Fair Debt Collection Practices Act (Regulation F); Time-Barred Debt, 26475-26477 [2023-09171]

Download as PDF 26475 Rules and Regulations Federal Register Vol. 88, No. 83 Monday, May 1, 2023 This section of the FEDERAL REGISTER contains regulatory documents having general applicability and legal effect, most of which are keyed to and codified in the Code of Federal Regulations, which is published under 50 titles pursuant to 44 U.S.C. 1510. The Code of Federal Regulations is sold by the Superintendent of Documents. CONSUMER FINANCIAL PROTECTION BUREAU 12 CFR Part 1006 Fair Debt Collection Practices Act (Regulation F); Time-Barred Debt Consumer Financial Protection Bureau. ACTION: Advisory opinion. AGENCY: The Consumer Financial Protection Bureau (CFPB) is issuing this advisory opinion to affirm that the Fair Debt Collection Practices Act (FDCPA) and its implementing Regulation F prohibit a debt collector, as that term is defined in the statute and regulation, from suing or threatening to sue to collect a time-barred debt. Accordingly, an FDCPA debt collector who brings or threatens to bring a State court foreclosure action to collect a timebarred mortgage debt may violate the FDCPA and Regulation F. DATES: This advisory opinion is effective on May 1, 2023. FOR FURTHER INFORMATION CONTACT: Seth Caffrey, Courtney Jean, or Kristin McPartland, Senior Counsels, Office of Regulations at (202) 435–7700 or https://reginquiries. consumerfinance.gov/. If you require this document in an alternative electronic format, please contact CFPB_ Accessibility@cfpb.gov. SUPPLEMENTARY INFORMATION: The CFPB is issuing this advisory opinion through the procedures for its Advisory Opinions Policy.1 Refer to those procedures for more information. SUMMARY: I. Advisory Opinion loans.2 These practices, which harmed millions of people, included in some cases originating products such as ‘‘piggyback’’ mortgages in which highinterest second mortgages were issued simultaneously with the origination of the first mortgage. One common piggyback mortgage product, known as an 80/20 loan, involved a first lien loan for 80 percent of the value of the home and a second lien loan for the remaining 20 percent of the valuation. Some consumers in these loans found themselves unable to make full payments on their first and second mortgages, and when housing prices began to decline in 2005, refinancing became more difficult.3 When a borrower defaults on a second mortgage, the mortgage holder may be able to initiate a foreclosure even if the borrower is current on the first mortgage. However, the second mortgage holder only receives proceeds from the foreclosure sale if there are any funds left after paying off the first mortgage. As a result, many second mortgage holders of piggyback loans, recognizing that a foreclosure would not generate enough money to cover even the first mortgage, charged their defaulted loans off as uncollectible and ceased communicating with the borrowers. Some sold the loans to debt buyers, often for pennies on the dollar. Such sales often occurred unbeknownst to borrowers, who continued to receive no communications regarding the loans. Many borrowers, having not received any notices or periodic statements for years, concluded that their second mortgages had been modified along with the first mortgage, discharged in bankruptcy, or forgiven. In recent years, as home prices have increased and borrowers have paid down their first mortgages, after years of silence, some borrowers are hearing from companies that claim to own or have the right to collect on their longdormant second mortgages.4 These companies often demand the outstanding balance on the second mortgage, plus fees and interest, and threaten to foreclose if the borrower lotter on DSK11XQN23PROD with RULES1 A. Background Leading up to the 2008 financial crisis, many lenders originated mortgages to consumers without considering their ability to repay the 1 85 FR 77987 (Dec. 3, 2020). VerDate Sep<11>2014 15:55 Apr 28, 2023 Jkt 259001 2 See generally 78 FR 79730, 79732–33 (Dec. 31, 2013). 3 Id. at 79733. 4 See generally Michael Hill, ‘‘Zombie Debt’’: Homeowners face foreclosure on old mortgages, Associated Press (Nov. 16, 2022), https:// apnews.com/article/business-mortgages44b1ffad08a80b96a8630e091d1e96f2. PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 does not or cannot pay. The CFPB is concerned about homeowners who survived the 2008 financial crisis but who are now facing foreclosure threats and other collection activity because of long-dormant second mortgages. These borrowers are often told that they face a choice between entering into onerous payment plans or losing their homes and the equity they have diligently built since the financial crisis. Because of the amount of time that has lapsed on these long-dormant loans, some have likely become time barred under State law. Time-barred debts are debts for which the applicable statute of limitations has expired.5 Statutes of limitation are, typically, State laws that provide time limits for bringing suit on legal claims.6 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.7 