5766 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

BUREAU OF CONSUMER FINANCIAL reporting agency before communicating applicable provisions, such as PROTECTION with the consumer about the debt) and definitions that apply throughout the the collection of debt that is beyond the regulation. Subpart B contains rules for 12 CFR Part 1006 statute of limitations (i.e., time-barred FDCPA debt collectors. Subpart C is [Docket No. CFPB–2019–0022] debt). On November 30, 2020, the reserved for any future debt collection Bureau published a final rule in the rulemakings. Subpart D contains certain RIN 3170–AA41 Federal Register that focused on debt miscellaneous provisions. This final collection communications and related rule adds additional provisions in Debt Collection Practices (Regulation practices by debt collectors (November subparts A, B, and D. F) 2020 Final Rule). The November 2020 B. Scope of the Final Rule AGENCY: Bureau of Consumer Financial Final Rule reserved certain sections of Regulation F in anticipation of this final Protection. FDCPA section 809(a) requires that a ACTION: Final rule; official rule. As discussed in the November 2020 debt collector send a written notice interpretation. Final Rule, in 1977, Congress passed the containing certain information about the debt and actions the consumer may take SUMMARY: The Bureau of Consumer FDCPA to eliminate abusive debt in response (the validation notice) to a Financial Protection (Bureau) is issuing collection practices by debt collectors, consumer within five days of the initial this final rule to revise Regulation F, to ensure that those debt collectors who communication, unless such validation which implements the Fair Debt refrain from using abusive debt information was provided in the initial Collection Practices Act (FDCPA). The collection practices are not communication or the consumer has final rule governs certain activities by competitively disadvantaged, and to paid the debt.5 The final rule clarifies debt collectors, as that term is defined promote consistent State action to the information about the debt and the in the FDCPA. Among other things, the protect consumers against debt consumer’s rights with respect to the final rule clarifies the information that collection abuses.2 The statute was a a debt collector must provide to a response to ‘‘abundant evidence of the debt that a debt collector must provide consumer at the outset of debt collection use of abusive, deceptive, and unfair to a consumer at the outset of debt communications, prohibits debt debt collection practices by many debt collection communications, including collectors from bringing or threatening collectors.’’ 3 According to Congress, (if applicable) on a validation notice. to bring a legal action against a these practices ‘‘contribute to the The final rule also requires a debt consumer to collect a time-barred debt, number of personal bankruptcies, to collector to provide prompts that a and requires debt collectors to take marital instability, to the loss of jobs, consumer can use to dispute the debt, certain actions before furnishing and to invasions of individual request information about the original information about a consumer’s debt to privacy.’’ 4 creditor, or take certain other actions. a consumer reporting agency. The FDCPA established specific The final rule provides a safe harbor for compliance with these disclosure DATES: This rule is effective on consumer protections, enabling requirements for debt collectors who November 30, 2021. consumers to establish controls on when and how debt collectors contact use the model validation notice or FOR FURTHER INFORMATION CONTACT: Joel them, establishing privacy protections certain variations of the notice. Singerman, Counsel, or Dania Ayoubi, surrounding the collection of debts, and Joseph Baressi, Seth Caffrey, Brandy The final rule also prohibits a debt protecting consumers from certain Hood, David Jacobs, Courtney Jean, collector from suing or threatening to collection practices. The FDCPA also Adam Mayle, Kristin McPartland, sue a consumer to collect time-barred established broad consumer protections, Michael Silver, Senior Counsels, Office debt. In addition, the final rule prohibits prohibiting harassment or abuse, false or of Regulations, at 202–435–7700. If you a debt collector from furnishing misleading representations, and unfair require this document in an alternative information about a debt to a consumer practices. In the Dodd-Frank Wall Street electronic format, please contact CFPB_ reporting agency before engaging in Reform and Consumer Protection Act [email protected]. specific outreach to the consumer about (Dodd-Frank Act), Congress provided SUPPLEMENTARY INFORMATION: the debt. The final rule also addresses the Bureau with authority under the certain other disclosure-focused I. Summary of the Final Rule FDCPA to prescribe substantive rules provisions, such as clarifying how a with respect to the collection of debts by The Bureau is finalizing amendments debt collector may respond to a debt collectors. The Bureau issues this to Regulation F, 12 CFR part 1006, consumer’s request for original-creditor final rule, like the November 2020 Final which implements the FDCPA.1 The information if the original creditor is the Rule, to implement and interpret the amendments prescribe Federal rules same as the current creditor. FDCPA. governing the activities of debt Additionally, the final rule interprets collectors, as that term is defined in the A. Coverage and Organization of the the definition of consumer under the FDCPA (debt collectors or FDCPA debt Final Rule FDCPA to include deceased natural collectors). The final rule clarifies the The final rule is based primarily on persons and, relatedly, provides that, if information that a debt collector must the Bureau’s authority to issue rules to a debt collector knows or should know provide to a consumer at the outset of implement the FDCPA and, that the a consumer is deceased, and the debt collection communications and consequently, covers debt collectors, as debt collector has not previously provides a model validation notice that term is defined in the FDCPA. provided the validation information to containing such information. The final As revised in the November 2020 the deceased consumer, the debt rule also addresses consumer protection Final Rule, Regulation F contains four collector must provide that information concerns related to passive collections subparts. Subpart A contains generally to a person who is authorized to act on (i.e., the practice of furnishing behalf of the deceased consumer’s information about a debt to a consumer 2 15 U.S.C. 1692(e). estate. 3 15 U.S.C. 1692(a). 1 15 U.S.C. 1692 et seq. 4 Id. 5 15 U.S.C. 1692g(a).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5767

II. Background obtained contact information for a and debt type; most limitations periods consumer, the debt collector typically are between three and six years, A. Debt Collection Market Background will seek to communicate with the although some are as long as 15 years. A consumer debt is commonly consumer to obtain payment on some or Currently, in most States, expiration of understood to be a consumer’s all of the debt. the statute of limitations, if raised by the obligation to pay money to another As already noted, FDCPA section consumer as an affirmative defense, person or entity. Sometimes a debt 809(a) generally requires a debt collector precludes the debt collector from arises out of a closed-end loan. Other to provide certain information to a recovering on the debt through times, a debt arises from a consumer’s consumer either at the time that, or litigation, but it does not extinguish the use of an open-end line of credit, shortly after, the debt collector first debt itself. If the debt is not commonly a credit card. And in other communicates with the consumer in extinguished, a debt collector may use cases, a debt arises from a consumer’s connection with the collection of a debt. non-litigation means, such as letters and purchase of goods or services with The required information includes: (1) telephone calls, to collect a time-barred payment due thereafter. Often there is Certain details about the debt, such as debt, as long as those means do not an agreed-upon payment schedule or the amount of the debt and the name of violate the FDCPA or other laws.11 date by which the consumer must repay the creditor to whom the debt is owed; C. Consumer Protection Concerns the debt. and (2) a description of consumer For a variety of reasons, consumers protections, such as the consumer’s As discussed in the November 2020 sometimes are unable or unwilling to rights to dispute the debt and to request Final Rule, each year consumers submit make payments when they are due. information about the original creditor. tens of thousands of complaints about Collection efforts may directly recover A debt collector may send a validation debt collection to Federal regulators.12 some or all of the overdue amounts notice containing the required A significant proportion of those owed to debt owners and thereby may information as the initial complaints involve debts that indirectly help to keep consumer credit communication to the consumer or send consumers believe they do not owe, available and more affordable to the required information in a validation which may be because the debt is being consumers.6 Collection activities also notice within five days after the initial collected in error or because the can lead to repayment plans or debt communication. Currently, validation consumer does not recognize the debt. restructuring that may provide notices include little or no information Consumers also file thousands of private consumers with additional time to make about the debt beyond the information actions each year against debt collectors payments or resolve their debts on more specifically listed in FDCPA section who allegedly have violated the FDCPA, manageable terms.7 809(a). This information may not be including many cases alleging violations The November 2020 Final Rule sufficient for the consumer to recognize related to the validation notice. Since provides an extensive overview of the the debt, particularly if, for example, the the Bureau began operations in 2011, it debt collection market (including the amount owed has changed over time has brought numerous debt collection roles of creditors, third-party debt due to interest, fees, payment, or credits, collectors, debt buyers, and a variety of or if the debt collector has changed 11 See 85 FR 12672, 12672–73 (Mar. 3, 2020). service providers in the market), since an original collection attempt. 12 See, e.g., Bureau of Consumer Fin. Prot., Fair A debt collector may tailor the Debt Collection Practices Act: CFPB Annual Report methods of debt collection, and 2020, at 13 (Mar. 2020), https:// consumer protection concerns in debt collection strategy depending on a files.consumerfinance.gov/f/documents/cfpb_ collection.8 Below the Bureau variety of factors, including the size and fdcpa_annual-report-congress_03-2020.pdf (2020 summarizes information regarding debt age of the debt and the debt collector’s FDCPA Annual Report); Fed. Trade Comm’n, 2019 assessment of the likelihood of Consumer Sentinel Network Databook, at 7 (Jan. collection methods and consumer 2020), https://www.ftc.gov/system/files/documents/ protection concerns specifically related obtaining money from the consumer. reports/consumer-sentinel-network-data-book-2019/ to the topics addressed in this final rule. For example, rather than engage in consumer_sentinel_network_data_book_2019.pdf; active debt collection efforts by Bureau of Consumer Fin. Prot., Fair Debt Collection B. Debt Collection Methods Practices Act: CFPB Annual Report 2019, at 15–16 affirmatively locating and contacting (Mar. 2019), https://files.consumerfinance.gov/f/ If a consumer’s payment obligations consumers, some debt collectors documents/cfpb_fdcpa_annual-report-congress_03- remain unmet, a creditor may send the collecting relatively small debts—such 2019.pdf (2019 FDCPA Annual Report); Fed. Trade account to a third-party debt collector to as many medical, utility, and Comm’n, 2018 Consumer Sentinel Network Databook, at 4, 7 (Feb. 2019), https://www.ftc.gov/ recover on the debt in the third-party telecommunications debts—report the system/files/documents/reports/consumer-sentinel- debt collector’s name. A creditor debts to consumer reporting agencies network-data-book-2018/consumer_sentinel_ typically stops communicating with a and then wait for consumers to contact network_data_book_2018_0.pdf; Bureau of consumer once responsibility for an them after discovering the debts on their Consumer Fin. Prot., Fair Debt Collection Practices 9 Act: CFPB Annual Report 2018, at 14–15 (Mar. account has moved to a third-party debt consumer reports. 2018), https://files.consumerfinance.gov/f/ collector. Active debt collection efforts As discussed in the November 2020 documents/cfpb_fdcpa_annual-report-congress_03- typically begin with the debt collector Final Rule, a debt owner may also try 2018.pdf (2018 FDCPA Annual Report); Fed. Trade attempting to locate the consumer, to recover on a debt through litigation.10 Comm’n, 2017 Consumer Sentinel Network And debt collectors sometimes attempt Databook, at 3, 6 (Mar. 2018), https://www.ftc.gov/ usually by identifying a valid telephone system/files/documents/reports/consumer-sentinel- number or mailing address, so that the to collect debt for which the applicable network-data-book-2017/consumer_sentinel_data_ debt collector can establish contact with statute of limitations has expired. The book_2017.pdf; Bureau of Consumer Fin. Prot., the consumer. Once a debt collector has length of the limitations period for debt 2017 Fair Debt Collection Practices Act: CFPB collection claims usually varies by State Annual Report 2017, at 15–16 (Mar. 2017), https:// files.consumerfinance.gov/f/documents/201703_ 6 See Bureau of Consumer Fin. Prot., Fair Debt cfpb_Fair-Debt-Collection-Practices-Act-Annual- Collection Practices Act: CFPB Annual Report 2013, 9 Bureau of Consumer Fin. Prot., Consumer Credit Report.pdf (2017 FDCPA Annual Report); Fed. at 9 (Mar. 20, 2013), https:// Reports: A Study of Medical and Non-Medical Trade Comm’n, Consumer Sentinel Network Data www.consumerfinance.gov/data-research/research- Collections, at 35–36 (Dec. 2014), http:// Book for January–December 2016, at 3, 6 (Mar. reports/annual-report-on-the-fair-debt-collection- files.consumerfinance.gov/f/201412_cfpb_reports_ 2017), https://www.ftc.gov/system/files/documents/ practices-act/ (2013 FDCPA Annual Report). consumer-credit-medical-and-non-medical- reports/consumer-sentinel-network-data-book- 7 See id. collections.pdf (CFPB Medical Debt Report). january-december-2016/csn_cy-2016_data_ 8 See 85 FR 76734, 76735–37 (Nov. 30, 2020). 10 See 85 FR 76735, 76736 (Nov. 30, 2020). book.pdf.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5768 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

cases against third-party debt collectors, refrain from using abusive debt Regulation F in anticipation of this final alleging both FDCPA violations and collection practices are not rule. unfair, deceptive, or abusive debt competitively disadvantaged.’’ 17 collection acts or practices in violation Among other things, the FDCPA: (1) B. The 2019 Proposal and 2020 of the Dodd-Frank Act.13 In many of Prohibits debt collectors from engaging Supplemental Proposal these cases, the Bureau has obtained in harassment or abuse, making false or As noted, on May 21, 2019, the civil penalties, monetary compensation misleading representations, and Bureau published a proposed rule (the for consumers, and other relief. In its engaging in unfair practices in debt May 2019 proposal or proposal) in the supervisory work, the Bureau similarly collection; (2) restricts debt collectors’ Federal Register to amend Regulation has identified many FDCPA violations communications with consumers and F.20 The proposal provided a 90-day during examinations of debt collectors. others; and (3) requires debt collectors comment period that would have closed Over the past decade, the Federal Trade to provide consumers with disclosures on August 19, 2019. To allow interested Commission (FTC) and State regulators concerning the debts they owe or persons more time to consider and also have brought numerous additional allegedly owe. submit their comments, the Bureau actions against debt collectors for The FDCPA, in general, applies to issued an extension of the comment violating Federal and State debt debt collectors as that term is defined period until September 18, 2019.21 In collection and consumer protection under the statute. As discussed further response to the May 2019 proposal, the laws. in the section-by-section analysis of Bureau received more than 14,000 D. FDCPA and Dodd-Frank Act § 1006.2(i) of the November 2020 Final comments from consumers, consumer Protections for Consumers Rule, the FDCPA generally provides that groups, members of Congress, other a debt collector is any person: (1) Who Federal and State governments government agencies, creditors, debt uses any instrumentality of interstate historically have sought to protect collectors, industry trade associations, commerce or the mails in any business consumers from harmful debt collection and others. As discussed below, the the principal purpose of which is the practices. From 1938 to 1977, the Bureau has considered those comments collection of any debts (i.e., the Federal government primarily protected in deciding to issue this final rule. ‘‘principal purpose’’ prong), or (2) who consumers through FTC enforcement As relevant to this final rule, in the regularly collects, or attempts to collect, actions against debt collectors who May 2019 proposal, the Bureau directly or indirectly, debts owed or due engaged in unfair or deceptive acts or or asserted to be owed or due to another proposed to implement and interpret practices in violation of section 5 of the (i.e., the ‘‘regularly collects’’ prong). FDCPA section 809(a) and (b) regarding FTC Act.14 When Congress enacted the FDCPA section 803(6) also sets forth the information that debt collectors FDCPA in 1977, it found that ‘‘[e]xisting several exclusions from the general must provide to consumers at the outset laws and procedures for redressing . . . definition. of debt collection communications and injuries [were] inadequate to protect debt collectors’ obligations to respond to consumers.’’ 15 Congress found that Until the creation of the Bureau, no consumers’ disputes and requests for ‘‘[t]here [was] abundant evidence of the Federal agency was authorized to issue original-creditor information, including use of abusive, deceptive, and unfair regulations to implement the if the consumer obligated or allegedly debt collection practices by many debt substantive provisions of the FDCPA. obligated to pay the debt has died. The collectors’’ and that these practices Courts have issued opinions providing Bureau also proposed to prohibit debt ‘‘contribute to the number of personal differing interpretations of various collectors from bringing or threatening bankruptcies, to marital instability, to FDCPA provisions, and there is to bring a legal action against a the loss of jobs, and to invasions of considerable uncertainty with respect to consumer to collect a debt that the debt individual privacy.’’ 16 how the FDCPA applies to collector knows or should know is a The FDCPA was enacted, in part, ‘‘to communication technologies that have time-barred debt. And the Bureau eliminate abusive debt collection developed since 1977. The Dodd-Frank proposed to prohibit debt collectors practices by debt collectors, [and] to Act amended the FDCPA to provide the from furnishing information regarding a insure that those debt collectors who Bureau with authority to ‘‘prescribe debt to a consumer reporting agency rules with respect to the collection of before communicating with the 18 13 See, e.g., Stipulated Final Judgment and debts by debt collectors.’’ consumer about the debt. Consent Order, Consumer Fin. Prot. Bureau v. Encore Capital Grp., Inc., 3:20–cv–01750 (S.D. Cal. III. Summary of the Rulemaking On February 21, 2020, the Bureau Oct. 15, 2020), https://www.courtlistener.com/ Process released a supplemental notice of recap/gov.uscourts.casd.686719/ gov.uscourts.casd.686719.5.1.pdf; Consent Order, In A. The November 2020 Final Rule proposed rulemaking to amend re Asset Recovery Assocs., 2019–BCFP–0009 (Aug. Regulation F to require debt collectors 28, 2019), https://www.consumerfinance.gov/ The Bureau issued the November to make certain disclosures when documents/7938/cfpb_asset-recovery-associates_ 2020 Final Rule to finalize certain collecting time-barred debts (the _ consent-order 2019-08.pdf; Consent Order, In re 22 Encore Capital Grp., Inc., 2015–CFPB–0022 (Sept. provisions of the proposed rule that the February 2020 proposal). The 9, 2015), http://files.consumerfinance.gov/f/ Bureau published in the Federal February 2020 proposal provided a 60- 201509_cfpb_consent-order-encore-capital- Register on May 21, 2019, to amend day comment period that would have group.pdf; Consent Order, In re Portfolio Recovery Regulation F.19 Specifically, the closed on May 4, 2020. To allow Assocs., LLC, 2015–CFPB–0023 (Sept. 9, 2015), http://files.consumerfinance.gov/f/201509_cfpb_ November 2020 Final Rule primarily interested persons more time to consent-order-portfolio-recovery-associates-llc.pdf; addressed debt collection consider and submit their comments, Complaint, Consumer Fin. Prot. Bureau v. Nat’l communications and related practices the Bureau issued two extensions of the Corrective Grp., Inc., 1:15–cv–00899–RDB (D. Md. by debt collectors. The November 2020 comment period, the first until June 5, Mar. 30, 2015), http://files.consumerfinance.gov/f/ 201503_cfpb_complaint-national-corrective- Final Rule reserved certain sections of 2020, and the second until August 4, group.pdf. 14 15 U.S.C. 45. 17 15 U.S.C. 1692(e). 20 Id. 15 15 U.S.C. 1692(b). 18 FDCPA section 814(d), 15 U.S.C. 1692l(d). 21 84 FR 37806 (Aug. 2, 2019). 16 15 U.S.C. 1692(a). 19 See 84 FR 23274 (May 21, 2019). 22 See 85 FR 12672 (Mar. 3, 2020).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5769

2020.23 In response to the February 2020 testing,28 and a report prepared by FMG validation notice and indicated that the proposal, the Bureau received summarizing the focus group testing, information in the notice was clear and approximately 90 comments from cognitive testing, and usability testing.29 available actions were obvious. In consumers, consumer groups, members Second, to obtain additional addition, 88 percent of participants of Congress, other government agencies, information about consumer rated the overall model validation creditors, debt collectors, industry trade comprehension and decision-making in notice as ‘‘very easy’’ or ‘‘easy’’ to associations, and others. As discussed response to sample debt collection understand, and no participants rated below, the Bureau has considered those disclosures relating to time-barred debt, the notice as ‘‘difficult’’ or ‘‘very comments in adopting this final rule. in 2017 the Bureau contracted with ICF difficult’’ to understand. Finally, 77 International, Inc. (ICF) to conduct a percent of participants answered C. Consumer Testing web survey of approximately 8,000 correctly over 90 percent of the time The Bureau has undertaken two individuals possessing a broad range of when, after reviewing the notice, they rounds of qualitative disclosure testing demographic characteristics.30 This were asked to answer certain questions and one round of quantitative disclosure quantitative testing concluded in late about information included on the testing, all of which have informed this September 2019, and, in conjunction notice. In conjunction with release of final rule. with the release of the February 2020 this final rule, the Bureau is making First, as discussed in more detail in proposal, the Bureau 31 and ICF 32 available a report prepared by FMG the May 2019 proposal, the Bureau in published detailed reports summarizing regarding the qualitative testing.34 2014 contracted with a third-party the testing methodology and results. 35 vendor, Fors Marsh Group (FMG), to The February 2020 proposal provides an D. Other Outreach assist with developing, and to conduct extensive overview of the quantitative In November 2013, the Bureau began qualitative consumer testing of the testing.33 the rulemaking process with the model validation notice.24 This initial Third, to further evaluate the publication of an Advance Notice of qualitative testing included focus group effectiveness of the model validation Proposed Rulemaking (ANPRM) testing, cognitive testing, and usability notice, the Bureau contracted with FMG regarding debt collection.36 As testing conducted by FMG.25 Through again in 2019 to conduct an additional discussed in the May 2019 proposal, the the testing, the Bureau sought insight round of qualitative testing. Because of ANPRM sought information about a into consumers’ understanding of debt the COVID–19 pandemic, FMG wide variety of both first- and third- collection protections and how conducted this consumer testing by party debt collection practices. The consumers would interact with the telephone, completing 51 one-on-one Bureau received more than 23,000 forms if the forms were incorporated usability interviews between October 5 comments in response to the ANPRM, into a final rule. Specific findings from and October 15, 2020. The qualitative which the Bureau considered when the consumer testing are discussed in testing showed, among other things, that developing the proposals. more detail in part V where relevant. In 80 percent of participants shared To better understand the operational conjunction with the release of the May positive initial reactions to the model costs of debt collection firms, including 2019 proposal, the Bureau made law firms, the Bureau also surveyed available a report prepared by FMG Generic Information Collection Plan for the debt collection firms and vendors and 26 Development and/or Testing of Model Forms, published a report based on that study regarding the focus group testing, the Disclosures, Tools, and Other Similar Related cognitive testing,27 the usability Materials. in July 2016 (CFPB Debt Collection 28 See generally Fors Marsh Grp., Debt Collection Operations Study or Operations 23 See 85 FR 17299 (Mar. 27, 2020) (first User Experience Study (Feb. 2016), https:// Study).37 The Operations Study focused _ extension); 85 FR 30890 (May 21, 2020) (second files.consumerfinance.gov/f/documents/cfpb debt- on understanding how debt collection collection_fmg-usability-report.pdf (FMG Usability extension). firms obtain information about 24 The Bureau also tested a statement of consumer Report). Like the other testing, the usability testing rights disclosure, but the Bureau decided not to was conducted in accordance with OMB control delinquent consumer accounts and propose to require debt collectors to provide such number 3170–0022, Generic Information Collection attempt to collect on those accounts. a disclosure to consumers. Instead, the Bureau Plan for the Development and/or Testing of Model In August 2016, the Bureau convened proposed in the May 2019 proposal to require Forms, Disclosures, Tools, and Other Similar a Small Business Review Panel (Small certain debt collectors to provide with the Related Materials. validation information a statement referring 29 See generally Fors Marsh Grp., Debt Collection Business Review Panel or Panel) with consumers to a Bureau-provided website that would Validation Notice Research: Summary of Focus the Chief Counsel for Advocacy of the describe certain consumer protections in debt Groups, Cognitive Interviews, and User Experience Small Business Administration (SBA) collection. See the section-by-section analysis of Testing (Feb. 2016), https:// and the Administrator of the Office of § 1006.34(c)(3)(iv). Because the Bureau did not files.consumerfinance.gov/f/documents/cfpb_debt- propose to require debt collectors to provide collection_fmg-summary-report.pdf (FMG Summary Information and Regulatory Affairs with consumers with a statement of consumer rights Report). disclosure, the Bureau did not summarize testing 30 OMB approved the Bureau’s request to conduct 34 See generally Fors Marsh Grp., Consumer related to that disclosure in the May 2019 proposal. the survey on May 7, 2019. See Office of Financial Protection Bureau (CFPB) Usability 25 See 84 FR 23274, 23279 (May 21, 2019). Information & Regulatory Affairs, Office of Mgmt. Testing Report: Model Validation Notice (Nov. 20, 26 See generally Fors Marsh Grp., Debt Collection & Budget, ICR—OIRA Conclusion, https:// 2020), https://files.consumerfinance.gov/f/ _ _ _ _ Focus Groups (Aug. 2014), https:// www.reginfo.gov/public/do/PRAViewICR?ref documents/cfpb model-validation-notice report files.consumerfinance.gov/f/documents/cfpb_debt- nbr=201902-3170-001# (last visited Feb. 18, 2020). 2020-12.pdf (November 2020 Qualitative Testing collection_fmg-focus-group-report.pdf (FMG Focus 31 See Bureau of Consumer Fin. Prot., Disclosure Report). Group Report). The focus group testing was of Time-Barred Debt and Revival: Findings from the 35 The preamble to the May 2019 proposal conducted in accordance with OMB control number CFPB’s Quantitative Disclosure Testing (Feb. 2020), includes a more thorough discussion of the 3170–0022, Generic Information Collection Plan for https://files.consumerfinance.gov/f/documents/ outreach the Bureau conducted prior to issuing the the Development and/or Testing of Model Forms, cfpb_debt-collection-quantitative-disclosure- proposal. See 84 FR 23274, 23278–80 (May 21, Disclosures, Tools, and Other Similar Related testing_report.pdf (CFPB Quantitative Testing 2019). Materials. Report). 36 78 FR 67848 (Nov. 12, 2013). 27 See generally Fors Marsh Grp., Debt Collection 32 See ICF Int’l, Inc., Quantitative Survey Testing 37 See generally Bureau of Consumer Fin. Prot., Cognitive Interviews (n.d.), https:// of Model Disclosure Clauses and Forms for Debt Study of Third-Party Debt Collection Operations files.consumerfinance.gov/f/documents/cfpb_debt- Collection: Methodology Report (Jan. 21, 2020), (July 2016), https://www.consumerfinance.gov/ collection_fmg-cognitive-report.pdf (FMG Cognitive https://files.consumerfinance.gov/f/documents/ documents/755/20160727_cfpb_Third_Party_Debt_ Report). The cognitive testing was conducted in cfpb_icf_debt-survey_methodology-report.pdf. Collection_Operations_Study.pdf (CFPB Debt accordance with OMB control number 3170–0022, 33 See 85 FR 12672, 12676–77 (Mar. 3, 2020). Collection Operations Study).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5770 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

the Office of Management and Budget Inherited Rulemaking Authorities; 42 the Section 1022(a) of the Dodd-Frank Act (OMB).38 As part of this process, the Bureau considered these comments in provides that ‘‘[t]he Bureau is Bureau prepared an outline of proposals developing the proposals and this final authorized to exercise its authorities under consideration and the alternatives rule. In addition, the Bureau has under Federal consumer financial law to considered (Small Business Review engaged in general outreach, speaking at administer, enforce, and otherwise Panel Outline or Outline),39 which the consumer advocate and industry events implement the provisions of Federal Bureau posted on its website for review and visiting consumer organizations and consumer financial law.’’ 44 Section by the small entity representatives industry stakeholders. The Bureau has 1022(b)(1) of the Dodd-Frank Act participating in the Panel process and provided other regulators with provides that the Director may prescribe by the general public. The Panel information about the proposals and rules and issue orders and guidance, as gathered information from the small this final rule, has sought their input, may be necessary or appropriate to entity representatives and made and has received feedback that has enable the Bureau to administer and findings and recommendations helped the Bureau to prepare this final carry out the purposes and objectives of regarding the potential compliance costs rule. the Federal consumer financial laws, and other impacts on those entities of Under the Dodd-Frank Act, the and to prevent evasions thereof.45 the proposals under consideration. Bureau is required to conduct an ‘‘Federal consumer financial law’’ Those findings and recommendations assessment of significant rules within includes title X of the Dodd-Frank Act are set forth in the Small Business five years of the rule’s effective date. and the FDCPA.46 No provisions in this Review Panel Report, which is part of The Bureau anticipates that this final final rule are based on section 1031 of the administrative record in this rule may be significant and therefore the Dodd-Frank Act.47 rulemaking and is available to the may require an assessment within five These and other authorities are public.40 The Bureau considered these years of the rule’s effective date. The discussed in greater detail in parts IV.A findings and recommendations in Bureau is preparing now for this through C below. Part IV.A discusses preparing the proposals and this final possible assessment. Specifically, the the Bureau’s authority under sections rule. Bureau is considering how best to 806 through 808 of the FDCPA. Parts The Bureau has also met on many obtain information now to serve as a IV.B through C discuss the Bureau’s occasions with various stakeholders, baseline for evaluation of the costs, relevant authorities under the Dodd- including consumer advocates, debt benefits, and other effects of the final Frank Act. collection trade associations, industry rule. The Bureau expects to collect data participants, academics with expertise and other information from consumers, A. FDCPA Sections 806 Through 808 in debt collection, Federal prudential debt collectors, and other stakeholders As discussed in part V, the Bureau is regulators, and other Federal and State to understand whether the rule is finalizing several provisions, in whole consumer protection regulators. The achieving its goals under the FDCPA or in part, pursuant to its authority to Bureau also received a number of and the Dodd-Frank Act, and to help the interpret FDCPA sections 806 through comments specific to the debt collection Bureau measure the costs and benefits 808, which set forth general rulemaking in response to its Request of the rule. Topics of data collection prohibitions on, and requirements for Information Regarding the Bureau’s could include: whether consumers are relating to, debt collectors’ conduct and Adopted Regulations and New better able to identify a debt when are accompanied by non-exhaustive lists Rulemaking Authorities 41 and its receiving validation information after of examples of unlawful conduct. The Request for Information Regarding the the rule compared to before the rule; November 2020 Final Rule provides an Bureau’s Inherited Regulations and whether debt collectors are receiving overview of how the Bureau interprets higher or lower rates of consumer FDCPA sections 806 through 808. 38 The Small Business Regulatory Enforcement disputes after the rule compared to FDCPA section 806 generally Fairness Act of 1996 (SBREFA), as amended by before the rule; whether greater clarity prohibits a debt collector from section 1100G(a) of the Dodd-Frank Act, requires about FDCPA requirements helps ‘‘engag[ing] in any conduct the natural the Bureau to convene a Small Business Review reduce litigation related to the Panel before proposing a rule that may have a consequence of which is to harass, substantial economic impact on a significant validation notice after the rule oppress, or abuse any person in number of small entities. See Public Law 104–121, compared to before the rule; and costs connection with the collection of a tit. II, 110 Stat. 857 (1996) (as amended by the Small of the rule, both anticipated and Business and Work Opportunity Act of 2007, Public unexpected, for consumers or for Law. 110–28, tit. VIII, subtit. C, sec. 8302, 121 Stat. substantive debt collection rules under the FDCPA. 204 (2007)). industry. The Bureau expects to conduct Prior to the Dodd-Frank Act’s grant of rulemaking 39 Bureau of Consumer Fin. Prot., Small Business outreach in 2021 to explore how best to authority to the Bureau, no agency had authority to Review Panel for Debt Collector and Debt Buyer obtain such data, including potentially issue substantive rules with respect to the Rulemaking: Outline of Proposals Under through surveying consumers or firms collection of debts by debt collectors under the Consideration and Alternatives Considered (July 28, FDCPA, but the FTC published various materials 2016), https://files.consumerfinance.gov/f/ or by collecting operational data. providing guidance on the FDCPA. The FTC’s documents/20160727_cfpb_Outline_of_ IV. Legal Authority materials have informed the Bureau’s rulemaking proposals.pdf (Small Business Review Panel and, if relevant to particular provisions, are Outline). The Bureau also gathered feedback on the The Bureau is issuing this final rule discussed in part V. Small Business Review Panel Outline from other primarily pursuant to its authority 44 12 U.S.C. 5512(a). 45 stakeholders, members of the public, and the under the FDCPA and the Dodd-Frank 12 U.S.C. 5512(b)(1). Bureau’s Consumer Advisory Board and 46 12 U.S.C. 5481(12)(H), (14). Community Bank Advisory Council. Act. As amended by the Dodd-Frank 47 The Bureau proposed to rely on its Dodd-Frank 40 Bureau of Consumer Fin. Prot., U.S. Small Bus. Act, FDCPA section 814(d) provides that Act section 1031 authority (relating to unfair, Admin. & Office of Mgmt. & Budget, Final Report the Bureau ‘‘may prescribe rules with deceptive, or abusive acts or practices in connection of the Small Business Review Panel on the CFPB’s respect to the collection of debts by debt with consumer financial products or services) to Proposals Under Consideration for the Debt 43 support two interventions in the May 2019 Collector and Debt Buying Rulemaking (Oct. 2016), collectors,’’ as defined in the FDCPA. proposal. The Bureau has not finalized any https://files.consumerfinance.gov/f/documents/ provisions of this final rule (or, as discussed in the cfpb_debt-collector-debt-buyer_SBREFA-report.pdf 42 83 FR 12881 (Mar. 26, 2018). November 2020 Final Rule, of that final rule), (Small Business Review Panel Report). 43 15 U.S.C. 1692l(d). As noted, the Bureau is the pursuant to its authority under Dodd-Frank Act 41 83 FR 12286 (Mar. 21, 2018). first Federal agency with authority to prescribe section 1031.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5771

