HOW DOES FDCPA AFFECT BANKS?
On October 30, 2020 the CFPB announced a final version of the Fair Debt Collection Practices Act. Although the rule is generally applicable to third-party debt collection practices, it has an indirect effect on financial institutions. First, at a pre-described stage, most institutions turn their debt collection over to a third party. As a “vendor,” the Bank should review the party’s debt collection practices as part of their vendor due diligence. In addition, a Bank’s own best practices should model those of FDCPA.
The recent changes focus on debt collection communications in a modern-day context and how to avoid unfair practices. This is covered in Subpart B which:
- Clarifies restrictions on the times and places at which a debt collector may communicate with a consumer.
- Clarifies that a consumer may restrict the media platform through which a debt collector communicates by designating a particular medium, such as email, as one that cannot be used for debt collection communications.
- Clarifies that a debt collector is presumed to violate the FDCPA’s prohibition on repeated or continuous telephone calls if the debt collector places a telephone call to a person more than seven times within a seven-day period or within seven days after engaging in a telephone conversation with the person.
- Clarifies that newer communication technologies, such as emails and text messages, may be used in debt collection, with certain limitations to protect consumer privacy and to protect consumers from harassment or abuse, false or misleading representations, or unfair practices. For example, the final rule requires that each of a debt collector’s emails and text messages must include instructions for a reasonable and simple method by which a consumer can opt out of receiving further emails or text messages. The final rule also provides that a debt collector may obtain a safe harbor from civil liability for an unintentional third-party disclosure if the debt collector follows the procedures identified in the rule when communicating with a consumer by email or text message.
- Defines a new term related to debt collection communications: limited-content message.
This definition identifies what information a debt collector must and may include in a voicemail message for consumers (with the inclusion of no other information permitted) for the message to not be deemed a communication under the FDCPA. This definition permits a debt collector to leave a voicemail message for a consumer that is not communication under the FDCPA or the final rule and is not subject to certain requirements or restrictions.
This is but a sample of what’s in this final rule. We recommend that each institution compare its current collection practices to the context of the revised rule and make appropriate “best practice” revisions.
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