Compliance Blog

Written by David Park, Regulatory Compliance Counsel, NAFCU

By now you may have already read NAFCU's Regulatory Alert on the CFPB's proposed rule amending Regulation F that implements the Fair Debt Collection Practices Act (FDCPA).  As you may recall, the FDCPA applies to debt collectors as specifically defined in section 803 of the FDCPA. In general, creditors collecting debts owed to themselves as first-party collectors are not covered debt collectors under the FDCPA.

The focus of today's blog is sections 1006.14(b)(2)(i) and (ii). Section 1006.14 generally prohibits debt collectors from engaging in conduct that harasses, oppresses, or abuses any person in connection with the collection of a debt. This section implements and interprets section 806 of the FDCPA.

Section 1006.14(b)(2)(i) specifically prohibits a debt collector from placing a telephone call to a particular person in connection with the collection a debt more than seven times within seven consecutive days. Section 1006.14(b)(2)(ii) bars debt collectors from  placing a telephone call to a particular person in connection with the collection of a debt within seven days following an actual telephone conversation with that person where the date of the conversation is the first day of the seven day period. Section 1006.14(b)(2)(ii), if finalized as proposed, would bar debt collectors from calling a person for a week. In other words, if a debt collector had an actual phone conversation with someone on a Monday, it would be a violation of section 1006.14(b)(2)(ii) to call that person again before the following Monday.

The CFPB noted that the specific prohibitions identified in section 1006.14(b)(2)(i) and (ii) were necessary because of the lack of certainty built into section 806 of the FDCPA:

"As noted, FDCPA section 806 prohibits a broad range of debt collection communication practices that harm consumers and others, and section 806(5) in particular prohibits debt collectors from making telephone calls or engaging a person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass. Section 806(5) does not identify a specific number of telephone calls or telephone conversations within any particular timeframe that would violate the statute. In the years since the FDCPA was enacted, courts interpreting FDCPA section 806(5) have not developed a consensus or bright-line rule regarding call frequency. While several States and localities have imposed numerical limits on debt collection contacts, the limits vary, and the large majority of jurisdictions have not established any numerical limits." 84 Fed. Reg. 23274, 23309.

One thing to keep in mind is that the limitations would not only apply to consumers who owed a debt. See, 84 Fed. Reg. 23274, 23311 ("Proposed § 1006.14(b)(2) would apply not only to debt collection calls placed to consumers who owe or are alleged to owe debt, but to any person (with certain exceptions described below)."). So the limitations may apply to calls a debt collector makes in an attempt to locate a debtor.

The proposed rule, however, identifies certain types of calls that are excluded from the limitations set forth in section 1006.14(b)(2)(i) and (ii):

"(3) Certain telephone calls excluded from the frequency limits. Telephone calls placed to a person do not count toward, and are permitted in excess of, the frequency limits in paragraph (b)(2) of this section if they are:

(i) Made to respond to a request for information from such person;

(ii) Made with such person's prior consent given directly to the debt collector;

(iii) Not connected to the dialed number; or

(iv) With the persons described in § 1006.6(d)(1)(ii) through (vi) [the consumer's attorney, a consumer reporting agency, the creditor, the creditor's attorney, or the debt collector's attorney]." See, 12 CFR § 1006.14(b)(3)(i) through (iv).

Now you may be wondering how this particular requirement in the proposed rule might apply to your credit union if your credit union is not a debt collector under the FDCPA or the proposed rule. Like the FDPCA, the proposed rule defines debt collector in a way that seems to exclude a creditor collecting its own debts.

But footnote 313 in the proposed rule suggests that creditors may have reason to be wary of these call limitations:

"313.  The Bureau has not determined in connection with this proposal whether telephone calls in excess of the limit in proposed § 1006.14(b)(2)(i) by creditors and others generally not covered by the FDCPA would constitute an unfair act or practice under section 1031(c) of the Dodd-Frank Act if engaged in by those persons, rather than by an FDCPA-covered debt collector. The Bureau's proposal does not address, for example, whether consumers could reasonably avoid harm from creditor contacts or whether frequent creditor contacts provide greater benefits to consumers or competition." See, 84 Fed. Reg. 23274, 23314.

While the footnote acknowledges that the CFPB has not concluded whether creditors calling in excess of the limits set forth in sections 1016.14(b)(2)(i) and (ii) would constitute an unfair act or practice prohibited by Dodd-Frank, the footnote seems to suggest that the CFPB has at least thought about it.  As the proposed rule explains, the CFPB has authority under section 1031(b) of the Dodd-Frank Act to promulgate rules to prevent unfair acts or practices in connection with any transaction with a consumer for a consumer financial product or service. This authority was the basis for CFPB Bulletin 2013-07. That bulletin explained that certain violations of the FDCPA could constitute a UDAAP and noted that creditors who were not covered debt collectors under the FDCPA still had an obligation to avoid committing UDAAPs. The authority to prescribe rules to prevent unfair acts or practices prohibited by Dodd-Frank is a potential hook the CFPB could use to make these call limits a concern for first-party collectors.

Comments on the proposed rule are due to the CFPB by August 19, 2019. Your credit union can provide comments to NAFCU by August 5, 2019.

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