[Federal Register Volume 81, Number 202 (Wednesday, October 19, 2016)]
[Rules and Regulations]
[Pages 71977-71981]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18902]



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  Federal Register / Vol. 81, No. 202 / Wednesday, October 19, 2016 / 
Rules and Regulations  

[[Page 71977]]



BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1006

[Docket No. CFPB-2014-0033]
RIN 3170-AA49


Safe Harbors From Liability Under the Fair Debt Collection 
Practices Act for Certain Actions Taken in Compliance With Mortgage 
Servicing Rules Under the Real Estate Settlement Procedures Act 
(Regulation X) and the Truth in Lending Act (Regulation Z)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Official Bureau interpretations.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
issuing this interpretive rule under the Fair Debt Collection Practices 
Act (FDCPA) to clarify the interaction of the FDCPA and specified 
mortgage servicing rules in Regulations X and Z. This interpretive rule 
constitutes an advisory opinion for purposes of the FDCPA and provides 
safe harbors from liability for servicers acting in compliance with 
specified mortgage servicing rules in three situations: Servicers do 
not violate FDCPA section 805(b) when communicating about the mortgage 
loan with confirmed successors in interest in compliance with specified 
mortgage servicing rules in Regulation X or Z; servicers do not violate 
FDCPA section 805(c) with respect to the mortgage loan when providing 
the written early intervention notice required by Regulation X to a 
borrower who has invoked the cease communication right under FDCPA 
section 805(c); and servicers do not violate FDCPA section 805(c) when 
responding to borrower-initiated communications concerning loss 
mitigation after the borrower has invoked the cease communication right 
under FDCPA section 805(c).

DATES: This rule is effective on October 19, 2017, except that the 
interpretation contained in Part II.A is effective on April 19, 2018.

FOR FURTHER INFORMATION CONTACT: Dania L. Ayoubi, Counsel, or Laura A. 
Johnson or Amanda E. Quester, Senior Counsels; Office of Regulations, 
at (202) 435-7700.

SUPPLEMENTARY INFORMATION: 

I. Background

    In January 2013, the Bureau issued several final rules concerning 
mortgage markets in the United States (2013 Title XIV Final Rules), 
pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection 
Act (Dodd-Frank Act), Public Law 111-203, 124 Stat. 1376 (2010). Two of 
these rules were (1) the Mortgage Servicing Rules Under the Real Estate 
Settlement Procedures Act (Regulation X) (2013 RESPA Servicing Final 
Rule); \1\ and (2) the Mortgage Servicing Rules Under the Truth in 
Lending Act (Regulation Z) (2013 TILA Servicing Final Rule).\2\
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    \1\ 78 FR 10695 (Feb. 14, 2013).
    \2\ 78 FR 10901 (Feb. 14, 2013).
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    The Bureau clarified and revised those rules through notice and 
comment rulemaking during the summer and fall of 2013 in the (1) 
Amendments to the 2013 Mortgage Rules under the Real Estate Settlement 
Procedures Act (Regulation X) and the Truth in Lending Act (Regulation 
Z) (July 2013 Mortgage Final Rule) \3\ and (2) Amendments to the 2013 
Mortgage Rules under the Equal Credit Opportunity Act (Regulation B), 
Real Estate Settlement Procedures Act (Regulation X), and the Truth in 
Lending Act (Regulation Z) (September 2013 Mortgage Final Rule).\4\ In 
October 2013, the Bureau clarified compliance requirements in relation 
to successors in interest, early intervention requirements, bankruptcy 
law, and the Fair Debt Collection Practices Act (FDCPA) \5\ through an 
Interim Final Rule (IFR) \6\ and a contemporaneous compliance bulletin 
(October 2013 Servicing Bulletin).\7\ Among other things, the IFR 
provisionally exempted servicers from the early intervention 
requirements when a borrower has properly invoked the FDCPA's cease 
communication protections and indicated that the Bureau expected to 
explore the potential utility and application of such requirements in 
comparison to the FDCPA protections in a broader debt collection 
rulemaking.\8\ In October 2014, the Bureau added an alternative 
definition of small servicer in the Amendments to the 2013 Mortgage 
Rules under the Truth in Lending Act (Regulation Z).\9\ The purpose of 
each of these updates was to address important questions raised by 
industry, consumer advocacy groups, and other stakeholders.
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    \3\ 78 FR 44685 (July 24, 2013).
    \4\ 78 FR 60381 (Oct. 1, 2013).
    \5\ 15 U.S.C. 1692 et seq.
    \6\ 78 FR 62993 (Oct. 23, 2013).
    \7\ 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.
    \8\ 78 FR 62993, 62994 (Oct. 23, 2013). The Bureau received 
comments in response to the IFR that it took into account in 
developing the proposed rule and sample forms for consumers in 
bankruptcy.
    \9\ 79 FR 65300, 65304 (Nov. 3, 2014).
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A. Proposed Rule