In many jurisdictions, State court (i.e., judicial) foreclosure actions are subject to a statute of limitations. The CFPB understands that some debt collectors collecting on long-dormant second mortgages may have filed or have threatened to file judicial foreclosure actions even though the underlying debt is time barred. The CFPB is issuing this advisory opinion to affirm that: (1) the FDCPA and its implementing Regulation F prohibit a debt collector, as that term is defined in the statute and regulation, from suing or threatening to sue to collect a timebarred debt; and (2) this prohibition applies even if the debt collector neither knows nor should know that the debt is time barred. Accordingly, an FDCPA debt collector who brings or threatens to bring a State court foreclosure action to collect a time-barred mortgage debt may violate the FDCPA and Regulation F. B. Coverage This advisory opinion applies to debt collectors as defined in section 803(6) of the FDCPA and implemented in Regulation F, 12 CFR 1006.2(i). 5 See 86 FR 5766, 5776–77 (Jan. 19, 2021); 12 CFR 1006.26(a)(2). 6 See 86 FR at 5775–76; 12 CFR 1006.26(a)(1). 7 See 86 FR at 5777. E:\FR\FM\01MYR1.SGM 01MYR1 26476 Federal Register / Vol. 88, No. 83 / Monday, May 1, 2023 / Rules and Regulations C. Legal Analysis The FDCPA 8 and its implementing Regulation F 9 govern the conduct of ‘‘debt collectors’’ when they collect ‘‘debt.’’ The statute and regulation generally define a debt collector as ‘‘any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.’’ 10 Many individuals and entities that seek to collect defaulted mortgage loans, and many of the attorneys that bring foreclosure actions on their behalf, are FDCPA debt collectors. The FDCPA and Regulation F define ‘‘debt’’ as ‘‘any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.’’ 11 A consumer’s payment obligation arising from a mortgage transaction primarily for personal, family, or household purposes, such as the purchase of the consumer’s residence, falls within the plain language of this definition.12 It follows that State court foreclosure proceedings often constitute the collection of ‘‘debt’’ under the FDCPA,13 and debt collectors who engage in such debt collection activity are subject to the requirements and prohibitions of the FDCPA and Regulation F. Regulation F prohibits a debt collector from suing or threatening to sue to collect a time-barred debt.14 As the CFPB explained in finalizing this prohibition, ‘‘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 8 15 U.S.C. 1692–1692p. CFR part 1006. 10 15 U.S.C. 1692a(6); 12 CFR 1006.2(i). The statute and regulation also provide that, for purposes of section 808(6) and 12 CFR 1006.22(e), the term debt collector also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests. Id. 11 15 U.S.C. 1692a(5); 12 CFR 1006.2(h). 12 See, e.g., Cohen v. Rosicki, Rosicki & Assocs., PC, 897 F.3d 75, 83 (2d Cir. 2018). 13 Id. at 83–84. 14 12 CFR 1006.26(b). lotter on DSK11XQN23PROD with RULES1 9 12 VerDate Sep<11>2014 15:55 Apr 28, 2023 Jkt 259001 whether to pay it.’’ 15 Regulation F’s prohibition on suits and threats of suit on time-barred debt is subject to a strict liability standard.16 That is, a debt collector who sues or threatens to sue to collect a time-barred debt violates the prohibition ‘‘even if the debt collector neither knew nor should have known that a debt was time barred.’’ 17 Accordingly, a debt collector who brings or threatens to bring a State court foreclosure action with respect to a time-barred mortgage debt may violate the FDCPA and Regulation F. This is true even if the debt collector neither knew nor should have known that the debt was time barred. The CFPB also notes that a broad range of non-foreclosure debt collectionrelated activity, such as communicating with consumers about defaulted mortgages, can be covered by the FDCPA. FDCPA debt collectors undertaking such activity are subject to the other requirements and prohibitions of the statute and Regulation F when collecting debt 18 whether or not that debt is time-barred. These include, for example, the prohibition on debt collectors: falsely representing the character, amount, or legal status of any debt; 19 threatening to take any action that cannot legally be taken or that is not intended to be taken; 20 and selling, transferring for consideration, or placing for collection a debt that the debt collector knows or should know has been paid or settled or discharged in bankruptcy.21 They also include, for example, the requirement that debt collectors: identify themselves as a debt collector in all communications with the consumer (except formal pleadings in connection with a legal action); 22 provide the consumer with validation information in certain circumstances; 23 and respond to consumer disputes adequately before continuing to collect.24 Finally, even if an FDCPA debt collector engages only in actions necessary to undertake a nonjudicial foreclosure action, the debt collector is still subject to FDCPA section 808(6) 25 and Regulation F, 12 CFR 1006.22(e),26 which generally prohibit taking or 15 86 FR 5776, 5778 (Jan. 19, 2021). id. at 5777, 5781. 