[Federal Register Volume 78, Number 218 (Tuesday, November 12, 2013)]
[Proposed Rules]
[Pages 67848-67880]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-26875]
[[Page 67847]]
Vol. 78
Tuesday,
No. 218
November 12, 2013
Part IV
Bureau of Consumer Financial Protection
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12 CFR Part 1006
Debt Collection (Regulation F); Advanced Notice of Proposed Rulemaking
Federal Register / Vol. 78 , No. 218 / Tuesday, November 12, 2013 /
Proposed Rules
[[Page 67848]]
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BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Part 1006
[Docket No. CFPB-2013-0033]
RIN 3170-AA41
Debt Collection (Regulation F)
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Advance notice of proposed rulemaking.
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SUMMARY: The Consumer Financial Protection Bureau (the Bureau) is
seeking comment, data, and information from the public about debt
collection practices. Debt collection affects a significant number of
consumers and the Bureau is considering proposing rules relating to
debt collection. Therefore, the Bureau is interested in learning
through responses to this advance notice of proposed rulemaking (ANPR)
about the debt collection system, about consumer experiences with the
debt collection system, and about how rules for debt collectors might
protect consumers without imposing unnecessary burdens on industry.
The Fair Debt Collection Practices Act (FDCPA) was passed in 1977
and the Bureau is the first Federal agency to possess the authority to
issue substantive rules for debt collection under this statute. The
Bureau may also address concerns related to debt collection using its
authority under the Dodd-Frank Act to issue regulations concerning
unfair, deceptive, and abusive acts or practices and to establish
disclosures to assist consumers in understanding the costs, benefits,
and risks associated with consumer financial products and services.
DATES: Comments on this ANPR must be received by February 10, 2014.
ADDRESSES: You may submit comments, identified by Docket No. CFPB-2013-
0033 or Regulatory Identification Number (RIN) 3170-AA41, by any of the
following methods:
Electronic: http://www.regulations.gov. Follow the
instructions for submitting comments.
Mail/Hand Delivery: Monica Jackson, Office of the
Executive Secretary, Bureau of Consumer Financial Protection, 1700 G
Street NW., Washington, DC 20552.
Instructions: All submissions must include the agency name and
docket number or RIN. Please include the question number(s) to which
your comment pertains. In general, all comments received will be posted
without change to http://www.regulations.gov. In addition, comments
will be available for public inspection and copying at 1700 G Street
NW., Washington, DC 20552, on official business days between the hours
of 10 a.m. and 5 p.m. Eastern Time. You can make an appointment to
inspect the documents by calling (202) 435-7275.
All comments submitted through the formal means described above,
including attachments and other supporting materials, will become part
of the public record and subject to public disclosure. Sensitive
personal information, such as account numbers or Social Security
numbers, should not be included. Comments will not be edited to remove
any identifying or contact information.
E-Rulemaking Initiative: The Bureau is working with the Cornell e-
Rulemaking Initiative (CeRI) on a pilot project, RegulationRoom
(www.RegulationRoom.org), that uses web technologies and approaches to
enhance public understanding and effective participation. This ANPR on
debt collection is a focus of the project. RegulationRoom is set up to
make it easier for consumers and others to understand what the Bureau
is considering, to share their information, experiences, and concerns,
and to discuss possible ideas and solutions. Note that RegulationRoom
is not an official United States Government Web site. Although comments
made on that site are not formal comments like those submitted through
the means identified above, the discussion on RegulationRoom will be
captured through a detailed summary, which participants will have the
chance to review and suggest revisions. This summary will be filed as a
formal comment on Regulations.gov. For questions about this project,
please contact Whitney Patross, Counsel, Office of Regulations, at
(202) 435-7700.
FOR FURTHER INFORMATION CONTACT: Krista Ayoub and Pavneet Singh, Senior
Counsels; or Kristin McPartland, Lauren Weldon, and Evan White,
Counsels; Bureau of Consumer Financial Protection, 1700 G Street NW.,
Washington, DC 20552, at (202) 435-7700.
SUPPLEMENTARY INFORMATION: This ANPR seeks data and other information
to assist the Bureau in developing proposed rules for debt collection.
Part I provides a general overview of debt collection, consumer
protection problems in debt collection, and government authority and
activities to address these problems.
Parts II and III of the ANPR principally focus on the quantity and
quality of information in the debt collection system. Part II solicits
information on the transfer of information and access to information
upon sale or placement of debts. Part III seeks information regarding
validation notices, disputes, investigations, and verification of
disputes.
Parts IV, V, and VI primarily concern the conduct of collectors in
interacting with consumers in trying to recover on debts through the
collection process. Part IV requests information about collector
communications seeking location information about consumers,
interacting with consumers themselves, disclosing debts to third
parties, and newer technologies. This part includes issues concerning
sections 804 and 805 of the FDCPA. Part V asks for information about
unfair, deceptive, and abusive acts and practices, including issues
concerning sections 806, 807, and 808 of the FDCPA. Part VI addresses
issues relating to the collection of debts that are beyond the statute
of limitations.
Parts VII and VIII predominantly address debt collection activities
that implicate issues relating to State law. Part VII requests
information about debt collection litigation, most of which occurs in
State courts. Part VIII raises questions about exemptions under Federal
law for State debt collection systems under section 817 of the FDCPA,
as well as for private entities that operate bad check diversion
programs under contracts with State and local district attorneys under
section 818 of the FDCPA.
Finally, Part IX solicits information concerning recordkeeping,
monitoring, and compliance.
While the Bureau encourages all commenters to read and respond to
the entire ANPR, we provide the outline above to assist commenters in
identifying the sections most relevant to their interests and
knowledge. The Bureau also invites consumers, consumer service
organizations, creditors, collectors, or other interested parties to
file comments describing the practical experiences that they have had
or observed in the area of consumer debt collection, even if it is not
apparent to which particular question those experiences are closely
related. In particular, Parts III and VII may be of most interest to
consumers, who may be able to offer insight on their experiences and
expectations with respect to debt collection communications and
interactions with debt collection litigation.
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I. Debt Collection and Consumer Protection
A. Consumer Debts
A debt is commonly understood to be an obligation by a consumer to
pay its owner; these obligations frequently arise out of an extension
of credit. Consumers have many debts in collection and may have many
different types of debts in collection. In 2011, for example, a
national trade association of collectors reported that the most
frequent debts on which collectors seek to recover from others include
medical and other health-related debts (36%), credit card debts (20%),
telecom debts (13%), and student loan debts (12%).\1\
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\1\ ACA International, 2011 Top Collection Markets Survey: For
Period: Jan.1, 2010-Dec. 31, 2010 at 9 (2011), available at http://www.acainternational.org/files.aspx?p=/images/12980/2011topmarketsurvey-electronic.pdf.
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Owners of debts include original creditors as well as those who buy
debts from original creditors and from others. Some consumers are
unable or unwilling to pay debts at the time when payment is required.
Owners of debts who are not paid typically deem, for various reasons,
that the consumer is in default after a period of time and therefore
place the debt in collection. Owners either use their own collectors to
recover in their own names on these defaulted debts (first-party debt
collectors) or they place the debts with collection firms or law firms
that specialize in the collection of defaulted debt (third-party debt
collectors).
Collection of consumer debts serves an important role in the
functioning of consumer credit markets by reducing the costs that
creditors incur through their lending activities.\2\ Collection efforts
directly recover some amounts owed to owners of debts and may
indirectly support responsible borrowing by underscoring the obligation
of consumers to repay their debts and by incenting consumers to do
so.\3\ The resulting reductions in creditors' losses, in turn, may
allow them to provide more credit to consumers at lower prices.\4\
Collection activities can also lead to repayment plans or debt
restructuring that enable consumers to gradually make payments and
resolve their debts.
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\2\ U.S. Bureau of Consumer Fin. Prot., Fair Debt Collection
Practices Act: CFPB Annual Report 2013 at 9 (Mar. 20, 2013),
available at http://files.consumerfinance.gov/f/201303_cfpb_March_FDCPA_Report1.pdf (2013 FDCPA Annual Report); U.S. Fed.
Trade Comm'n, The Structure and Practices of the Debt Buying
Industry at 11 (Jan. 2013), available at http://www.ftc.gov/os/2013/01/debtbuyingreport.pdf (2013 FTC Debt Buyer Report).
\3\ 2013 FDCPA Annual Report at 9.
\4\ 2013 FDCPA Annual Report at 9.
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While debt collection can benefit consumers by reducing the price
and increasing the availability of credit, in the absence of
legislation and regulation many consumers may be subject to debt
collection efforts that raise consumer protection concerns. Typically,
competition in markets will incentivize firms to provide products and
services on terms that consumers favor, but this competition may not be
effective with regard to collections practices. Once a debt has gone
into collection, consumers cannot choose their collector; the relevant
choice for the consumer came when deciding from which firm to purchase
or borrow. If firms' collection practices--or the practices of third-
party collectors employed by the creditors or the buyers to whom
creditors sell debt--played an important role in consumers' borrowing
or purchasing decisions, then this competition would impose some
discipline on firms to reduce overly aggressive tactics. When consumers
make borrowing or purchasing decisions, however, they may not be
focused on the risk that they will default. As a result, a consumer's
decision to obtain credit from a particular creditor is unlikely to be
influenced by the identity of the collector that might eventually
collect on the debt if the consumer defaults. Indeed, it is unlikely
that the consumer and perhaps even the creditor could know the identity
of the future third-party collector. Firms therefore have a limited
incentive to engage in less aggressive tactics if those tactics lead to
increased recovery of debts. This effect may be exacerbated in the case
of third-party collectors or debt buyers if consumers do not associate
their treatment by the collector or debt buyer with the original
creditor.
B. Debt Collection Industry
Debt collection is currently a multi-billion dollar industry
composed of first-party collectors, third-party collectors, debt
buyers, collection law firms, and a wide variety of related service
providers. The Bureau understands that, over the past few decades, the
debt collection industry has experienced dramatic growth along with
significant evolution in business practices.
When a consumer defaults on a debt, the first efforts to collect on
that debt are often made by the creditor itself, either through in-
house collectors or others collecting in the name of the creditor. In
either case, first-party collections are largely exempt from the FDCPA.
These collections presumably constitute a significant segment of the
debt collection market, with one industry source estimating revenues to
collection companies acting in the name of first-party collectors to
have been around $2 billion in 2007.\5\
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\5\ Kaulkin Ginsberg, Executive Summary: The Kaulkin Report: The
Future of Receivables Management (Kaulkin-Ginsberg Company 7th ed.
2007), available at http://www.insidearm.com/wp-content/uploads/The-Kaulkin-Report-7th-Ed-Executive-Summary.pdf.
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If the creditor or other owner of the debt decides not to collect
on the debt itself, it may engage a third-party debt collector to try
to recover on the debt in the collector's own name rather than in the
name of the creditor or other owner of the debt. In 2010, there were
more than 4,000 third-party debt collection firms that employed more
than 140,000 people.\6\ These third-party collection firms had reported
revenue of $11.7 billion in 2010.\7\
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\6\ Robert Hunt, Fed. Reserve Bank of Pa., Understanding the
Model: The Life Cycle of a Debt at 10 (2013), available at http://www.ftc.gov/bcp/workshops/lifeofadebt/UnderstandingTheModel.pdf
(presented at the FTC-CFPB Roundtable).
\7\ Id.
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An original creditor or subsequent debt purchaser may choose to
``outsource'' its collections to a third party to collect in the third
party's name for several reasons. Third-party collectors may possess
capabilities and expertise in collections that the creditors' in-house
operations lack. Typically, third-party collectors are paid on a
contingency basis, usually a percentage of recoveries. This transfers
collections expenses from the debt owner or creditor to the third
party, with the result that the debt owner or creditor may recover some
of what it is owed but without assuming risk that its in-house
collections expense would be unproductive. Additionally, using third
parties may allow debt owners and creditors to expand collection
capacity during down-cycles in the economy (when the number of debts in
collection increases) without having to hire or invest in additional
systems or higher additional collectors on a short-term basis. Finally,
an original creditor or debt owner may determine that a customer in
default is no longer one with whom it is likely to maintain a long-term
business relationship and thus may choose to devote its customer
service efforts toward paying or prospective customers.
Debt collectors typically contact consumers to try to recover on
debts, but if these efforts are unsuccessful, debt owners may decide to
file an action in court to try to recover the debt. Most debt
collection litigation is filed in State
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and local courts, and, therefore, owners of debts often retain law
firms and attorneys that specialize in debt collection and are familiar
with these courts and State and local requirements to act on their
behalf. The use of debt collection litigation to recover on debts has
grown to become a critical part of the debt collection industry, with
collection law firms having an estimated $2.4 billion in revenues from
collections in 2011.\8\
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\8\ Kaulkin Ginsberg, Executive Summary: The Kaulkin Report: The
Future of Receivables Management (Kaulkin-Ginsberg Company 7th ed.
2007), available at http://www.insidearm.com/wp-content/uploads/The-Kaulkin-Report-7th-Ed-Executive-Summary.pdf.
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While third-party collection agencies have been increasing in size
in recent years, third-party debt collection continues to include a
significant number of smaller entities.\9\ Several factors account for
this level of industry fragmentation. First, debt collection has
historically been subject to low barriers to entry; and while debt
collection relies on an array of data processing and communications
technologies, the cost of investing in these technologies has steadily
declined. Secondly, some collection firms specialize regarding the
types of debt they collect. For example, some firms specialize in the
collection of student loans, while others may specialize in collection
of medical debt.
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\9\ Robert Hunt, Fed. Reserve Bank of Pa., Understanding the
Model: The Life Cycle of a Debt at 10 (2013), available at http://www.ftc.gov/bcp/workshops/lifeofadebt/UnderstandingTheModel.pdf
(presented at the FTC-CFPB Roundtable).
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A third source of industry fragmentation may be that many
businesses that use debt collection services, such as utilities and
medical providers, serve local markets and may prefer to rely on
collectors who are based in, and familiar with, their local markets.
Utilities and medical providers' collection practices, in particular,
may be subject to regulation at the State or even local level, and thus
require collectors who are sensitive to these requirements.
A final source of collections industry fragmentation may be due to
the fact that a considerable amount of debt collection activity,
including direct collection from consumers as well as debt litigation,
is conducted by law firms, which similarly operate within local and
State jurisdictions.
Additionally, the advent and growth of debt buying has been called
``the most significant change in the debt collection business in the
past decade.'' \10\ Debt buyers purchase defaulted debt from original
creditors or other owners of debt and thereby take title to the debt.
They seek to collect on purchased debts themselves, place them with
third-party collectors, or sell them to other debt buyers. Credit card
debt comprises a large majority of the debt that debt buyers
purchase.\11\ Although over 500 debt buyers are currently active, the
market is fairly concentrated, with about 10 firms purchasing a large
proportion of the debt that is sold.\12\
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\10\ U.S. Fed. Trade Comm'n, Collecting Consumer Debts: The
Challenges of Change--A Workshop Report at iv (2009), available at
http://www.ftc.gov/bcp/workshops/debtcollection/dcwr.pdf.
\11\ U.S. Gov't Accountability Office, GAO-09-748, Fair Debt
Collection Practices Act Could Better Reflect the Evolving Debt
Collection Marketplace and Use of Technology (2009), available at
http://www.gao.gov/new.items/d09748.pdf.
\12\ Robert Hunt, Fed. Reserve Bank of Pa., Understanding the
Model: The Life Cycle of a Debt (2013), available at http://www.ftc.gov/bcp/workshops/lifeofadebt/UnderstandingTheModel.pdf
(presented at the FTC-CFPB Roundtable).
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Creditors who sell their uncollected debt to debt buyers receive a
certain up-front return, with these debts typically sold at prices that
are a small fraction of the face value of the debt they are owed. The
debt buyer assumes the risk that it may recover less than it paid to
acquire the debt and collect on it (including litigation costs, if
applicable).
While all collectors have an incentive to minimize their costs and
maximize their recoveries to increase their profits, their strategies
and methodologies may vary considerably based on a number of factors.
Types of debts may differ widely in amount or in the amount or type of
information available to collectors about them, as discussed further
below. For example, a majority of medical, utility, and
telecommunications debts in collection are for small amounts and may
not warrant the high cost of seeking to locate or contact the consumer;
consequently some collectors simply report these items to consumer
reporting agencies (CRAs) and wait for the consumer to contact the
collector after discovering the item on a credit report.
Some types of debts are subject to statutory or regulatory
requirements that may affect how the collector tries to recover on
them. Privacy protections may impact how collectors seek to recover on
medical debt, for example. The availability of administrative wage
garnishment and tax refund intercepts likewise may affect how
collectors try to recover on Federal student loans.
For some debts, changes in the consumer's situation may warrant a
change in the collector's recovery strategy. For example, a consumer
that was unable to pay a debt due to unemployment may find a job. Thus,
some collectors purchase information about consumers from CRAs and
other third parties to track whether the consumers' circumstances have
changed, indicating new ability to pay past debts they still owe.
To assist them in developing efficient and effective means of
collecting on debts, collectors may obtain goods and services from a
wide range of other businesses. Skip-tracing companies, for instance,
provide contact information for consumers and may screen accounts to
determine if consumers have declared bankruptcy or have died.
Technology firms provide auto-dialers and related software programs to
help debt collectors place calls to consumers. Print shops prepare and
mail validation notices and other written communications from
collectors to consumers. Collectors may furnish information about their
experience with the debts about consumers to CRAs and these agencies
may, in turn, provide collectors with consumer reports for use in
connection with collections.
C. FDCPA Protection for Consumers
The Federal and State governments historically have sought to
protect consumers from harmful practices of collectors. From 1938 to
1977, the Federal government primarily protected consumers through
Federal Trade Commission (FTC or Commission) enforcement actions
against collectors who engaged in unfair or deceptive acts and
practices in violation of section 5 of the FTC Act. Despite such
efforts, Congress found in 1977 that ``there [was] abundant evidence of
the use of abusive, deceptive, and unfair debt collection practices by
many debt collectors,'' and that these practices ``contribute[d] to the
number of personal bankruptcies, to marital instability, to the loss of
jobs, and to invasions of individual privacy.'' \13\ Congress also
found that ``existing laws and procedures for redressing these injuries
[were] inadequate to protect consumers.'' \14\
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\13\ Fair Debt Collection Practices Act, Public Law 95-109, 91
Stat 874 (FDCPA), 15 U.S.C. 1692(a).
\14\ FDCPA section 802(b), 15 U.S.C. 1692(b).
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In light of these findings, Congress enacted the FDCPA. Among other
things, the FDCPA was enacted to ``eliminate abusive debt collection
practices by debt collectors, [and] to insure that those debt
collectors who refrain from using abusive debt collection practices are
not competitively disadvantaged.'' \15\ To achieve these purposes,
among other things, the FDCPA: (1) prohibits debt collectors from
engaging in abusive, deceptive, or unfair practices; (2)
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imposes restrictions on debt collectors' communications with consumers
and on their communications with others; and (3) mandates a debt
dispute process that includes certain protections for consumers and
obligations for collectors.
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\15\ FDCPA section 802(e), 15 U.S.C. 1692(e).
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The FDCPA, however, does not apply to all collectors of debts. The
statute generally covers the collection activities of third-party
collectors for debts in default at the time they are obtained. In
addition, a creditor can be treated as a debt collector under the FDCPA
with respect to debts that were in default when it obtained them, or
when a creditor collects under names other than its own.
D. Continued Consumer Problems and Government Responses
Despite the enactment and enforcement of the FDCPA and other
measures,\16\ significant consumer protection problems related to debt
collection have persisted. For many years, consumers have submitted
more complaints to the FTC about debt collectors than any other single
industry.\17\ The Bureau began accepting debt collection complaints on
July 10, 2013. As of November 1, 2013, the Bureau is receiving
comparable levels of debt collection and mortgage complaints in terms
of daily complaint volume, with each accounting for approximately
thirty percent of daily volume.
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\16\ In 1984, the FTC issued its Credit Practices Rule under the
FTC Act, which addressed a few unfair or deceptive acts or practices
that relate to consumer credit, but which have application in the
context of debt collection. Trade Regulation Rule: Credit Practices,
49 FR 7740 (Mar. 1, 1984). The Board of Governors of the Federal
Reserve System (Board), the Federal Home Loan Bank Board (FHLBB)
(predecessor to the former Office of Thrift Supervision), and
National Credit Union Administration (NCUA) followed suit with
similar rules. Unfair or Deceptive Acts or Practices; Credit
Practices, 50 FR 16696 (Apr. 29, 1985) (Board); Consumer
Protections; Unfair or Deceptive Credit Practices, 50 FR 19325 (May
8, 1985) (FHLBB); Federal Credit Union; Prohibited Lending
Practices, 52 FR 35060 (Sept. 17, 1987) (NCUA).
\17\ In 2010, for example, the FTC received 141,285 total
complaints about collectors, representing 27 percent of all
complaints received by the FTC. U.S. Bureau of Consumer Fin. Prot.,
Fair Debt Collection Practices Act: CFPB Annual Report 2012 at 6
(2012), available at http://files.consumerfinance.gov/f/201203_cfpb_FDCPA_annual_report.pdf. In 2011, the FTC received 142,743
total complaints about collectors, representing 27 percent of all
complaints. Id. In 2012, the FTC received 125,136 total complaints
about collectors, representing 24 percent of all complaints received
by the FTC. U.S. Bureau of Consumer Fin. Prot., Fair Debt Collection
Practices Act: CFPB Annual Report 2013 at 14 (2013), available at
http://files.consumerfinance.gov/f/201303_cfpb_March_FDCPA_Report1.pdf.
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Consumer complaints relate to a wide variety of debt collection
acts and practices. Consumers most commonly complain to the FTC that
collectors harass them, demand amounts that consumers do not owe,
threaten dire consequences for non-payment, or fail to send required
notices.\18\
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\18\ 2013 FDCPA Annual Report at 7-9.
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Not only do consumers complain about debt collectors, but they also
file thousands of private actions each year against debt collectors
that allegedly have violated the FDCPA. The number of these actions
filed in Federal district court increased from 3,215 in 2005 to 11,811
in 2011, with increases observed each year.\19\ While the number of
these actions appeared to level off in 2012,\20\ the continued number
of such actions filed each year demonstrates that a significant number
of consumers allege that debt collectors are violating the FDCPA.
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\19\ Blog Post, J. Gordon, FDCPA and Other Consumer Lawsuit
Statistics, Full Year 2011 Recap (Jan. 12, 2012), available at
http://accountsrecovery.net/profiles/blogs/fdcpa-and-other-consumer-lawsuit-statistics-full-year-2011-recap.
\20\ P. Lunsford, FDCPA Lawsuits Filed by Consumers Decline 7
Percent in 2012 (Jan. 17, 2013), available at http://www.insidearm.com/daily/debt-buying-topics/debt-buying/fdcpa-lawsuits-filed-by-consumers-decline-7-percent-in-2012/.
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Other sources report different but no less serious consumer
protection problems in debt collection. For instance, some consumer
advocates have highlighted issues in debt collection litigation,
including problems with inadequate service of process, insufficient
evidence accompanying complaints, and high rates of default
judgment.\21\
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\21\ See, e.g., Susan Shin & Claudia Wilner, New Econ. Project,
The Debt Collection Racket in New York (2013), available at http://www.nedap.org/resources/documents/DebtCollectionRacketNY.pdf; Rachel
Terp & Lauren Bowne, East Bay Commty. Law Ctr., PAST DUE: Why Debt
Collection Practices and the Debt Buying Industry Need Reform Now
(2011), available at http://www.defendyourdollars.org/pdf/Past_Due_Report_2011.pdf; Rick Jurgens & Robert J. Hobbs, Nat'l
Consumer Law Ctr., The Debt Machine: How the Collection Industry
Hounds Consumers and Overwhelms Courts (2010), available at http://www.nclc.org/images/pdf/pr-reports/debt-machine.pdf.
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In response to these consumer protection concerns, Federal and
State officials have made debt collection a top priority. In October
2012, for example, the Bureau used its enforcement authority under the
Dodd-Frank Act to bring its first enforcement action involving debt
collection practices, requiring three bank subsidiaries to refund an
estimated $85 million to approximately 250,000 customers for several
distinct illegal credit card practices, including deceptive debt
collection.\22\ In 2012, the FTC also brought or resolved seven debt
collection cases, matching the highest number of debt collection cases
that it has brought or resolved in any single year.\23\ States likewise
have continued their traditional vigorous law enforcement activities
involving a broad range of conduct by debt collectors.
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\22\ Press Release, U.S. Bureau of Consumer Fin. Prot., CFPB
Orders American Express to Pay $85 Million Refund to Consumers
Harmed by Illegal Credit Card Practices (Oct. 1, 2012), available at
http://www.consumerfinance.gov/newsroom/cfpb-orders-american-express-to-pay-85-million-refund-to-consumers-harmed-by-illegal-credit-card-practices/.
\23\ 2013 FDCPA Annual Report at 28.
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The Bureau has also become the first Federal agency to routinely
supervise debt collectors.\24\ In addition to its supervisory
activities involving certain creditors collecting on their own debts,
in October 2012 the Bureau issued its Larger Participant Rule,\25\
establishing supervisory authority over approximately 175 debt
collectors accounting for over 60 percent of the industry's annual
receipts.\26\ On July 10, 2013, the Bureau held a field hearing in
Portland, Maine, during which it announced guidance in the form of two
supervisory bulletins, one that addresses unfair, deceptive, and
abusive acts and practices in debt collection activities generally \27\
and one that specifically addresses representations regarding credit
reports and credit scores during the debt collection process.\28\ At
the field hearing, the Bureau also announced that it was accepting debt
collection complaints and released template letters to assist
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consumers when corresponding with debt collectors.\29\
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\24\ Note that collectors of debts also may be subject to
licensing, registration, supervision, and other oversight under
State law.
\25\ Defining Larger Participants of the Consumer Debt
Collection Market, 77 FR 65775 (Oct. 31, 2012), 12 CFR 1090.
\26\ Note that the Larger Participant Rule does not delineate
the scope of the FDCPA, provisions of the Dodd-Frank Act related to
consumer debt collection activities, or any other Federal consumer
financial law. Activities that the Bureau chose to exclude from the
defined consumer debt collection market in the Larger Participant
Rule may nonetheless qualify as ``collecting debt'' within the
meaning of the Dodd-Frank Act and may constitute consumer financial
products or services.
