1. Proposed CFPB Debt Collection Rules & Client Impact
Presented by
John Rhine
VP Client Relations
National Credit Management

2. Legal Disclaimer
The views and opinions expressed by the Presenter are those of the Presenter.
This information is not intended as legal advice and may not be used as legal advice. Legal advice must be tailored to the specific circumstances of each case.
This information is not intended to be a full and exhaustive explanation of the law in any area, nor should it be used to replace the advice of your own legal counsel.

3. Ask Your Legal Counsel Legal Advise is tailored
Always consult with your own legal counsel to ensure you are following not only federal, but also state and local laws.
Legal Advise is tailored
to the specific circumstances of each case.

4. CFPB

5. Consumer Financial Protection Bureau
Judge, Jury and Executioner
Consumer Financial Protection Bureau
CFPB created by Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
Independent bureau within Federal Reserve System, run by Director who is Presidential Appointee, confirmed by Senate.
Authority to issue rules for all financial institutions, including rules under Truth in Lending Act, Fair Debt Collection Practices Act, Equal Credit Opportunity and Real Estate Settlement Procedures Act.

6. Federal Laws Subject to CFPB
Credit Card Accountability, Responsibility, and Disclosure Act (CARD)
Electronic Funds Transfer Act (EFTA)
Equal Credit Opportunity Act (ECOA)
Fair Credit Billing Act (FCBA)
Fair Credit Reporting Act
(FCRA and FACTA)
Fair Debt Collection Practices Act (FDCPA)
Gramm-Leach-Bliley Act (GLBA)
Servicemembers Civil Relief Act (SCRA)
Truth in Lending Act (TILA)

7. SBREFA Proposals
In July 2016, the CFPB announced long-awaited rules for the debt collection industry that would have tremendous implications for student finance. At minimum, these rules would create new requirements for debt substantiation, documentation and dispute resolution that would cost collection contractors and their clients millions.

8. Rule Making Process
This was the next step in the notice and comment process that the CFPB needed to complete before a final, enforceable rule on debt collection was published.

9. The PHH Case
The first blow to the rulemaking process came in October of 2016; the Court of Appeals for the DC Circuit determined that the structure of the CFPB was unconstitutional, in that its independent structure should allow for more oversight from the Office of the President. In short, the Court believed that the Director of the CPFB should serve at the pleasure of the President.

10. The PHH Case
The CFPB has appealed this decision and it is currently the front line in the battle between deregulatory interests and the CFPB. The hearing is scheduled to take place on May 24th.

11. The Trump Factor
One of Donald Trump’s first executive orders was his order on “Reducing Regulation and Controlling Regulatory Costs.” This executive order required that any Federal agency (arguably including the CFPB) could not submit any new regulation for notice and comment without eliminating two existing ones and having a net budgetary impact of $0.

12. The Trump Factor
This order does not apply to the CFPB- Yet. This order would halt the CFPB debt collection rulemaking process indefinitely, if the PHH decision to make the CFPB an Executive Agency holds.

13. UDAAP

14. UDAAP
Unfair Deceptive Abusive Acts or Practices
Pub.L. 111–203, H.R. 4173;
FTC enforced as UDAP since 1938, Dodd-Frank added “A” for Abusive.
Oversight by the CFPB.
It is unlawful to engage in any Unfair, Deceptive, or Abusive Act or Practices
No formal definition for “abusive” in the regulation
Both schools and third-party servicers are required to follow UDAAP.

15. FDCPA

16. Fair Debt Collection Practices Act
Fair Debt Collection Practices Act of 1978
15 U.S.C et. Seq., Pub. L
a consumer protection amendment, to the Consumer Credit Protection Act which establishing legal protection from abusive debt collection practices.
Stated purposes are:
to eliminate abusive practices in the collection of consumer debts,
to promote fair debt collection,
and to provide consumers with an avenue for disputing and obtaining validation of debt information in order to ensure the information's accuracy.