    On December 15, 2014, the Bureau published for notice and comment a 
proposed rule to amend Regulations X and Z.\10\ Among other things, the 
Bureau proposed three sets of rules relating to successors in interest. 
First, the Bureau proposed rules to define successors in interest for 
purposes of Regulation X's subpart C and Regulation Z as those persons 
who acquired an ownership interest in the property securing a mortgage 
loan in a transfer protected from due-on-sale enforcement by the Garn-
St Germain Depository Institutions Act of 1982. Second, the Bureau 
proposed rules relating to how a mortgage servicer confirms a successor 
in interest's identity and ownership interest in the property. Third, 
the Bureau proposed to apply specified mortgage servicing rules in 
Regulations X and Z to successors in interest whose identity and 
ownership interest in the property have been confirmed by the servicer. 
The Bureau proposed these changes to address the significant problems 
that successors in interest continue to encounter with respect to the 
servicing of mortgage loans secured by their property--such as lack of 
access to information about the mortgage loan--which can lead to 
unnecessary foreclosures.
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    \10\ 79 FR 74176 (Dec. 15, 2014).
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    The Bureau also proposed to maintain the IFR's exemption from the 
live contact requirements of Sec.  1024.39(a)

[[Page 71978]]

with regard to a mortgage loan for which a borrower has invoked the 
cease communication protections of FDCPA section 805(c), for a servicer 
subject to the FDCPA with respect to that loan, while partially 
eliminating the exemption from the written early intervention notice 
requirements of Sec.  1024.39(b) to require that a servicer provide a 
modified written notice to the borrower, if loss mitigation options are 
available. In addition to the information set forth in Sec.  
1024.39(b)(2), the proposal would have required that the modified 
written early intervention notice include a statement that the servicer 
may or intends to invoke its specified remedy of foreclosure.