\27\ U.S. Bureau of Consumer Fin. Prot., CFPB Bulletin 2013-07,
Prohibition of Unfair, Deceptive, or Abusive Acts or Practices in
the Collection of Consumer Debts (July 10, 2013), available at
http://files.consumerfinance.gov/f/201307_cfpb_bulletin_unfair-deceptive-abusive-practices.pdf.
\28\ U.S. Bureau of Consumer Fin. Prot., CFPB Bulletin 2013-08,
Representations Regarding Effect of Debt Payments on Credit Reports
and Scores (July 10, 2013), available at http://files.consumerfinance.gov/f/201307_cfpb_bulletin_collections-consumer-credit.pdf.
\29\ See, e.g., U.S. Bureau of Consumer Fin. Prot., How Can I
Stop Debt Collectors from Contacting Me?, available at http://www.consumerfinance.gov/askcfpb/1405/how-can-i-stop-debt-collectors-contacting-me.html (last updated July 12, 2013); U.S. Bureau of
Consumer Fin. Prot., I've Been Contacted by a Debt Collector and
Need Help Responding. How Do I Reply?, available at http://www.consumerfinance.gov/askcfpb/1695/ive-been-contacted-debt-collector-and-need-help-responding-how-do-i-reply.html (last updated
July 10, 2013); Blog Post, U.S. Bureau of Consumer Fin. Prot., New
Ways to Combat Harmful Debt Collection Practices, available at
http://www.consumerfinance.gov/blog/debtcollection/ (last updated
July 10, 2013).
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Finally, Federal agencies have engaged in extensive efforts to
identify consumer protection problems and potential solutions relating
to debt collection. In 2009, for example, the FTC issued a report,
``Collecting Consumer Debts: The Challenges of Change'' (2009 FTC
Modernization Report), which discussed a range of critical consumer
protection issues thirty years after the enactment of the FDCPA.\30\ In
2010, the FTC issued another report, ``Repairing a Broken System:
Protecting Consumers in Debt Collection Litigation and Arbitration''
(2010 FTC Litigation and Arbitration Report), which identified consumer
protection issues and possible responses related to debt collection
litigation and arbitration.\31\ In 2011, the FTC held a workshop to
consider the impact of technological advances on the debt collection
system, during which participants discussed, among other things, the
ways in which changing technology affects debt collector
communications.\32\ In January 2013, the FTC issued ``The Structure and
Practices of the Debt Buying Industry'' (2013 FTC Debt Buyer Report),
which examined the manner and flow of information from creditors and
other owners of debts to debt buyers, among other issues.\33\ Most
recently, in June 2013, the Bureau and the FTC held a joint FTC-CFPB
Roundtable (FTC-CFPB Roundtable or Roundtable) on data integrity and
information flows in debt collection.\34\
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\30\ U.S. Fed. Trade Comm'n, Collecting Consumer Debts: The
Challenges of Change--A Workshop Report at iv (2009), available at
http://www.ftc.gov/bcp/workshops/debtcollection/dcwr.pdf.
\31\ U.S. Fed. Trade Comm'n, Repairing a Broken System (2010),
available at http://www.ftc.gov/os/2010/07/debtcollectionreport.pdf.
\32\ Additional information about the Workshop is available at
http://www.ftc.gov/bcp/workshops/debtcollectiontech.
\33\ U.S. Fed. Trade Comm'n, The Structure and Practices of the
Debt Buying Industry (2013), available at http://www.ftc.gov/os/2013/01/debtbuyingreport.pdf.
\34\ Additional information about the Roundtable is available at
http://www.ftc.gov/bcp/workshops/lifeofadebt.
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E. Federal Debt Collection Rulemaking
1. Rulemaking Authority
From the FDCPA's enactment in 1977 until its amendment by the Dodd-
Frank Act in 2010, the FDCPA expressly prohibited the FTC and any other
agency with enforcement responsibility from issuing implementing rules
with respect to the collection of debts by debt collectors.\35\ In
2010, the Dodd-Frank Act authorized the Bureau to ``prescribe rules
with respect to the collection of debts by debt collectors, as defined
in [the FDCPA].''\36\
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\35\ 15 U.S.C. 1692l(d). During that time period, the FDCPA
required the FTC by regulation to exempt from the requirements of
the FDCPA any class of debt collection practices within any State if
the FTC determined that under the law of that State that class of
debt collection practices was subject to requirements substantially
similar to those imposed by the FDCPA, and that there was adequate
provision for enforcement. 15 U.S.C. 1692o. The FTC issued its rule
on State exemptions in 1979. Fair Debt Collection Practices;
Procedures for State Application for Exemption, 44 FR 21005 (Apr. 9,
1979) (Interim rule promulgating 16 CFR pt. 901). Maine applied for
and received such an exemption from the FTC, effective March 26,
1996. Exemption from Sections 803-812 of the Fair Debt Collection
Practices Act granted to State of Maine, 60 FR 66972 (Dec. 27,
1995).
\36\ Section 814(d) of the FDCPA, 15 U.S.C. 1692l(d), as amended
by section 1089 of the Dodd-Frank Act. This provision expressly
excludes certain motor vehicle dealers from the scope of the
Bureau's rulemaking authority. Id. See section 1029 of the Dodd-
Frank Act, 12 U.S.C. 5519. The Dodd-Frank Act also transferred the
FTC's rule writing authority with respect to State exemptions to the
Bureau. See section 817 of the FDCPA, 15 U.S.C. 1692o, as amended by
section 1089 of the Dodd-Frank Act. The Bureau restated the FTC's
rule in 2011. Fair Debt Collection Practices Act (Regulation F), 76
FR 78121 (Dec. 16, 2011). The FTC rescinded its rule in 2012.
Rescission of Rules, 77 FR 22200 (Apr. 13, 2012).
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In addition to conferring rulemaking authority under the FDCPA, the
Dodd-Frank Act empowers the Bureau to issue regulations ``identifying
as unlawful unfair, deceptive, or abusive acts or practices in
connection with any transaction with a consumer for a consumer
financial product or service, or the offering of a consumer financial
product or service.'' \37\ Such rules ``may include requirements for
the purpose of preventing such acts or practices.'' \38\
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\37\ Section 1031(b) of the Dodd-Frank Act, 12 U.S.C. 5531(b).
\38\ Id.
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Section 1032 of the Dodd-Frank Act also grants the Bureau the
authority to ``prescribe rules to ensure that the features of any
consumer financial product or service, both initially and over the term
of the product or service are fully, accurately, and effectively
disclosed to consumers in a manner that permits consumers to understand
the costs, benefits, and risks associated with the product or service
in light of the facts and circumstances.'' \39\ ``In prescribing rules
under this section, the Bureau shall consider available evidence about
consumer awareness, understanding of, and responses to disclosures or
communications about the risks, costs, and benefits of consumer
financial products or services.'' \40\ The Bureau may include in such
rules a model form that may be used at the option of the covered person
for provision of the required disclosures and provide a safe
harbor.\41\ Such model forms must be validated through consumer
testing.\42\
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\39\ Section 1032(a) of the Dodd-Frank Act, 12 U.S.C. 5532(a).
\40\ Section 1032(c) of the Dodd-Frank Act, 12 U.S.C. 5532(c).
\41\ Section 1032(b) of the Dodd-Frank Act, 12 U.S.C. 5532(d).
\42\ Section 1032(b) of the Dodd-Frank Act, 12 U.S.C. 5532(b).
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Further, the Bureau has the authority to ``prescribe rules and
issue orders and guidance, as may be necessary or appropriate to enable
the Bureau to administer and carry out the purposes and objectives of
the Federal consumer financial laws, and to prevent evasions thereof.''
\43\ ``Federal consumer financial laws'' include the FDCPA and other
statutes enumerated in the Dodd-Frank Act, as well as the rules to
implement these statutes.\44\
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\43\ Section 1022(b) of the Dodd-Frank Act, 12 U.S.C. 5512(b).
\44\ Section 1002(14) of the Dodd-Frank Act, 12 U.S.C. 5481(14).
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The Bureau can exercise the Dodd-Frank Act rulemaking authority
above with regard to any ``covered person or service provider.'' \45\
``Covered person'' is defined as ``(A) any person that engages in
offering or providing a consumer financial product or service; and (B)
any affiliate of a person described in subparagraph (A) if such
affiliate acts as a service provider to such person.'' \46\ ``Covered
persons'' for purposes of the Dodd-Frank Act includes first-party
collectors and third-party collectors who are collecting or attempting
to collect on debts that arise out of consumer credit transactions.\47\
[[Page 67853]]
``Service provider'' is generally defined as ``any person that provides
a material service to a covered person in connection with the offering
or provision by such covered person of a consumer financial product or
service.'' \48\
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\45\ Section 1031(b) of the Dodd-Frank Act, 12 U.S.C. 5531(b).
\46\ Section 1002(6) of the Dodd-Frank Act, 12 U.S.C. 5481(6).
However, a person is not a ``service provider'' solely by virtue of
offering or providing to a covered person ``(i) a support service of
a type provided to businesses generally or a similar ministerial
service; or (ii) time or space for an advertisement for a consumer
financial product or service through print, newspaper, or electronic
media.'' Id.
\47\ ``Consumer financial product or service'' under the Dodd-
Frank Act means any ``financial product or service,'' either offered
or provided for use by consumers primarily for personal, family, or
household purposes, or, as applicable, delivered, offered, or
provided in connection with a consumer financial product or service.
Section 1002(5) of the Dodd-Frank Act, 12 U.S.C. 5481(5).
``Financial product or service'' includes ``extending credit and
servicing loans, including acquiring, purchasing, selling,
brokering, or other extension of credit (other than solely extending
commercial credit to a person who originates consumer credit
transactions).'' Section 1002(15)(A)(i) of the Dodd-Frank Act, 12
U.S.C. 5481(15)(A)(i); see Section 1002(7) of the Dodd-Frank Act, 12
U.S.C. 5481 (defining ``credit'' as ``the right granted by a person
to a consumer to defer payment of a debt, incur debt and defer its
payment, or purchase property or services and defer payment for such
purchase.)'' ``Financial product or service'' also includes
``collecting debt related to any consumer financial product or
service.'' Section 1002(15)(A)(x) of the Dodd-Frank Act, 12 U.S.C.
5481(15)(A)(x).
\48\ Section 1002(6) of the Dodd-Frank Act, 12 U.S.C. 5481(26).
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In addition, the Bureau has the authority to, after considering
enumerated factors,\49\ ``conditionally or unconditionally exempt any
class of covered persons, service providers, or consumer financial
products or services from any provision of this title, or from any rule
issued under this title, as the Bureau determines necessary or
appropriate to carry out the purposes and objectives of this title
[title X of the Dodd-Frank Act].'' \50\
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\49\ These factors include the total assets of the class of
covered persons, the volume of transactions involving consumer
financial products or services in which the class of covered persons
engages, and existing provisions of law which are applicable to the
consumer financial product or service and the extent to which such
provisions provide consumers with adequate protections. Section
1022(b)(3)(B) of the Dodd-Frank Act, 12 U.S.C. 5512(b)(3)(B).
\50\ Section 1022(b)(3)(B) of the Dodd-Frank Act, 12 U.S.C.
5512(b)(3).
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2. Federal Debt Collection Rulemaking Proceeding
The Bureau is issuing this ANPR to request information on a wide
range of debt collection practices and issues and to explore potential
debt collection rulemaking proceedings and other actions that the
Bureau could take to improve the systematic performance of the debt
collection market. The Bureau believes this information will be useful
for several reasons. First, significant consumer protection problems
relating to debt collection appear to persist despite various vigorous
government enforcement, supervision, policy development, and
educational efforts. While the Bureau is active in these efforts, the
Bureau believes it is appropriate to explore ways in which the new
rulemaking authorities afforded by the Dodd-Frank Act could be used to
address some of the longstanding problems discussed above.
Second, there have been technological developments, such as email
and text messaging, since the enactment of the FDCPA. These new
communication tools have created uncertainty as to the applicability of
the FDCPA in various contexts. Rulemaking permits the Bureau to
consider these technological issues in a comprehensive and careful
manner, fostering the considered development of standards that provide
adequate protection for consumers while reducing uncertainty for
collectors.
Third, the Bureau believes it is important to examine whether rules
covering the conduct of creditors collecting in their own names on
their own debts that arise out of consumer credit transactions are
warranted. As discussed above, Congress excluded such creditors from
the FDCPA in 1977, but it gave the Bureau authority under the Dodd-
Frank Act in 2010 to prescribe rules applicable to creditors. Congress
excluded such creditors in 1977 because it concluded that the risk of
reputational harm would be sufficient to deter creditors from engaging
in harmful debt collection practices.\51\ However, experience since
passage of the FDCPA suggests that first-party collections are in fact
a significant concern in their own right. For instance, the FTC
receives tens of thousands of debt collection complaints each year
concerning creditors.\52\ The Bureau likewise has brought a debt
collection enforcement action against a creditor,\53\ and it recently
issued a supervisory bulletin emphasizing that collectors, including
creditors, need to ensure that they are not engaging in unfair,
deceptive, or abusive, acts and practices in violation of the Dodd-
Frank Act.\54\ Moreover, many States have enacted consumer protection
statutes that apply to the collection activities of creditors,\55\ with
some of these statutes enacted after Congress excluded creditors in the
FDCPA. In addition to seeking input on whether any proposed rules
should cover creditors, the Bureau seeks input on the basic premise
that it should generally seek to harmonize any rules it develops for
third-party collectors and first-party collectors, except to the extent
that the law, facts, or policy considerations warrant different
treatment.
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\51\ As early as two years after the FDCPA's enactment, the FTC
submitted a report to Congress finding that ``there is little
difference between the practices employed by certain creditors and
those employed by debt collection firms. Indeed, there evidence that
the collection practices of creditors may be more egregious than
those practices engaged in by debt collection firms.'' U.S. Fed.
Trade Comm'n, 1979 FDCPA Annual Report at 7 (1979). The FTC
therefore ``urge[d] the Congress to reconsider its decision to
exempt creditors from the provisions of the Fair Debt Collection
Practices Act.'' Id.
\52\ In 2012, the FTC received 22,353 complaints about first-
party collectors, representing 4.3 percent of all complaints
received. In 2011, the FTC received 25,506 complaints about first-
party collectors, representing 4.9 percent of all complaints
received. In 2010, the FTC received 31,952 complaints first-party
collectors, representing 6.2 percent of all complaints received.
U.S. Bureau of Consumer Fin. Prot., Fair Debt Collection Practices
Act: CFPB Annual Report 2013 at 14 (2013), available at http://files.consumerfinance.gov/f/201303_cfpb_March_FDCPA_Report1.pdf;
U.S. Bureau of Consumer Fin. Prot., Fair Debt Collection Practices
Act: CFPB Annual Report 2012 at 7 (2012), available at http://files.consumerfinance.gov/f/201203_cfpb_FDCPA_annual_report.pdf.
\53\ See http://www.consumerfinance.gov/newsroom/cfpb-orders-american-express-to-pay-85-million-refund-to-consumers-harmed-by-illegal-credit-card-practices/.
\54\ See U.S. Bureau of Consumer Fin. Prot., CFPB Bulletin 2013-
07, Prohibition of Unfair, Deceptive, or Abusive Acts or Practices
in the Collection of Consumer Debts (July 10, 2013), available at
http://files.consumerfinance.gov/f/201307_cfpb_bulletin_unfair-deceptive-abusive-practices.pdf. See also U.S. Bureau of Consumer
Fin. Prot., CFPB Bulletin 2013-08, Representations Regarding Effect
of Debt Payments on Credit Reports and Scores (July 10, 2013),
available at http://files.consumerfinance.gov/f/201307_cfpb_bulletin_collections-consumer-credit.pdf.
\55\ See, e.g., Cal. Civ. Code Sec. Sec. 1788--1788.33,
1812.700--1812.072; Colo. Rev. Stat. Sec. Sec. 5-1-101--5-12-105,
12-14-101--12-14-137; Conn. Gen. Stat. Sec. 36a-647; Fla. Stat.
Sec. Sec. 559.55--559.785; Haw. Rev. Stat. Sec. Sec. 443B-1,
480D--480D-5; Kan. Stat. Ann. Sec. 16a-5-107; N.Y. Gen. Bus. Law
Sec. Sec. 600--604b; Okla. Stat. Sec. 14A, 5-107; Tex. Fin. Code
Ann. Sec. Sec. 392.001--392.404, 396.001--393.353; Vt. Stat. Ann.
tit. 9, Sec. 2451a--2461; Wis. Stat. Ann. Sec. 427.101--427.105.
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3. Scope of Proceeding
In this ANPR, the Bureau seeks information to help it determine
what rules and other Bureau actions, if any, would be useful under the
FDCPA and the Dodd-Frank Act. The Bureau has not yet decided the
precise scope and nature of rulemaking(s) it may conduct concerning
debt collection. Specifically, the Bureau seeks to learn more about
regulations that would best complement other governmental activities in
protecting consumers from problems in debt collection. The Bureau's
objective would be to protect consumers, yet not impose undue or
unnecessary burdens on the industry.
The Bureau is also interested in receiving information bearing on
how proposed rules should define and use relevant terms. The FDCPA
defines terms such as ``communication,'' \56\ ``creditor,'' \57\
``debt,'' \58\ and ``debt
[[Page 67854]]
collector.'' \59\ The FDCPA also uses terms such as ``regularly
collects or attempts to collect'' \60\ and ``in default.'' \61\ For
example, one influential FTC staff opinion letter addressed when an
account goes into ``default'' and when a collection agency's employees
become the creditor's de facto employees.\62\ Many court decisions and
agency documents interpret the FDCPA's terms to establish important
parameters for the FDCPA. Likewise, the Dodd-Frank Act defines terms
such as ``consumer financial product or service'' \63\ and ``credit''
\64\ and uses terms such as ``extending credit and servicing loans''
\65\ and ``collecting debt related to any consumer financial product or
service.'' \66\
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\56\ Section 803(2) of the FDCPA, 15 U.S.C. 1692a(2).
\57\ Section 803(4) of the FDCPA, 15 U.S.C. 1692a(4).
\58\ Section 803(5) of the FDCPA, 15 U.S.C. 1692a(5).
\59\ Section 803(6) of the FDCPA, 15 U.S.C. 1692a(6).
\60\ Section 803(6) of the FDCPA, 15 U.S.C. 1692a(6).
\61\ Section 803(6)(F)(iii) of the FDCPA, 15 U.S.C.
1692a(6)(F)(iii).
\62\ Letter from Thomas Kane, Attorney, U.S. Fed. Trade Comm'n,
to Richard de Mayo, President & CEO, TSYS Total Debt Management,
Inc. (May 23, 2002), available at http://www.ftc.gov/os/statutes/fdcpa/letters/demayo.htm.
\63\ Section 1002(5) of the Dodd-Frank Act, 12 U.S.C. 5481(5).
\64\ Section 1002(7) of the Dodd-Frank Act, 12 U.S.C. 5481(7).
\65\ Section 1002(15)(A)(i) of the Dodd-Frank Act, 12 U.S.C.
5481(15)(A)(i).
\66\ Section 1002(15)(A)(x) of the Dodd-Frank Act, 12 U.S.C.
5481(15)(A)(x).
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The way in which proposed rules might define ``collectors'' would
be critical to determining the scope of the proposed rules. The Bureau
is especially interested in information bearing on whether a rule under
the Dodd-Frank Act would be useful to protect consumers from the
conduct of creditors collecting in their own names on debts arising out
of consumer credit transactions.\67\ In particular, the Bureau seeks
comment on whether proposed rules should exclude certain types of debts
or subject them to different requirements. Some debt collection that is
subject to the FDCPA may not be subject to the Dodd-Frank Act's
prohibition against unfair, deceptive, or abusive acts or practices and
thus could be addressed in a proposed FDCPA rule but not a proposed
Dodd-Frank Act rule. For example, in its Larger Participant Rule, the
Bureau noted that some medical debt (i.e., that which did not arise
from an extension of credit within the meaning of the Dodd-Frank Act),
might not involve a consumer financial product or service.\68\
Municipal debts (e.g., tickets and fines) and some other types of debts
that may not arise out of an extension of credit may raise similar
issues. The Bureau seeks factual information regarding different types
of debts in collection to help it determine which debts involve a
consumer financial product or service.
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\67\ Note that in 2009, the FTC said that, because ``neither
consumer advocates nor industry representatives [at the FTC's 2007
debt collection workshop] recommended that the FDCPA be generally
expanded to cover creditors,'' ``there is no basis in the workshop
record for the Commission to assess the costs and benefits of such
an expansion of FDCPA coverage, including how such an expansion
would affect entities like national backs that are subject to
regulation by other federal agencies.'' 2009 FTC Modernization
Report at 2 n.1.
\68\ Defining Larger Participants of the Consumer Debt
Collection Market, 77 FR 65775, 65778 n.28, 65779 (Oct. 31, 2012)
(promulgating 12 CFR pt. 1090).
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The Bureau acknowledges that there are avenues other than
rulemaking through which to change or clarify the standards applicable
to the collections process. The statutory standards governing how
collectors must act in seeking to recover on debts have remained
largely unchanged since the FDCPA was enacted in 1977. Further, certain
changes that would be beneficial to consumers may be attainable only
through statutory revisions. Others may be best effectuated by issuing
guidance. The Bureau therefore encourages commenters to provide comment
on where rulemaking provides the preferred means of addressing a
particular issue and where statutory changes \69\ or guidance would be
a better approach. Finally, the Bureau seeks information about market
initiatives or other ways in which tools are already being implemented
to improve the debt collection marketplace.
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\69\ The Bureau notes that under section 815(a) of the FDCPA, it
is required to file annual reports with the Congress ``concerning
the administration of its functions under [the FDCPA], including
such recommendations as the Bureau deems necessary or appropriate.''
15 U.S.C. 1692m(a). Comments could be useful to the Bureau in
fulfilling this statutory requirement.
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The Bureau also recognizes that industry, academics, or others may
have already conducted consumer testing or other research that is
relevant to the topics addressed in this proceeding. The Bureau invites
comment on any consumer testing or other research concerning consumer
understanding or disclosures that has been undertaken. The Bureau also
invites comments on any model notices that industry organizations,
consumer groups, academics, or governmental entities have developed.
Such information would augment consumer testing the Bureau plans to do
in connection with validation notices and other required disclosures.
II. Transfer and Accessibility of Information Upon Sale and Placement
of Debts
This Part addresses transfers of information related to debt when
debts are sold or placed for collection with third parties. This Part
seeks information to assist in the development of proposed rules for
creditors, debt buyers, and third-party collectors to create a
comprehensive and coherent system for information about debts.
Incentives in the marketplace may not be sufficient in some
circumstances \70\ to result in collectors having adequate information.
A comprehensive and coherent system for information about debts would
make it more likely that those who demand that consumers pay debts have
accurate and complete information bearing on claims of indebtedness.
Having accurate and complete information, in turn, would facilitate
disclosing information to consumers through validation notices and
other methods, as well as assist in preventing false or misleading
claims as to who owes debts and how much is owed.
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\70\ For example, debt collectors seeking to maximize profits
may not acquire sufficient information about the amount of debts.
Owners of debts might be able to create or compile additional
information that would allow debt collectors to accurately calculate
the outstanding balance on debts in all, or virtually all,
circumstances. Collectors nevertheless may not acquire this
information for various reasons. Collectors often may accept
payments for debts that are substantially less than the outstanding
balance, so it may not benefit collectors substantially to have
additional information that allows them to determine the precise
amount of the balance of debts. Even if collectors would benefit
from additional information that permits them to calculate the
outstanding balance more accurately, the cost to the collector of
acquiring this additional information may still exceed its benefit
to the collector, while if the benefits to consumers were considered
the overall value of the information may exceed the cost.
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A. Information Transferred Between Debt Owners and Debt Buyers or
Third-Party Collectors
Debt owners, collectors, consumer advocates, and the FTC have all
raised concerns about the adequacy of information transferred with
debts when debts are placed with a collector or sold to a debt buyer.
In the 2009 FTC Modernization Report, the Commission identified
problems with the flow of information in the debt collection system as
a significant issue, noting repercussions from these problems for both
debt collectors and consumers.\71\ The FTC also observed that
technological innovations over the past thirty years have exponentially
increased the ability of creditors and
[[Page 67855]]
debt collectors to obtain, store, and transfer data about consumers and
their debts.\72\
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\71\ 2009 FTC Modernization Report at 21-24.
\72\ Id. at 17.
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The Bureau believes that improving the integrity and flow of
information within the debt collection system is of critical
importance. In addition to the FTC's work, consumer groups have also
raised concerns about the lack of information available to debt buyers
and third-party collectors.\73\ Consumer groups have shed light on the
impact that the lack of information has on debt collection litigation,
a topic discussed in greater depth in Part VII.\74\ Concerns about the
adequacy of information available to participants in the system served
as the impetus for the recent FTC-CFPB Roundtable that examined the
integrity and flow of debt-related information throughout the debt
collection system.
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\73\ E.g., Rick Jurgens & Robert J. Hobbs, Nat'l Consumer Law
Ctr., The Debt Machine: How the Collection Industry Hounds Consumers
and Overwhelms Courts at 22 (2010), available at http://www.nclc.org/images/pdf/pr-reports/debt-machine.pdf; Legal Aid
Society, et al., Debt Deception: How Debt Buyers Abuse the Legal
System to Prey on Lower-Income New Yorkers at 5 (2010), available at
http://www.nedap.org/pressroom/documents/DEBT_DECEPTION_FINAL_WEB.pdf.
\74\ See, e.g., New York Appleseed, Due Process and Consumer
Debt: Eliminating Barriers to Justice in Consumer Credit Cases at
20, available at http://ftc.gov/os/comments/debtcollectroundtable3/545921-00031.pdf (only 1 percent of complaints reviewed ``included
any documents relating to proof of the underlying agreement''); Debt
Deception at 6, 10 (suggesting that 35 percent of debt buyer cases
were meritless).
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With respect to the placement of debts with third-party collectors,
participants at the Roundtable stated that the amount of information
provided by a debt owner placing a debt with a collector may vary
significantly depending on the sophistication of the debt owner and the
collector.\75\ More sophisticated debt owners and collectors typically
share information through electronic interfaces that allow both parties
to access data maintained or submitted by either party.\76\
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\75\ U.S. Bureau of Consumer Fin. Prot. & U.S. Fed. Trade
Comm'n, Roundtable on Data Integrity in Debt Collection: Life of a
Debt at 109 (June 6, 2013) (Transcript of 2013 FTC-CFPB Roundtable).