debt.’’ 48 Then, ‘‘[w]ithout limiting the conduct that the specific examples in C. Other Authorities Under the Dodd- general application of the foregoing,’’ it FDCPA sections 806 through 808 do not Frank Act lists six examples of conduct that address if the conduct violates the Section 1022(b)(1) of the Dodd-Frank 49 violate that section. Similarly, FDCPA general prohibitions. In addition, the Act provides that the Bureau’s Director section 807 generally prohibits a debt Bureau uses the specific examples to ‘‘may prescribe rules and issue orders collector from ‘‘us[ing] any false, inform its understanding of the general and guidance, as may be necessary or deceptive, or misleading representation prohibitions. The Bureau also interprets appropriate to enable the Bureau to or means in connection with the FDCPA sections 806 through 808 in 50 administer and carry out the purposes collection of any debt.’’ Then, light of the significant body of existing and objectives of the Federal consumer ‘‘[w]ithout limiting the general court decisions interpreting those financial laws, and to prevent evasions application of the foregoing,’’ section sections, including, where applicable, thereof.’’ 63 ‘‘Federal consumer financial 807 lists 16 examples of conduct that cases discussing the collection of time- laws’’ include the FDCPA and title X of violate that section.51 Finally, FDCPA barred debt.59 Finally, consistent with the Dodd-Frank Act.64 Section section 808 prohibits a debt collector the majority of courts, the Bureau 1022(b)(2) of the Dodd-Frank Act from ‘‘us[ing] unfair or unconscionable interprets FDCPA sections 806 through prescribes certain standards for means to collect or attempt to collect rulemaking that the Bureau must follow any debt.’’ 52 Then, ‘‘[w]ithout limiting 808 to incorporate an objective, in exercising its authority under Dodd- the general application of the ‘‘unsophisticated’’ or ‘‘least 60 Frank Act section 1022(b)(1).65 See part foregoing,’’ FDCPA section 808 lists sophisticated’’ consumer standard. VII for a discussion of the Bureau’s eight examples of conduct that violate B. Dodd-Frank Act Section 1032 standards for rulemaking under Dodd- that section.53 Consistent with the approach in the November 2020 Final Dodd-Frank Act section 1032(a) Frank Act section 1022(b)(2). Rule 54 and as proposed in the May 2019 provides that the Bureau may prescribe V. Section-by-Section Analysis proposal,55 the Bureau interprets rules to ensure that the features of any FDCPA sections 806 through 808 in consumer financial product or service, Subpart A—General light of: (1) The FDCPA’s language and ‘‘both initially and over the term of the Section 1006.1 Authority, Purpose, purpose; (2) the general types of product or service,’’ are ‘‘fully, and Coverage conduct prohibited by those sections accurately, and effectively disclosed to 1(c) Coverage and, where relevant, the specific consumers in a manner that permits examples enumerated in those sections; consumers to understand the costs, In the November 2020 Final Rule, the and (3) judicial decisions.56 benefits, and risks associated with the Bureau adopted § 1006.1(c)(1) to specify In particular, the Bureau notes that, product or service, in light of the facts that, except as provided in § 1006.108 by their plain terms, FDCPA sections and circumstances.’’ 61 Under Dodd- and appendix A, Regulation F applies to 806 through 808 make clear that their Frank Act section 1032(a), the Bureau is debt collectors, as defined in § 1006.2(i), examples of prohibited conduct do not empowered to prescribe rules regarding other than a person excluded from ‘‘limit[ ] the general application’’ of the disclosure of the ‘‘features’’ of coverage by section 1029(a) of the those sections’ general prohibitions. The consumer financial products and Consumer Financial Protection Act of FDCPA’s legislative history is consistent 2010, title X of the Dodd-Frank Act (12 services generally. Accordingly, the with this understanding,57 as are U.S.C. 5519(a)).66 The Bureau also noted Bureau may prescribe rules containing opinions by courts that have addressed that it was not finalizing, as part of the disclosure requirements even if other this issue.58 Accordingly, the Bureau November 2020 Final Rule, proposed Federal consumer financial laws do not may interpret the general provisions of § 1006.1(c)(2), which provided that specifically require disclosure of such FDCPA sections 806 to 808 to prohibit certain provisions of Regulation F features. Dodd-Frank Act section applied to debt collectors only when 48 15 U.S.C. 1692d. 1032(c) provides that, in prescribing they were collecting consumer financial 49 15 U.S.C. 1692d(1)–(6). rules pursuant to Dodd-Frank Act product or service debt, as defined in 50 15 U.S.C. 1692e. section 1032, the Bureau ‘‘shall consider § 1006.2(f). The Bureau explained that it 51 15 U.S.C. 1692e(1)–(16). available evidence about consumer was not finalizing § 1006.1(c)(2) as part 52 15 U.S.C. 1692f. awareness, understanding of, and 53 of the November 2020 Final Rule 15 U.S.C. 1692f(1)–(8). responses to disclosures or 54 See 85 FR 76734, 76738 (Nov. 30, 2020). because all of the provisions of that final 55 84 FR 23274, 23281–82 (May 21, 2019). communications about the risks, costs, rule apply to debt collectors as defined 56 Where the Bureau prescribes requirements and benefits of consumer financial in § 1006.2(i). The Bureau nevertheless pursuant only to its authority to implement and products or services.’’ 62 The Bureau is reserved § 1006.1(c)(2) so that the interpret sections 806 through 808 of the FDCPA, finalizing §§ 1006.34 and 1006.38 based the Bureau does not take a position on whether Bureau could clarify which provisions such practices also would constitute an unfair, in part on its authority under Dodd- of this final rule, if any, apply to debt deceptive, or abusive act or practice under section Frank Act section 1032. collectors only if they are collecting 1031 of the Dodd-Frank Act. 57 debt related to a consumer financial See, e.g., S. Rep. No. 382, 95th Cong., 1st Sess. 59 2, 4 (1977), reprinted in 1977 U.S.C.C.A.N. 1695, Id. See, e.g., Holzman v. Malcolm S. Gerald & product or service. 1698 (S. Rep. No. 382) (‘‘[T]his bill prohibits in Assocs., 920 F.3d 1264 (11th Cir. 2019); Tatis v. For the reasons discussed in the general terms any harassing, unfair, or deceptive Allied Interstate, LLC, 882 F.3d 422 (3d Cir. 2018); Pantoja v. Portfolio Recovery Assocs., LLC, 852 F.3d section-by-section analysis of § 1006.34, collection practice. This will enable the courts, two provisions of that section where appropriate, to proscribe other improper 679 (7th Cir. 2017), cert. denied, 138 S. Ct. 736 conduct which is not specifically addressed.’’). (2018); Daugherty v. Convergent Outsourcing Inc., (§ 1006.34(c)(2)(iii) and (3)(iv)) apply to Courts have also cited legislative history in noting 836 F.3d 507 (5th Cir. 2016); Buchanan v. debt collectors only if they are that, ‘‘in passing the FDCPA, Congress identified Northland Grp., Inc., 776 F.3d 393 (6th Cir. 2015); collecting debt related to a consumer abusive collection attempts as primary motivations McMahon v. LVNV Funding, LLC, 744 F.3d 1010, for the Act’s passage.’’ Hart v. FCI Lender Servs., 1020 (7th Cir. 2014). 63 Inc., 797 F.3d 219, 226 (2d Cir. 2015). 60 85 FR 76734, 76740 (Nov. 30, 2020); 84 FR 12 U.S.C. 5512(b)(1). 58 See, e.g., Stratton v. Portfolio Recovery Assocs., 23274, 23282–83 (May 21, 2019). 64 12 U.S.C. 5481(14). LLC, 770 F.3d 443, 450 (6th Cir. 2014) (‘‘[T]he listed 61 12 U.S.C. 5532(a). 65 12 U.S.C. 5512(b)(2). examples of illegal acts are just that—examples.’’). 62 12 U.S.C. 5532(c). 66 85 FR 76734, 76742 (Nov. 30, 2020).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5772 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

financial produce or service as defined on behalf of a deceased consumer’s definition of consumer in FDCPA in § 1006.2(f). Therefore, the Bureau is estate should have the same rights section 803(3) is silent with respect to finalizing § 1006.1(c)(2) to provide that regarding validation notices and deceased consumers, other FDCPA certain provisions of Regulation F apply disputes as the consumer would have provisions that refer to a debt collector’s to debt collectors only if they are had if the consumer were still living. obligations to a consumer lack clarity in collecting debt related to a consumer Another industry commenter reported the decedent debt context. For example, financial product or service as defined that many debt collectors currently FDCPA provisions requiring debt in § 1006.2(f), and to specify that those attempt to treat deceased consumers as collectors to provide validation provisions are § 1006.34(c)(2)(iii) and ‘‘consumers’’ under the FDCPA and information, and to respond to disputes (3)(iv). explained that the proposal would and requests for original-creditor provide additional clarity that would Section 1006.2 Definitions information, do not address situations benefit both consumers and debt in which the person obligated or 2(e) Consumer collectors in resolving the debts of allegedly obligated to pay the debt is FDCPA section 803(3) defines a deceased consumers. A group of deceased. Uncertainty surrounding consumer as any natural person consumer advocates supported these provisions increases the risk of obligated or allegedly obligated to pay clarifying the rights of executors, consumer harm in the decedent debt any debt.67 The Bureau proposed administrators, and personal context. Specifically, without validation § 1006.2(e) to implement this definition representatives regarding validation information and an opportunity to and to interpret it to include a deceased notices and disputes. However, as dispute the debt, individuals trying to natural person who is obligated or discussed below, these consumer resolve debts in a deceased consumer’s allegedly obligated to pay a debt.68 The advocate commenters opposed the estate will lack information needed to Bureau explained that this proposed interpretation and suggested a determine whether they are being asked interpretation would ensure that different way to address the issue. to pay the right debt, in the right Other commenters opposed individuals trying to resolve a deceased amount, and to the right debt collector, interpreting the term consumer to consumer’s debts have the same legal include deceased natural persons who and, consequently, whether they should right to receive the validation notice, are obligated or allegedly obligated to assert dispute rights. and to dispute the debt and request pay a debt. One industry commenter Accordingly, to increase clarity and to information about the original creditor, asserted that the proposed interpretation decrease the risk of consumer harm, the as the deceased consumer would have would serve no purpose because Bureau is revising § 1006.2(e) to provide had. deceased consumers lacked privacy that the term consumer means any As the Bureau noted in the November interests. A trade group commenter natural person, whether living or 2020 Final Rule, the Bureau received a stated that no evidence of confusion deceased, obligated or allegedly number of comments regarding its existed in the decedent debt context, obligated to pay any debt. The Bureau proposal to interpret the term consumer and that the Bureau’s interpretation also is revising § 1006.2(e) to delete the to include deceased natural persons. would expand the class of individuals statement that the Bureau may further The Bureau also noted that it had entitled to sue debt collectors for define the term to clarify its application proposed that interpretation, in large violations of the FDCPA and the final when the consumer is deceased, since part, to facilitate delivery of validation rule. Finally, a group of consumer this final rule contains that further notices under proposed § 1006.34 if the advocates suggested that the Bureau’s definition.72 Relatedly, the Bureau is consumer obligated, or allegedly interpretation was unnecessary because finalizing the commentary to obligated, on the debt has died. Further, proposed comments 34(a)(1)–1 and 38– §§ 1006.34(a)(1) and 1006.38 that the Bureau noted that it planned to 1 would clarify that a person who is clarifies that a person who is authorized address comments received regarding authorized to act on behalf of the to act on behalf of the deceased that interpretation, and to determine deceased consumer’s estate operates as consumer’s estate, such as the executor, whether to finalize that interpretation, the consumer for purposes of administrator, or personal as part of this final rule. Thus, as §§ 1006.34(a)(1) and 1006.38.70 These representative, operates as the consumer finalized in the November 2020 Final commenters also stated that, if the for purposes of §§ 1006.34(a)(1) and Rule, § 1006.2(e) provides that the term Bureau were attempting to change the 1006.38. consumer means any natural person class of individuals who may bring civil obligated or allegedly obligated to pay Regarding the comment that deceased actions against debt collectors, the any debt.69 The Bureau now addresses consumers have no privacy rights, the FDCPA already allows any ‘‘person’’ to comments received regarding its Bureau disagrees. In its Policy bring such claims. proposal to interpret the definition to Statement on Decedent Debt, the FTC For the reasons discussed below, the prohibited debt collectors from openly include deceased natural persons. Bureau is revising § 1006.2(e), as set Several commenters supported the referring to a deceased consumer’s debts forth in the November 2020 Final Rule, Bureau’s proposed interpretation. One in communications with third parties, to clarify that the definition of consumer industry commenter stated that, in the instead adopting an approach that includes deceased natural persons. As decedent debt context, the person acting ‘‘balance[d] the legitimate needs of the explained in the May 2019 proposal, the collector with the privacy interests of FDCPA does not specify whether a 67 15 U.S.C. 1692a(3). consumer, as defined in section 803(3), 68 See 84 FR 23274, 23288 (May 21, 2019). 72 In the proposal, the Bureau explained that its 69 For the reasons discussed in the November includes a deceased consumer (or interpretation was ‘‘consistent with a modern trend 2020 Final Rule, § 1006.2(e) as finalized in that rule whether a natural person, as that term in the law that favors recognizing, as a default, the also provides that, for purposes of § 1006.6, the is used in section 803(3), includes a continued existence of a natural person after term consumer includes the persons described in deceased natural person).71 Because the death.’’ 84 FR 23274, 23288 (May 21, 2019). § 1006.6(a). To account for any revisions adopted in Consumer advocates pointed out that the authority this final rule, it also specifies that the Bureau may cited for this proposition comes from contexts other further define the term in Regulation F to clarify its 70 See the section-by-section analyses of than the FDCPA. But these commenters do not application when the consumer is deceased. See 85 §§ 1006.34 and 1006.38. explain why this fact undermines the existence of FR 76734, 76744–45, 76888 (Nov. 30, 2020). 71 See 84 FR 23274, 23288 (May 21, 2019). the trend described by the Bureau.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5773

the decedent.’’ 73 In the November 2020 comments regarding its proposal to definition of consumer under Final Rule, the Bureau took a similar interpret the term consumer to include § 1006.2(e) will complicate and approach regarding location deceased natural persons and that it potentially impede the existing communications for decedent debt.74 would address such comments in this successor in interest process under Moreover, interpreting the term final rule. In determining to revise Regulations X and Z. The commenter consumer in § 1006.2(e) to include § 1006.2(e) to include a deceased natural explained that, under proposed deceased natural persons is supported person who is obligated or allegedly comment 34(a)(1)–1, mortgage servicers by more than concern for a decedent’s obligated to pay a debt, the Bureau thus who are also debt collectors under privacy; it also clarifies debt collector’s also clarifies that the prohibition in Regulation F would have to send obligations to a consumer and, in turn, § 1006.22(f)(4) includes deceased validation information to the person to those authorized to act on the consumers. authorized to act on behalf of the consumer’s behalf, if the consumer has The Bureau disagrees with the deceased consumer’s estate but would died. This includes clarifying a debt industry commenter that there is no not be able to send foreclosure-related collector’s obligations under the evidence of confusion about the disclosures required under State law to FDCPA’s provisions, as implemented in definition of consumer in the decedent the same person, unless that person had this final rule and in the November 2020 debt context. As explained above, the assumed ownership of the obligation. Final Rule, regarding validation FDCPA’s current lack of clarity in the The commenter also suggested that, information and disputes and requests decedent debt context creates under proposed comment 38–1, debt for original-creditor information, which uncertainty in several situations arising collectors would be required to focus help to ensure that consumers are not during the collection of debts belonging resources on verifying the identify of an paying the wrong debt, in the wrong to deceased consumers. Therefore, the individual asserting to be a person amount, to the wrong debt collector. Bureau determines that additional authorized to act on behalf of the This interpretation also clarifies the clarity will improve the debt collection deceased consumer’s estate, which application of § 1006.22(f)(4), which the system for all parties. would take away from legitimate efforts Bureau adopted in the November 2020 Nor does § 1006.2(e) expand the class to respond to disputes and requests for Final Rule to prohibit debt collectors of potential plaintiffs who may bring original-creditor information. from communicating or attempting to suit under the FDCPA and Regulation F, Another trade group commenter communicate with a person in as an industry commenter alleged. The stated that the clarification in proposed connection with the collection of a debt civil liability provision of the FDCPA comment 34(a)(1)–1 to send the through a social media platform if the already creates liability for violations validation notice to the person communication or attempt to committed against any person.77 As authorized to act on behalf of the communicate is viewable by the general noted in the proposal, the trend in the deceased consumer’s estate if the debt public or the person’s social media law has been to recognize, as a default, collector knows or should know that the contacts.75 In adopting that provision, the continued existence of a natural consumer is deceased would, unlike the the Bureau discussed that a consumer person after death for purposes of Bureau’s mortgage servicing rules, advocate commenter had stated that the bringing civil actions, particularly for appear to create an affirmative Bureau should broaden the prohibition remedial statutes like the FDCPA.78 This obligation for mortgage servicers to track to apply to deceased consumers, such commenter did not explain how the down information about potential that debt collectors would be prohibited Bureau’s interpretation would result in successors in interest and cloud from posting publicly about a deceased a lawsuit by someone other than a requirements for mortgage servicers consumer’s alleged debt on the ‘‘person’’ under the statute. under Regulation X. For this reason, a consumer’s social media page. The Finally, the Bureau disagrees, as third trade group commenter suggested consumer advocate commenter stated suggested by certain commenters, that that, if a required notice must be sent that a debt collector’s only reason for the commentary to §§ 1006.34(a)(1) and and no individual has come forward as doing so would be to pressure surviving 1006.38 (final comments 34(a)(1)–1 and a potential or confirmed successor in relatives to pay the debt, either to 38–3) provide adequate clarity without interest, the Bureau should permit protect the deceased consumer’s interpreting the term consumer to mortgage servicers to address a reputation or out of a sense of moral include deceased natural persons. In validation notice to the deceased obligation.76 fact, interpreting the term consumer to consumer or ‘‘the estate of’’ the In finalizing § 1006.22(f)(4) in the include deceased natural persons is a deceased consumer rather than require November 2020 Final Rule, Bureau necessary predicate to provide that the a search for an individual to whom to noted that the prohibition applied to persons identified in those comments address the notice. communications and attempts to operate as the consumer for purposes of As the Bureau has previously communicate with ‘‘a person,’’ and that the requirements relating to validation explained, while many mortgage person, as defined in § 1006.2(k), information, disputes, and requests for servicers are not subject to the FDCPA, includes a consumer. The Bureau again original-creditor information. mortgage servicers that acquired a noted that it had received a number of Commenters raised additional issues mortgage loan at the time that it was in related to § 1006.2(e). A few industry default may be subject to the FDCPA 73 Fed. Trade Comm’n, Statement of Policy commenters suggested that the Bureau’s with respect to that mortgage loan.79 As Regarding Communications in Connection with the proposed interpretation was discussed below, the Bureau concludes Collection of Decedents’ Debts at 44921 (July 27, 2011), https://www.ftc.gov/sites/default/files/ inconsistent with the Bureau’s mortgage that including a deceased natural person documents/federal_register_notices/statement- servicing rules regarding successors in who is obligated or allegedly obligated policy-regarding-communications-connection- interest. One trade group commenter to pay a debt within the definition of collection-decedents-debts-policy-statement/ stated that allowing any individual consumer under § 1006.2(e) is not 110720fdcpa.pdf (FTC Policy Statement on Decedent Debt). authorized to act on behalf of a deceased inconsistent with the Bureau’s mortgage 74 See 85 FR 76734, 76797–00, 76890, 76900 consumer’s estate to meet Regulation F’s servicing rules on successors in interest. (Nov. 30, 2020). 75 See id. at 76836–39, 76892. 77 15 U.S.C. 1692k. 79 See 85 FR 76734, 76758 (Nov. 30, 2020); 81 FR 76 See id. at 76836–39. 78 See 84 FR 23274, 23288 (May 21, 2019). 71977, 71978 (Oct. 19, 2016).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5774 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

Although one commenter asserted that information to the deceased consumer. The Bureau declines to adopt the finalizing this definition as proposed According to the comment, under these suggestion to allow mortgage servicers would complicate and potentially circumstances, a debt collector who is to address a validation notice to the impede the existing successor in interest collecting the debt of a deceased deceased consumer or to ‘‘the estate of’’ process, the commenter failed to explain consumer must determine who is the deceased consumer. As discussed in why that would be the case and the authorized to act on behalf of a deceased the proposal, the Bureau shares the view Bureau does not believe that to be the consumer’s estate. These efforts, of the FTC, which stated in its Policy case. however, do not create an affirmative Statement on Decedent Debt that Regarding delivery of validation obligation under the Bureau’s mortgage individuals who lack the authority to information, as discussed below, servicing rule for a mortgage servicer resolve the estate but who wish to be comment 34(a)(1)–1 clarifies that, if a that is subject to the FDCPA with helpful are likely to open debt collector knows or should know respect to a mortgage loan to seek out communications addressed to the that a consumer is deceased, and if the potential successors in interest within decedent’s estate, or to an unnamed debt collector has not previously the meaning of the mortgage servicing executor or administrator, which makes provided the validation information to rules. Under the mortgage servicing such communications insufficiently the deceased consumer, then in such rules, a mortgage servicer is not required targeted to a consumer with whom the circumstances, to comply with to conduct a search for potential debt collector may generally discuss the § 1006.34(a)(1), a debt collector must successors in interest if the mortgage debt.85 The Bureau, therefore, shares the provide the validation information to an servicer has not received actual notice view of the FTC that ‘‘communication[s] individual whom the debt collector of their existence.83 If, in the course of addressed to the decedent’s estate, or an identifies by name and who is determining who is authorized to act on unnamed executor or administrator, authorized to act on behalf of the behalf of a deceased consumer’s estate [are] location communication[s] and deceased consumer’s estate.80 A person for purposes of § 1006.34(a)(1), a must not refer to the decedent’s who is authorized to act on behalf of a mortgage servicer receives actual notice debts.’’ 86 Accordingly, comment deceased consumer’s estate may include of the existence of a potential successor 34(a)(1)–1 specifies that a debt collector the executor, administrator, or personal in interest, the mortgage servicer must, must provide the validation information representative. However, as discussed in as required under Regulation X, to an individual that the debt collector the November 2020 Final Rule, for maintain policies and procedures identifies by name who is authorized to purposes of Regulations X and Z, a reasonably designed to ensure that the act on behalf of the deceased successor in interest is, in general, a servicer can retain this information and consumer’s estate. person to whom an ownership interest promptly facilitate communication with A group of consumer advocates stated either in a property securing a mortgage the potential successor in interest.84 that certain other provisions of the loan subject to subpart C of Regulation However, because a mortgage servicer Bureau’s proposal, such as X, or in a dwelling securing a closed- that is subject to the FDCPA with § 1006.14(e)’s prohibition on publishing end consumer credit transaction under respect to a mortgage loan may comply lists of consumers who allegedly refuse Regulation Z, is transferred under with both this final rule and the to pay debts and § 1006.18(b)(1)(iv)’s specified circumstances including, for applicable successor in interest prohibition on falsely representing or example, after a consumer’s death or as implying that the consumer committed 81 provisions under Regulations X and Z, part of a divorce. Therefore, a person the Bureau concludes there is no any crime or other conduct in order to who is authorized to act on behalf of a disgrace the consumer, should apply to conflict with the mortgage servicing deceased consumer’s estate for purposes deceased consumers. But, these rules. Additionally, nothing in this final of Regulation F may or may not also be commenters claimed, other provisions, rule is intended to alter the successor in a successor in interest under like § 1006.6(b)(1)’s restrictions on interest provisions in Regulations X and Regulations X and Z, depending on communicating at inconvenient times or Z or to impose additional requirements whether an ownership interest in a places, were nonsensical as applied to under Regulations X and Z. property securing a mortgage loan or a deceased consumers. Therefore, these dwelling securing a closed-end In response to the commenter’s commenters argued, the Bureau’s consumer credit transaction is concern regarding the burdens under interpretation in proposed § 1006.2(e) transferred to that person under the comment 38–1 of determining who is was overbroad. circumstances specified in Regulations authorized to act on behalf of a deceased The Bureau acknowledges that there X and Z.82 consumer’s estate before responding to may be certain provisions in the Comment 34(a)(1)–1 provides debt a dispute or request for original-creditor November 2020 Final Rule and in this collectors clarity regarding to whom the information, the potential burdens final rule that refer to a consumer that validation information must be associated with responding to such simply will be inapplicable in the provided in the narrow circumstance in incoming disputes and requests will be context of a deceased consumer.87 which the debt collector knows or significantly reduced once a debt Nevertheless, as consumer advocates should know that a consumer is collector has procedures in place to acknowledged, other provisions that deceased and the debt collector has not make that threshold determination or previously provided the validation has already made that determination for 85 See 84 FR 23274, 23334 (May 21, 2019). purposes of providing the validation 86 FTC Policy Statement on Decedent Debt, supra 80 See the section-by-section analysis of information as described in comment note 73, at 44920. § 1006.34(a)(1). 34(a)(1)–1. 87 For example, § 1006.6(b) restricts, among other 81 See 85 FR 76734, 76758–59 (Nov. 30, 2020). things, the times at which debt collectors can See also 12 CFR 1024.31, 1026.2(a)(27)(i). A communicate or attempt to communicate with confirmed successor in interest, in turn, means a 83 12 CFR 1024.38(b)(1)(vi); comment consumers. See 85 FR 76734, 76889 (Nov. 30, 2020). successor in interest once a mortgage servicer has 38(b)(1)(vi)–1. To the extent that ‘‘communicate’’ includes having confirmed the successor in interest’s identity and 84 Id. The general servicing policies, procedures, a conversation, the Bureau believes it is obvious ownership interest in the property that secures the and requirements in 12 CFR 1024.38 do not apply that this prohibition is simply inapplicable in the mortgage loan or in the dwelling. See 12 CFR to a mortgage servicer that qualifies as a small case of a deceased consumer (but does apply to 1024.31, 1026.2(a)(27)(ii). servicer pursuant to 12 CFR 1026.41(e). See 12 CFR having a conversation with the executor or 82 12 CFR 1024.31, 1026.2(a)(27). 1024.30(b)(1). administrator of the consumer’s estate).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5775

refer to a consumer will apply to 2(f) Consumer Financial Product or debts (proposed § 1006.26(b)). In the deceased consumers. For example, as Service February 2020 proposal, the Bureau discussed above, interpreting the term As discussed in the November 2020 proposed to require debt collectors to consumer in § 1006.2(e) to include Final Rule, the Bureau proposed provide disclosures if collecting certain deceased natural persons means that, as § 1006.2(f) to define consumer financial time-barred debts (proposed applied to § 1006.22(f)(4), debt product or service debt to mean any § 1006.26(c)). The February 2020 collectors are prohibited from posting debt related to any consumer financial proposal also included model language publicly about a deceased consumer’s product or service, as consumer and forms that debt collectors could use alleged debt on a deceased consumer’s financial product or service is defined to comply with the proposed disclosure public-facing social media page. In in section 1002(5) of the Dodd-Frank requirements. In the November 2020 situations that are currently unclear, Act.89 As also discussed in the Final Rule, the Bureau noted that it such as delivery of validation November 2020 Final Rule, the Bureau planned to address its proposals information, the final rule adopts did not finalize § 1006.2(f) as part of that regarding time-barred debt in this final commentary clarifying debt collectors’ rulemaking because the Bureau did not rule, and the Bureau reserved § 1006.26 obligations. finalize in that rulemaking any for that purpose. After considering the This group of consumer advocates provisions for which the definition in comments received in response to both also recommended that the Bureau proposed § 1006.2(f) would have been the May 2019 and February 2020 require debt collectors to provide a relevant. proposals, the Bureau is now finalizing validation notice to the person For the reasons discussed in the proposed § 1006.26(a) and (b) with authorized to act on behalf of the section-by-section analyses of modifications as described below. The deceased consumer’s estate even if §§ 1006.1(c) and 1006.34, the Bureau is Bureau is not finalizing proposed validation information already was adopting in this final rule two § 1006.26(c). provided to the consumer. These provisions (§ 1006.34(c)(2)(iii) and 26(a) Definitions commenters also asked the Bureau to (3)(iv)) that apply to debt collectors only Proposed § 1006.26(a) defined two provide that the validation period starts if they are collecting debt related to a terms not defined in the FDCPA: Statute from the date the person authorized to consumer financial product or service. of limitations and time-barred debt. The act on behalf of the deceased This includes, for example, debt Bureau proposed to define these terms consumer’s estate receives the collectors collecting debts related to to facilitate compliance with proposed validation notice, and to require debt consumer mortgage loans or credit § 1006.26(b) and (c). As discussed 90 collectors to respond to disputes and cards. To facilitate compliance with below, the Bureau is finalizing requests for original-creditor those provisions, the Bureau is adopting § 1006.26(a) as proposed. The Bureau is information submitted by this person, § 1006.2(f) to provide that consumer finalizing § 1006.26(a) pursuant to its even if a response already was provided financial product or service has the authority under FDCPA section 814(d) to the consumer. The Bureau declines to meaning in section 1002(5) of the Dodd- to prescribe rules with respect to the adopt these suggestions because the Frank Act (12 U.S.C. 5481(5)). collection of debts by debt collectors. Bureau finds that, in the scenario The Bureau notes that it originally described, the debt collector has already proposed § 1006.2(f) to define the term 26(a)(1) Statute of Limitations satisfied the debt collector’s obligations ‘‘consumer financial product or service Proposed § 1006.26(a)(1) defined the to the consumer as set forth in FDCPA debt.’’ However, because the relevant term statute of limitations to mean the section 809 and §§ 1006.34 and 1006.38. defined term in the Dodd-Frank Act is period prescribed by applicable law for Depending on the facts, the debt ‘‘consumer financial product or bringing a legal action against the collector could be required to provide a service,’’ and because certain consumer to collect a debt.91 validation notice or dispute response to commenters observed that including Statutes of limitation, which typically the person authorized to act on behalf two definitions of the term ‘‘debt’’ in the are established by State law, provide of the deceased consumer’s estate,88 but rule would be confusing, the Bureau is time limits for bringing suit on legal the Bureau declines to require debt finalizing § 1006.2(f) to provide that the claims. As the Bureau explained in the collectors to do so in all cases. defined term in the rule is ‘‘consumer May 2019 proposal, statutes of Nevertheless, the Bureau notes that debt financial product or service’’ and that limitation serve several purposes.92 collectors who voluntarily provide the term has the same meaning given to First, statutes of limitations advance a validation notices after a consumer dies it in section 1002(5) of the Dodd-Frank defendant’s interest in repose. That is, (as some industry commenters reported Act. they reflect a legislative judgment that it is done), and who, in doing so, start a Subpart B—Rules for FDCPA Debt is ‘‘unjust to fail to put the adversary on new validation period, do not thereby Collectors notice to defend within a specified violate the FDCPA or Regulation F. period of time.’’ 93 Second, statutes of For the reasons discussed above, and Section 1006.26 Collection of Time- limitations eliminate stale claims. That pursuant to its authority under FDCPA Barred Debts is, they protect defendants and the section 814(d) to prescribe rules with The May 2019 proposal and the courts from having to deal with cases in respect to the collection of debts by debt February 2020 proposal both addressed which ‘‘the search for truth may be collectors, the Bureau is finalizing the collection of time-barred debt. In the seriously impaired by the loss of § 1006.2(e) as proposed to interpret the May 2019 proposal, the Bureau evidence, whether by death or definition of consumer in FDCPA proposed to define several terms disappearance of witnesses, fading section 803(3) to mean any natural (proposed § 1006.26(a)) and to prohibit person, whether living or deceased, who debt collectors from bringing or 91 See 84 FR 23274, 23327–28 (May 21, 2019). is obligated or allegedly obligated to pay threatening to bring legal actions against 92 See generally Rotella v. Wood, 528 U.S. 549, 555 (2000) (identifying ‘‘the basic policies of all any debt. consumers to collect certain time-barred limitations provisions’’ as ‘‘repose, elimination of stale claims, and certainty’’). 88 See the section-by-section analysis of 89 85 FR 76734, 76745 (Nov. 30, 2020). 93 United States v. Kubrick, 444 U.S. 111, 117 § 1006.34(b)(5). 90 See 84 FR 23274, 23286 (May 21, 2019). (1979).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5776 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

memories, disappearance of documents, define the term ‘‘applicable law’’ in the commenter confirmed that the proposed or otherwise.’’ 94 Third, statutes of manner requested by commenters. The definition comported with debt limitations provide ‘‘certainty about a Bureau recognizes that, in some cases, it collectors’ understanding of the term. plaintiff’s opportunity for recovery and can be challenging and costly for a debt Two other industry commenters a defendant’s potential liabilities.’’ 95 collector to determine what statute of expressed concern that the term time- For debt collection claims, the length of limitations applies to a legal action barred debt may imply that a debt the applicable statute of limitations against the consumer to collect a collector has no right at all to collect the often varies by State and, within each particular debt, and that, in some cases, debt, whereas in most jurisdictions a State, by debt type. Although most the commenters’ suggestions could debt’s time-barred status only limits the statutes of limitations applicable to debt reduce those challenges and costs. The debt collector’s right to recover on the collection claims are between three and Bureau declines, however, to address debt through a lawsuit. Several industry six years, some are as long as 15 years. the challenges and costs associated with commenters expressed concern that the Several commenters addressed determining whether a debt is time proposal seemed to contemplate that a proposed § 1006.26(a)(1). One industry barred by modifying the definition of debt is a single amount that becomes commenter confirmed that the proposed statute of limitations, a term with a time barred at a single moment in time definition of statute of limitations meaning widely understood by debt and noted that not all debts operate in comported with debt collectors’ collectors, or by defining new terms. that manner. For example, these understanding of the term. A number of Comments relating to the difficulty of commenters stated that an installment other industry commenters requested determining whether a debt is time loan could become time barred on a that the Bureau modify the definition to barred are discussed further in the rolling basis depending on when each account for the fact that it can be section-by-section analysis of installment was due. In addition, challenging to determine the applicable § 1006.26(b). according to some commenters, a legal statute of limitations in certain action to collect a debt may be based on 26(a)(2) Time-Barred Debt circumstances. For example, two more than one legal theory or involve industry commenters requested that the Proposed § 1006.26(a)(2) defined the more than one cause of action, and each Bureau clarify that, in determining the term time-barred debt to mean a debt for theory or cause of action may be subject applicable statute of limitations, a debt which the applicable statute of to a different statute of limitations. collector need only conduct a limitations has expired.96 Similarly, according to some reasonable investigation based on As the Bureau explained in the May commenters, certain secured debts may objectively ascertainable facts, and that 2019 proposal, many debt collectors be subject to more than one method of a debt collector would only be charged already determine whether the statute of suit and more than one statute of with knowing that the statute of limitations applicable to a debt has limitations. For example, these limitations has expired if the law is expired. Some do so to comply with commenters asserted, in some States a clearly established. The commenters State and local disclosure laws that mortgagee may choose whether to also requested that the Bureau more require them to inform consumers when pursue a remedy at law on the note, a specifically define certain elements of debts are time barred.97 Others do so to remedy in equity on the mortgage, or the term statute of limitations to lessen assess whether they can sue to collect both, and the statute of limitations the burden on debt collectors of the debt, which may affect their applicable to these claims may differ. determining whether a debt is time collection strategy. In addition, the Relatedly, one industry commenter barred. For example, they suggested information that debt buyers generally asked the Bureau to clarify that debt defining ‘‘applicable law’’ as the law of receive when bidding on and collectors are not prohibited from taking the jurisdiction where the consumer purchasing debts, and the information legal action to enforce a lien even if a resides or is believed to reside at the that other debt collectors generally claim on the underlying obligation is time collections begin, or the law of the receive at placement, may allow them to time barred. Alternatively, the jurisdiction in which the consumer determine whether the applicable commenter asked the Bureau to clarify 98 signed any underlying contract. statute of limitations has expired. that the requirements of proposed Commenters suggested that these Several commenters addressed § 1006.26 would apply only when all changes would make it easier for a debt proposed § 1006.26(a)(2). An industry causes of action associated with the collector to determine the statute of underlying note and with the security 96 limitations applicable to a particular See 84 FR 23274, 23328 (May 21, 2019). instrument are time barred.99 97 See, e.g., Cal. Civ. Code sec. 1788.52(d)(3); debt while protecting a debt collector Conn. Gen. Stat. sec. 36a–805(a)(14); Mass. Code The Bureau is finalizing from liability when it is difficult Regs., tit. 940, § 7.07(24); N.M. Code. R. sec. § 1006.26(a)(2) as proposed. As industry determine the exact date on which a 12.2.12.9(A); N.Y. Comp. Codes R. & Regs., tit. 23, commenters confirmed, the definition of debt becomes time barred. sec. 1.3; New York City, N.Y., Rules, tit. 6, sec. 2– time-barred debt in § 1006.26(a)(2) is 191(a); W. Va. Code sec. 46a–2–128(f). consistent with debt collectors’ The Bureau is finalizing 98 See Fed. Trade Comm’n, The Structure and § 1006.26(a)(1) as proposed. As industry Practices of the Debt Buying Industry, at 49 (Jan. commenters confirmed, the definition of 2013), https://www.ftc.gov/sites/default/files/ 99 Another commenter seeking clarification on the documents/reports/structure-and-practices-debt- scope of proposed § 1006.26(b) asserted that in rem statute of limitations in § 1006.26(a)(1) buying-industry/debtbuyingreport.pdf (FTC Debt enforcement of a security instrument is not is consistent with debt collectors’ Buying Report) (‘‘The data the Commission received inherently debt collection. The Bureau notes that understanding of the term. The Bureau from debt buyers suggests that debt buyers usually § 1006.26, like the rest of this final rule, applies declines to modify the definition to are likely to know or be able to determine whether only to FDCPA debt collectors. The Supreme Court the debts on which they are collecting are beyond recently held that a business engaged in no more identify the type of investigation a debt the statute of limitations.’’). Similarly, the majority than nonjudicial foreclosure proceedings is not an collector must or should undertake to of respondents to the Bureau’s Debt Collection FDCPA debt collector, except for the limited ascertain the applicable statute of Operations Study reported always or often receiving purpose of FDCPA section 808(6). See Obduskey v. limitations. The Bureau also declines to certain information and documentation that may be McCarthy & Holthus LLP, 139 S. Ct. 1029 (2019). relevant to determining whether a debt is time FDCPA section 808(6) specifically prohibits taking barred, such as debt balance at charge off, account or threatening to take any nonjudicial action in 94 Id. agreement documentation, and billing statements. certain circumstances, such as where there is no 95 Young v. United States, 535 U.S. 43, 47 (2002) See CFPB Debt Collection Operations Study, supra present right to possession through an enforceable (quoting Rotella, 528 U.S. at 555). note 37, at 23. security instrument.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5777

