effect of
State debt collection laws on the price and availability of
credit.\468\ That research shows that State debt collection laws affect
the price and availability of credit in ways that theory would predict,
but that effects are relatively small even for changes in State laws
that are likely more significant than the provisions in this final
rule.\469\ In light of that research and the CCP analysis above, the
Bureau concludes that the provisions in this final rule are unlikely to
cause any significant reduction in access to consumer credit.
---------------------------------------------------------------------------
\468\ See 84 FR 23274, 23389-91 (May 21, 2019).
\469\ For example, one study found that additional State
regulations on debt collectors' conduct caused the rate at which a
credit inquiry led to a successful account opening to decline by
less than 0.02 percentage points off a base rate of about 43
percent. See id. at 23389-90.
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I. Potential Specific Impacts of the 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 under the
final rule. Creditors could experience indirect effects from the final
rule to the extent they hire FDCPA 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 debt collectors to collect uncollected
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 did not receive any comments on this issue with respect to the
provisions in this final rule.
2. Impact of the Final Rule on Consumers in Rural Areas
Consumers in rural areas may experience benefits from the final
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
debt collectors.
The Bureau requested interested parties to provide data, research
results, and other factual information on the impact of the proposed
rule on consumers in rural areas, but the Bureau did not receive any
comments on this subject.
VIII. Final Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act (RFA) generally requires an agency
to conduct an Initial Regulatory Flexibility Analysis (IRFA) and a
Final Regulatory Flexibility Analysis (FRFA) of any rule subject to
notice-and-comment rulemaking requirements.\470\ Section 604(a) of the
RFA sets forth the required elements of the FRFA. Section 604(a)(1)
requires a statement of the objectives of, and the legal basis for, the
rule.\471\ Section 604(a)(2) requires a statement of the significant
issues raised by the public comments in response to the initial
regulatory flexibility analysis, a statement of the assessment of the
agency of such issues, and a statement of any changes made in the
proposed rule as a result of such comments. Section 604(a)(3) requires
the response of the agency to any comments filed by the Chief Counsel
for Advocacy of the Small Business Administration in response to the
proposed rule and a detailed statement of any change made to the
proposed rule in the final rule as a result of the comments. Section
604(a)(4) requires a description of and,
[[Page 5850]]
where feasible, an estimate of the number of small entities to which
the rule will apply.\472\ Section 604(a)(5) requires a description of
the projected reporting, recordkeeping, and other compliance
requirements of the 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.\473\ Section 604(a)(6) requires a description of any
significant alternatives to the rule that accomplish the stated
objectives of applicable statutes and that minimize any significant
economic impact of the rule on small entities.\474\ Finally, section
604(a)(7) requires a description of the steps the agency has taken to
minimize any additional cost of credit for small entities.\475\
---------------------------------------------------------------------------
\470\ 5 U.S.C. 603(a), 604(a).
\471\ 5 U.S.C. 604(a)(1).
\472\ 5 U.S.C. 604(a)(4).
\473\ 5 U.S.C. 604(a)(5).
\474\ 5 U.S.C. 604(a)(6).
\475\ Id.
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A. Statement of the Objectives of, and Legal Basis for, the Final Rule
As discussed in part IV, the Bureau issues this rule pursuant to
its authority under the FDCPA and the Dodd-Frank Act. The objectives of
the final rule are to clarify and implement the FDCPA's provisions 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.\476\ 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 is requiring consumer disclosure requirements to
provide greater clarity for both consumers and industry participants as
to the information debt collectors must provide consumers to comply
with the law. 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.\477\
---------------------------------------------------------------------------
\476\ See 15 U.S.C. 1692(e).
\477\ 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.\478\
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.'' \479\ ``Federal consumer financial
law'' includes title X of the Dodd-Frank Act and the FDCPA. The legal
basis for the final rule is discussed in detail in the legal authority
analysis in part IV and in the section-by-section analysis in part V.
---------------------------------------------------------------------------
\478\ 15 U.S.C. 1692l(d).
\479\ 12 U.S.C. 5512(a).
---------------------------------------------------------------------------
B. Significant Issues Raised by the Public Comments in Response to the
Initial Regulatory Flexibility Analysis
The Bureau received comments on the IRFA from the Acting Chief
Counsel for Advocacy of the Small Business Administration, which are
discussed in the next section. The Bureau did not receive other
comments that referenced the IRFA specifically; however, several
commenters did raise issues about the burdens of the proposed rule's
provisions, and the Bureau's response to these issues is discussed in
parts V and VII above and in this part below.
C. Response to Any Comments Filed by the Chief Counsel for Advocacy of
the Small Business Administration
The Acting Chief Counsel for Advocacy of the Small Business
Administration filed a public comment letter on the May 2019 proposed
rule that discusses both the IRFA and certain of the proposed
requirements (the ``first SBA letter''). The Acting Chief Counsel for
Advocacy of the Small Business Administration also filed a public
comment letter on the February 2020 supplemental proposed rule that
discusses both the IRFA and the proposed requirements (the ``second SBA
letter''). This section first responds to comments on the IRFA and then
responds to the substantive comments on the proposed rule's provisions.
The first SBA letter notes that the proposed rule could impose
costs to read and understand the rule and to train employees in new
practices. The Bureau had discussed these costs in the context of some
specific provisions but has added a more general discussion of these
costs to section E of the FRFA, below.
The first SBA letter also notes that the Bureau claims some
provisions will cause no significant impact because those provisions
are already part of debt collectors' business practices, and argues
that the Bureau should clarify what the benefit of such provisions is
to consumers if they will not change debt collector practices. As
discussed in part V above and the section 1022(b)(2) analysis of the
proposed rule, the Bureau believes that, by clarifying the FDCPA's
requirements, the rule will benefit both consumers and debt collectors,
including small entities. Many market participants have identified a
need for greater clarity in interpreting many of the FDCPA's
provisions. For example, a trade group commenter emphasized that
ambiguities in the FDCPA lead to unnecessary and costly litigation. The
Bureau believes that there is a benefit to providing additional clarity
about the FDCPA's requirements even where the vast majority of debt
collectors follow practices that meet those requirements. The
additional clarity helps those debt collectors to avoid unnecessary
litigation and to have confidence in what practices do and do not
violate the FDCPA. The additional clarity also makes it easier to
establish when less scrupulous debt collectors have violated the
statute and to hold them accountable, which benefits consumers as well
as debt collectors who do comply with the law.