B. Final Rule

    Concurrent with issuing this interpretive rule, the Bureau is 
finalizing the proposed changes described above, with certain 
adjustments in the Amendments to the 2013 Mortgage Rules under the Real 
Estate Settlement Procedures Act (Regulation X) and the Truth in 
Lending Act (Regulation Z) (2016 Servicing Final Rule).\11\ Among other 
things, the 2016 Servicing Final Rule includes the proposed three sets 
of rule changes relating to successors in interest, with modifications 
to address concerns raised in comments the Bureau received. First, the 
2016 Servicing Final Rule adds definitions of successor in interest to 
Regulations X and Z that are modeled on the categories of transferees 
that are protected from due-on-sale enforcement by the Garn-St Germain 
Depository Institutions Act of 1982.\12\ Consistent with the proposal, 
successors in interest, as defined in the 2016 Servicing Final Rule, 
will not necessarily have assumed the mortgage loan obligation (i.e., 
legal liability for the mortgage debt) under State law or otherwise be 
legally obligated on the mortgage loan.
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    \11\ See Bureau of Consumer Fin. Prot., 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) (Aug. 4, 2016), available at http://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/amendments-2013-mortgage-rules-under-real-estate-settlement-procedures-act-regulation-x-and-truth-lending-act-regulation-z.
    \12\ Regulation X Sec.  1024.31; Regulation Z Sec.  
1026.2(a)(27)(i).
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    Second, the 2016 Servicing Final Rule includes new rules relating 
to how a mortgage servicer confirms a successor in interest's identity 
and ownership interest. It also defines confirmed successor in interest 
under subpart C of Regulation X and under Regulation Z as a successor 
in interest once a servicer has confirmed the successor in interest's 
identity and ownership interest in the relevant property.
    Third, the 2016 Servicing Final Rule provides that a confirmed 
successor in interest is considered a borrower for purposes of 
Regulation X subpart C and Sec.  1024.17 and a consumer for purposes of 
Regulation Z Sec. Sec.  1026.20(c) through (e), 1026.36(c), 1026.39, 
and 1026.41 (collectively referred to herein as the Mortgage Servicing 
Rules). Under the 2016 Servicing Final Rule, confirmed successors in 
interest can obtain information about the mortgage loan through 
requests for information and notice of error procedures.\13\ Confirmed 
successors in interest are also generally entitled to receive notices 
required under the Mortgage Servicing Rules to the extent applicable, 
if the servicer is not providing the same specific notices to another 
borrower on the account.\14\ Applying these protections to confirmed 
successors in interest will further the purposes of RESPA and TILA by 
helping to prevent unnecessary foreclosures and other consumer harm by 
keeping confirmed successors in interest informed of the status of the 
mortgage loans on their property.
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    \13\ The 2016 Servicing Final Rule provides that, in responding 
to a request for information under Sec.  1024.36 or a request for 
documentation under Sec.  1024.35(e)(4), a servicer may omit 
location and contact information and personal financial information 
(other than information about the terms, status, and payment history 
of the mortgage loan) if: (i) The information pertains to a 
potential or confirmed successor in interest who is not the 
requester; or (ii) the requester is a confirmed successor in 
interest and the information pertains to any borrower who is not the 
requester.
    \14\ The same exemptions and scope limitations apply to 
confirmed successors in interest as to other borrowers under the 
Mortgage Servicing Rules. Additionally, if a servicer provides an 
initial written notice and acknowledgment form to a confirmed 
successor in interest upon confirmation in compliance with the 
requirements of Regulation X Sec.  1024.32(c)(1) through (3), the 
2016 Servicing Final Rule allows the servicer not to provide notices 
under the Mortgage Servicing Rules to the confirmed successor in 
interest until the confirmed successor in interest requests such 
notices through the acknowledgment.
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    The 2016 Servicing Final Rule also finalizes the proposed partial 
exemption from the early intervention requirements with regard to a 
mortgage loan for which any borrower has invoked the cease 
communication right pursuant to FDCPA section 805(c), for a servicer 
subject to the FDCPA with respect to that loan, with modifications to 
address concerns raised in comments the Bureau received. Under the 2016 
Servicing Final Rule, if a borrower has invoked the cease communication 
right pursuant to FDCPA section 805(c), a servicer subject to the FDCPA 
with respect to that loan is exempt from the live contact requirements 
with respect to that mortgage loan. If no loss mitigation option is 
available or while any borrower on the mortgage loan is a debtor in 
bankruptcy under title 11 of the United States Code, a servicer is also 
exempt from the written notice requirements with respect to that 
mortgage loan. If these conditions are not met, the servicer is 
required to provide a modified written early intervention notice 
pursuant to Sec.  1024.39(d)(3), as described in more detail below.

II. Application of Interpretive Rule

    While many mortgage servicers are not subject to the FDCPA, 
mortgage servicers that acquired a mortgage loan at the time that it 
was in default are subject to the FDCPA with respect to that mortgage 
loan. The Bureau is issuing this interpretive rule to clarify the 
interaction between certain provisions of the FDCPA and the Mortgage 
Servicing Rules. This interpretive rule constitutes an advisory opinion 
under FDCPA section 813(e) and provides a safe harbor from liability 
for actions done or omitted in good faith in conformity with the 
opinion, even if the opinion is rescinded or amended in whole or in 
part after the act or omission occurs, or is determined invalid by a 
judicial authority.\15\ The interpretations contained in this rule are 
included in relevant commentary to Regulations X and Z.\16\
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    \15\ FDCPA section 813(e).
    \16\ Regulation X comments 30(d)-1 and 39(d)-2; Regulation Z 
comment 2(a)(11)-4.ii.
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A. Confirmed Successors in Interest