understanding of the term. In response not extinguish the debt itself.102 In other who do often are unrepresented. As a to commenters’ concerns that the term words, in most States a debt collector result, the vast majority of judgments on time-barred debt might imply that a debt may use non-litigation means to collect unpaid debts, including on time-barred collector has no right to collect the debt, a time-barred debt, as long as those debts, are default judgments, entered the Bureau notes that, in most means do not violate the FDCPA or solely on the representations contained jurisdictions, as commenters observed other laws. If a debt collector does sue in the debt collector’s complaint.104 and as is discussed in the section-by- to collect a time-barred debt, and if the Consumer and consumer advocate section analysis of § 1006.26(b), a debt consumer proves the expiration of the commenters generally supported the is not extinguished when the statute of statute of limitations as an affirmative prohibitions in proposed § 1006.26(b). limitations expires. Rather, in these defense, the court will dismiss the suit. jurisdictions, a debt collector still may Suits and threats of suit on time- Many of these commenters also argued collect the debt using non-litigation barred debts can harm consumers in that, to prevent deception, the Bureau means, such as telephone calls and multiple ways. A debt collector’s threat should prohibit the collection of time- letters, and the Bureau’s use of the term to sue on a time-barred debt may barred debt altogether, even though the time-barred debt neither changes that prompt some consumers to pay or Bureau did not propose such a fact nor is meant to imply otherwise. prioritize that debt over others in the prohibition in the May 2019 proposal or With respect to industry commenters’ mistaken belief that doing so is the February 2020 proposal. The Bureau concern about debts for which multiple necessary to avoid litigation. In some certainly supports measures to prevent statutes of limitation may be relevant, jurisdictions, a consumer’s payment on deception because of the harm it causes the Bureau notes that a debt is a time- or acknowledgement of a debt can to consumers. However, the Bureau barred debt under § 1006.26(a)(2) if the revive the debt collector’s right to sue concludes that is not necessary to ban applicable statute of limitations has for the entire amount, opening the the collection of time-barred debt to expired. The applicable statute of consumer to new legal liability.103 prevent potential deception. As limitations depends on the specific legal Similarly, suits on time-barred debts discussed in the February 2020 action the debt collector takes or may lead to judgments against proposal, the Bureau’s quantitative represents that it will take. For some consumers on claims for which those testing generally indicates that debts, such as certain installment loans consumers had meritorious defenses, disclosures, in certain situations, can be and secured debts, it may be the case including defenses based on the statute effective in curing the potential that one claim associated with a debt is of limitations. Few consumers who are deception associated with the collection time barred while another claim sued for allegedly unpaid debts— of time-barred debt.105 The Bureau associated with the debt is not. In such whether time barred or not—actually concludes that a prohibition on the a case, the prohibitions in § 1006.26(b) defend themselves in court, and those collection of time-barred debt would apply to the time-barred claim only. impose significant burden on debt 102 See generally Midland Funding, LLC v. collectors to identify such debts and 26(b) Legal Actions and Threats of Legal Johnson, 137 S. Ct. 1407, 1411–12 (2017) (noting Actions Prohibited that under ‘‘the law of many States . . . a creditor would decrease the value of time-barred has the right to payment of a debt even after the debts to little or nothing; a debt has The Bureau proposed § 1006.26(b) to limitations period expires,’’ and collecting State little or no value if the owner cannot prohibit a debt collector from bringing laws). In Mississippi and Wisconsin, however, collect the debt either in litigation or or threatening to bring a legal action debts are extinguished when the applicable statute outside of litigation. The Bureau against a consumer to collect a debt that of limitations expires. See Miss. Code Ann. sec. 15– 1–3 (‘‘The completion of the period of limitation declines to impose such extraordinarily the debt collector knows or should prescribed to bar any action, shall defeat and 100 large costs because much less costly know is a time-barred debt. In extinguish the right as well as the remedy.’’); Wis. measures—namely, disclosures—can be response to comments, the Bureau is Stat. Ann. sec. 893.05 (‘‘When the period within finalizing proposed § 1006.26(b) with which an action may be commenced on a 104 See FTC Debt Buying Report, supra note 98, two principal changes. First, the Bureau Wisconsin cause of action has expired, the right is at 45 (observing that ‘‘90 percent or more of extinguished as well as the remedy.’’). consumers sued in [debt collection actions] do not is not adopting the proposed knows-or- 103 Revival extinguishes the consumer’s right to appear in court to defend,’’ which ‘‘creates a risk should-know standard; instead, a debt raise the expiration of the statute of limitations as that consumer will be subject to a default judgment collector may violate final § 1006.26(b) an affirmative defense to litigation; that is, it revives on a time-barred debt’’); Peter A. Holland, The One even if the debt collector neither knew the debt collector’s right to sue to collect the debt. Hundred Billion Dollar Problem in Small Claims Although State revival laws vary, there are nor should have known that a debt was Court: Robo-Signing and Lack of Proof in Debt generally several circumstances in which revival Buyer Cases, 6 J. Bus. & Tech. L. 259, 265 (2011) time barred. Second, consistent with the occurs. First, in some States, a consumer’s partial (‘‘In the majority of debt buyer cases, the courts Supreme Court’s decision in Midland payment on a time-barred debt revives the debt grant the debt buyer a default judgment because the Funding, LLC v. Johnson, the final rule collector’s right to sue. Second, in some States, a consumer has failed to appear for trial .... consumer’s written acknowledgement of a time- Debtors who do receive notice usually appear clarifies that the prohibitions in barred debt revives the debt collector’s right to sue. without legal representation.’’); CFPB Debt § 1006.26(b) do not apply to proofs of Third, a consumer’s oral acknowledgement of a Collection Operations Study, supra note 37, at 18 time-barred debt may revive the debt collector’s claim filed in bankruptcy (observing that respondents reported obtaining right to sue in some States. See, e.g., Lima v. proceedings.101 default judgments in 60 to 90 percent of their filed Schmidt, 595 So. 2d 624, 631 (La. 1992) (‘‘Our suits); cf. Kimber v. Fed. Fin. Corp., 668 F. Supp. Prohibitions courts have consistently held that renunciation must be clear, direct, and absolute and manifested 1480, 1478 (M.D. Ala. 1987) (‘‘Because few As the Bureau explained in the May by words or actions of the party in whose favor unsophisticated consumers would be aware that a prescription has run.’’) (citations omitted); 22 Tenn. statute of limitations could be used to defend 2019 proposal, in most States the against lawsuits based on stale debts, such expiration of the applicable statute of Pract. Contract Law and Practice § 12:88 (rev. Aug. 2020) (‘‘[T]he defendant may revive a plaintiff’s consumers would unwittingly acquiesce to such limitations, if raised by the consumer as remedy that has been barred by the statute of lawsuits. And, even if the consumer realizes that an affirmative defense, precludes the limitations. This event can occur either when the she can use time as a defense, she will more than debt collector from recovering on the defendant expressly promises to pay a debt or when likely still give in rather than fight the lawsuit because she must still expend energy and resources debt using judicial processes, but it does the defendant acknowledges the debt and expresses a willingness to pay it .... The expression of a and subject herself to the embarrassment of going defendant’s willingness to pay might be implied into court to present the defense; this is particularly 100 See 84 FR 23274, 23328–29 (May 21, 2019). from the words or action of a debtor . . . .’’) true in light of the costs of attorneys today.’’). 101 137 S. Ct. 1407 (2017). (citations and internal quotation marks omitted). 105 See 85 FR 12672, 12677–79 (Mar. 3, 2020).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5778 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

effective in preventing potential court, and, as a consequence, many proposed § 1006.26(b) contradicts the deception. claims result in default judgments on Federal Rules of Civil Procedure and Moreover, the Bureau emphasizes that debts that were not legally enforceable. State-law equivalents and abridges a prohibiting the collection of time-barred Consumer advocate commenters also debt collector’s right to petition the debt when doing so is unnecessary to provided anecdotes and pointed to courts. The commenter pointed to prevent potential deception is recent enforcement actions to show that Federal Rule of Civil Procedure 11, inconsistent with the First Amendment debt collectors continue to sue and pursuant to which an attorney’s claims, limitations on the Bureau’s authority to threaten to sue on time-barred debt.109 defenses, and other legal contentions ban commercial speech. Courts have One industry commenter who must be warranted by existing law or by held that a debt collector who asks a supported elements of proposed a nonfrivolous argument for extending, consumer to pay a debt is engaging in § 1006.26(b) acknowledged that modifying, or reversing existing law or commercial speech.106 Prohibiting the proposed § 1006.26(b) is consistent with for establishing new law. According to collection of time-barred debt therefore long-standing FDCPA case law. this commenter, the proposed would restrict commercial speech. The Several industry commenters who prohibitions conflict with Rule 11 and Supreme Court has held that restrictions opposed proposed § 1006.26(b) argued its equivalents by discouraging debt on commercial speech are permissible that the Bureau should not prohibit collectors from filing legitimate lawsuits when they: (1) Are supported by a suits and threats of suit on time-barred that argue in good faith for the substantial government interest; (2) debt because, in most jurisdictions, modification or reversal of existing law. directly advance that interest; and (3) expiration of the statute of limitations Final § 1006.26(b) prohibits a debt are no more extensive than necessary to does not prohibit a debt collector from collector from bringing or threatening to serve that interest.107 If the potential bringing suit but rather provides the bring a legal action against a consumer deception associated with the collection consumer with an affirmative defense to to collect a time-barred debt. A debt of time-barred debt can be cured by a liability. According to these collector who sues or threatens to sue a disclosure, then prohibiting the commenters, proposed § 1006.26(b) consumer to collect a time-barred debt collection of time-barred debt would would effectively preempt State explicitly or implicitly misrepresents to impose a restriction that is more affirmative defense laws by making the consumer that the debt is legally extensive than necessary.108 As noted expiration of the statute of limitations a enforceable, and that misrepresentation above, the Bureau’s quantitative testing total bar to suit, thereby interfering with is material to consumers because it may generally indicates that, in certain debt collectors’ right to legal recourse affect their conduct with regard to the situations involving the collection of under State law. Relatedly, an industry collection of that debt, including time-barred debt, disclosures can be commenter argued that State courts are whether to pay it.110 The Bureau’s effective in curing potential deception. capable of addressing situations in consumer testing suggests that Therefore, the Bureau declines to which a debt collector sues to collect a consumers often are uncertain about finalize a prohibition on the collection time-barred debt, including by their rights concerning time-barred of time-barred debt. dismissing the debt collector’s claim debt.111 Consumers sued or threatened In addition to consumers and and awarding sanctions if appropriate. with suit on a time-barred debt consumer advocates, several industry Another industry commenter asserted generally do not recognize that the debt commenters, Federal agency staff, and that consumers should be responsible is time barred, that time-barred debts are one local government commenter for tracking the legal obligations unenforceable in court, or that they expressed support for the proposed associated with their debts, and that it must raise the expiration of the statute prohibitions. Commenters who would be unduly burdensome to require of limitations as an affirmative defense. supported the proposed prohibitions debt collectors to determine whether a The prohibitions in final § 1006.26(b) asserted that suits and threats of suit on debt is time barred, particularly for debt generally are consistent with the current time-barred debts may induce collectors who are small businesses. state of the law. Multiple courts have consumers to make payments they Some industry commenters argued held that suits and threats of suit on otherwise would not make. Some that the Bureau lacks the authority to time-barred debt violate the FDCPA, consumer advocate commenters noted prohibit suits and threats of suit on reasoning that such practices violate that these payments can revive the debt time-barred debts. For example, several FDCPA section 807’s prohibition on collector’s right to sue in certain industry commenters argued that false or misleading representations, jurisdictions. Additionally, consumer proposed § 1006.26(b) exceeds the FDCPA section 808’s prohibition on advocate commenters asserted that Bureau’s authority because, in their unfair practices, or both.112 The FTC consumers often assume that the mere view, nothing in the FDCPA permits the filing of a lawsuit means that they owe Bureau to preempt State laws relating to 110 See, e.g., Kimber, 668 F. Supp. at 1489 (‘‘By the debt, that the amount owed is debt collection or access to courts or threatening to sue Kimber on her alleged debt . . . accurately stated, and that the debt establishes a Federal role in determining FFC implicit[ly] represented that it could recover in collector has the legal right to collect the State law defenses. Similarly, one a lawsuit, when in fact it cannot properly do so.’’). debt, whereas in fact the debt collector 111 See FMG Focus Group Report, supra note 26, industry commenter asserted that at 9–10; FMG Cognitive Report, supra note 27, at may lack support for its claims. These 36–37; FMG Summary Report, supra note 29, at 35– commenters also asserted that 109 See, e.g., Consent Order ¶¶ 65–69, In re Encore 36; see also Fed. Trade Comm’n, Repairing a consumers generally lack the knowledge Capital Grp., Inc., No. 2015–CFPB–0022 (Sept. 9, Broken System: Protecting Consumers in Debt and resources to defend their rights in 2015), http://files.consumerfinance.gov/f/201509_ Collection Litigation and Arbitration at iii, 26 (July cfpb_consent-order-encore-capital-group.pdf; 2010), https://www.ftc.gov/sites/default/files/ Consent Order ¶¶ 56–59, In re Portfolio Recovery documents/reports/federal-trade-commission- 106 See, e.g., ACA Int’l v. Healey, 457 F. Supp. 3d Assocs. LLC, No. 2015–CFPB–0023 (Sept. 9, 2015), bureau-consumer-protection-staff-report-repairing- 17, 25–26 (D. Mass. 2020); Stover v. Fingerhut http://files.consumerfinance.gov/f/201509_cfpb_ broken-system-protecting/debtcollectionreport.pdf Direct Mktg., 709 F. Supp. 2d 473, 479 (S.D. W.Va. consent-order-portfolio-recovery-associates-llc.pdf; (FTC Litigation Report). 2009). see also Complaint ¶¶ 30–35, Bureau of Consumer 112 See, e.g., Pantoja v. Portfolio Recovery Assocs., 107 See Cent. Hudson Gas & Elec. Corp. v. Pub. Fin. Prot. v. Encore Capital Grp., Inc., No. LLC, 852 F.3d 679, 683–84 (7th Cir. 2017); Serv. Comm’n, 447 U.S. 557, 566 (1980). 2020CV1750 (S.D. Cal. Sept. 8, 2020), https:// McMahon v. LVNV Funding, LLC, 744 F.3d 1010, 108 In re R.M.J., 455 U.S. 191, 203 (1982); see also www.consumerfinance.gov/documents/9167/cfpb_ 1020 (7th Cir. 2014); Phillips v. Asset Acceptance, Pearson v. Shalala, 164 F.3d 650 (D.C. Cir. 1999). encore-capital-group-et-al_complaint_2020-08.pdf. LLC, 736 F.3d 1076, 1079 (7th Cir. 2013); Huertas

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5779

also has concluded that the FDCPA bars contrary to commenters’ assertions, will know, or will be able to readily actual and threatened suits on time- § 1006.26(b) does not exceed the determine, whether the statute of barred debt.113 In addition, the Bureau’s authority by regulating access limitations has expired. In some prohibitions in final § 1006.26(b) to the courts or litigation activities. Debt instances, however, a debt collector may generally are consistent with current collectors have repeatedly argued that be genuinely uncertain even after industry practice. For example, a they cannot be held liable under the undertaking a reasonable investigation, number of industry commenters stated FDCPA for actions taken in litigation such as if the case law in a State is they do not sue or threaten to sue on because, for example, the United States unclear as to which statute of time-barred debt as a matter of policy, Constitution allows debt collectors to limitations applies to a particular type and one trade group commenter stated petition the courts, or because the of debt. The proposed knows-or-should- that it requires its members to refrain Federal Rules of Civil Procedure (or know standard was meant to address from suing or threatening to sue on their State equivalents) allow debt this concern by not imposing liability time-barred debts. collectors to argue for the modification on a debt collector if it had no way of The Bureau recognizes that, in most or reversal of existing law. Many courts knowing that a particular debt was time jurisdictions, expiration of the statute of have rejected such arguments, generally barred. But the Bureau also limitations provides the consumer with reasoning that the FDCPA acknowledged that it sometimes may be an affirmative defense to liability, but it unquestionably applies to litigation difficult to determine whether a knows- does not bar a debt collector from activities.115 The fact that expiration of or-should-know standard has been met. bringing suit. The Bureau concludes, a State’s statute of limitations may not Such uncertainty could increase however, that consumers are unlikely to extinguish a debt under State law or bar litigation costs and make it difficult for know whether the applicable statute of a lawsuit in State court unless an consumers and government agencies to limitations has expired or that the affirmative defense is raised and proven bring actions against debt collectors. To expiration of the statute of limitations does not render the FDCPA’s address this concern, the Bureau sought provides an affirmative defense. Suits prohibition on using deceptive or comment on an alternative strict and threats of suit on time-barred debts misleading representations or means in liability standard pursuant to which a therefore imply to the least debt collection inapplicable. There is debt collector would be liable for suing sophisticated consumer not simply that nothing unusual about the proposition or threatening to sue on a time-barred the debt collector may sue or has sued that some behavior permitted by State debt even if the debt collector neither the consumer but also that the debt law may nevertheless violate Federal knew nor should have known that the collector’s claim is legally enforceable. law. Moreover, nothing in § 1006.26(b) debt was time barred. For time-barred debts, this is misleading prohibits a debt collector from bringing because expiration of the statute of Industry commenters generally did a legal action against a consumer in not support a strict liability standard. limitations provides the consumer with which the debt collector argues for an a complete defense.114 Accordingly, the These commenters generally agreed that extension, modification, or reversal of it can be difficult for a debt collector to Bureau concludes that bringing or existing law or the establishment of new threatening to bring a legal action to determine whether a debt is time barred law—including a legal action in which and asserted that holding debt collectors collect a time-barred debt is a deceptive the debt collector argues that a debt is practice under FDCPA section 807 even strictly liable for good faith errors would not time barred. Debt collectors remain be unduly harsh. These commenters if expiration of the statute of limitations free to do so. But a debt collector who is an affirmative defense rather than a stated, for example, that determining the brings such an action may violate applicable statute of limitations and categorical bar to suit. § 1006.26(b) if a court ultimately As explained below, the Bureau is whether it has expired may require determines that the debt was time finalizing § 1006.26(b) as an analyzing a variety of factual and legal barred. interpretation of FDCPA section 807’s questions specific to the debt, and that, prohibition on deception; such an Liability Standard in many cases, a debt collector may reach the wrong conclusion even after interpretation is squarely within the Proposed § 1006.26(b) would have undertaking a reasonable investigation Bureau’s authority under FDCPA prohibited a debt collector from and analysis. Industry commenters section 814(d) to prescribe rules with bringing or threatening to bring a legal asserted that debt collectors may be respect to the collection of debts by debt action against a consumer to collect a unable to reliably determine the statute collectors. Contrary to commenters’ time-barred debt only if the debt of limitations before filing suit because claims, § 1006.26(b) does not preempt collector knew or should have known the law is unclear, because some State laws relating to when a debt the debt was time barred. information relevant to the analysis may collector may bring a lawsuit in State In proposing a knows-or-should-know be unavailable, or both. Some industry court. Rather, it provides that a debt standard, the Bureau explained that commenters also asserted that the collector who sues or threatens to sue a determining whether a debt is time analysis may change over time. For consumer to collect a time-barred debt barred may involve analyzing which example, according to these violates the FDCPA even if applicable State law applies, which statute of commenters, a consumer’s decision to State law permits the suit. In addition, limitations applies, when the statute of move to a different State after signing a limitations began to run, and whether v. Galaxy Asset Mgmt., 641 F.3d 28, 33 (3d Cir. loan agreement could affect a debt the statute of limitations has been tolled 2011) (per curiam); Goins v. JBC & Assocs., P.C., collector’s analysis of which State law or reset. In many cases, a debt collector 352 F. Supp. 2d 262, 273 (D. Conn. 2005); Kimber, applies and whether the statute of 668 F. Supp. at 1487–89. limitations has been tolled. As another 113 FTC Litigation Report, supra note 111, at 23. 115 See, e.g., Aguilar v. LVNV Funding LLC, No. 114 See, e.g., Goins, 352 F. Supp. 2d at 272 2:19–cv–105, 2019 WL 3369706, at *3–4 (M.D. Fla. example, an industry commenter stated (holding that, although the statute of limitations is July 26, 2019); Tobing v. Parker McCay, P.A., No. that, in certain jurisdictions, the statute an affirmative defense, threatening to bring suit on 3:17–cv–00474, 2018 WL 2002799, at *9 (D.N.J. of limitations applicable to mortgage time-barred debt ‘‘can at best be described as a Apr. 30, 2018); Consumer Fin. Prot. Bureau v. debt is in flux because of unprecedented ‘misleading’ representation, in violation of Frederick J. Hanna & Assocs., P.C., 114 F. Supp. 3d § 1692e,’’ because the statute of limitations is a 1342, 1359–61 (N.D. Ga. 2015); Johnson v. Riddle, access by consumers to loss mitigation complete defense to any suit). 305 F.3d 1107, 1118 (10th Cir. 2002). and an increase in bankruptcy filings in

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5780 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

the wake of the foreclosure crisis. finalize a liability standard akin to filing suit. Some consumer advocate Several industry commenters also qualified immunity such that a debt commenters suggested that this would expressed concern that debt collectors collector who sued or threatened to sue help reduce the consumer protection who are not attorneys may have to collect a time-barred debt would not risks associated with the collection of particular difficulty making an accurate be liable unless the applicable statute of time-barred debt, including the risk that time-barred debt determination. For limitations was clearly established. consumers may be unable to adequately these reasons, industry commenters Other industry commenters suggested protect their rights in court and the risk asserted that a strict liability standard, that the Bureau finalize an actual that consumers may make a payment on which would leave no room for error, knowledge standard such that a debt the debt under the misimpression that would expose debt collectors to liability collector who sued or threatened to sue the debt is legally enforceable, which even though it would be challenging or on a time-barred debt would be liable could revive the debt collector’s right to very costly in many circumstances to only if the debt collector knew the debt sue. Some commenters expressed determine if a debt is time barred. was time barred. concern that the proposed knows-or- Some industry commenters supported Some commenters suggested that the should-know standard would not the proposed knows-or-should-know Bureau finalize various safe harbors for adequately incentivize debt collectors to standard. These commenters generally debt collectors. For example, industry determine the time-barred status of asserted that the proposed standard commenters recommended safe harbors debts. Around two dozen members of would help debt collectors avoid for debt collectors collecting debts of a Congress asserted that finalizing a liability for good-faith mistakes in certain age and for debt collectors who knows-or-should-know standard determining whether a debt is time rely on information provided by the without additional protections could barred—something industry creditor. Other industry commenters encourage willful ignorance on the part commenters argued is important given suggested that a debt collector who of a debt collector about the time-barred the complexity and uncertainty of maintains and follows reasonable status of a debt. A group of State certain time-barred debt analyses. One procedures for determining whether a Attorneys General and some consumer industry commenter asserted that the debt is time barred should receive a safe advocate commenters similarly argued proposed standard also would harbor from liability in the event that that a knows-or-should-know standard adequately protect consumers from the debt collector inadvertently sues or would promote willful ignorance by harm. However, several industry threatens to sue on a time-barred debt. debt collectors. commenters who expressed general One industry commenter requested that A number of commenters, including support for the proposed standard also the Bureau specifically confirm that consumer advocate commenters and a asked the Bureau to provide additional FDCPA section 813(c)’s bona fide error group of State Attorneys General, guidance, including examples of defense would apply to violations of advocated a strict liability standard circumstances in which a debt collector § 1006.26(b). because, in their view, debt collectors neither knows nor should know that a Other commenters, including generally have more resources and debt is time barred. consumers, consumer advocates, expertise and better access to Not all industry commenters academics, some members of Congress, information than consumers. These supported the proposed knows-or- a group of State Attorneys General, and commenters generally asserted that it should-know standard. Some industry several local governments, urged the would often be difficult for a consumer commenters argued that the proposed Bureau to adopt a strict liability to establish that a debt was time barred standard was vague and subjective and standard. Although some of these and that the debt collector knew or could increase litigation risk rather than commenters acknowledged that should have known that fact. mitigating it. Other industry determining whether a debt is time Many of these commenters also commenters asked the Bureau to clarify barred can be complicated,116 others argued that the proposed knows-or- that the knows-or-should-know argued that determining whether a debt should-know standard was inconsistent standard depends on the specific is time barred is relatively with the FDCPA (which some understanding and sophistication of the straightforward in most cases. One commenters described as a strict particular debt collector. They asserted, commenter suggested that, if the Bureau liability statute) and with FDCPA for example, that what an attorney debt finalizes the proposed knows-or-should- section 807’s prohibition on deception collector knows or should know about know standard, the Bureau should (which does not include a knowledge a debt’s time-barred status may differ clarify that in most cases a debt element). Some commenters pointed out from what a non-attorney debt collector collector will know (or should know) that, because FDCPA section 813(c) knows or should know. whether the statute of limitations has provides debt collectors with a bona Some industry commenters who run because in most cases debt fide error defense to liability in certain opposed the proposed knows-or-should- collectors have the necessary circumstances, a strict liability standard know standard offered alternative information to make the determination. would not expose debt collectors to standards. For example, several industry Some consumer advocate commenters undue liability. Commenters also argued commenters recommended that the who argued for a strict liability standard that the proposed knows-or-should- Bureau finalize a reasonable stated that it would incentivize debt know standard was inconsistent with investigation standard such that a debt collectors to determine whether a debt case law imposing or implying a strict collector who sued or threatened to sue is time barred before threatening or liability standard when evaluating to collect a time-barred debt would not claims that a debt collector sued or be liable if the debt collector undertook 116 A group of academic commenters challenged threatened to sue to collect a time- a reasonable investigation before doing the Bureau’s assertion that debt buyers generally barred debt. Several commenters agreed receive enough information to determine whether a so. Similarly, some industry debt is time barred. These commenters noted that with the Bureau that a strict liability commenters argued that a debt collector fewer than half of respondents to the Bureau’s standard generally would reduce who acts in good faith should not be industry survey reported receiving account ambiguity and be easier to enforce than liable for suits and threats of suit on agreement documentation or billing statements, the proposed knows-or-should-know information that the commenters believed would time-barred debts. Other industry help a debt collector calculate the applicable statute standard. Federal government agency commenters suggested that the Bureau of limitations and whether it has expired. staff encouraged the Bureau to consider

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5781

further whether a knows-or-should- Bureau’s decision to finalize a strict industry commenters suggested that the know standard would place an liability standard is generally consistent term ‘‘legal action’’ is unclear and could unnecessary burden on law enforcement with this principle. be interpreted to encompass any action agencies. The Bureau emphasizes that, although in any court of law or equity. These The Bureau is not finalizing the a strict liability standard might create commenters suggested replacing ‘‘legal proposed knows-or-should-know some risk for debt collectors if a debt’s action’’ with ‘‘lawsuit,’’ asserting that, standard and is instead finalizing a time-barred status is unclear, debt although ‘‘legal action’’ and ‘‘lawsuit’’ strict liability standard. Although collectors have multiple ways to manage have overlapping meanings, ‘‘lawsuit’’ determining whether a debt is time such risk. In particular, a debt collector has a narrower connotation that barred can be challenging or costly in can avoid liability under § 1006.26(b) by excludes certain legal actions, such as certain circumstances, the Bureau confirming that the statute of limitations bankruptcy proceedings. Alternatively, concludes that the proposed knows-or- has not expired before bringing or these commenters argued that, if the should-know standard is generally threatening to bring a legal action. Bureau declines to change the term legal inconsistent with FDCPA section 807, Similarly, a debt collector who is action, the prohibitions in proposed which does not include an exception or ultimately unable to determine with § 1006.26(b) should be adjusted to exclusion for debt collectors whose certainty whether a debt is time barred specifically exclude certain types of deceptive statements are unintentional can avoid liability under § 1006.26(b) by legal actions, such as garnishment or for whom ensuring that a statement refraining from bringing or threatening actions, probate actions, and the filing is not deceptive is burdensome.117 The to bring a legal action while, in most of proofs of claim in bankruptcy Bureau also concludes that a strict States, continuing with non-litigation proceedings.122 Another commenter liability standard is more consistent collection activities. Moreover, a debt asked the Bureau to clarify that, for with FDCPA section 807’s prohibition collector who brings or threatens to purposes of proposed § 1006.26(b), the on deception, as well as case law bring a legal action against a consumer term ‘‘legal action’’ does not include imposing or implying such a standard to collect a time-barred debt may, ‘‘non-original complaints,’’ such as when evaluating claims under FDCPA depending upon the reason for the debt amended complaints, supplemental section 807 generally and claims related collector’s error, have a defense to civil complaints, complaints re-filed after a to suits and threats of suit on time- liability under FDCPA section 813 if the prior dismissal without prejudice, post- barred debt specifically.118 debt collector shows by a judgment court filings, or post-judgment Moreover, the Bureau notes that a preponderance of evidence that the communications (such as executions or knows-or-should-know standard could, violation was not intentional and garnishments). in some circumstances, shift the risk resulted from a bona fide error Final § 1006.26(b) uses the term ‘‘legal that a claim is deceptive from debt notwithstanding the maintenance of action.’’ In Midland Funding, LLC v. collectors to consumers. As explained procedures reasonably adapted to avoid Johnson, the Supreme Court held that above, suits and threats of suit on time- any such error.120 For these reasons, the filing a proof of claim on a time-barred barred debt can cause consumer harm. Bureau concludes that finalizing a strict debt in a bankruptcy proceeding does In a case in which it is difficult or costly liability standard under § 1006.26(b) not violate the FDCPA sections 807 or to determine whether a debt is time does not pose an undue risk of liability 808.123 Consistent with Midland, the barred, a knows-or-should-know for debt collectors, even in cases in final rule clarifies that § 1006.26(b) does standard could allow debt collectors to which a debt collector is unable to not prohibit the filing of proofs of claim avoid liability for causing such harm. In determine with certainty whether a debt in a bankruptcy proceeding. The Bureau other consumer protection contexts, is time barred. does not see a basis to categorically courts and the FTC have recognized that exclude other types of legal actions, an advertiser who makes an Requests for Clarification such as garnishment and probate unsubstantiated claim may be liable for Several commenters asked the Bureau actions, from the prohibitions in deception even if the cost of to clarify the scope of proposed § 1006.26(b). No other section of the substantiating the claim is high or § 1006.26(b)’s prohibitions.121 Two FDCPA pertaining to legal actions prohibitively expensive.119 The contains a similar exclusion, and the advertiser may ‘‘make particular claims that go commenters did not explain why they 117 For the same reasons, the Bureau concludes beyond the substantiation it possesses and then ask believe an exclusion is merited here. that the alternative standards proposed by industry the Commission to excuse the inadequacy of its commenters—including, for example, an actual support by asserting that [the] advertiser did the At least one industry commenter knowledge standard, a reasonable-investigation best it could because the proper substantiation for asked the Bureau to clarify the types of standard, or a clearly-established-law standard—are the actual claim would be too expensive’’); In re actions and statements that qualify as a generally inconsistent with FDCPA section 807. Kroger Co., 98 F.T.C. 639, 737 (1981) (‘‘Where the threat of legal action or that could be 118 See, e.g., Pantoja, v. Portfolio Recovery demands of the purse require such compromises, Assocs., LLC, 852 F.3d 679, 683 (7th Cir. 2017); the advertiser must generally limit the claims it interpreted by a consumer as a threat of Buchanan v. Northland Grp., Inc., 776 F.3d 393, makes for its data or make appropriate disclosures legal action. The Bureau declines to do 399 (6th Cir. 2015); Phillips v. Asset Acceptance, to insure proper consumer understanding of the so at this time. Whether a particular LLC, 736 F.3d 1076, 1083–84 (7th Cir. 2013); Clark survey’s results.’’). action or statement constitutes a threat v. Capital Credit & Collection Servs., 460 F.3d 1162, 120 See Jerman v. Carlisle, McNellie, Rini, Kramer 1176 (9th Cir. 2006); Gearing v. Check Brokerage & Ulrich LPA, 559 U.S. 573 (2010) (holding that of legal action depends on the facts and Corp., 233 F.3d 469, 472 (7th Cir. 2000). bona fide error defense is not available when circumstances of the particular case. 119 See, e.g., POM Wonderful, LLC v. FTC, 777 FDCPA violation arises from a debt collector’s Nevertheless, the Bureau notes that F.3d 478, 497 (D.C. Cir. 2015) (‘‘We acknowledge mistaken interpretation of FDCPA’s legal § 1006.26(b) prohibits not only explicit that RCTs [i.e., randomized clinical trials] may be requirements but noting that bona fide error defense costly.... Yet if the cost of an RCT proves is available when FDCPA violation arises from prohibitive, petitioners can choose to specify a certain other types of errors). not propose these interventions and it is not lower level of substantiation for their claims. As the 121 Commenters also asked the Bureau to adopt a finalizing them. Commission observed, the need for RCTs is driven number of interventions that the Bureau did not 122 A consumer advocate commenter argued that by the claims petitioners have chosen to make.’’) propose, such as a prohibition on revival and a the rule should expressly prohibit filing a (internal brackets and quotation marks omitted); In prohibition on perpetual tolling, which commenters bankruptcy proof of claim to recover a time-barred re POM Wonderful LLC, 2013 WL 268926, at *50 asserted prevents a statute of limitations from ever debt. (F.T.C. Jan. 16, 2013) (rejecting argument that an expiring in certain circumstances. The Bureau did 123 137 S. Ct. 1407 (2017).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5782 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