[[Page 5851]]
The first SBA letter points out that the proposed rule's Paperwork
Reduction Act (PRA) section estimates 1,029,500 burden hours and argues
that this could translate into millions of dollars in recordkeeping and
reporting costs. Most of this burden is not attributable to the rule
itself but rather to the requirements of the FDCPA. As discussed in the
supporting statement accompanying the Bureau's information collection
request, the PRA estimates include the burden not only of complying
with the new requirements introduced by the final rule but also of
complying with the FDCPA itself. These burdens had not previously been
accounted for under the PRA. Thus, the large majority of the estimated
burden hours represent the burden of complying with existing FDCPA
provisions that exist independent of the rule, in particular the
requirement to provide a validation notice under Sec. 809(a) of the
FDCPA and the requirement to respond to consumer disputes under Sec.
809(b) of the FDCPA. There are, of course, burdens associated with
other information collections that are being introduced or modified by
the final rule, and those burdens are discussed in this FRFA as well as
in the supporting statement.
The SBA letters also expressed several concerns about specific
provisions of the proposed rule and recommended changes to those
provisions. These concerns and recommendations, and the Bureau's
response, are discussed in the section-by-section analysis of the
relevant provisions in part V above.
D. Description and, Where Feasible, Provision of an Estimate of the
Number of Small Entities to Which the Final Rule Will Apply
As discussed in the Small Business Review Panel Report, for the
purposes of assessing the impacts of this final rule on small entities,
``small entities'' is defined in the RFA to include small businesses,
small nonprofit organizations, and small government jurisdictions.\480\
A ``small business'' is determined by application of SBA regulations in
reference to the North American Industry Classification System (NAICS)
classifications and size standards.\481\ Under such standards, the
Small Business Review Panel (Panel) identified four categories of small
entities that may be subject to the final rule: Collection agencies
(NAICS 561440) with annual receipts at or below the SBA size standard
(currently $16.5 million), debt buyers (NAICS 522298) with annual
receipts at or below the size standard (currently $41.5 million),
collection law firms (NAICS 541110) with annual receipts at or below
the size standard (currently $12 million), and servicers who acquire
accounts in default. These servicers include depository institutions
(NAICS 522110, 522120, and 522130) with assets at or below the size
standard (currently $600 million) or non-depository institutions (NAICS
522390) with annual receipts at or below the size standard (currently
$22 million). The Panel did not meet with small nonprofit organizations
or small government jurisdictions.\482\
---------------------------------------------------------------------------
\480\ 5 U.S.C. 601(6).
\481\ The current SBA size standards are found on SBA's website,
https://www.sba.gov/content/table-small-business-size-standards.
\482\ Small Business Review Panel Report, supra note 40, at 29.
---------------------------------------------------------------------------
The following table provides the Bureau's estimate of the number
and types of entities that may be affected by the final rule:
Table 1--Estimated Number of Affected Entities and Small Entities by Category
----------------------------------------------------------------------------------------------------------------
Estimated
Estimated number of
total number small-entity
Category NAICS Small-entity threshold of debt debt
collectors collectors
within within
category category
----------------------------------------------------------------------------------------------------------------
Collection agencies............ 561440................. $16.5 million in 9,000 8,800
annual receipts.
Debt buyers.................... 522298................. $41.5 million in 330 300
annual receipts.
Collection law firms........... 541110................. $12.0 million in 1,000 950
annual receipts.
Loan servicers................. 522110, 522120, and $600 million in annual 700 200
522130 (depositories); receipts for
522390 (non- depository
depositories). institutions; $22.0
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.'' \483\ According to the Census Bureau, in 2012 (the
most recent year for which detailed data are available), 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 $16.5 million or less in annual receipts and are
therefore small entities.\484\ 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.
---------------------------------------------------------------------------
\483\ As defined by the U.S. Census Bureau, collection agencies
include entities that collect only commercial debt, and the proposed
rule would apply only to debt collectors of consumer debt. However,
the Bureau understands that relatively few collection agencies
collect only commercial debt.
\484\ The U.S. 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.\485\ Many debt buyers--particularly those that are small
entities--also collect debt on behalf of other debt owners.\486\
---------------------------------------------------------------------------
\485\ The Receivables Management Association, the largest trade
group for debt buyers, states that it has approximately 300 debt
buyer members and believes that 90 percent of debt buyers are
current members.
\486\ 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 U.S. 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
[[Page 5852]]
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.\487\
---------------------------------------------------------------------------
\487\ The primary trade association for collection attorneys,
the National Creditors Bar Association (NCBA), 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 NCBA members and that a similar fraction
of non-member law firms are small entities.
---------------------------------------------------------------------------
Loan servicers. Loan servicers would be covered by the final rule
if they are covered by the FDCPA because, among other things, they
acquire the right to service loans already in default.\488\ 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
final rule are small.\489\
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\488\ 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 final rule.
\489\ 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.
---------------------------------------------------------------------------
E. Projected Reporting, Recordkeeping, and Other Compliance
Requirements of the 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 final rule will not impose new reporting or recordkeeping
requirements, but it will impose new compliance requirements on small
entities subject to the rule.\490\ The requirements and the costs
associated with them are discussed below. In addition to the specific
costs discussed below, all small entities will incur costs to read the
rule and incorporate its provisions into their policies and procedures,
and small entities with employees will need to train employees in new
policies and procedures. The extent of training required will depend on
debt collectors' existing practices and on the roles performed by
individual employees. Debt collectors employ an estimated 123,000
workers.\491\ If, on average, the rule required an additional hour of
training for each of these employees, at an average cost of $22 per
hour, the total training cost would be approximately $2,700,000.\492\
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\490\ While the final rule does not include new recordkeeping
requirements, the Bureau notes that, by introducing a new compliance
requirement, the rule may increase the cost of complying with
recordkeeping requirements of the November 2020 Final Rule. This is
because debt collectors would need to retain evidence of compliance
with any additional compliance requirement.
\491\ 2020 FDCPA Annual Report, supra note 12, at 7.
\492\ The estimated hourly cost is based on an estimated wage of
$15 per hour and taxes, benefits, and incentives of $7 per hour. See
CFPB Debt Collection Operations Study, supra note 37, at 17
(describing estimated debt collector wages ranging from $10 to $20
per hour).
---------------------------------------------------------------------------
In evaluating the potential impacts of the rule on small entities,
the Bureau takes as a baseline conduct in 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 by courts and law
enforcement agencies, other Federal laws, and the rules and statutory
requirements promulgated by the States. This baseline represents the
status quo from which the impacts of this rule will be evaluated.
The Bureau requested that interested parties provide data and
quantitative analysis of the benefits, costs, or impacts of the
proposed rule on small entities but did not receive any comments on
this subject.
The Bureau believes that, except where otherwise noted, the impacts
discussed in part VII would apply to small entities to the same extent
as to larger entities.
F. Description of Any Significant Alternatives to the Rule That
Accomplish the Stated Objectives of the Applicable Statutes and
Minimize Any Significant Economic Impact of the Rule on Small Entities
Section 604(a)(6) of the RFA requires the Bureau to describe in the
FRFA any significant alternatives to the rule that accomplish the
stated objectives of applicable statutes and that minimize any
significant economic impact of the rule on small entities.\493\ In
developing the 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 rule on small entities. Some of these alternatives
are discussed in part V, above.