    In the 2016 Servicing Final Rule, the Bureau is extending certain 
protections of Regulations X and Z to cover confirmed successors in 
interest whether or not a successor has assumed the mortgage loan 
obligation.\17\ For

[[Page 71979]]

example, servicers generally will have to comply with Regulation X's 
requirements for loss mitigation and Regulation Z's requirements for 
periodic statements with respect to confirmed successors in 
interest.\18\ This interpretive rule clarifies the interaction between 
the requirements in the 2016 Servicing Final Rule applicable to 
confirmed successors in interest and FDCPA section 805(b)'s general 
prohibition on communicating with third parties in connection with 
collection of a debt.
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    \17\ For purposes of Regulation X subpart C, successor in 
interest is defined as:
    A person to whom an ownership interest in a property securing a 
mortgage loan subject to this subpart is transferred from a 
borrower, provided that the transfer is:
     A transfer by devise, descent, or other operation of 
law on the death of a joint tenant or tenant by the entirety;
     A transfer to a relative resulting from the death of a 
borrower;
     A transfer where the spouse or children of the borrower 
become an owner of the property;
     A transfer resulting from a decree of a dissolution of 
marriage, legal separation agreement, or from an incidental property 
settlement agreement, by which the spouse of the borrower becomes an 
owner of the property; or
     A transfer into an inter vivos trust in which the 
borrower is and remains a beneficiary and which does not relate to a 
transfer of rights of occupancy in the property.
    Regulation X Sec.  1024.31. The 2016 Servicing Final Rule's 
definition of successor in interest for Regulation Z is identical, 
except that the Regulation Z definition substitutes ``a dwelling 
securing a closed-end consumer credit transaction is transferred 
from a consumer'' for ``a property securing a mortgage loan is 
transferred from a borrower.'' Regulation Z Sec.  1026.2(27)(i). The 
categories included in these definitions track the categories of 
transfers protected by section 341(d) of the Garn-St Germain 
Depository Institutions Act of 1982. The 2016 Servicing Final Rule 
also defines confirmed successor in interest as a successor in 
interest once a servicer has confirmed the successor in interest's 
identity and ownership interest in the relevant property. Regulation 
X Sec.  1024.31, Regulation Z Sec.  1026.2(a)(27)(ii).
    \18\ Regulation X Sec. Sec.  1024.30(d) and 1024.41; Regulation 
Z Sec. Sec.  1026.2(a)(11) and 1026.41.
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    FDCPA section 805(b) generally prohibits debt collectors from 
communicating with third parties in connection with the collection of a 
debt in the absence of a court order or prior consumer consent given 
directly to the debt collector. FDCPA section 805(b) permits debt 
collectors to communicate with a person who is a consumer for purposes 
of section 805. FDCPA section 805(d), in turn, states that the term 
consumer for purposes of section 805 includes the consumer's spouse, 
parent (if the consumer is a minor), guardian, executor, or 
administrator.\19\ The use of the word ``includes'' indicates that 
section 805(d) is an exemplary rather than exhaustive list of the 
categories of individuals that are ``consumers'' for purposes of FDCPA 
section 805.
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    \19\ 15 U.S.C. 1692c(d). In general, the FDCPA defines consumer 
as ``any natural person obligated or allegedly obligated to pay any 
debt.'' FDCPA section 803(3), 15 U.S.C. 1692b(3).
---------------------------------------------------------------------------