17. Fair Debt Collection Practices Act
Prohibited conduct
Hours of contact (8am to 9pm local time)
Failure to cease communication upon request
Misrepresentation or deceit
Causing a telephone to ring or engaging in telephone conversation repeatedly or continuously
Communication with third parties
Threatening arrest or legal action
Abusive or profane language
Contact by embarrassing media
Seeking unjustified amounts

18. Fair Debt Collection Practices Act
Required conduct:
Identify themselves and notify the consumer,
Give the name and address of the original creditor
Notify the consumer of their right to dispute the debt
Provide verification of the debt
File lawsuit in proper venue (where debtor lives or where debtor signed contract)
The law only applies to third-party collection firms, not to first party entities (schools)

19. New Proposed Debt Collection Rules

20. Debt Substantiation – Initial Review
Obligations Before Initiating Debt Collection
Obtain “Fundamental Information”
Obtain a “Written Representation” from debt owner to ensure accuracy of information
Require Debt Collectors to review information obtained from debt owner for “Warning Signs”

21. Debt Substantiation – Fundamental Info
The following is list of Fundamental Information for Review
Full Name, last know address, and last know telephone number of the consumer;
The account number of the consumer with the debt owner at the time the account went into default;
The date of default, the amount owed at default, and the date and amount of any payment or credit applied after default;
Each charge for interest or fees imposed after default and the contractual or statutory source for such interest or fees; and
Complete chain of title form the debt owner at the tie of default to the collector

22. Initial Review – Written Representation
The Debt Owner must state:
1) It has adopted and implemented “reasonable policies and procedures” to ensure the accuracy of the transferred information
2) The transferred information is “identical” to the information in the debt owner’s records.
The representation must be made in writing.

23. Initial Review – Warning Signs
Debt Collectors must look for warning signs that may raise questions as to the accuracy of the information that might appear in individual accounts or across an entire portfolio
Examples provided by CFPB:
Information for an individual debt is not in clearly understandable form; facially implausible or contradictory
Significant percentage of debt in portfolio has missing or implausible information or unresolved disputes
Debt Collectors are “not” required to confirm all information

24. Debt Substantiation – After Dispute
Definition of Dispute
Subsequent Collectors
Filed disputes that had not been addressed by a previous collector would be required to be transferred to the new collector.

25. Debt Substantiation – After Dispute
Written Disputes within 30 days of Validation Notice
Provide documentation establishing information for relative category of dispute
Duplicate Disputes
Not required to substantiate debt; but must notify consumer that the dispute is duplicate
Oral Disputes within 30 days of Validation Notice
Review documentation for relevant category of dispute to establish reasonable support for claims

26. Disputes – Before Filing Litigation
Documentation for Claims in Litigation
Must have reasonable support for claims that consumer being sued owes the amount claimed and the legal right to make the claim.
Collectors could satisfy their “reasonable support” obligation by obtaining and reviewing all of the specified consumer dispute documentation
Collectors that do not review the documentation specified for all types of disputes could acquire a reasonable basis consistent with the level of support through alternative methods, but would bear the burden of justifying any alternative approach.

27. Proposed Rules – Transfer of Information
Transfer & Review of Certain Information
Require Debt Collectors to obtain and review certain information that could either:
Affect the subsequent collectors’ obligations to comply with FDCPA and other federal consumer protection laws.
Facilitate collector behavior that may be beneficial to consumers
Obligate prior Debt Collectors to transfer this information if the consumer provided it to them in the course of collection activity, but it generally would not require Debt Collectors to attempt affirmatively to obtain the information.

28. Transfer of Information – FDCPA Compliance
Transfer of Information affecting FDCPA compliance
Whether the debt was disputed in writing within 30 days of receipt of the validation notice and either that the debt was verified or dispute details (including information consumer submitted or prior collector provided)
Whether the debt was disputed orally or more than 30 days after receipt of the validation notice and either that the claims were substantiated or dispute details (including information the consumer submitted or the prior collector provided)
Any time, place or method of communication that the consumer stated is inconvenient;

29. Transfer of Information – FDCPA Compliance Continued
The name and address of any Attorney who is representing the consumer in connection with the debt;
Whether the consumer’s employer prohibits the consumer from receiving collection communications at the place of employment.
Whether the collector has made confirmed consumer contact, and the contact information used to establish such contact;
Whether the collector has provided the time-barred debt disclosure; and
Whether the consumer is deceased and, if so, the date of death