---------------------------------------------------------------------------
\493\ 5 U.S.C. 604(a)(6).
---------------------------------------------------------------------------
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.\494\ 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 of 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.
---------------------------------------------------------------------------
\494\ 5 U.S.C. 603(d).
---------------------------------------------------------------------------
The Bureau's Small Business Review Panel Outline asked small entity
representatives to comment on how the proposals under consideration
would affect the cost of credit to small entities. During the SBREFA
process, several small entity representatives said that the proposals
under consideration at that time, which included time-barred debt
disclosures among several other proposals, 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.
The Bureau believes that the disclosures in the final rule will
have little impact on the cost of credit to small entities. The Bureau
does recognize that consumer credit could become more expensive and
less available as a result of requirements that restrict the collection
of debt; however, the Bureau does not anticipate that the requirements
of this final rule will have any significant impact on the cost or
availability of consumer credit. Many
[[Page 5853]]
small entities affected by the disclosures in the final 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.
IX. Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995 (PRA),\495\ 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 to, an information collection unless the
information collection displays a valid control number assigned by OMB.
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\495\ 44 U.S.C. 3501 et seq.
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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 final rule amends 12 CFR part 1006 (Regulation F), which
implements the FDCPA. The Bureau's OMB control number for Regulation F
is 3170-0056; it expires April 30, 2022. This final rule along with the
November 2020 Final Rule would revise the information collection
requirements contained in Regulation F that OMB has approved under that
OMB control number.
Under the final rule, the Bureau requires two information
collection requirements in Regulation F beyond those required by the
November 2020 Final Rule:
1. Validation notices (final rule Sec. 1006.34).
2. Communication with consumers prior to furnishing information
(final rule Sec. 1006.30(a)).
These information collections are required to provide benefits for
consumers and will be mandatory. Because the Bureau does not collect
any information, no issue of confidentiality arises. The likely
respondents are for-profit businesses that are FDCPA debt collectors.
The collections of information contained in this rule, and
identified as such, as well as the information collections contained in
the November 2020 final rule have been submitted to OMB for review
under section 3507(d) of the PRA. A complete description of the
information collection requirement, including the burden estimate
methods, is provided in the information collection request (ICR)
supporting statement that the Bureau has submitted to OMB under the
requirements of the PRA. The Bureau will publish a separate notice in
the Federal Register when these information collections have been
approved by OMB.
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.
Estimated Number of Respondents: 12,027.\496\
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\496\ The Bureau shares enforcement authority under the FDCPA
with the Federal Trade Commission. To avoid double-counting, the
Bureau allocates to itself half of the estimated paperwork burden
under the final rule by dividing the burden hours even between the
agencies. However, since the Bureau has joint authority over the
respondents themselves, the Bureau retains the entity count of all
affected respondents as shown above.
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Estimated Total Annual Burden Hours: 881,000.
The Bureau has a continuing interest in the public's opinion of its
collections of information. At any time, comments regarding the burden
estimate, or any other aspect of the information collection, including
suggestions for reducing the burden, may be sent to the Consumer
Financial Protection Bureau (Attention: PRA Office), 1700 G Street NW,
Washington, DC 20552, or by email to [email protected].
Where applicable, the Bureau will display the control number
assigned by OMB to any documents associated with any information
collection requirements adopted in this rule.
X. Congressional Review Act
Pursuant to the Congressional Review Act,\497\ the Bureau will
submit a report containing this rule and other required information to
the U.S. Senate, the U.S. House of Representatives, and the Comptroller
General of the United States at least 60 days prior to the rule's
published effective date. The Office of Information and Regulatory
Affairs has designated this rule as a ``major rule'' as defined by 5
U.S.C. 804(2).
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\497\ 5 U.S.C. 801 et seq.
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XI. Signing Authority
The Director of the Bureau, Kathleen L. Kraninger, having reviewed
and approved this document, is delegating the authority to
electronically sign this document to Grace Feola, a Bureau Federal
Register Liaison, for purposes of publication in the Federal Register.
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 is further amending
Regulation F, 12 CFR part 1006, as revised on November 30, 2020, at 85
FR 76734, effective November 30, 2021, as set forth below:
PART 1006--DEBT COLLECTION PRACTICES (REGULATION F)
0
1. The authority citation for part 1006 continues to read as follows:
Authority: 12 U.S.C. 5512, 5514(b), 5532; 15 U.S.C. 1692l(d),
1692o, 7004.
Subpart A--General
0
2. Section 1006.1 is amended by adding paragraph (c)(2) to read as
follows:
Sec. 1006.1 Authority, purpose, and coverage.
* * * * *
(c) * * *
(2) Section 1006.34(c)(2)(iii) and (c)(3)(iv) applies to debt
collectors only when they are collecting debt related to a consumer
financial product or service as defined in Sec. 1006.2(f).
0
3. Section 1006.2 is amended by revising paragraph (e) and adding
paragraph (f) to read as follows:
Sec. 1006.2 Definitions.
* * * * *
[[Page 5854]]
(e) Consumer means any natural person, whether living or deceased,
obligated or allegedly obligated to pay any debt. For purposes of Sec.
1006.6, the term consumer includes the persons described in Sec.
1006.6(a).
(f) Consumer financial product or service has the same meaning
given to it in section 1002(5) of the Dodd-Frank Act (12 U.S.C.
5481(5)).
* * * * *
Subpart B--Rules for FDCPA Debt Collectors
0
4. Section 1006.26 is added to read as follows:
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) Legal actions and threats of legal actions prohibited. A debt
collector must not bring or threaten to bring a legal action against a
consumer to collect a time-barred debt. This paragraph (b) does not
apply to proofs of claim filed in connection with a bankruptcy
proceeding.
0
5. Section 1006.30 is amended by adding paragraph (a) to read as
follows:
Sec. 1006.30 Other prohibited practices.
(a) Required actions prior to furnishing information--(1) In
general. Except as provided in paragraph (a)(2) of this section, 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 about a debt before the debt collector:
(i) Speaks to the consumer about the debt in person or by
telephone; or
(ii) Places a letter in the mail or sends an electronic message to
the consumer about the debt and waits a reasonable period of time to
receive a notice of undeliverability. During the reasonable period, the
debt collector must permit receipt of, and monitor for, notifications
of undeliverability from communications providers. If the debt
collector receives such a notification during the reasonable period,
the debt collector must not furnish information about the debt to a
consumer reporting agency until the debt collector otherwise satisfies
this paragraph (a)(1).
(2) Special rule--information furnished to certain specialty
consumer reporting agencies. Paragraph (a)(1) of this section does not
apply to a debt collector's furnishing of information about a debt to a
nationwide specialty consumer reporting agency that compiles and
maintains information on a consumer's check writing history, as
described in section 603(x)(3) of the Fair Credit Reporting Act (15
U.S.C. 1681a(x)(3)).