threats of legal action but also implicit proposed to require these disclosures in confusing, vague, and ineffective— ones. the debt collector’s initial particularly for the least sophisticated For the reasons discussed above, the communication with the consumer, on consumer.128 Some consumer advocate Bureau is finalizing § 1006.26(b), which any validation notice, and in certain commenters also expressed concern provides that a debt collector must not situations if the debt became time about the accuracy of the proposed bring or threaten to bring a legal action barred during collections. The February disclosures and the frequency with against a consumer to collect a time- 2020 proposal also included, among which the Bureau proposed to require barred debt. Section 1006.26(b) also other things, model forms and language them. These commenters urged the states that these prohibitions do not a debt collector could have used to Bureau to reconsider or significantly apply to proofs of claim filed in comply with the proposed disclosure revise the proposal. connection with a bankruptcy requirements (proposed Model Forms Given industry commenters’ concerns proceeding. The Bureau is finalizing B–4 through B–7), and it provided a safe about the burden on debt collectors of § 1006.26(b) as an interpretation of harbor to a debt collector who used the the Bureau’s specific proposal, and FDCPA section 807. FDCPA section 807 model forms or language (proposed consumer advocate commenters’ generally prohibits debt collectors from § 1006.26(c)(3)). In support of proposed concerns about whether the Bureau’s using ‘‘any false, deceptive, or § 1006.26(c), the Bureau cited, among specific proposal would effectively cure misleading representation or means in other things, the results of its consumer deception, the Bureau has connection with the collection of any quantitative testing survey.127 decided not to finalize proposed debt,’’ and FDCPA section 807(2)(A) Although some commenters § 1006.26(c). In deciding not to finalize specifically prohibits falsely expressed general support for the idea of proposed § 1006.26(c), the Bureau representing ‘‘the character, amount, or addressing the risk of deception determines only that the specific legal status of any debt.’’ The Bureau associated with the collection of time- disclosure requirements described in interprets FDCPA section 807 and barred debts by requiring time-barred the February 2020 proposal may not 807(2)(A) to prohibit debt collectors debt and revival disclosures, many sufficiently accommodate the concerns from suing or threatening to sue commenters opposed the Bureau’s raised by different stakeholders. consumers on time-barred debts because specific proposal. According to industry However, the Bureau concludes, as such suits and threats of suit explicitly commenters, the proposal would have discussed in the February 2020 or implicitly misrepresent, and cause imposed a significant burden on debt proposal, that, in many circumstances, consumers to believe, that the debts are collectors by requiring them to conduct disclosures can effectively cure the legally enforceable. In addition, threats time-barred debt and revival analyses potential deception associated with the to sue consumers on time-barred debts for each debt in collection. These collection of time-barred debt. are similar to threats to take actions that commenters also reported that they Finally, the Bureau emphasizes that cannot legally be taken, which FDCPA would face a significant risk of liability the FDCPA, the November 2020 Final section 807(5) specifically prohibits, given uncertainty about the statute of Rule, and this final rule nevertheless because both involve the threat of action limitations and revival law in at least apply to debt collectors’ activities to which the consumer has a complete some States. Industry commenters involving the collection of time-barred legal defense.124 The Bureau’s stated that most debt collectors lack the debts, including debt collectors’ interpretation of FDCPA section 807 is legal training to determine whether a communications when collecting such generally consistent with well- debt is time barred or the circumstances debts. Accordingly, a debt collector may established case law holding that suits in which it can be revived. To comply not use any false, deceptive, or and threats of suits on time-barred debt with the disclosure requirements, these misleading representation or means in connection with the collection of a time- violate FDCPA section 807.125 commenters asserted that debt collectors would need to engage an attorney or barred debt. Nor may a debt collector Proposed Provision Not Finalized otherwise incur substantial costs. use unfair or unconscionable means to In the February 2020 proposal, the Industry commenters particularly collect or attempt to collect a time- Bureau proposed to require a debt objected to imposing these costs on debt barred debt. Depending on the collector collecting a debt that the debt collectors who never sue to collect circumstances associated with the collector knows or should know is a debts, or never sue to collect revived collection of a specific time-barred debt, time-barred debt to provide time-barred debts. Industry commenters also raised a debt collector may decide that, to debt disclosures and, if applicable, concerns about being required to avoid violating the FDCPA and the final revival disclosures (proposed respond to legal questions from § 1006.26(c)(1) and (2)).126 The Bureau 128 Courts have applied an objective standard of consumers as a result of providing the an ‘‘unsophisticated’’ or ‘‘least sophisticated’’ disclosures. consumer to claims brought under FDCPA section 124 A consumer advocate commenter requested Among consumer, consumer 807. Jensen v. Pressler & Pressler, 791 F.3d 413, 419 that the Bureau clarify that a debt collector who advocate, academic, and State Attorneys (3d Cir. 2015) (‘‘The standard is an objective one, brings or threatens to bring a legal action against a General commenters who opposed the meaning that the specific plaintiff need not prove consumer to collect a time-barred debt also violates that she was actually confused or misled, only that the Dodd-Frank Act. The Bureau is finalizing Bureau’s proposal, many doubted that the objective least sophisticated debtor would be.’’); § 1006.26(b) as an interpretation of FDCPA section disclosures can effectively convey Hartman v. Great Seneca Fin. Corp., 569 F.3d 606, 807 only. information about topics as complicated 613 (6th Cir. 2009) (applying least sophisticated 125 See, e.g., Pantoja, 852 F.3d at 683; McMahon, and unfamiliar to consumers as time- consumer standard to section 807 claim); Bentley v. 744 F.3d at 1020; Phillips, 736 F.3d at 1079; Kimber, Great Lakes Collection Bureau, 6 F.3d 60, 62 (2d 668 F. Supp. at 1488–89. barred debt and revival. These Cir. 1993) (same); Swanson v. S. Or. Credit Serv., 126 Specifically, proposed § 1006.26(c)(1) would commenters also raised concerns about Inc., 869 F.2d 1222, 1227 (9th Cir. 1988) (per have required a debt collector collecting a debt that the Bureau’s proposed model curiam) (same). This standard ‘‘protects the the debt collector knows or should know is a time- disclosures, characterizing them as consumer who is uninformed, naive, or trusting, yet barred debt to disclose (i) that the law limits how it admits an objective element of reasonableness.’’ long a consumer can be sued for a debt and that, Gammon v. GC Servs. Ltd. P’ship, 27 F.3d 1254, because of the age of the debt, the debt collector revived, then the fact that revival can occur and the 1257 (7th Cir. 1994). As discussed in part IV, the will not sue the consumer to collect it; and (ii) if, circumstances in which it can occur. 85 FR 12672, Bureau interprets FDCPA sections 807 to under applicable law, the debt collector’s right to 12696 (Mar. 3, 2020). incorporate an objective, ‘‘unsophisticated’’ or bring a legal action against the consumer can be 127 See id. at 12678–79. ‘‘least sophisticated’’ consumer standard.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00018 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5783

rule, the debt collector needs to disclose industry commenters, and government which the consumer can then use to information to consumers about the debt agencies. Many commenters supported make payment arrangements. collector’s ability to sue and the the proposed prohibition on passive A number of commenters suggested possibility of revival and, in that case, collections. A consumer group changing or clarifying the proposed the debt collector may do so. emphasized the consumer harms requirement to ‘‘communicate’’ before identified in the proposal and agreed furnishing information to a consumer Section 1006.30 Other Prohibited reporting agency. Some urged the Practices that, because with passive collections a consumer does not know a debt is in Bureau to adopt a stricter requirement, 30(a) Required Actions Prior to collection, the practice can cause a such as by requiring written notice to Furnishing Information consumer’s credit score to decrease, the consumer before reporting, The Bureau proposed in § 1006.30(a) increase the cost of future credit for the mandating specific disclosure language, to prohibit so-called passive collections, consumer, make it more difficult for a imposing across-the-board waiting i.e., the practice of a debt collector consumer to obtain affordable housing, periods before reporting, or prohibiting furnishing to a consumer reporting and jeopardize some job opportunities, indirect communications. Others agency, as defined in section 603(f) of all without the consumer’s knowledge. expressed concern that the proposal the Fair Credit Reporting Act (FCRA),129 Three government commenters also would impose more stringent information regarding a debt before supported the proposed prohibition; one communication requirements than the communicating with the consumer of them reported receiving consumer FDCPA otherwise requires and asked about the debt. The Bureau proposed complaints regarding passive the Bureau to relax the proposal, such § 1006.30(a) pursuant to its authority collections. An industry commenter as by clarifying that proof of receipt of under FDCPA section 814(d) to supporting the proposal noted that the a communication is not required, by prescribe rules with respect to the commenter provides consumers with a allowing debt collectors to satisfy the collection of debts by debt collectors; 90-day grace period before furnishing proposed requirement by leaving pursuant to its authority to interpret information to consumer reporting limited-content messages (as defined in FDCPA section 806, which prohibits a agencies. § 1006.2(j) of the November 2020 Final debt collector from engaging in any A number of comments, primarily Rule), or by permitting debt collectors to conduct the natural consequence of from industry or industry trade groups, presume receipt of a communication which is to harass, oppress, or abuse opposed the prohibition or suggested after a waiting period expires. After considering all of the comments, any person in connection with the changes or clarifications. Two industry the Bureau is finalizing proposed collection of a debt; and pursuant to its trade groups and a law firm commenter § 1006.30(a) and its related commentary authority to interpret FDCPA section argued that proposed § 1006.30(a) with substantial revisions, as follows. 808, which prohibits a debt collector should not be finalized because it from using unfair or unconscionable Subject to § 1006.30(a)(2) (discussed conflicts with the FCRA, including below), final § 1006.30(a)(1) requires a means to collect or attempt to collect section 623(a)(7), which requires certain any debt. Courts have interpreted debt collector to take certain actions financial institutions to provide written before furnishing information about a FDCPA sections 806 and 808 to prohibit notice to customers if they furnish certain coercive collection methods that debt to a consumer reporting agency, as negative information to a consumer defined in section 603(f) of the FCRA. may cause consumers to pay debts not reporting agency, and section 623(a)(5), actually owed.130 Specifically, the debt collector must which requires furnishers to provide either: (1) Speak to the consumer about For the reasons discussed below, the certain information about a reported Bureau is: (1) Finalizing § 1006.30(a) as the debt in person or by telephone, or delinquency to the consumer reporting (2) place a letter in the mail or send an § 1006.30(a)(1), with changes to specify agency no later than 90 days after the required actions that a debt collector electronic message to the consumer furnishing information.131 Other about the debt and wait a reasonable generally must take before furnishing industry commenters argued that the information to a consumer reporting period of time to receive a notice of proposal would encourage consumers to undeliverability. During the reasonable agency; and (2) finalizing in ignore communications, provide § 1006.30(a)(2) a special rule for period, the debt collector must permit inaccurate forwarding information to receipt of, and monitor for, notifications information furnished to certain the creditor, or falsely mark mail as specialty consumer reporting agencies. of undeliverability from undeliverable to avoid having collection communications providers. If the debt 30(a)(1) In General items furnished to consumer reporting collector receives such a notification The Bureau received comments on agencies. In addition, several industry during the reasonable period, the debt proposed § 1006.30(a) from consumer commenters stated that locating collector must not furnish information advocates and individuals, nonprofits, consumers for certain debts, such as about the debt to a consumer reporting medical debt, telecommunications debt, agency until the debt collector 129 15 U.S.C. 1681a(f). or rental debt, is costly and may not be otherwise satisfies § 1006.30(a)(1). The 130 See, e.g., Fox v. Citicorp Credit Servs., Inc., 15 justified for small amounts. If debt Bureau is finalizing commentary to F.3d 1507, 1517 (9th Cir. 1994) (reversing grant of collectors cannot passively collect these clarify these requirements as discussed summary judgment to debt collector in part because debts, the commenters argued, then the ‘‘a jury could rationally find’’ that filing writ of below. garnishment was unfair or unconscionable under debts are effectively uncollectible. One The Bureau finalizes the requirements section 808 when debt was not delinquent); Ferrell industry trade group similarly argued under § 1006.30(a)(1) to address v. Midland Funding, LLC, No. 2:15–cv–00126–JHE, that passive collections benefits consumer harms that may arise if a debt 2015 WL 2450615, at *3–4 (N.D. Ala. May 22, 2015) consumers who otherwise cannot be collector furnishes information about a (denying debt collector’s motion to dismiss section 806 claim where debt collector allegedly initiated located, rather than harming them, debt to a consumer reporting agency collection lawsuit even though it knew plaintiff did because the collection item on their without first informing the consumer not owe debt); Pittman v. J.J. Mac Intyre Co. of Nev., credit report will provide them contact about the debt. As discussed in the Inc., 969 F. Supp. 609, 612–13 (D. Nev. 1997) information for the debt collector, (denying debt collector’s motion to dismiss claims proposal, consumers who have not been under sections 807 and 808 where debt collector informed about the debt are likely to be allegedly attempted to collect fully satisfied debt). 131 15 U.S.C. 1681s–2(a)(5) and (7). unaware that they have a debt in

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5784 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

collection unless they obtain and review information about a debt to a consumer information about a debt to a consumer their consumer report. In turn, many reporting agency. reporting agency, a debt collector may consumers may not obtain their To respond to such comments, and ensure compliance with the final rule consumer reports until they apply for because the proposal was designed to based on the debt collector’s own credit, housing, employment, or another increase the likelihood that consumers actions, such as by placing a letter about product or service provided by an entity would learn that a debt attributed to the debt in the mail to the consumer and that reviews consumer reports during them is in collection but was not waiting a reasonable period of time to the application process. At that point, intended to be a broader limitation on receive a notice of undeliverability. consumers may feel pressure to pay furnishing valid information about debts Therefore, the final rule also resolves debts that they otherwise would to consumer reporting agencies, the concerns about consumers avoiding a dispute, including debts they do not Bureau finalizes specific requirements a debt collector’s communications to owe, or may face the denial of an debt collector must take before prevent the debt collector from application, a higher interest rate, or furnishing. The actions specified in the furnishing information to a consumer other negative consequences. final rule are ones that increase the reporting agency. In addition, as discussed in the likelihood that a consumer will learn The final rule specifies in proposal, debt collectors may attempt to about a debt before a debt collector § 1006.30(a)(1)(i) and (ii) the methods by collect debts passively if the expected begins furnishing information about that which a debt collector may meet its return from that technique exceeds the debt to a consumer reporting agency. obligation to take certain actions before cost of attempting to collect the debt by For this reason, after a debt collector has furnishing information about a debt to a 132 communicating with consumers. The complied with § 1006.30(a)(1) and consumer reporting agency. All of the Bureau understands that imposing a furnished information to a consumer methods require that information ‘‘about requirement intended to inform the reporting agency, the debt collector may the debt’’ be conveyed to the consumer. consumer about a debt before furnishing furnish additional information with Although the final rule does not specify information about a debt to consumer respect to that debt without having to the particular information required to reporting agencies will increase costs for repeat the actions specified in meet the ‘‘about the debt’’ requirement, debt collectors who do not currently § 1006.30(a)(1). Accordingly, the Bureau the final rule adds comment 30(a)(1)–1 attempt to do so. However, passive does not incorporate a receipt to clarify that the validation information collection practices can harm requirement in final § 1006.30(a)(1) and, required by § 1006.34(c), including such consumers for the reasons discussed instead of using the term information if provided in a validation above. The Bureau has determined that ‘‘communicate,’’ sets forth the specific notice, is information ‘‘about the debt.’’ the final rule best balances debt actions that a debt collector must take Under § 1006.30(a)(1), information collectors’ cost concerns with before furnishing. about a debt must be transmitted ‘‘to the protections for consumers against the The Bureau has also determined that consumer’’ as defined in § 1006.2(e). A harms imposed by passive collection final § 1006.30(a)(1) does not conflict debt collector who sends information practices. Final § 1006.30(a)(1) gives a with FCRA section 623(a)(7) or (5) about the debt that reaches a debt collector flexibility to contact because those provisions have different ‘‘consumer’’ as defined in § 1006.6(a), consumers in a variety of ways, requirements and goals than which includes additional persons,136 including in person, by telephone, by § 1006.30(a)(1). FCRA section 623(a)(7) may not have communicated with the mail, or by electronic message.133 This applies only to ‘‘financial institutions’’ consumer as defined in § 1006.2(e). gives debt collectors flexibility to as defined in FCRA section 603(t), The Bureau notes that, in taking any contact the consumer in a manner that which will cover few, if any, FDCPA of the actions specified in works best for their operations, and debt debt collectors. Final § 1006.30(a)(1) § 1006.30(a)(1), a debt collector must collectors need not confirm receipt of does not prevent debt collectors from comply with the FDCPA and the mail or electronic messages. complying with the FCRA, and the Although proposed § 1006.30(a) used November 2020 Final Rule, including FCRA does not prevent debt collectors the prohibition on communicating, in the term ‘‘communicate,’’ the proposal from complying with final did not clearly specify a debt collector’s connection with the collection of any § 1006.30(a)(1).134 The FCRA also does 137 obligations if the debt collector learned debt, with a third party. not state that it is the exclusive Federal after furnishing information to a Proposed comment 30(a)–1 provided law governing credit reporting and, consumer reporting agency that no clarifications regarding the term indeed, the FDCPA also references a communication actually occurred ‘‘communicate’’ in proposed debt collector’s interactions with (because, e.g., the communication was § 1006.30(a)(1). Because final consumer reporting agencies.135 sent by mail to the consumer’s current § 1006.30(a)(1) does not use the term Because final § 1006.30(a)(1) clearly address but the debt collector later ‘‘communicate’’ and instead states the describes the specific actions that a debt received a notification that the letter specific actions the debt collector must collector must take before furnishing was not delivered). Some commenters take before furnishing information about raised concerns that the proposal’s use a debt to a consumer reporting agency, 134 For example, FCRA section 623(a)(7) requires proposed comment 30(a)–1 is no longer of the term ‘‘communicate’’ could be certain financial institutions that furnish negative construed to require debt collectors to information to a consumer reporting agency, as confirm a consumer’s receipt of the defined in FCRA section 603(p), to provide a 136 For purposes of § 1006.6(a), the term written notice to consumers prior to, or no later ‘‘consumer’’ also includes the consumer’s spouse, information before furnishing than 30 days after, furnishing the negative parent (if the consumer is a minor), legal guardian, information. A financial institution that is required executor or administrator of the consumer’s estate, 132 84 FR 23274, 23330 (May 21, 2019). to provide a written notice under FCRA section if the consumer is deceased, and a confirmed 133 Because medical offices, telecommunications 623(a)(7) and that is also acting as an FDCPA debt successor in interest. See 85 FR 76734, 76889 (Nov. companies, and rental offices typically have contact collector could comply with both requirements by, 30, 2020). information for their customers, and because a for example, placing a letter in the mail to the 137 A debt collector sending an email or text variety of options to verify and forward mail to a consumer that contains sufficient information to message who uses the procedures provided for in consumer’s new address exist, a debt collector of satisfy both requirements before furnishing § 1006.6(d)(4) or (5) as finalized in the November such debts should be able to satisfy § 1006.30(a)’s information to a consumer reporting agency. 2020 Final Rule does not violate the prohibition on requirements without incurring significant costs. 135 See, e.g., 15 U.S.C. 1692c(b), 1692d(3). third-party disclosure under § 1006.6(d)(1).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00020 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5785

necessary and the Bureau is not period (i.e., 14 consecutive days) for furnished to certain nationwide finalizing it. electronic messages as for mailed specialty consumer reporting agencies The final rule specifies in letters.139 The Bureau may consider described in FCRA section 603(x)(3), § 1006.30(a)(1)(ii) that a debt collector revising the safe harbor for electronic i.e., consumer reporting agencies that who places a letter in the mail or sends messages in the future based on actual maintain and compile files on an electronic message to the consumer stakeholder experience with this consumers on a nationwide basis about the debt to satisfy § 1006.30(a)(1) provision. relating to check writing history (‘‘check must wait a reasonable period of time to The Bureau recognizes that the final verification consumer reporting receive a notice of undeliverability rule may result in instances in which agencies’’). before furnishing information about a debt collectors furnish information The commenters explained that debt to a consumer reporting agency. about a debt to a consumer reporting merchants use check verification New comment 30(a)(1)–2 clarifies that agency even though the consumer has consumer reporting agencies to the reasonable period of time begins on not been made aware of the collection determine whether they should accept a the date that the debt collector places item, either because the mail or particular check. When a merchant the letter in the mail or sends the electronic message is returned as seeks check verification information, the electronic message. Comment 30(a)(1)–2 undeliverable after the reasonable check verification consumer reporting also provides a safe harbor for waiting period has passed or is not received but agency issues a check verification report a reasonable period of time by clarifying is also not returned. These consumers with a code that will indicate if the that a period of 14 consecutive days will not have the same opportunity to check appears acceptable, the check is after the date that the debt collector receive a message about their debt as potentially fraudulent, or the checking places a letter in the mail or sends an those consumers for whom the mail or account is likely overdrawn. These electronic message is a reasonable electronic message is delivered. inquiries are usually completed in real period of time. Nevertheless, the Bureau determines time, while a transaction is occurring in Comment 30(a)(1)–3 clarifies that a that establishing a requirement that debt a checkout lane or in remote retailing. debt collector who places a letter in the collectors wait a reasonable period of The commenters expressed concern that mail or sends an electronic message to time after placing a letter in the mail or proposed § 1006.30(a) would degrade the consumer about the debt to satisfy sending an electronic message provides the timely content of check verification § 1006.30(a)(1) and does not receive a sufficient consumer protection without reports issued by check verification notice of undeliverability during the unduly prohibiting a debt collector from consumer reporting agencies because reasonable period of time, and who furnishing information about a valid debt collectors would be required to thereafter furnishes information about debt to a consumer reporting agency. delay or refrain from reporting the debt to a consumer reporting agency, The Bureau declines commenters’ altogether, which would undermine the does not violate § 1006.30(a)(1) even if other suggestions, such as those to accuracy of check verification reports the debt collector subsequently receives require communications in writing, and reduce the willingness of merchants a notice of undeliverability. Comment dictate specific language, apply longer to accept checks. 30(a)(1)–3 also provides three examples waiting periods (e.g., 180 days), or The commenters argued that the illustrating this requirement. establish other safe harbors because the current system benefits consumers by The Bureau determines that these suggestions are unnecessary to achieve alerting them to potential fraud or that provisions clarify the proposal with the purpose of the passive collections their account may be overdrawn. respect to pre-furnishing outreach by ban. For example, requiring written Requiring contact before furnishing mail or electronic message and provide communications and specific disclosure information would harm these protection for consumers.138 The Bureau language is unnecessary to put the consumers because the fraud or understands that the U.S. Postal Service consumer on notice that a debt is in overdrawn status of the account may typically notifies senders of most collections. Additional safe harbors are never be detected and, thus, consumers undeliverable-as-addressed mail within unnecessary and unwarranted at this may not be alerted to potential fraud or 14 days. The amount of time it takes a time because the final rule clarifies the may unknowingly continue writing communications provider to return a specific actions that must occur before checks on an overdrawn account. notice of undeliverability with respect furnishing information to a consumer Further, the commenters stated that to electronic messages is less clear. reporting agency. these requirements could harm While an undeliverability notice is consumers by decreasing the number of 30(a)(2) Special Rule—Information typically received soon after sending an merchants that accept checks or Furnished to Certain Specialty electronic message, the Bureau increasing prices at merchants who Consumer Reporting Agencies understands that the time for receiving continue to accept checks. a notice of undeliverability with respect The Bureau did not propose a special The commenters also expressly to such electronic messages may vary by rule regarding furnishing to specialty recognized the harm that can occur if a provider, and the Bureau does not have consumer reporting agencies. An debt unexpectedly appears on a credit- sufficient information to determine a industry commenter and a consumer related consumer reporting agency uniform time period for electronic reporting agency argued in a joint report if the consumer is applying for messages. Nevertheless, the Bureau has comment that the final rule should credit, a job, or rental housing, and no reason to believe that notices of exempt from § 1006.30(a) information cannot move forward with the undeliverability are typically received transaction. However, they noted that more than 14 days after an electronic 139 The Bureau notes that the 14-consecutive-day check verification reporting does not message is sent. Therefore, the Bureau is period is a safe harbor. To comply with the rule, present comparable risk of harm a debt collector only needs to wait a ‘‘reasonable finalizing the same safe harbor time period of time’’ to receive a notice of because (1) such reports are used to undeliverability. Therefore, a debt collector who determine whether a particular check 138 The Bureau does not impose a similar period shows that the debt collector waited a reasonable should be accepted, not to evaluate a when a debt collector speaks to a consumer about time period to receive notices of undeliverability for consumer’s creditworthiness for credit, the debt in person or by telephone because these electronic messages may be able to satisfy the scenarios do not have the potential for an requirements of the final rule without waiting 14 a job, or rental housing; and (2) any equivalent undeliverable notice outcome. days. harm caused by refusal to accept a

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00021 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5786 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

check is outweighed by benefits, consistent with several State laws document containing the information is including alerting the consumer to regulating passive collections.140 For commonly referred to as a ‘‘validation potential fraud and preventing them these reasons, the Bureau concludes that notice.’’ from incurring additional overdraft or furnishing of information to a check The requirement to provide validation non-sufficient funds fees. verification consumer reporting agency information is an important component After carefully considering the before engaging in outreach to the of the FDCPA and was intended to comment, the Bureau has determined consumer does not raise concerns under improve the debt collection process by that § 1006.30(a) should not apply to a FDCPA sections 806 and 808 similar to helping consumers to recognize debts debt collector’s furnishing of furnishing to other types of consumer that they owe and raise concerns about information about a debt to a check reporting agencies. debts that are unfamiliar. Congress in verification consumer reporting agency. Therefore, the final rule adds 1977 considered the requirement a The Bureau finds that a debt collector’s § 1006.30(a)(2) to state that ‘‘significant feature’’ of the FDCPA, furnishing of information about a debt § 1006.30(a)(1) does not apply to a debt explaining that it was designed to to a check verification consumer collector’s furnishing of information ‘‘eliminate the recurring problem of debt reporting agency before engaging in about a debt to a nationwide specialty collectors dunning the wrong person or outreach to the consumer about the debt consumer reporting agency that attempting to collect debts which the is unlikely to undermine the ability of compiles and maintains information on consumer has already paid.’’ 143 consumers to decide whether to pay a consumer’s check writing history, as Congress provided the Bureau with debts in the same manner as the described in FCRA section 603(x)(3).141 rulemaking authority in 2010 apparently furnishing of information about debts to For the reasons discussed above, the to address continuing inadequacies other consumer reporting agencies. As a Bureau is adopting final § 1006.30(a) around validation information and result, the Bureau has not found that pursuant to its authority under FDCPA verification, among other things.144 In furnishing information about a debt to a section 814(d) to prescribe rules with addition, debt collectors have sought check verification consumer reporting respect to the collection of debts by debt clarification about how to provide agency before engaging in outreach to collectors. The Bureau is also adopting information consistent with the FDCPA, the consumer about the debt constitutes final § 1006.30(a) pursuant to its noting, for instance, that a significant conduct that may have the natural authority to interpret FDCPA section number of lawsuits are filed each year consequence of harassment, oppression, 806, which prohibits a debt collector alleging deficiencies in their validation or abuse in violation of FDCPA section from engaging in any conduct the notices. 806, or that is an unfair or natural consequence of which is to For these reasons, the Bureau unconscionable means to collect or harass, oppress, or abuse any person in proposed § 1006.34 to require debt attempt to collect a debt under FDCPA connection with the collection of a debt, collectors to provide certain validation and FDCPA section 808, which section 808. information to consumers and to specify Immediate and frequent reporting prohibits a debt collector from using when and how the information must be appears to be a critical aspect of check unfair or unconscionable means to provided. As discussed in more detail verification consumer reporting, and it collect or attempt to collect any debt. below, the Bureau is finalizing § 1006.34 appears that imposing a requirement Section 1006.34 Notice for Validation with modifications in response to that debt collectors inform consumers of Debts feedback and for clarity and consistency about debts before furnishing with other provisions in this final rule information to those check verification FDCPA section 809(a) generally and the November 2020 Final Rule. consumer reporting agencies would requires a debt collector to provide Final § 1006.34(a) sets forth the require significant operational changes certain information to a consumer either and could significantly reduce the at the time that, or shortly after, the debt general requirement to provide effectiveness of those reports. This is collector first communicates with the validation information and describes unlike credit-related reporting, which consumer in connection with the how such information may be provided typically involves less immediate collection of a debt.142 The required on a validation notice. Section furnishing. The Bureau also finds that information—i.e., the validation 1006.34(b) sets forth definitions for the consumer harm that § 1006.30(a)(1) information—includes details about the purposes of § 1006.34. Section is designed to address is not present for debt and about consumer protections, 1006.34(c) sets forth the validation check verification consumer reporting such as the consumer’s rights to dispute information, and § 1006.34(d) sets forth because these reports are unlikely to be and receive verification of the debt and a general requirement that such used in making credit, employment, or to request information about the original information be clear and conspicuous. rental housing decisions. While creditor. When this validation Section 1006.34(d) also provides safe consumers could also be harmed if they information is provided in writing, the harbors for use of Model Form B–1 in are unaware of checking account report appendix B to Regulation F, specified items, the harm of reducing the 140 Colo. Rev. Stat. sec. 12–14–108 limits when variations of the model notice, or a effectiveness of the check verification ‘‘debt collectors’’ may furnish information to a 143 system, including the potential harm to consumer reporting agency, but exempts checks, S. Rep. No. 382, supra note 57; see also negotiable instruments, or credit card drafts. Jacobson v. Healthcare Fin. Servs., Inc., 516 F.3d consumers if checks are accepted by California and Utah also limit when information 85, 95 (2d Cir. 2008) (validation notices ‘‘make the fewer merchants, outweighs the benefits can be furnished to a consumer reporting agency, rights and obligations of a potentially hapless of requiring communication before but those laws only apply to ‘‘creditors.’’ Cal. Civ. debtor as pellucid as possible’’); Wilson v. furnishing. In addition, the immediacy Code sec. 1785.26; Utah Code sec. 70C–7–107. Quadramed Corp., 225 F.3d 350, 354 (3d Cir. 2000); 141 If and to the extent a check verification Miller v. Payco-Gen. Am. Credits, Inc., 943 F.2d of the current check verification system consumer reporting agency compiles and maintains 482, 484 (4th Cir. 1991); Swanson v. S. Oregon provides countervailing benefits to other types of information specified in FCRA Credit Serv., Inc., 869 F.2d 1222, 1225 (9th Cir. consumers who are alerted to potential section 603(x) (e.g., residential or tenant history), 1988). fraud or to discontinue writing checks the special rule in § 1006.30(a)(2) does not apply 144 See S. Rep. No. 111–176, at 19 (‘‘In addition with respect to a debt collector’s furnishing of that to concerns about debt collection tactics, the on an overdrawn account. Further, a information to the check verification consumer Committee is concerned that consumers have little special rule for check verification reporting agency. ability to dispute the validity of a debt that is being consumer reporting agencies is 142 See 15 U.S.C. 1692g(a). collected in error.’’).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00022 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5787

substantially similar form, and describes § 1006.42 148 in the initial § 1006.42, a debt collector may send the optional disclosures that debt collectors communication with the consumer in validation notice electronically under may, but are not required to, provide connection with the collection of the § 1006.34(a)(1)(i)(A) (i.e., within the with the validation information.145 debt (proposed § 1006.34(a)(1)(i)(A)) or initial communication) if the debt Section 1006.34(e) affirmatively permits within five days of that initial collector complies with § 1006.42(a)(1), debt collectors to provide validation communication (proposed which requires that the debt collector notices translated into other languages § 1006.34(a)(1)(i)(B)); or (2) by providing send the notice in a manner that is and requires debt collectors who offer to the validation information orally in the reasonably expected to provide actual provide consumers translated notices to initial communication (proposed notice, and in a form that the consumer provide them to consumers who request § 1006.34(a)(1)(ii)).149 As discussed may keep and access later. A debt them. below, the Bureau is adopting collector may send the validation notice As discussed in further detail in the § 1006.34(a)(1) with certain minor electronically under § 1006.34(a)(1)(i)(B) section-by-section analysis of revisions. (i.e., not within the initial § 1006.34(d), the Bureau proposed to Some commenters recommended that communication) if the debt collector require that validation notices must be the Bureau modify proposed complies with § 1006.42(a)(1) and also the same as, or substantially similar to, § 1006.34(a)(1) generally. Some complies with § 1006.42(b), which the proposed model validation notice. consumer advocate commenters stated requires that the debt collector send the The Bureau is not finalizing that that the Bureau should require debt notice in accordance with section 101(c) requirement. Instead, the final rule collectors to provide non-electronic, of the E–SIGN Act. The Bureau provides certain safe harbors for written validation notices to all concludes that, if debt collectors send compliance with the information and consumers. According to at least one validation notices electronically as form requirements in § 1006.34(c) and commenter, the Bureau should require a described above, there is a reasonable (d)(1) for debt collectors who use the written validation notice even if a debt likelihood that consumers will receive model validation notice, specified collector also provides the validation and be able to retain the notices. variations of the model notice, or a information electronically. Another The Bureau determines, therefore, substantially similar notice. consumer advocate commenter asked that it is unnecessary and unwarranted the Bureau to require debt collectors to 34(a) Validation Information Required to impose the burden on debt collectors provide a consumer a validation notice that would result from a requirement to 34(a)(1) In General in every communication. always provide the validation notice in FDCPA section 809(a) provides, in The Bureau declines to require debt written, non-electronic form; to provide relevant part, that, within five days after collectors to always provide written, a validation notice in written form even the initial communication with a non-electronic validation notices to if the debt collector also provides the consumer in connection with the consumers. For the reasons set forth in validation notice electronically; or to collection of any debt, a debt collector the November 2020 Final Rule, the provide a validation notice or validation shall send the consumer a written notice Bureau interprets FDCPA section 809(a) information with every consumer containing the validation information, as not requiring that the notice of debt communication.151 Such requirements unless that information is contained in be provided in writing when it is would go beyond the FDCPA’s the initial communication or the contained in the initial 150 provisions and would be unduly consumer has paid the debt. The Bureau communication. Moreover, if FDCPA burdensome on debt collectors, because, proposed § 1006.34(a)(1) to implement section 809(a) does require that the as stated above, the Bureau concludes and interpret this general notice of debt be provided in writing— that the Regulation F provisions that the requirement.146 Specifically, proposed i.e., if the validation information is not Bureau is adopting provide sufficient § 1006.34(a)(1) provided that, subject to contained within the initial consumer protection. Accordingly, the a limited exception for if a consumer communication—nothing in the FDCPA Bureau does not impose such has already paid a debt, a debt collector prohibits a debt collector from requirements. must provide a consumer the required providing the required written The Bureau received few comments validation information either: (1) By validation notice electronically in specifically about proposed sending the consumer a validation accordance with the consumer-consent § 1006.34(a)(1)(i). Commenters who notice (i.e., a written or electronic provisions of section 101(c) of the E– provided feedback supported the notice) 147 in the manner permitted by SIGN Act. In turn, if a statute (here, the Bureau’s proposal. Thus, the Bureau is FDCPA) requires a written disclosure, adopting § 1006.34(a)(1)(i) largely as 145 The Bureau proposed a model validation the E–SIGN Act’s consumer-consent proposed. notice as Model Form B–3. The Bureau is finalizing provisions specify requirements that form, with revisions, as Model Form B–1. This A large number of commenters Notice refers to proposed Model Form B–3 as the pursuant to which debt collectors may responded to the clarification in ‘‘proposed model validation notice’’ or the send the required written disclosures proposed § 1006.34(a)(1)(ii) that debt ‘‘proposed model notice’’ and final Model Form B– electronically. Accordingly, pursuant to collectors may provide validation 1 as the ‘‘model validation notice’’ or ‘‘model notice.’’ This Notice uses the phrase ‘‘specified information orally in the initial variations of the model notice’’ to refer to the provides the validation information described in communication. Commenters, including § 1006.34(c). specifically enumerated versions of the model most consumer advocates who notice that receive a safe harbor pursuant to 148 As finalized, § 1006.42 generally requires debt § 1006.34(d)(2)(i) and (ii) (i.e., notices that are the collectors to send written disclosures in a manner addressed the topic, urged the Bureau to same as, or substantially similar to, the model that is reasonably expected to provide actual notice, notice but for: Omitting some or all of the optional and in a form that the consumer may keep and 151 The Bureau additionally notes that, if a statute disclosures that appear on the model notice; access later. 85 FR 76734, 76893 (Nov. 30, 2020). (here, FDCPA section 809(a)) requires a written including optional disclosures that do not appear 149 Proposed § 1006.34(b)(2) provided that, with disclosure, E–SIGN Act section 104(c)(1) states that on the model notice; or including certain limited exceptions, initial communication means Federal agencies’ authority to interpret E–SIGN Act disclosures on a separate page as permitted by the first time that, in connection with the collection section 101 (including the consumer-consent § 1006.34(c)(2)(viii) and (5)). of a debt, a debt collector conveys information, provisions in E–SIGN Act section 101(c)) does not 146 See 84 FR 23274, 23333–34 (May 21, 2019). directly or indirectly, to the consumer regarding the include the ‘‘authority to impose or reimpose any 147 Proposed § 1006.34(b)(4) defined a validation debt. requirement that a record be in a tangible printed notice as any written or electronic notice that 150 85 FR 76734, 76854 (Nov. 30, 2020). or paper form.’’ See 15 U.S.C. 7004(c)(1).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00023 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5788 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