\76\ Id.
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With respect to debt sales, the FTC noted in its 2013 Debt Buyer
Report that in addition to the information the FDCPA currently requires
debt collectors to include with the validation notices, debt buyers
typically receive or are aware of the name of the original
creditor,\77\ as well as other information such as the original
creditor's account number, the debtor's Social Security number, the
date of last payment, and the date of charge-off.\78\ The Commission's
report also examined the transfer and availability of debt-related
documents (sometimes referred to as ``media'') when debts are
purchased. Examples of such documentation might include electronic
copies of original signed agreements, periodic statements, or payment
receipts. According to the report, debt buyers obtain few, if any,
underlying documents about a debt at the time of purchase.\79\ Debt
buyers are sometimes able to obtain account documentation for the debts
they purchase, but debt sellers often limit or charge for access to
those documents.\80\ In the absence of this information, debt buyers
may try to collect from the wrong consumer or collect the wrong amount.
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\77\ 2013 FTC Debt Buyer Report, at ii. Under the FDCPA, debt
collectors are required to provide the name and address of the
original creditor if different from the current creditor to any
consumer who requests such information in writing within 30 days of
receipt of the validation notice. 15 U.S.C. 1692g(a)(5).
\78\ 2013 FTC Debt Buyer Report at 34-35. However, the FTC
further noted that, in its experience, debt buyers generally do not
include these types of information in their validation notices. Id.
at 36.
\79\ Id. at 35-36.
\80\ Id. at 39-40.
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In sum, it is widely recognized that problems with the flow of
information in the debt collection system is a significant consumer
protection concern. At the Roundtable, many participants expressed
support for national standards related to what information should be
transferred with a debt.\81\ However, various participants expressed
different ideas about what specific information should be
transferred.\82\ The Bureau is considering using its rulemaking
authority to develop requirements related to the transfer of specified
information or documents as part of the sale of a debt or the placement
of a debt with a third-party collector.
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\81\ Transcript of 2013 FTC-CFPB Roundtable at 103, 119, 144,
159, 171, 174, 196.
\82\ Id. at 26-37.
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Q1: What data are available regarding the information that is
transferred during the sale of debt or the placement of debt with a
third-party collector and does the information transferred vary by type
of debt (e.g., credit card, mortgage, student loan, auto loan)? What
data are available regarding the information that third-party debt
collectors acquire during their collection activities and provide to
debt owners?
Q2: Does the cost of a debt that is sold vary based on the
information provided with the debt by the seller? Are there certain
types of debts that are not sold, such as debts a consumer has
disputed, decedent debt, or other categories of debt?
Q3: The OCC recently released a statement of best practices in debt
sales which recommends that national banks monitor debt buyers after
sales are completed ``to help control and limit legal and reputation
risk.'' \83\ What monitoring or oversight of debt buyers do creditors
currently undertake or should they undertake after debt sales are
completed or after debts are placed with third parties for collection?
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\83\ Office of the Comptroller of the Currency, Statement of the
Office of the Comptroller of the Currency Provided to the
Subcommittee on Financial Institutions and Consumer Protection
Senate Committee on Banking, Housing, and Urban Affairs, Shining a
Light on the Consumer Debt Industry at 12 (July 17, 2013), available
at http://www.occ.gov/news-issuances/congressional-testimony/2013/pub-test-2013-116-oral.pdf.
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Q4: If debt buyers resell debts, do purchasers typically receive or
have access to the same information as the reseller? Do purchasers from
resellers typically receive or have access to information or
documentation from the reseller or from the original creditor? Do
conditions or limitations on purchasers from resellers obtaining
information from the resellers or the original creditors raise any
problems or concerns?
Information Related to FDCPA Provisions
Q5: To what extent do debt owners transfer or make available to
debt buyers or third-party collectors information relating to: Disputes
\84\ (e.g., that a debt had been disputed, the nature of the dispute,
whether the debt had or had not been verified, the manner in which it
was verified, and any information or documentation provided by the
consumer with the dispute); unusual or inconvenient places or times
\85\ for communications with the consumer (e.g., at the consumer's
place of employment); \86\ cease communications requests; \87\ or
attorney representation \88\? What would be the benefits and costs of
debt buyers and third-party collectors obtaining or obtaining access to
this information upon sale or placement of the debt? To what extent do
third-party debt collectors provide this information to
[[Page 67856]]
debt owners? What would be the costs and benefits of third-party
collectors providing this information to debt owners?
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\84\ Information about the requirements related to disputes
under both the FDCPA and FCRA are discussed below in Part III.B.
\85\ Collection at inconvenient places and times is discussed
below in Part IV.C.
\86\ Collectors contacting consumers at work is discussed below
in Part IV.C.
\87\ Cease communications requests are discussed below in Part
IV.E.
\88\ Collector communications with consumers represented by
counsel is discussed below in Part IV.C.
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Additional Information
Q6: To what extent do debt owners transfer or make available to
debt buyers or third-party collectors information relating to: The
consumer's understanding of other languages (if the consumer has
limited English proficiency); the consumer's status as a servicemember;
the consumer's income source; or the fact that a consumer is deceased?
What would be the benefits and costs of debt buyers and third-party
collectors obtaining or obtaining access to this information upon sale
or placement of the debt? To what extent do third-party debt collectors
provide this information to debt owners? What would be the costs and
benefits of third-party collectors providing this information to debt
owners?
Q7: Is there other information that has not yet been mentioned that
should be required to be transferred or made available with a debt when
it is sold or placed for collection with a third-party collector? What
would be the costs and benefits of debt buyers and third-party
collectors obtaining or obtaining access to this information upon the
sale or placement of a debt?
Documentation (Media)
Q8: Please describe debt collectors' access rights to documentation
such as account statements, terms and conditions, account applications,
payment history documents, etc. What restrictions are most commonly
placed on these access rights? Do these restrictions prevent or hinder
debt collectors from accessing documentation?
Q9: Part III.A below solicits comment on whether the last periodic
statement or billing statement provided by the original creditor or
mortgage servicer should be provided to consumers in connection with
the validation notice. If these documents are not required in
connection with the validation notice, what would be the costs and
benefits of debt buyers and third-party collectors obtaining or
obtaining access to this documentation when the debt is sold or placed
for collection?
Q10: Are there other types of documents that would be useful for
debt buyers and third-party collectors in their interactions with
consumers? What types of documentation would it be most beneficial to
consumers for debt buyers to have or have access to? For instance,
would it be beneficial to consumers for debt buyers to have: (1) A
contract or other statement evidencing the original transaction; (2) a
statement showing all charges and credits after the last payment or
charge-off; or (3) a charge-off statement? What would be the costs and
benefits of debt buyers and third-party collectors obtaining or
obtaining access to each of these types of documentation when a debt is
sold or placed for collection?
Q11: What privacy and data security concerns should the Bureau
consider when owners of debts provide or debt buyers and third-party
collectors obtain or obtain access to documentation and information
when a debt is sold or placed for collection?
Technological Advances. In the 2009 FTC Modernization Report, the
Commission noted that increases in data storage capacity can enable
document sharing between creditors and collection agencies, or between
creditors and debt buyers.\89\ A number of commenters at the recent
FTC-CFPB Roundtable also pointed to technological advances as a means
to better enable creditors, debt collectors, and debt buyers to share
information and documentation.\90\ At the same time, centralizing such
consumer data raises potential data privacy and security risks, as well
as the costs of transferring documents and other information.\91\
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\89\ 2009 FTC Modernization Report at 17-18.
\90\ Transcript of 2013 FTC-CFPB Roundtable at 103-04, 120-21,
130-31, 135.
\91\ 2009 FTC Modernization Report at 23.
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Q12: Would sharing documentation and information about debts
through a centralized repository be useful and cost effective for
industry participants? If repositories are used, what would be the
costs and benefits of allowing consumers access to the documentation
and information about their debts in the repository and of creating
unique identifiers for each debt to assist in the process of tracking
information related to a debt? What privacy and data security concerns
would be raised by the use of data repositories and by permitting
consumer and debt collector access? Would such concerns be mitigated by
requiring that repositories meet certain privacy and security standards
or register with the CFPB? What measures, if any, should the Bureau
consider taking in proposed rules or otherwise to facilitate the debt
collection industry's use of repositories? What rights, if any, should
consumers have to see, dispute, and obtain correction of information in
such a repository?
B. Information Debt Owner, Debt Buyer, or Third-Party Collector
Provides to Consumer Upon Sale or Placement of Debt
The FDCPA does not currently require any notification to consumers
at the time that a consumer's debt is sold or placed with a third party
for collection. Instead, consumers often become aware that their debts
have been sold or placed with a third party for collection because they
receive a communication to collect the debt or a written validation
notice from the debt buyer or third-party collector. Consumers may have
difficulty recognizing a debt or knowing whom to pay because a debt may
be sold and resold multiple times or placed for collection multiple
times with different third-party collectors, with the result that a
consumer may receive communications from several debt collectors,
possibly naming several debt owners, over a period of several years.
Some commenters have suggested that one way to mitigate that confusion
would be to require notification to the consumer when a debt is sold or
placed for collection.
Q13: Do debt owners, buyers of debt, or third-party collectors
currently notify consumers upon sale or placement of a debt, other than
through the statutorily-required validation notices or through required
mortgage transfer notices? \92\
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\92\ Federal consumer financial laws currently require notices
to consumers of mortgage transfers. Under the Truth in Lending Act's
(TILA's) implementing Regulation Z, a mortgage transfer notice must
be sent by each covered person. The transfer notice must include the
date of the transfer, contact information for the covered person and
an agent or party authorized to receive notice of the right to
rescind or resolve issues concerning the consumer's payments on the
loan, and whether ownership is or may be recorded in public records
or has not been recorded in public records. 12 CFR 1026.39. Further,
under the Real Estate Settlement Procedures Act's (RESPA's)
implementing Regulation X, a mortgage servicer transfer servicing
notice must be sent both by the transferor prior to the transfer,
and by the transferee after the transfer (though they can be
combined in one notice). That servicing transfer notice must include
the effective date of the transfer, the contact information for both
servicers, the date on which the transferor will cease accepting
payments, and other statements of the consumer's rights. 12 CFR
1024.21. The Regulation Z and Regulation X notices can be combined
where applicable. 12 CFR pt. 1026, Supp. I, Comment 1026.39(b)(1)-1.
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Q14: What would be the costs and benefits of requiring notification
to a consumer when a debt has been sold or placed with a third party
for collection? If such a notice were required, what additional
information should be provided to the consumer and what would be the
costs and benefits of providing such additional information?
Q15: What would be the respective costs and benefits of requiring a
debt
[[Page 67857]]
buyer or a debt owner to provide notice that a debt has been sold? What
would be the respective costs and benefits of requiring that a third-
party collector or a debt owner provide notice that a debt has been
placed with a third party for collection?
III. Validation Notices, Disputes, and Verifications (Section 809 of
the FDCPA)
This Part seeks information related to the validation notices
provided to consumers and the obligations of debt collectors with
respect to consumer disputes. Part III.A discusses the content, form,
and delivery of validation notices under the FDCPA. Part III.B solicits
comment on the FDCPA dispute process, including the process to submit
disputes, the requirements of investigations, and the processes used to
verify debts.
A. Validation Notices
FDCPA section 809(a) generally requires a debt collector, within
five days of the first communication with a consumer in connection with
the collection of any debt, to provide the following information in
writing to the consumer:
1. The amount of debt;
2. The name of the creditor to whom the debt is owed;
3. A statement that unless the consumer disputes the validity of
the debt or any portion of it within 30 days after receipt of the
notice, the debt will be considered to be valid by the debt collector;
4. A statement that if the consumer notifies the debt collector in
writing within the 30-day period that the debt, or any portion of it,
is disputed, the debt collector will obtain verification of the debt or
a copy of a judgment against the consumer and will mail a copy of such
verification or judgment to the consumer;
5. A statement that upon written request within 30 days of the
notice, the collector will provide the name and address of the original
creditor, if different from the current creditor.
The above notice is typically referred to as the ``validation
notice'' or ``g notice'' (since the notice requirement is codified at
15 U.S.C. 1692(g)). Under FDCPA section 809(a), a debt collector is not
required to provide this validation notice in writing within five days
of the first communication with a consumer in connection with the
collection of any debt if (1) the debt collector provided the
information that is required in the validation notice in the initial
communication to the consumer; or (2) the consumer has paid the
debt.\93\
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\93\ 15 U.S.C. 1692g(a).
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The legislative history of FDCPA section 809 indicates that the
principal purpose for the validation notice and related dispute rights
was to ``eliminate the recurring problem of debt collectors dunning the
wrong person or attempting to collect debts which the consumer has
already paid.'' \94\ Through FDCPA section 809, Congress intended to
provide consumers with a means of addressing such mistakes by requiring
collectors to provide debtors with some basic information about the
alleged debt and about the consumer's right to dispute it. In addition,
validation notices educate consumers about their FDCPA rights.\95\
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\94\ S. Rept. 382, 95th Cong. at 4 (1977).
\95\ Jacobson v. Healthcare Fin. Services, Inc., 516 F.3d 85, 95
(2d Cir. 2008) (validation notices ``make the rights and obligations
of a potentially hapless debtor as pellucid as possible''); see also
Wilson v. Quadramed Corp., 225 F.3d 350, 354 (3d Cir. 2000); Miller
v. Payco-Gen. Am. Credits, Inc., 943 F.2d 482, 484 (4th Cir. 1991);
Swanson v. S. Oregon Credit Serv., Inc., 869 F.2d 1222, 1225 (9th
Cir. 1988).
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1. Information in Validation Notices Related to Recognizing the Debt
Debt collectors must disclose two pieces of information about the
specific debt in validation notices: (1) The name of the creditor to
whom the debt is owed, and (2) the amount of the debt. Concerns have
been raised by the FTC and consumer groups that this information is not
sufficient in many cases to allow consumers to recognize whether the
debts being collected are their own because consumers may not recognize
the name of the debt buyer that currently owns the debt. In addition,
the amount of the debt shown on the validation notice may not be
recognizable to consumers because it may differ from the amount of debt
that was disclosed on the last periodic statement or billing statement
sent by the original creditor because original creditors, debt
collectors, and debt buyers sometimes add fees and interest to the
amount of the debt that appeared on the last periodic statement,
billing statement, or other documentation that consumers received.
a. Current Owner of the Debt
As discussed above, under FDCPA section 809(a), a debt collector
must disclose in the validation notice the name of the current owner of
the debt.\96\
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\96\ 15 U.S.C. 1692g(a).
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Q16: Where the current owner of the debt is not the original
creditor, should additional information about the current owner, such
as the current owner's address, telephone number or other contact
information, be disclosed in the validation notice or upon request?
Would this information be helpful to consumers so that they may contact
the current owner directly about the debt, or about the conduct of its
third-party collector?
b. Itemization of Total Amount of Debt
As discussed above, the amount of the debt shown on the validation
notice may not be recognizable to consumers because original creditors,
debt collectors, and debt buyers sometimes add fees and interest to the
amount of the debt that appeared on the last periodic statement,
billing statement, or other documentation that consumers received. In
its 2009 Modernization Report, the FTC recommended that debt collectors
be required to include in all validation notices an itemization of the
total debt using the following categories: (1) Principal; (2) total of
all interest; and (3) total of all fees and other charges added. The
FTC concluded that this itemization would benefit consumers and debt
collectors, insofar as consumers would be more likely to recognize
debts they have incurred and to identify debts that are not theirs.
Once they recognize a debt, consumers might be more willing to discuss
payment arrangements. The FTC also stated that debt buyers, in
particular, would benefit from obtaining such an itemization of debts
they purchase because they must distinguish between principal and
interest to prepare Form 1099-C's to comply with section 6050P of the
Internal Revenue Code.\97\
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\97\ 2009 FTC Modernization Report at 29-30.
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For certain types of debts, such as closed-end mortgage loans, the
amount of outstanding principal is disclosed on periodic statements for
those loans.\98\ For other types of debts, such as credit card debts,
consumers may not understand the term ``principal'' and how it relates
to amounts shown on periodic statements or billing statements provided
by the original creditor.\99\
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\98\ For example, beginning January 10, 2014, creditors,
assignees, and servicers generally will be required under Regulation
Z to provide periodic statements for most closed-end consumer
mortgage loans secured by a dwelling. 12 CFR 1026.41; 78 FR 10902,
11007 (Feb. 14, 2013). The periodic statements for these loans must
include the outstanding principal on the loan. 12 CFR
1026.41(d)(7)(i); 78 FR 10902, 11007 (Feb. 14, 2013).
\99\ For example, for credit card accounts or other open-end
credit, whether a charge is ``interest'' or a ``fee'' or
``principal'' may change over time, depending on whether the
interest or fee is capitalized. For credit card accounts, if
interest or fees charged in a billing cycle are not paid by the end
of the billing cycle, these charges typically are added to the
outstanding balance as principal. Creditors typically do not label
the outstanding account balance on periodic statements given for
credit card accounts or other open-end credit using the term
``principal.''
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[[Page 67858]]
The Bureau specifically solicits comments on the alternatives
discussed below for itemizing the total amount of debt. The Bureau also
solicits comments on whether there are other alternatives it should
consider. For each alternative, the Bureau solicits comment on the
benefits and costs of providing each itemization, including the costs
for creditors and debt collectors in tracking or collecting data and in
providing this itemization on the validation notice. The Bureau also
solicits comment on: (1) The types of debts for which or situation in
which each alternative would be most useful to consumers and (2) how
should relevant terms for each alternative should be defined.
Alternative 1: (1) Principal; (2) interest; and (3) fees and other
charges?
Alternative 2: (1) The amount of debt at the date of charge-off or
default; (2) total of interest added after the date of charge-off or
default; (3) total of all fees or other charges added or credits posted
after the date of charge-off or default; and (4) any payments or
credits received after the date of charge-off or default.
Alternative 3: (1) The amount due shown on the last periodic
statement given for the account; (2) any additional outstanding balance
that became due after the closing date of such periodic statement; (3)
any interest imposed after the closing date of such periodic statement;
(4) any fees or other charges imposed after the closing date of such
periodic statement; and (5) any payments or credits received after the
closing date of such periodic statement.
Other alternatives.
Q17: Are there other approaches to itemization of the total amount
of debt on validation notices that the Bureau should consider, and if
so, for what type of debts should this itemization apply? For example,
the Bureau recognizes that the three alternatives described above might
work best for credit-based debt. Are there other approaches that might
work better for other types of debts? Are there advantages to
consistency in itemization across different types of debt or would it
be more helpful, for consumers and collectors alike, to require
different itemizations standards depending on the type of debt? Or
could a standard set of information be required, with certain
augmentation for specific types of debt?
c. Additional Information
Q18: What additional information should be included in the
validation notice to help consumers recognize whether the debts being
collected are owed by them or respond to collection activity? For
example, which of the following pieces of information would be most
useful to consumers?
The name and address of the alleged debtor to whom the
notice is sent
The names and addresses of joint borrowers
A partial Social Security number of the alleged debtor
The account number used by the original creditor or a
truncated version of the account number
Other identifying information
The name of the original creditor (if different from
current owner)
The name of the brand associated with the debt, where
different from the original creditor (e.g., the name of a retail
partner on a private label or co-branded credit card, or the name of
the person providing the periodic statement for closed-end mortgages)
The name of the doctor, medical group, or hospital for
medical bills ancillary to their provision of services (e.g., a testing
laboratory)
Type of debt (e.g., student loan, auto loan, etc.)
Date and amount of last payment by the consumer on the
debt
Copy of last periodic statement
To what extent is this information available to debt collectors and
debt buyers and what would be the cost of requiring that it be included
in the validation notice? What privacy concerns would be implicated by
providing any of this information (e.g., the name and addresses of
joint borrowers, partial Social Security numbers, and account numbers)
and how might the Bureau address such concerns?
2. Statements of Consumers' Rights Set Forth in the FDCPA
Under FDCPA section 809(a), debt collectors must disclose in the
validation notice two statements regarding the consumer's right to
dispute the debt. Specifically, the validation notice must include a
statement that if the consumer notifies the debt collector in writing
within the 30-day period that the debt, or any portion of it, is
disputed, the debt collector will obtain verification of the debt or a
copy of a judgment against the consumer and will mail a copy of such
verification or judgment to the consumer. The validation notice must
also include a statement that unless the consumer disputes the validity
of the debt or any portion of it within 30 days after receipt of the
notice, the debt collector will consider the debt valid.
Q19: Are the statements currently provided to consumers regarding
these FDCPA rights understandable to consumers? If consumers do not
understand the statements that collectors currently include on
validation notices as to their FDCPA rights, please provide suggested
language for how these statements should be changed to make them easier
to understand.
The FDCPA does not require debt collectors to notify consumers
that: (1) Disputing a debt will suspend collection until it is
verified, and (2) consumers can request that collectors cease
communicating with them. In its 2009 Modernization Report, the FTC
noted that few, if any, debt collectors appear to voluntarily disclose
this information to consumers. \100\
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\100\ 2009 FTC Modernization Report at 26.
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Q20: Should consumers be informed in the validation notice that, if
they send a timely written dispute or request for verification, the
debt collector must suspend collection efforts until it has provided
the verification in writing? Would any other information be useful to
consumers in understanding this right? Should consumers be informed in
the validation notice of their right to request that debt collectors
cease communication with them?
Q21: Are there any other rights provided in the FDCPA that should
be described in the validation notices? For example, would it be
helpful to consumers for the validation notice to state that the
consumer has the right to refer the debt collector to the consumer's
attorney, to inform a debt collector about inconvenient times to be
contacted, or to advise the collector that the consumer's employer
prohibits the consumer from receiving communications at work? If so,
please identify the costs and benefits of including each right that
should be included in the validation notices.
Q22: What would be the costs and benefits of disclosing FDCPA
rights in the validation notice itself, as opposed to the Bureau
developing a separate ``summary of rights'' document that debt
collectors would include with validation notices? \101\
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\101\ See 12 CFR pt. 1022, App. K for an example of a stand-
alone document summarizing rights under the FCRA.
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3. Format and Delivery of Validation Notices
a. Format
FDCPA section 809(a) does not impose formatting requirements for
[[Page 67859]]
validation notices, such as form, sequence, location, grouping,
segregation, or type-size requirements for the information in the
notice.\102\ In addition, FDCPA section 809(a) does not expressly
prohibit debt collectors from adding language to the written validation
notice with the mandatory disclosures. Nevertheless, FDCPA section
809(b) expressly states that ``[a]ny collection activities and
communication during the 30-day period [to dispute the debt] may not
overshadow or be inconsistent with the disclosure of the consumer's
right to dispute the debt or request the name and address of the
original creditor.'' \103\
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\102\ The FTC in its Commentary indicated that an illegible
notice, however, does not comply with FDCPA section 809. FTC
Commentary section 809(a), comment 3.
\103\ 15 U.S.C. 1692g(b).
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Debt collectors typically add language to the written validation
notice along with the mandatory disclosures, such as a demand for
payment.
Q23: What additional information do debt collectors typically
include on or with validation notices beyond the mandatory disclosures?
Do debt collectors typically include State law disclosures on the
validation notices? If so, do debt collectors typically use a
validation notice that contains the State law disclosures from multiple
States, or do debt collectors typically tailor validation notices for
each State?
b. Foreign Language Notices
According to the U.S. Census, approximately 34 million Americans
speak Spanish at home. Of those, approximately 10 million speak English
less than ``well,'' making it the largest linguistic population with
limited English proficiency (LEP) in the United States.\104\ Many other
LEP consumers speak languages at home other than Spanish, but no other
individual language is nearly as prevalent.\105\
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\104\ See U.S. Census Bureau, Language Use, available at http://www.census.gov/hhes/socdemo/language/.
\105\ For example, LEP consumers speaking Chinese, Korean, and
Vietnamese, the next three largest LEP linguistic populations,
number in the hundreds of thousands. Id.
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Recognizing that only providing forms and notices in English may
impede these populations' ability to understand written material, some
financial service providers, including debt collectors, apparently
provide forms and notices in languages other than English. For example,
some providers will convey disclosures to a consumer in Spanish if the
consumer initiated the credit application in Spanish. Other providers
may allow consumers to choose the language they would like to use in
communicating with collectors.
Q24: How common is it for collectors to communicate with consumers
or provide validation notices in languages other than English?
Q25: If collectors were sometimes required to provide validation
notices in languages other than English, what should trigger that
obligation? For example, should it be triggered by the request of the
consumer, by information from the original creditor indicating that the
consumer communicated in a language other than English, by the language
used in the original credit contract, or by information gathered by the
collector during the course of its dealing with the consumer? What
would be the costs of requiring validation notices in languages other
than English using each of these triggers?
c. Method of Delivery of Validation Notices
(1) Electronic Delivery of the Validation Notice
The Electronic Signatures in Global and National Commerce Act (E-
Sign Act) prescribes a procedure by which firms may provide to
consumers electronically disclosures that are required to ``be provided
or made available to a consumer in writing.'' In essence, that statute
requires affirmative consent from consumers to receiving disclosures
electronically after they demonstrate they can access the disclosure
electronically and after they have been informed of their right to a
paper copy.\106\ The statute also gives Federal regulatory agencies the
ability to interpret, within certain limits, the E-Sign Act with
respect to other statutes over which they have rulemaking
authority.\107\
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\106\ 15 U.S.C. 7001(c)(1).
\107\ 15 U.S.C. 7004(b).
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Q26: Do collectors currently provide validation notices to
consumers electronically? If so, in what circumstances, by what
electronic media (e.g., email), and in what format (e.g., PDF, HTML,
plain text)?
Q27: Does the consent regime under the E-Sign Act work well for
electronic delivery of validation notices? If a consumer consents to
electronic disclosures pursuant to the E-Sign Act prior to the account
being moved to collection, are debt collectors currently requiring E-
Sign consent again when the account moves into collection? When the
account is sold or placed with a new collector, is the new collector
currently requiring a new E-Sign consent? If a consumer consents to
electronic correspondence, what process do debt collectors currently
require to revoke this consent?
(2) Consumers' Use of Electronic Means To Fulfill Writing Requirements
for Exercising Rights Described in Validation Notice
To be effective under FDCPA section 809(a)(4), a consumer's right
to dispute the debt must be exercised in writing.\108\ Likewise, under
FDCPA section 809(a)(5), the collector must provide the consumer with
the name of the original creditor only if the consumer submits a
written request within 30 days after receiving a validation
notice.\109\ Also, under FDCPA section 805(c), consumers can request in
writing that collectors cease communicating with them. The purpose of
requiring that such communications be in writing appears to be to
establish a written record of the request.