* * * * *
0
6. Section 1006.34 is added to read as follows:
Sec. 1006.34 Notice for validation of debts.
(a) Validation information required--(1) In general. Except as
provided in paragraph (a)(2) of this section, a debt collector must
provide a consumer with the validation information required by
paragraph (c) of this section either:
(i) By sending the consumer a validation notice in the manner
required 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 readily understandable. In the case
of written and electronic disclosures, the location and type size also
must be readily noticeable and legible to consumers, although no
minimum type size is mandated. 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 five 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 by a creditor;
(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;
(iv) The transaction date, which is the date of the transaction
that gave rise to the debt; or
(v) The judgment date, which is the date of a final court judgment
that determines the amount of the debt owed by the consumer.
(4) Validation notice means a written or electronic notice that
provides the validation information required by paragraph (c) of this
section.
(5) Validation period means the period starting on the date that a
debt collector provides the validation information required by
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 identified in 5 U.S.C. 6103(a), Saturdays, and Sundays)
after the debt collector provides it.
(c) Validation information. Pursuant to paragraph (a)(1) of this
section, a debt collector must provide the following 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 the mailing address at which the
debt collector accepts disputes and requests for original-creditor
information.
(ii) The consumer's name and mailing address.
(iii) If the debt collector is collecting a debt related to a
consumer financial product or service as defined in Sec. 1006.2(f),
the name of the creditor to whom the debt was owed on the itemization
date.
(iv) The account number, if any, associated with the debt on the
itemization date, or a truncated version of that number.
(v) The name of the creditor to whom the debt currently is owed.
(vi) The itemization date.
(vii) The amount of the debt on the itemization date.
[[Page 5855]]
(viii) An itemization of the current amount of the debt reflecting
interest, fees, payments, and credits since the itemization date. A
debt collector may disclose the itemization on a separate page provided
in the same communication with a validation notice, if the debt
collector includes on the validation notice, where the itemization
would have appeared, a statement referring to that separate page.
(ix) The current amount of the debt.
(3) Information about consumer protections. (i) The date that the
debt collector will consider the end date of the validation period and
a statement that, if the consumer notifies the debt collector in
writing on or before that date 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 verification of the debt or a copy of a
judgment.
(ii) The date that the debt collector will consider the end date of
the validation period and a statement that, if the consumer requests in
writing on or before that date 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) The date that the debt collector will consider the end date
of the validation period and a statement that, unless the consumer
contacts the debt collector to dispute the validity of the debt, or any
portion of the debt, on or before that date, the debt collector will
assume that the debt is valid.
(iv) If the debt collector is collecting debt related to a consumer
financial product or service 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 www.cfpb.gov/debt-collection.
(v) If the debt collector sends the validation notice
electronically, a statement explaining how a consumer can, as described
in paragraphs (c)(4)(i) and (ii) of this section, dispute the debt or
request original-creditor information electronically.
(4) Consumer-response information. The following information,
segregated from the validation information required by paragraphs
(c)(1) through (3) of this section and from any optional information
included pursuant to paragraphs (d)(3)(i) and (ii), (d)(3)(iii)(A),
(d)(3)(iv) and (v), (d)(3)(vi)(A), and (d)(3)(vii) and (viii) of this
section, and, if provided on 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 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 are the debt collector's and the consumer's names
and mailing addresses as disclosed pursuant to Sec. 1006.34(c)(2)(i)
and (ii).
(5) Special rule for certain residential mortgage debt. For
residential mortgage debt, if a periodic statement is required under
Regulation Z, 12 CFR 1026.41, at the time a debt collector provides the
validation notice, a debt collector need not provide the validation
information required by paragraphs (c)(2)(vi) through (viii) of this
section if the debt collector:
(i) Provides the consumer, in the same communication with 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) Includes on the validation notice, where the validation
information required by paragraphs (c)(2)(vi) through (viii) of this
section would have appeared, a statement referring to that periodic
statement.
(d) Form of validation information--(1) In general. The validation
information required by paragraph (c) of this section must be clear and
conspicuous.
(2) Safe harbor--(i) In general. Model Form B-1 in appendix B to
this part contains the validation information required by paragraph (c)
of this section and certain optional disclosures permitted by paragraph
(d)(3) of this section. A debt collector who uses Model Form B-1
complies with the information and form requirements of paragraphs (c)
and (d)(1) of this section, including if the debt collector:
(A) Omits any or all of the optional disclosures shown on Model
Form B-1; or
(B) Adds any or all of the optional disclosures described in
paragraph (d)(3) of this section that are not shown on Model Form B-1,
provided that any such optional disclosures are no more prominent than
any of the validation information required by paragraph (c) of this
section.
(ii) Certain disclosures on a separate page. A debt collector who
uses Model Form B-1 as described in paragraph (d)(2)(i) of this section
and who, pursuant to paragraph (c)(2)(viii) or (c)(5) of this section,
includes certain disclosures on a separate page in the same
communication with the validation notice and, on the notice, the
required statement referring to those disclosures, receives a safe
harbor for compliance with the information and form requirements of
paragraphs (c) and (d)(1) of this section except with respect to the
disclosures on the separate page.
(iii) Substantially similar form. A debt collector who uses Model
Form B-1 as described in paragraph (d)(2)(i) or (ii) of this section
may make changes to the form and retain a safe harbor for compliance
with the information and form requirements of paragraphs (c) and (d)(1)
of this section provided that the form remains substantially similar to
Model Form B-1.
(3) Optional disclosures. A debt collector may include any of the
following information when providing the validation information
required by paragraph (c) of this section. A debt collector who
includes any of the following information receives the safe harbor
described in paragraph (d)(2) of this section, provided that the debt
collector otherwise uses Model Form B-1 in appendix B to this part, or
a variation of Model Form B-1, as described in paragraph (d)(2) of this
section.
(i) Telephone contact information. The debt collector's telephone
contact information.
(ii) Reference code. A number or code that the debt collector uses
to identify the debt or the consumer.
(iii) Payment disclosures. Either or both of the following phrases:
(A) The statement, ``Contact us about your payment options.'',
using that phrase or a substantially similar phrase; and
(B) Below the consumer-response information required by paragraphs
(c)(4)(i) and (ii) 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.
(iv) Disclosures under applicable law--(A) Disclosures on the
reverse of the validation notice. On the reverse of
[[Page 5856]]
the validation notice, any disclosures that are specifically required
by, or that provide safe harbors under, applicable law and, if any such
disclosures are included, a statement on the front of the validation
notice referring to those disclosures. Any such disclosures must not
appear directly on the reverse of the consumer-response information
required by paragraph (c)(4) of this section.
