Regulation F
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When Regulation F takes effect on November 29, 2021, debt collectors and creditors will have to change the way they do business. If you have delinquent accounts or accounts in collections these changes could affect you.

Congress passed the Fair Debt Collection Practices Act (FDCPA) in 1977. It has governed the debt collection industry ever since. Regulation F is the first serious update to the FDCPA, and it will have a significant impact on the way American debt collectors work.

The debt collection industry is talking about Regulation F. The personal finance community is not. That needs to change. Debtors need to know what the new rules mean and understand the impact they will have.

Let’s take a closer look.

Regulation F: What’s Going to Change?

Regulation F is large and complicated. The document containing the final rule and official interpretation is over 350 pages. That’s a lot to digest, but while some legal interpretations may change, the main items are fairly clear.

Here are the key points.

Debt Collectors Cannot Sue or Threaten to Sue Over Time-Barred Debts

When the statute of limitations on a debt expires, the debt is said to be time-barred. Under the old rules, collectors could still sue a debtor over a time-barred debt. The debtor had to appear in court and use the statute of limitations as a defense.

Many debtors do not appear. Judges often issue summary judgments against them even though the debt was time-barred.

When Regulation F takes effect collection agencies will no longer be able to sue or threaten a suit over a time-barred debt.

Collectors Cannot Report a Debt to a Credit Bureau Before they Contact You

Debt collectors often use a tactic called “passive collection”, especially with smaller debts. Instead of chasing you down, they report the collection account to the credit bureaus and wait for you to notice the damage and contact them.

A lot of people had their credit battered before they ever had a chance to dispute or resolve the debt.

Regulation F will prohibit that, except in certain very limited exceptional situations. Collectors will have to contact you before they place an account on your credit record.

Collectors Must Supply More Information

The FDCPA stated that a collector must send the debtor a Notice of Debt within five days of their first contact with the debtor.

The information that had to be contained in that notice was quite limited, essentially just the name of the collector, the amount of the debt, and a notice advising the debtor of their right to dispute the debt within 30 days.

Under the new rules, a collector must provide a much more informative Debt Validation Notice within 5 days of the first contact. That notice must contain much more detailed information.

The Consumer Financial Protection Bureau (CFPB) has supplied a model Validation Notice. It will show you what collectors need to provide.

These are some of the items that the new Validation Notice must contain:

An Itemization Date

An itemization date can be any one of five different dates.

  • The date of the last statement or invoice provided to the consumer by the creditor.
  • The charge-off date.
  • The date of the last payment applied to the debt.
  • The date of the transaction that gave rise to the debt.
  • The judgment date, if there is court judgment on the debt.

This information can help the consumer identify the debt and determine whether the statute of limitations has expired.

Validation Information

The collector must supply the consumer with more extensive validation information, including these elements.

  • The debt collector’s name and mailing address.
  • The consumer’s full name and mailing address.
  • If the debt is realted to a financial product (like a loan or credit card), the notice must contain the name of the creditor to whom the debt was owed on the itemization date.
  • The account number associated with the debt.
  • The name of the creditor to which the debt is currently owed.
  • The amount of the current debt and an itemized list of any payments made and added fees, interest, or other charges.

Under the current system, many debt collectors would not have this information. They will have to get it from the original creditors.

Dispute and Information Prompts

The Validation Notice must contain a returnable form or a live-prompt option if it’s electronically delivered. These prompts will allow the consumer to check an “I want to dispute this debt because” option. The consumer can then check one of several boxes.

  • This is not my debt.
  • The amount is wrong.
  • Other (you will need to supply additional information.)

The consumer can also simply check a box stating “I want you to send me the name and address of the original creditor”.

Disclosure of Rights

The validation notice must contain information advising the consumer of their right to dispute the debt and request further information.

Debt Collectors Can Use Email and Text, If You Let Them

The Fair Debt Collection Practices Act dates back to 1977. Naturally, it does not mention email or text messaging. Debt collectors have avoided these methods because there is no legal framework for them.

Regulation F clarifies that email and text messaging can be used. It also states that the consumer can specify what communication channels the collector can use. If you want all communication to take place in email, or if you want to specify that the collector cannot use the phone or text, you can.