prohibit debt collectors from providing initial communication. Further, FDCPA For all of these reasons, and pursuant validation information orally. These section 807(11) indicates that the initial to its authority under FDCPA section commenters stated that debt collectors communication may be oral.154 814(d) to prescribe rules with respect to could not effectively convey orally to Accordingly, the Bureau concludes that the collection of debts by debt consumers the amount of validation the most reasonable interpretation of collectors, the Bureau is finalizing information that the Bureau FDCPA sections 809(a) and 807(11) is § 1006.34(a)(1) to implement and proposed.152 Commenters argued that, if that the FDCPA permits the required interpret the FDCPA section 809(a) validation information were conveyed validation information to be conveyed requirement that debt collectors provide orally, a consumer would be unable to orally if it is contained in the initial validation information to consumers. review the information at a later time, communication. 34(a)(2) Exception unless the consumer transcribed or Moreover, debt collectors providing recorded the communication with the validation information orally will not be FDCPA section 809(a) contains a debt collector. Commenters stated that able to use the model validation notice limited exception that provides that, if this dynamic would place an and therefore will not receive a safe required validation information is not unreasonable burden on consumers and harbor for compliance under contained in the initial communication, would be atypical compared to other § 1006.34(d)(2). The Bureau declines to a debt collector need not send the consumer law disclosure regimes, provide additional guidance about oral consumer a written validation notice which mandate that required notices be delivery of validation information. The within five days of that communication provided in written form. At least one Bureau is not aware of debt collectors if the consumer has paid the debt prior commenter stated that oral delivery providing validation information orally to the time that the notice is required to would be incompatible with the today, and, for the reasons discussed, be sent. The Bureau proposed in formatting requirements in proposed the Bureau believes they will be § 1006.34(a)(2) to implement this § 1006.34(d). unlikely to do so in the future. As a exception by providing that a debt On the other hand, some industry result, the Bureau concludes that such collector who otherwise would be required to send a validation notice commenters supported the Bureau’s additional guidance is not necessary or pursuant to § 1006.34(a)(1)(i)(B) is not clarification that debt collectors may warranted at this time. required to do so if the consumer has provide validation information orally. The Bureau proposed comment paid the debt prior to the time that These commenters asked the Bureau to 34(a)(1)–1 to clarify the provision of § 1006.34(a)(1)(i)(B) would require the provide additional guidance about oral validation notices if the consumer is validation notice to be sent. Proposed delivery of validation information, deceased. Proposed comment 34(a)(1)–1 § 1006.34(a)(2) generally restated the including, for example, specific content explained that, if the debt collector for an oral notice, such as a script. statute, except for minor changes for knows or should know that the organization and clarity.155 As proposed, the Bureau is finalizing consumer is deceased, and if the debt the provision in § 1006.34(a)(1)(ii) that At least two consumer advocate collector has not previously provided commenters recommended that debt debt collectors may provide the required the deceased consumer the validation validation information orally in the collectors be required to provide a information, a person who is authorized validation notice even if a consumer has initial communication. The Bureau to act on behalf of the deceased agrees that there may be significant already paid the debt. According to consumer’s estate operates as the these commenters, some consumers, challenges to conveying the required consumer for purposes of providing validation information orally.153 including seniors, will pay a debt that validation information under they do not owe or recognize because Nevertheless, FDCPA section 809(a) § 1006.34(a)(1). Under proposed does not prohibit oral delivery. FDCPA they ‘‘pay first and ask questions later.’’ comment 34(a)(1)–1, a debt collector These commenters suggested that section 809(a) states that the required attempting to collect a debt from a validation information may be validation information would help such deceased consumer’s estate generally consumers assess after the fact whether ‘‘contained in the initial would provide the validation communication’’ and that a written they paid a debt that they owed. An information to the named person who is industry trade group commenter stated notice is mandatory only if that required authorized to act on behalf of the information is not contained in the that, for open-end credit, a debt deceased consumer’s estate, if the debt collector should be permitted to satisfy collector had not already provided that 152 § 1006.34(a)(1) by providing a periodic Proposed § 1006.34(c) described the validation information to the consumer. information that proposed § 1006.34(a)(1) would statement pursuant to Regulation Z, 12 have required debt collectors to provide. As As discussed in the section-by-section CFR 1026.7, because periodic discussed in the section-by-section analysis of analysis of § 1006.2(e), the Bureau is statements disclose sufficient account § 1006.34(c), the final rule requires debt collectors interpreting the term consumer to mean information to consumers. to provide up to 18 items of validation information. any natural person, whether living or 153 Section 1006.34(c) requires a significant The Bureau declines to require debt amount of validation information that debt deceased, who is obligated or allegedly collectors to provide a validation notice collectors may not currently include in the obligated to pay any debt. And the if a consumer has already paid the debt. validation information they provide to consumers. Bureau is adopting commentary FDCPA section 809(a) explicitly It might be difficult for a debt collector to convey clarifying how this definition operates all of the required information orally, particularly provides that a debt collector is not in an initial communication, which is the only in the decedent debt context, including required to send the validation notice if context in which a debt collector could comply with respect to debt collectors’ the consumer has paid the debt, and the with its legal obligation by providing the validation obligations to provide the validation Bureau has determined that it is neither information orally. Further, real-time information and respond to disputes communications with consumers are unpredictable. necessary nor warranted to adopt a rule Accordingly, even if the required components of the and requests for original-creditor requiring otherwise. validation information are contained in the oral information. Accordingly, the Bureau is The Bureau also declines to adopt communication, the debt collector might not finalizing comment 34(a)(1)–1 as recommendations to include an convey them in a way that meets the requirements proposed. of the regulation; for example, as commenters noted exception to § 1006.34(a)(1) for open- the debt collector might not convey the required information clearly and conspicuously. 154 See 15 U.S.C. 1692e(11). 155 See 84 FR 23274, 23334–35 (May 21, 2019).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00024 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5789

end credit, because a periodic statement proposed § 1006.34(b)(1). This Different debt collectors may design provided in accordance with Regulation commenter stated that a clear-and- their communications in different ways, Z, 12 CFR 1026.7, is not an adequate conspicuous requirement is unnecessary and the Bureau does not believe it is substitute for the validation in the debt collection context because necessary or warranted to specify such information. While such a periodic consumers have an ongoing relationship details, as long as the disclosure statement discloses some information with debt collectors, and a consumer satisfies the clear and conspicuous about the debt, it typically does not therefore has the ability to ask a debt standard. In addition, the definition is disclose other information required collector to explain a particular consistent with, and provides the same under the final rule, such as the disclosure or communication if the level of specificity as, standards in some information about consumer protections consumer does not understand it. other consumer financial services laws required by FDCPA section 809(a)(3) Other commenters asked the Bureau and their implementing regulations, through (5) and the corresponding to clarify the proposed definition. For including but not limited to the provisions of final § 1006.34. instance, industry trade group and Bureau’s Remittance Transfers rule,159 Accordingly, pursuant to its authority consumer advocate commenters offered which do not specify font size or under FDCPA section 814(d) to various suggestions for specific font size disclosure placement requirements. prescribe rules with respect to the or disclosure placement requirements. Moreover, the Bureau concludes that the collection of debts by debt collectors, At least one industry commenter lack of more prescriptive guidance will and to implement and interpret FDCPA suggested that the Bureau explain how not impose material burden on debt section 809(a), the Bureau is finalizing proposed § 1006.34(b)(1) would interact collectors. As discussed in the section- § 1006.34(a)(2) as proposed. with State disclosure laws, which may by-section analysis of § 1006.34(d)(2), a have their own clear-and-conspicuous 34(b) Definitions debt collector who uses the model standards that dictate font size or validation notice, specified variations of To facilitate compliance with disclosure placement. An industry trade the model notice, or a substantially § 1006.34, proposed § 1006.34(b) group commenter asked the Bureau to similar form, receives a safe harbor for defined several terms that appear provide additional guidance about oral the information requirements in throughout the section. As discussed delivery of the validation information § 1006.34(c) and for the clear-and- below, the Bureau is finalizing those because, in the commenter’s view, the conspicuous requirement in definitions and related commentary proposal that oral communications be § 1006.34(d)(1). Because debt collectors with certain modifications in response ‘‘given at a volume and speed sufficient may use the model validation notice, to feedback. Consistent with the for a consumer to hear and comprehend specified variations of the model notice, proposal, unless noted otherwise below, them’’ was ambiguous. or a substantially similar form if the Bureau is finalizing the definitions The Bureau disagrees that ongoing providing validation notices, debt relationships between debt collectors to implement and interpret FDCPA collectors need not incur significant and consumers make a clear and section 809(a) and pursuant to its expenses ascertaining what meets the conspicuous definition unnecessary or authority under FDCPA section 814(d) clear-and-conspicuous standard. unwarranted in the debt collection to prescribe rules with respect to the Nevertheless, the final rule does clarify context. Consumer financial services collection of debts by debt collectors. that, in the case of written and laws and their implementing regulations electronic disclosures, although no 34(b)(1) Clear and Conspicuous commonly include standards for clear minimum font size is required, the and conspicuous disclosures provided The Bureau proposed § 1006.34(b)(1) location and type size must be both in the context of ongoing customer and to define the term clear and readily noticeable and legible to business relationships between conspicuous for purposes of Regulation consumers.160 F consistent with the standards used in consumers and consumer financial services providers.158 Additionally, The Bureau declines to revise other consumer financial services laws § 1006.34(b)(1) to clarify how the and their implementing regulations, validation information is provided at the outset of collection definition of clear and conspicuous including, for example, Regulation E, interrelates with State disclosure laws. subpart B (Remittance Transfers).156 communications. If a consumer chooses not to engage with the debt collector, no A debt collector can comply with both Proposed § 1006.34(b)(1) thus provided § 1006.34(b)(1) and State disclosure that disclosures are clear and ongoing communications will be established. requirements that specify font size or conspicuous if they are readily disclosure placement. With respect to understandable. The proposal provided The Bureau declines to further clarify the clear and conspicuous definition in font size, the Bureau concludes, in that, in the case of written and general, that debt collectors satisfying electronic disclosures, the location and § 1006.34(b)(1) by, for example, dictating font sizes or requirements State-law minimum-font-size type size also must be readily noticeable requirements will also satisfy the to consumers and that, in the case of regarding disclosure placement as requested by some commenters. standard in § 1006.34(b)(1) for a type oral disclosures, the disclosures must be size that is readily noticeable and given at a volume and speed sufficient 158 See, e.g., 12 CFR 1026.5(a)(1)(i) (disclosures legible to consumers. With respect to for a consumer to hear and comprehend for open-end credit) and 12 CFR 1026.17(a)(1) disclosure placement, as discussed in 157 them. For the reasons discussed (disclosures for closed-end credit). Moreover, a the section-by-section analysis of below, the Bureau is adopting consumer does not typically get to choose which debt collector collects the consumer’s debt, whereas § 1006.34(b)(1) largely as proposed but 159 a consumer does choose his or her financial See 12 CFR 1005.31(a)(1), comment 31(a)(1)– with minor modifications for clarity and services providers. Further, some customer 1. See also, e.g., the general disclosure requirements in response to feedback. relationships between consumers and debt for open-end and closed-end credit in, respectively, An industry commenter objected to collectors may be of shorter duration than customer 12 CFR 1026.5(a)(1) and 1026.17(a)(1) and their the clear and conspicuous definition in relationships between consumers and other types of commentary. consumer financial services providers. These 160 The section-by-section analysis of factors suggest that a standard for clear and § 1006.38(b)(2) discusses a new safe harbor from the 156 See 12 CFR 1005.31(a)(1), comment 31(a)(1)– conspicuous disclosures may be even more overshadowing prohibition in § 1006.38(b)(1) for a 1. important in the debt collection context than in debt collector who uses the model validation 157 See 84 FR 23274, 23335 (May 21, 2019). other consumer financial services contexts. notice.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00025 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5790 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

§ 1006.34(d)(3)(iv), a debt collector may collection of the debt and is expressly between complying with the FDCPA place disclosures specifically required required by the Internal Revenue Code and the Bankruptcy Code if the debt under other applicable law, which of 1986, title V of the Gramm-Leach- collector were required to provide a includes disclosures specifically Bliley Act, or any provision of Federal validation notice to a consumer in required by State law, on the reverse (or, or State law relating to notice of a data bankruptcy.167 in certain specified circumstances, on security breach or privacy, or any The Bureau has determined to the front) of the validation notice. The regulation prescribed under any such interpret the term initial communication Bureau believes that § 1006.34(d)(3)(iv) provision of law. not to include proofs of claim filed in will permit debt collectors to provide The Bureau proposed § 1006.34(b)(2) bankruptcy proceedings. Courts have State law disclosures in a manner that to implement FDCPA section 809(a), (d), reached different conclusions about is clear and conspicuous under and (e) by defining the term initial whether the FDCPA conflicts with the applicable law. communication. The proposed Bankruptcy Code.168 The Bureau is The Bureau also declines to further definition largely restated the FDCPA unaware of any case definitively clarify the meaning of clear and and defined initial communication as holding that a proof of claim is an initial conspicuous in the context of oral the first time that, in connection with communication and that a debt collector delivery of validation information. The the collection of a debt, a debt collector therefore must provide a validation Bureau determines that the proposed conveys information, directly or notice after filing a proof of claim. On and final regulatory text is sufficiently indirectly, regarding the debt to the the other hand, some courts have held clear and that the final rule will not consumer, other than a communication that proofs of claim are not initial impose an undue burden on debt in the form of a formal pleading in a communications because, under FDCPA collectors, particularly in light of the civil action, or a communication in any section 809(d), they are communications Bureau’s expectation that few, if any, form or notice that does not relate to the in the form of a formal pleading in a oral disclosures will be provided. collection of the debt and is expressly civil action.169 Further, the Bureau has For the reasons discussed above, the required by any of the laws referenced decided to permit a debt collector to file Bureau is finalizing § 1006.34(b)(1) to in FDCPA section 809(e).163 a proof of claim in a bankruptcy provide that clear and conspicuous An industry trade group proceeding as required by the means readily understandable and that, recommended a bankruptcy-specific Bankruptcy Code without thereby in the case of written and electronic exception to the definition of initial triggering the debt collector’s obligation disclosures, the location and type size communication for debt collectors to provide a validation notice under the also must be readily noticeable and collecting debts owed by consumers in FDCPA, because the Bureau finds it legible to consumers, although no bankruptcy. The commenter expressed unlikely that consumer harm will result minimum type size is mandated. Final concern that certain actions by a debt if a consumer does not receive a § 1006.34(b)(1) also provides that oral collector in the context of a consumer’s validation notice subsequent to a proof disclosures must be given at a volume bankruptcy proceeding, in particular of claim in bankruptcy. The bankruptcy and speed sufficient for the consumer to filing a proof of claim, may be construed proof-of-claim form is filed under hear and comprehend them. to be an initial communication and penalty of perjury, and a person who therefore trigger the FDCPA section files a fraudulent claim could be fined 34(b)(2) Initial Communication 809(a) validation notice requirement.164 up to $500,000, imprisoned for up to 5 FDCPA section 809(a) requires debt Additionally, according to the years, or both.170 Thus, the Bureau collectors to provide consumers with commenter, content on the validation concludes that bankruptcy proof-of- certain validation information either in notice, including the debt collection claim forms generally are likely to the debt collector’s initial communication disclosure required by contain accurate information about the communication with the consumer in FDCPA section 807(11), could be debt. connection with the collection of the construed as a demand for payment that Accordingly, to provide clarity for debt, or within five days after that initial violates the automatic stay provisions of debt collectors while maintaining communication. FDCPA section 803(2) the United States Bankruptcy Code protections for consumers, the Bureau is defines the term communication (Bankruptcy Code) 165 or, if the interpreting the term initial broadly to mean the conveying of consumer has been relieved of personal information regarding a debt directly or liability, the discharge injunction.166 167 See, e.g., In re Chaussee, 399 B.R. 225, 238 indirectly to any person through any According to the commenter, some (B.A.P. 9th Cir. 2008) (‘‘In our opinion, the debt 161 courts have opined that a debt collector validation provisions required by the FDCPA medium. FDCPA section 809(d) and clearly conflict with the claims processing (e) identifies particular communications would face an irreconcilable conflict procedures contemplated by the [Bankruptcy] Code that are not initial communications for and Rules.’’). purposes of FDCPA section 809(a) and 163 See 84 FR 23274, 23335 (May 21, 2019). 168 See Walls v. Wells Fargo Bank, 276 F.3d 502, that therefore do not trigger the 164 To receive a distribution from a bankruptcy 511 (9th Cir. 2002) (holding that the Bankruptcy estate, a creditor generally must file with the Code precludes application of FDCPA requirements 162 validation notice requirement. bankruptcy court a proof of claim, which includes in bankruptcy cases); Chaussee, 399 B.R. at 239 Pursuant to FDCPA section 809(d), an details about an alleged debt or interest. See Fed. (same); contra Simon v. FIA Card Servs., N.A., 732 initial communication excludes a R. Bankr. P. 3002. F.3d 259, 274 (3d Cir. 2013) (stating that when communication in the form of a formal 165 See 11 U.S.C. 362. ‘‘FDCPA claims arise from communications a debt 166 collector sends a bankruptcy debtor in a pending pleading in a civil action. Pursuant to A debtor’s bankruptcy petition operates as an automatic stay that, among other things, prohibits bankruptcy proceeding, and the communications FDCPA section 809(e), an initial ‘‘any act to collect, assess, or recover a claim against are alleged to violate the Bankruptcy Code or Rules, communication also excludes the the debtor that arose before the commencement of there is no categorical preclusion of the FDCPA sending or delivery of any form or the case.’’ 11 U.S.C. 362(a)(6). When a debtor’s claims’’). 169 notice that does not relate to the liability is discharged through bankruptcy, the See Simon, 732 F.3d at 273; Townsend v. discharge ‘‘operates as an injunction against the Quantum3 Grp., LLC, 535 B.R. 415, 423 (M.D. Fla. commencement or continuation of an action, the 2015); In re Brimmage, 523 B.R. 134, 141–42 (Bankr. 161 See 15 U.S.C. 1692a(2). The November 2020 employment of process, or an act, to collect, recover N.D. Ill. 2015). Final Rule implemented this definition in or offset any such debt as a personal liability of the 170 The official bankruptcy proof-of-claim form is § 1006.2(d). 85 FR 76734, 76888 (Nov. 30, 2020). debtor, whether or not discharge of such debt is available here: https://www.uscourts.gov/forms/ 162 See 15 U.S.C. 1692g(d), (e). waived.’’ 11 U.S.C. 524(a)(2). bankruptcy-forms/proof-claim-0.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00026 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5791

communication not to include proofs of commenter, after an FDCPA-covered qualify as an initial communication. claim filed in bankruptcy. Specifically, mortgage debt is transferred and a Similarly, an initial communication the Bureau is adopting new comment consumer receives a servicing transfer generally would not include a 34(b)(2)–1, which clarifies that a proof notice, the transferee may not have consumer’s visit to a debt collector’s of claim that a debt collector files in a received all the information necessary to website, unless during that visit the debt bankruptcy proceeding in accordance send a validation notice within the five- collector conveyed information with the requirements of the Bankruptcy day timeframe required by FDCPA regarding the consumer’s specific Code is a communication in the form of section 809(a). For this reason, the debt.172 a formal pleading in a civil action and commenter suggested that Regulation X For the reasons discussed above, the therefore is not an initial servicing transfer notices should not Bureau is finalizing § 1006.34(b)(2) communication for purposes of trigger the validation information largely as proposed but with a revision § 1006.34. The Bureau adopts this requirement. to clarify that proofs of claim filed in comment as an interpretation of the The Bureau declines to interpret the bankruptcy proceedings are not initial phrase ‘‘[a] communication in the form term initial communication to exclude communications. servicing transfer notices required by of a formal pleading in a civil action’’ 34(b)(3) Itemization Date in FDCPA section 809(d). The Bureau Regulation X. Section 1006.34(b)(2) interprets that phrase to include a proof largely mirrors existing language in FDCPA section 809(a)(1) requires debt of claim that a debt collector files in a FDCPA sections 803(2) and 809(a), (d), collectors to disclose to consumers, bankruptcy proceeding in accordance and (e) and does not impose new either in the debt collector’s initial with the requirements of the Bankruptcy substantive requirements or obligations communication in connection with the Code. on covered entities. As discussed in the collection of the debt, or within five The Bureau acknowledges that other section-by-section analysis of days after that communication, the scenarios may exist in which a debt § 1006.34(c), Regulation F will result in amount of the debt.173 The Bureau collector communicates with a validation notices containing more proposed in § 1006.34(c)(2)(vii) through consumer in bankruptcy and information about the debt than they (ix) to interpret the phrase ‘‘amount of subsequently may be required to typically do today, but that information the debt’’ to mean that debt collectors provide a validation notice. To the is, generally, either routine account must disclose the amount of the debt as extent that debt collectors do provide information that owners of debts of a particular ‘‘itemization date.’’ 174 To validation notices to consumers in currently provide to debt collectors or facilitate compliance with proposed bankruptcy, § 1006.34(a)(1) implements that owners of debts can include § 1006.34(c)(2), the Bureau proposed an existing FDCPA disclosure without significant additional expense. § 1006.34(b)(3) to define itemization requirement and does not create a new Although the commenter argues that date as one of four reference dates for tension between the FDCPA and the there may be timing considerations which a debt collector can ascertain the Bankruptcy Code. In addition, nothing unique to mortgage servicing transfer amount of the debt. The proposed in the final rule requires debt collectors notices, the Bureau determines that reference dates were the last statement to include payment requests in the such timing concerns do not warrant an date, the charge-off date, the last validation information; instead, exception that would deem a mortgage payment date, and the transaction payment requests are optional servicing transfer notice, even one that date.175 disclosures that § 1006.34(d)(3)(iii) does convey information, directly or The proposed definition of permits debt collectors to include along indirectly, regarding the debt to the itemization date was designed to allow with the validation information. consumer to be excluded from the the use of dates that debt collectors Consequently, a debt collector definition of an ‘‘initial could identify with relative ease concerned that a payment request communication.’’ because they reflect routine and would violate the Bankruptcy Code’s Other commenters asked the Bureau recurring events, and that correspond to automatic stay or discharge injunction is to clarify whether a consumer-initiated notable events in the debt’s history that not required to include a payment communication, such as a consumer consumers may recall or be able to request and, additionally, could use the visiting a debt collector’s website or a verify with records. The proposed model validation notice, specified consumer leaving a voicemail with a definition also was intended to include variations of the model notice, or a debt collector, would constitute an dates for which debt collectors typically substantially similar form, without a initial communication under proposed may receive account information from payment request and receive a safe § 1006.34(b)(2). The Bureau notes that, debt owners and that, therefore, debt harbor under § 1006.34(d)(2). under § 1006.34(b)(2), for an initial An industry trade group communication to occur, a debt 172 For example, a debt collector potentially could convey information regarding the debt during a recommended that the Bureau exclude collector must ‘‘convey[ ] information, consumer’s visit to a website through a website chat from the § 1006.34(b)(2) definition of directly or indirectly, regarding the feature. initial communication the notice of debt. . . .’’ Section 1006.34(b)(2) is 173 See 15 U.S.C. 1692g(a)(1). transfer of loan servicing required by clear that, if a debt collector conveys no 174 Proposed § 1006.34(c)(2)(vii) and (viii) would 171 information, directly or indirectly, have required debt collectors to disclose, Regulation X. According to the respectively, the itemization date and the amount regarding the debt, an initial of the debt on the itemization date. Proposed 171 Generally, under Regulation X, each transferor communication has not occurred and, § 1006.34(c)(2)(ix) would have required debt servicer and transferee servicer of any mortgage consequently, the validation notice collectors to disclose an itemization of the debt loan shall provide to the borrower a notice of requirement has not been triggered. reflecting interest, fees, payments, and credits since transfer for any assignment, sale, or transfer of the the itemization date. For additional discussion of servicing of the mortgage loan. 12 CFR Thus, a consumer’s voicemail left with these provisions, which have been renumbered in 1024.33(b)(1). Generally, the transferor servicer a debt collector generally would not the final rule, see the section-by-section analysis of shall provide the notice of transfer to the borrower § 1006.34(c)(2)(vi) through (viii). not less than 15 days before the effective date of the transferee servicers may provide a single notice, in 175 See 84 FR 23274, 23335–37 (May 21, 2019). transfer of the servicing of the mortgage loan. The which case the notice shall be provided not less The reference dates were set forth in proposed transferee servicer shall provide the notice of than 15 days before the effective date of the transfer § 1006.34(b)(3)(i) through (iv) and are discussed in transfer to the borrower not more than 15 days after of the servicing of the mortgage loan. 12 CFR the section-by-section analysis of those paragraphs the effective date of the transfer. The transferor and 1024.33(b)(3)(i). below.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5792 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

collectors would be able to use to The Bureau determines that prescriptive ordering of reference dates, provide the disclosures proposed in § 1006.34(b)(3) will facilitate such as a hierarchy that would permit § 1006.34(c)(viii) and (ix). compliance with the itemization date- a debt collector to use a date listed later Proposed comment 34(b)(3)–1 related requirements in final in the hierarchy only if the debt explained that a debt collector could § 1006.34(c)(2)(vi) through (viii). collector did not have information about select any of the four reference dates as Account information available to debt any dates earlier in the hierarchy. the itemization date. Once a debt collectors may vary by debt type Industry and industry trade group collector used one of the reference dates because some account information is commenters generally favored the for a specific debt in a communication not universally tracked or used across proposed flexible approach. According with a consumer, however, the debt product markets. To facilitate the ability to commenters, a prescriptive ordering collector would be required to use that of debt collectors across debt markets to would significantly increase costs and reference date for that debt consistently comply with Regulation F, the final rule litigation risk for debt collectors. As when providing disclosures pursuant to permits debt collectors to determine the noted above, consumer advocates § 1006.34 to that consumer. itemization date by selecting from one expressed concern that the proposed For the reasons discussed below, the of five reference dates for which they approach would result in disclosure of Bureau is adopting § 1006.34(b)(3) and can ascertain the amount of the debt. itemization dates that are not its related commentary largely as The Bureau finds that this framework meaningful to consumers and urged the proposed but with minor wording will not result in undue industry Bureau to use consumer testing to changes and to include an additional burden. Debt collectors today routinely determine a date that would be reference date in response to feedback: analyze and organize account meaningful. The judgment date. The Bureau also is information included in files from The Bureau agrees that a prescriptive adopting new comment 34(b)(3)–2, creditors when creditors place accounts ordering could impose undue costs and which provides that a debt collector for collection. Debt collectors should be litigation risks for debt collectors. In may use a different reference date than able to use or build on these existing addition, as discussed below in the a prior debt collector used for the same functions to select an itemization date section-by-section analysis of debt. based on the definition in § 1006.34(b)(3)(i) through (v), each Some industry commenters supported § 1006.34(b)(3). Therefore, even if reference date may be meaningful to the itemization date definition in creditors provide or retain account consumers because it corresponds to a proposed § 1006.34(b)(3). At least two information based on multiple reference notable event in the debt’s history that industry commenters supported dates, debt collectors should not face consumers may recall or be able to providing debt collectors with a choice substantial new costs or litigation risks of several reference dates because a debt verify with records. Because each from complying with § 1006.34(b)(3). reference date may be meaningful to a collector might not be able ascertain the The Bureau declines consumer consumer, and because each reference amount of the debt on a single reference advocates’ suggestion to specify a single date may be more or less meaningful to date. According to an industry trade reference date. As discussed in the the consumer than one of the other group commenter, the proposed proposal, the Bureau considered reference dates depending on the reference dates would provide adequate requiring debt collectors to provide an flexibility, as a creditor’s information itemization of the debt based on a single circumstances surrounding the debt, systems will have recorded at least one reference date but rejected that there may not be a benefit to consumers of those dates for any given debt. approach because of the infeasibility of if the Bureau were to structure the dates Another industry trade group identifying a single reference date that as a hierarchy. The Bureau therefore commenter stated that the proposal’s applies to all debt types across all declines to adopt a prescriptive ordering standardization of account information relevant markets.176 The group of of the reference dates. would allow debt collectors to build consumer advocate commenters that Some commenters who did not object better internal procedures and improve recommended a single reference date to the proposed itemization date consumer communication practices. An did not suggest or provide evidence that framework in principle either raised industry commenter stated that it would be feasible to identify a single concerns that the proposed reference proposed § 1006.34(b)(3) would require date that would be appropriate for all dates would not accommodate debts in significant client education and types of debt. The Bureau also declines all product markets or recommended information technology investment but to exercise its discretion to conduct additional reference dates. At least one ultimately concluded that the consumer testing to attempt to industry trade group commenter asked framework was feasible. determine an optimal itemization date the Bureau to clarify what reference date Other commenters objected to for debt collectors to use within each debt collectors should use for debts in proposed § 1006.34(b)(3). An industry debt collection market (e.g., mortgage bankruptcy. An industry commenter commenter stated that creditors may debt, credit card debt, student loan debt, stated that the proposal might not provide debt collectors information medical debt, and so on). The Bureau accommodate a debt a consumer owes about multiple reference dates. determines that such testing is not to a government, such as a tax debt. According to this commenter, analyzing necessary or warranted, because the According to this commenter, although creditor records to identify and organize Bureau finds that debt collectors’ use of the FDCPA does not cover many debts account information as of a single any one of the five itemization dates set consumers owe to governments,177 some reference date would be complicated, forth in § 1006.34(b)(3) should debt collectors who collect debts on costly, and increase the likelihood of correspond, in most cases, to events in behalf of Federal government agencies validation notice errors. A group of the debt’s history that consumers may are legally or contractually obliged to consumer advocate commenters stated recall or be able to verify with records. that, instead of permitting debt In the proposal, the Bureau requested 177 FDCPA section 803(5) defines a ‘‘debt’’ as any collectors to choose between reference comment on whether the itemization obligation arising out of a transaction ‘‘primarily for personal, family, or household purposes.’’ 15 U.S.C. dates, § 1006.34(b)(3) should define the date should be structured as a 1692a(5). According to the commenter, a debt a itemization date as a single reference consumer owes to a government in many cases does date supported by consumer testing. 176 See 84 FR 23274, 23336 (May 21, 2019). not meet this definition.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00028 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5793

abide by the FDCPA.178 This commenter With respect to which reference date debt. The availability of account stated that the proposed reference dates a debt collector should use to itemize a information, including about a prior might not accommodate tax debt tax obligation a consumer owes to a debt collector’s activities, to a because, in some instances, it will be government, the date the tax was subsequent debt collector depends on the case that no previous statement was assessed may be a transaction date for the creditor or debt buyer who places provided, no prior payment was made, tax debt, as discussed in the section-by- the debt with the subsequent debt and there was no transaction per se section analysis of § 1006.34(b)(3)(iv). In collector. If the creditor or debt buyer between the consumer and the addition, a date on which the does not provide the previously used government creditor. government provided a written invoice itemization date, the subsequent debt According to another commenter, an or tax bill may constitute a last collector may be unable to determine additional reference date for student statement date for tax debt under that date, and therefore fail to comply loan debt is necessary because debt § 1006.34(b)(3)(i). with a requirement to use it. It is collectors collecting Federal student The Bureau determines that a conceivable that, were the rule to loans do not receive any of the proposed reference date specific to student loan require use of the same itemization date reference dates at the time of placement. debt is unnecessary and unwarranted previously used, debt collectors and Some commenters suggested that the because the reference dates in creditors could begin to structure their Bureau permit debt collectors to use the § 1006.34(b)(3) are sufficient. For contracts and processes to enable date of default as defined by the Higher virtually any student loan debt, there creditors and debt collectors to transfer Education Act of 1965; commenters will be a last statement date as a previously used itemization date. argued that this date is a widely used described in § 1006.34(b)(3)(i), a last However, establishing such contracts reference date in the student loan payment date as described in and processes would likely impose costs market.179 By contrast, an FTC § 1006.34(b)(3)(ii), or a transaction date on creditors and debt collectors,180 and commissioner urged the Bureau not to as described in § 1006.34(b)(3)(iv). For those costs would likely be passed on to use the Higher Education Act’s many student loan debts, all three consumers. Further, the Bureau finds definition of default and instead to use reference dates will exist. that the costs are not warranted because the date a student loan borrower The Bureau also declines to permitting a subsequent debt collector becomes 90 days past due. incorporate into § 1006.34(b)(3) the date to use a different itemization date will In addition, an industry commenter of placement or the date the debt maintain protections for consumers, as recommended that § 1006.34(b)(3) collector provides the validation notice. long as the debt collector uses one of the incorporate: (1) The date a creditor From a consumer’s perspective, these five itemization dates specified in the places a debt with the debt collector, or dates do not correspond to notable rule. As stated above, the Bureau finds (2) the date the debt collector provides events in a debt’s history that the that the five itemization dates are all validation information to the consumer. consumer may recall or be able to verify. dates that should result in reasonably Another industry commenter suggested As noted above, however, in response to meaningful and recognizable debt that § 1006.34(b)(3) incorporate the date feedback, the Bureau is adding a new amounts for consumers. Accordingly, of a previously obtained court judgment. reference date called the ‘‘judgment the Bureau is adopting new comment The Bureau determines that date,’’ which is the date of a final court 34(b)(3)–2 to clarify that, when selecting § 1006.34(b)(3)—in conjunction with the judgment that determines the amount of an itemization date pursuant to five reference dates described in the debt owed by the consumer. The § 1006.34(b)(3), a debt collector may use § 1006.34(b)(3)(i) through (v)—provides judgment date is discussed in the a different reference date than a prior adequate flexibility for debts in all section-by-section analysis of final debt collector who attempted to collect product markets, including for debts in § 1006.34(b)(3)(v). the debt. bankruptcy. A debt collector may With respect to the Bureau’s request For the reasons set forth above, the choose which of the five reference dates for comment about whether a Bureau is finalizing § 1006.34(b)(3) and to use based on the facts and subsequent debt collector should be its related commentary with minor circumstances surrounding the history permitted to use a different itemization wording changes and to include a new of the debt—e.g., whether a creditor date than a prior debt collector used for reference date, the judgment date, in provided statements, whether the the same debt, industry and industry § 1006.34(b)(3)(v). In addition, the consumer made payments—and the trade group commenters generally Bureau is adopting new comment information available to the debt agreed that requiring debt collectors to 34(b)(3)–2 to explain that a debt collector. use the same reference date as a prior collector may use a different reference collector would be burdensome and date than a prior debt collector. The 178 For example, debt collectors who collect on impractical. These commenters stated Bureau is finalizing § 1006.34(b)(3) and behalf of the Internal Revenue Service under a that debt collectors would be unable to ‘‘qualified tax collection contract’’ generally are § 1006.34(b)(3)(i) through (v), discussed required by statute to comply with the FDCPA. See ensure compliance with such a below, pursuant to its authority under 26 U.S.C. 6306(g) (‘‘The provisions of the [FDCPA] requirement because a creditor might FDCPA section 814(d) to prescribe rules shall apply to any qualified tax collection contract, not disclose the reference date that a with respect to the collection of debts by except to the extent superseded by section 6304, prior debt collector used. By contrast, an section 7602(c), or by any other provision of this debt collectors and pursuant to its title.’’). academic and a consumer advocate 179 The Higher Education Act defines ‘‘default’’ as commenter stated that a debt collector 180 In order for the contractual framework and ‘‘the failure of a borrower . . . to make an should be required to use the same processes to achieve the desired result of a creditor installment payment when due, or to meet other itemization date the prior debt collector passing the previously used itemization date to the terms of the promissory note, the Act, or regulations current debt collector, creditors would have to as applicable, if the Secretary or guaranty agency used because a consumer may not be structure contracts to require the previous debt finds it reasonable to conclude that the borrower able to assess the amount owed if the collectors to pass back to the creditors the and endorser, if any, no longer intend to honor the subsequent debt collector uses a previously used itemization dates so that the obligation to repay, provided that this failure different reference date. creditors, in turn, can pass them on to the current persists for—(1) 270 days for a loan repayable in debt collectors. Developing and implementing such monthly installments; or (2) 330 days for a loan The final rule permits a debt collector contractual provisions and processes across the repayable in less frequent installments.’’ 34 CFR to use a different itemization date than debt collection industry would likely impose 682.200(b). a prior debt collector used for the same potentially significant costs.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00029 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5794 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