30. Information Forwarding Requirements
CFPB is considering requiring collectors to forward the following information after returning the debt to the owner or selling it to subsequent debt buyer
Payments submitted by the consumer;
Bankruptcy discharge notices;
Identity theft reports;
Disputes; and
Any assertion or implication by the consumer that his or income and assets are exempt under federal or state laws from a judgment creditor seeking garnishment

31. 11/12/2018 6:30 AM
Validation Notice
A big source of complaints is seeking to collect from the wrong consumer for the incorrect amount
Believe that notices we are currently sending are lacking certain information
They believe that the information is not sufficient to help consumers navigate the collection process and understand all their rights
They also believe the current validation notice does not have enough information for the consumer to be able to tell that the debt is theirs
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

32. Validate the Debt Amount of debt The name of the creditor that is owed
Currently all send the same validation notice
Amount of debt
The name of the creditor that is owed
Description of the consumers right to dispute the debt
A statement that if it is not disputed the collector will assume it is valid

33. Proposals for Time Barred Debt
11/12/2018 6:30 AM
Proposals for Time Barred Debt
Concerned some debt collectors taking advantage of consumers lack of understanding on statute of limitations
Few consumers understand that making a payment “restarts the clock”
Considering a proposal that would require disclosures
These disclosures would be developed after consumer testing and be a brief plain language statement informing the consumer that they cannot be sued to recover the debt

34. What the CFPB is Considering Regarding Time Barred Debt
11/12/2018 6:30 AM
What the CFPB is Considering Regarding Time Barred Debt
Whether a collector should be required to make this disclosure if the collector knew it or should have known it was time barred or whether they should be strictly liable ( regardless if they knew or not)
Debt collectors would be required to include such a statement in the validation notice and first oral communication with consumer in which they request payment
Maybe provide this disclosure at additional intervals
Subsequent debt collectors would be bound of the actions of prior collectors
Also considering a proposal prohibiting a debt collector from accepting payment on such a debt until the collector obtains the consumers written acknowledgement of having received the time barred disclosure

35. Client Considerations
Review & educate your staff on CFPB Proposed Rules for Debt Collection that directly impact YOU!!
Review your Debt Substantiation Documentation
Compare to CFPB’s dispute documentation guidelines
Review & Transfer of Information
Review your existing placement layouts
Compare to CFPB’s guidelines for transfer & forwarding information to subsequent collectors
Reach out to Agency/Partner for assistance

36. Proposed Consumer Contact
When the CFPB rolled out the proposed rulemaking outline on 28 July 2016 one of the major focus was consumer communications.
The Bureau cited vague or conflicting provisions in the FDCPA as a source of frustrations for both consumers and debt collectors.
The Consumer’s Perspective;
Frustration with number of calls.
Frustration with no messages being left.
Disclosure of debt to Third Party

37. Proposed Consumer Contact
Continued
The Debt Collector’s Perspective;
Concern for liability when leaving message.
FDCPA requires the collector to identify themselves
Risk of third party disclosure
Foti v. NCO Financial System, (S.D.N.Y 2006)
The Bureau is proposing a “limited- content message” collectors may leave for a consumer which includes (1) the individual debt collector’s name, (2) the consumer’s name, and (3) a toll-free number for the consumer to return the call.

38. Proposed Consumer Contact
Continued
The Potential Benefits to the Limited-contact message;
Reduce repeated contact attempts without a messages being left for the consumer.
Provide guidelines to leave message with a third-party in a live conversation without disclosure.
Not trigger the requirement to provide the FDCPA warnings.
In conjunction with establishing guidance on leaving messages the CFPB has also presented proposed regulations on the frequency of contacts or attempted contacts with a consumer by a debt collector.

39. Proposed Consumer Contact
Continued
The Bureau has taken the contact frequency a step further by proposing a decrease in the number of allowed calls or contacts once the debt collector has made contact with the consumer and he or she acknowledges as the debtor or alleged debtor. The “confirmed consumer contact” status would pass from collector to collector.