    FDCPA section 805 thus recognizes the importance of permitting debt 
collectors to communicate with a narrow category of other persons who, 
by virtue of their relationship to the obligor or the debt in question, 
may need to communicate with the debt collector in connection with the 
collection of the debt.
    In light of its expertise as the agency that Congress has charged 
with interpreting and implementing the FDCPA, RESPA, and TILA, the 
Bureau interprets the term consumer for purposes of FDCPA section 805 
to include a confirmed successor in interest as that term is defined in 
Regulation X Sec.  1024.31 and Regulation Z Sec.  1026.2(a)(27)(ii). 
Given their relationship to the obligor, the mortgage loan, and the 
property securing the mortgage loan, and given the Bureau's extension 
of certain protections of Regulations X and Z to them, the Bureau 
concludes that confirmed successors in interest are--like the narrow 
categories of persons enumerated in FDCPA section 805(d)--the type of 
individuals with whom a servicer needs to communicate about the 
mortgage loan. As the Bureau notes in the 2016 Servicing Final Rule, a 
servicer's failure to provide information to a successor in interest 
about the status of a mortgage loan or to evaluate the successor in 
interest for available loss mitigation options could result in 
unnecessary foreclosure and loss of the successor in interest's 
ownership interest. Under this interpretive rule, servicers subject to 
the FDCPA with respect to a mortgage loan do not violate FDCPA section 
805(b)'s prohibition on communicating with third parties by 
communicating with a confirmed successor in interest about a mortgage 
loan secured by property in which the confirmed successor in interest 
has an ownership interest, in compliance with the Mortgage Servicing 
Rules.\20\
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    \20\ As a consequence of this interpretation, the protections in 
FDCPA sections 805(a) and (c), which apply to consumers for purposes 
of section 805, apply to confirmed successors in interest. Under 
FDCPA section 805(a), a debt collector may not--without the prior 
consent of the consumer or the express permission of a court--
communicate with the consumer in connection with the collection of 
any debt in certain circumstances, including at any unusual or 
inconvenient time or place. And, as explained in greater detail 
below, FDCPA section 805(c) provides that, if a consumer refuses in 
writing to pay a debt or requests that a debt collector cease 
communicating with the consumer about the debt, the debt collector 
must generally cease communicating with the consumer.
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    Because this interpretive rule applies only to the use of the term 
consumer in section 805, it does not affect the definition of consumer 
under the remaining FDCPA provisions. Moreover, this interpretive rule 
applies only to confirmed successors in interest as defined in 
Regulation X Sec.  1024.31 and Regulation Z Sec.  1026.2(a)(27)(ii) to 
facilitate their access to information about the mortgage loan 
encumbering their property. It does not expand the definition of 
consumer for purposes of FDCPA section 805 beyond confirmed successors 
in interest as defined in Regulations X and Z. Furthermore, this 
interpretation does not relieve servicers that are debt collectors of 
their obligations under the FDCPA, including their obligations under 
FDCPA sections 806 through 808.\21\
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    \21\ For example, servicers that are debt collectors must not: 
Engage in conduct the natural consequence of which is to harass, 
oppress, or abuse any person in connection with the collection of a 
debt; use any false, deceptive, or misleading representation or 
means in connection with the collection of a debt; or use unfair or 
unconscionable means to collect or attempt to collect any debt.
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B. Required Early Intervention Notice

    As explained in the 2016 Servicing Final Rule, the Bureau is, in 
part, eliminating the exemption from the written early intervention 
requirements with regard to a mortgage loan for which any borrower has 
invoked the cease communication right under FDCPA section 805(c), for a 
servicer subject to the FDCPA with respect to that loan. A servicer 
that is a debt collector with respect to that loan is exempt from the 
written notice requirements with regard to that loan if no loss 
mitigation option is available \22\ or while any borrower on the 
mortgage loan is a debtor in bankruptcy under title 11 of the United 
States Code. If these conditions are not met, the servicer is required 
to provide a modified written early intervention notice that, among 
other things, includes statements encouraging the borrower to contact 
the servicer, provides a brief description of examples of loss 
mitigation options that may be available from the servicer, and states 
that the servicer may or intends to invoke its specified remedy of 
foreclosure.\23\ The servicer is legally required to provide a 
delinquent borrower with the written notice not later than the 45th day 
of the borrower's delinquency. As a general matter, this written notice 
must be provided well before the servicer may initiate foreclosure: In 
most cases, the servicer is legally required to wait until a borrower's 
mortgage loan obligation is more than 120 days delinquent, after the 
written notice has been sent, to make the first notice or filing 
required by applicable law for any judicial or non-