authority under Dodd-Frank Act section parties acting on a creditor’s behalf Federal standard for consumer credit 182 1032(a) to prescribe rules to ensure that routinely provide consumers with and would be a reliable reference date the features of consumer financial account statements, such as periodic for itemization-related disclosures in products and services are disclosed to statements or invoices. If a consumer some circumstances. An industry trade consumers fully, accurately, and has received an account statement from group commenter stated that creditors effectively. a creditor, the consumer either may frequently provide debt collectors 34(b)(3)(i) recognize the date that they last account information as of the charge-off received a statement or may be able to date. Commenters stated that consumers The Bureau proposed in verify that date in their records.181 may recognize the amount due as of the § 1006.34(b)(3)(i) to permit debt Further, last statement information is charge-off date because some creditors collectors to use as the itemization date often readily available to debt collectors, provide charge-off statements that the date of the last periodic statement or as debt collectors frequently receive, or reflect the charge-off balance and, they written account statement or invoice have the ability to request, last said, consumers have the ability to provided to the consumer. Proposed statement information or records from review these charge-off statements. comment 34(b)(3)(i)–1 explained that a creditors. Other commenters objected to statement provided by a creditor or a The Bureau determines that only a including the charge-off date as a third party acting on the creditor’s last statement or invoice provided to a permissible reference date. An industry behalf, including a creditor’s service consumer by a creditor, as opposed to commenter stated that not all creditors provider, may constitute the last a statement, such as a validation notice, maintain account information as of the statement provided to the consumer for provided by a debt collector, should charge-off date or communicate that purposes of § 1006.34(b)(3)(i). serve as a basis for a last statement date information to debt collectors at Commenters disagreed about whether as defined in § 1006.34(b)(3)(i) because placement. Consumer advocates and at the Bureau should adopt the last consumers may be more likely to recall least two industry trade group statement date as a permissible or be able to verify a statement sent by commenters stated that, although the reference date. Several industry and a creditor than by a debt collector. This charge-off date may be widely used for industry trade group commenters may be true even if a creditor issues a some financial products, it may not supported the proposal, stating that, for statement after the debt has gone into resonate with consumers or help them some debts, the last statement date is collection. Under § 1006.34(b)(3)(i), recognize a debt because consumers readily available to debt collectors and such a new statement may serve as the might not know the charge-off date.183 recognizable to consumers. Some last statement for purposes of the The Bureau determines that the commenters stated that, even when itemization date. charge-off date may be used as a creditors do not initially provide For these reasons, the Bureau is reference date. Creditors frequently periodic statements to debt collectors, finalizing § 1006.34(b)(3)(i) and its provide account information as of the such statements are available upon related commentary with revisions to charge-off date for various types of request. However, some consumer provide that only a statement or invoice debts, including credit card debt, to debt advocate commenters stated that the last provided by a creditor qualifies as a last collectors. The Bureau acknowledges statement date may not be meaningful to statement for purposes of that not all creditors maintain account some consumers and may not help them § 1006.34(b)(3)(i). Specifically, the information as of the charge-off date or recognize a debt. For example, a Bureau is revising § 1006.34(b)(3)(i) to provide such information to debt commenter stated that a creditor may state that the last statement date is the collectors, but the charge-off date is only send duplicates of the same periodic date of the last periodic statement or one of five reference dates specified in statement or invoice to a consumer written account statement or invoice the final rule. Further, account multiple times, even when the balance provided to the consumer by a creditor. information at charge off is readily is changing due to interest or fees. In The Bureau also is revising comment available to a sufficiently large number this scenario, the commenter said, the 34(b)(3)(i)–1 to provide that a statement of debt collectors—including collectors last statement a consumer received or invoice provided by a debt collector of credit card debt—to justify its would not reflect the actual amount is not a last statement for purposes of adoption as a reference date. In owed and would not be helpful to the § 1006.34(b)(3)(i), unless the debt addition, while consumers might not consumer. know the specific charge-off date, they At least two commenters stated that a collector is also a creditor. may, in fact, recognize account validation notice provided by a prior 34(b)(3)(ii) information as of approximately the debt collector should not constitute a The Bureau proposed in charge-off date because charge off often last statement for purposes of § 1006.34(b)(3)(ii) to permit debt occurs at around the time the creditor § 1006.34(b)(3)(i). According to a collectors to use the date that the debt provided a last account statement. consumer advocate commenter, the date was charged off as the itemization date. Further, as noted by commenters, some of a prior validation notice will not be An industry trade group and an creditors may provide consumers with meaningful to consumers and, industry commenter supported the use charge-off statements that reflect the consequently, an itemization as of that of the charge-off date, particularly for balance as of the charge-off date. date will not help consumers recognize debts associated with open-end credit, Accordingly, the Bureau is finalizing an alleged debt. An industry trade group such as credit cards. The commenters § 1006.34(b)(3)(ii) as proposed. commenter advised against relying on a stated that charge off is a regulated validation notice provided by a prior 182 65 FR 36903 (June 12, 2000); Off. of the debt collector because creditors 181 This is likely to be true even if the consumer Comptroller of the Currency, Bulletin 2000–20, generally do not provide previously sent has received a duplicative statement as the last Uniform Retail Credit Classification and Account validation notices to subsequent debt statement. In that scenario, under Management Policy (June 20, 2000). collectors. § 1006.34(c)(2)(vii), which requires a debt collector 183 An individual commenter requested to disclose the amount of the debt on the clarification whether, for medical debt, the date of The Bureau determines that the last itemization date, the debt amount that the debt charge off is the date a creditor places the account statement date may be used as a collector discloses to the consumer must be the debt for collection. The Bureau is not aware that such reference date. Many creditors or third amount as of that last statement date. a definition is commonly used.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00030 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5795

34(b)(3)(iii) the debt has been outstanding for a long contracts, or lawn care service contracts. time. In addition, an industry commenter The Bureau proposed in For these reasons, the Bureau is stated that medical providers may § 1006.34(b)(3)(iii) to permit debt finalizing § 1006.34(b)(3)(iii) as combine multiple dates of service into collectors to use the date the last proposed to provide that the last one account or use family billing that payment was applied to the debt as the payment date is the date the last combines separate bills for family itemization date. payment was applied to the debt. The members into one account. The Industry and consumer advocate Bureau also is adopting new comment commenter suggested that, if an account commenters generally supported 34(b)(3)(iii)–1, which clarifies that a in collection reflects services on proposed § 1006.34(b)(3)(iii). These third-party payment applied to the debt, multiple dates or for multiple commenters agreed that account such as a payment from an auto individuals, identifying a transaction information as of the last payment date repossession agent or an insurance date may be difficult for the debt is readily available to debt collectors company, can be a last payment for collector. and recognizable to consumers. purposes of § 1006.34(b)(3)(iii). The Bureau finds that, for some debts, According to one consumer advocate, a creditors may provide debt collectors consumer may have a general idea of 34(b)(3)(iv) with account information related to the when a bill was last paid, especially if The Bureau proposed in transaction date. In addition, consumers the consumer’s delinquency was related § 1006.34(b)(3)(iv) to permit debt may recognize the amount of a debt on to a significant life event, such as a job collectors to use as the itemization date the transaction date, which may be loss, a divorce, or an illness. the date of the transaction that gave rise reflected on a copy of a contract or a bill Accordingly, the Bureau determines that to the debt. Proposed comment provided by a creditor. For this reason, the last payment date as defined in 34(b)(3)(iv)–1 explained that the the Bureau is finalizing § 1006.34(b)(3)(iii) is an appropriate transaction date is the date that a § 1006.34(b)(3)(iv) as proposed to reference date. creditor provided, or made available, a good or service to a consumer, and it provide that the transaction date, which Commenters asked the Bureau to is the date of the transaction that gave clarify whether a third-party payment included examples of transaction dates. The comment also explained that, if a rise to the debt, can be the itemization could serve as the basis for the last date for purposes of § 1006.34(b)(3). payment date. For example, several debt has more than one potential trade group commenters stated that, if a transaction date, a debt collector may As commenters noted, various dates consumer’s car is repossessed, the sale use any such date as the transaction may serve as potential transaction dates of the collateral may be applied to the date but must use whichever transaction under § 1006.34(b)(3)(iv). For example, consumer’s balance after receipt of the date it selects consistently. potential transaction dates may include A number of commenters, including consumer’s last payment. Another the date a service or good was provided consumer advocates, industry trade commenter raised the possibility of to a consumer or the date that a groups, and at least one industry third-party payments and insurance consumer signed a contract for a service commenter, supported including the adjustments in the medical debt context. or good. In the case of a consumer’s tax transaction date in the itemization date A group of consumer advocates debt, the date a government assessed the definition. According to several recommended that only a payment from tax may be a transaction date for commenters, consumers likely would 184 a consumer to a creditor should serve as purposes of § 1006.34(b)(3)(iv). recognize the transaction date as the basis for a last payment date. Nevertheless, the Bureau declines to defined by proposed § 1006.34(b)(3)(iv). According to this commenter, a last adopt a prescriptive standard for At least one commenter stated that consumer payment to a prior debt identifying the only transaction date creditors provide account information collector may not be significant or debt collectors may use. Both the as of the transaction date for some debt recognizable to a consumer. contract date and the service date are types. significant dates that may resonate with The Bureau determines that third- With respect to proposed comment a consumer. Because the consumer may party payments may serve as the basis 34(b)(3)(iv)–1, a consumer advocate recognize the amount of the debt on for the last payment date under commenter stated that, if a debt has those dates, the Bureau finds that either § 1006.34(b)(3)(iii). The Bureau finds more than one potential transaction date may serve as the transaction date. that the date of a third-party payment on date, the debt collector should not be Further, the Bureau determines that the debt, such as a payment from an permitted to choose which date to use developing a more prescriptive standard auto repossession agent or an insurance as the transaction date for purposes of that would apply to all debt types is not company, may be meaningful to a § 1006.34(b)(3)(iv). The commenter feasible. For this reason, the Bureau is consumer because such payments may urged the Bureau to develop a finalizing comment 34(b)(3)(iv)–1, with be accompanied by a notice to the prescriptive standard for identifying the minor changes for clarity, to provide consumer, and therefore the consumer appropriate transaction date for that, if a debt has more than one could recognize or verify with records scenarios where multiple transaction transaction date, a debt collector may the date of such payments. dates exist. use any such date as the transaction The Bureau also determines that a Several commenters also stated that date, but the debt collector must use consumer’s payment to a prior debt determining the transaction date may be whichever date the debt collector selects collector may serve as the last payment problematic in some circumstances. For consistently, as described in comment date. The Bureau finds that consumers example, a consumer advocate 34(b)(3)–1. Comment 34(b)(3)(iv)–1 also are at least as likely to recognize or be commenter explained that, while addresses concerns regarding able to verify with records the status of determining the transaction date is identifying the transaction date for the debt as of the consumer’s last straightforward with one-time medical debt that includes services on payment to a prior debt collector as transactions, identifying the transaction date may be more difficult with respect consumers are able to recognize or 184 See the discussion of tax debts in the verify an earlier (perhaps much earlier) to contracts for ongoing services, such introductory section-by-section analysis of payment to the creditor, particularly if as gym memberships, cellular telephone § 1006.34(b)(3).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00031 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5796 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

multiple dates or for multiple required by FDCPA section 809(a) as a beyond the required 30 days to exercise individuals.185 ‘‘validation notice’’ or a ‘‘g notice.’’ The their validation rights—proposed The Bureau recognizes that the Bureau proposed in § 1006.34(b)(4) to § 1006.34(b)(5) provided that a debt transaction date may be difficult to define validation notice to mean a collector may assume that a consumer determine in some circumstances. written or electronic notice that receives the validation information on However, under the framework in provides the validation information any day that is at least five days § 1006.34(b)(3) for determining the described in § 1006.34(c).186 The Bureau (excluding legal public holidays, itemization date, the transaction date is received no comments regarding Saturdays, and Sundays) after the debt one of five reference dates from which proposed § 1006.34(b)(4) and is collector provides it. Proposed comment a debt collector may choose. Section finalizing it with a minor wording 34(b)(5)–1 clarified that, if a debt 1006.34(b)(3) does not require a debt change for consistency with final collector sends an initial validation collector to use the transaction date as § 1006.34(c). notice that was not received and then the reference date for itemization- sends a subsequent validation notice, 34(b)(5) Validation Period related disclosures. If a debt collector the validation period ends 30 days after cannot determine the transaction date, FDCPA section 809(b) contains the consumer receives or is assumed to the debt collector may use another certain requirements that a debt receive the subsequent validation reference date. collector must satisfy if a consumer notice. disputes a debt or requests the name 34(b)(3)(v) For the reasons discussed below, the and address of the original creditor.187 Bureau is finalizing proposed As discussed above, the proposed If a consumer disputes a debt in writing § 1006.34(b)(5) and proposed comment definition of itemization date included within 30 days of receiving the 34(b)(5)–1 (which is renumbered as four reference dates. In response to the validation information, a debt collector comment 34(b)(5)–2) with minor proposed definition, an industry must stop collection of the debt until wording changes for clarity and commenter suggested that the Bureau the debt collector obtains verification of consistency with other provisions of add a fifth date—the date of a court the debt or a copy of a judgment against Regulation F. The Bureau is adopting judgment. The Bureau has determined the consumer and mails it to the new comment 34(b)(5)–1 to illustrate to adopt this recommendation. As a consumer. Similarly, if a consumer how a debt collector may calculate the general matter, debt collectors will requests the name and address of the end of the validation period before know if a court judgment against a original creditor in writing within 30 sending the validation notice. consumer exists and consumers are days of receiving the validation A number of commenters, including likely to recognize the date of a court information, the debt collector must industry commenters, supported judgment against them or be able to cease collection of the debt until the proposed § 1006.34(b)(5). According to verify the date with records. Further, the debt collector obtains and mails such several commenters, the proposed amount of the debt as of the date of a information to the consumer. FDCPA definition is consistent with current court judgment is verifiable as it will section 809(b) also prohibits a debt industry practices. For example, with have been memorialized in court collector, during the 30-day period for respect to the proposed five-day records. Accordingly, the Bureau is written disputes and original-creditor delivery timing assumption, industry finalizing § 1006.34(b)(3)(v) to permit information requests, from engaging in commenters stated that debt collectors debt collectors to use as the itemization collection activities and generally assume that a consumer date the judgment date, which is the communications that overshadow, or receives a validation notice five to eight date of a final court judgment that are inconsistent with, the disclosure of days after mailing. Consumer advocate determines the amount of the debt owed the consumer’s rights to dispute the commenters objected to the proposed by the consumer. debt and request original-creditor definition, stating that debt collectors 34(b)(4) Validation Notice information, which are sometimes should be obligated to honor consumer referred to as ‘‘verification rights.’’ verification requests at any time, not FDCPA section 809(a) provides, in As described in the section-by-section relevant part, that, within five days after only during the validation period. analysis of § 1006.34(c)(3)(i) through Some commenters recommended the initial communication with a (iii), the Bureau proposed to require lengthening the proposed five-day consumer in connection with the debt collectors to disclose to a consumer delivery timing assumption. A collection of any debt, a debt collector the date certain on which the shall send the consumer a written notice consumer advocate commenter and an consumer’s verification rights under industry trade group commenter containing specified information (i.e., FDCPA section 809(b) expire. To validation information), unless that suggested that the validation period facilitate compliance with that proposed definition should assume that the information is contained in the initial requirement, proposed § 1006.34(b)(5) communication or the consumer has consumer receives the validation notice defined the term validation period to seven days after the debt collector mails paid the debt. Debt collectors and others mean the period starting on the date that commonly refer to the written notice it to account for delays or bulk mail a debt collector provides the validation delivery.189 Another trade group information described in § 1006.34(c) 185 Because of differences between various debt types and the particular facts and circumstances of and ending 30 days after the consumer 189 United States Postal Service (USPS) delivery any given transaction, § 1006.34(b)(3)(iv) provides receives or is assumed to receive the times for Standard Mail, commonly referred to as debt collectors flexibility when selecting a validation information.188 To clarify bulk mail, are typically longer than delivery times transaction date. However, if the total amount of a how to calculate the end of the for first-class mail. For example, based on the USPS debt in collection includes amounts incurred on Originating Service Standards, bulk mail originated different dates of service, the Bureau believes that, validation period—including how debt in Washington, DC takes six days to reach New even though § 1006.34(b)(3)(iv) does not require it, collectors may disclose a period that York City, seven days to reach Denver, and nine debt collectors generally will select the last date of provides consumers additional time days to reach Seattle. By contrast, first-class mail service as the transaction date. This date may be from Washington, DC reaches New York City in two most recognizable to consumers. Further, disclosing days and Denver and Seattle in three days. See U.S. itemization-related information as of the last date, 186 See 84 FR 23274, 23337 (May 21, 2019). Postal Serv., Service Standards Maps, https:// as opposed to an earlier date, likely would be easier 187 15 U.S.C. 1692g(b). postalpro.usps.com/ppro-tools/service-standards- for a debt collector. 188 84 FR 23274, 23337–38 (May 21, 2019). maps (last visited Nov. 16, 2020).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00032 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5797

commenter recommended a fixed ten- business days or less.191 The Bureau is validation information is generated. day assumption that omits unaware that debt collectors typically Specifically, a debt collector who sends consideration of weekends and use bulk mail to deliver validation a written or electronic validation notice holidays. notices, and commenters offered no will not know, at the time the notice is Other commenters recommended evidence otherwise. For these reasons, generated, the date on which the consumer will receive the notice and, shortening the delivery timing the Bureau declines to extend the five- therefore, must be able to use the date assumption. For example, an industry day delivery timing assumption. of assumed receipt to calculate the trade group commenter recommended The Bureau also declines to shorten the validation period’s five-day delivery validation period end date. The Bureau that the Bureau eliminate the timing assumption. The FDCPA’s 30- is adding new comment 34(b)(5)–1 to assumption entirely and clarify that the day validation period begins to run clarify that, in such circumstances, debt validation period commences upon when the consumer receives the collectors may rely on the date of mailing of a validation notice. Other validation information.192 If the 30-day assumed receipt, even if they learn after industry commenters urged the Bureau clock began to run upon the debt sending the notice that the consumer to shorten the assumption for near- collector’s mailing of the validation received the validation information on a instantaneous communication methods, notice, as some commenters suggested, different date. such as electronic or oral delivery. In the consumer would be deprived of the Several industry and industry trade contrast, at least two industry trade full 30-day period provided by the group commenters expressed concern groups commenters and a consumer FDCPA to respond to the notice. about the use of the term ‘‘legal public advocate commenter recommended a Further, the Bureau declines to shorten holiday’’ in proposed § 1006.34(b)(5). uniform validation period across the length of the validation period for According to these commenters, legal delivery methods. According to an validation information provided by public holidays may include State and industry trade group commenter, if the communication methods such as local holidays that the debt collector is validation period is not the same for all electronic delivery. A delivery timing not aware of and cannot reasonably delivery methods, consumers may be assumption that varied by delivery ascertain. In response to these concerns, confused if they receive validation method could pose compliance and consistent with § 1006.22(c)(1) in 193 notices through different delivery challenges and incentivize use of one the November 2020 Final Rule, the methods with different due dates. communication method over another. Bureau is revising § 1006.34(b)(5) to After considering this feedback, the Therefore, as proposed, the five-day provide that a debt collector may assume that a consumer receives the Bureau determines that a validation delivery timing assumption applies validation information on any date that period definition will facilitate debt uniformly to all validation information is at least five days (excluding legal collectors’ compliance with the delivery methods. public holidays identified in 5 U.S.C. requirement in § 1006.34(c)(3) to A group of consumer advocates asked 6103(a), Saturdays, and Sundays) after disclose to a consumer the date certain the Bureau to define the validation period based solely on when the the debt collector provides it. on which the consumer’s FDCPA Several industry commenters asked consumer is assumed to receive the section 809(b) verification rights expire. the Bureau to clarify whether a debt validation information. In other words, The Bureau declines, as requested by collector must receive a consumer’s this commenter requested that the rule consumer advocate commenters, to verification request before the validation not permit the date that a consumer require a debt collector to comply with period end date, or whether the actually received the validation notice a verification request that a consumer consumer need only send the request by to serve as the basis of the validation submits after the 30-day period the validation period end date for the period. According to this commenter, provided by the statute has expired. request to be effective. The Bureau relying solely on the date that the FDCPA section 809(b) establishes a 30- determines that a consumer’s consumer is assumed to receive the day period for consumers to exercise verification request—whether an 190 information would prevent confusion if their verification rights. original-creditor information request or the date the consumer received the a dispute—is effective if the consumer The Bureau also declines to modify notice and the date the debt collector sends or submits the request within the the length of the five-day delivery assumed the consumer received it are 30-day period established in timing assumption. The Bureau different. § 1006.34(b)(5), even if the debt proposed § 1006.34(b)(5) on the basis The Bureau declines to adopt this collector does not receive the request that a consumer typically receives a suggestion. The FDCPA’s 30-day until after the 30-day period. In validation notice no more than five days validation period begins to run when specifying requirements for debt (excluding legal public holidays, the consumer receives the validation collectors’ responses to consumers’ Saturdays, and Sundays) after the debt information. Nevertheless, the Bureau verification requests, § 1006.38(c) and collector provides the notice. Based on determines that, at least in certain (d)(2) of the Bureau’s November 2020 its market monitoring activities, the contexts, the date that the consumer is Final Rule implemented FDCPA section Bureau understands that debt collectors assumed to receive the validation notice 809(b) by providing that, upon receipt of typically send consumer is the only date information that a debt an original-creditor information request communications by first-class mail, collector will have at the time the which generally is delivered in three (§ 1006.38(c)) or a dispute (§ 1006.38(d)(2)) ‘‘submitted by the 191 See U.S. Postal Serv., Service Standards Maps, 190 Although the FDCPA and this implementing https://postalpro.usps.com/ppro-tools/service- consumer in writing within the regulation do not require a debt collector to provide standards-maps (last visited Dec. 1, 2020). validation period, a debt collector must verification after the validation period expires, a 192 FDCPA section 809(a)(3) requires the cease collection of the debt . . . .’’ debt collector nevertheless may choose to do so. validation notice to include ‘‘a statement that (emphasis added). The Bureau The Bureau has received feedback from debt unless the consumer, within thirty days after collectors and at least one industry trade group that receipt of the notice, disputes the validity of the determines that a consumer’s original- many debt collectors respond to disputes with debt, or any portion thereof, the debt will be verification, and to original-creditor-information assumed to be valid by the debt collector.’’ 15 193 85 FR 76734, 76833–34, 76892 (Nov. 30, requests, after the validation period has expired. U.S.C. 1692g(a)(3) (emphasis added). 2020).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00033 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5798 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

creditor information request or dispute 34(c) Validation Information to clarify what version of the FDCPA has been ‘‘submitted by the consumer’’ Proposed § 1006.34(c) set forth the section 807(11) disclosure should for purposes of § 1006.38(c) and (d)(2) if validation information that proposed appear on the validation notice: The the consumer sends or submits the § 1006.34(a)(1) would have required longer, initial disclosure described in request within the 30-day period debt collectors to disclose. The § 1006.18(e)(1) or the shorter, established in § 1006.34(b)(5), even if validation information consisted of four subsequent disclosure described in the debt collector does not receive the general categories: Information to help § 1006.18(e)(2). The Bureau is adopting new comment request until after the 30-day period. consumers identify debts (including the 34(c)(1)–1 to clarify that a debt collector For the reasons discussed above, the information specifically referenced in who provides the validation notice Bureau is adopting § 1006.34(b)(5) to FDCPA section 809(a)); information required by § 1006.34(a)(1)(i)(A)—i.e., a provide that validation period means about consumers’ protections in debt debt collector who provides the the period starting on the date that a collection; information to facilitate validation notice in the initial debt collector provides the validation consumers’ ability to exercise their information and ending 30 days after communication—complies with rights with respect to debt collection; § 1006.34(c)(1) by providing the the consumer receives or is assumed to and certain other statutorily required receive it. Section 1006.34(b)(5) also disclosure described in § 1006.18(e)(1). information. Each of those categories is The disclosure described in specifies that a debt collector may addressed separately in the section-by- assume that a consumer receives the § 1006.18(e)(1) is broader than, and section analysis of § 1006.34(c)(1) incorporates the content of, the validation information on any date that through (4). is at least five days (excluding legal disclosure described in § 1006.18(e)(2). public holidays identified in 5 U.S.C. 34(c)(1) Debt Collector Communication Accordingly, new comment 34(c)(1)–1 6103(a) (i.e., federally recognized public Disclosure also clarifies that a debt collector who provides the validation notice required holidays), Saturdays, and Sundays) after FDCPA section 807(11) requires a by § 1006.34(a)(1)(i)(B)—i.e., a debt the debt collector provides it. debt collector to disclose in its initial collector who provides the validation Proposed comment 34(b)(5)–1 written communication with a notice within five days of the initial clarified that, if a debt collector sends a consumer—and, if the initial subsequent validation notice to a communication—complies with communication is oral, in that oral § 1006.34(c)(1) by providing either the consumer because the consumer did not communication as well—that the debt receive the original validation notice disclosure required by § 1006.18(e)(1) or collector is attempting to collect a debt the disclosure required by and the consumer has not otherwise and that any information obtained will § 1006.18(e)(2).198 The Bureau received the validation information, the 194 be used for that purpose. A debt determines that this clarification will debt collector must calculate the end of collector must also disclose in each facilitate compliance, encourage use of the validation period based on the date subsequent communication that the the model validation notice, and protect the consumer receives or is assumed to communication is from a debt collector. consumers. receive the subsequent validation If a debt collector provides validation The consumer advocate commenter notice. information, the debt collector engages also recommended that the Bureau At least two industry trade group in a debt collection communication and require every validation notice to commenters stated that proposed must make an appropriate FDCPA include a Spanish translation of the comment 34(b)(5)–1 was consistent with section 807(11) disclosure.195 FDCPA section 807(11) disclosure to current industry practice. According to The Bureau proposed to implement assist Spanish-speaking consumers. The these commenters, if a validation notice the FDCPA section 807(11) disclosures Bureau declines to do so. Mandating is returned as undeliverable, debt in § 1006.18(e).196 In turn, the Bureau that every debt collector provide a collectors typically send a new proposed in § 1006.34(c)(1) that the Spanish translation of the disclosure is validation notice and provide a new § 1006.18(e) disclosure is required unnecessary for the majority of period for consumers to exercise their validation information. The Bureau consumers, who are not Spanish verification rights. A law firm finalized § 1006.18(e) in the November speakers. Further, a mandatory commenter asked the Bureau to provide 2020 Final Rule.197 Section translation could undermine the additional guidance on a debt collector’s 1006.18(e)(1) requires a debt collector to effectiveness of the other validation duties if a validation notice is returned disclose in its initial communication information disclosures. Moreover, the as undeliverable after the validation that the debt collector is attempting to November 2020 Final Rule contained a period has expired. collect a debt and that any information targeted language access intervention on The Bureau concludes based on obtained will be used for that purpose. this topic. Pursuant to § 1006.18(e)(4) in feedback received and its own market- Section 1006.18(e)(2) requires a debt that rule, debt collectors will be monitoring, supervision, and collector to disclose in each subsequent required to make the FDCPA section enforcement experience that proposed communication that the communication 807(11) disclosure in the same language comment 34(b)(5)–1 is consistent with is from a debt collector. or languages used for the rest of the existing industry practice and therefore At least one industry trade group communication in which the is adopting it largely as proposed but supported proposed § 1006.34(c)(1)’s disclosures are conveyed. Thus, if a debt renumbered as comment 34(b)(5)–2. If a cross-reference to the FDCPA section collector provides a consumer a validation notice is returned as 807(11) requirement. A consumer undeliverable after the validation period advocate commenter asked the Bureau 198 The model validation notice includes the has expired and the debt collector sends disclosure required by § 1006.18(e)(1). As explained in the section-by-section analysis of § 1006.34(d)(2), 194 See 15 U.S.C. 1692e(11). a subsequent notice, then, as stated in new comment 34(d)(2)(i)–1 clarifies that a debt 195 the comment, the debt collector must See, e.g., Dorsey v. Morgan, 760 F. Supp. 509 collector who uses the model notice to provide a calculate the end of the validation (D. Md. 1991). validation notice as described in 196 See 84 FR 23274, 23322–23, 23402 (May 21, period based on the date the consumer § 1006.34(a)(1)(i)(B) may replace the disclosure 2019). required by § 1006.18(e)(1) with the disclosure receives or is assumed to receive the 197 See 85 FR 76734, 76830–31, 76891–92 (Nov. required by § 1006.18(e)(2) without losing the safe subsequent validation notice. 30, 2020). harbor provided by use of the model notice.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00034 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5799

validation notice in Spanish pursuant to collectors to disclose the proposed General. The Bureau’s testing also § 1006.34(e), the debt collector must information about the debt and parties supports this conclusion.200 include on that notice a Spanish related to the debt would increase costs The Bureau determines that requiring translation of the FDCPA section for debt collectors as well as for debt collectors to disclose the 807(11) disclosure. creditors. Another industry commenter information about the debt and parties Accordingly, the Bureau is finalizing suggested that proposed § 1006.34(c)(2) related to the debt in § 1006.34(c)(2) is § 1006.34(c)(1) as proposed and is was not feasible because debt collectors necessary. Industry commenters did not finalizing new comment 34(c)(1)–1 as rely on creditors for account support their claims about the relative described above. information and records. According to infrequency of problematic debts with this commenter, if creditors did not verifiable evidence.201 In addition, a 34(c)(2) Information About the Debt provide the information, debt collectors group of State Attorneys General stated Proposed § 1006.34(c)(2) specified would be unable to comply with that consumers routinely complain that that certain information about the debt § 1006.34(c)(2). they do not recognize debts being and the parties related to the debt was Some commenters stated that the collected, and the Bureau’s complaint required validation information.199 The information proposed § 1006.34(c)(2) statistics indicate similar concerns section-by-section analysis of proposed would require might confuse consumers about debts among consumers.202 Thus, § 1006.34(c)(2)(i) through (x) discussed and questioned whether it was the Bureau is finalizing § 1006.34(c)(2) the specific items of information, which supported by the Bureau’s consumer to require information about the debt were designed to help consumers testing. and parties related to the debt. recognize debts and included existing Some commenters recommended that The Bureau also determines that disclosures. The Bureau addresses the Bureau revise proposed § 1006.34(c)(2) will not impose undue comments related to specific disclosures § 1006.34(c)(2) to require additional industry burden. As discussed in part in the section-by-section analysis of validation information. Federal VII, while § 1006.34(c)(2) may increase § 1006.34(c)(2)(i) through (x). In this government agency staff, a group of some costs for debt collectors, as well as section-by-section analysis, the Bureau State Attorneys General, and a cause some indirect costs for creditors, addresses comments related to government commenter suggested that the Bureau does not expect these costs § 1006.34(c)(2) more generally. the name of the original creditor and the to be substantial. The Bureau disagrees Some commenters supported date of the original transaction should that a significant number of debt proposed § 1006.34(c)(2). A consumer be required validation information. A collectors will be unable to comply with advocate and a municipal government group of State Attorneys General § 1006.34(c)(2). The Bureau commenter stated that the proposed suggested that the Bureau require debt acknowledges that debt collectors validation information would help collectors to provide information about depend on creditors to provide account information and that creditors will not consumers determine whether they owe the debt as of the charge-off date. Two be required by the final rule to provide a debt. A group of State Attorneys associations representing State the information that § 1006.34(c)(2) will General stated that consumers today do regulatory agencies recommended that require. Notwithstanding this fact, the not consistently receive the information the Bureau require disclosure of a debt Bureau has received feedback that many they need to identify debts. According collector’s State license or registration creditors today make available much of to these commenters, consumers number, such as the Nationwide Multi- the information mandated by routinely submit complaints that they State Licensing System identification. § 1006.34(c)(2). To the extent that do not recognize the debts or creditors According to these commenters, creditors do not already provide debt disclosed on validation notices. An requiring debt collectors to disclose industry trade group stated that it would collectors with this information, the license or registration information Bureau determines that creditors will be be feasible for debt collectors to disclose would assist regulators examining for incentivized to do so after the proposed information because debt compliance with State debt collection § 1006.34(c)(2)’s effective date because buyers routinely obtain such laws. In addition, a consumer advocate, the debt collectors they hire or sell debts information at purchase. an industry trade group, and an industry to will be unable to legally collect Other commenters objected to commenter recommended that, for without it. proposed § 1006.34(c)(2) and suggested medical debt, validation information that consumers do not need information should include the facility name 200 Certain information that Bureau qualitative beyond what the FDCPA expressly associated with the debt. According to testing indicates helps consumers to recognize a requires. An industry trade group stated, these commenters, a consumer may be debt—including a debt’s original account number or without providing verifiable evidence, an itemization of interest and fees—may not more likely to recognize a facility where consistently appear on validation notices. See FMG that most debts are valid and asserted treatment was provided than the name Cognitive Report, supra note 27, at 8–11. that less than one-half of 1 percent of of the physician or healthcare provider 201 Even assuming one commenter’s claim that debts lack a contractual basis or are to whom the consumer owes the debt. only one-half of 1 percent of debts lack a miscalculated. According to this contractual basis or are miscalculated, this error After considering the feedback, the rate would impact hundreds of thousands of commenter, the small number of debts Bureau has determined to finalize consumers annually. As the proposal noted, 49 that are problematic can be resolved by § 1006.34(c)(2). The Bureau determines million consumers are contacted by debt collectors consumers invoking their FDCPA that validation notices in use today every year. See 84 FR 23274, 23382 n.656 (May 21, 2019). If one-half of 1 percent of these consumers verification rights. frequently lack sufficient information received validation notices for debts they did not Other commenters who objected to about the debt and the parties related to owe, 245,000 consumers could be impacted. proposed § 1006.34(c)(2) cited industry the debt, and this lack of information 202 The most common debt collection complaint burden. For example, one industry undermines the ability of consumers to received by the Bureau continues to be about attempts to collect a debt that the consumer reports commenter stated that requiring debt determine whether they owe an alleged is not owed. See 2020 FDCPA Annual Report, supra debt. This conclusion is consistent with note 12, at 14. Consumers may report that a debt 199 84 FR 23274, 23338–42, 23404 (May 21, 2019). feedback from Federal and State is not owed for a variety of reasons including, but Proposed § 1006.34(c)(5) set forth a special rule for government commenters, including the not limited to, that the debt is being collected in information about the debt for certain residential error or that the consumer does not recognize the mortgage debt. FTC and a group of State Attorneys debt.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00035 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5800 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