(B) Disclosures on the front of the validation notice. If a debt
collector is collecting time-barred debt, on the front of the
validation notice below the disclosure required by paragraph (c)(2)(ix)
of this section, any time-barred debt disclosure that is specifically
required by, or that provides a safe harbor under, applicable law,
provided that applicable law specifies the content of the disclosure.
(v) Information about electronic communications. The following
information:
(A) The debt collector's website and email address.
(B) If the validation information is not provided electronically, a
statement explaining how a consumer can, as described in paragraphs
(c)(4)(i) and (ii) of this section, dispute the debt or request
original-creditor information electronically.
(vi) Spanish-language translation disclosures. Either or both of
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 this 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 required by paragraph
(c)(4) of this section, the statement ``Quiero este formulario 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.
(vii) The merchant brand, affinity brand, or facility name, if any,
associated with the debt.
(viii) If a debt collector is collecting debt other than debt
related to a consumer financial product or service as defined in Sec.
1006.2(f), the information specified in paragraph (c)(2)(iii) or
(c)(3)(iv) of this section.
(4) Validation notices delivered electronically. If a debt
collector delivers a validation notice electronically, a debt collector
may, at its option, format the validation notice as follows:
(i) Prompts. Any prompt required by paragraph (c)(4)(i) or (ii) or
paragraph (d)(3)(iii)(B) or (d)(3)(vi)(B) of this section may be
displayed electronically as a fillable field.
(ii) Hyperlinks. Hyperlinks may be embedded that, when clicked:
(A) Connect a consumer to the debt collector's website;
(B) Connect a consumer to the Bureau's debt collection website as
disclosed pursuant to paragraph (c)(3)(iv) of this section; or
(C) Permit a consumer to respond to the dispute and original-
creditor information prompts required by paragraphs (c)(4)(i) and (ii)
of this section.
(e) Translation into other languages--(1) In general. A debt
collector may send a consumer a validation notice completely and
accurately translated into any language if the debt collector:
(i) Sends the consumer an English-language validation notice in the
same communication as the translated validation notice; or
(ii) Previously provided the consumer an English-language
validation notice, in which case the debt collector need not send the
consumer an English-language validation notice in the same
communication as the translated validation notice.
(2) Spanish-language validation notice--requirement to provide
after optional disclosure. A debt collector who includes in the
validation information either or both of the optional disclosures
described in paragraph (d)(3)(vi) of this section, and who thereafter
receives a request from the consumer for a Spanish-language validation
notice, must provide the consumer a validation notice completely and
accurately translated into Spanish.
0
7. Section 1006.38 is amended by revising paragraphs (a)(2), (b), and
(c) to read as follows:
Sec. 1006.38 Disputes and requests for original-creditor information.
(a) * * *
(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--(1) Prohibition. 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.
(2) Safe harbor. A debt collector who uses Model Form B-1 in
appendix B to this part in a manner described in Sec. 1006.34(d)(2)
has not thereby violated paragraph (b)(1) of this section.
(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:
(1) In general. Sends the name and address of the original creditor
to the consumer in writing or electronically in the manner required by
Sec. 1006.42; or
(2) Special rule if the current creditor and the original creditor
are the same. In lieu of taking the actions described in paragraph
(c)(1) of this section, reasonably determines that the original
creditor is the same as the current creditor, notifies the consumer of
that fact in writing or electronically in the manner required by Sec.
1006.42, and refers the consumer to the validation information
previously provided pursuant to Sec. 1006.34(a)(1).
* * * * *
0
8. Section 1006.42 is amended by revising paragraphs (a)(2) and (b) to
read as follows:
Sec. 1006.42 Sending required disclosures.
(a) * * *
(2) Exceptions. A debt collector need not comply with paragraph
(a)(1) of this section when sending 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).
(b) Requirements for certain disclosures sent electronically. To
comply with paragraph (a) of this section, a debt collector who sends
the notice required by Sec. 1006.34(a)(1)(i)(B), or the disclosures
described in Sec. 1006.38(c) or (d)(2)(i), electronically must do so
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)).
0
9. Appendix B to part 1006 is added to read as follows:
Appendix B to Part 1006--Model Forms
B-1 Model Form for Validation Notice
BILLING CODE 4810-AM-P
[[Page 5857]]
[GRAPHIC] [TIFF OMITTED] TR19JA21.028
BILLING CODE 4810-AM-C
0
10. In supplement I to part 1006:
0
a. Under Section 1006.30--Other Prohibited Practices, the headings
30(a) Required actions prior to furnishing information, and 30(a)(1) In
general, and paragraphs 1 and 2 are added.
0
b. Section 1006.34--Notice for Validation of Debts is added.
0
c. Under Section 1006.38--Disputes and Requests for Original-Creditor
Information, the introductory text before 38(a) Definitions is revised.
0
d. Under Section 1006.100--Record Retention, 100(a) In general,
including the heading, is revised.
0
e. Section 1006.104--Relation to State Laws is added.
The additions and revisions read as follows:
Supplement I to Part 1006--Official Interpretations
* * * * *
Subpart B--Rules for FDCPA Debt Collectors
* * * * *
Section 1006.30--Other Prohibited Practices
30(a) Required actions prior to furnishing information.
30(a)(1) In general.
1. About the debt. Section 1006.30(a)(1) provides, in relevant
part, that a debt collector must not furnish to
[[Page 5858]]
a consumer reporting agency, as defined in section 603(f) of the Fair
Credit Reporting Act (15 U.S.C. 1681a(f)), information about a debt
before taking one of the actions described in Sec. 1006.30(a)(1)(i) or
(ii). Each of the actions includes conveying information ``about the
debt'' to the consumer. The validation information required by Sec.
1006.34(c), including such information if provided in a validation
notice, is information ``about the debt.''
2. Reasonable period of time. Section 1006.30(a)(1)(ii) provides,
in relevant part, that a debt collector who places a letter about a
debt in the mail, or who sends an electronic message about a debt to
the consumer, must wait a reasonable period of time to receive a notice
of undeliverability before furnishing information about the debt to a
consumer reporting agency. The reasonable period of time begins on the
date that the debt collector places the letter in the mail or sends the
electronic message. A period of 14 consecutive days after the date that
the debt collector places a letter in the mail or sends an electronic
message is a reasonable period of time.