[[Page 71980]]

judicial foreclosure process. This written notice may not contain a 
request for or suggestion of payment, other than for purposes of loss 
mitigation, and the servicer is not required to provide it to the 
borrower more than once during any 180-day period.\24\
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    \22\ See Regulation X comment 39(d)-1 (explaining availability 
of loss mitigation options).
    \23\ Regulation X Sec.  1024.39(d)(3). The 2016 Servicing Final 
Rule provides the following model language that servicers that are 
debt collectors may use:
    This is a legally required notice. We are sending this notice to 
you because you are behind on your mortgage payment. We want to 
notify you of possible ways to avoid losing your home. We have a 
right to invoke foreclosure based on the terms of your mortgage 
contract. Please read this letter carefully.
    Appendix MS-4(D). Use of this model clause or another statement 
in compliance with Sec.  1024.39(d)(3)(i), on a written notice as 
required by and in compliance with the other requirements of Sec.  
1024.39(d)(3), provides a safe harbor from FDCPA liability under 
section 805(c) for providing the required statement.
    \24\ Regulation X Sec.  1024.39(d)(3).
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    Section 805(c) of the FDCPA provides that, if a consumer refuses in 
writing to pay a debt or requests that a debt collector cease 
communicating with the consumer about the debt, the debt collector must 
discontinue communicating with the consumer, subject to enumerated 
exceptions. As relevant here, the prohibition does not apply where a 
debt collector communicates with a consumer who has invoked the cease 
communication right to notify the consumer that the debt collector or 
creditor may invoke specified remedies which are ordinarily invoked by 
such debt collector or creditor \25\ or, where applicable, to notify 
the consumer that the debt collector or creditor intends to invoke a 
specified remedy.\26\
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    \25\ FDCPA section 805(c)(2).
    \26\ FDCPA section 805(c)(3).
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    Because failure to provide the written early intervention notice 
required by Sec.  1024.39(d)(3) is closely linked to a servicer's 
ability to invoke its specified remedy of foreclosure, the Bureau 
concludes that the notice falls within the exceptions in FDCPA sections 
805(c)(2) and (3).
    This interpretation is limited to the specific situation where a 
servicer that is a debt collector with respect to a mortgage loan is 
required by Sec.  1024.39(d)(3) to provide a modified written early 
intervention notice to a borrower who has invoked the cease 
communication right under FDCPA section 805(c) with regard to that 
loan. It is a narrow safe harbor, based only upon the interplay between 
these two specific federal consumer protections--the early intervention 
requirements of Sec.  1024.39 of Regulation X and the cease 
communication provision and statutory exceptions of section 805(c) of 
the FDCPA. All other provisions of the FDCPA, including the 
prohibitions contained in FDCPA sections 805 through 808, are 
unaffected by this interpretation, and a servicer that is a debt 
collector with respect to the particular mortgage loan remains liable 
to the extent that anything in the notice violates any other provision 
of the FDCPA.\27\
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    \27\ For example, servicers that are debt collectors must not: 
Engage in conduct the natural consequence of which is to harass, 
oppress, or abuse any person in connection with the collection of a 
debt; use any false, deceptive, or misleading representation or 
means in connection with the collection of a debt; or use unfair or 
unconscionable means to collect or attempt to collect any debt.
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    The Bureau concludes that, in the limited circumstances where a 
servicer is subject to the FDCPA with respect to a borrower's mortgage 
loan and the borrower has invoked the cease communication right 
pursuant to FDCPA section 805(c) with regard to that mortgage loan, and 
where the servicer complies with the requirements of the modified 
written early intervention notice under Sec.  1024.39(d)(3) of 
Regulation X, the modified written early intervention notice required 
under Sec.  1024.39(d)(3) is within the statutory exceptions of FDCPA 
section 805(c)(2) and (3) and thus does not violate section 805(c) with 
respect to the mortgage loan.