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\108\ 15 U.S.C. 1692g(a)(4).
\109\ 15 U.S.C. 1692g(a)(5).
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Q28: Do debt collectors currently treat emails, text messages, or
other forms of electronic communications as satisfying the ``in
writing'' requirement to exercise the three rights described above? If
so, what would be the costs and benefits of treating them as satisfying
the ``in writing'' requirement?
(3) Consumer Testing of Validation Notices
Q29: Have industry organizations, consumer groups, academics, or
governmental entities developed model validation notices? Have any of
these entities or individuals developed a model summary of rights under
the FDCPA that is being given to consumers to explain their rights, or
a model summary of rights under State debt collection laws? Which of
these models, if any, should the Bureau consider in developing proposed
rules?
Q30: Is there consumer testing or other research concerning
consumer understanding or disclosures relating to validation notices
that the Bureau should consider? If so, please provide any data
collected or reports summarizing such data.
B. Disputes and Verification
The adoption of standards for transferring information about debts
and for compiling and presenting clarified and enhanced validation
notices may make it more likely that collectors will try to collect the
correct amounts from the correct consumers. Currently, there are many
circumstances in which consumers deny or question that they are the
debtor, that they owe the debt, or that the amount sought is accurate,
as
[[Page 67860]]
evidenced by the significant volume of these complaints to the FTC and
the Bureau.
Under the FDCPA, consumers have the right to dispute and receive
verification of the debts that collectors attempt to collect and many
consumers exercise this right.\110\ Section 809(b) of the FDCPA
provides that if a consumer disputes a debt in writing within 30 days
of receiving the validation notice, a debt collector must stop
collection of the debt until the collector obtains verification of the
debt or a copy of a judgment against the consumer and mails it to the
consumer.\111\ The FDCPA does not elaborate on the standards for
investigating a dispute, nor does it expressly define what constitutes
``verification of the debt.''
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\110\ 15 U.S.C. 1692g. Although the Bureau is not aware of any
comprehensive data regarding what percentage of debts are disputed,
the data available indicate that a significant number of consumers
avail themselves of their FDCPA dispute rights each year. In its
2013 Debt Buyer Report, the FTC found that consumers disputed 3.2
percent of all accounts on which debt buyers attempted to collect
themselves. The FTC noted that this dispute figure likely
underestimated the prevalence of information problems, but that if
it were applied across the entire debt buying industry, it would
result in about one million disputed debts per year. 2013 FTC Debt
Buyer Report at iv. The total number of disputed debts for the
entire debt collection industry is likely to be substantially higher
because it would include disputes of debt on which third-party
collectors, not just debt buyers, seek to recover.
\111\ 15 U.S.C. 1692g(b). Notably, the FDCPA contains other
provisions related to consumer disputes that are not dependent upon
when the debt was disputed or whether the dispute was made in
writing. For example, section 807(8) requires that a debt collector
communicate that a debt is disputed if it shares credit information
about that debt, and section 810 provides that if a consumer owes
multiple debts and makes a single payment, a debt collector cannot
apply the payment to a disputed debt. 15 U.S.C. 1692e(8), 1692h. In
addition to obligations under the FDCPA related to disputes, debt
collectors that furnish information on debts to CRAs are also
subject to dispute obligations under the FCRA, which imposes
different requirements than the FDCPA.
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The Bureau is interested in information bearing on the adequacy of
current practices to investigate collection disputes and verify the
debt under the FDCPA. According to the 2009 FTC Modernization Report,
``many collectors currently do little more to verify debts than confirm
that their information accurately reflects what they received from the
creditor,'' which is unlikely to reveal whether collectors are trying
to collect from the wrong consumer, collect the wrong amount, or
otherwise misrepresent the debt.\112\ The FTC further noted that to
verify a debt, some debt collectors only provide consumers with a
written statement that the amount being demanded is what the creditor
claims is owed. To address these concerns, the FTC recommended that if
a consumer disputes a debt, the debt collector should be required to
undertake a ``reasonable'' investigation that is responsive to the
specific dispute raised by the consumer.\113\ At the recent FTC-CFPB
Roundtable, a number of participants raised similar concerns about the
limited investigations collectors conduct when consumers dispute
debts.\114\
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\112\ 2009 FTC Modernization Report, at v.
\113\ Id. Recent FTC consent orders have also addressed the
issue of how collectors subject to such orders must investigate debt
disputes in the future. For example, the FTC's recent Expert Global
Solutions consent order defines how the debt collector defendant
must conduct each investigation, and includes consideration of
specific information from the original creditor, the alleged debtor,
third parties such as skip tracers, and from its own systems.
Stipulated Order at 5-6, United States v. Expert Global Solutions,
Inc., No. 3-13CV2611-M (N.D. Tex. Jul. 16, 2013), available at
http://www.ftc.gov/os/caselist/1023201/130709ncoorder.pdf. The Asset
Acceptance consent order also stipulates certain requirements for
completing an investigation, such as considering whether ``other
accounts in a particular portfolio have been disputed by consumers
for similar reasons at disproportionately high rates'' or whether
``a disproportionately high number of accounts in a particular
portfolio have been supplemented by data from third-party sources.''
Consent Decree at 9, United States v. Asset Acceptance, LLC, No.
8:12-CV-182-T-27EAJ (M.D. Fla. Jan. 30, 2012), available at http://www.ftc.gov/os/caselist/0523133/120131assetconsent.pdf.
\114\ Transcript of the 2013 FTC-CFPB Roundtable at 189, 191,
204.
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1. Definition, Types, and Timing of Disputes
Q31: What types of consumer inquiries do debt collectors currently
treat as ``disputes'' under the FDCPA? What standards do debt
collectors currently apply in distinguishing disputes from other types
of consumer communications? What data exist to indicate the percentage
of debts that are disputed, and what definition of ``dispute'' is being
used to arrive at this percentage? What data exist to indicate how
disputes are resolved by debt collectors?
Q32: Are certain types of debts (e.g., credit card vs. student)
disputed at higher rates than others? Do dispute rates differ between
debts being collected by debt buyers versus those being collected by
third-party collectors?
Q33: What data or other information are available regarding how
disputed debts are resolved? What percentage of disputed debts are
verified? What percentage of debt disputes are never investigated?
Where disputes are investigated, what percentage of the investigations
reveal that there was an error?
Q34: Should the Bureau define or set standards for what
communications must be treated as ``disputes'' under the FDCPA and, if
so, how? What are the advantages and disadvantages of the definition
recommended?
Dispute Requirements
Regulation V sets standards for the consumer's direct dispute
notice under the FCRA. This notice must include: (1) Sufficient
information to identify the account or other relationship that is in
dispute; (2) the specific information that the consumer is disputing
and an explanation of the basis for the dispute; and (3) all supporting
documentation or other information reasonably required by the furnisher
to substantiate the basis of the dispute.\115\
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\115\ 12 CFR 1022.43(d).
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Q35: Should consumers be required to provide particular information
or documentation as part of their disputes to debt collectors to
trigger an investigation requirement under the FDCPA? What would be the
costs and benefits of requiring that consumers provide the same or
similar information as required under the FCRA when making disputes
directly to debt collectors? Should a consumer's obligation to provide
this information about the basis for their disputes be contingent on
having received a validation notice with requisite information? Why or
why not?
Types of Disputes. Consumers apparently dispute debts for various
reasons, such as disputing that they are the debtor or the amount of
the debt. With respect to the amount of the debt, the consumer also
might dispute more specific issues relating to the debt owed, such as
the charges comprising a credit card balance, the fees applied after
default, the application of past payments, or the interest calculation.
Q36: Do consumer disputes typically specify what is being disputed,
or do consumers simply make general statements that they dispute the
debt? If consumers do make specific statements, are those statements
typically relevant to the consumer's particular circumstances or the
alleged debt, or do they typically appear to be unrelated to the
consumer's particular circumstances or the alleged debt? What types of
specific disputes are most commonly received by debt collectors (e.g.,
identity theft, wrong amount, do not recognize the debt, previously
paid, previously disputed)?
Timing. Although a consumer can dispute a debt at any time, only a
written dispute sent within 30 days of receipt of the validation notice
triggers a debt collector's requirement to stop collection activities
and provide
[[Page 67861]]
verification of the debt. The FDCPA does not impose a time limit for a
debt collector to respond to a dispute; it only requires that the
collector must cease collection until it provides verification of the
debt. At the recent FTC-CFPB Roundtable, some industry participants
stated that debt collectors typically honor disputes that are received
after the 30-day time period by stopping collection on the account,
although it was unclear the extent to which those disputes are
investigated or the debts verified.\116\
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\116\ Transcript of 2013 FTC-CFPB Roundtable at 183.
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Q37: What practices do debt collectors follow when they receive a
dispute after the 30-day period following receipt of the validation
notice has expired? Do collectors usually follow the same verification
procedures as for disputes that are received during the 30-day period?
What would be the potential costs and benefits of a debt collector
following the same investigation and verification procedures for
disputes received after the 30-day period relative to disputes received
within the 30-day period?
Q38: How long does it typically take after a debt has been disputed
for the collector to investigate and provide verification to the
consumer? Would establishing a specific time period for responding to a
dispute be beneficial to consumers? Does the prohibition on collection
until verification has been provided give collectors a sufficient
incentive to investigate expeditiously and appropriately? What costs
and burdens would establishing a specific deadline for an investigation
impose?
2. Investigation of Disputed Debts
Under section 809(b) of the FDCPA, after receiving a consumer
dispute, a debt collector may either cease collection efforts without
investigation or may investigate the dispute with the intent of
providing verification to the consumer.\117\ The FDCPA does not detail
how a collector must investigate a dispute. Several commenters have
raised concerns that some debt collectors state that they have verified
the debt to the extent the FDCPA requires \118\ when, in fact, the
collector has done little or nothing to investigate the disputes and
verify the debts.
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\117\ 15 U.S.C. 1692g(b).
\118\ See, e.g., Chaudhry v. Gallerizzo, 174 F.3d 394, 406 (4th
Cir. 1999) (``[V]erification of debt involves nothing more than the
debt collector confirming in writing that the amount being demanded
is what the creditor is claiming is owed. . . . Verification is only
intended to `eliminate the problem of debt collectors dunning the
wrong person or attempting to collect debts which the consumer has
already paid.' '')
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The FTC has recommended that debt collectors be required to conduct
``reasonable'' investigations under the FDCPA, noting that such a
standard would be consistent with the FCRA.\119\ In the FTC's view,
adopting a ``reasonable investigation'' standard would decrease
consumer concerns about mistaken collection attempts, but also respond
to collection industry requests for flexible standards.\120\
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\119\ 2009 FTC Modernization Report at 33.
\120\ Id. at 34.
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Q39: What steps do collectors take to investigate a dispute under
the FDCPA? Do collectors request information from the debt owner or any
other parties? Do they look beyond confirming that the information
contained in the validation notice is consistent with their records?
Are the steps debt collectors are taking adequate?
Q40: What steps should debt collectors be required to take to
investigate a dispute? Would a ``reasonableness'' standard benefit
consumers and debt collectors? Would more specific standards or
guidance be useful to help effectuate such a standard? For example,
should debt collectors be required to review account-specific documents
upon receiving the consumer's dispute? Should debt collectors be
required to consider the accuracy and completeness of the information
with a portfolio of accounts, including whether the information is
facially inaccurate or incomplete? Should debt collectors be required
to consider the nature and frequency of disputes they have received
about other accounts within the same portfolio?
Q41: How should the investigation required vary depending on the
type of dispute? For example, if a consumer states the balance on a
debt is incorrect, what information should a debt collector review for
its investigation? If a consumer states that she is not the alleged
debtor, what information should a debt collector be required to obtain
or review? If a consumer disputes the debt by stating that she does not
recognize it, what information should a debt collector obtain or
review? If the consumer claims prior payment of the debt, what
information should a debt collector obtain or review? Please comment on
other common dispute scenarios that may require review of specific
types of information.
FCRA Obligations. In addition to their obligations under the FDCPA,
debt collectors who furnish information to CRAs are subject to
obligations to investigate disputes submitted directly to them by
consumers (``direct disputes'') \121\ and submitted to them through
CRAs.\122\ The FCRA contains an exception from the investigation
requirement for certain disputes that are deemed ``frivolous and
irrelevant,'' an exception for which there is no parallel in the FDCPA.
A debt collector may treat a FCRA dispute submitted by a consumer
directly to the collector as ``frivolous and irrelevant'' if the
consumer does not provide sufficient information to investigate the
dispute, the dispute is substantially the same as a previously
submitted dispute that has already been investigated, or it falls
within one of several other exceptions, including an exception for
disputes the furnisher reasonably believes are submitted or prepared by
a credit repair organization.\123\ If the direct dispute is treated as
frivolous and irrelevant, the FCRA and Regulation V require the
collector to provide the consumer with a notice of that
determination.\124\
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\121\ 12 CFR 1022.43.
\122\ 15 U.S.C. 1681s-2(b). Although section 623(b)(1)(A) does
not specifically state that a furnisher must conduct a
``reasonable'' investigation upon learning of a dispute from a CRA,
courts applying the provision have consistently adopted a
``reasonable investigation'' standard. See, e.g., Gorman v. Wolpoff
& Abramson, LLP, 584 F.3d 1147 (9th Cir. 2009); Westra v. Credit
Control of Pinellas, 409 F.3d 825, 827 (7th Cir. 2005); Johnson v.
MBNA Am. Bank, NA, 357 F.3d 426, 431 (4th Cir. 2004); King v. Asset
Acceptance, LLC, 452 F. Supp. 2d 1272, 1278 (N.D. Ga. 2006).
\123\ 15 U.S.C. 1681s-2(a)(8)(F)-(G); 12 CFR 1022.43(b), (f).
The FCRA also contains an exception from the investigation
requirements for disputes submitted to CRAs that are deemed
``frivolous and irrelevant.'' 15 U.S.C. 1681i(a)(3).
\124\ 15 U.S.C. 1681s-2(a)(8)(F); 12 CFR 1022.43(f). Similarly,
when a CRA treats a dispute as ``frivolous and irrelevant,'' the
FCRA requires the CRA to provide the consumer with a notice of that
determination. 15 U.S.C. 1681i(a)(3)(B).
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Q42: What percentage of debt collectors are ``furnishers'' under
the FCRA? How many FCRA disputes do debt collectors receive? What
percentage of FDCPA disputes do collectors treat as direct disputes
under the FCRA? How do debt collectors fulfill their responsibilities
to investigate disputes that are covered by both the FDCPA and the
FCRA? To what extent do debt collectors stop collecting debts disputed
pursuant to the FDCPA and the FCRA without investigation? To what
extent do debt collectors stop reporting debts disputed pursuant to the
FDCPA and the FCRA without investigation?
Q43: What percentage of disputes are repeat disputes that were
already subject to a reasonable investigation and do not include any
new information from consumers? How do debt collectors currently handle
repeat disputes or disputes that are unclear or
[[Page 67862]]
incomplete? Do debt collectors receive a significant number of disputes
from credit repair organizations? Is any data available as to the
number of repeat disputes or disputes from credit repair organizations
that debt collectors receive?
Q44: Should the Bureau consider including in proposed rules for
debt collection an exception for ``frivolous and irrelevant'' disputes,
similar to the one found in the FCRA? Are the incentives of those
collecting on debts different from the incentives of other furnishers
and CRAs with respect to information included on consumer reports? What
would be the costs and benefits of allowing collectors not to
investigate ``frivolous and irrelevant'' disputes?
3. Verification of Disputed Debts
Congress intended the dispute and verification process in FDCPA
section 809(b) to address the problem of debt collectors collecting
from the wrong person or collecting the wrong amount.\125\ As noted
above, the FDCPA does not define what constitutes proper verification
of a debt, and some commenters have interpreted court decisions as
holding that section 809(b) does not require debt collectors to
undertake substantial efforts to verify a disputed debt.\126\ In one
case addressing this issue, Chaudhry v. Gallerizzo, the Fourth Circuit
stated that ``verification of a debt involves nothing more than the
debt collector confirming in writing that the amount being demanded is
what the creditor is claiming is owed; the debt collector is not
required to keep detailed files of the alleged debt.'' \127\ Based upon
this statement, some debt collectors believe that verification requires
nothing more than providing consumers with a written statement that the
amount being demanded is the amount the creditor claims is owed.\128\
However, other commenters have pointed out that, in the Chaudhry case,
the debt collector had already verified the amount of the debt with the
creditor; broken out that amount into principal, interest, and
inspection fees; and forwarded bank summaries of consumers' loan
transactions that included a description of and the date of each
transaction.
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\125\ See S. Rept. 382, 95th Cong., at 4 (1977); 94 Cong. Rec.
H7789 (1976).
\126\ See 2009 FTC Modernization Report at 31.
\127\ Chaudhry v. Gallerizzo, 174 F.3d 394, 406 (4th Cir. 1999).
\128\ 2009 FTC Modernization Report at 32.
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In the 2009 FTC Modernization Report, the Commission noted that
some debt collectors currently respond to verification requests only by
confirming in writing that the amount demanded is what the creditor
claims is owed.\129\ A number of consumer advocates have recommended
that debt collectors should be required to provide consumers with
verification that is responsive to the consumer's specific
dispute.\130\ For example, if a consumer raises a claim of identity
theft, the debt collector should provide verification that relates to
the consumer's identity. Some debt collection industry representatives
have stated that any requirements to provide more substantial
verification should be flexible enough to account for different types
and ages of consumer debt.
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\129\ Id. at 32.
\130\ Id. at 33.
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Under the FCRA, if a consumer continues to dispute information
appearing in her consumer report with a CRA after an investigation is
completed, the consumer may file a brief statement with the CRA setting
forth the nature of the dispute.\131\ Under the FCRA, a CRA is required
to include this statement or a clear and accurate summary of the
statement in any subsequent reports about the consumer.\132\
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\131\ 15 U.S.C. 1681i(b).
\132\ 15 U.S.C. 1681i(c).
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Q45: What information do debt collectors currently provide to
verify a disputed debt? Do debt collectors typically provide
documentation (media) to consumers to verify a debt?
Q46: Under which circumstances, if any, should collectors be
required to provide consumers with documentation (media) to verify a
debt? Would providing the last periodic or billing statement related to
the account be sufficient to verify most disputed debts?
Q47: What would be the costs and benefits of requiring particular
forms of information to verify a debt? Are there any particular types
of verification that would be especially beneficial to consumers or
particularly costly for collectors to provide?
Q48: Section 809(b) of the FDCPA states that verifications must be
``mailed'' to the consumer.\133\ Do debt collectors currently provide
the verifications only by postal mail, or are debt collectors providing
verifications in other formats, such as email or text message? Do
collectors obtain consumer consent if they wish to provide the
verification electronically and, if so, what type of consent are they
obtaining (e.g., do they follow E-Sign standards)?
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\133\ 15 U.S.C. 1692g(b).
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Q49: If consumers disagree with the verification of disputed debts
provided by debt collectors, or if they do not receive verification of
the disputed debts, should consumers be afforded the opportunity to
file statements with collectors that explain the nature of their
disputes with the debt collector, and should the debt collector then be
required to provide that statement to the owner of the debt or
subsequent collectors? What would be the costs and benefits of
requiring debt collectors to accept and communicate consumers'
statements of dispute?
Unverified Debts. The 2013 FTC Debt Buyer Report found that debt
buyers did not verify nearly 50 percent of disputed debts.\134\ The
following types of debts were less likely to be verified than others:
medical, telecommunications, and utility debts; debts purchased from
another debt buyer rather than from the creditor; and debts more than
six years old. In comparison, credit card debt, debt purchased from the
creditor rather than from another debt buyer, and debt less than three
years old were more likely to be verified.\135\ The study also found
that at least some debt buyers sold a small percentage of debt with
unresolved disputes.\136\ One participant at the recent FTC-CFPB
Roundtable stated that many creditors and collectors refrain from
selling or collecting on any debts with unresolved disputes.\137\ The
Debt Buyers Association has commenced a certification program that
prohibits the sale of disputed debts that are unresolved.\138\ Under
the FCRA, debt owners are prohibited from selling a debt or placing it
for collection if a CRA notifies the owner that the debt resulted from
identity theft.\139\ The FCRA also contains a prohibition on furnishing
information related to an account disputed by a consumer without noting
for the CRA that such information is disputed.\140\
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\134\ 2013 FTC Debt Buyer Report at 40.
\135\ Id. at 40-41.
\136\ Id. at 41.
\137\ Transcript of 2013 FTC-CFPB Roundtable at 224.
\138\ DBA Int'l, DBA Int'l Debt Buyer Certification Program,
Certification Standards Manual at 8, available at http://www.dbainternational.org/certification/certificationstandards.pdf.
\139\ FCRA section 615(f), 15 U.S.C. 1681m(f).
\140\ FCRA section 623(a)(3), 15 U.S.C. 1681s-2(a)(3).
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Q50: To what extent do debt collectors attempt to verify a debt
that is disputed? What do debt collectors currently do when they are
unable to verify a disputed debt? What, if anything, should debt
collectors be required to do when they are unable to verify a disputed
debt? Do third-party collectors typically return the account to the
debt owner when it is disputed, without attempting to verify it?
[[Page 67863]]
Q51: If a debt collector's investigation reveals errors or
misrepresentations with respect to the debt, do collectors report those
findings to the consumer? When and how are such findings conveyed to
consumers?
Q52: Do owners of debts sell disputed but unverified debts to debt
buyers or place them with new third-party collectors? Are these debts
reported to CRAs? What limitations should be placed on the sale or re-
placement of unverified disputed debts? For example, should the owner
of the debt or the collector be required to inform debt buyers and new
collectors that it is an unverified disputed debt when it is sold or
re-placed? Should the new debt buyer or collector be required to verify
the debt before making collection efforts? What would be the potential
costs and benefits of such restrictions or conditions?
4. Reporting of Un-Validated Debts
Section 809(b) of the FDCPA provides for a 30-day window after the
collector first contacts the consumer about the alleged debt in which
the consumer may dispute or request verification of the debt.\141\ The
FTC's Staff Commentary states that collectors may report a debt to a
CRA within the 30-day window, as long as the consumer has not yet
disputed the debt.\142\
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\141\ 15 U.S.C. 1692g(b).
\142\ FTC Staff Commentary on FDCPA section 809(b), comment 1.
At least one State, Colorado, prohibits collectors from reporting a
debt to a CRA during the 30-day validation period. See Colo. Rev.
Stat. 12-14-108(1)(j). The reasoning behind such a statute
apparently is that such a prohibition gives consumers the
opportunity to dispute debts before they are reported and appear on
their credit reports. The Colorado statute provides some exceptions,
such as when the consumer's last known address is known to be
invalid.
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Q53: What would be the costs and benefits of prohibiting collectors
from reporting a debt to a CRA during the 30-day window?
IV. Debt Collection Communications (Sections 804 and 805 of the FDCPA)
Many provisions of the FDCPA regulate debt collectors'
communications with consumers and third parties. For example, debt
collectors are generally prohibited from contacting consumers at
unusual times or places, from disclosing collection-related information
to third parties, and from communicating with consumers that have asked
the collector to cease communications.\143\ The FDCPA also governs
communications in which a debt collector seeks location information
about a consumer from a third party.\144\ These provisions focus on
preventing consumer harm in debt collection communications.
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\143\ 15 U.S.C. 1692c(a)(1), (b), (c).
\144\ 15 U.S.C. 1692b.
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Despite the FDCPA's protections, consumers still consistently
report abuses focusing on debt collection communications. For example,
the FDCPA prohibits collectors from calling consumers ``repeatedly or
continuously with intent to annoy, abuse, or harass any person at the
called number.'' \145\ Nevertheless, the most frequent debt collection-
related complaint in the FTC's Consumer Sentinel database is that a
collector is calling repeatedly or continuously, conduct in which
collectors may be engaged to annoy, abuse, or harass the recipients of
these calls.\146\ A 2009 survey conducted by Ohio University similarly
found that approximately one-third of survey respondents had received
multiple calls from a debt collector in a pattern that seemed to them
to be harassment.\147\ Other communications-related concerns include
calling hours, communications at the workplace, and inappropriate
communications with friends and family. Consumers also file many
lawsuits alleging that collectors have engaged in communication
practices that are prohibited by the FDCPA.
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\145\ Section 806(5) of the FDCPA, 15 U.S.C. 1692d(5).
\146\ 2013 FDCPA Annual Report at 16-17.
\147\ Scripps Survey Research Ctr., Ohio Univ., Survey: SHOH42
(Sept. 26, 2009), available at http://www.newspolls.org/surveys/SHOH42/22540 (Question: Have you or your family ever received
multiple calls from a debt collection agency, so many that it seemed
to you to be harassment? Answers: Yes 32%; No 66%; Don't know 2%).
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The Bureau seeks comment on how rulemaking with respect to
communications in debt collections could help both consumers and the
industry. Part IV.A discusses recent advances in communications
technologies, including social media, and their potential implications
for debt collection practices. Part IV.B discusses communications
soliciting location information from third parties about consumers,
including when collectors may reinitiate contact with a third party and
how collectors identify themselves in location communications. Part
IV.C discusses issues regarding communications between debt collectors
and consumers, including the times and places that are unusual or
inconvenient for consumers, and issues specific to military
servicemembers. Part IV.D addresses communications between debt
collectors and third parties, including issues regarding decedent debt,
caller ID, and recorded messages. Finally, Part IV.E discusses the
right for consumers to cease communications from a debt collector,
including the consumer's ability to limit communications to certain
media or certain times of day.
A. Advances in Communications Technologies
The debt collection landscape has changed dramatically since the
FDCPA was enacted in 1977. Perhaps the greatest transformations have
occurred in the technologies that debt collectors and debt owners use
to communicate with consumers. The statute itself contemplates
communications via telephone, postal mail, and telegraph, but it does
not reflect the advent of the internet, smartphones, autodialers, fax
machines, and social media. These newer technologies present new
challenges and new opportunities.\148\ The challenges often arise when
attempting to apply the FDCPA's prohibitions to a technology that was
not envisioned at the time of its enactment and may not easily fit its
statutory framework. Nonetheless, these technologies also create new
opportunities for consumers, debt collectors, and debt owners to
communicate in ways that may be more convenient and less costly than
prior methods.