40. Proposed Consumer Contact
Continued
Permissible Consumer Contacts(or Attempts)
Per account Per Week
Collector Activity
No Confirmed Consumer Contact
Confirmed Consumer Contact
Attempts per unique address or phone number 3 2
Total contact attempts 6
Live
Communications
N/A 1

41. Proposed Consumer Contact
Continued
The FDCPA has language to support a debt collector reaching out to a third party, i.e. reference, in an attempt to acquire location information for a consumer who owes or allegedly owes a debt.
The Bureau felt given the possibly of “consumer harm” from debt collectors such as repeated calls or having the third party feel pressure to compel the consumer to call the debt collector there is a need to propose some safeguards. Given this concern the proposal has a set of “contact caps” limiting the number of location contacts that can be made to a third party.

42. Proposed Consumer Contact
Continued
Permissible Number of Location Contacts (or attempts)
To a Third Party Per Account Per Week
Collector Activity
No Confirmed Consumer Contact
Confirmed Consumer Contact
Attempts per unique address or phone number per third party 3
Total contact attempts per third party 6
Total contacts across all third
parties
No specific limits
Live Communications
(total not weekly) 1

43. Proposed Consumer Contact
Continued
In regards to “contact caps” for third parties; once the debt collector has confirmed consumer contact the proposal would stop further third party attempts. The mindset is once you have contact with the consumer who owes or allegedly owes the debt there is no longer a need to obtain location information.
If the debt collector believes the confirmed contact information for the consumer is no longer valid then the collector may resume contact with third parties in an attempt to uncover new location information.

44. Proposed Consumer Contact
Continued
Presently FDCPA section 805(a) sets guidelines regarding the times and places a debt collector my communicate with a consumer when collecting a debt. Consumers have complained even with the guidelines in section 805(a) of receiving contacts from debt collectors at inconvenient times and places.
The CFPB has determined that this the opportunity to clarify this section of the FDCPA. Some of the proposed changes would take into consideration communication via newer technologies.
One area of clarification is around inconvenient places to contact a consumer.

45. Proposed Consumer Contact
Continued
The Bureau has proposed the following as inconvenient places for a consumer to receive calls from a debt collector:
Medical Facilities
Places of Worship
Funeral homes and cemeteries
Childcare Facilities
Active Duty Zone for Military Service Members

46. Proposed Consumer Contact
Continued
Currently the Bureau is not proposing to include the consumer’ place of employment as a presumptively inconvenient place as this could have a significant impact on the debt collector’ ability to communicate with the consumer.
The Bureau is however considering to generally prohibit work s given the concern of third-party disclosure. If the consumer however give consent to communicate with them via their work this restriction would be lifted.

47. Proposed Consumer Contact
Continued
One final piece being proposed under the Consumer portion of the rulemaking is imposing a 30-day waiting period for the debt collector to contact the decedent’ surviving family members.
The Bureau’ position is this 30-day windows allows the family time for grieving and to begin putting the affairs of the decedent in order.
Further guidance is pending on contacting a third party who by the courts is appointing as a “representative” of the decedent.

48. Credit Bureau Reporting

49. Credit Reporting Initiative Collection Agencies/Debt Buyers
Furnisher Action
Effective Date
Report the name of the Original Creditor and Creditor Classification Code
Report the Original Creditor Name and the valid Creditor Classification Code according to the Metro 2 format. These fields are required for each account or item reported
06/15/2016
Do not report a debt that did not arise from a contract or agreement to pay
Do not report debt that did not arise from a contract or agreement to pay(including, but not limited to, certain fines, tickets and other assessments

50. Credit Reporting Initiative Continued Collection Agencies/Debt Buyers
Furnisher Action
Effective Date
Report a full file monthly
Report your full file monthly including accounts that are open, that are paid in the last 90 days, or that require deletion or correction.
09/01/2016

51. Credit Reporting Initiative Continued All Data Furnishers
Furnisher Action
Effective Date
Reporting of consumer personally identifiable information
There will be a greater push for collecting an reporting more consumer identification information, ie. Full name, Address, Social Security Number and Date of Birth.
09/015/2017
Questions contact
Equifax:
Experian:
TransUnion:

52. What Questions Do You Have

53. Resources CFPB www.consumerfinance.gov COHEAO www.coheao.org ACA
COHEAO
ACA
NACUBO

54. Contact Information
John Rhine
VP-Client Relations
NCM
, Ext #225