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CFPB finalizes disclosures for debt collection with NAFCU-sought changes
The CFPB last week issued a final rule on consumer disclosures related to debt collection. The bureau in October finalized its debt collection rule – which applies to third-party debt collectors and heeded several concerns NAFCU had flagged for the bureau in its comments on the proposal – and indicated it would issue a separate rulemaking for disclosures.
The final rule released Friday:
- addresses information that a debt collector must provide to a consumer at the outset of the debt collection communications and provides a model validation notice;
- addresses consumer protection concerns related to passive collection activities such as furnishing information to a consumer reporting agency (CRA); and
- prohibits collectors from suing or threating to sue a consumer to collect time-barred debt.
Similar to the debt collection rule, the disclosures rule covers debt collectors as defined by the Fair Debt Collection Practices Act (FDCPA) and does not directly impact first-party collectors. NAFCU had flagged for the bureau concerns about the potential indirect impacts on credit unions.
Of note for the validation notice of debt, debt collectors must provide it to a consumer within five days of the initial communication, unless the information was provided in the initial communication or the consumer has paid the debt. The validation notice must include prompts that a consumer can use to dispute the debt or request information from the original creditor. Debt collectors are afforded a safe harbor of compliance if they utilize the model form validation notice or certain variations of the notice.
NAFCU shared concerns about costs and increased burdens on credit unions with respect to the validation notice as the proposal provided an alternative channel for debt collectors to rely on that previously provided opt-out notices from creditors to the consumer. The CFPB heeded these concerns and declined to finalize a proposed provision that would have provided an "alternative procedure" for providing the validation notice and would have allowed a debt collector to rely on a previously provided opt-out notice, including those given by a creditor.
NAFCU also asked for clarification on the "itemization date" that is required in the validation notice of debt. The final rule allows the option to provide one of five reference dates, including the use of a different itemization date than a prior debt collector used for the same date.
The final rule will take effect one year after it is published in the Federal Register.