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\148\ In 2009, the FTC published a report that focused in part
on the issues raised by changes in debt collection technologies. See
2009 FTC Modernization Report.
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Q54: In addition to telephone and mail, what technologies, if any,
do debt collectors currently use on a regular basis to communicate or
transact business with consumers? For which technologies would it be
useful for the Bureau to clarify the application of the FDCPA or laws
regarding unfair, deceptive, or abusive acts or practices? What are the
potential efficiencies or cost savings to collectors of using certain
technologies, such as email or text messaging? What potential privacy,
security, or other risks of harm to consumers may arise from those
technologies and how significant are those harms? Could regulations
prevent or mitigate those harms? Should consumers also be able to
communicate with and respond to collectors through such technologies,
including to exercise their rights under the FDCPA and particularly
when a collector uses the same technology for outgoing communications
to the consumer? What would be the potential costs and benefits of such
regulations?
Q55: Are there nascent communication technologies, or communication
technologies that are
[[Page 67864]]
likely to arise in the future, whose use in connection with debt
collection might materially benefit or harm debt collectors or
consumers? What additional challenges do those communication
technologies present in applying the FDCPA or the Dodd-Frank Act's
prohibition against unfair, deceptive, and abusive acts and practices
to debt collectors?
Q56: What complications or compliance issues do social media
present for consumers or collectors in the debt collection process?
How, if at all, should collector communications via social media be
treated differently from other types of communications under debt
collection rules? What privacy concerns are raised by various social
media platforms?
Q57: FDCPA section 807(11) declares it to be a false, deceptive, or
misleading representation for collectors to fail to disclose that a
communication is from a debt collector. This section also requires in
the collector's initial communication what is often called a ``mini-
Miranda'' warning, in which the collectors state that they are
attempting to collect a debt and any information obtained will be used
for that purpose. Standard industry practice is for third-party debt
collectors to provide the mini-Miranda warning during every collection
call. What are the costs and benefits of such collectors including the
mini-Miranda disclosure when they send communications via social media?
B. Communications To Locate Debtors (Section 804 of the FDCPA)
Collectors are generally prohibited from communicating with third
parties regarding the collection of a debt, but one exception is
location communications.\149\ Location communications are permitted
under FDCPA section 804 and used by collectors to obtain or update
contact information for consumers. That section, for instance, requires
a debt collector making location calls to ``identify himself, state
that he is confirming or correcting location information concerning the
consumer, and, only if expressly requested, identify his employer'' but
not state that the consumer owes any debt.\150\ Collectors are also
limited to one location communication with a person unless, inter alia,
``the debt collector reasonably believes that the earlier response of
such person is erroneous or incomplete and that such person now has
correct or complete location information.'' \151\
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\149\ 15 U.S.C. 1692c(b).
\150\ 15 U.S.C. 1692b(1), (2).
\151\ 15 U.S.C. 1692b(3).
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Q58: How frequently do debt collectors communicate with third
parties about matters other than the location of the consumer? What
other topics are discussed and for what reason? What are the potential
risks to consumers or third parties? Would additional regulation to
address this issue be useful?
Q59: What would be the costs and benefits of setting a standard for
when a debt collector's belief about a third party's erroneous or
incomplete location information is reasonable? If a standard would be
useful, what standard would be appropriate? \152\
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\152\ A recent FTC consent order provided standards governing
when the debt collector subject to the order has a ``reasonable
belief'' that a third party's prior statements are ``erroneous or
incomplete.'' That order required that, to establish such a belief,
the defendant debt collector must have:
(1) Conducted a thorough review of all applicable records,
documents, and database entries for the alleged debtor Defendants
are trying to reach to search for any notations that indicate that
the alleged debtor cannot be reached at that telephone number or
that the person does not have location information about the alleged
debtor Defendants are trying to reach; and (2) obtained and
considered information or evidence from a new or different source
other than the information or evidence previously relied upon by
Defendants in attempting to contact the alleged debtor Defendants
are trying to reach and such information or evidence substantiates
Defendants' belief that the person's earlier statements were
erroneous or incomplete and that such person now has correct or
complete location information.
Stipulated Order at 5-6, United States v. Expert Global
Solutions, Inc., No. 3-13CV2611-M (N.D. Tex. July 16, 2013),
available at http://www.ftc.gov/os/caselist/1023201/130709ncoorder.pdf.
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Q60: Some individuals employed by debt collectors use aliases to
identify themselves to third parties when seeking location information
about a consumer. Should this practice be addressed in a rulemaking? If
so, how?
Q61: Under FDCPA section 804(1), debt collectors are permitted to
identify their employers during location communications only if the
recipient of the communication expressly requests that information.
Does providing the true and full name of the collector's employer upon
request risk disclosing the fact of the alleged debt to a third party?
If so, how could the risk be minimized? What would be the costs and
benefits of minimizing or otherwise addressing this risk?
Q62: FDCPA section 804(5) bars a debt collector from using any
language or symbol on an envelope or elsewhere in a written
communication seeking location information if the name indicates that
the collector is in the debt collection business or that the
communication relates to the collection of the debt.\153\ How should
such a restriction apply to technologies like email, text message, or
fax?
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\153\ 15 U.S.C. 1692b(5).
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C. Communications With Consumers (Section 805(a) of the FDCPA)
1. Unusual or Inconvenient Times
a. Traditional Communications Technologies (Phones)
Section 805(a) of the FDCPA sets parameters on collector
communications with consumers, including a bar on contacting consumers
at ``any unusual time or place or a time or place known or which should
be known to be inconvenient to the consumer.'' \154\ The statute
further states, ``In the absence of knowledge to the contrary, a
collector shall assume that a convenient time for communicating with a
consumer is'' between 8:00 a.m. and 9:00 p.m., local time in the
consumer's location.
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\154\ 15 U.S.C. 1692c(a)(1).
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The advent of mobile phones complicates the determination of what
times are unusual or inconvenient. Mobile phones are increasingly the
prominent mode of telephone communications.\155\ With landline phone
numbers, a collector can generally determine the consumer's time zone
using the area code for the number (call forwarding is one exception).
But consumers may take mobile phones anywhere and travel to different
time zones is not uncommon. In addition, many consumers now keep their
mobile phone number when they move, so that the area code for their
mobile phone does not match the area code of their current residence.
Collectors that use area codes or home addresses to determine
convenient calling hours therefore may inadvertently call earlier or
later than the law permits. In the 2009 FTC Modernization Report, the
FTC recommended that collectors be permitted to assume, for the
purposes of determining appropriate calling hours, that the consumer
was located in the same time zone as her home address.\156\
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\155\ Eighty-nine percent of U.S. households now own a mobile
phone, up from 36% in 1998, while 71% of households own a landline,
down from 96% in 1998. Moreover, mobile-only households are on the
rise among younger households, with about two-thirds of households
led by people ages 15 to 29 having only mobile phones. Jeffrey
Sparshott, More People Say Goodbye to Landlines, Wall St. J., Sep.
6, 2013, at A5.
\156\ 2009 FTC Modernization Report at vi.
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Q63: Does sufficiently reliable technology exist to allow
collectors to screen to determine whether a given phone number is a
landline versus a
[[Page 67865]]
mobile phone? If so, should collectors conduct such screening before
relying on an area code to determine a consumer's time zone? What would
be the costs and benefits of requiring such screening? Should
collectors be allowed to rely on information provided by consumers at
the time they applied for credit, such as when a consumer provides a
phone number identified as a ``home'' number or a ``mobile'' phone
number on an initial credit application without screening the area
code?
Q64: Should collectors assume that the consumer's mailing address
on file with the collector indicates the consumer's local time zone? If
the local time zone for the consumer's mailing address and for the area
code of the consumer's landline or mobile telephone number conflict,
should collectors be prohibited from communicating during any
inconvenient hours at any of the potential locations, or should one
type of information (e.g., the home address) prevail for determining
the consumer's assumed local time zone?
b. Newer Communications Technologies (Email and Text Message)
The legislative history of the FDCPA indicates that the
restrictions on convenient hours in section 805(a)(1) were intended to
apply principally, or perhaps exclusively, to telephone communications
rather than postal mail.\157\ Newer technologies like email and text
messages present challenges in applying section 805(a)(1) because the
technologies themselves are hybrids between the textual nature of
postal mail and the immediate delivery of telephone calls (as with
faxes). For email, recipients arguably do not receive their messages
until they affirmatively check their email account, thus allowing
consumers to control when they view new messages. However, some
consumers have devices that notify them when the email is delivered to
their email provider, such as a smartphone that makes a sound upon the
delivery of an email. The extent to which the receipt of an email
occurs at an unusual or inconvenient time may therefore differ greatly
among consumers.
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\157\ See, e.g., S. Rept. 382, 95th Cong., at 2 (1977); 123
Cong. Rec. S13851, 13854 (daily ed. Aug. 5, 1977); H. Rept. 5294,
95th Cong., (1977) (prior version of the bill specifying that the
hours restriction applied to telephone calls).
---------------------------------------------------------------------------
Text messaging presents similar but distinct issues. Text messages
arrive primarily over telephones, whereas emails can arrive on any
device with an internet connection. As with email, a consumer may not
view a text message until long after it was delivered to her phone, but
many consumers are alerted when a text message arrives, often by an
audio alert.
Q65: A main purpose of designating certain hours in the FDCPA as
presumptively convenient apparently was to prevent the telephone from
ringing while consumers or their families were asleep. Do similar
concerns exist for other technologies? Should any distinction be made
between the effect of a telephone ringing and an audio alert associated
with another type of message delivery, such as email or text message,
if a mobile phone is on during the night?
Q66: Should a limitation on usual times for communications apply to
those sent via email, text message, or other new media? Should it
matter whether the consumer initiates contact with the collector via
that media? Is there a means of reliably determining when an electronic
message is received by the consumer? Are there data on how frequently
consumers receive audio alerts when either emails or text messages are
delivered? Are there data showing how many consumers disable audio
alerts on their devices when they wish not to be disturbed?
Q67: Is there a general principle that can guide the incorporation
of standards on unusual times for communications to newer technologies?
For instance, should such restrictions apply only to technologies that
have ``disruptive'' effects, like phone calls, and if so, how might
``disruptive'' be best defined? What would be the costs and benefits of
applying any such general principles?
2. Unusual or Inconvenient Places
Inconvenient Places. The Bureau seeks comment about the types of
places, if any, that are unusual or that collectors know or should know
to be inconvenient for them to contact consumers.
Q68: Especially with the advent and widespread adoption of mobile
phones, consumers often receive calls at places other than at home or
at work. Under what circumstance do collectors know, or should know,
that the consumer is at one of the types of places listed below? What
would be the costs and benefits of specifying that such locations are
unusual or inconvenient, assuming the debt collector knows or should
know the location of the consumer at the time of the communication?
Hospitals, emergency rooms, hospices, or other places of
treatment of serious medical conditions
Churches, synagogues, mosques, temples, or other places of
worship
Funeral homes, cemeteries, military cemeteries, or other
places of burial or grieving
Courts, prisons, jails, detention centers, or other
facilities used by the criminal justice system
Military combat zones or qualified hazardous duty postings
Daycare centers
Q69: Are there additional places not listed above that would be
inconvenient places for consumers to be contacted?
Q70: Under what circumstances are communications at a consumer's
place of employment inconvenient, even if the employer does not
prohibit the receipt of such communications? What would be the
potential costs and benefits of prohibiting communications at a
consumer's place of employment due to inconvenience, assuming that the
collector knows or should know the consumer's location? To what extent
does the inconvenience depend on the nature of the consumer's workplace
or on the consumer's type of employment at that workplace?
Place of employment communications. Under FDCPA section 805(a)(3),
a collector may not contact a consumer at his place of employment if
the collector knows or has reason to know that his employer prohibits
the consumer from receiving such communication.\158\
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\158\ 15 U.S.C. 1692c(a)(3).
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Q71: Do employers typically distinguish, in their policies
regarding employee contacts at work, between collection communications
and other personal communications? Are employers' policies concerning
receipt of communications usually company-wide, specific to certain job
types, or specific to certain individuals?
Q72: Collectors may have many accounts with consumers employed by
the same large employer, such as a national chain store, and this may
enable collectors to become familiar with the employers' policies
regarding receipt of personal or collection communications in the
workplace. Can collectors reliably determine consumers' employers and
their policies with regard to receiving communications at work? If so,
what would be the costs and benefits of requiring that collectors cease
communications at work for all consumers working for a certain employer
if collectors are informed by one (or more) consumer(s) that the
employer does not permit personal communications for any of its
employees overall, or at a particular location or job type (e.g.,
retail premises employers)? What would be the costs and benefits of
requiring that collectors
[[Page 67866]]
cease communication at work if they learn of the employer's policy
through other means, such as the policy being posted on the employer's
Web site?
3. Consumers Represented by Attorneys
The FDCPA provides that ``[w]ithout the prior consent of the
consumer given directly to the debt collector or the express permission
of a court of competent jurisdiction, a debt collector may not
communicate with a consumer in connection with the collection of any
debt if the debt collector knows the consumer is represented by an
attorney with respect to such debt and has knowledge of, or can readily
ascertain, such attorney's name and address, unless the attorney fails
to respond within a reasonable period of time to a communication from
the debt collector or unless the attorney consents to direct
communication with the consumer.'' \159\ Collectors are also prohibited
from making location communications concerning represented consumers
unless the attorney fails to respond within a reasonable period of time
to the communications from the debt collector.\160\
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\159\ 15 U.S.C. 1692c(a)(2).
\160\ 15 U.S.C. 1692b(6).
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Q73: The FDCPA's restriction on contacting consumers represented by
attorneys does not apply if ``the attorney fails to respond within a
reasonable period of time.'' \161\ How do collectors typically
calculate a ``reasonable period of time'' for this purpose, and does
the answer vary depending on particular circumstances?
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\161\ Id.
---------------------------------------------------------------------------
Q74: How common is it for consumers to be represented by attorneys
on debts? When consumers have multiple debts, do attorneys usually
represent them on one debt, all debts, or some number of debts less
than the total? How often do consumers with debts change their
attorney?
4. Servicemember Issues
Credit applications for servicemembers may sometimes require them
to provide contact information for their commanding officers. These
applications may also request or require that servicemembers provide
some form of consent allowing debt owners to contact their commanding
officers with respect to the debt. When a servicemember signs such an
application, some collectors may believe that communications to
commanding officers are not subject to the prohibition on communication
with third-parties under FDCPA section 805(b). Nonetheless,
servicemembers may report that these communications are inconvenient,
annoying, or harassing, or may harm their reputations at work.
Q75: How prevalent is the practice of requesting or requiring, as
part of a credit application or credit contract, contact information
and consent to contact a servicemember's commanding officer or other
third parties? Are such consent agreements to contact a consumer's
employer or boss as common among civilian consumers? How frequently do
debt collectors actually contact servicemembers' commanding officers or
other third parties identified in credit contracts? Are servicemembers
harmed in unique ways by communications with their commanding officers?
Relatedly, do such harms suggest solutions that are unique to
servicemembers, either in the disclosures they receive as part of
credit applications or regarding limits on communications with
commanding officers?
Collectors may communicate with spouses while servicemembers are
deployed to combat zones or qualified hazardous duty areas.\162\
Collectors may ask military spouses to pay the debts of these consumers
during periods when it is difficult for the spouse to contact these
consumers, or when such contact may interfere with combat readiness.
Alternatively, collectors may contact military spouses during the
potentially sensitive period immediately following the death of a
servicemember serving in a combat zone or qualified hazardous duty
zone, with the hope of obtaining payment from the spouse's military
death gratuity.
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\162\ See Part IV.D's discussion of spouses.
---------------------------------------------------------------------------
Q76: How common are the practices mentioned above?
D. Communications With Third Parties (Section 805(b) of the FDCPA)
FDCPA section 805(b) bars communication with most third parties
absent prior consent of the consumer provided directly to the debt
collector, express permission of a court, or as reasonably necessary to
effectuate a postjudgment judicial remedy.\163\ Communications with the
consumer, the consumer's attorney, a CRA if otherwise permitted by law,
the creditor, the attorney of the creditor, and the attorney of the
debt collector are not subject to the bar in section 805(b). The
purpose of this provision is to protect the privacy of consumers'
personal and financial affairs.\164\
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\163\ 15 U.S.C. 1692c(b).
\164\ See, e.g., S. Rept. 382, 95th Cong., at 4 (1977) (``[T]his
legislation strongly protects the consumer's right to privacy by
prohibiting a debt collector from communicating the consumer's
personal affairs to third persons . . . .
[T]his legislation adopts an extremely important protection . .
.: it prohibits disclosing the consumer's personal affairs to third
persons . . . . Such contacts are not legitimate collection
practices and result in serious invasions of privacy, as well as the
loss of jobs.'').
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1. Definition of ``Consumer''
The FDCPA's definition of ``consumer'' is ``any natural person
obligated or allegedly obligated to pay any debt.'' \165\ In addition,
for the purposes of FDCPA section 805, ``consumer'' is defined as
including ``the consumer's spouse, parent (if the consumer is a minor),
guardian, executor, or administrator.'' \166\ The Bureau seeks comment
on the following questions related to the FDCPA's definition of
``consumer.''
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\165\ 15 U.S.C. 1692a(3).
\166\ 15 U.S.C. 1692c(d).
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Q77: During a consumer's lifetime, a collector can communicate with
a consumer's spouse about the consumer's debt. When a consumer dies,
the FDCPA does not specify whether a consumer's surviving spouse
continues to be the consumer's ``spouse,'' such that collectors may
continue to contact the person without violating section 805(b). How
often do collectors contact surviving spouses and what is the effect of
such contacts? What would be the potential costs and benefits of
regarding surviving spouses as ``spouses'' under section 805(b)?
Q78: Are there circumstances under which a collector should not be
permitted to contact a consumer's spouse, for example, the individuals
are estranged or the consumer has obtained a restraining order against
her spouse? How frequently do these circumstances occur? What would be
the costs and benefits of prohibiting or limiting communications with a
consumer's spouse upon the consumer's request?
Q79: The FDCPA permits collectors to communicate with ``executors''
and ``administrators'' about a decedent's debts. State laws may allow
individuals other than those with the status of ``executor'' or
``administrator'' under State law, for example, ``personal
representatives,'' to pay the debts of a decedent out of the assets of
the decedent's estate. How frequently do collectors contact individuals
who are not ``executors'' or ``administrators'' but still have the
authority under State law to pay the debts of decedents out of the
assets of decedents estates? What is the effect of these contacts? What
would be the potential costs and benefits of treating any person who
has the authority to pay the debts of the
[[Page 67867]]
decedent out of the assets of the estate as ``executors'' or
``administrators?'' \167\ To what extent do spouses, executors, and
administrators pay decedents' debts out of their own assets? Do
collectors state or imply that such parties have an obligation to pay
these debts?
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\167\ The FTC previously issued a Policy Statement providing
that the agency will not take enforcement action under the FDCPA
against collectors that communicate with someone who is authorized
to pay a decedent's debts from the estate of the deceased even if
that person is not officially designated as an ``executor'' or
``administrator.'' Statement of Policy Regarding Communications in
Connection With the Collection of Decedents' Debts, 76 FR 44915
(July 27, 2011).
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Q80: Do owners of debts or collectors inform executors and
administrators when collecting on debt that was disputed by the
decedent prior to the decedent's death?
Q81: A third party who is not a ``consumer'' under FDCPA section
805(d) may know details about the consumer's debt and contact a debt
collector to settle a consumer's debt. For example, the parent of a
non-minor child may reach out to a collector to assist with the child's
debt. How often are such contacts made? Should collectors be permitted
to assume that the consumer has consented to the third-party contact,
where a third party already knows about the consumer's debt and is
offering to repay the debt? When would it be appropriate to allow
collectors to rely on this theory of implied consent?
2. Recorded Messages
Communications by telephone remain the most common form of consumer
contact in debt collections. Telephones themselves were one of the
communications technologies Congress addressed when the FDCPA was
enacted in 1977. However, over the years, phone technology has changed
dramatically, from landlines to mobile phones and then to smart phones.
In addition to voice calling, the ability to record voice messages for
others to retrieve at a later date is commonplace (e.g., voicemails).
Many phones also allow consumers to see the caller's phone number, and
sometimes other information about the caller, before answering.
When collectors leave recorded messages, they must identify
themselves in the communication but they also must refrain from
disclosing information about debtors to third parties. FDCPA section
806(6) prohibits debt collectors from placing telephone calls without
meaningful disclosure of their identity.\168\ Section 807(11) of the
FDCPA also requires that collectors disclose in their initial
communications with consumers, including telephone calls, that they are
trying to collect a debt and that any information they obtain will be
used for that purpose.\169\ For many years, collectors did not include
the information set forth in FDCPA sections 806(6) and 807(11) in
recorded messages that they left on voicemails or answering
machines.\170\ However, in 2006, a Federal district court in Foti v.
NCO Financial Systems, Inc., held that a collector's telephone message
is a ``communication'' within the meaning of the FDCPA, thereby
requiring that these messages include the information set forth in
FDCPA sections 806(6) and 807(11).\171\ Other courts have reached the
same conclusion as Foti.\172\
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\168\ 15 U.S.C. 1692d(6).
\169\ 15 U.S.C. 1692e(11).
\170\ For example, collectors would often leave messages
stating, ``This is John Smith calling for Nancy Jones about an
important business matter. Please call me back at 555-5555.''
\171\ 424 F. Supp. 2d 643 (S.D.N.Y. 2006) (denying collector's
motion to dismiss).
\172\ See, e.g., Hosseinzadeh v. M.R.S. Assocs., 387 F. Supp. 2d
1104 (C.D. Cal. 2005) (denying collector's motion for summary
judgment); Costa v. Nat'l Action Fin. Services, 634 F. Supp. 2d
1069, 1076 (E.D. Cal. 2007) (denying collector's motion for summary
judgment); Berg v. Merchants Ass'n Collection Div., Inc., 586 F.
Supp. 2d 1336, 1340-41 (S.D. Fla. 2008) (denying a collector's
motion to dismiss); Edwards v. Niagara Credit Solutions, Inc., 586
F. Supp. 2d 1346, 1350-51 (N.D. Ga. 2008) (granting consumer's
motion for summary judgment), aff'd on other grounds, 584 F.3d 1350
(11th Cir. 2009).
---------------------------------------------------------------------------
Collectors believe that Foti creates a dilemma. On the one hand, if
recorded messages are ``communications,'' \173\ then collectors must
identify themselves as a debt collector. On the other hand, if they
leave that information in a recorded message, they risk disclosing such
information to a third party who may hear the message, which could
violate FDCPA section 805(b).
---------------------------------------------------------------------------
\173\ Some collectors argue that messages that do not reference
the debt or the fact that the message is from a debt collector are
not ``communications'' because they do not convey information
regarding a debt, as required by the definition of ``communication''
under FDCPA section 803(2).
---------------------------------------------------------------------------
Courts and other observers have noted that collectors can avoid
both forms of liability by simply refraining from leaving recorded
messages altogether.\174\ Some collectors argue that this would impose
high costs, by limiting their ability to reach many consumers, such as
those that work night hours (given the calling-time restrictions in
FDCPA section 805(a)(1)), those that do not answer calls from
unfamiliar numbers, or those for whom collectors have the wrong mailing
address. It could also cause harm if consumers do not learn that their
debts are in collection and debt collectors furnish information about
these debts to CRAs or file law suits to collect.
---------------------------------------------------------------------------
\174\ See, e.g., Mark v. J.C. Christensen & Assocs., Inc., Civil
No. 09-100 ADM/SRN, 2009 WL 2407700, at *5 (D. Minn. Aug. 4, 2009);
Berg v. Merchants Ass'n Collection Division, Inc., 586 F. Supp. 2d
1336, 1343 (S.D. Fla. 2008); Leyse v. Corporate Collection Services,
No. 03 Civ 8491 (DAB), 2006 WL 2708451, at *5 (S.D.N.Y. Sept. 18,
2006).
---------------------------------------------------------------------------
In its 2009 Modernization Report, the FTC acknowledged the
challenges that Foti and similar cases create for collectors and stated
that it would be beneficial to clarify the law relating to collectors
leaving recorded messages.\175\
---------------------------------------------------------------------------
\175\ 2009 FTC Modernization Report at 49.
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Q82: How should a rule treat recorded messages, if at all? What
benefits do recorded messages (as distinct from live phone calls) offer
to debt collectors or consumers?
Q83: What would be the costs and benefits of allowing the following
approaches to leaving recorded messages?
When leaving recorded messages on certain media where
there is a plausible risk of third-party disclosure, the collector
leaves a message that identifies the consumer by name but does not
reference the debt and does not state the mini-Miranda warning.
The collector leaves a recorded message identifying the
consumer by name and referring the consumer to a Web site that provides
the mini-Miranda warning after verifying the consumer's identity.
The collector leaves a recorded message identifying the
consumer by name, but only on a system that identifies (e.g., via an
outgoing greeting) the debtor by first and last name and does not
identify any other persons.
The collector leaves a recorded message that identifies
the consumer by name and includes the mini-Miranda warning but
implements safeguards to try to prevent third parties from
listening.\176\
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\176\ ACA International, a debt collection trade association,
developed a model message designed to address the Foti dilemma. The
message provides the required disclosures only after asking third
parties to stop listening and providing time for execution of those
directions: ``This message is for [ ]. If you are not [ ] or their
spouse, please delete this message. If you are [ ] or their spouse,
please continue to listen to this message. By continuing to listen
to this message, you acknowledge that you are the right party. You
should not listen to this message so that other people can hear it,
as it contains personal and private information. There will be a
three second pause in the message to allow you to listen to the
message in private. (Pause.)'' A 2010 survey of ACA's members found
that 47 percent used its proposed message, while 39 percent did not,
and 14 percent left no messages whatsoever. However, collectors note
that these messages may prove too complicated to execute, their
length may prove expensive, and their efficacy, in the end, may not
convince courts, due to the continued risk that third parties can
listen in. See, e.g., Leahey v. Franklin Collection Serv., Inc., 756
F. Supp. 2d 1322, 1327 (N.D. Ala. 2010) (denying a collector's
motion to dismiss in which it had argued that the ACA message did
not violate FDCPA section 1692c(b)); Berg v. Merchants Ass'n
Collection Div., Inc., 586 F. Supp. 2d 1336, 1343 (S.D. Fla. 2008)
(denying a collector's motion to dismiss).