17 Id. at 5777. 18 See 15 U.S.C. 1692a(5); 12 CFR 1006.2(h). 19 15 U.S.C. 1692e(2)(a); 12 CFR 1006.18(b)(2). 20 15 U.S.C. 1692e(5); 12 CFR 1006.18(c)(1); 15 U.S.C. 1692f(6); 12 CFR 1006.22(e). 21 12 CFR 1006.30(b). 22 15 U.S.C. 1692e(11); 12 CFR 1006.18(e). 23 15 U.S.C. 1692g(a); 12 CFR 1006.34. 24 15 U.S.C. 1692g(b); 12 CFR 1006.38(d); 85 FR 76734, 76845–48 (Nov. 30, 2020). 25 15 U.S.C. 1692f(6). 26 See 15 U.S.C. 1692a(6); 12 CFR 1006.2(i)(1). 16 See PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 threatening to take any nonjudicial action to effect dispossession or disablement of property if the debt collector has no present right or intention to do so.27 Although not the focus of this advisory opinion, the CFPB also notes that entities selling or collecting on these second mortgages who are mortgage servicers may also be subject to certain requirements under the Real Estate Settlement Procedures Act,28 the Truth in Lending Act,29 and the CFPB’s mortgage servicing regulations.30 For example, unless an exemption applies, the CFPB’s mortgage servicing regulations require servicers to provide periodic statements to consumers.31 II. Regulatory Matters This advisory opinion is issued under the CFPB’s authority to interpret the FDCPA, including under section 1022(b)(1) of the Consumer Financial Protection Act of 2010,32 which authorizes guidance as may be necessary or appropriate to enable the CFPB to administer and carry out the purposes and objectives of Federal consumer financial laws.33 An advisory opinion is a type of interpretive rule. As an interpretive rule, this advisory opinion is exempt from the notice-and-comment rulemaking requirements of the Administrative Procedure Act.34 Because no notice of proposed rulemaking is required, the Regulatory Flexibility Act does not require an initial or final regulatory flexibility analysis.35 The CFPB has also 27 See Obduskey v. McCarthy & Holthus LLP, 139 S.Ct. 1029 (2019) (holding that a business engaged in no more than nonjudicial foreclosure proceedings is not a debt collector under FDCPA section 803(6), except for the limited purpose of FDCPA section 808(6)). 28 12 U.S.C. 2601 et seq. 29 15 U.S.C. 1601 et seq. 30 See, e.g., 12 CFR 1024.33(b) (requiring a transferee and transferor servicer to provide a timely notice of transfer of servicing to the affected borrower), 12 CFR 1024.39 (requiring servicers to make early intervention contacts with delinquent borrowers), 12 CFR 1024.41 (requiring servicers to follow certain loss mitigation procedural requirements, including certain foreclosure-related protections). Note that small servicers, as defined in 12 CFR 1026.41(e)(4), are exempt from certain of these requirements. See 12 CFR 1024.30(b). 31 See 12 CFR 1026.41(a); see also, e.g., 12 CFR 1026.41(e)(4) (exempting small servicers from this requirement) and 12 CFR 1026.41(e)(6) (exempting servicers from periodic statement requirements for certain charged-off loans but only if, among other conditions, the servicer sends a specific notice to the consumer and does not charge additional fees or interest on the account). 32 Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111–203, 124 Stat. 1376 (2010). 33 12 U.S.C. 5512(b)(1). 34 5 U.S.C. 553(b). 35 5 U.S.C. 603(a), 604(a). E:\FR\FM\01MYR1.SGM 01MYR1 Federal Register / Vol. 88, No. 83 / Monday, May 1, 2023 / Rules and Regulations determined that this advisory opinion does not impose any new or revise any existing recordkeeping, reporting, or disclosure requirements on covered entities or members of the public that would be collections of information requiring approval by the Office of Management and Budget under the Paperwork Reduction Act.36 Pursuant to the Congressional Review Act,37 the CFPB will submit a report containing this interpretive rule and other required information to the United States Senate, the United States House of Representatives, and the Comptroller General of the United States prior to the rule’s published effective date. The Office of Information and Regulatory Affairs has designated this interpretive rule as not a ‘‘major rule’’ as defined by 5 U.S.C. 804(2). Rohit Chopra, Director, Consumer Financial Protection Bureau. [FR Doc. 2023–09171 Filed 4–28–23; 8:45 am] BILLING CODE 4810–AM–P DEPARTMENT OF DEFENSE Office of the Secretary 32 CFR Part 158 [Docket ID: DOD–2020–OS–0015] RIN 0790–AK81 Operational Contract Support (OCS) Outside the United States Office of the Under Secretary of Defense for Acquisition and Sustainment, Department of Defense (DoD). ACTION: Final rule. AGENCY: The DoD is updating the policies and procedures for operational contract support (OCS) outside the United States. These changes include broadening the range of applicable operational scenarios, eliminating content internal to the Department designating contractor personnel as part of the DoD total force, incorporating requirements for accountability and reporting, and clarifying responsibilities. With these updates, the Department addresses open recommendations from the Government