In this blog, we will look at the Consumer Financial Protection Bureau (CFPB). We will define the role of the CFPB – and specifically, we will look at the new CFPB rules regarding disclosures, debt collection, and communications with consumers.
What is the CFPB?
The CFPB, also known as the Consumer Financial Protection Bureau, is a federal organization created to define and enforce laws that protect consumers in the financial marketplace. Historically, these responsibilities were cared for by several government organizations, but today, these responsibilities have been pushed to one organization, the CFPB.
“The CFPB was created to provide a single point of accountability for enforcing federal consumer financial laws and protecting consumers in the financial marketplace. Before, that responsibility was divided among several agencies. Today, it’s our primary focus,” the CFPB website states.
Work of the Consumer Financial Protection Bureau Includes:
- Protecting consumers from deceptive acts by writing and enforcing laws
- Enforcing laws that protect against discrimination
- Promoting financial education for consumers
- Monitoring the market for abusive and deceptive practices
The CFBP’s Recent Rule on Consumer Disclosures Related to Debt Collection
The CFPB’s new rule on consumer disclosures falls under the Fair Debt Collection Practices Act (FDCPA).
This new rule requires that all debt collectors provide detailed disclosures about a consumer’s debt and their rights associated with debt collection. The CFPB has defined specific regulations on how collectors should notify consumers of debt through various methods. These methods include oral, written, and electronic communications.
According to the new rule, debt collectors must first take one of three actions before reporting the debt to a consumer reporting agency (CRA). The debt collector must speak with a consumer by phone, send a notification by mail, or send a message electronically.
If sent by mail, collectors must wait 14 days before providing information about a consumer’s debt to a CRA. Read more about this on the CFPB website.
Also, collectors are not allowed to sue or threaten suit against consumers to collect a time-barred debt. Collectors who utilize these practices to collect debts will be held liable.
The new rule from the CFPB makes clear that communications with consumers via email and text are permitted. However, there are strict opt-out guidelines that must be followed.
A Closer Look at CFPB Rules Around Communications with Consumers
Communication by Phone
The new rule states that debt collectors making phone calls are only allowed to make seven calls per week. However, collectors who exceed this amount will not necessarily be penalized by the CFPB. According to the CFPB, the intentions of the collector’s call must be carefully considered. For example, are calls being made with the intent to harass or harm consumers?
It is important to note that although it’s unclear what actions the CFPB might take against collectors who go over seven calls per week, going over the seven-call limit does open the door for consumers to sue.
Also impacting communications by telephone is the “limited content message.” Limited content messages allow collectors to leave messages for consumers if they don’t fall under the FDCPA or final rule.
Communication by Text and Email
The new rule states that debt collectors who send disclosures required by FDCPA electronically must ensure that their messages are done in a “reasonably expected” manner to provide actual notice. Delivery of the communication must also be in a format that consumers may keep and have access to at any time.
Communication Through Social Media Messaging
For social media, the CFPB states that collectors may not contact consumers through social media if the messages can be viewed by the public or a consumer’s social media contacts.
CFPB Rules on Opting Out of Communications
Debt collectors are permitted to communicate with consumers in several ways, including text, phone, and email. However, collectors must provide consumers with the ability to opt-out of every communication. Additionally, the method of opting out offered to a consumer must be “a reasonable and simple method.”
Suppose a consumer opts out of receiving messages by text or by email. In that case, collectors are permitted one attempt at communication if the communication channel they use to make contact is one that the consumer initially opened.
For example, if a consumer originally used email to make contact, the collector may contact by email. If they opt out of email but the consumer initially communicated via email, they can make one more attempt by email.
Regulation E and E-signatures
Regulation E has been around for a while now. It was signed into law by Congress and President Jimmy Carter in 1978. It defines the rights and liabilities of consumers and businesses who participate in Electronic Funds Transfers.
Reg E has surfaced again because, over the years, many businesses have not been compliant or have not fully understood their responsibilities regarding Reg E. Because of this, the CFPB has set out to provide more clarity on EFTA’s Regulation E. The bureau’s goal is to show how Regulation E and the E-sign Act are connected and to set expectations of what the CFPB expects from organizations looking to obtain consumer authorizations.
The Electronic Funds Transfer Act (EFTA)
The EFTA was established to protect consumers who make payments by electronic transfers. Electronic transfers are any payments made by phone, terminal, computer, or magnetic tape.
Regulation E is a part of the EFTA, and the CFPB is the federal agency responsible for enforcing the rules associated with the EFTA.
Preauthorization requires a signature from the consumer or some other very similar form of authentication. Additionally, a copy of any authorization must be provided to consumers.
Signatures via both paper and e-signature are permitted. The bottom line is basically that any authorization must prove the consumer’s identity and directly show a consumer’s consent for authorization. Furthermore, the preauthorization must be easy to understand, and copies of the terms and authorization must be provided to the consumer.
Verbal authorizations by telephone are also acceptable forms of consumer authorization. However, these authorizations are required to be recorded electronically. And the authorizations are required to be given by the person intending to sign the contract. An example of this is a consumer entering a code on their mobile device.
How the New Debt Collection CFPB Rules Impacts Collectors
As a result of the new CFPB rules, a plus for collectors is that they can communicate with customers through more modern channels such as text and email.
The new rule also requires collectors to be more forthright and transparent about their intentions to collect a debt. Debt collectors must clearly communicate to consumers their rights related to debt, their rights to dispute any debt, and the consumer’s right to request information about the creditor.
However, the new CFPB rule does eliminate the “meaningful involvement” requirement. Initially, this requirement permitted attorneys to send letters to consumers only if they were involved in the collection process. Several consumer advocates have criticized the decision to drop this rule.
How the New Debt Collection Rule Impacts Consumers
With the new CFPB rule, consumers will now be equipped with more knowledge as they set out to resolve their debt issues.
Consumers must directly be communicated to about their collector’s intentions through reasonable means before their debt information is passed on to a CRA. Additionally, consumers will be provided their rights and cannot be threatened with lawsuits to collect time-barred debts.
Consumers must also now be given opt-out options in all messages via text and email.
Although the new CFPB rules does provide protections for consumers, some critics take issue with the new rule stating that it will open up new opportunities for debt collectors to bombard consumers with texts and emails.
CFPB Rules on Disclosures and Debt Collection: A Recap
Historically, multiple agencies have worked on writing laws, enforcing laws, and monitoring debt collectors’ practices and how these practices impact the consumer. Today, writing laws to protect consumers, enforcing those laws, and monitoring the financial markets all fall under the Consumer Financial Protection Bureau’s responsibility.
The new CFPB rules have been established to provide clarity to organizations regarding collecting debt, disclosures, and communications with the consumers. The new rules clearly spell out how organizations must conduct themselves with communicating with consumers through more modern mediums such as text, email, and even social media.
With the recent rules, the CFPB hopes to provide more clarity to organizations collecting debts and more protection to consumers.