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[[Page 67868]]
The collector leaves a recorded message that indicates the
call is from a debt collector but does not identify the consumer by
name.
The collector leaves a message that does not contain the
mini-Miranda warning, but only after the consumer consents to receiving
voice messages without the mini-Miranda warning.
Q84: Some of the proposed solutions described above would permit a
collector to leave a recorded message without leaving the mini-Miranda
warning. Should collectors be permitted, in their communications with
consumers, to ask consumers if they will opt out of receiving future
mini-Miranda warnings? If consumers are permitted to opt out of
receiving future mini-Miranda messages, what factors or limitations, if
any, should limit consumers' right to opt out? Should consumers be
allowed to opt out both in writing and orally? Should the opt-out
provision extend to mini-Miranda warnings given in other communications
besides recorded messages?
3. Caller Identification (``Caller ID'')
Caller-ID technologies transmit certain information along with a
telephone call that allows recipients of calls to view callers'
telephone numbers and sometimes also their names. Some telephones
display all or part of such information while others, such as many
landlines, do not. A 2004 survey by the Pew Research Center indicated
that approximately half of phone owners had some form of caller
ID.\177\
---------------------------------------------------------------------------
\177\ See Pew Research Ctr., Polls Face Growing Resistance, But
Still Representative Survey Experiment Shows (2004), available at
http://www.people-press.org/2004/04/20/polls-face-growing-resistance-but-still-representative/.
---------------------------------------------------------------------------
Caller-ID technologies present certain compliance issues for debt
collectors. For instance, FDCPA section 807(14) requires that debt
collectors use the ``true name'' of their business. However, a debt
collector may be concerned that using the name of the collector's
employer in caller ID risks causing a disclosure of the consumer's debt
to a third party or disclosure of the identity of the collector's
employer without an express request under FDCPA sections 805(b) or
804(1). Alternatively, a debt collector may be concerned that changing
how the name of its business is displayed via caller ID risks making a
false representation or using a deceptive means, using a false name, or
failing to make meaningful disclosure of the caller's identity under
FDCPA sections 806(6), 807(10), or 807(14).
Debt collectors sometimes change the telephone number displayed via
caller ID. For instance, when callers use certain voice-over-IP (VOIP)
services, the phone number displayed to the recipient may have a local
area code. Collectors may intend this result because they believe that
consumers are more likely to pick up a local phone call, or it may be
an unintended result of the telephone services collectors use. Callers
sometimes block the caller-ID phone number altogether so that the
recipient is unaware of the caller's identity. Debt collectors may be
concerned that blocking or changing the phone number displayed via
caller ID risks making a false representation or using a deceptive
means under FDCPA section 807(10).\178\ The FTC considered similar
issues in its Telemarketing Sales Rule and its 2009 Modernization
Report, but it did not make any specific recommendations in the debt
collection context.\179\
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\178\ See, e.g., Knoll v. Allied Interstate, Inc., 502 F. Supp.
2d 943, 945 (D. Minn. 2007) (denying motion to dismiss where
collector displayed caller ID as ``Jennifer Smith''). But see Glover
v. Client Services, Inc., No. 1:07-CV-81, 2007 WL 2902209 (W.D.
Mich. Oct. 2, 2007) (granting motion to dismiss where collector
displayed caller ID as ``unavailable'').
\179\ The FTC's Telemarketing Sales Rule concluded that
telemarketers should be prohibited from blocking, circumventing, or
altering the transmission of caller-ID information. 68 FR 4580,
4623-4627 (Jan. 29, 2003). The FTC reasoned that transmission of
caller-ID information was inexpensive and was not a technical
impossibility and that doing so provided many benefits, including
privacy protections for consumers, increased accountability in
telemarketing, and increased information for law enforcement groups.
The FTC recognized in its 2009 Modernization Report that prohibiting
debt collectors from blocking, circumventing, or altering the
transmission of caller-ID information would provide similar benefits
in the debt collection context. 2009 FTC Modernization Report at 54-
55.
---------------------------------------------------------------------------
Q85: What would be the costs and benefits for collectors in
transmitting caller-ID information? In addition to the benefit of
consumers being able to screen calls, how do consumers benefit from
receiving caller-ID information? Do space limitations constrain the
ability of collectors to disclose information (e.g., the collector's
identity) via caller ID? What are the risks of third-party disclosure
by caller ID? The Bureau is particularly interested in data showing how
many consumers currently use telephones that provide technologies such
as caller ID, and whether these technologies display for consumers only
a telephone number or whether they display additional information, such
as the name of the caller. How can collectors use these technologies to
minimize third-party disclosure risks while still providing consumers
with relevant, truthful, and non-misleading information?
Q86: Should debt collectors be prohibited from blocking or altering
the telephone number or identification information transmitted when
making a telephone call, for example by blocking the name of the
company or the caller's phone number or by changing the phone number to
a local area code? What technological issues might complicate or ease
compliance with regulation regarding caller-ID technologies?
4. Newer Technologies
Some new methods of communication appear to present greater privacy
risks than do telephone or postal communications. Email, for example,
is a service consumers often access through a provider, such as an
employer or outside company (e.g., Google, Microsoft, Yahoo). These
providers, including employers, may retain rights to access the emails
of their users. If employers or other email providers retain the
ability to access an email account, the likelihood increases that debt
collection emails sent to those accounts may be read by third parties.
Joint users of email accounts also may be able to read each other's
email messages, including any that debt collectors send.
Emails may also pose risks of third-party disclosure because they
may be publicly viewable by anyone near the display screen. Even when
consumers check their email using a smartphone, nearby onlookers may
have the opportunity to see communications from debt collectors,
especially when consumers have their smartphones configured to
conspicuously display the subject and sender of the message upon
receipt. A similar concern exists for text messages, which are often
displayed on the public-facing screens of mobile phones.
Q87: Should the email provider's privacy policy affect whether
collectors send emails to that account? For instance, where a collector
knows or should know that an employer reserves the right to access
emails sent to its employees, should the collector be prohibited from
or limited in its ability to email a consumer at the employer-provided
email address? Should a collector be prohibited from using an employer-
provided email address if a collector is unsure whether an employer or
other third party has access to email
[[Page 67869]]
sent to a consumer? How difficult is it for collectors to discern
whether an email address belongs to an employer?
Newer technologies also raise an issue similar to the Foti dilemma
relating to the requirement to provide the mini-Miranda and the
simultaneous prohibition against third-party disclosures.\180\ All
collection communications, including those made via new communication
technologies, are subject to the requirements of FDCPA section 807(11),
which requires that collectors clearly disclose in both initial and
subsequent communications that the communication is from a debt
collector.\181\ Debt collectors may be concerned that this requirement
is in tension with the prohibition on third-party disclosure under
FDCPA section 805(b).\182\ To prevent such disclosures with traditional
communication technologies, FDCPA section 808(8) prohibits the use of
debt-collection-related language or symbols on the envelope of any
communication, such as a communication through postal mail or
telegram.\183\ The Bureau seeks comment on whether analogous
prohibitions might be useful to prevent third-party disclosures in the
sending of emails, text messages, or other communications made via
newer technologies.
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\180\ See, e.g., Complaint at ] 15, United States v. Nat'l Atty.
Collection Servs., Inc., No. CV13-06212 (C.D. Cal. Aug. 23, 2013),
available at http://www.ftc.gov/os/caselist/1223032/130925naccmpt.pdf.
\181\ 15 U.S.C. 1692e(11).
\182\ See 15 U.S.C. 1692c(b).
\183\ 15 U.S.C. 1692f(8).
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Q88: What third-party disclosure issues arise from providing FDCPA
section 807(11)'s mini-Miranda via email, text message, or other means
of electronic communication? Are an email's subject line and sender's
address akin to the front of an envelope mailed by post, and should it
be subject to the same restrictions? Should the restrictions apply to
the sender's name on a text message or to the banner line on a fax?
E. Ceasing Communications (Section 805(c) of the FDCPA)
The structure of the FDCPA raises the question of whether consumers
may set the conditions under which collectors communicate with them.
First, FDCPA section 805(c) affords consumers the right to cease
communications from collectors, with limited exceptions, if consumers
notify the collectors in writing.\184\ Second, as discussed above,
FDCPA section 805(a) prohibits collectors from communicating with
consumers at unusual or inconvenient times or places, from
communicating with a consumer represented by an attorney, and from
communicating with the consumers at their places of employment where
the consumer's employer prohibits such communications.\185\
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\184\ 15 U.S.C. 1692c(c).
\185\ 15 U.S.C. 1692c(a).
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The express language of the FDCPA does not provide consumers with
the right to restrict collector communications to a particular medium
or a particular time or place. However, because consumers have the
right to cease collector communications and the apparent right to
declare certain times or places inconvenient, some argue that consumers
do or should have the right to limit communications to certain media or
to certain times or places. Others may respond that the FDCPA does not
confer such a right on consumers and, if it is interpreted to, this
would impose undue or unreasonable burdens on collectors.
Q89: What would be the costs and benefits of allowing consumers to
limit the media through which collectors communicate with them? What
would be the costs and benefits of allowing consumers to specify the
times or locations that are convenient for collectors to contact them?
What would be the costs and benefits of allowing consumers to provide
notice orally or in writing to collectors of their preferred means or
time of contact? Should there be limits or exceptions to a consumer's
ability to restrict the media, time, or location of debt collection
communications? Should consumers also be allowed to restrict the
frequency of communications from debt collectors?
Q90: Other Federal consumer financial laws, as defined in section
1002(14) of the Dodd-Frank Act, may require collectors to provide
certain notices or disclosures to consumers for a variety of purposes,
raising potential conflicts in cases in which consumers have made a
written request that collectors cease communications.\186\ For example,
the 2013 RESPA and TILA Servicing Final Rules require mortgage
servicers to provide certain disclosures to borrowers, while the FDCPA
may prohibit communications with those same consumers where the
servicer falls within the FDCPA's definition of a debt collector and
the consumer has requested that the servicer cease communications. The
Bureau recently concluded that, in most cases, servicers that fall
within the FDCPA's definition of debt collector are required to engage
in certain communications required by Regulations X and Z,
notwithstanding a consumer's cease communications request under the
FDCPA.\187\ However, two of the provisions under Regulations X and Z
exempt such servicers from certain communications requirements in cases
where the consumer has validly requested that communications cease
under the FDCPA.\188\ How often do debt collectors provide notices or
disclosures to consumers required by other Federal consumer financial
laws? What would be the advantages and disadvantages to consumers of
receiving these notices and disclosures notwithstanding their cease
communication requests?
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\186\ See, e.g., U.S. Fed. Trade Comm'n, Anderson/Beato Advisory
Opinion (June 23, 2009), available at http://www.ftc.gov/os/statutes/andersonbeatoletter.pdf.
\187\ U.S. Bureau of Consumer Fin. Prot., CFPB Bulletin 2013-12,
Implementation Guidance for Certain Mortgage Servicing Rules (Oct.
15, 2013), available at http://files.consumerfinance.gov/f/201310_cfpb_mortgage-servicing_bulletin.pdf.
\188\ Interim Final Rule, Amendments to the 2013 Mortgage Rules
under the Real Estate Settlement Procedures Act (Regulation X) and
the Truth in Lending Act (Regulation Z), 78 FR 62993 (Oct. 23,
2013), available at http://files.consumerfinance.gov/f/201310_cfpb_mortgage-servicing_interim.pdf.
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Q91: Some jurisdictions require that collectors provide consumers
with contact information. At least one jurisdiction has required that
collectors provide not only contact information, but also a means of
contacting the collector that will be answered by a natural person
within a certain time period.\189\ How would the costs and benefits of
providing contact information compare to those associated with a
natural person answering calls within a certain period of time?
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\189\ New York City Admin. Code Sec. 2-194.
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V. Unfair, Deceptive, and Abusive Acts and Practices (Sections 806,
807, 808, 810, and 812 of the FDCPA)
Congress enacted the FDCPA in response to the ``abundant evidence
of the use of abusive, deceptive, and unfair practices by many debt
collectors.'' \190\ A main purpose of the FDCPA's provisions,
therefore, is to prohibit the use of such practices.\191\ FDCPA section
806 prohibits ``any conduct the natural consequence of which is to
harass, oppress, or abuse any person in connection with the collection
of a
[[Page 67870]]
debt.'' \192\ FDCPA section 807 also bars the use of any ``false,
deceptive, or misleading representation or means in connection with the
collection of any debt.'' \193\ FDCPA section 808 further prohibits the
use of ``unfair or unconscionable means to collect or attempt to
collect any debt.'' \194\
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\190\ 15 U.S.C. 1692(a).
\191\ 15 U.S.C. 1692(e); See also F.T.C. v. LoanPointe, LLC, No.
12-4006, 2013 WL 1896820, *6 (10th Cir. May 8, 2013) (``The FDCPA
was expressly designed to curb the harms of abusive debt collection
practices.''); Schlegel v. Wells Fargo Bank, NA, No. 11-16816, 2013
WL 3336727 (9th Cir. July 3, 2013); Mellentine v. Ameriquest Mortg.
Co., No. 11-2467, 2013 WL 560515 (6th Cir. Feb. 14, 2013).
\192\ 15 U.S.C. 1692d.
\193\ 15 U.S.C. 1692e.
\194\ 15 U.S.C. 1692f.
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The Dodd-Frank Act authorizes the Bureau to prescribe rules that
identify as unlawful unfair, deceptive, or abusive acts or practices in
connection with any transaction with a consumer for a consumer
financial product or service or the offering of a consumer financial
product or service, including collecting debt related to and delivered
in connection with a consumer financial product or service.\195\ The
Act does not describe when the Bureau may declare an act or practice to
be ``deceptive.'' However, the Dodd-Frank Act permits the Bureau to
declare an act or practice to be ``unfair'' if it has a reasonable
basis to conclude that it ``causes or is likely to cause substantial
injury to consumers which is not reasonably avoidable by consumers
[and] such substantial injury is not outweighed by countervailing
benefits to consumers or to competition.'' \196\ In determining if an
act or practice is unfair, the Bureau ``may consider established public
policies as evidence to be considered with all other evidence,'' but
``[s]uch public policy considerations may not serve as a primary basis
for such determination.'' \197\ The Act also authorizes the Bureau to
declare an act or practice to be ``abusive'' if the act or practice:
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\195\ 12 U.S.C. 5531(b).
\196\ 12 U.S.C. 5531(c)(1)(A)-(B).
\197\ 12 U.S.C. 5531(c)(2).
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(1) [M]aterially interferes with the ability of a consumer to
understand a term or condition of a consumer financial product or
service; or
(2) [T]akes unreasonable advantage of-(A) a lack of understanding
on the part of the consumer of the material risks, costs, or conditions
of the product or service; (B) the inability of the consumer to protect
the interests of the consumer in selecting or using a consumer
financial product or service; or (C) the reasonable reliance by the
consumer on a covered person to act in the interests of the
consumer.\198\
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\198\ 12 U.S.C. 5531(d)(1)-(2).
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The FDCPA provides numerous specific examples of each category of
``harassment or abuse,'' ``false or misleading representations,'' or
``unfair practices,'' but the language of the FDCPA also expressly
states that these examples do not limit the general application of
these categories.\199\ Courts have thus found other types of conduct to
be included within these categories, including some conduct that
violates other sections of the FDCPA.\200\
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\199\ 12 U.S.C. 1692d, 1692e, 1692f.
\200\ See, e.g., Fox v. Citicorp Credit Services, Inc., 15 F.3d
1507, 1516 (9th Cir. 1994) (holding that a violation of the FDCPA
section 805(a) may also constitute an abusive practice under the
FDCPA); Jeter v. Credit Bureau, Inc., 760 F.2d 1168, 1178 (11th Cir.
1985) (holding that FDCPA section 1692d is not limited to the
enumerated conduct it proscribes); United States v. Cent. Adjustment
Bureau, Inc., 667 F. Supp. 370, 375 (N.D. Tex. 1986) aff'd as
modified, 823 F.2d 880 (5th Cir. 1987) (holding that making calls to
a debtor at inconvenient times, at debtor's place of work, or
contacting third parties about debt without debtor's consent
constitutes abusive, deceptive, and unfair debt collection); see
also McVey v. Bay Area Credit Serv., 4:10-CV-359-A, 2010 WL 2927388,
at *2 (N.D. Tex. July 26, 2010); Arteaga v. Asset Acceptance, LLC,
733 F. Supp. 2d 1218, 1228 (E.D. Cal. 2010); Pittman v. J.J. Mac
Intyre Co. of Nevada, Inc., 969 F. Supp. 609, 612 (D. Nev. 1997).
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Unfair, deceptive, or abusive conduct that violates the FDCPA or
the Dodd-Frank Act has been and will remain a focus of Bureau
supervision and enforcement activity. Indeed, the Bureau recently
issued two supervisory bulletins providing guidance to promote
compliance with these laws.\201\ Although such conduct is unlawful
under these statutes, incorporating debt collection provisions into
rules relating to unfair, deceptive, or abusive conduct could provide
greater clarity and specificity. Greater clarity and specificity as to
prohibited conduct could make it easier for collectors and others to
know what they must do to comply with the law. Rules that provide
greater clarity and specificity as to prohibited conduct also could
simplify law enforcement actions against those who do not comply.
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\201\ See U.S. Bureau of Consumer Fin. Prot., CFPB Bulletin
2013-07, Prohibition of Unfair, Deceptive, or Abusive Acts or
Practices in the Collection of Consumer Debts (July 10, 2013),
available at http://files.consumerfinance.gov/f/201307_cfpb_bulletin_unfair-deceptive-abusive-practices.pdf; U.S. Bureau of
Consumer Fin. Prot., CFPB Bulletin 2013-08, Representations
Regarding Effect of Debt Payments on Credit Reports and Scores (July
10, 2013), available at http://files.consumerfinance.gov/f/201307_cfpb_bulletin_collections-consumer-credit.pdf.
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A. Abusive Conduct (Section 806 of the FDCPA)
A stated purpose of the FDCPA is ``to eliminate abusive debt
collection practices by debt collectors, to insure that those debt
collectors who refrain from using abusive debt collection practices are
not competitively disadvantaged, and to promote consistent State action
to protect consumers against debt collection abuses.'' \202\ Although
the FDCPA does not define the term ``abusive,'' FDCPA section 806
prohibits debt collectors from engaging in any conduct ``the natural
consequence of which is to harass, oppress, or abuse any person in
collection of a debt.'' \203\ The FDCPA also sets forth six specific
examples of conduct that is harassing, oppressive, or abusive. The
Dodd-Frank Act does not expressly prohibit conduct that is harassing or
oppressive, but it does authorize the Bureau to prescribe rules barring
``abusive'' acts or practices in specified circumstances.\204\
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\202\ 15 U.S.C. 1692(e).
\203\ 15 U.S.C. 1692d.
\204\ 12 U.S.C. 5531(d)(1)-(2).
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1. General Abusive Conduct Questions
Q92: Should the Bureau incorporate all of the examples in FDCPA
section 806 into proposed rules prohibiting acts and practices by
third-party debt collectors where the natural consequence is to harass,
oppress, or abuse any person? Should any other conduct by third-party
debt collectors be incorporated into proposed rules under section 806
on the grounds that such conduct has such consequences? If so, what are
those practices; what information or data support or do not support the
conclusion that they are harassing, oppressive, or abusive; and how
prevalent are they?
Q93: Should the Bureau include in proposed rules prohibitions on
first-party debt collectors engaging in the same conduct that such
rules would bar as abusive conduct by third-party debt collectors? What
considerations, information, or data support or do not support the
conclusion that this conduct is ``abusive'' under the Dodd-Frank Act?
Does information or data support or not support the conclusion that
this conduct is ``unfair'' or ``deceptive'' conduct under the Dodd-
Frank Act?
2. Specific Section 806 Prohibition Questions
Q94: FDCPA section 806(3) enjoins debt collectors from ``the
publication of a list of consumers who allegedly refuse to pay debts,
except to a consumer reporting agency or to persons meeting the
requirements of 603(f) or 604(a)(3) of [the Fair Credit Reporting
Act].'' Should the Bureau clarify or supplement this prohibition in
proposed rules? If so, how? The Bureau notes that in communicating with
debtors through social media, the use of this media might cause
collectors to make known the names of debtors to others using that
medium. Should the Bureau include in proposed rules provisions setting
forth
[[Page 67871]]
what constitutes the publication of a list of debtors in the context of
newer communications technologies, such as social media? If so, what
should these provisions prohibit or require and why?
Q95: FDCPA section 806(5) bars debt collectors from ``causing a
telephone to ring or engaging any person in telephone conversation
repeatedly or continuously with intent to annoy, abuse, or harass any
person at the called number.'' Should the Bureau clarify or supplement
this prohibition in proposed rules? If so, how?
Q96: The FDCPA does not specify what frequency or pattern of phone
calls constitutes annoyance, abuse, or harassment. Courts have issued
differing opinions regarding what frequency of calls is sufficient to
establish a potential violation.\205\ Courts also often consider other
factors beyond frequency, such as the pattern and content of the calls,
where the calls were placed, and other factors demonstrating
intent.\206\ Should the Bureau articulate standards in proposed rules
for when calls demonstrate an intent to annoy, harass, or abuse a
person by telephone? If so, what should those standards be and why?
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\205\ Compare Tucker v. CBE Group, Inc., 710 F. Supp. 2d 1301,
1303 (M.D. Fla. 2010) (granting summary judgment finding no
violation with 57 calls to non-debtor, including 7 on one day, only
6 messages left in total), with Sanchez v. Client Services, Inc.,
520 F. Supp. 2d 1149, 1161 (N.D. Cal. 2007) (denying summary
judgment where there were 54 calls and 24 messages in a 6-month
period, including 17 calls in one month and 6 calls in one day).
\206\ E.g., Bingham v. Collection Bureau, Inc., 505 F. Supp.
864, 873 (D.N.D. 1981) (violation where collector immediately called
back after plaintiff hung up).
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Q97: At least one State has codified bright-line prohibitions on
repeated communications. Massachusetts allows only two communications
via phone--whether phone calls, texts, or audio recordings--in any
seven-day period.\207\ The prohibition is stricter for phone calls to a
work phone, allowing only two in any 30-day period. If the Bureau
provides bright-line standards in proposed rules, what should these
standards include? Should there be a prohibition on repetitious or
continuous communications for media other than phone calls and should
that prohibition be in addition to any proposed restriction on phone
calls? Should all communications be treated equally for this purpose,
regardless of the communication media, such that one phone
communication (call or text), one email, or one social networking
message each count as ``one'' communication? What time period should be
used in proposed rules in assessing an appropriate frequency of
communications?
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\207\ 940 Code of Mass. Regulations 7.04(1)(f).
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The Bureau recognizes that many consumers complain not only about
the number and frequency of the calls they received from collectors,
but also that they answer many calls in which the collector hangs up
when they answer or in which there is no one on the line. It appears
that such calls are the result of debt collectors' use of predictive
dialer technologies in placing calls. Predictive dialers are automated
systems that determine who to call, when to call, and how often to
call, based on information about the time of day, the time zone of the
consumer, the number of collectors available, and other factors such as
the length of prior collection calls. The 2009 FTC Modernization Report
noted that approximately 50 percent of ACA members use some type of
predictive dialer, and that dialers may be the ``single most
significant change in technology since the enactment of the FDCPA,''
given their ability to increase the efficiency of collection
operations.
The 2009 FTC Modernization Report concluded that predictive dialers
can result in disconnections when a consumer is reached but no
collector is available, resulting in ``hang-ups'' or ``dead air.''
\208\ Although the FTC did not make policy recommendations relating to
the use of predictive dialers in the collection context, the FTC has
addressed hang-up and dead air calls in its Telemarketing Sales Rule.
Call abandonment under the Telemarketing Sales Rule is treated as
``abusive,'' but the Rule creates a safe harbor for telemarketing
systems that contain certain safeguards.\209\ For instance, to qualify
for the safe harbor, three percent or less of the calls the system
places can be abandoned. The system also must allow the consumer's
phone to ring for at least 15 seconds or four rings before
disconnecting an unanswered call.
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\208\ 2009 FTC Modernization Report at 37.
\209\ 16 CFR 310.4(b)(1)(iv) and 16 CFR 310(b)(4)(iii).
---------------------------------------------------------------------------
Q98: What are the costs and benefits to consumers and collectors of
using predictive dialers? How commonly are they used by the collection
industry and what are the different ways in which they are used? How
often do consumers receive debt collection calls resulting in hang-ups,
dead air, or other similar treatment?
Q99: Should there be standards limiting call abandonment or dead
air for debt collection calls, similar to the standards under the FTC's
Telemarketing Sales Rule? Are there reasons why debt collection
standards should be more stringent or more lenient than standards for
telemarketing?
B. Deceptive Conduct (Section 807 of the FDCPA)
1. FDCPA Examples of Deception
As discussed above, FDCPA section 807 prohibits ``any false,
deceptive, or misleading representation or means in connection with the
collection of any debt.'' Without limiting the application of this
general prohibition, section 807 also sets forth 16 examples of such
prohibited behavior but does not explicitly define the terms ``false,
deceptive, or misleading.'' \210\
---------------------------------------------------------------------------
\210\ 15 U.S.C. 1692e.
---------------------------------------------------------------------------
The Dodd-Frank Act also prohibits deceptive practices but does not
define ``deceptive.'' The Bureau has stated that the FTC's
interpretation and application of deception under the FTC Act informs
the Bureau's standard for deceptive practices under the Dodd-Frank
Act.\211\ Under section 5 of the FTC Act, deceptive acts or practices
can take the form of written or oral representations or omissions of
material information. Whether a representation or omission is likely to
mislead under the circumstances is considered from the viewpoint of a
reasonable consumer.\212\ To be deceptive, a representation or omission
must be material, that is, likely to affect a consumer's purchasing or
other decisions. Section 807 contains a set of prohibitions regarding
(1) the identity of collectors; (2) character, amount, or status of
debt; (3) documentation of debt; (4) consequence of non-payment of
debt; (5) implications of debt transfers; and (6) reporting credit
information.
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\211\ See U.S. Bureau of Consumer Fin. Prot., CFPB Supervision
and Examination Manual at UDAAP 6, available at http://files.consumerfinance.gov/f/201210_cfpb_supervision-and-examination-manual-v2.pdf; see also U.S. Bureau of Consumer Fin.