3. Notices of undeliverability. Section 1006.30(a)(1)(ii) provides,
in relevant part, that, if a debt collector who places a letter about a
debt in the mail, or who sends an electronic message about a debt to
the consumer, receives a notice of undeliverability during the
reasonable period of time, the debt collector must not furnish
information about the debt to a consumer reporting agency until the
debt collector otherwise satisfies paragraph (a)(1) of this section. A
debt collector who does not receive a notice of undeliverability during
the reasonable period and who thereafter furnishes information about
the debt to a consumer reporting agency does not violate paragraph
(a)(1) of this section even if the debt collector subsequently receives
a notice of undeliverability. The following examples illustrate the
rule:
i. Assume that, on May 1, a debt collector mails the consumer a
validation notice as described in Sec. 1006.34(a)(1)(i)(A). On May 10,
the debt collector receives a notice of undeliverability and, without
taking any additional action described in Sec. 1006.30(a)(1),
subsequently furnishes information regarding the debt to a consumer
reporting agency. The debt collector has violated Sec. 1006.30(a)(1).
ii. Assume that, on May 1, a debt collector mails the consumer a
validation notice as described in Sec. 1006.34(a)(1)(i)(A). On May 10,
the debt collector receives a notice of undeliverability. On May 11,
the debt collector mails the consumer another validation notice as
described in Sec. 1006.34(a)(1)(i)(A). From May 11 to May 24, the debt
collector permits receipt of, monitors for, and does not receive, a
notice of undeliverability and thereafter furnishes information
regarding the debt to a consumer reporting agency. The debt collector
has not violated Sec. 1006.30(a)(1).
iii. Assume that, on May 1, a debt collector mails the consumer a
validation notice as described in Sec. 1006.34(a)(1)(i)(A). From May 1
to May 14, the debt collector permits receipt of, monitors for, and
does not receive, a notice of undeliverability and thereafter furnishes
information regarding the debt to a consumer reporting agency. After
furnishing the information, the debt collector receives a notice of
undeliverability. The debt collector has not violated Sec.
1006.30(a)(1) and, without taking any further action, may furnish
additional information about the debt to a consumer reporting agency.
* * * * *
Section 1006.34--Notice for Validation of Debts
34(a) Validation information required.
34(a)(1) In general.
1. Deceased consumers. Section 1006.34(a)(1) generally requires a
debt collector to provide the validation information required by Sec.
1006.34(c) either by sending the consumer a validation notice in the
manner required by Sec. 1006.42, 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)(2) Initial communication.
1. Bankruptcy proofs of claim. Section 1006.34(b)(2) defines
initial communication and states that the term does not include a
communication in the form of a formal pleading in a civil action. A
proof of claim that a debt collector files in a bankruptcy proceeding
in accordance with the requirements of the United States Bankruptcy
Code (Title 11 of the U.S. Code) is a communication in the form of a
formal pleading in a civil action and therefore is not an initial
communication for purposes of Sec. 1006.34.
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 five reference dates for which a debt
collector can ascertain the amount of the debt. The reference dates are
the last statement date, the charge-off date, the last payment date,
the transaction date, and the judgment 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 debt in a
communication with a consumer, the debt collector must use that
reference date for that debt consistently when providing the
information required by Sec. 1006.34(c) 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)(iv), 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)(vii).
2. Subsequent debt collectors. When selecting an itemization date
pursuant to Sec. 1006.34(b)(3), a debt collector may use a different
reference date than a prior debt collector who attempted to collect the
debt.
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 by a creditor.
For purposes of Sec. 1006.34(b)(3)(i), the last statement may be
provided by a creditor or a third party acting on the creditor's
behalf, including a creditor's service provider. However, a statement
or invoice provided by a debt collector is not a last statement for
purposes of Sec. 1006.34(b)(3)(i), unless the debt collector is also a
creditor.
Paragraph 34(b)(3)(iii).
1. Last payment date. Under Sec. 1006.34(b)(3)(iii), the last
payment date is the date the last payment was applied to the debt. A
third-party payment applied to the debt, such as a payment from an auto
repossession agent or an insurance company, can be a last payment for
purposes of Sec. 1006.34(b)(3)(iii).
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.
[[Page 5859]]
The transaction date is the date that the good or service that gave
rise to the debt was provided or made available to the 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 may have more
than one transaction date. This could occur, for example, 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 the debt collector must use whichever
transaction date is selected consistently, as described in comment
34(b)(3)-1.
34(b)(5) Validation period.
1. Assumed receipt of validation information. 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(c) and ending 30 days after the consumer receives or is assumed
to receive it. Section 1006.34(c)(3)(i) through (iii) requires
statements that specify the end date of the validation period. If a
debt collector provides the validation information in writing or
electronically, then, at the time that the debt collector calculates
the validation period end date, the debt collector will know only the
date on which the consumer is assumed to receive the validation
information. In such cases, the debt collector may use that date to
calculate the validation period end date even if the debt collector
later learns that the consumer received the validation information on a
different date.
2. Updated 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 required by 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 is 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)(1) Debt collector communication disclosure.
1. Statement required by Sec. 1006.18(e). Section 1006.34(c)(1)
provides that validation information includes the statement required by
Sec. 1006.18(e). Section 1006.18(e)(1) requires a debt collector to
disclose in its initial communication that the debt collector is
attempting to collect a debt and that any information obtained will be
used for that purpose. Section 1006.18(e)(2) requires a debt collector
to disclose in each subsequent communication that the communication is
from a debt collector. A debt collector who provides a validation
notice as described in Sec. 1006.34(a)(1)(i)(A) complies with Sec.
1006.34(c)(1) by providing on the validation notice the disclosure
required by Sec. 1006.18(e)(1). A debt collector who provides a
validation notice as described in Sec. 1006.34(a)(1)(i)(B) complies
with Sec. 1006.34(c)(1) by providing either the disclosure required by
Sec. 1006.18(e)(1) or the disclosure required by Sec. 1006.18(e)(2).
The following example illustrates the rule:
i. ABC debt collector has an initial communication with the
consumer by telephone. Within five days of that initial communication,
ABC debt collector sends the consumer a validation notice using Model
Form B-1 in appendix B to this part. ABC debt collector has complied
with Sec. 1006.34(c)(1) even though Model Form B-1 includes the
disclosure described in Sec. 1006.18(e)(1) rather than the disclosure
described in Sec. 1006.18(e)(2).
34(c)(2) Information about the debt.
Paragraph 34(c)(2)(i).
1. Debt collector's name. Section 1006.34(c)(2)(i) provides, in
part, that validation information includes the debt collector's name. A
debt collector may disclose its trade or doing-business-as name,
instead of its legal name.
2. Debt collector's mailing address. Section 1006.34(c)(2)(i)
provides, in part, that validation information includes the mailing
address at which the debt collector accepts disputes and requests for
original-creditor information. A debt collector may disclose a vendor's
mailing address, if that is an address at which the debt collector
accepts disputes and requests for original-creditor information.
Paragraph 34(c)(2)(ii).