Accountability Office (GAO). DATES: This rule is effective May 31, 2023. FOR FURTHER INFORMATION CONTACT: Ms. Donna M. Livingston, 703–692–3032, donna.m.livingston.civ@mail.mil. lotter on DSK11XQN23PROD with RULES1 SUMMARY: 36 44 37 5 U.S.C. 3501–3521. U.S.C. 801 et seq. VerDate Sep<11>2014 15:55 Apr 28, 2023 Jkt 259001 OCS is a segment of the GAO High Risk Area of DoD Contract Management, and while the latest update in March 2021, GAO– 21–119SP, ‘‘High-Risk Series: Dedicated Leadership Needed to Address Limited Progress in Most High-Risk Areas’’ (available at: https://www.gao.gov/ products/gao-21-119sp) acknowledged progress, GAO cited the need to revise and reissue guidance to address five open recommendations. SUPPLEMENTARY INFORMATION: Legal Authority Section 861 of the National Defense Authorization Act for Fiscal Year 2008 (Pub. L. 110–181) requires the DoD, Department of State, and the United States Agency for International Development to enter into an agreement regarding contracting matters in Iraq and Afghanistan and identify a common database to serve as a repository of information on contracts and contractor personnel supporting these operations. Section 854 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (Pub. L. 110–417) requires mechanisms for ensuring contractors are required to report specified offenses that are alleged to have been committed by or against contractor personnel to the appropriate authorities. Discussion of Comments The Department of Defense published a proposed rule titled ‘‘Operational Contract Support (OCS) Outside the United States’’ (32 CFR part 158) in the Federal Register on January 7, 2021 (86 FR 1063–1080). Fourteen comments were received from eight respondents and a summary of the comments and the Department’s responses as follows. Comment: The Department received five comments from respondents recommending the addition of requirements for defense contractor personnel to report information on gross violations of human rights (GVHRs). In general, all five comments regarding GVHR reporting recommended that the rule include a ‘‘duty to report’’ GVHRs for defense contractors. Several respondents noted that the proposed rule missed an opportunity to address the requirements of Section 888 of the National Defense Authorization Act for Fiscal Year 2020 to ‘‘monitor and report allegations of gross violations of internationally recognized human rights.’’ Response: The DoD acknowledges the requirement, however the policy and processes to support the requirements for reporting allegations of gross violations of human rights are still being developed and are not final. When those PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 26477 actions are completed, the DoD will initiate actions to update this rule as needed to comply with the established policy. Comment: The Department received a comment objecting to requiring the people of the United States to provide proof of vaccination for the coronavirus disease 2019 (COVID–19) prior to any travel. Response: The rule does not address requirements related to any specific vaccination requirement for contractor personnel. The provisions in the rule regarding immunizations and deployment health activities ensure that contractor personnel are medically ready to deploy and protect the health of the total force in deployed environments. Comment: The DoD received a comment recognizing the significant role defense contractors play in support of military operations overseas and the costs born in terms of injury and death that have resulted. The commenter recommended DoD make a more robust effort to collect, analyze, and publicly share data with regard to contractor personnel fatalities and injuries. Response: The Department appreciates the commenter’s understanding of the key role defense contractors play in supporting the DoD. While the DoD does collect data on contractor personnel wounded and killed while performing their duties, this data is not made publicly available. The Synchronized Predeployment and Operational Tracker—Enterprise Suite (SPOT–ES) is the common joint database used to maintain accountability and visibility of contractors supporting applicable operations. In accordance with the SPOT Business Rules, referenced in this rule, it is the responsibility of the contractor’s employer to close out the individual’s deployment record in SPOT–ES following a death and to update the records when an injury occurs. The DoD is reviewing how to improve contractors’ compliance with these procedures and to respectfully encourage more comprehensive reporting to the DoD without impacting legal and privacy issues. Comment: The DoD received one comment regarding the types of support contractors are generally required to provide their employees while deployed. The commenter asserted that in austere environments, it is common for the U.S. Government to provide life support to contractor personnel when those personnel are located at U.S. military facilities; however, contractor personnel may need to transit through other military facilities before reaching E:\FR\FM\01MYR1.SGM 01MYR1