C. Borrower-Initiated Communications Concerning Loss Mitigation After 
Invocation of Cease Communication Rights

    Even after a borrower has invoked the cease communication right 
under section 805(c) of the FDCPA, the borrower may contact the 
servicer to discuss or apply for loss mitigation. For instance, as 
noted above, Sec.  1024.39(d)(3) requires servicers subject to the 
FDCPA with respect to a borrower's mortgage loan to provide a written 
early intervention notice to borrowers who have invoked the FDCPA's 
cease communication right with regard to that loan if any loss 
mitigation option is available and no borrower on the mortgage loan is 
a debtor in bankruptcy under title 11 of the United States Code. The 
written notice must include a statement encouraging the borrower to 
contact the servicer.\28\ The Bureau believes that, when borrowers 
respond to such a notice by contacting the servicer to discuss 
available loss mitigation options or otherwise initiate communication 
with the servicer concerning loss mitigation, such a borrower-initiated 
communication should not be understood as within the category of 
communication that borrowers generally preclude by invoking the cease 
communication right under FDCPA section 805(c). The Bureau therefore 
concludes that a borrower's invocation of the FDCPA's cease 
communication right with regard to a mortgage loan does not prevent a 
servicer that is a debt collector with respect to that mortgage loan 
from responding to borrower-initiated communications concerning loss 
mitigation.
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    \28\ See Regulation X Sec.  1024.39(b)(2)(i).
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    As noted above, FDCPA section 805(c) empowers borrowers to direct 
debt collectors to cease contacting them with respect to a debt and 
frees borrowers from the burden of being subjected to unwanted 
communications regarding collection of a debt. Borrower-initiated 
conversations about loss mitigation options do not give rise to the 
burden of unwanted communications that FDCPA section 805(c) protects 
against. Rather, they are sought out by borrowers for this narrow 
purpose. The Bureau therefore concludes that a borrower's cease 
communication notification pursuant to FDCPA section 805(c) should 
ordinarily be understood to exclude borrower-initiated communications 
with a servicer concerning loss mitigation because the borrower has 
specifically requested the communication at issue to discuss available 
loss mitigation options. Accordingly, when a servicer that is a debt 
collector with respect to a mortgage loan responds to a borrower-
initiated communication concerning loss mitigation after the borrower's 
invocation of FDCPA section 805(c)'s cease communication protection 
with regard to that loan, the servicer does not violate FDCPA section 
805(c) with respect to such communications as long as the servicer's 
response is limited to a discussion of any potentially available loss 
mitigation option. For example, a servicer may discuss with a borrower 
any available loss mitigation option that the owner or assignee of the 
borrower's mortgage loan offers, instructions on how the borrower can 
apply for loss mitigation, what documents and information the borrower 
would need to provide to complete a loss mitigation application, and 
the potential terms or details of a loan modification program, 
including the monthly payment and duration of the program. These 
borrower-initiated communications, although variable, are unlikely to 
be perceived as within the scope of the cease communication request 
given the borrower's initiation of communications concerning loss 
mitigation information.
    This is the case even if the borrower provides a cease 
communication notification during the loss mitigation application and 
evaluation process under Sec.  1024.41. The borrower usually should be 
understood to have excluded the loss mitigation application and 
evaluation process under Sec.  1024.41 from the general request to 
cease communication, and therefore a servicer should continue to comply 
with the procedures under Sec.  1024.41. Only if the borrower provides 
a communication to the servicer specifically withdrawing

[[Page 71981]]

the request for loss mitigation does the cease communication 
prohibition apply to communicating about the specific loss mitigation 
action.\29\
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    \29\ See Bureau of Consumer Fin. Prot., Implementation Guidance 
for Certain Mortgage Servicing Rules, CFPB Bulletin 2013-12 (Oct. 
15, 2013), available at http://files.consumerfinance.gov/f/201310_cfpb_mortgage-servicing_bulletin.pdf.
---------------------------------------------------------------------------