1. Consumer's name. Section 1006.34(c)(2)(ii) provides, in part,
that validation information includes the consumer's name. To satisfy
the requirement to provide this validation information, a debt
collector must disclose the version of the consumer's name that the
debt collector reasonably determines is the most complete and accurate
version of the name about which the debt collector has knowledge. A
debt collector does not disclose the most complete and accurate version
of the consumer's name if the debt collector omits known name
information in a manner that creates a false, misleading, or confusing
impression about the consumer's identity. For example, assume the
creditor provides the consumer's first name, middle name, last name,
and name suffix to the debt collector. In this scenario, the debt
collector would reasonably determine that the most complete and
accurate version of the consumer's name about which the debt collector
has knowledge includes the first name, middle name, last name, and name
suffix. If the debt collector omits any of this information, the debt
collector has not satisfied the requirement to provide the consumer's
name pursuant to Sec. 1006.34(c)(2)(ii).
Paragraph 34(c)(2)(iii).
1. Creditor's name. Section 1006.34(c)(2)(iii) provides that, if a
debt collector is collecting debt related to a consumer financial
product or service as defined in Sec. 1006.2(f), validation
information includes the name of the creditor to whom the debt was owed
on the itemization date. Pursuant to Sec. 1006.34(c)(2)(iii), a debt
collector may disclose this creditor's trade or doing-business-as name,
instead of its legal name.
Paragraph 34(c)(2)(iv).
1. Account number truncation. Section 1006.34(c)(2)(iv) provides
that validation information includes the account number, if any,
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 are provided.
Paragraph 34(c)(2)(v).
1. Creditor's name. Section 1006.34(c)(2)(v) provides that
validation information includes the name of the creditor to whom the
debt currently is owed. A debt collector may disclose this creditor's
trade or doing-business-as name, instead of its legal name.
Paragraph 34(c)(2)(vii).
1. Amount of the debt on the itemization date. Section
1006.34(c)(2)(vii) provides that validation information includes the
amount of the debt on the itemization
[[Page 5860]]
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)(viii).
1. Itemization of the debt. Section 1006.34(c)(2)(viii) provides
that validation information includes an itemization of the current
amount of the debt reflecting interest, fees, payments, and credits
since the itemization date. If 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,'' ``none,'' or may state that no interest, fees,
payments, or credits have been assessed or applied to the debt; a debt
collector may not leave a required field blank.
2. Itemization required by other applicable law. If a debt
collector is required by other applicable law to provide an itemization
of the current amount of the debt with the validation information, the
debt collector may comply with Sec. 1006.34(c)(2)(viii) by disclosing
the itemization required by other applicable law in lieu of the
itemization described in Sec. 1006.34(c)(2)(viii), if the itemization
required by other applicable law is substantially similar to the
itemization that appears on Model Form B-1 in appendix B to this part.
3. Itemization on a separate page. Section 1006.34(c)(2)(viii)
provides that a debt collector may disclose the itemization of the
current amount of the debt on a separate page provided in the same
communication with a validation notice if the debt collector includes
on the validation notice, where the itemization would have appeared, a
statement referring to that separate page. A debt collector may comply
with the requirement to refer to the separate page by, for example,
including on the validation notice the statement, ``See the enclosed
separate page 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)(ix).
4. Debt collectors collecting multiple debts. A debt collector who
combines multiple debts on a single validation notice complies with
Sec. 1006.34(c)(2)(viii) by disclosing either a single, cumulative
itemization on the validation notice or a separate itemization of each
debt on a separate page or pages provided in the same communication as
the validation notice.
Paragraph 34(c)(2)(ix).
1. Current amount of the debt. Section 1006.34(c)(2)(ix) 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.
2. Debt collectors collecting multiple debts. A debt collector who
combines multiple debts on a single validation notice complies with
Sec. 1006.34(c)(2)(ix) by disclosing on the validation notice a single
cumulative figure that is the sum of the current amount of all the
debts.
34(c)(3) Information about consumer protections.
Paragraph 34(c)(3)(v).
1. Electronic communication media. Section 1006.34(c)(3)(v)
provides that, if the debt collector provides the validation notice
electronically, validation information includes a statement explaining
how a consumer can, as described in paragraphs (c)(4)(i) and (ii) of
this section, dispute the debt or request original-creditor information
electronically. A debt collector may provide the information required
by Sec. 1006.34(c)(3)(v) by including the 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 required to provide information regarding only
one of these media but may provide information on any additional media.
34(c)(4) Consumer-response information.
1. Prompts. If the validation information is provided in writing or
electronically, a prompt required by Sec. 1006.34(c)(4) may be
formatted as a checkbox as in Model Form B-1 in appendix B to this
part.
34(c)(5) Special rule for certain residential mortgage debt.
1. In general. Section 1006.34(c)(5) provides that, for residential
mortgage debt, if a periodic statement is required under Regulation Z,
12 CFR 1026.41, at the time a debt collector provides the validation
notice, a debt collector need not provide the validation information
required by Sec. 1006.34(c)(2)(vi) through (viii) if the debt
collector provides the consumer, in the same communication with 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 includes on the validation notice, where the validation
information required by paragraphs (c)(2)(vi) through (viii) of this
section would have appeared, a statement referring to that periodic
statement. A debt collector may comply with the requirement to refer to
the periodic statement in the validation notice by, for example,
including on the validation notice the statement, ``See the enclosed
periodic statement for an itemization of the debt.''
34(d) Form of validation information.
34(d)(2) Safe harbor.
1. In general. A debt collector who provides a validation notice
that is neither a notice described in Sec. 1006.34(d)(2)(i) or (ii),
nor a substantially similar notice as described in Sec.
1006.34(d)(2)(iii), does not receive a safe harbor for compliance with
the information and form requirements of Sec. 1006.34(c) and (d)(1).
34(d)(2)(i) In general.
1. Disclosure required by Sec. 1006.18(e). Section 1006.18(e)(1)
requires a debt collector to disclose in its initial communication that
the debt collector is attempting to collect a debt and that any
information obtained will be used for that purpose. Section
1006.18(e)(2) requires a debt collector to disclose in each subsequent
communication that the communication is from a debt collector. Model
Form B-1 in appendix B to this part includes the disclosure required by
Sec. 1006.18(e)(1). A debt collector who uses Model Form B-1 to
provide a validation notice as described in Sec. 1006.34(a)(1)(i)(B)
may replace the disclosure required by Sec. 1006.18(e)(1) with the
disclosure required by Sec. 1006.18(e)(2) without losing the safe
harbor described in Sec. 1006.34(d)(2). See comment 34(c)(1)-1 for
further guidance related to providing the disclosure required by Sec.
1006.18(e) on a validation notice.
34(d)(2)(iii) Substantially similar form.
1. Substantially similar form. Pursuant to Sec.
1006.34(d)(2)(iii), a debt collector who uses Model Form B-1 as
described in Sec. 1006.34(d)(2)(i) may make changes to the form and
retain the safe harbor for compliance with the information and form
requirements of
[[Page 5861]]
Sec. 1006.34(c) and (d)(1) provided that the form remains
substantially similar in substance, clarity, and meaningful sequence to
Model Form B-1. Permissible 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'';
ii. Relocating the consumer-response information required by Sec.