Agencies

  • CONSUMER FINANCIAL PROTECTION BUREAU
[Federal Register Volume 88, Number 83 (Monday, May 1, 2023)]
[Rules and Regulations]
[Pages 26475-26477]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-09171]



========================================================================
Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 

========================================================================


Federal Register / Vol. 88, No. 83 / Monday, May 1, 2023 / Rules and 
Regulations

[[Page 26475]]



CONSUMER FINANCIAL PROTECTION BUREAU

12 CFR Part 1006


Fair Debt Collection Practices Act (Regulation F); Time-Barred 
Debt

AGENCY: Consumer Financial Protection Bureau.

ACTION: Advisory opinion.

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SUMMARY: The Consumer Financial Protection Bureau (CFPB) is issuing 
this advisory opinion to affirm that the Fair Debt Collection Practices 
Act (FDCPA) and its implementing Regulation F prohibit a debt 
collector, as that term is defined in the statute and regulation, from 
suing or threatening to sue to collect a time-barred debt. Accordingly, 
an FDCPA debt collector who brings or threatens to bring a State court 
foreclosure action to collect a time-barred mortgage debt may violate 
the FDCPA and Regulation F.

DATES: This advisory opinion is effective on May 1, 2023.

FOR FURTHER INFORMATION CONTACT: Seth Caffrey, Courtney Jean, or 
Kristin McPartland, Senior Counsels, Office of Regulations at (202) 
435-7700 or https://reginquiries.consumerfinance.gov/. If you require 
this document in an alternative electronic format, please contact 
[email protected].

SUPPLEMENTARY INFORMATION: The CFPB is issuing this advisory opinion 
through the procedures for its Advisory Opinions Policy.\1\ Refer to 
those procedures for more information.
---------------------------------------------------------------------------

    \1\ 85 FR 77987 (Dec. 3, 2020).
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I. Advisory Opinion

