The Final Countdown to the Effective Date: Ten Tips for a Smooth Implementation
By Caren D. Enloe
On November 30th, the CFPB’s Debt Collection Rule (the “Rule”) will take effect. While the industry has spent most of the past two years preparing for this date, implementation is finally here. Here are Ten Tips for a Smooth Implementation.
Audit Your Entire Letter Series
Generally, all letters should be audited at least once a year. While the Rule most directly affects your Validation Notice, other letters in your letter series may also be impacted by the provisions of the Rule and should also be reviewed to ensure they comply with the Rule, the FDCPA, and any applicable state regulations or statutes.
Audit Your Policies and Procedures
While debt collectors have been busy adding and revising policies and procedures to account for the requirements of the Rule, they should also audit the entirety of their policies and procedures to ensure the comply with the Rule, the FDCPA, and applicable state regulations or statutes. Audits should be done at least annually.
Review Your Scripts
Scripts also should be given a final review to ensure they comply with the FDCPA, the Rule, and any applicable state regulators or statutes.
Review the CFPB FAQs
Over the past 60 days, the CFPB has issued a series of FAQs addressing Limited-Content Messages, Call Frequency and Validation Information. Agencies should review the FAQs to ensure their understanding of the Rule aligns with that of the CFPB. The link is here: https://www.consumerfinance.gov/compliance/compliance-resources/other-applicable-requirements/debt-collection/debt-collection-rule-faqs/
If you have been credit reporting, you should review your records for any consumers for which the requirements of Section 1006.30(a)(1) have not been met and refrain from credit reporting on those consumers before November 30th. Remember, Section 1006.30 only allows credit reporting after the debt collector has either spoken to the consumer or placed a letter in the mail and waited a reasonable amount of time (the presumption is 14 days) for a notice of undeliverability. If the debt collector receives notification of undeliverability within that 14-day period, it cannot credit report until it has satisfied the notice requirement. Debt collectors should be flagging their records for those consumers for which the debt collector has not complied with Section 1006.30(a) and cease credit reporting on those until the Rule requirements have been met.
Review State Debt Collection Rules and Regulations to Identify Places Where They May be Inconsistent with the Rule and Determine Their Impact on Operations
Debt collectors should remember that state statutes and regulations still apply. The Rule makes clear that state laws do not apply only to the extent they are inconsistent with the FDCPA and Rule. A state law is not inconsistent where it affords the consumer greater protections. Debt collectors should review all applicable state laws and regulations, identify any inconsistencies, and assess risk and options to reconcile their practices with both.
Communicate with Creditors
By now debt collectors should have had crucial conversations with their creditor clients about the Rule and its impacts, including what additional information will be needed for validation notices. A follow up conversation and reminder of the effective date never hurts. Debt collectors should begin receiving information in post November 30th format prior to November 30th to allow the debt collector and creditor ample time to work through any issues in advance of November 30th. Sending test files is never a bad idea.
Don’t Forget About Your State Licensing Requirements
It’s easy to lose sight of state licensing requirements in the rush to comply with the Rule. Some states require letters and scripts (and any changes to them) be submitted to the state regulator prior to use. Make sure you don’t overlook any such state regulatory requirements.
Make sure all employees have been appropriately trained on the FDCPA and on the Rule and document that training. Remember, not only does the Rule require debt collectors retain records that are evidence of its compliance with the Rule, but a bona fide error defense requires proof of an error notwithstanding policies and procedures in place to prevent violations. Training and proof of training is indicia of both.
Now is the time to test your systems to ensure compliance. Run dummy letters to ensure the backers do not overlap with the payment/dispute cut off portion on the front of the letter. Ensure your dialing campaigns will comply with call frequency and safeguards are in place to ensure once contact is made, no further calls are made which would exceed the call frequency limitations. Make sure your validation and dispute procedures are in place and will work. Review your credit reporting system to ensure it will not prematurely report accounts.
As the Greek philosopher Heraclitus once said, there is nothing permanent except change. The Rule brings about the biggest changes the industry has seen since the enactment of the FDCPA. While the industry is well prepared for November 30th, collection agencies need to remember that implementation is just the next step. Collection agencies should expect to see an uptick in FDCPA litigation in 2022 which tests the industry’s interpretation and compliance with the Rule.
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.