Regulation F also sets up a system for what they call “limited information messages”. These are messages that the collector can place on channels that may be seen or heard by a third party, like voice mail. These messages can ask you to contact the collector, but cannot mention debt collection or identify the contacting party as a debt collector.

Limits on Communication

Harassment with a high volume of communication is an old tactic of debt collectors, but that’s about to change. Regulation F puts strict limits on how often a collector can contact you.

  • A debt collector cannot call you more than seven times within seven consecutive days.
  • If a debt collector speaks to you on the phone they must wait seven days before calling again.

You can speak to a collector more frequently but only with your prior consent.

What Debt Collectors Say About Regulation F

There has been very little discussion of the new debt collection rules in the personal finance community. One way to assess the impact of Regulation F is to look at what debt collectors and business lawyers are saying.

Debt collection is a big business, and the industry (it calls itself “Accounts Receivable Management”) has its own trade publications. There’s a great deal of discussion about Regulation F in that community.

Inside ARM

InsideARM is a trade publication serving the Accounts Receivable Management industry. On October 11 they ran an article headlined “Without Creditor Cooperation, Debt Collectors Cannot Safely Work Accounts After November 29th“.

They highlight these key points.

  • The information collectors must supply to debtors can only come from the original creditor. It cannot come from another collection company.
  • Collectors can expect “an avalance of litigation” from consumer attorneys.
  • “If creditors do not engage with their agencies and do not listen to the agency’s needs, collection efforts may come to a screeching halt on November 29, 2021.”

What can debtors learn from this? If Inside ARM is correct in its evaluations, collectors that are retained by original creditors should have no problem. Collectors buying debt directly from original creditors will probably be able to get the required information.

Collectors specializing in resurrecting “zombie debts” or in buying debt packages from other collectors may see their operations impaired. They may not be able to get the information they require to collect legally.

Business Law Today

Business Law Today approaches Regulation F from the standpoint of the original creditor. An article titled “Six Things Creditors Should Know About the New Federal Debt Collection Rule” lays out the impact on creditors.

  • Creditors will have to choose third-party collection agencies that are capable of compliance with Regulation F.
  • Creditors collecting on their own accounts will be subject to many provisions in Regulation F.
  • Regulation F will change and restrict creditor communication practices.
  • Creditors will have to be more engaged with their third-party collectors.

This interpretation supports many of the points made by InsideARM about the need for close cooperation between original creditors and collectors.

ACA International

ACA International is another collection industry trade publication. They say that “Regulation F is the biggest thing to hit our industry, since the inception of the FDCPA.”

ACA has developed a 15-hour educational video series designed to provide legal education to collectors who are “overwhelmed” by the prospect of compliance with the new regulations. That’s an indication of how seriously the debt collection business is treating the issues.

What Does Regulation F Mean to You?

The debt collection industry is busily bracing for impact and preparing for compliance with Regulation F. Consumers with debts, for the most part, have never even heard of it.

What will these changes mean for consumers with debts?

Debt collectors will still collect debts. Regulation F will not shut down the debt collection business.

The impact of Regulation F is still not 100% clear, but we can reach a few preliminary conclusions.

  • Reputable debt collectors who are retained by original creditors or buy debt directly from creditors will have to change some practices but will continue to collect.
  • Less reputable collectors who work on collecting old debts or buying debt from other collectors may not be able to continue. Original creditors have no incentive to spend time and effort helping them to collect.
  • Collectors will be able to contact debtors by text and email. Debtors will be able to opt out of these contact.
  • Collectors will have to provide much more information about debts in collection from the start.
  • Debtors will have an opportunity to dispute or settle debts before they are reported to credit bureaus.
  • Debtors will not have to worry about lawsuits over time-barred debts. This could make collectors more likely to sue as the debts near the statute of limitations.
  • Collectors will not be able to call as frequently as they once did. They will have more communication options and debtors will have the freedom to select the communication channels they want to use.

One of the most important parts of dealing with debt collectors has always been to know your rights. Those rights are about to change. If you have debts that are or may soon be in collection, you need to keep up.

We’ll be writing more as the impact of Regulation F emerges!