A. Background

    Leading up to the 2008 financial crisis, many lenders originated 
mortgages to consumers without considering their ability to repay the 
loans.\2\ These practices, which harmed millions of people, included in 
some cases originating products such as ``piggyback'' mortgages in 
which high-interest second mortgages were issued simultaneously with 
the origination of the first mortgage. One common piggyback mortgage 
product, known as an 80/20 loan, involved a first lien loan for 80 
percent of the value of the home and a second lien loan for the 
remaining 20 percent of the valuation. Some consumers in these loans 
found themselves unable to make full payments on their first and second 
mortgages, and when housing prices began to decline in 2005, 
refinancing became more difficult.\3\
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    \2\ See generally 78 FR 79730, 79732-33 (Dec. 31, 2013).
    \3\ Id. at 79733.
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    When a borrower defaults on a second mortgage, the mortgage holder 
may be able to initiate a foreclosure even if the borrower is current 
on the first mortgage. However, the second mortgage holder only 
receives proceeds from the foreclosure sale if there are any funds left 
after paying off the first mortgage. As a result, many second mortgage 
holders of piggyback loans, recognizing that a foreclosure would not 
generate enough money to cover even the first mortgage, charged their 
defaulted loans off as uncollectible and ceased communicating with the 
borrowers. Some sold the loans to debt buyers, often for pennies on the 
dollar. Such sales often occurred unbeknownst to borrowers, who 
continued to receive no communications regarding the loans. Many 
borrowers, having not received any notices or periodic statements for 
years, concluded that their second mortgages had been modified along 
with the first mortgage, discharged in bankruptcy, or forgiven.
    In recent years, as home prices have increased and borrowers have 
paid down their first mortgages, after years of silence, some borrowers 
are hearing from companies that claim to own or have the right to 
collect on their long-dormant second mortgages.\4\ These companies 
often demand the outstanding balance on the second mortgage, plus fees 
and interest, and threaten to foreclose if the borrower does not or 
cannot pay. The CFPB is concerned about homeowners who survived the 
2008 financial crisis but who are now facing foreclosure threats and 
other collection activity because of long-dormant second mortgages. 
These borrowers are often told that they face a choice between entering 
into onerous payment plans or losing their homes and the equity they 
have diligently built since the financial crisis.
---------------------------------------------------------------------------

    \4\ See generally Michael Hill, ``Zombie Debt'': Homeowners face 
foreclosure on old mortgages, Associated Press (Nov. 16, 2022), 
https://apnews.com/article/business-mortgages-44b1ffad08a80b96a8630e091d1e96f2.
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    Because of the amount of time that has lapsed on these long-dormant 
loans, some have likely become time barred under State law. Time-barred 
debts are debts for which the applicable statute of limitations has 
expired.\5\ Statutes of limitation are, typically, State laws that 
provide time limits for bringing suit on legal claims.\6\ 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.\7\ In 
many jurisdictions, State court (i.e., judicial) foreclosure actions 
are subject to a statute of limitations.
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    \5\ See 86 FR 5766, 5776-77 (Jan. 19, 2021); 12 CFR 
1006.26(a)(2).
    \6\ See 86 FR at 5775-76; 12 CFR 1006.26(a)(1).
    \7\ See 86 FR at 5777.
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    The CFPB understands that some debt collectors collecting on long-
dormant second mortgages may have filed or have threatened to file 
judicial foreclosure actions even though the underlying debt is time 
barred. The CFPB is issuing this advisory opinion to affirm that: (1) 
the FDCPA and its implementing Regulation F prohibit a debt collector, 
as that term is defined in the statute and regulation, from suing or 
threatening to sue to collect a time-barred debt; and (2) this 
prohibition applies even if the debt collector neither knows nor should 
know that the debt is time barred. Accordingly, an FDCPA debt collector 
who brings or threatens to bring a State court foreclosure action to 
collect a time-barred mortgage debt may violate the FDCPA and 
Regulation F.

B. Coverage

    This advisory opinion applies to debt collectors as defined in 
section 803(6) of the FDCPA and implemented in Regulation F, 12 CFR 
1006.2(i).

[[Page 26476]]