1006.34(c)(4) to facilitate mailing;
iii. Adding barcodes or QR codes, as long as the inclusion of such
items does not violate Sec. 1006.38(b);
iv. Adding the date the form is generated; and
v. Embedding hyperlinks, if delivering the form electronically.
34(d)(3) Optional disclosures.
34(d)(3)(i) Telephone contact information.
1. In general. Section 1006.34(d)(3)(i) permits a debt collector to
include telephone contact information. Telephone contact information
may include, for example, a telephone number as well as the times that
the debt collector accepts consumer telephone calls.
34(d)(3)(iv) Disclosures under applicable law.
34(d)(3)(iv)(A) Disclosures on the reverse of the validation
notice.
1. In general. Section 1006.34(d)(3)(iv)(A) permits, in relevant
part, a debt collector to include on the reverse of the validation
notice any disclosures that are specifically required by, or that
provide safe harbors under, applicable law. If a debt collector
provides a validation notice in the body of an email, the debt
collector may, in lieu of including the disclosures permitted by Sec.
1006.34(d)(3)(iv)(A) on the reverse of the validation notice, include
them in the same communication below the content of the validation
notice. Disclosures permitted by Sec. 1006.34(d)(3)(iv)(A) include,
for example, specific disclosures required by Federal, State, or
municipal statutes or regulations, and specific disclosures required by
judicial or administrative decisions or orders, including
administrative consent orders. Such disclosures could include, for
example, time-barred debt disclosures and disclosures that the current
amount of the debt may increase or vary due to interest, fees, or other
charges, provided that such disclosures are specifically required by
applicable law.
2. Statement referring to disclosures. If a debt collector includes
disclosures pursuant to Sec. 1006.34(d)(3)(iv)(A), the debt collector
must include a statement on the front of the validation notice
referring to those disclosures. A debt collector may comply with the
requirement to refer to the disclosures by including on the front of
the validation notice the statement, ``Notice: See reverse side for
important information,'' or a substantially similar statement. If, as
permitted by comment 34(d)(3)(iv)(A)-1, a debt collector places the
disclosures below the content of the validation notice, the debt
collector may comply with the requirement to refer to the disclosures
by stating, ``Notice: See below for important information,'' or a
substantially similar statement.
34(d)(3)(iv)(B) Disclosures on the front of the validation notice.
1. In general. Section 1006.34(d)(3)(iv)(B) provides, in relevant
part that, if a debt collector is collecting time-barred debt, the debt
collector may include on the front of the validation notice any time-
barred debt disclosure that is specifically required by, or that
provides a safe harbor under, applicable law, provided that applicable
law specifies the content of the disclosure. For example, if applicable
State law requires a debt collector who is collecting time-barred debt
to disclose to the consumer that the law limits how long a consumer can
be sued on a debt and that the debt collector cannot or will not sue
the consumer to collect it, the debt collector may include that
disclosure on the front of the validation notice. See Sec.
1006.26(a)(2) for the definition of time-barred debt. For purposes of
Sec. 1006.34(d)(3)(iv)(B), time-barred debt disclosures may include
disclosures about revival of debt collectors' right to bring a legal
action to enforce the debt.
34(d)(3)(vi) Spanish-language translation disclosures.
Paragraph 34(d)(3)(vi)(A).
1. Supplemental information in Spanish. 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
accepts consumer requests through those communication media.
Paragraph 34(d)(3)(vii).
1. Merchant brand. Section 1006.34(d)(3)(vii) permits a debt
collector to include the merchant brand, if any, associated with debt.
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. ``XYZ Store'' is the merchant brand.
2. Affinity brand. Section 1006.34(d)(3)(vii) permits a debt
collector to include the affinity brand, if any, associated with the
debt. 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 the logo for the College of Columbia appears on the
credit card. ``College of Columbia'' is the affinity brand.
3. Facility name. Section 1006.34(d)(3)(vii) permits a debt
collector to include the facility name, if any, associated with the
debt. For example, assume that a debt collector is attempting to
collect a consumer's medical debt. The medical debt relates to a
treatment that the consumer received at ABC Hospital. ``ABC Hospital''
is the facility name.
34(e) Translation into other languages.
1. Safe harbor for complete and accurate translation. Section
1006.34(e) provides, among other things, that, if a debt collector
sends a consumer a validation notice translated into a language other
than English, the translation must be complete and accurate. The
language of a validation notice that a debt collector obtains from the
Bureau's website is considered a complete and accurate translation.
Debt collectors are permitted to use other validation notice
translations if they are complete and accurate.
Section 1006.38--Disputes and Requests for Original-Creditor
Information
1. 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) requires to appear on the validation notice and
indicates on the form the dispute or request;
iii. Provides the dispute or request to the debt collector using a
medium of electronic communication through which the debt collector
accepts
[[Page 5862]]
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. Deceased consumers. 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.
* * * * *
Subpart D--Miscellaneous
Section 1006.100--Record Retention
* * * * *
100(a) In general.
1. Records that evidence compliance. Section 1006.100(a) provides,
in part, that a debt collector must retain records that are evidence of
compliance or noncompliance with the FDCPA and this part. Thus, under
Sec. 1006.100(a), a debt collector must retain records that evidence
that the debt collector performed the actions and made the disclosures
required by the FDCPA and this part, as well as records that evidence
that the debt collector refrained from conduct prohibited by the FDCPA
and this part. If a record is of a type that could evidence compliance
or noncompliance depending on the conduct of the debt collector that is
revealed within the record, then the record is one that is evidence of
compliance or noncompliance, and the debt collector must retain it.
Such records include, but are not limited to, records that evidence
that the debt collector's communications and attempts to communicate in
connection with the collection of a debt complied (or did not comply)
with the FDCPA and this part. For example, a debt collector must
retain:
i. Telephone call logs as evidence of compliance or noncompliance
with the prohibition against harassing telephone calls in Sec.
1006.14(b)(1); and
ii. Copies of documents provided to consumers 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.
* * * * *
Section 1006.104--Relation to State Laws
1. State law disclosure requirements. The Act and the corresponding
provisions of Regulation F do not annul, alter, or affect, or exempt
any person subject to these requirements from complying with a
disclosure requirement under applicable State law that describes
additional protections under State law that are not inconsistent with
the Act and Regulation F. A disclosure required by State law is not
inconsistent with the FDCPA or Regulation F if the disclosure describes
a protection that such law affords any consumer that is greater than
the protection provided by the FDCPA or Regulation F.
Dated: December 18, 2020.
Grace Feola,
Federal Register Liaison, Bureau of Consumer Financial Protection.
[FR Doc. 2020-28422 Filed 1-15-21; 8:45 am]
BILLING CODE 4810-AM-P