    The Bureau notes that this interpretation provides a safe harbor 
from FDCPA section 805(c) for servicers that are debt collectors with 
respect to a particular mortgage loan communicating with the borrower 
in connection with a borrower's initiation of communications concerning 
loss mitigation. Preceding a borrower's loss mitigation application and 
during the evaluation process, a servicer may respond to borrower 
inquiries about potentially available loss mitigation options and 
provide information regarding any available option. Similarly, if that 
borrower submits a loss mitigation application, the servicer's 
reasonable diligence obligations under Sec.  1024.41(b)(1) require the 
servicer to request additional information from the borrower, including 
by contacting the borrower, and these communications by the servicer to 
complete a loss mitigation application do not fall within the cease 
communication prohibition. The servicer may also seek information that 
will be necessary to evaluate the borrower for loss mitigation, though 
the servicer may not seek a payment unrelated to the purpose of loss 
mitigation. Once the borrower's loss mitigation application is 
complete, a servicer's communications with a borrower in accordance 
with the procedures in Sec.  1024.41 are not subject to liability under 
FDCPA section 805(c) because they arise from the borrower's application 
for loss mitigation.
    The Bureau recognizes that, in order for a borrower to engage in 
meaningful loss mitigation discussions with a servicer, the servicer 
may discuss repayment options, the borrower's ability to make a 
payment, and how much the borrower can afford to pay as a part of a 
loss mitigation option for which the servicer is considering the 
borrower. Furthermore, the Bureau understands that any offer for a loan 
modification or repayment plan is likely to include a specific payment 
amount the borrower must pay under the terms of the loss mitigation 
agreement. Such communications, as long as for the purpose of loss 
mitigation, are permissible because they should not be understood as 
within the scope of the cease communication request.
    The Bureau emphasizes, however, that the cease communication 
prohibition continues to apply to a servicer's communications with a 
borrower about payment of the mortgage loan that are outside the scope 
of loss mitigation conversations. The Bureau's interpretation does not 
protect a servicer that is a debt collector with respect to a mortgage 
loan and is using borrower-initiated communications concerning loss 
mitigation as a pretext for debt collection in circumvention of a 
borrower's invoked cease communication right under FDCPA section 805(c) 
with regard to that loan. Seeking to collect a debt under the guise of 
a loss mitigation conversation is not exempt from liability under FDCPA 
section 805(c) under this interpretation. Thus, in subsequently 
communicating with a borrower concerning loss mitigation, the servicer 
is strictly prohibited from making a request for payment that is not 
immediately related to any specific loss mitigation option. Some 
examples of impermissible communications include initiating 
conversations with the borrower related to repayment of the debt that 
are not for the purposes of loss mitigation, demanding that the 
borrower make a payment, requesting that the borrower bring the account 
current or make a partial payment on the account, or attempting to 
collect the outstanding balance or arrearage, unless such 
communications are immediately related to a specific loss mitigation 
option.\30\ Additionally, all other provisions of the FDCPA, including 
the prohibitions contained in FDCPA sections 805 through 808, continue 
to apply.\31\
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    \30\ See 53 FR 50097, 50103 (Dec. 13, 1988) (Section 805(c)-2 of 
the Federal Trade Commission's (FTC) Official Staff Commentary on 
FDCPA section 805(c)) (``A debt collector's response to a `cease 
communication' notice from a consumer may not include a demand for 
payment, but is limited to the three statutory exceptions [under 
FDCPA section 805(c)(1) through (3)].'').
    \31\ For example, servicers that are debt collectors must not: 
Engage in conduct the natural consequence of which is to harass, 
oppress, or abuse any person in connection with the collection of a 
debt; use any false, deceptive, or misleading representation or 
means in connection with the collection of a debt; or use unfair or 
unconscionable means to collect or attempt to collect any debt.
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III. Regulatory Requirements

    This rule articulates the Bureau's interpretation of the FDCPA. It 
is exempt from notice and comment rulemaking requirements under the 
Administrative Procedure Act pursuant to 5 U.S.C. 553(b). Because no 
notice of proposed rulemaking is required, the Regulatory Flexibility 
Act does not require an initial or final regulatory flexibility 
analysis.\32\ The Bureau has determined that this rule does not impose 
any new or revise any existing recordkeeping, reporting, or disclosure 
requirements on covered entities or members of the public that would be 
collections of information requiring OMB approval under the Paperwork 
Reduction Act, 44 U.S.C. 3501 et seq.
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    \32\ 5 U.S.C. 603(a) and 604(a).

    Dated: August 2, 2016.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2016-18902 Filed 10-18-16; 8:45 am]
 BILLING CODE 4810-AM-P