C. Legal Analysis

    The FDCPA \8\ and its implementing Regulation F \9\ govern the 
conduct of ``debt collectors'' when they collect ``debt.'' The statute 
and regulation generally define a debt collector as ``any person who 
uses any instrumentality of interstate commerce or the mails in any 
business the principal purpose of which is the collection of any debts, 
or who regularly collects or attempts to collect, directly or 
indirectly, debts owed or due or asserted to be owed or due another.'' 
\10\ Many individuals and entities that seek to collect defaulted 
mortgage loans, and many of the attorneys that bring foreclosure 
actions on their behalf, are FDCPA debt collectors.
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    \8\ 15 U.S.C. 1692-1692p.
    \9\ 12 CFR part 1006.
    \10\ 15 U.S.C. 1692a(6); 12 CFR 1006.2(i). The statute and 
regulation also provide that, for purposes of section 808(6) and 12 
CFR 1006.22(e), the term debt collector also includes any person who 
uses any instrumentality of interstate commerce or the mails in any 
business the principal purpose of which is the enforcement of 
security interests. Id.
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    The FDCPA and Regulation F define ``debt'' as ``any obligation or 
alleged obligation of a consumer to pay money arising out of a 
transaction in which the money, property, insurance, or services which 
are the subject of the transaction are primarily for personal, family, 
or household purposes, whether or not such obligation has been reduced 
to judgment.'' \11\ A consumer's payment obligation arising from a 
mortgage transaction primarily for personal, family, or household 
purposes, such as the purchase of the consumer's residence, falls 
within the plain language of this definition.\12\ It follows that State 
court foreclosure proceedings often constitute the collection of 
``debt'' under the FDCPA,\13\ and debt collectors who engage in such 
debt collection activity are subject to the requirements and 
prohibitions of the FDCPA and Regulation F.
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    \11\ 15 U.S.C. 1692a(5); 12 CFR 1006.2(h).
    \12\ See, e.g., Cohen v. Rosicki, Rosicki & Assocs., PC, 897 
F.3d 75, 83 (2d Cir. 2018).
    \13\ Id. at 83-84.
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    Regulation F prohibits a debt collector from suing or threatening 
to sue to collect a time-barred debt.\14\ As the CFPB explained in 
finalizing this prohibition, ``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.'' \15\ Regulation F's 
prohibition on suits and threats of suit on time-barred debt is subject 
to a strict liability standard.\16\ That is, a debt collector who sues 
or threatens to sue to collect a time-barred debt violates the 
prohibition ``even if the debt collector neither knew nor should have 
known that a debt was time barred.'' \17\ Accordingly, a debt collector 
who brings or threatens to bring a State court foreclosure action with 
respect to a time-barred mortgage debt may violate the FDCPA and 
Regulation F. This is true even if the debt collector neither knew nor 
should have known that the debt was time barred.
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    \14\ 12 CFR 1006.26(b).
    \15\ 86 FR 5776, 5778 (Jan. 19, 2021).
    \16\ See id. at 5777, 5781.
    \17\ Id. at 5777.
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    The CFPB also notes that a broad range of non-foreclosure debt 
collection-related activity, such as communicating with consumers about 
defaulted mortgages, can be covered by the FDCPA. FDCPA debt collectors 
undertaking such activity are subject to the other requirements and 
prohibitions of the statute and Regulation F when collecting debt \18\ 
whether or not that debt is time-barred. These include, for example, 
the prohibition on debt collectors: falsely representing the character, 
amount, or legal status of any debt; \19\ threatening to take any 
action that cannot legally be taken or that is not intended to be 
taken; \20\ and selling, transferring for consideration, or placing for 
collection a debt that the debt collector knows or should know has been 
paid or settled or discharged in bankruptcy.\21\ They also include, for 
example, the requirement that debt collectors: identify themselves as a 
debt collector in all communications with the consumer (except formal 
pleadings in connection with a legal action); \22\ provide the consumer 
with validation information in certain circumstances; \23\ and respond 
to consumer disputes adequately before continuing to collect.\24\ 
Finally, even if an FDCPA debt collector engages only in actions 
necessary to undertake a nonjudicial foreclosure action, the debt 
collector is still subject to FDCPA section 808(6) \25\ and Regulation 
F, 12 CFR 1006.22(e),\26\ which generally prohibit taking or 
threatening to take any nonjudicial action to effect dispossession or 
disablement of property if the debt collector has no present right or 
intention to do so.\27\
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    \18\ See 15 U.S.C. 1692a(5); 12 CFR 1006.2(h).
    \19\ 15 U.S.C. 1692e(2)(a); 12 CFR 1006.18(b)(2).
    \20\ 15 U.S.C. 1692e(5); 12 CFR 1006.18(c)(1); 15 U.S.C. 
1692f(6); 12 CFR 1006.22(e).
    \21\ 12 CFR 1006.30(b).
    \22\ 15 U.S.C. 1692e(11); 12 CFR 1006.18(e).
    \23\ 15 U.S.C. 1692g(a); 12 CFR 1006.34.
    \24\ 15 U.S.C. 1692g(b); 12 CFR 1006.38(d); 85 FR 76734, 76845-
48 (Nov. 30, 2020).
    \25\ 15 U.S.C. 1692f(6).
    \26\ See 15 U.S.C. 1692a(6); 12 CFR 1006.2(i)(1).
    \27\ See Obduskey v. McCarthy & Holthus LLP, 139 S.Ct. 1029 
(2019) (holding that a business engaged in no more than nonjudicial 
foreclosure proceedings is not a debt collector under FDCPA section 
803(6), except for the limited purpose of FDCPA section 808(6)).
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    Although not the focus of this advisory opinion, the CFPB also 
notes that entities selling or collecting on these second mortgages who 
are mortgage servicers may also be subject to certain requirements 
under the Real Estate Settlement Procedures Act,\28\ the Truth in 
Lending Act,\29\ and the CFPB's mortgage servicing regulations.\30\ For 
example, unless an exemption applies, the CFPB's mortgage servicing 
regulations require servicers to provide periodic statements to 
consumers.\31\
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    \28\ 12 U.S.C. 2601 et seq.
    \29\ 15 U.S.C. 1601 et seq.
    \30\ See, e.g., 12 CFR 1024.33(b) (requiring a transferee and 
transferor servicer to provide a timely notice of transfer of 
servicing to the affected borrower), 12 CFR 1024.39 (requiring 
servicers to make early intervention contacts with delinquent 
borrowers), 12 CFR 1024.41 (requiring servicers to follow certain 
loss mitigation procedural requirements, including certain 
foreclosure-related protections). Note that small servicers, as 
defined in 12 CFR 1026.41(e)(4), are exempt from certain of these 
requirements. See 12 CFR 1024.30(b).
    \31\ See 12 CFR 1026.41(a); see also, e.g., 12 CFR 1026.41(e)(4) 
(exempting small servicers from this requirement) and 12 CFR 
1026.41(e)(6) (exempting servicers from periodic statement 
requirements for certain charged-off loans but only if, among other 
conditions, the servicer sends a specific notice to the consumer and 
does not charge additional fees or interest on the account).
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II. Regulatory Matters

