Adjusting Procedures for Deceased Consumers
By: Caren D. Enloe
Section 1692a(3) defines a consumer as any natural person obligated or allegedly obligated to pay a consumer debt. The final debt collection rule interprets the definition of a consumer to include deceased natural consumers, as well. Looking towards a November 30th effective date, here are some key items that may require adjustments to your policies and procedures.
Initial Skip Traces
Because the Rule now addresses communications regarding dead consumers, it’s important to review skip trace policies and ensure policies are in place which will provide the debt collector with ample information as to the deceased consumer’s estate. Collection agencies will therefore want to examine their skip trace policies and procedures to ascertain whether they adequately identify estates and the representatives of those estates wherever possible. According to the CFPB, acceptable means for identifying estates would include a search of public records and use of location information communications.
The Rule will allow debt collectors to seek location information concerning persons authorized to act on behalf of the deceased consumer’s estate. While neither the FDCPA nor the Rule allow for the debt collector to disclose the debt, the Rule’s Official Commentary provides directed guidance on the what content is acceptable in location information communications. Specific to deceased consumers, the Comments indicate a debt collector may state: “that the debt collector is seeking to identify and locate the person who is authorized to act on behalf of the deceased consumer’s estate” or “that the debt collector is seeking to identify and locate the person handling the financial affairs of the deceased consumer.” See Comment 10(b)(2)-1. Collection agencies should consider incorporating this language into their skip tracing and location inquiries. While not a per se safe harbor, adherence to the language of the comments provides some persuasive authority for compliance.
Debt Validation Notice
For purposes of debt validation, the Rule makes clear that if the debt collector knows or should know that the consumer is deceased, and if the debt collector has not previously provided the validation notice to the deceased consumer, the debt collector must provide the debt validation notice to a person authorized to act on behalf of the deceased consumer’s estate. Under the CFPB’s interpretation this would include executors, administrators and personal representatives.
The “should know” standard should give debt collectors pause to consider what tools they have at their disposal that would or should allow them to know a consumer is deceased. Debt collectors should be establishing policies and procedures which address when and to whom a debt validation notice should be sent when the consumer is deceased, as well as processes for identifying estates and the appropriate representative of the estate.
Debt collectors should be mindful of the specificity required when sending validation notices to the representative of a deceased consumer. Comment 34(a)(1)-1 requires that the debt collector identify by name the person who is authorized to act on behalf of the deceased person. It is not enough to simply address the debt validation to the “Estate of John Smith.” Instead, the debt collector will need to identify the specific person authorized to act on behalf of the deceased consumer’s estate and, where the validation notice has not previously been provided, provide it addressed to the appropriate representative.
Permissive Parties for Communication
For all other communications and consistent with this expansive interpretation of who is a consumer, the Rules likewise include as permissive third parties for communication the deceased consumer’s spouse, parent (if the consumer is a minor), legal guardian, executor or administrator, and confirmed successor in interest (as defined Regulation X). Moreover, the Comments clarify that the terms “executor” and “administrator” include less formal personal representatives. See Comment 6(a)(4)-1. “Persons with such authority may include personal representatives under the informal probate and summary administration procedures…, persons who sign declarations or affidavits to effectuate the transfer of estate assets, and persons who dispose of the deceased consumer’s financial assets or other assets of monetary value extrajudicially.” Collection agencies should be mindful of this clarification and should begin reviewing their policies, procedures and scripts to evaluate whether they are sufficiently robust to adequately identify such parties.
Summary of Actions for Preparedness
Because the Rule takes a more expansive view of who is a consumer, collection agencies should begin reviewing their policies, procedures, scripts and letter contents to ensure they are properly communicating with the appropriate representatives of estates. Skip tracing and location contacts should be updated to identify deceased consumers and those authorized to act on behalf of the deceased consumer’s estate. Debt validation notices should be similarly updated to send debt validation notices to the appropriate named representative of the estate. And finally, policies and procedures should be updated to identify the appropriate third parties for further communications concerning the debt when the consumer is deceased.
About the Author. Caren Enloe leads Smith Debnam’ s consumer financial services litigation and compliance group. Caren currently serves as chair of the Debt Collection Practices and Bankruptcy subcommittee for the American Bar Association’s Consumer Financial Services committee and as co-chair of the National Creditors Bar Association’ s Bankruptcy Section. She is additionally a MAP State Chair and member of ACA International. Most recently, she was elected to the Governing Committee for the Conference on Consumer Finance Law. In 2018, Caren was named one of the “20 Most Powerful Women in Collections” by Collection Advisor, a national trade publication. An active writer and speaker, Caren oversees a blog dedicated to consumer financial services and has been published in various publications.