Prot., CFPB Bulletin 2012-06, Marketing of Credit Card Add-On
Products (July 18, 2012), available at http://files.consumerfinance.gov/f/201207_cfpb_bulletin_marketing_of_credit_card_addon_products.pdf (adding that the Bureau applies
factors that track FTC guidance in evaluating the effectiveness of
disclosures at preventing consumers from being misled).
\212\ Id.
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Q100: With respect to each of the areas covered in FDCPA section
807, should the Bureau clarify or supplement any of these FDCPA
provisions? If so, how? Are there other representations or omissions
that the Bureau should address to prevent deception in each of these
areas? For each additional representation or omission you believe
should be addressed, please describe its prevalence and why you believe
it is material to consumers.
[[Page 67872]]
Q101: Do collectors falsely state or imply that the Servicemembers
Civil Relief Act does not apply to debts? What would be the costs and
benefits of requiring collectors to disclose information about rights
related to debts subject to the Servicemembers Civil Relief Act to a
consumer, consumer's spouse, or dependents? What debt collection
information related to the Servicemembers Civil Relief Act should be
communicated?
Q102: The Bureau has heard reports of debt collectors falsely
stating that they will have a servicemember's security clearance
revoked and threatening action under the Uniform Code of Military
Justice if the servicemember fails to pay the debt. How prevalent are
these threats?
Q103: Spouses and surviving spouses of alleged debtors may be asked
by collectors to pay the spouse's individual debt in circumstances in
which the non-debtor spouse is not legally liable for the debt. Do debt
collectors state or imply that the non-debtor spouse or surviving
spouse has an obligation to pay debts for which they are not liable?
What would be the costs and benefits of requiring that collectors,
where applicable, use disclosures or other approaches to convey that
non-debtor spouses or surviving spouses have no legal obligation to pay
the spouse's individual debt?
Q104: Authorized users on credit cards are sometimes contacted by
debt collectors and asked to pay debts in circumstances where the
cardholder is liable but the authorized user is not. How often are
authorized users asked to pay debts for which they are not liable? What
would be the costs and benefits of requiring that collectors disclose
to authorized users, where applicable, that they have no legal
obligation to pay the debt?
2. Other Deceptive Act and Practices
As discussed above, Congress intended the specific conduct set out
in FDCPA section 807 to be a non-exhaustive list of examples of false,
deceptive, and misleading representations. Indeed, FDCPA section
807(10) is a broad provision which prohibits collectors from using any
``false representation or deceptive means to collect or attempt to
collect any debt or to obtain information concerning a consumer.'' In
addition, the Dodd-Frank Act also includes a general prohibition on any
covered person or service provider engaging in unfair, deceptive, or
abusive acts or practices, which would include deceptive acts and
practices in the collection of debts arising out of consumer credit
transactions. Consequently, the Bureau is interested in information
about deceptive acts and practices beyond the specific examples in
section 807 that would be appropriate to include in proposed rules.
a. Newer Communication Technologies
Collectors are making use of newer communications technologies like
social media and text messaging. In recent years, social media has
become a major means of communications. A 2012 Nielson report found
that over 20 percent of internet time is devoted to social media.\213\
Social media can take many forms, including, but not limited to, micro-
blogging sites (e.g., Facebook, Google Plus, MySpace, and Twitter);
forums, blogs, customer review Web sites, and bulletin boards (e.g.,
Yelp); photo and video sites (e.g., Flickr and YouTube); sites that
enable professional networking (e.g., LinkedIn); virtual worlds (e.g.,
Second Life); and social games (e.g., FarmVille).\214\
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\213\ Nielsen, State of the Media: The Social Media Report 2012,
at 3 (Dec. 2012), available at http://www.nielsen.com/us/en/reports/2012/state-of-the-media-the-social-media-report-2012.html.
\214\ For the purposes of this document, social media is a form
of interactive online communication in which users can generate and
share content through text, images, audio, and/or video; messages
sent via email or text message, standing alone, do not constitute
social media.
---------------------------------------------------------------------------
Collectors' use of social media to communicate with consumers
implicates certain provisions of the FDCPA. Section 807(10) forbids
collectors from using ``false representation or deceptive means to
collect or attempt to collect any debt or to obtain information
concerning a consumer.'' \215\ Section 807(11) requires that certain
disclosures accompany initial and subsequent communications with
consumers.\216\ Similar concerns about deception in collecting via
social media may arise under the Dodd-Frank Act's prohibition on
deceptive acts and practices.
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\215\ 15 U.S.C. 1692e(10).
\216\ 15 U.S.C. 1692e(11).
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Text messaging is now a common mode of communication.\217\ It may
be more difficult to disclose information in a text message than in
other methods collectors use to communicate with consumers. Text
messages (sometimes called ``short message service'' or ``SMS'') are
normally limited to 160 characters (although some services allow other
forms of ``messaging'' with longer formats). Debt collectors who
communicate by text message, among other things, are subject to FDCPA
section 807(11), but the limited character format of text messages
presents a special challenge for inclusion of both the mini-Miranda
disclosure and the communication itself.\218\
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\217\ A recent Pew Internet Research study found that 73 percent
of cell phone users use text messages, sending an average of over 40
text messages each day. See Pew Research Ctr., Americans and Text
Messaging (Sept. 2011), available at http://pewinternet.org/Reports/2011/Cell-Phone-Texting-2011.aspx.
\218\ See, e.g., Stipulated Order for Permanent Injunction and
Monetary Judgment, United States v. Nat'l Attorney Collection
Services, Case No. CV13-06212 (C.D. Cal. Aug. 23, 2013), available
at http://ftc.gov/os/caselist/1223032/130925nacstip.pdf.
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Q105: What technological limitations might prevent mini-Miranda
warnings from being sent via text message? Should consumers be able to
opt in to collector communications via text message that do not include
a mini-Miranda warning? If so, what type of consent should be required
and how and when should it be obtained? Could the mini-Miranda warning
be more succinctly stated so that it fits within the character
constraints of a text message?
Q106: What technological innovations (e.g., links, attachments)
might facilitate the delivery of mini-Miranda warnings via text
message? For instance, what would be the potential costs and benefits
of allowing a collector to send the consumer a text message that does
not contain the mini-Miranda but contains only a link to a Web site,
PDF, or similar document that provides the mini-Miranda as well as
other information about the consumer's debt? Should the acceptability
of relying on a link or an attachment depend on the frequency with
which persons who receive such links or attachments go to the linked
material or open the attachment? Would relying on a link or an
attachment raise privacy or security risks? If so, how significant are
those risks?
Q107: Are there challenges in providing the mini-Miranda warning
via other newer technologies, such as email or social networking sites?
If so, what, if anything, should be included in proposed rules to
address these challenges?
b. Payment Methods and Fees
With advances in technologies and in the marketplace, consumers now
have a greater variety of payment options than they once did. For
example, as the FTC noted in its 2009 Modernization Report, electronic
payment methods have continued to proliferate in recent years.\219\
According to the Federal Reserve, in 2009, electronic payments exceeded
75 percent of noncash retail
[[Page 67873]]
payments, with checks constituting less than 25 percent of noncash
retail payments.\220\
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\219\ 2009 FTC Modernization Report at 20-21.
\220\ Fed. Reserve Sys., The 2010 Federal Reserve Payments
Study: Noncash Payment Trends in the United States 2006-2009 at 4-5
(Dec. 10, 2007), available at http://www.frbservices.org/files/communications/pdf/press/2010_payments_study.pdf.
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Q108: Which methods of payment do consumers use to pay debts? How
frequently do consumers use each type of payment method? In particular,
how often do consumers pay collectors through electronic payment
systems?
Q109: Do collectors charge fees to consumers based on the method
that they use to pay debts? How prevalent are such fees for each
payment method used? How much is charged for each payment method used?
Q110: Do collectors make false or misleading claims to consumers
about the availability or cost of payment methods? If so, how prevalent
are these claims and why are they material to consumers?
Q111: Do consumers understand the costs of using specific payment
methods to pay their debts or the speed with which their payment will
be processed depending on which payment method they choose? Should
disclosures be required with respect to the costs, speed, or
reversibility of alternative payment methods and, if so, what type of
disclosures?
C. Unfair Conduct (Section 808 of the FDCPA)
As discussed above, FDCPA section 808 prohibits any ``unfair or
unconscionable means to collect or attempt to collect any debt.'' \221\
Without limiting the application of this general prohibition, section
808 sets forth eight examples of such prohibited behavior. Unfairness
is not defined in the FDCPA. The Dodd-Frank Act also prohibits
unfairness, and it authorizes the Bureau to identify through rulemaking
acts or practices as unfair so long as ``the Bureau has a reasonable
basis to conclude that-(A) the act or practice causes or is likely to
cause substantial injury to consumers which is not reasonably avoidable
by consumers; and (B) such substantial injury is not outweighed by
countervailing benefits to consumers or to competition.'' \222\ The
Bureau may consider established public policies as evidence in its
analysis of whether acts and practices are unfair.\223\ This Dodd-Frank
Act approach to ``unfairness'' is very similar to the approach to
unfairness in section 5(n) of the FTC Act, and the Bureau has stated
that its views on unfairness under the Dodd-Frank Act are informed by
the FTC's application of the unfairness standard in the FTC Act.\224\
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\221\ 15 U.S.C. 1692f.
\222\ 12 U.S.C. 5531(c)(1).
\223\ 12 U.S.C. 5531(c)(2).
\224\ See U.S. Bureau of Consumer Fin. Prot., CFPB Supervision
and Examination Manual at UDAAP 6.
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1. General Unfair Conduct Questions
Q112: Should the Bureau incorporate the examples from FDCPA section
808 into proposed rules prohibiting unfair or unconscionable means to
collect or attempt to collect any debt by third-party debt collectors?
Should any of the specific examples addressed in section 808 be
clarified or supplemented and, if so, how? Should any other conduct by
third-party debt collectors be incorporated into proposed rules
prohibiting unfair or unconscionable means of collection? If so, what
are those practices; what information or data support or do not support
the conclusion that they are unfair or unconscionable; and how
prevalent are they?
Q113: Should the Bureau include in proposed rules prohibitions on
first-party debt collectors engaging in the same conduct that such
rules would bar as unfair or unconscionable by third-party debt
collectors? What information or data support or do not support the
conclusion that this conduct is ``unfair'' under the Dodd-Frank Act?
What information or data support or do not support the conclusion that
this conduct is ``abusive'' or ``deceptive'' conduct under the Dodd-
Frank Act?
2. Specific Section 808 Prohibition Questions
Q114: Section 808(1) of the FDCPA prohibits collecting any amount
unless it is expressly authorized by the agreement creating the debt or
permitted by law. Should the Bureau clarify or supplement this
prohibition in proposed rules?
Q115: The FDCPA expressly defines the amount owed to include ``any
interest, fee, charge, or expense incidental to the principal
obligation.'' Section 808(1) makes it unlawful for debt collectors to
collect on these amounts unless authorized by the agreement creating
the debt or permitted by law. Should the Bureau clarify or supplement
this prohibition in proposed rules?
FDCPA section 808(5) prohibits debt collectors from ``causing
charges to be made to any person for communications by concealment of
the true purpose of the communication.'' \225\ Since the FDCPA was
enacted in 1977, communications methods other than collect calls and
telegrams have been introduced that also may cause consumers to incur
charges. Two prominent examples are calls to mobile phones and text
messaging. While some consumers have wireless plans that do not charge
for either mode of communication, other consumers are charged by the
minute or by the text message. Some free-to-end-user services, however,
may be available to allocate all charges to collectors and thereby
obviate concerns about charges to consumers.
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\225\ 15 U.S.C. 1692f(5).
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In the 2009 FTC Modernization Report, the FTC recommended that
``the law should presume that consumers will incur charges for calls
and text messages made to their mobile phones, and, therefore,
generally prohibit debt collectors from contacting consumers via mobile
phones.'' \226\ However, the FTC also recognized that ``the law may
need to be changed in the future if most consumers would not be charged
based on the number of calls or text messages received or the time
spent on calls to their mobile phones.'' \227\
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\226\ 2009 FTC Modernization Report at 41.
\227\ Id. at 42.
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Q116: What communications technologies could cause consumers to
incur charges from contacts by debt collectors? What are the costs to
consumers and how many consumers use these technologies? For instance,
how common is it for consumers to be charged for text messages and what
is the average cost of receiving a text message? How common is it for
consumers to be charged for mobile phone calls and what is the average
cost of receiving an average-length call? Does incurring such charges
vary by demographic group? If so, how?
Q117: Should proposed rules presume that consumers incur charges
for calls and text messages made to their mobile phones? Should the
failure to use free-to-end-user services when using technologies that
would otherwise impose costs on the consumer be prohibited? What would
be the costs and challenges for collectors of implementing such
requirements?
Q118: Should proposed rules require collectors to obtain consent
before contacting consumers using a medium that might result in charges
to the consumer, such as text messaging or mobile calls? If so, what
sort of consent should be required and how should collectors be
required to obtain it?
Q119: Should proposed rules impose other limits beyond consent on
communications via media that result in charges to the consumer and if
so, what limits? For example, would it be feasible
[[Page 67874]]
to require in proposed rules that consumers have the right to opt out
of communications via certain media to avoid the possibility of being
charged? If so, should initial communications via such media be
required under proposed rules to include a disclosure of the consumer's
right to opt out? Should proposed rules include limits on the frequency
with which collectors use such media?
3. Payment Acts and Practices
Q120: FDCPA section 810 states, ``If any consumer owes multiple
debts and makes any single payment to any debt collector with respect
to such debts, such debt collector may not apply such payment to any
debt which is disputed by the consumer and, where applicable, shall
apply such payment in accordance with the consumer's direction.'' \228\
Should the Bureau clarify or supplement this prohibition in proposed
rules? If so, how? In addition, what information or data support or do
not support the conclusion that conduct that violates FDCPA section 810
is unfair or abusive conduct under the Dodd-Frank Act? Why or why not?
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\228\ 15 U.S.C. 1692h.
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Q121: Should proposed rules require that payments be applied
according to specific standards in the absence of an express consumer
request or require a collector to identify the manner in which a
payment will be applied? Should proposed rules require that the payment
be applied on or as of the date received or at some other time?
Q122: Many consumers complain that debt collectors seek to recover
on debts that consumers have already paid and therefore no longer owe.
Other consumers assert that debt collectors promise that they will
treat partial payments on debts as payment in full, but then collectors
subsequently seek to recover the remaining balance on these debts. To
what extent do debt collectors currently provide consumers with a
receipt or other documentation showing the amount they have paid and
whether it is or is not payment in full? Should such documentation be
required under proposed rules? Are there any State or local laws that
are useful models to consider? \229\
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\229\ For example, New York City has issued rules providing that
if a payment schedule or settlement agreement is reached, the
collector must send a confirmation of the arrangement to the debtor
within five business days with certain information. New York City
Admin. Code Sec. 2-192.
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D. Substantiation
Firms may want to make claims to consumers for which they lack
support, or lack adequate support, at the time they are made. To
protect consumers from harm if such claims prove to be false, the FTC
has a long history of treating certain types of unsubstantiated claims
to consumers in advertising as unfair or deceptive in violation of
section 5 of the FTC Act.
Even though the FTC's substantiation doctrine arose in the
advertising context, the FTC has used it to protect consumers in other
contexts. Most significantly, the FTC has brought cases alleging that
debt collectors made unsubstantiated claims to consumers in seeking to
recover on debts.\230\ The FTC has clearly articulated its view that
``[c]ollectors have a legal obligation to possess information to
support the claims they make to consumers about debt, pursuant to both
Section 5(a) of the FTC Act, and Section 807 of the FDCPA.'' \231\ The
Bureau's views regarding unfair and deceptive acts and practices under
the Dodd-Frank Act are informed by the FTC's application of those terms
under the FTC Act.\232\ The Bureau also gives due consideration to the
FTC's interpretation of the FDCPA prior to July 21, 2011.\233\
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\230\ See, e.g., United States v. Luebke Baker & Assoc., No.
1:12-cv-01145 (C.D. Ill. May 23, 2012) (debt collector), available
at http://ftc.gov/os/caselist/0823206/120515luebkecmpt.pdf; United
States v. Asset Acceptance, LLC, No. 8:12-cv-00182 (M.D. Fla. Jan.
31, 2012) (debt collector), available at http://www.ftc.gov/os/caselist/0523133/120130assetcmpt.pdf; United States v. Allied
Interstate, Inc., No. 0-10-cv-04295 (D. Minn. Oct. 21, 2010) (debt
collector), available at http://www.ftc.gov/os/caselist/0823207/101021alliedinterstatecmpt.pdf; United States v. Credit Bureau
Collection Services, No. 2-10-cv-169 (D. Ohio Feb. 24, 2010) (debt
collector), available at http://www.ftc.gov/os/caselist/0623226/100303creditcollectioncmpt.pdf. Note that the FTC also has brought
actions against mortgage servicers for making unsubstantiated claims
to consumers. FTC v. EMC Mortg. Corp., No. 4:08-cv-00338 (E.D. Tex.
Sept. 9, 2008) (mortgage servicer), available at http://www.ftc.gov/os/caselist/0623031/080909emcmortgagecmplt.pdf; FTC v. Countrywide
Home Loans, Inc., No. 2-10-cv-04193 (C.D. Cal. June 7, 2010)
(mortgage servicer), available at http://ftc.gov/os/caselist/0823205/100607countrywidecmpt.pdf.
\231\ 2009 FTC Modernization Report at 24 (footnotes omitted).
\232\ U.S. Bureau of Consumer Fin. Prot., CFPB Examination
Manual at UDAAP 1.
\233\ The Bureau has explained:
The CFPB will give due consideration to the application of other
written guidance, interpretations, and policy statements issued
prior to July 21, 2011, by a transferor agency, in light of all
relevant factors, including: whether the agency had rulemaking
authority for the law in question; the formality of the document in
question and the weight afforded it by the issuing agency; the
persuasiveness of the document; and whether the document conflicts
with guidance or interpretations issued by another agency.
Identification of Enforceable Rules and Orders, 76 FR 43569,
43570 (July 21, 2011).
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Q123: Should the Bureau's proposed rules impose standards for the
substantiation of common claims related to debt collection? If so, what
types of claims should be covered and what level of support should be
required for each such claim? What would be the costs and benefits to
consumers, collectors, and others of requiring different levels of
substantiation? Would a case-by-case approach to substantiating claims
instead be preferable? Why or why not?
Q124: Should the information or documentation substantiating a
claim depend upon the type of debt to which the claim relates (e.g.,
mortgage, credit card, auto, medical)? Is it more costly or beneficial
to substantiate claims regarding certain types of debts than others?
Q125: Should the information or documentation expected to
substantiate a claim depend on the stage in the collection process
(e.g., initial communication, subsequent communications, litigation)
and if so, why?
Q126: What information do debt collectors use and should they use
to support claims of indebtedness:
Prior to sending a validation notice;
after a consumer has disputed the debt;
after a consumer has disputed the debt and it has been
verified; and
prior to commencing a lawsuit to enforce a debt?
Q127: In July 2013, the Bureau released a compliance bulletin
explaining that representations about the effect of debt payments on
credit reports, credit scores, and creditworthiness have the potential
to be deceptive under the FDCPA and the Dodd-Frank Act.\234\ What
information are debt collectors using to support the following claims:
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\234\ U.S. Bureau of Consumer Fin. Prot., CFPB Bulletin 2013-08,
Representations Regarding Effect of Debt Payments on Credit Reports
and Scores (July 10, 2013), available at http://files.consumerfinance.gov/f/201307_cfpb_bulletin_collections-consumer-credit.pdf.
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The consumer's credit score will improve if the consumer
pays the debt;
payment of the debt will result in the collection trade
line being removed from a consumer's credit report;
the consumer's creditworthiness will improve if the
consumer pays the debt; and the collector will furnish information
about a consumer's debt to a CRA?
E. Service Providers and Third-Party Liability for UDAAP Violations
The previous section of this Part sought comment related to
potential proposed rules that would prevent unfair, deceptive, or
abusive acts and practices by first-party and third-party
[[Page 67875]]
collectors. Section 1031(a) of the Dodd-Frank Act, however, not only
prohibits such collectors from engaging in these acts and practices but
also more broadly prohibits UDAAPs from being committed by ``service
providers.'' Under the Dodd-Frank Act, ``service provider'' is defined
to include ``any person that provides a material service to a covered
person in connection with the offering or provision * * * of a consumer
financial product.''\235\ The Dodd-Frank Act prohibits these service
providers ``from committing or engaging in an unfair, deceptive, or
abusive act or practice * * * in connection with a consumer for a
consumer financial product or service, or the offering of a consumer
financial product or service.'' This prohibition includes those
activities or practices that may arise out of a consumer credit
transaction.
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\235\ Section 1002(26)(A) of the Dodd-Frank Act, 12 U.S.C.
5481(26)(A). The term, ``service provider'' does not include ``a
person solely by virtue of such person offering or providing to a
covered person--(i) a support service of a type provided to
businesses generally or a similar ministerial service; or (ii) time
or space for an advertisement for a consumer financial product or
service through print, newspaper, or electronic media.'' Section
1002(26)(B) of the Dodd-Frank Act, 12 U.S.C. 5481(26)(B).
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Q128: What services are provided to debt collectors in connection
with the collection of debts and who provides them? Are the types of
services the same for first-party and third-party collectors? What
information or data support or do not support the conclusion that such
services provided are material to the collection of debts?
Q129: Are there specific acts or practices by service providers
that should be specified in proposed rules as constituting unfair,
deceptive, or abusive acts or practices in connection with the
collection of debts? How prevalent are such acts or practices?
In addition to the prohibition on unfair, deceptive, and abusive
acts and practices by service providers, section 1036(a)(3) of the
Dodd-Frank Act prohibits ``any person [from] knowingly or recklessly
provid[ing] substantial assistance to a covered person or service
provider in violation of the provisions of section 1031 or any rule or
order issued thereunder.''
Q130: Who provides substantial assistance to debt collectors? Is
the assistance provided to first-party collectors the same as the
assistance provided to third-party collectors? What measure should be
used to assess whether such services provided are material to the
collection of debts?
Q131: In what types of circumstances, if any, are persons knowingly
or recklessly providing substantial assistance to collectors who are a
``covered person'' or ``service provider'' as defined in the Dodd-Frank
Act with respect to acts or practices by the covered person or service
provider that violate section 1031? How prevalent is conduct by such
persons?
VI. Time-Barred Debts
Time-barred debts are debts that are older than the applicable
statute of limitations. There are no requirements set forth in the
FDCPA or the Dodd-Frank Act regarding time-barred debts. The Bureau is
generally interested in comments about the need for and the costs and
benefits of proposed rule provisions concerning the collection of time-
barred debt. The Bureau particularly is interested in comment about the
need for and the costs and benefits of requiring debt collectors to
provide consumers with information relating to time-barred debts.
A. No Legal Right To File Suit on Time-Barred Debt
The FTC and consumer groups have raised the concern that many
consumers do not know or understand their legal rights with respect to
the collection of time-barred debts. For example, a consumer may not
realize that a debt collector is collecting on a time-barred debt and
that it is unlawful \236\ under the FDCPA for collectors to sue on such
debts if the consumer does not pay. Some empirical research suggests
that information about the time-barred status of debts may affect
consumers' decisions to pay debts and in what order to pay their
debts.\237\
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\236\ E.g., Kimber v. Fed. Fin. Corp., 668 F. Supp. 1480 (M.D.
Ala. 1987); Basile v. Blatt, Hasenmiller, Liebsker & Moore LLC, 632
F. Supp. 2d 842, 845 (N.D. Ill.2009).
\237\ Timothy E. Goldsmith & Natalie Martin, Testing Materiality
Under the Unfair Practices Acts: What Information Matters When
Collecting Time-Barred Debts?, 64 Consumer Fin. L.Q. Rep. 372
(2010). This study examined whether consumers' responses to
collection efforts are affected by the knowledge that a debt is time
barred. The study concluded that ``[t]hose participants who were
told that the debt could not be enforced through court action chose
different repayment options than participants who were not told
about time-barred debt.'' Goldsmith & Martin at 377-80. In the
study, 34 percent of subjects said they would decline to pay a
hypothetical debt when they were told the debt ``cannot be enforced
against you through court action because the enforcement period has
run out.'' Only 6 percent of subjects said they would decline to pay
when they had not received the notice. This difference was
statistically significant. Id. at 378-79.
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The FTC and the Bureau have taken law enforcement actions arising
from the collection of time-barred debts. In 2012, the FTC brought an
action against a debt buyer that allegedly collected on time-barred
debt without disclosing to consumers that they could no longer be sued
successfully on the debt. The U.S. Department of Justice, on behalf of
the FTC, filed a complaint against Asset Acceptance, LLC (``Asset'')
alleging that when Asset collects time-barred debts, ``[m]any consumers
do not know if the accounts that Asset is attempting to collect are
beyond the statute of limitations. . . . When Asset contacts consumers
to collect on a debt, many consumers believe they could experience
serious negative consequences, including being sued, if they fail to
pay the debt.'' \238\ The complaint alleged that it was deceptive for
Asset to fail to disclose to consumers that they could not be sued if
they did not pay.\239\ Asset agreed to a settlement under which it was
required to disclose such information when it collects on debts that it
knows or should know are time barred.\240\ Later in 2012, the Bureau
also entered into a settlement agreement with a bank collecting on its
own debts that requires the bank to provide disclosures concerning the
expiration of the bank's litigation rights when collecting debts that
are barred by the applicable statute of limitations.\241\
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\238\ Complaint at ] 34, United States v. Asset Acceptance, LLC,
No. 8:12-CV-182-T-27EAJ (M.D. Fla. Jan. 30, 2012), available at
http://www.ftc.gov/opa/2012/01/asset.shtm.
\239\ Id. at ]] 81-82.
\240\ The Asset-required disclosure states that: (1) ``The law
limits how long [the consumer] can be sued on the debt,'' and (2)
``Because of the age of [the consumer]'s debt, we will not sue [the
consumer] for it.'' Consent Decree, United States v. Asset
Acceptance, LLC, No. 8:12-cv-182-T-27EAJ (M.D. Fla. Jan. 31, 2012),
available at http://www.ftc.gov/opa/2012/01/asset.shtm.
\241\ In re Am. Express Centurion Bank, Salt Lake City, Utah,
FDIC-12-315b, FDIC-12-316k, 2012-CFPB-0002 (Oct. 1, 2012), at 6-7
(Joint Consent Order, Joint Order for Restitution, and Joint Order
to Pay Civil Money Penalty), available at http://files.consumerfinance.gov/f/2012-CFPB-0002-American-Express-Centurion-Consent-Order.pdf.