The Bureau determines that the respect to the collection of debts by debt clients of debt collectors, including the information required by § 1006.34(c)(2) collectors and, as described more fully Department of Education, do not permit will not confuse consumers. As below, its authority to implement and debt collectors to receive payments at discussed in part III.C, the Bureau has interpret FDCPA section 809. In their office locations and instead require validated the model validation notice addition, except with respect to final debt collectors to direct payments to a and the validation information § 1006.34(c)(2)(v) and (ix), the Bureau is ‘‘lockbox,’’ which is a post office box contained therein through four rounds finalizing § 1006.34(c)(2) pursuant to its administered by a third party for the of consumer testing. authority under section 1032(a) of the receipt of payments. The Bureau declines the Dodd-Frank Act, on the basis that the A consumer advocate asked the recommendation to add certain validation information describes the Bureau to modify proposed disclosures to § 1006.34(c)(2). First, the debt, which is a feature of debt § 1006.34(c)(2)(i) to require debt Bureau declines to require the name of collection. collectors to also disclose a telephone the original creditor and the date of the number, an email address, and any original transaction. Requiring this 34(c)(2)(i) other method the debt collector uses for additional information on validation FDCPA section 809(b) provides that a consumer communications. notices may overwhelm consumers, may consumer may notify a debt collector in After considering the feedback, the be repetitive, or may otherwise not add writing, within 30 days after receipt of Bureau is adopting § 1006.34(c)(2)(i) to consumer understanding because the the information required by FDCPA with a revision for clarity and is also validation information already includes section 809(a), that the consumer is adopting two new comments to items such as the debt collector’s name exercising certain verification rights, incorporate certain suggestions made by (§ 1006.34(c)(2)(i)), the name of the including the right to dispute the commenters. creditor to whom the debt was owed on debt.204 FDCPA section 809(a)(3) As noted, some commenters suggested the itemization date through (5), in turn, requires debt that debt collectors who use multiple (§ 1006.34(c)(2)(iii)), and the name of collectors to disclose how consumers mailing addresses be permitted to the creditor to whom debt is currently may exercise their verification rights. include more than one mailing address owed (§ 1006.34(c)(2)(v)). The proposal stated that to notify a debt as validation information. The Bureau The Bureau also declines to tie collector in writing that the consumer is declines to affirmatively permit the use information disclosure requirements to exercising the consumer’s verification of more than one mailing address as the date that a debt was charged off rights, the consumer must have the debt validation information. As discussed in because charge off is not relevant to all collector’s name and address.205 the proposal, the purpose of validation debt types. However, as discussed in the Proposed § 1006.34(c)(2)(i) therefore information is to facilitate a consumer’s section-by-section analysis of provided that the debt collector’s name exercise of their rights in debt § 1006.34(b)(3)(ii), a debt collector may and mailing address are required collection, namely, the right to dispute use the charge-off date as the validation information. the debt or to request original-creditor itemization date, in which case Industry and industry trade group information. Accordingly, the mailing consumers will receive information commenters recommended various address included in the validation about the amount of the date as of the revisions to proposed § 1006.34(c)(2)(i). information must be an address at charge-off date, as well as information First, some industry trade group which the debt collector accepts about interest, fees, payments, and commenters suggested that the Bureau disputes and original-creditor credits since that date.203 permit a debt collector to disclose a information requests. The Bureau is The Bureau also declines to require a trade name or doing-business-as name revising § 1006.34(c)(2)(i) to debt collector to disclose a State license (DBA), in lieu of the debt collector’s affirmatively state this requirement. If a or registration number. If a debt legal name. According to these debt collector only accepts payments at collector is specifically required by commenters, because a debt collector a different address than the address at applicable law to disclose such may not use its legal name when which it accepts disputes and original- information, a debt collector may do so communicating with consumers, a creditor information requests, the as an optional disclosure under final consumer may be more likely to Bureau notes that the debt collector § 1006.34(d)(3)(iv)(A). recognize the debt collector’s trade need not include payment disclosures The Bureau does agree that a facility name or DBA. with the validation information; they name associated with a debt may be Next, one industry trade group are optional disclosures under helpful to consumers in the medical commenter recommended that the § 1006.34(d)(3)(iii).206 Moreover, if a debt context. The Bureau is not Bureau permit a debt collector to debt collector omits the optional modifying § 1006.34(c)(2) to require this disclose a vendor’s mailing address payment disclosures, the validation information, but final because some debt collectors do not § 1006.34(d)(3)(vii) permits debt receive mail from consumers at their 206 The Bureau also notes that nothing in collectors to include facility name as an office locations and instead use letter Regulation F prevents a debt collector from using optional disclosure. vendors. a different mailing address in communications that Finally, some industry and industry do not contain the validation information. For Accordingly, as noted above, the example, if a debt collector accepts payments at a Bureau is finalizing § 1006.34(c)(2) to trade group commenters recommended different address, the payment address may be require debt collectors to provide that the Bureau permit debt collectors to included in a separate communication seeking certain information about the debt and disclose multiple addresses. Some of payment. Additionally, as noted at the outset of the these commenters stated that debt section-by-section analysis of § 1006.34, the Bureau the parties related to the debt. Except is not finalizing the proposed requirement that all with respect to final § 1006.34(c)(2)(iii), collectors may use separate addresses validation notices be substantially similar to the the Bureau is finalizing § 1006.34(c)(2) for payments and other correspondence, Bureau’s model validation notice. Therefore, a debt pursuant to its authority under FDCPA including disputes. For example, an collector may include a separate payment address industry trade group stated that some on a validation notice, but a debt collector who section 814(d) to prescribe rules with does so will not receive safe harbors pursuant to §§ 1006.34(d)(2) and 1006.38(b)(2) and must 203 See the section-by-section analysis of 204 15 U.S.C. 1692g(b). otherwise comply with the FDCPA and Regulation § 1006.34(c)(2)(vii) and (viii). 205 84 FR 23274, 23339, 23404 (May 21, 2019). F.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00036 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5801

notice will continue to contain contact consumer determine whether the it does not alter the fundamental information for the debt collector, consumer owes a debt and is the expectation that a debt collector will including, at the debt collector’s option, intended recipient of a validation disclose the most complete and accurate the debt collector’s telephone number notice.208 The Bureau therefore name about which the debt collector has pursuant to § 1006.34(d)(3)(i), should proposed § 1006.34(c)(2)(ii) to provide knowledge. In addition, the Bureau the consumer wish to reach out for that the consumer’s name and mailing determines that the reference to payment information or to make a address is required validation ‘‘another source’’ is ambiguous and may payment. information. As discussed below, create unjustified litigation risk and The Bureau is also adopting new proposed comment 34(c)(2)(ii)–1 industry burden. comment 34(c)(2)(i)–1 to clarify that a clarified the meaning of the term Second, the Bureau is revising the debt collector may disclose the debt ‘‘consumer’s name.’’ comment to clarify that a debt collector collector’s trade name or DBA in lieu of A consumer advocate and an industry must reasonably determine ‘‘the most the debt collector’s legal name. The trade group expressed overall support complete and accurate version’’ of a Bureau observes that, in some cases, a for the proposed provision. The consumer’s name. The Bureau intended debt collector’s trade name or DBA may consumer advocate stated that consumer that a debt collector would be required be more recognizable to consumers than name information would help a to disclose ‘‘accurate’’ consumer name the debt collector’s legal name. The consumer identify an alleged debt. The information, but proposed comment Bureau therefore determines that a debt consumer advocate also stated that 34(c)(2)–1 only referred to ‘‘the most collector may use its trade name or DBA complete name information—such as a complete version’’ of the consumer’s when communicating with consumers. first name, middle name, last name, and name. Finally, the Bureau has However, when disclosing a trade name suffix—would help consumers elaborated on the example of a debt or DBA, the debt collector may not do determine whether a debt collector is collector omitting a consumer’s name so in a manner that violates the FDCPA seeking a different consumer with a information. section 807 prohibition on false or similar name. According to the industry misleading representations. For trade group, it would be unreasonable 34(c)(2)(iii) 209 example, a debt collector may violate for a debt collector to omit known name FDCPA section 809(a)(2), which the FDCPA and this final rule if the debt information. For the reasons discussed requires debt collectors to disclose to collector discloses a trade name or DBA in the proposal, the Bureau is finalizing consumers the name of the creditor to that falsely represents or implies that § 1006.34(c)(2)(ii) as proposed. whom the debt is owed, typically is the debt collector is an attorney, when Proposed comment 34(c)(2)(ii)–1 understood to refer to the current that is not the case.207 clarified that the consumer’s name creditor.210 Second, the Bureau is adopting new should reflect what the debt collector As the proposal stated, if the comment 34(c)(2)(i)–2 to clarify that a reasonably determines is the most original creditor (or the creditor as of debt collector may disclose a vendor’s complete version of the name the itemization date) and the current mailing address, if that is an address at information about which the debt creditor are the same, a consumer is which the debt collector accepts collector has knowledge, whether more likely to recognize the creditor’s disputes and requests for original- obtained from the creditor or another name. If they are different, however, a creditor information. As one commenter source. Proposed comment 34(c)(2)(ii)– consumer may be less likely to observed, some debt collectors may use 1 further explained that a debt collector recognize the current creditor than the a vendor to receive mail from would not be able to omit name name of the creditor as of the consumers. The Bureau is finalizing information in a manner that would itemization date. Proposed comment 34(c)(2)(i)–2 to accommodate create a false, misleading, or confusing § 1006.34(c)(2)(iv) provided that, if a this business practice. impression about the consumer’s debt collector is collecting a consumer The Bureau declines to adopt the identity and provided an example. financial product or service debt (as that recommendation of some commenters to Some commenters raised concerns term was defined in proposed require debt collectors to disclose other about proposed comment 34(c)(2)(ii)–1. § 1006.2(f)), the name of the creditor to contact methods, including a telephone A number of industry and industry whom the debt was owed on the number or an email address. The trade group commenters objected to the itemization date is required validation 211 FDCPA does not require debt collectors statement that debt collectors would be information. For the reasons to communicate by telephone or email. required to determine the most discussed below, the Bureau is However, as noted, § 1006.34(d)(3)(i) complete version of the name about finalizing proposed § 1006.34(c)(2)(iv) permits a debt collector to disclose the which the debt collector has knowledge, with minor wording changes and debt collector’s telephone number. whether obtained from the creditor or renumbered as § 1006.34(c)(2)(iii), and Likewise, § 1006.34(d)(3)(v)(A), permits another source. These commenters is adopting new comment 34(c)(2)(iii)– a debt collector to disclose the debt stated that the reference to ‘‘another 1 to clarify that a debt collector may collector’s website and email address. source’’ was ambiguous and would disclose the trade name or DBA of the create litigation risk and compel debt creditor to whom the debt was owed on 34(c)(2)(ii) collectors to conduct open-ended the itemization date. FDCPA section 809(a) requires debt research about a consumer’s name. collectors to disclose information about Several commenters urged the Bureau to 209 Proposed § 1006.34(c)(2)(iii) generally the debt that helps consumers identify omit the reference to ‘‘another source.’’ provided that the merchant brand, if any, associated with a credit card debt was required validation the debt and facilitates resolution of the The Bureau is finalizing comment information. The Bureau is finalizing merchant debt. The proposal stated that, like the 34(c)(2)–1 with revisions in response to brand information as an optional disclosure. See the information FDCPA section 809(a) feedback and for clarity. First, the section-by-section analysis of § 1006.34(d)(3)(vii). expressly requires, the consumer’s name Bureau is deleting the phrase ‘‘whether The Bureau therefore is finalizing proposed § 1006.34(c)(2)(iv) through (x) as § 1006.34(c)(2)(iii) and address is essential information obtained from the creditor or another through (ix). about the debt that may help a source.’’ This phrase is unnecessary as 210 See 15 U.S.C. 1692g(a)(2). See the section-by- section analysis of § 1006.34(c)(2)(v). 207 See 15 U.S.C. 1692e(3). 208 84 FR 23274, 23339 (May 21, 2019). 211 84 FR 23274, 23404 (May 21, 2019).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00037 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5802 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

An industry trade group commenter the debt was owed on the itemization Bureau determines that an account expressed support for requiring debt date. number associated with a debt as of one collectors to disclose the creditor to of those dates will also likely resonate 34(c)(2)(iv) whom the debt was owed on the with a consumer, even if it is not the itemization date but asked the Bureau to The purpose of FDCPA section 809 is current account number. clarify that a debt collector may disclose to ‘‘eliminate the recurring problem of Accordingly, the Bureau is finalizing this creditor’s trade name or DBA, as debt collectors dunning the wrong § 1006.34(c)(2)(iv) and its related opposed to its legal name, which a person or attempting to collect debts commentary largely as proposed, with consumer may not recognize. which the consumer has already only minor wording changes to the A consumer advocate objected to the paid.’’ 212 Consistent with the FDCPA’s commentary for clarity. No substantive proposal because a consumer may not purpose, FDCPA section 809(a) requires change is intended. recognize the creditor to whom the debt debt collectors to disclose to consumers 34(c)(2)(v) was owed on the itemization date. certain information, such as the amount According to the commenter, in some of the debt, to help consumers identify FDCPA section 809(a)(2) requires debt cases, the itemization date may have debts. According to the proposal, an collectors to disclose to consumers the occurred years after the debt was account number associated with a debt name of the creditor to whom the debt incurred. And, particularly if the debt on the itemization date may be integral is owed.214 By using the present tense was transferred before the itemization information that a consumer uses to ‘‘is owed,’’ the statute appears to refer date, the consumer may not recognize identify the debt.213 The Bureau to the creditor to whom the debt is owed the creditor as of that date. As an proposed § 1006.34(c)(2)(v) to provide when the debt collector makes the alternative, the commenter suggested that the account number, if any, disclosure.215 The Bureau proposed that a debt collector be required to associated with the debt on the § 1006.34(c)(2)(vi) to provide that the disclose the name of the original itemization date, or a truncated version name of the current creditor is required creditor. of that number, is required validation validation information. For the reasons As discussed in the section-by-section information. Proposed comment discussed below, the Bureau is analysis of § 1006.34(c)(2)(i), an entity’s 34(c)(2)(v)–1 explained that a debt finalizing the proposal, renumbered as trade name or DBA may be more collector may truncate an account § 1006.34(c)(2)(v), and is adopting new recognizable to consumers than an number provided that the account comment 34(c)(2)(v)–1 to clarify that a entity’s legal name. It may be number remains recognizable. For the debt collector may disclose the trade appropriate for a debt collector to reasons discussed below, the Bureau is name or DBA of the creditor to whom disclose a creditor’s trade name or DBA, adopting proposed § 1006.34(c)(2)(v), the debt is currently owed, instead of its in lieu of the creditor’s legal name, renumbered as § 1006.34(c)(2)(iv), and legal name. when communicating with consumers. its related commentary with minor The Bureau received no comments Thus, the Bureau is adopting new wording changes. specifically addressing proposed comment 34(c)(2)(iii)–1 to clarify that a Industry commenters, a consumer § 1006.34(c)(2)(vi) and is finalizing it as debt collector may disclose as validation advocate, and a group of State Attorneys proposed but renumbered as information the trade name or DBA of General, expressed overall support for § 1006.34(c)(2)(v). An industry trade the creditor to whom the debt was owed proposed § 1006.34(c)(2)(v). However, group commenter recommended that on the itemization date. one industry commenter recommended the Bureau permit debt collectors to The Bureau declines to require a debt that the Bureau exempt debt collectors disclose, along with the required collector to disclose the name of the collecting residential mortgage debt validation information, all current and original creditor as validation from the requirement to disclose an past creditors associated with the debt. information under § 1006.34(c). FDCPA account number. According to the According to the commenter, some section 809(a)(5) and (b) require a debt commenter, the account number for a creditors, such as healthcare and collector to provide the name and residential mortgage that has had a financial services providers, may have address of the original creditor in servicing transfer may not be the current multiple sub-entities with different response to a consumer request. While account number, which might confuse corporate names. This commenter the Bureau acknowledges that, in some consumers. suggested that disclosing more names of cases, a consumer may not recognize the The Bureau concludes that an account creditors will increase the likelihood creditor to whom the debt was owed on number associated with a debt on the that a consumer will recognize one of the itemization date, this information itemization date may help some them. will still benefit some consumers. For consumers recognize the debt. The The Bureau declines to adopt this an older debt or a debt that has been Bureau declines to adopt the recommendation. Disclosing all current transferred, consumers may be more recommendation to exempt debt and past creditors along with the likely to recognize the creditor as of the collectors collecting residential validation information could itemization date than the current mortgage debt from disclosing an overwhelm and confuse consumers.216 creditor. account number. As discussed in the Thus, as discussed in the section-by- Accordingly, the Bureau is finalizing section-by-section analysis of section analysis of § 1006.34(c), the § 1006.34(c)(2)(iii) to provide that, if the § 1006.34(b)(3), the Bureau has Bureau is requiring debt collectors to debt collector is collecting debt related determined that the reference dates that to a consumer financial product or a debt collector may use to determine 214 See 15 U.S.C. 1692g(a)(2). 215 service as defined in § 1006.2(f), the the itemization date may be meaningful 84 FR 23274, 23341 (May 21, 2019). 216 During one round of cognitive testing, name of the creditor to whom the debt to consumers because they correspond participants were shown disclosure language that was owed on the itemization date is to a notable event in the debt’s history included a list of prior creditors. Confusion was required validation information. In that consumers may recall or be able to observed when participants tried to explain the addition, the Bureau is finalizing verify with records. By extension, the difference between prior and current creditors. The unclear relationship between creditors was comment 34(c)(2)(iii)–1 to clarify that a highlighted when participants attempted to identify debt collector may disclose the trade 212 S. Rep. No. 382, supra note 57, at 4. the creditor that currently owned the debt. See FMG name or DBA of the creditor to whom 213 84 FR 23274, 23340 (May 21, 2019). Cognitive Report, supra note 27, at 3–4.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00038 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5803

disclose as validation information only debt collector used to determine that date is required validation two creditors: The creditor to whom the date.219 information.220 Proposed comment debt was owed on the itemization date The Bureau declines to adopt this 34(c)(2)(viii)–1 explained that this (§ 1006.34(c)(2)(iii)) and the creditor to recommendation. As discussed in the amount includes any fees, interest, or whom the debt is currently owed section-by-section analysis of other charges owed as of the itemization (§ 1006.34(c)(2)(v)). Nothing in the final § 1006.34(b)(3), the Bureau determines date. rule prohibits a debt collector from that the reference dates that a debt An industry commenter questioned including the name of another creditor collector may use to determine the whether proposed § 1006.34(c)(2)(viii) on a validation notice, but a debt itemization date have a significant would significantly improve consumer collector who does so will not receive likelihood of being meaningful to understanding. According to the the § 1006.34(d)(2) safe harbor and will consumers because they correspond to commenter, if a debt collector risk not complying with the notable events in a debt’s history that determines the itemization date based requirements of § 1006.34, including the consumers may recall or be able to on the last statement date pursuant to § 1006.34(b)(1) clear and conspicuous verify with records. Because each of the § 1006.34(b)(3)(i), and if the debt is standard. reference dates may be meaningful to placed for collection shortly after the As discussed in the section-by-section consumers, the Bureau determines that last statement was provided, the current analysis of § 1006.34(c)(2)(i) and (iii), no additional disclosure explaining amount of the debt (which the Bureau the Bureau is finalizing new comments their relevance is necessary. Moreover, proposed as a separate item of required 34(c)(2)(i)–1 and 34(c)(2)(iii)–1 to clarify the Bureau determines that an validation information) and the amount that a debt collector may disclose an additional disclosure explaining the of the debt on the itemization date entity’s trade name or DBA, instead of reference date may confuse or would be approximately the same. The its legal name. The Bureau concludes overwhelm some consumers. While a commenter stated that, in this scenario, that it is also appropriate to permit a debt collector likely could describe disclosing the amount of the debt on the debt collector to disclose the trade name some reference dates (e.g., a last itemization date would not benefit the or DBA of a current creditor. Thus, the statement date) in a straightforward consumer. Bureau is adopting new comment manner, other reference dates (e.g., the The Bureau acknowledges that, for a 34(c)(2)(v)–1 to clarify that a debt charge-off date and the transaction date) given debt, the amount owed on the collector may disclose the trade name or do not lend themselves to a succinct itemization date and the current amount a DBA of the creditor to whom the debt explanation. That is because some of the debt may be similar or even the reference dates reflect financial is currently owed, instead of its legal same. However, as discussed below in concepts that are inherently complex name. the section-by-section analysis of final (i.e., charge off) or that could vary by § 1006.34(c)(2)(viii), even in these cases, 34(c)(2)(vi) debt type and the facts and the itemization of the debt will still be circumstances surrounding a particular FDCPA section 809(a)(1) requires debt required, and, as clarified in final debt (i.e., transaction dates). For such collectors to disclose to consumers the comment 34(c)(2)(viii)–1, the reference dates, a statement explaining amount of the debt.217 In itemization (if the amounts are the their relevance could distract or confuse § 1006.34(c)(2)(viii), the Bureau same) will show $0 in interest, fees, consumers, thereby undermining the proposed to interpret FDCPA section payments, and credits. As such, it efficacy of the other validation 809(a)(1), and to use its authority under information. should be clear to the consumer why the Dodd-Frank Act section 1032(a), to two amounts are the same. In many provide that the amount of the debt on 34(c)(2)(vii) other cases, these amounts will differ, the itemization date is required As noted, FDCPA section 809(a)(1) sometimes substantially. In these cases, validation information.218 Consistent requires debt collectors to disclose to the amount of the debt on the with proposed § 1006.34(c)(2)(viii), the consumers the amount of the debt. As itemization date will help consumers Bureau proposed § 1006.34(c)(2)(vii) to discussed in the proposal, the phrase recognize or evaluate the debt. provide that the itemization date, as ‘‘the amount of the debt’’ is ambiguous; For these reasons, the Bureau is defined in § 1006.34(b)(3), also is it does not specify which debt amount finalizing § 1006.34(c)(2)(viii) and its required validation information. For the is being referred to, even though the related commentary as proposed but reasons discussed below, the Bureau is debt amount may change over time. As renumbered as § 1006.34(c)(2)(vii). finalizing § 1006.34(c)(2)(vii) as also discussed in the proposal, 34(c)(2)(viii) proposed but renumbered as consumers may recognize the amount of § 1006.34(c)(2)(vi). the debt as of the itemization date (as As noted, FDCPA section 809(a)(1) Several commenters, including an the Bureau proposed to define that term requires a debt collector to disclose to industry commenter, an industry trade in § 1006.34(b)(3)). Because the amount consumers the amount of the debt. As group commenter, and a group of of the debt on the itemization date may discussed, the Bureau proposed to consumer advocates, stated that the help a consumer recognize a debt and implement and interpret FDCPA section itemization date may not be meaningful determine whether the amount of a debt 809(a)(1) to provide that debt collectors to consumers or help them recognize is accurate, the Bureau proposed to must disclose to consumers both the debts, if disclosed without an interpret FDCPA section 809(a)(1), and amount of the debt on the itemization explanation of its relevance. These to use its authority under Dodd-Frank date and the current amount of the debt commenters, along with Federal Act section 1032(a), to provide in (i.e., the amount of the debt on the date government agency staff, recommended proposed § 1006.34(c)(2)(viii) that the that the validation information is requiring debt collectors to disclose amount of the debt on the itemization with the itemization date a statement 220 84 FR 23274, 23341 (May 21, 2019). As explaining which reference date the 219 As discussed in the section-by-section analysis proposed, the Bureau is finalizing of § 1006.34(b)(3), the Bureau defines itemization § 1006.34(c)(2)(ix) (renumbered from proposed date to mean one of five reference dates for which § 1006.34(c)(2)(x)) separately to provide that the 217 See 15 U.S.C. 1692g(a)(1). a debt collector can ascertain the amount of the current amount of the debt also is required 218 84 FR 23274, 23341 (May 21, 2019). debt. validation information.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00039 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5804 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

provided).221 In conjunction with the industry commenters, debt collectors not support proposed § 1006.34(c)(2)(ix) amount of the debt on the itemization would either have to manually access because the testing did not involve date and the current amount of the debt, itemization information in creditor files actual consumers assessing debts in a the Bureau proposed § 1006.34(c)(2)(ix) or implement costly information real-world setting. to provide that an itemization of the technology solutions to comply with the A few industry commenters objected current amount of the debt, in a tabular proposed requirement. Some industry to proposed § 1006.34(c)(2)(ix) because format reflecting interest, fees, commenters, industry trade groups, and the FDCPA does not expressly require payments, and credits since the the SBA argued that the proposed an itemization of the current amount of itemization date, is required validation requirement would impose burdens on the debt. information. Proposed comment creditors. Commenters stated that some Some industry and industry trade 34(c)(2)(ix)–1 clarified how debt creditors may not maintain all of the group commenters objected to proposed collectors could disclose that no itemization information that the § 1006.34(c)(2)(ix) because the interest, fees, payments, or credits were proposal would require or do not itemization that appears on the model assessed or applied to a debt. typically provide itemization validation notice is formatted for a For the reasons discussed below, the information at placement and that to do single debt. According to commenters, Bureau is finalizing the proposal, so would involve significant expense. the proposal would not accommodate renumbered as § 1006.34(c)(2)(viii), with Some commenters speculated that, to debt collectors who combine multiple revisions to permit debt collectors to avoid such costs, creditors might refer debts in a single validation notice. disclose the itemization on a separate fewer accounts for collection or file Several commenters stated that not page provided in the same more collections lawsuits against permitting debt collectors to include communication with a validation consumers. The SBA, an industry trade multiple debts in one validation notice notice, if the debt collector includes on group, and industry commenters argued would dramatically increase the volume the validation notice, where the that compliance costs could be onerous of mail sent to consumers and would itemization would have appeared, a for smaller creditors and debt collectors. require consumers to exercise their statement referring to that separate page. For the most part, commenters offered verification rights for each individual The Bureau also is finalizing comment qualitative assessments of industry debt in the event that a consumer has 34(c)(2)(ix)–1 with a substantive burden, but one industry trade group a global dispute. Industry and industry modification and renumbered as did estimate that proposed trade group commenters stated that the comment 34(c)(2)(viii)–1, and is § 1006.34(c)(2)(ix) would impose inability to combine multiple debts adopting new comments 34(c)(2)(viii)–2 billions of dollars in compliance costs would be particularly challenging for through–4 to clarify other aspects of on industry.223 medical debt collectors. According to final § 1006.34(c)(2)(viii). Some commenters stated that some commenters, healthcare providers Commenters offered differing proposed § 1006.34(c)(2)(ix) is routinely combine multiple debts, in opinions regarding proposed unnecessary or unhelpful. Multiple part because they utilize family billing, § 1006.34(c)(2)(ix). A group of State industry commenters asserted that an which involves combining the separate Attorneys General, Federal government itemization is superfluous because bills for family members of a primary agency staff, consumer advocate consumers can exercise their FDCPA insured party. Commenters stated that commenters, some industry trade group section 809 verification rights to receive itemizations for medical debt may be commenters, and at least one industry more account information if desired. further complicated by the fact that commenter supported the proposed With respect to medical debt, an healthcare providers typically do not provision. These commenters generally industry trade group stated that maintain a rolling total of charges for a agreed that an itemization of the debt proposed § 1006.34(c)(2)(ix) is general service and instead individually would help consumers recognize an unnecessary because the Internal bill for each good or service provided. alleged debt and understand how the Revenue Service (IRS) requires non- At least one trade group stated that debt had evolved over time due to profit hospitals to send letters with student loan debt presents comparable interest, fees, payments, and credits. itemized information to consumers, and itemization-related challenges because Further, the Bureau received feedback health insurance companies routinely student loan debt may be provided that the proposal was consistent with mail to responsible parties ‘‘Explanation through multiple disbursements with some industry practice. For instance, a of Benefits’’ documents that provide separate account numbers. commenter noted an industry details about coverage, payments, and An industry trade group suggested certification standard that, during the co-pays. Some commenters expressed that proposed § 1006.34(c)(2)(ix) would sales of certain debt types, requires debt concern that proposed not accommodate debts in bankruptcy. buyers to obtain or provide the unpaid § 1006.34(c)(2)(ix) could increase legal According to the commenter, the balance due on the account, with a risk for debt collectors if the itemization proposal did not have the specificity breakdown of the post-charge-off information confused consumers. At necessary to account for how the balance, interest, fees, payments, and least one industry commenter stated Bankruptcy Code permits a debtor to credits or adjustments.222 that the Bureau’s consumer testing did cure pre-bankruptcy defaults over the The majority of industry and industry term of the bankruptcy plan while 223 trade group commenters objected to One industry trade group estimated that an maintaining regular post-bankruptcy itemization requirement would cost $600 million in payments. In addition, the commenter proposed § 1006.34(c)(2)(ix). Some such professional fees to conduct legal analyses of commenters stated that the proposed HIPAA compliance for medical debt, $30 million argued, the proposal would not itemization requirement would be for one-time system reprogramming for debt accommodate the nuances that arise in burdensome. According to several collectors, and $3 billion for one-time system the context of certain bankruptcy reprogramming for creditors. The proposal allegedly scenarios, such as a cramdown plan or would also result in billions of dollars in ongoing 224 221 84 FR 23274, 23341 (May 21, 2019). support costs and uncompensated medical care a lien strip. 222 See Receivables Mgmt. Ass’n Int’l, Receivables because, according to the commenter, the proposed Management Certification Program, at 41–45 (Mar. requirement, if adopted, would increase the risks 224 Pursuant to 11 U.S.C. 1322(b)(5), a bankruptcy 1, 2020), https://rmaintl.org/RMCP (last visited Dec. that hospitals might be unable to use debt court may change the underlying terms of a debt, 9, 2020). collectors. which is referred to as a ‘‘cramdown.’’ Pursuant to

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00040 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5805