    This advisory opinion is issued under the CFPB's authority to 
interpret the FDCPA, including under section 1022(b)(1) of the Consumer 
Financial Protection Act of 2010,\32\ which authorizes guidance as may 
be necessary or appropriate to enable the CFPB to administer and carry 
out the purposes and objectives of Federal consumer financial laws.\33\
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    \32\ Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Public Law 111-203, 124 Stat. 1376 (2010).
    \33\ 12 U.S.C. 5512(b)(1).
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    An advisory opinion is a type of interpretive rule. As an 
interpretive rule, this advisory opinion is exempt from the notice-and-
comment rulemaking requirements of the Administrative Procedure 
Act.\34\ Because no notice of proposed rulemaking is required, the 
Regulatory Flexibility Act does not require an initial or final 
regulatory flexibility analysis.\35\ The CFPB has also

[[Page 26477]]

determined that this advisory opinion does not impose any new or revise 
any existing recordkeeping, reporting, or disclosure requirements on 
covered entities or members of the public that would be collections of 
information requiring approval by the Office of Management and Budget 
under the Paperwork Reduction Act.\36\
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    \34\ 5 U.S.C. 553(b).
    \35\ 5 U.S.C. 603(a), 604(a).
    \36\ 44 U.S.C. 3501-3521.
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    Pursuant to the Congressional Review Act,\37\ the CFPB will submit 
a report containing this interpretive rule and other required 
information to the United States Senate, the United States House of 
Representatives, and the Comptroller General of the United States prior 
to the rule's published effective date. The Office of Information and 
Regulatory Affairs has designated this interpretive rule as not a 
``major rule'' as defined by 5 U.S.C. 804(2).
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    \37\ 5 U.S.C. 801 et seq.

Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2023-09171 Filed 4-28-23; 8:45 am]
BILLING CODE 4810-AM-P
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