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The Bureau and the FTC also recently explained in a joint amicus
brief that consumers may be deceived in connection with the collection
of time-barred debts.\242\ Consumers, in some circumstances, may infer
from a collection attempt the mistaken impression that a debt is
enforceable in court even in the absence of an express or implied
threat of litigation. Accordingly, where a debt is not legally
enforceable, a debt collector may be required to make the affirmative
disclosure to that effect to avoid misleading consumers.
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\242\ Brief for FTC and CFPB as Amici Curiae Supporting
Respondent, Delgado v. Capital Mgmt. Services, LP, No. 4:12-cv-04057
(7th Cir. Aug. 14, 2013), available at http://files.consumerfinance.gov/f/201309_cfpb_agency-brief_12-cv-04057.pdf.
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Q132: Is there any data or other information that demonstrate or
indicate
[[Page 67876]]
what consumers believe may occur when they do not pay debts in response
to collection attempts? Does it show that consumers believe that being
sued is a possibility?
Q133: Should the Bureau include in proposed rules a requirement
that debt collectors disclose when a debt is time barred and that the
debt collector cannot lawfully sue to collect such a debt? Should the
disclosure be made in the validation notice? Should it be made at other
times and in other contexts? Should such a rule be limited to
situations in which the collector knows or should have known that the
debt is time barred? Is there another standard that the Bureau should
consider?
Q134: The FTC in its Asset Acceptance consent order and several
States by statute or regulation have mandated specific language
disclosing that consumers cannot be lawfully sued if they do not pay
time-barred debts. Please identify what language would be most
effective in conveying to consumers that the collector cannot lawfully
sue to collect the debt, and why.
B. Revival of Statute of Limitations With Partial Payment of Debt
The FTC and consumer groups also have raised concerns that
consumers do not understand that partial payments in some jurisdictions
may revive the entire balance of the debt for a new statute of
limitations period. Specifically, consumers may believe that when they
make a partial payment on a time-barred debt they have only obligated
themselves in the amount of the partial payment but in many
circumstances that is not true.\243\ Under the laws of most States, a
partial payment on a time-barred debt revives the entire balance of the
debt for a new statute of limitations period.\244\
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\243\ For example, if a debt collector offers to accept a $50
payment on a $500 time-barred debt, a consumer may believe that the
$50 payment itself is the only consequence to him or her of making
the payment.
\244\ 2013 FTC Debt Buyer Report at 47.
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The FTC stated in its 2010 FTC Litigation and Arbitration Report
that in many circumstances in States where laws provide that a partial
payment on a time-barred debt revives it, a collector's attempt to
collect time-barred debt may create a misleading impression as to the
consequences of making such a payment, in violation of section 5 of the
FTC Act and FDCPA section 807. The FTC stated that to avoid creating a
misleading impression, collectors in many circumstances would need to
disclose clearly and prominently to consumers prior to requesting or
accepting such payments that providing a partial payment would revive
the collector's ability to sue to collect the balance.\245\ Apart from
avoiding a misleading impression, consumers also may benefit from
receiving affirmative statements regarding the impact of partial
payments in making decisions about whether to pay debts and in what
order to pay them. Indeed, some State and local governments have
started requiring collectors to disclose similar types of information
when seeking partial payments on time-barred debts both to prevent
deception and assist consumers in making better informed
decisions.\246\
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\245\ 2010 FTC Litigation and Arbitration Report at 28.
\246\ N.Y.C. Admin. Code Sec. 20-493.2 (2012); N.M. Admin. Code
12.2.12; 940 Mass. Code Regs. 7.07(24).
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Q135: Is there any data or other information indicating how
frequently time-barred debt is revived by consumers' partial payments?
How frequently do owners of debts and collectors sue to recover on
time-barred debts that have been revived?
Q136: Is there any data or other information bearing on what
consumers believe are the consequences for them if collectors demand
payment on debts and they make partial payments?
Q137: Should the Bureau require debt collectors seeking or
accepting partial payments on time-barred debts to include a statement
in the validation notice that paying revives the collector's right to
file an action for a new statute of limitations period for the entire
balance of the debt if that is the case under State law? What would be
the benefits to consumers of receiving such disclosure? What would be
the costs to debt collectors in making such a disclosure? How should
such a disclosure be made to be effective? Are there any State or local
models that the Bureau should consider in developing proposed rules
concerning disclosures and the revival of time-barred debts?
Q138: Some debts may become time barred after collectors have sent
validation notices to consumers. In this case, if a collector is still
attempting to collect debts after they become time barred, should the
collector be required to disclose information about the debt being
time-barred, the right of the collector to sue, and the effect of
making partial payment to these consumers, and, if so, when and how
should it be provided?
Q139: A substantial period of time may transpire between the time
of the first disclosure that debt is time barred and of the consequence
of making a partial payment and subsequent collection attempts. Should
collectors be required to repeat the partial payment disclosure during
subsequent collection attempts? If so, when and how often should the
disclosure be required?
Q140: How frequently do actions by consumers other than partial
payment (e.g., written confirmation by the consumer) revive the ability
of debt collectors to sue on time-barred debts? If so, what other
actions trigger the revival of time-barred debts? Should debt
collectors be required to provide the same type of disclosures to
consumers before they take one of these actions that they would be
required to provide in connection with payment on a time-barred debt?
C. Consumer Testing of Time-Barred Debt Disclosures
Some consumer financial services statutes and regulations mandate
specific format and wording requirements for disclosures. In other
cases, to ease compliance, the Bureau publishes model forms and model
clauses that may be used to comply with certain disclosure requirements
under its regulations. The Bureau seeks comments concerning developing
model or standard language and formats for disclosures relating to
time-barred debts.
Q141: Have industry organizations, consumer groups, academics, or
governmental entities developed model time-barred debt notices? Have
any of these entities or individuals developed a model summary of
rights under the FDCPA or State debt collection laws related to time-
barred debt? Which of these models, if any, should the Bureau consider
for proposed rules?
The Bureau plans to conduct consumer testing and other research in
developing content or format requirements for any disclosures for time-
barred debts it may propose, and for any model forms or clauses for
these disclosures it may propose. The Bureau believes that testing
disclosures with consumers would help produce disclosures that
consumers will be more likely to pay attention to, understand, and use.
The Bureau recognizes that industry, academics, or others may have
already conducted relevant consumer testing or other research.
Q142: Is there consumer testing or other research concerning
consumer understanding or disclosures relating to time-barred debts
that the Bureau should consider? If so, please provide any data
collected or reports summarizing such data.
[[Page 67877]]
VII. Debt Collection Litigation Practices
This Part of the ANPR seeks comment on several aspects of debt
collection litigation practice and procedure. Part VII.A discusses
section 811 of the FDCPA, which relates to the venue requirements for
filing debt collection actions in State courts. Part VII.B seeks
comment on a variety of issues related to litigation process and
procedure.
A. Venue (Section 811 of the FDCPA)
Section 811 of the FDCPA specifies where a debt collector may file
suit and mandates that legal action be filed in one of three places. In
an action to enforce an interest in real property securing the
consumer's obligation, the suit must be filed where the property is
located.\247\ Otherwise, the suit must be filed in the judicial
district in which the consumer signed the contract sued upon or in the
district in which the consumer resides at the time of the commencement
of the suit.\248\
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\247\ 15 U.S.C. 1692i(a)(1).
\248\ 15 U.S.C. 1692i(a)(2).
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These restrictions on venue are intended to protect consumers by
preventing them from incurring undue costs that could arise if they
were required to defend themselves in distant collection actions.\249\
Even with these restrictions, however, consumer groups have stated that
the venue alternatives may create problems for consumers in those
States where judicial districts are sufficiently large that it can be
unduly burdensome for indigent consumers to travel to distant
courthouses.\250\
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\249\ S. Rept. 382, 95th Cong. at 2.
\250\ See 2010 FTC Litigation and Arbitration Report at 12
(noting that consumer groups have pointed out the challenges faced
by some consumers in traveling to court).
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Q143: Where do most collectors file suit? For example, do
collectors usually select the place of suit based on a consumer's place
of residence or based on where a contract was signed? Do collectors'
choices of venue differ based on the type of debt, the amount of debt,
or other considerations?
Q144: Are there any consumer protection concerns related to the
geographic size of judicial districts, and if so, where do these
problems arise specifically? Are States implementing any measures to
decrease burdens on consumers in areas where it may be more burdensome
for indigent consumers to travel to courts that are farther away from
their places of residency?
Q145: Are there any particular unfair, deceptive, or abusive
practices related to choice of venue that the Bureau should address in
proposed rules?
B. State Debt Collection Litigation
Most debt collection litigation actions that collectors file to
recover on debts are filed in State and local courts. The
administration of justice and regulation of these State and local
courts ``on all subjects not entrusted to the Federal Government, [is]
the peculiar and exclusive province, and duty of the State
Legislatures.'' \251\ Despite the traditional State role in regulating
State and local courts, the FDCPA has been applied to the actions of
debt collectors in connection with debt collection litigation.\252\ The
Bureau is interested in comments concerning how proposed rules could
protect consumers in debt collection litigation without adversely
affecting the traditional role of the States in overseeing the
administration and operation of their court systems and without
imposing undue or unnecessary burdens on the debt collection process.
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\251\ Calder v. Bull, 3 U.S. 386, 387 (1798).
\252\ Courts have interpreted the FDCPA as prohibiting filing
actions in court to collect on time-barred debt where the debt
collector knows or reasonably should have known that it was time
barred. See, e.g., Kimber v. Fed. Fin. Corp., 668 F. Supp. 1480,
1488-89 (M.D. Ala. 1987). Courts have also interpreted the FDCPA as
prohibiting collectors from making materially false or misleading
representations in the pleadings, motions, and other documents filed
in litigation. See, e.g., Washington v. Roosen, Varchetti & Oliver,
PPLC, 894 F. Supp. 2d 1015, 1023 (W.D. Mich. 2012) (noting that
false or misleading statements are prohibited where the statement is
materially false or misleading to violation section 1692e); see also
Miller v. Javitch, Block & Rathbone, 561 F.3d 588, 596-97 (6th Cir.
2009).
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Many of the consumer protection issues with regard to debt
collection litigation involve issues of procedure and evidence. As
mentioned above, the FTC addressed these issues in its 2010 Litigation
and Arbitration Report \253\ in which it recommended, among other
things, that: (1) States should consider adopting measures to make it
more likely that consumers would defend themselves in litigation,
decreasing the prevalence of default judgments; and (2) States should
consider requiring collectors to include more information about the
alleged debt in their complaints.\254\ At the recent FTC-CFPB
Roundtable discussed above, panelists emphasized that a number of
States have begun to address inadequate service of process and improve
the information that collectors provide to consumers before and at the
time a complaint is filed.\255\ Some States also have adopted or have
proposed regulations to modify procedures and standards for when
collectors can obtain default judgments.\256\
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\253\ In its 2010 Litigation and Arbitration Report, the FTC
also expressed concern about debt collectors' use of arbitration to
resolve disputes with consumers. 2010 FTC Litigation and Arbitration
Report at 37-46. After that Report, there was an industry self-
imposed moratorium on collectors' use of arbitration to resolve debt
collection claims. Section 1028 of the Dodd-Frank Act directs the
Bureau to conduct a study and submit a report to Congress concerning
mandatory, pre-dispute arbitration with respect to consumer
financial products or services, which would include debt collection.
\254\ 2010 FTC Litigation and Arbitration Report at iii-iv.
\255\ Maryland Court of Appeals, Rules Order (adopting
amendments to Rules 3-306, 3-308 and 3-509) (Sept. 8, 2011); North
Carolina Senate Bill 974 (signed into law on Sept. 9, 2009).
\256\ At the FTC-CFPB Roundtable, Christopher Koegel (Asst.
Dir., Div. of Financial Practices, FTC) noted that Delaware,
Maryland, and Texas had incorporated provisions of the FTC's earlier
recommendations into their State's laws on debt collection.
Transcript of 2013 FTC-CFPB Roundtable at 270. In addition,
California, Colorado, North Carolina, and Minnesota also have
enacted new laws regulating debt collection litigation.
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The Bureau is interested in receiving information about the nature
and extent of State debt collection litigation reforms relating to
rules of procedure and evidence and standards for proof at the time of
pleading and application for entry of a default judgment. Such
information will be useful to the Bureau in understanding the impact of
State rules of procedure and evidence on consumers who owe or are
alleged to owe debt and to ensure that the proposed debt collection
rules complement and avoid interfering with State rules of procedure
and evidence. The Bureau is especially interested in comments from
State courts and other State officials on these topics.
Q146: How many debt collection actions do collectors file against
consumers each year? If the number of actions filed has changed over
time, please explain why. Has the resolution of collection actions
changed over time? For example, are default judgments more prevalent
than in the past? If cases are being resolved for different reasons
than before, why?
Q147: Some States have adopted requirements for the information
that must be set forth in debt collection complaints, as well as for
documents (e.g., a copy of the credit contract) that must be attached
to them. Other States have set forth specific requirements for the
information that collectors must file in support of motions for default
judgment, including adopting standards for the information that must be
included in or attached to supporting affidavits and the reliability of
the information in the affidavits. Should the Bureau incorporate into
proposed rules any requirements to complement or avoid interfering with
States' pleading,
[[Page 67878]]
motions, and supporting documentation requirements?
Under the FDCPA, the Bureau has the authority to issue rules
prohibiting debt collectors from using ``false, deceptive, or
misleading representation or means in connection with the collection of
any debt'' or ``unfair or unconscionable means to collect or attempt to
collect any debt.'' The Bureau also has the authority under the Dodd-
Frank Act to prohibit unfair, deceptive, or abusive acts and practices
in collecting on debts arising from consumer credit transactions.
Concerns have been raised that some collectors may make unfair or
deceptive claims about consumer indebtedness in the pleadings, motions,
and related documents (usually affidavits) that they file in State debt
collection litigation.\257\
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\257\ At the FTC-CFPB Roundtable, W. Thomas Lawrie (AAG, Office
of the Maryland Attorney General) noted that he has seen multiple
cases where the ``affiant for the debt buyer [is] robo-signing
affidavits'' and ``filing 400, 500, up to say 900 affidavits a
day.'' Transcript of 2013 FTC-CFPB Roundtable at 336.
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Q148: What types of deceptive claims are made in pleadings,
motions, and documentation filed in debt collection litigation? How
common are such deceptive claims? For example, how frequently do
collectors make the false claim that they have properly served
consumers?
Q149: What specific documentation or information do collectors have
or provide in State courts to support claims that (1) the creditor has
the right to collect on debts; (2) the consumer owes the debt; and (3)
the consumer owes the debt in the amount claimed?
Q150: The FTC's Staff Commentary to section 803 excludes from the
definition of ``communication'' ``formal legal actions,'' like the
filing of a lawsuit or other petition/pleadings with a court, as well
as the service of a complaint or other legal papers in connection with
a lawsuit, or activities directly related to such service.\258\ Should
the Bureau address communications in formal legal actions in proposed
rules? If so, how?
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\258\ FTC Staff Commentary on FDCPA section 803(2), comment 2.
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Q151: Are there any other acts and practices in debt collection
litigation that the Bureau should address in a proposed rule? For each
type of act or practice, how prevalent is it, what harm does it cause
to consumers, and how could the Bureau address it in proposed rules in
a manner that complements and that is not inconsistent with State law?
VIII. State and Local Debt Collection Systems (Sections 817 and 818 of
the FDCPA)
A. Exemption for State Regulation (Section 817 of the FDCPA)
Section 817 of the FDCPA provides that the Bureau ``shall by
regulation exempt from the requirements of this subchapter any class of
debt collection practices within any State if the Bureau determines
that under the law of that State that class of debt collection
practices is subject to requirements substantially similar to those
imposed by this subchapter, and that there is adequate provision for
enforcement.'' \259\ Prior to July 21, 2011, the FDCPA permitted the
FTC to grant such exemptions, and the FTC set forth procedures in 16
CFR Part 901 that States could use to apply for the exemption.
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\259\ 15 U.S.C. 1692o.
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The Dodd-Frank Act transferred rulemaking authority related to the
State exemptions under the FDCPA to the Bureau. On December 16, 2011,
the Bureau published an interim final rule under Regulation F to
establish procedures and criteria whereby States may apply to the
Bureau for exemption of a class of debt collection practices within the
applying State from the provisions of the FDCPA.\260\ Regulation F
substantially duplicated the FTC's rule related to State exemptions
under the FDCPA, making only certain non-substantive, technical,
formatting, and stylistic changes.\261\ Accordingly, the FTC has
rescinded its rule.\262\
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\260\ See 12 CFR 1006.1 through 1006.8; 76 FR 78121 (Dec. 16,
2011).
\261\ Subpart A of Regulation F contains the rule related to
State exemptions under the FDCPA. Subpart B is reserved for any
future rulemaking by the Bureau under the FDCPA.
\262\ Rescission of Rules, 77 FR 22200 (Apr. 13, 2012).
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The Bureau solicits comment as to whether it should revise the
procedures and criteria that States must use to apply to the Bureau for
exemption of a class of debt collection practices from the provisions
of the FDCPA.\263\
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\263\ Maine is the only State that has ever sought or obtained
this exemption. See Exemption from Sections 803-812 of the Fair Debt
Collection Practices Act granted to State of Maine, 60 FR 66972
(Dec. 27, 1995).
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Q152: Do the procedures and criteria set forth in sections 1006.1
through 1006.8 of Regulation F adequately enable States to apply for
exemption? Are there any specific revisions to the procedures or
criteria set forth in sections 1006.1 through 1006.8 of Regulation F
that the Bureau should consider?
B. Exception for Certain Bad Check Enforcement Programs Operated by
Private Entities (Section 818 of the FDCPA)
In 2006, Congress amended the FDCPA and added a new exception under
section 818 for certain bad check enforcement programs operated by
private parties acting pursuant to contracts with a State or a district
attorney.\264\ Under the exception, a private entity is excluded from
the definition of ``debt collector'' under the FDCPA only if: (1) A
State or district attorney has established a pretrial diversion program
for alleged bad check offenders who agree to participate voluntarily in
such programs to avoid criminal prosecution; \265\ (2) the private
entity that operates the pretrial diversion program is ``subject to an
administrative services support contract with a State or district
attorney'' and ``operates under the direction, supervision, and control
of such State or district attorney''; \266\ and (3) the private entity
conducts its operations consistent with the specific requirements set
forth in section 818(a)(2)(C) of the FDCPA.
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\264\ Public Law 90-321, sec. 818, as added Public Law 109-351,
sec. 801(a)(2), 120 Stat. 2004 (2006).
\265\ 15 U.S.C. 1692p(a)(2)(A).
\266\ 15 U.S.C. 1692p(a)(2)(B).
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Consumer groups have expressed concern that some of the entities
may not be fulfilling the conditions necessary to be excluded from the
definition of ``debt collector,'' and, therefore, that the entities
should be subject to the FDCPA. For example, some consumer groups have
suggested that entities may not be including a ``clear and conspicuous
statement'' that the consumer may dispute the validity of the alleged
bad check violation.\267\
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\267\ 15 U.S.C. 1692p(a)(2)(C)(v)(I).
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Q153: How prevalent are bad check pretrial diversion programs?
Q154: What provisions typically are included in the
``administrative support services contracts'' between private entities
operating bad check pretrial diversion programs and State or district
attorneys? Are these contracts available to the public? Should the
Bureau define ``administrative support services contracts'' in proposed
rules or specify in such rules what types of provisions must be
included for contracts to meet the definition? Why or why not?
Q155: What do State or district attorneys usually do to ensure that
the private entities that operate bad check pretrial diversion programs
are subject to their ``direction, supervision, and control''? Should
the Bureau specify in proposed rules what State or district attorneys
must do to direct, supervise,
[[Page 67879]]
and control the private entities that operate bad check pretrial
diversion programs in order for these programs to be excluded from the
FDCPA? If so, what should be required?
Q156: One of the specific requirements in section 818(2)(C) of the
FDCPA is that in their initial written communication with consumers the
private entities operating bad check diversion programs must provide a
``clear and conspicuous'' statement of the consumers' rights.\268\ How
do private entities currently disclose this information? Should the
Bureau specify in proposed rules what constitutes a ``clear and
conspicuous statement'' of these rights? If so, what standards should
be included?
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\268\ 15 U.S.C. 1692p(a)(2)(C)(v).
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Q157: Private entities operating bad check pretrial diversion
programs that meet the conditions set forth in section 818 are exempt
from the FDCPA. Where these private entities are subject to title X of
the Dodd-Frank Act, should the Bureau exempt these entities from title
X of the Dodd-Frank Act and any implementing regulations?
Q158: Are there any other aspects of bad check pretrial diversion
programs that the Bureau should address in a proposed rule? To the
extent commenters have concerns about acts or practices involving these
programs, describe how prevalent the practice is and what harm it
causes to consumers?
IX. Recordkeeping, Monitoring, and Compliance Requirements
A. Federal Registration of Debt Collectors
A number of States require the licensing or registration of debt
collectors that operate in their State.\269\ Although the procedures in
each State differ, many States require that the collector file a
certificate with the State that includes the name of the collection
business, as well as the mailing and physical address of the business.
States may also require a listing of individual branch offices, and all
employees who operate in the State.\270\
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\269\ Examples of States with some type of licensing or
registration requirement include Alaska, Delaware, Florida,
Louisiana, Maine, Maryland, Massachusetts, Minnesota, Nevada, New
Mexico, North Carolina, North Dakota, Oregon, Tennessee, Utah,
Washington, West Virginia, and Wyoming.
\270\ See Alaska Application, available at http://commerce.alaska.gov/dnn/portals/5/pub/coa4106.pdf.
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In 2010, there were more than 4,000 third-party debt collection
firms that employed more than 140,000 people.\271\ Given the sheer
number of debt collectors, the fact that not all States have licensing
or registration programs, and that registration information may not be
shared among States, debt collection firms or individuals engaged in
debt collection may commit an unlawful act in one State, leave the
jurisdiction, and then commence operations in another State.
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\271\ Robert Hunt, Fed. Reserve Bank of Pa., Understanding the
Model: The Life Cycle of a Debt at 10 (2013), available at http://www.ftc.gov/bcp/workshops/lifeofadebt/UnderstandingTheModel.pdf
(presented at the FTC-CFPB Roundtable).
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Section 1022(c)(7) of the Dodd-Frank Act provides the Bureau with
the authority to ``prescribe rules regarding the registration
requirements applicable to a covered person,'' subject to limited
exceptions.\272\ Such a registration system could apply to many
collection firms and individual collectors.
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\272\ The registration provision excludes ``an insured
depository institution, insured credit union, or related person.''
Section 1022(c)(7) of the Dodd-Frank Act, 12 U.S.C. 5512(c)(7).
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Q159: Should the Bureau propose rules to require debt collectors to
register? Should any such registration system be used to register
individual debt collectors, debt collection firms, or both? What
information should be required for registration, and are there any
particular State models that the Bureau should consider? Are there data
on how consumers have benefitted from similar systems now operating in
States? Are there data on the costs imposed on collectors by
registration? How could a registration system be structured to minimize
the cost of registration for debt collectors, while still providing
adequate information for those who use the registration system?
Q160: The Nationwide Mortgage Licensing System and Registry
(``NMLSR''), which was originally used by State regulators for the
registry of mortgage loan originators, is increasingly being used as a
broader licensing platform, including for the registration of debt
collectors.\273\ Would it be desirable for NMLSR to expand or for some
other existing platform to be used to create a nationwide system for
registering debt collectors rather than having the Bureau create such a
system? What could the Bureau do to facilitate the sharing of
information among regulators who are part of the NMLSR or other
nationwide system to safeguard confidentiality and protect privileged
information?
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\273\ For example, some State banking agencies (including those
in Massachusetts, Oklahoma, Rhode Island, Vermont, and Washington)
are using the system to manage licensing for a variety of non-
depository financial services industries. See Press Release, Conf.
of State Bank Supervisors, State Regulators Expand Use of NMLS to
Include Additional Non-Depository Industries (Apr. 16, 2012),
available at http://www.csbs.org/news/press-releases/pr2012/Pages/pr-041612.aspx.
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B. Recordkeeping Requirements
At the FTC-CFPB Roundtable, several panelists stated that
recordkeeping requirements should be added to the FDCPA.\274\ The FDCPA
does not currently contain specific record retention requirements,
though debt owners, who also function as creditors or mortgage
originators, may be subject to record retention requirements under
other statutes and regulations, such as TILA or the Equal Credit
Opportunity Act and the Bureau's implementing rules.\275\ Some
Roundtable participants proposed that an FDCPA recordkeeping
requirement should be coextensive with the length of time a debt can
appear on a consumer report before it must be deleted as obsolete under
the FCRA (generally seven years, with some exceptions).\276\ Others
have suggested that a recordkeeping requirement should be coextensive
with the one-year statute of limitations for private actions under the
FDCPA, which begins to run from the time of the FDCPA violation.\277\
Another alternative would be to use the longer of these two periods.
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\274\ Transcript of 2013 FTC-CFPB Roundtable at 208-09.
\275\ See 12 CFR 1002.12 and 1026.25; Transcript of 2013 FTC-
CFPB Roundtable at 208-10.
\276\ See 15 U.S.C. 1681c; Transcript of 2013 FTC-CFPB
Roundtable at 208.
\277\ Transcript of 2013 FTC-CFPB Roundtable at 208; see section
813(d) of the FDCPA, 15 U.S.C. 692k(d) (``An action to enforce any
liability created by this subchapter may be brought in any
appropriate United States district court without regard to the
amount in controversy, or in any other court of competent
jurisdiction, within one year from the date on which the violation
occurs.'')
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Q161: What records do creditors and collectors currently retain
relating to debts in collection? Should proposed rules impose record
retention requirements in connection with debt collection activities?
If so, what requirements should be imposed and who should have to
comply with them? What would be the costs and benefits of these
requirements?
[[Page 67880]]
Q162: How long do creditors and debt collectors currently retain
records, and how does it differ based on the type of debt or type of
record? Should the length of time that debt collection records are
retained relate to how long a debt may generally be reported in a
consumer report, how long a collector may collect upon the debt, or how
long a consumer has to bring private action under the FDCPA? Or is
another time period more appropriate?
Dated: November 5, 2013.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2013-26875 Filed 11-8-13; 8:45 am]
BILLING CODE 4810-AM-P