The CFPB recently issued a supplemental Notice of Proposed Rulemaking (NPRM) to add a requirement that debt collectors make certain disclosures when collecting time-barred debts, generally prohibiting them from using non-litigation means to collect on time-barred debt unless they disclose to consumers during initial contact and on any required validation notice that the debt is time-barred.
As discussed in previous WBK articles, the CFPB, on May 7, 2019, issued a Notice of Proposed Rulemaking which announced proposed new regulations to implement various existing provisions of the FDCPA and addressed, among other things, issues related to collection of time-barred debt (i.e., debt for which the applicable statute of limitations has expired), proposing a “know or should have known” standard. It also indicated that the CFPB was likely to propose regulations requiring debt collectors to provide disclosures to consumers when collecting time-barred debt, but first wanted to conduct additional consumer testing of possible such disclosures, a process that now is complete. The related comment period had been extended through September 18, 2019.
In addition to the prior NPRM regarding proposed changes to Regulation F (the regulation implementing the FDCPA), the recent supplemental NPRM seeks to further amend Regulation F to require debt collectors collecting a debt that they know or should have known is time-barred to make certain clear and conspicuous disclosures, e.g.: (i) that the law limits how long the consumer can be sued for a debt, and that the debt collector will not sue the consumer to collect the debt because of its age; and (ii) if the debt collector’s right to bring a legal action against the consumer to collect the debt can be revived under applicable law, the fact that revival can occur, and when it can occur.
The supplemental NRPM sets forth disclosure requirements, including content, timing, formatting, and language requirements, in efforts to ensure, for example, that there are no false, deceptive, or misleading representations when collecting consumer debt and that consumers are fully, accurately, and effectively told about the features of debt collection (such that they understand the costs, benefits, and risks associated with debt collection, in light of the facts and circumstances). It also includes a safe harbor through the use of certain model forms (or use of their relevant content), including the following:
- Model Form B-4 is a validation notice with a time-barred disclosure that is to be used when the debt cannot be revived under applicable law.
- Model Form B-5 is a validation notice with time-barred and revival disclosures that is to be used if applicable law allows for revival when the consumer makes a payment or acknowledges the debt in writing.
- Model Form B-6 is a validation notice with time-barred and revival disclosures that is to be used if applicable law allows for revival only when a consumer makes a payment.
- Model Form B-7 is a validation notice with time-barred and revival disclosures that is to be used if applicable law allows for revival only when the consumer acknowledges the debt in writing.
Comments to the supplemental NPRM must be received on or before May 4, 2020. The CFPB proposes that the final rule become effective one year after it is published in the Federal Register and seeks comments on this proposed effective date as well as a number of other issues related to the supplemental NPRM, e.g., the benefits of using a “know or should know” standard versus a “strict liability” standard when determining whether these disclosures should be made and the burden of requiring all debt collectors to make determinations regarding the state laws that apply and when the law permits revival if the collectors want to collect debt they know or should know is time-barred.
The CFPB also issued some related documents, including: (i) a fact sheet about the supplemental NPRM; (ii) findings from the CFPB’s quantitative disclosure testing about disclosing time-barred debt and revival; and (iii) ICF International, Inc.’s methodology report, “Quantitative Survey Testing of Model Disclosure Clauses and Forms for Debt Collection.”