‘Detailed disclosures’ required from debt collectors at start of communications, new rule requires

Debt collectors must provide, at the outset of collection communications, detailed disclosures about the consumer’s debt and rights in debt collection, along with information to help consumers respond, under a final rule issued Friday by the federal consumer financial protection agency.

Its new rule, the Consumer Financial Protection Bureau (CFPB) said, requires debt collectors to take specific steps to disclose the existence of a debt to consumers, orally, in writing, or electronically, before reporting information about the debt to a consumer reporting agency (CRA).

The rule also prohibits debt collectors from making threats to sue, or from suing, consumers on time-barred debt.

“Before a collector furnishes information about a debt to a consumer reporting agency, the final rule generally requires the collector to take one of several actions to contact the consumer about the debt,” the bureau said of its new rule in a release. The actions, the bureau said, include speaking with consumers about their debts by telephone, mailing a letter to the consumer, or sending an electronic message about the debt to the consumer.

“If mailing a letter or sending an electronic message to the consumer, the collector must wait a reasonable period of time to receive a notice of undeliverability, such as 14 days, before furnishing information to a CRA and must not furnish if a notice of undeliverability is received unless the collector takes additional steps,” the bureau said. “Collectors are also prohibited from, and will be strictly liable for, suing or threatening to sue a consumer to collect a time-barred debt, which is defined as a debt for which the applicable statute of limitations has passed.”

According to CFPB, the final rule is the product of a seven-year process that included a notice of proposed rulemaking (NPRM) in 2019, a supplemental NPRM in February and what the agency described as “extensive consumer disclosure testing.”

The rule follows a regulation issued by the bureau in October focusing on communications between consumers and debt collectors under the Fair Debt Collection Practices Act (FDCPA). The bureau said that rule was intended to “restate and clarify” prohibitions on harassment and abuse, false or misleading representations, and unfair practices by debt collectors when collecting consumer debt.

Regarding the rule issued Friday, CFPB said that, under it, debt collectors will be also be required to provide “readily understandable” disclosures that contain more information than consumers now receive when the collector first begins to communicate with the consumer to collect the debt.

“The disclosures must include details about the debt and consumer protections, including the right to dispute the debt and to request information about the original creditor,” the agency said. “The disclosures also must continue to include a statement that indicates the communication is from a collector and is about a debt.”

CFPB said the disclosures are designed to help ensure that consumers are able to recognize debt they may owe and raise concerns about unfamiliar debts.

A model form in plain language is provided that debt collectors may use to comply with the rule, the agency said.

Consumer Financial Protection Bureau Issues Final Rule on Consumer Disclosures Related to Debt Collection

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