With regard to medical debt, industry itemization categories should be rule provides sufficient flexibility to commenters, an industry trade group, combined as proposed, industry debt collectors to tailor the itemization and the SBA stated that healthcare commenters suggested that the Bureau to specific business practices and types providers might violate the Health not deviate from the proposal. For of debt. Accordingly, the Bureau does Insurance Portability and instance, a commenter stated that, in the not conclude, as some commenters Accountability Act of 1996 (HIPAA) 225 context of medical debts, listing all suggested, that the itemization Privacy Rule if they provided the payments and credits individually requirement will result in creditors proposed itemization.226 According to could result in multiple additional referring significantly fewer accounts for these commenters, proposed pages because of the number of third- collections or filing more lawsuits § 1006.34(c)(2)(ix) would require debt party payments. In contrast, citing the against consumers.231 collectors to disclose more information Bureau’s consumer testing, an academic Although several commenters stated than the minimum necessary for commenter argued that the itemization that the required itemization treatment of the patient, payment of the should be more detailed because information may not be available for bill, or healthcare operations, in consumers prefer to see penalties and every debt, the Bureau notes that the violation of HIPAA. fees broken down into individual itemization of the debt is based on the Commenters recommended various charges.229 type of routine account information that modifications to proposed After considering these comments, debt collectors typically provide in § 1006.34(c)(2)(ix). Industry and and for the reasons discussed below, the response to consumer verification industry trade group commenters Bureau is adopting the proposed requests and that, as such, debt suggested that debt collectors should requirement, renumbered as collectors should be able to obtain such not need to comply with proposed § 1006.34(c)(2)(viii), with revisions to information to comply with the final § 1006.34(c)(2)(ix) if interest and fees are provide that validation information rule. While some debt collectors do not not charged on an account.227 An includes an itemization of the current currently provide this itemized industry commenter stated that debt amount of the debt reflecting interest, information at the outset of collection collectors should be permitted to fees, payments, and credits since the communications, providing such indicate ‘‘U’’ for ‘‘unknown’’ or itemization date. Final itemization information to consumers ‘‘unavailable’’ in fields for which a § 1006.34(c)(2)(viii) further provides already is considered a best practice in creditor did not provide the relevant that a debt collector may disclose the some segments of the debt buying information. itemization on a separate page provided industry, including for credit card debt Several commenters asked the Bureau in the same communication with a and student loan debt.232 Further, debt to clarify the proposal. An industry validation notice, if the debt collector collectors are already required to commenter asked how a debt collector includes on the validation notice, where disclose an itemization for some types could disclose third-party payments or the itemization would have appeared, a of debt in at least one jurisdiction, New 233 insurance adjustments, particularly in statement referring to that separate page. York State. the context of medical debt. An industry The Bureau determines that an In addition, as discussed in the trade group sought additional guidance itemization of the debt will help a section-by-section analysis of about how to disclose balance increases significant number of consumers § 1006.34(b)(3), the final rule’s that are not caused by interest or fees, recognize whether they owe a debt and itemization date definition permits debt such as a balance increase caused by a evaluate whether the debt is accurate, collectors to select an itemization date returned payment. Noting the existence because the itemization will disclose that is feasible for the type of debt in of validation notice itemization how the amount may have changed over collection and the information debt requirements imposed by other time due, for example, to interest, fees, collectors receive. And applicable law, such as New York State payments, and credits that have been § 1006.34(c)(2)(viii) requires itemization regulations, two industry trade groups assessed or applied to the debt. of fees, interest, and credits only requested guidance about how a debt The Bureau determines that subsequent to the selected itemization collector should simultaneously comply § 1006.34(c)(2)(viii) will not create date. Thus, for example, if a debt with those requirements and proposed undue industry burden in light of collector selects the last statement date 228 § 1006.34(c)(2)(ix). modifications made in response to as the itemization date under With respect to the Bureau’s request comments.230 The Bureau acknowledges § 1006.34(b)(3), and if the creditor has for comment about whether the that complying with the itemization proposed itemization should be more 231 requirement may result in some An industry trade group cited an article to detailed—for example, by reflecting suggest that collection lawsuits nearly doubled in additional costs to debt collectors, each fee charged and each payment New York City since 2015 because of New York particularly if they do not currently State’s debt collection rules, which mandate an received—or whether certain provide itemization information at itemization. See Yuka Hayashi, Debt Collectors placement or on validation notices, as Wage a Comeback, Wall Street Journal (July 5, 11 U.S.C. 1322(c)(2), a secured claim can be 2019). The Bureau notes that the article did not cite converted to an unsecured claim, which is referred well as in some indirect costs to a connection between higher rates of lawsuits and to as a ‘‘lien strip.’’ creditors. However, the Bureau the itemization requirement. Instead, the article 225 Public Law 104–191, 110 Stat. 1936 (1996). concludes that these costs will not discussed the phenomenon of increasing lawsuits 226 45 CFR part 160 and part 164 subparts A and substantially impact companies’ nationwide, including in States like Texas, which had not recently introduced a significant debt E. business operations because the final 227 In addition, an industry trade group suggested collection rule. that debt collectors should not be required to 232 See Receivables Mgmt. Ass’n Int’l, Receivables comply with the itemization requirement for pre- 229 FMG Summary Report, supra note 29. Management Certification Program, at 41–45 (Mar. charge-off debts, particularly if periodic statements 230 For example, as noted in the section-by- 1, 2020), https://rmaintl.org/RMCP (last visited Dec. continue to be provided. The Bureau notes that, in section analysis of § 1006.34(b)(3)(i), a creditor or a 9, 2020). many cases, a person collecting a debt that was not third-party servicer acting on the creditor’s behalf 233 See 23 NYCRR 1.2(b) (requiring debt collectors in default at the time it was obtained by such may issue a statement even after the debt has gone to provide an itemized accounting of the debt person will not be a debt collector subject to the into collection. In that case, under within five days after the initial communication FDCPA or Regulation F. See FDCPA section § 1006.34(b)(3)(i), that new statement may serve as with a consumer in connection with the collection 803(6)(F)(iii), 15 U.S.C. 1692a(6)(F)(iii). the last statement for purposes of the itemization of certain types of charged-off debt, such as credit 228 See 23 NYCRR 1.2(b)(2). date. card debt).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00041 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5806 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

recently issued a statement to the a separate page.235 The itemization that To accommodate debt collectors who consumer, the debt collector need only appears on the model validation notice wish to combine multiple debts on a obtain and provide to the consumer an may not accommodate all debt types in single validation notice, the Bureau is itemization with fees, interest, and every instance. Some debt collectors adopting new comment 34(c)(2)(viii)–4 credits subsequent to that last statement may have legitimate reasons to combine to clarify that a debt collector who date. And, as discussed in the section- multiple debts on a single validation combines multiple debts on a single by-section analysis of § 1006.34(d)(2), a notice. This may be the case with validation notice complies with debt collector may provide the respect to medical debt (for instance, § 1006.34(c)(2)(viii) by disclosing either itemization on a separate page and owing to healthcare provider billing a single, cumulative itemization on the retain the safe harbor for the rest of the practices) and student loan debt validation notice or a separate validation notice. For all of these (because consumers may receive loans itemization of each debt on a separate reasons, the Bureau concludes that the through multiple disbursements with page or pages provided in the same final rule will not impose undue separate account numbers). As finalized, communication as the validation burdens on debt collectors and will § 1006.34(c)(2)(viii) states that a debt notice.238 provide consumers with useful collector may disclose the itemization The Bureau concludes that the information. The Bureau will monitor on a separate page provided in the same itemization requirement will not cause whether the itemization date definition, communication with a validation healthcare providers or debt collectors including the last statement date notice, if the debt collector includes on to violate the HIPAA Privacy Rule. HHS definition, meets these goals. the validation notice, where the staff has advised the Bureau that the itemization would have appeared, a HIPAA Privacy Rule generally permits The Bureau disagrees that statement referring to that separate covered entities to disclose protected § 1006.34(c)(2)(viii) is unnecessary or page.236 New comment 34(c)(2)(viii)–3 health information required by unhelpful. The verification rights clarifies that a debt collector may applicable law.239 Because disclosure of afforded by FDCPA section 809 are an comply with the requirement to refer to itemization information will be important statutory protection; however, the separate page by, for example, necessary to comply with they do not serve the same purpose or including on the validation notice the § 1006.34(c)(2)(viii), this guidance provide an adequate substitute to the statement, ‘‘See the enclosed separate indicates that the HIPAA Privacy Rule itemization of the debt that page for an itemization of the debt,’’ will permit its disclosure. § 1006.34(c)(2)(viii) will require. The situated next to the information about The Bureau declines to modify Bureau disagrees that an itemization of the current amount of the debt required § 1006.34(c)(2)(viii) as commenters the current amount of the debt is by § 1006.34(c)(2)(ix).237 otherwise recommended. An unnecessary for medical debt, as some The Bureau is making an additional itemization, even if no interest and fees commenters argued. Although some change to § 1006.34(c)(2)(viii). As have been assessed or charged on an non-profit hospitals or insurance finalized, § 1006.34(c)(2)(viii) omits the account, remains relevant information companies may provide itemization proposed language that an itemization about the debt. Further, complying with information to some consumers, must be ‘‘in a tabular format.’’ The § 1006.34(c)(2)(viii) if no interest and commenters did not suggest, and the Bureau determined that it is fees have been assessed or charged is Bureau is not aware of other evidence unnecessary and unwarranted to relatively straightforward, and comment indicating, that all consumers with mandate the use of a tabular format 34(c)(2)(viii)–1 clarifies how debt medical debt receive itemization because, if the itemization information collectors may do so. information such that is provided on a separate page or orally, However, the Bureau is finalizing § 1006.34(c)(2)(viii) would be using a tabular format may be proposed comment 34(c)(2)(viii)–1 with unnecessary. The Bureau also disagrees impractical or infeasible and, if the a modification to delete language stating with comments that an itemization will itemization information is provided on that debt collectors may indicate ‘‘N/A’’ confuse consumers. As the proposal a validation notice, debt collectors in a required field when no interest, noted, the Bureau’s qualitative likely will use the tabular format shown fees, payments, or creditors have been consumer testing indicates that an on the model notice such that they may itemization improves consumer receive a safe harbor for compliance 238 Relatedly, as discussed in the section-by- section analysis of § 1006.34(c)(2)(ix), the Bureau is 234 with the information and form understanding about the debt. adopting new comment 34(c)(2)(ix)–2 to clarify that requirements of § 1006.34(c) and (d)(1). The Bureau also disagrees that the a debt collector who combines multiple debts on a FDCPA’s not expressly requiring an single validation notice complies with 235 Under § 1006.34(d)(2)(ii), a debt collector who § 1006.34(c)(2)(ix)’s requirement to disclose the itemization is a sufficient reason for the otherwise uses the model validation notice or a ‘‘current amount of the debt’’ by disclosing on the Bureau not to require it by rule. The substantially similar form, but who provides the validation notice a single, cumulative figure that is Bureau proposed and is finalizing the itemization of the current amount of the debt on the sum of the current amount of all the debts. 239 itemization requirement pursuant to its separate page, receives a safe harbor for compliance See 45 CFR 164.512(a)(1) (‘‘A covered entity with the information and form requirements of may use or disclose protected health information to authority to interpret FDCPA section § 1006.34(c) and (d)(1) except with respect to the the extent that such use or disclosure is required 809(a), as well as pursuant to its itemization that appears on the separate page. by law and the use or disclosure complies with and authority under Dodd-Frank Act section 236 For example, when delivering a validation is limited to the relevant requirements of such 1032(a) to prescribe rules to ensure that notice by mail, a debt collector may include the law.’’); see also U.S. Dep’t of Health & Human separate itemization in the same envelope as the Servs., Does the HIPAA Privacy Rule prevent health the features of debt collection are fully, validation notice. Similarly, when delivering a plans and providers from using debt collection accurately, and effectively disclosed to validation notice electronically, a debt collector agencies? Does the Privacy Rule conflict with the consumers. may include the separate itemization in the same Fair Debt Collection Practices Act?, https:// email as the validation notice. www.hhs.gov/hipaa/for-professionals/faq/268/does- The Bureau is revising 237 Section 1006.34(d)(2)(iii) establishes that a the-hipaa-privacy-rule-prevent-health-care- § 1006.34(c)(2)(viii) to permit debt debt collector who uses the model validation notice providers-from-using-debt-collection-agencies/ collectors to disclose the itemization on and who provides an itemization on a separate page index.html (last visited Dec. 1, 2020) (noting that receives a safe harbor for compliance with the the HIPAA Privacy Rule permits healthcare information and form requirements of § 1006.34(c) providers to provide the minimum necessary 234 See 84 FR 23274, 23341 (May 21, 2019); FMG and (d)(1), except with respect to the disclosures patient information to debt collectors for the Usability Report, supra note 28, at 16–19. that appear on the separate page. purpose of receiving payment).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00042 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5807

assessed or applied to the account the itemization required by 34(c)(2)(ix) because different consumers may § 1006.34(c)(2)(viii).240 Further, FDCPA section 809(a)(1) requires debt interpret ‘‘N/A’’ differently. For consumers likely would not benefit— collectors to disclose to consumers the example, some consumers might and, in fact, may be disadvantaged—by amount of the debt. Proposed understand it as indicating ‘‘not receiving multiple itemizations with the § 1006.34(c)(2)(x) provided that the available,’’ and others might construe it validation information. For instance, current amount of the debt is required as meaning ‘‘not applicable.’’ To although a debt collector could include validation information.241 Proposed eliminate this potential ambiguity, the both the itemization required by comment 34(c)(2)(x)–1 explained that, Bureau is revising comment § 1006.34(c)(2)(viii) on the front of a for residential mortgage debt subject to 34(c)(2)(viii)–1 to provide that a debt validation notice, and, on the reverse, collector may indicate that the value of Regulation Z, 12 CFR 1026.41, a debt an itemization specifically required by collector could comply with a required field is ‘‘0,’’ ‘‘none,’’ or may other applicable law (as an optional state that no interest, fees, payments, or § 1006.34(c)(2)(x) by including in the disclosure pursuant to validation notice the total balance of the credits have been assessed or applied to § 1006.34(d)(3)(iv)), a consumer would the debt. The Bureau also is revising the outstanding mortgage, including be unlikely to benefit from receiving principal, interest, fees, and other comment to clarify, as was intended in two itemizations. In addition, the proposal, that a debt collector may charges. permitting debt collectors to Some commenters raised concerns not leave a required field blank. simultaneously satisfy the Bureau’s The Bureau declines the about how proposed § 1006.34(c)(2)(x) itemization requirement and a would disclose the current amount of recommendation that debt collectors be substantially similar requirement under permitted to indicate ‘‘U’’ for the debt. Industry and industry trade other applicable law with one ‘‘unknown’’ or ‘‘unavailable’’ in the group commenters stated that, if interest itemization avoids burdening debt itemization if a creditor did not provide and fees are increasing, the current collectors with the costs of creating the relevant information. Allowing debt amount of the debt that appears on a redundant disclosures. collectors to omit specific itemization validation notice may no longer be information in this manner could The Bureau determines that the accurate by the time the consumer incentivize debt collectors to avoid itemization of the current amount of the receives the notice. Some commenters receiving it, thereby undermining the debt should not be more detailed (e.g., stated that some State laws and court effectiveness of § 1006.34(c)(2)(viii). it should not include a detailed list of decisions require debt collectors to Debt collectors sought clarification as all payments). The itemization that disclose if the current amount of the to how they should comply with appears on the model validation notice debt may change due to interest and § 1006.34(c)(2)(viii) in various scenarios. has been validated through four rounds fees.242 To address these concerns, Depending on the facts and of consumer testing and is effective, and industry and industry trade group circumstances, a third-party payment or the Bureau agrees with commenters who commenters suggested that the Bureau insurance adjustment may be disclosed observed that a detailed disclosure of, should either develop a stand-alone as a ‘‘payment’’ or a ‘‘credit’’ in the for example, all payments could be increasing-interest-and-fee disclosure or itemization. Also depending on the facts overwhelming and not logistically structure § 1006.34(c)(2)(x) to permit and circumstances, a payment that is feasible. debt collectors to disclose that the returned may be omitted from the For all of these reasons, the Bureau is itemized current amount of the debt itemization provided that the payment may increase or decrease.243 finalizing proposed § 1006.34(c)(2)(ix), and the return offset each other, and renumbered as § 1006.34(c)(2)(viii), to An industry trade group stated that provided that the amount of the debt disclosing the current amount of the owed on the itemization date pursuant provide that required validation information includes an itemization of debt as proposed would present to § 1006.34(c)(2)(vii) and the current challenges for some reverse mortgage amount of the debt pursuant to the current amount of the debt reflecting interest, fees, payments, and credits debt because that amount might differ § 1006.34(c)(2)(ix) are accurately from the amount disclosed in monthly since the itemization date. Final disclosed. statements.244 The commenter Regarding § 1006.34(c)(2)(viii)’s § 1006.34(c)(2)(viii) also provides that a debt collector may disclose the interaction with itemization 241 itemization on a separate page provided 84 FR 23274, 23342, 23415 (May 21, 2019). requirements in other applicable law, 242 See Avila v. Riexinger & Assocs., LLC, 817 the Bureau is finalizing new comment in the same communication with a F.3d 72, 76 (2d Cir. 2016) (holding that 15 U.S.C. 34(c)(2)(viii)–2, which states that, if a validation notice if the debt collector 1692e requires debt collectors to disclose if the debt collector is required by other includes on the validation notice, where amount of a debt may increase due to interest and applicable law to provide an itemization the itemization would have appeared, a fees). 243 A trade group commenter recommended the of the current amount of the debt with statement referring to that separate page. following dynamic balance disclosure: ‘‘As of the the validation information, the debt The Bureau is finalizing comment date of this letter, the balance due on the account collector may comply with 34(c)(2)(ix)–1 with revisions and is . Because interest, fees, and/or other § 1006.34(c)(2)(viii) by disclosing the renumbered as comment 34(c)(2)(viii)–1 charges may change the total owed from day to day, the amount due on the day you pay may be greater. itemization required by other applicable and is adding comments 34(c)(2)(viii)–2 If you pay the amount shown above, an adjustment law in lieu of the itemization described through –4 to clarify various aspects of may be necessary after we receive your payment, in in § 1006.34(c)(2)(viii), if the itemization final § 1006.34(c)(2)(viii), as discussed which event you may be informed of any other required by other applicable law is above. The Bureau is finalizing amount due.’’ § 1006.34(c)(2)(viii) and its related 244 The Bureau understands that, for some reverse substantially similar to the itemization mortgages, including Home Equity Conversion that appears on the model validation commentary pursuant to its authority to Mortgages insured by the FHA, when the reverse notice. The Bureau is aware of only one interpret FDCPA section 809(a), as well mortgage is due and payable, the amount due from jurisdiction that requires debt collectors as its authority under Dodd-Frank Act the borrower may not be the amount of outstanding section 1032(a). debt because these reverse mortgages are non- to provide an itemization with the recourse loans and a borrower will never owe more validation information, and that than a portion of the appraised value of the home. itemization is substantially similar to 240 See 23 NYCRR 1.2(b)(2). See 24 CFR 206.125.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00043 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5808 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

recommended that, to avoid potential reverse mortgages are not generally substantially similar form receives a safe confusion in the context of reverse subject to a separate disclosure harbor for compliance pursuant to mortgage debt, a debt collector should requirement, such as 12 CFR § 1006.34(d)(2)(ii). The Bureau therefore be permitted to provide the last monthly 1026.41(b)’s periodic statement expects that, in many circumstances, a account statement in lieu of disclosing requirement, that is functionally debt collector who is also a mortgage the current amount of the debt. equivalent to, or as useful to consumers servicer that is required to provide A group of consumer advocates as, certain disclosures required by periodic statements under Regulation Z, recommended that, for residential § 1006.34(c)(2). Reverse mortgages 12 CFR 1026.41 will disclose arrearage mortgage debt, the Bureau should generally are exempt from providing information. require debt collectors to disclose the periodic statements under the Truth in As noted in the section-by-section current amount of the total unpaid Lending Act (TILA) 245 and its analysis of § 1006.34(c)(2)(viii), industry balance owed as well as the arrearage implementing Regulation Z.246 While commenters requested further guidance owed. According to this commenter, the reverse mortgages may be subject to a about how to combine multiple debts on arrearage owed is important information monthly statement requirement that a single validation notice. The Bureau is because, in many jurisdictions, would require entities to disclose the adopting new comment 34(c)(2)(ix)–2 to homeowners in default can pay the ‘‘total outstanding loan balance,’’ this clarify that a debt collector who arrearage to stop a foreclosure and regulatory requirement is not as combines multiple debts on a single reinstate a mortgage. prescriptive as the Bureau’s periodic validation notice complies with After considering these comments, the statement requirement for other § 1006.34(c)(2)(ix) by disclosing on the Bureau is finalizing § 1006.34(c)(2)(x) as residential mortgage debt.247 Thus, the validation notice a single, cumulative proposed but renumbered as Bureau determines that a last monthly figure that is the sum of the current § 1006.34(c)(2)(ix). In addition, the statement for a reverse mortgage debt is amount of all the debts. Bureau is finalizing comment not an adequate substitute for Proposed Provision Not Finalized 34(c)(2)(x)–1 as proposed and is § 1006.34(c)(2)(ix). As discussed in the section-by-section adopting new comment 34(c)(2)(ix)–2 to The Bureau declines to require debt analysis of § 1006.26(c), in the February clarify how a debt collector who collectors to separately disclose an 2020 proposal, the Bureau proposed to combines multiple debts on a single arrearage owed for residential mortgage require debt collectors collecting time- validation notice complies with debt. Because the Bureau did not barred debt to include time-barred debt § 1006.34(c)(2)(ix). propose this disclosure, it lacks the With respect to interest and fee and revival disclosures on the benefit of public comment and accrual when disclosing the current validation notice.249 concludes that additional information, Proposed amount of the debt, the Bureau declines including through public comment, § 1006.34(c)(2)(xi) provided that to incorporate an increasing-interest-or- would be advisable before adopting any validation information included those fee disclosure or to structure the current such interpretation. However, the disclosures, as applicable, if the debt amount of the debt as a dynamic collector determined after a reasonable balance in § 1006.34(c)(2)(ix). The Bureau notes that a debt collector who utilizes the special rule for certain investigation that such disclosures were Bureau notes, however, that comment required by § 1006.26(c).250 For the 34(c)(2)(ix)–1 (proposed as comment residential mortgage debt described in § 1006.34(c)(5) to comply with reasons discussed in the section-by- 34(c)(2)(x)–1) clarifies that the current section analysis of § 1006.26(c), the amount of the debt is the amount of the § 1006.34(c)(2)(vi) through (viii) will provide a periodic statement that may Bureau is not finalizing the proposed debt as of the date that the validation time-barred debt disclosure disclose such information.248 Although information is provided. Therefore, a requirements and, accordingly, the a mortgage servicer is not required to debt collector satisfies the requirement Bureau is not finalizing proposed use the special rule for certain in § 1006.34(c)(2)(ix) without providing § 1006.34(c)(2)(xi). However, as residential mortgage debt, a mortgage a dynamic balance or increasing- discussed in the section-by-section servicer who does so and who otherwise interest-or-fee disclosure. Additionally, analysis of § 1006.34(d)(3)(iv)(B), any uses the model validation notice or a as discussed in the section-by-section disclosures relating to time-barred debt analysis of § 1006.34(d)(3)(iv), the final 245 that are specifically required by rule affirmatively permits debt 15 U.S.C. 1601 et seq. 246 See 12 CFR 1026.41(e)(1). applicable law or that provide safe collectors to include along with the 247 The regulation provides: ‘‘The mortgagee shall harbors under applicable law are required validation information other provide to the borrower a monthly statement optional disclosures that the final rule disclosures specifically required by regarding the activity of the mortgage for each affirmatively permits debt collectors to applicable law. As such, debt collectors month, as well as for the calendar year. The include on the validation notice. may include a disclosure pursuant to a statement shall summarize the total principal amount which has been paid to the borrower under 34(c)(3) Information About Consumer judicial decision or order that the the mortgage during that calendar year, the MIP current amount of the debt may increase paid to the Commissioner and charged to the Protections or vary due to interest, fees, or other borrower, the total amount of deferred interest The disclosures in FDCPA section charges. This modification addresses the added to the outstanding loan balance, the total outstanding loan balance, and the current principal 809(a) help consumers to determine if a challenges debt collectors face related to limit. The mortgagee shall include an accounting of particular debt is theirs and to facilitate interest and fee accrual in disclosing the all payments for property charges. The statement action in response to the receipt of current amount of the debt. shall be provided to the borrower monthly until the validation information. However, as the The Bureau declines to permit debt mortgage is paid in full by the borrower. The mortgagee shall provide the borrower with a new proposal stated, debt collectors typically collectors collecting reverse mortgage payment plan every time it recalculates monthly disclose only the information that debt to include a last monthly account payments or the payment option is changed. The FDCPA section 809(a) specifically statement in place of disclosing the statements shall be in a format acceptable to the references and provide the FDCPA current amount of the debt. Unlike the Commissioner.’’ See 24 CFR 206.203(a). section 809 information using statutory 248 12 CFR 1026.41(d)(8)(vi) requires a periodic special rule for certain residential statement to include, if the consumer is more than mortgage debt discussed in the section- 45 days delinquent, the total payment amount 249 See 85 FR 12672 (Mar. 3, 2020). by-section analysis of § 1006.34(c)(5), needed to bring the account current. 250 Id. at 12685, 12696.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00044 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5809

language, rather than plain language parrot the FDCPA’s statutory text.255 34(c)(3)(i) that consumers can more easily The Bureau therefore is adopting FDCPA section 809(a)(4) requires debt 251 comprehend. To address these § 1006.34(c)(3). Specifically, as collectors to disclose to consumers their concerns, proposed § 1006.34(c)(3) discussed further in the section-by- right under FDCPA section 809(b) to provided that certain information about section analysis below, the Bureau is dispute the validity of the debt within a consumer’s rights with respect to debt adopting § 1006.34(c)(3)(i) through (v) 30 days after receipt of the validation collection is required validation and its related commentary with minor information (i.e., during the validation information. This information, which is modifications, but is not finalizing period).258 If a consumer disputes a debt discussed in the section-by-section proposed § 1006.34(c)(3)(vi), which in accordance with FDCPA section analysis of § 1006.34(c)(3)(i) through (vi) addressed the opt-out notice required by 809(b), a debt collector must cease below, included disclosures specifically § 1006.6(e) for electronic collecting the debt until the debt referenced in FDCPA section 809(a)(4) communications or attempts to collector provides verification to the and (5), as well as additional disclosures communicate. consumer; this is sometimes referred to intended to help consumers understand The Bureau declines to require as the collections pause. FDCPA section 252 their debt collection rights. additional disclosures about consumer 809(a)(4) does not expressly indicate Commenters generally supported protections in debt collection, as some that a debt collector must disclose to requiring debt collectors to disclose commenters suggested. In particular, the consumers that a dispute triggers information about a consumer’s rights Bureau concludes that, although FDCPA section 809(b)’s collections with respect to debt collection. Federal consumers may benefit from pause, or whether a debt collector must government agency staff and a consumer understanding the rights the disclose the end date of the validation advocate commenter stated that commenters discussed, those rights are period. proposed § 1006.34(c)(3) would improve not sufficiently related to the purposes The Bureau proposed consumers’ understanding of their rights of FDCPA section 809—i.e., helping § 1006.34(c)(3)(i) to provide that in debt collection. Some industry and consumers to determine if a debt is validation information includes a industry trade group commenters theirs and to facilitate action in statement that specifies the end date of supported using plain language response to the receipt of validation the validation period and states that, if disclosures to explain consumer information—to require debt collectors the consumer notifies the debt collector protections in debt collection. to include them as validation 256 in writing before the end of the Some commenters recommended that information. In addition, as discussed validation period that the debt, or any the Bureau require additional in the section-by-section analysis of portion of the debt, is disputed, the debt disclosures about consumers’ rights § 1006.34(c)(3)(iv), the final rule collector must cease collection of the with respect to debt collection. Federal generally requires debt collectors to debt until the debt collector sends the government agency staff, a group of 28 include a statement that informs consumer either the verification of the State Attorneys General, and a number consumers that additional information debt or a copy of a judgment.259 of consumer advocate commenters regarding consumer protections in debt The Bureau received a variety of recommended that debt collectors be collection is available on the Bureau’s comments in response to proposed required to disclose the FDCPA section website, with a link to the § 1006.34(c)(3)(i)’s incorporation of the 257 805(c) cease communication right.253 A information. The Bureau’s website validation period end date.260 On the State regulatory agency recommended will disclose more information about one hand, an industry trade group and that the Bureau require debt collectors consumer protections in debt collection, a group of consumer advocate to disclose that a consumer’s failure to including about the cease commenters supported the inclusion, act or to dispute a debt may have credit communication right. asserting the validation period end date reporting implications. This commenter The Bureau is finalizing would provide certainty to consumers also recommended that § 1006.34(c)(3) § 1006.34(c)(3)(i) through (iii) and (v) about the timeframe within which to require debt collectors to disclose how pursuant to its authority under FDCPA exercise their verification rights. consumers may obtain an annual credit section 814(d) to prescribe rules with However, other commenters opposed report, which consumers are entitled to respect to the collection of debts by debt the inclusion because, if delivery of a under the FCRA and its implementing collectors and, as described more fully validation notice is delayed and the Regulation V.254 below, its authority to implement and consumer receives the notice later than interpret FDCPA section 809. The the debt collector presumed, the The Bureau determines, as discussed Bureau also is finalizing § 1006.34(c)(3) in the proposal, that consumers will validation period end date would be pursuant to its authority under section inaccurate. Commenters suggested this benefit from receiving additional 1032(a) of the Dodd-Frank Act, on the information about their rights in debt could pose legal risk to debt collectors. basis that a consumer’s rights are a To address this concern, an industry collection and from plain language feature of debt collection. disclosures rather than disclosures that commenter recommended that the Bureau modify proposed 255 84 FR 23274, 23342 (May 21, 2019). 251 § 1006.34(c)(3)(i) to replace the 84 FR 23274, 23342 (May 21, 2019). 256 For example, when Congress established the 252 See 15 U.S.C. 1692g(a)(4) and (5). cease communication right pursuant to FDCPA validation period end date with a 253 In the November 2020 Final Rule, the Bureau section 805(c), Congress did not require its generic statement that a consumer may finalized § 1006.6(c)(1) to implement FDCPA disclosure pursuant to FDCPA section 809. The request verification within 30 days after section 805(c) and to provide that, ‘‘if a consumer Bureau concludes that was intentional. Thus, the receiving the validation notice. notifies a debt collector in writing that the Bureau declines to include the cease consumer refuses to pay a debt or that the consumer communication right as validation information that wants the debt collector to cease further debt collectors must disclose. 258 See 15 U.S.C. 1692g(a)(4). communication with the consumer, the debt 257 Section 1006.34(c)(3)(iv) requires debt 259 84 FR 23274, 23343, 23404 (May 21, 2019). collector must not communicate or attempt to collectors to include the disclosure if they are 260 The discussion under the ‘‘Model Validation communicate further with the consumer with collecting debt related to a consumer financial Notice’’ heading in the section-by-section analysis respect to such debt.’’ 85 FR 76734, 78889 (Nov. 30, product or service, as defined in § 1006.2(f). of § 1006.34(d)(2) provides details about how the 2020). Otherwise, debt collectors can optionally include statement required by § 1006.34(c)(3)(i) is disclosed 254 See 15 U.S.C. 1681j(a); 12 CFR 1022.136. the disclosure under § 1006.34(d)(3)(viii). on the model validation notice.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00045 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5810 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

Some commenters, including collectors. Final § 1006.34(b)(5) and they could not write to dispute the consumer advocate commenters and an comment 34(b)(5)–1 provide that, for debt.263 When asked whether the debt industry trade group, stated that purposes of determining the end of the collector would be required to send disclosing the validation period end validation period, a debt collector who information saying they owe the debt if date might leave consumers with the provides the validation information in they wrote to dispute after the false impression that they could not writing or electronically may assume validation period end date, a small raise concerns about a debt after the that a consumer receives the validation majority of consumers assumed that the validation period expires. A group of information on any date that is at least debt collector would be required to do academic commenters argued that a five business days after the debt so.264 Thus, although consumers may study suggested that a significant collector provides it. If a debt collector not be certain of the effect of writing to number of consumers believed that, if calculates the validation period end dispute the debt after the validation they did not dispute a debt during the date in accordance with this period end date, the Bureau’s testing validation period, they would be unable presumption, the debt collector will not indicates that a sizeable majority of to assert later that they did not owe the violate the FDCPA or its implementing consumers would not be inhibited about debt.261 Similarly, an industry Regulation F, even if, as final comment raising general concerns about the debt commenter stated that disclosing the 34(b)(5)–1 clarifies, the consumer after the validation notice end date. As validation period end date might receives the validation notice later than discussed above, the final rule’s dissuade consumers from making the debt collector assumed. Further, the enhanced and plain-language verification requests after that date even Bureau determines that a generic disclosures should improve overall though debt collectors sometimes honor statement that a consumer may request consumer understanding and empower such requests. To address this potential verification within 30 days after consumers to respond, should they misunderstanding, some commenters receiving the validation notice is not an choose, to debt collectors. The Bureau recommended that the final rule require adequate substitute for disclosing the therefore declines to require as part of debt collectors to inform consumers that validation period end date. Such a the validation information an explicit they can raise concerns about a debt generic statement could leave many statement informing consumers that after the validation period end date. consumers unsure about when the they may continue to raise concerns Commenters also addressed the validation period ends. For example, about the debt after the validation Bureau’s proposal to require debt consumers might receive a validation period end date. collectors to disclose FDCPA section notice in the mail but not open it The Bureau also determines that 809(b)’s collections pause. Federal immediately, or they might open it and § 1006.34(c)(3)(i) should not omit the government agency staff and a group of return to it later without keeping track collections pause disclosure. As the consumer advocate commenters of how much time has passed. In these proposal noted, consumer testing supported the collections pause and similar scenarios, consumers would indicates that knowing about the disclosure. However, industry not be able to determine the validation collections pause was important to commenters stated that the disclosure period end date. consumers and would encourage them would be burdensome because it would Regarding commenters’ suggestion to exercise their dispute right if they encourage consumers to dispute the that the Bureau require debt collectors questioned a debt’s validity.265 Debt debt for the purpose of delaying or to inform consumers that they can raise collectors have not provided evidence to avoiding debt collection. According to concerns about a debt after the support the premise that a significant an industry commenter, consumers do validation period end date, the Bureau number of consumers exercise their not need to be informed about FDCPA concludes that it is not necessary to FDCPA section 809 verification rights section 809(b)’s collections pause require such a disclosure. FDCPA solely to evade or delay paying debts because debt collectors are aware of it section 809(a) requires specific that they owe. Absent such evidence, consumer disclosures, including and observe it. the Bureau declines to conclude that The Bureau determines that statements about the consumer’s rights consumers will exercise their rights for consumers will benefit from within 30 days of receipt of the notice, such purposes. Further, regardless of but does not require any additional § 1006.34(c)(3)(i)’s disclosure of the whether debt collectors are aware of and statement addressing consumer actions validation period end date. As comply with FDCPA section 809(b)’s after the expiration of that period. The discussed in the proposal, the validation collections pause requirement, the Bureau determines that a specific end period end date is an integral feature of Bureau concludes that consumers will date will not increase consumer consumers’ dispute right. Among other benefit from this disclosure because it confusion more than general language things, the validation period end date will provide them with more complete such as ‘‘within 30 days.’’ The Bureau’s will provide certainty to consumers information about the actions that debt testing shows that, while some about the timeframe provided by the collectors must take if consumers notify confusion does occur, about 40 percent FDCPA to exercise their verification them that the debt is disputed. of participants said they could still rights. For all of these reasons, the Bureau is dispute the debt after the validation The Bureau disagrees that a validation 262 finalizing § 1006.34(c)(3)(i) as proposed, period end date that is inaccurate period end date. Of the remaining 60 with minor wording changes to clarify because a validation notice was delayed percent of participants, about 40 percent the content of the required disclosure, will present significant legal risk to debt were unclear what would happen if they including by specifying that the wrote to dispute the debt, and only consumer must notify the debt collector 261 Jeff Sovern & Kate Walton, Are Validation about 20 percent specifically said that in writing ‘‘on or before’’ the end of the Notices Valid? An Empirical Evaluation of validation period, as opposed to Consumer Understanding of Debt Collection 262 See November 2020 Qualitative Testing Validation Notices, 70 SMU L. Rev. 63, 128 (2017) Report, supra note 34, at 13. Similarly, the Bureau’s (‘‘Our study indicated that more than a third of the prior testing suggested that ‘‘[o]verall, participants’ 263 Id. respondents believed that if they failed to meet the comments suggest that they understood the 264 Id. at 13–14. thirty-day deadline, they would either have to pay difference between writing before the specified date 265 FMG Cognitive Report, supra note 27, at 30; a debt they did not owe or would not be able to [and] writing after that date.’’ FMG Usability see also FMG Summary Report, supra note 29, at argue in court that they didn’t owe the debt.’’). Report, supra note 28, at 56. 25.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00046 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5811

‘‘before’’ the end of the validation Some commenters recommended that to be valid.273 The Bureau proposed period, as proposed.266 the Bureau modify proposed § 1006.34(c)(3)(iii) to provide that § 1006.34(c)(3)(ii) to omit the validation validation information includes a 34(c)(3)(ii) period end date and the collections statement that specifies the end date of FDCPA section 809(a)(5) requires debt pause disclosures. These comments the validation period and states that, collectors to disclose to consumers their were substantially similar to comments unless the consumer contacts the debt right under FDCPA section 809(b) to discussed in the section-by-section collector to dispute the validity of the request, within 30 days after receipt of analysis of § 1006.34(c)(3)(i). debt, or any portion of the debt, before the validation information, the name After considering the feedback, the the end of the validation period, the and address of the original creditor, if Bureau has determined to finalize debt collector will assume that the debt different from the current creditor.267 § 1006.34(c)(3)(ii). FDCPA section is valid.274 FDCPA section 809(a)(5) does not 809(a)(5) expressly requires debt At the time of the proposal, courts in expressly indicate that a debt collector collectors to include in the validation various jurisdictions had reached must disclose to consumers that an information a statement that, upon the different conclusions about whether original-creditor information request consumer’s written request within 30 FDCPA section 809(a)(3) requires debt invokes FDCPA section 809(b)’s days after receipt of the validation collectors to recognize oral disputes 275 collections pause, or whether a debt information, the debt collector will about the validity of a debt. These collector must disclose the end date of provide the consumer with the name differing decisions principally arose the validation period. The Bureau and address of the original creditor, if from the fact that, whereas FDCPA proposed § 1006.34(c)(3)(ii) to provide different from the current creditor. The section 809(a)(4) and (5) explicitly state that validation information includes a Bureau proposed § 1006.34(c)(3)(ii) to that a consumer must notify a debt statement that specifies the end date of implement that requirement and to collector in writing, FDCPA section the validation period and states that, if clarify the content of the disclosures for 809(a)(3) does not refer to a writing the consumer requests in writing before debt collectors. The Bureau did not requirement. In the absence of an the end of the validation period the propose an exception to this disclosure express writing requirement in FDCPA name and address of the original requirement if the original creditor and section 809(a)(3), the majority of circuit creditor, the debt collector must cease the current creditor are the same and courts that considered the issue had collection of the debt until the debt therefore does not have information determined that a consumer’s oral collector sends the consumer the name regarding the costs or benefits of dispute triggers certain FDCPA and address of the original creditor, if finalizing such an exception. To the protections, including, for example, different from the current creditor.268 FDCPA section 810’s payment extent that commenters were concerned 276 Some industry and industry trade about the burden of responding to application requirement. Consistent with this majority position, and group commenters recommended that original-creditor information requests pursuant to its authority to implement the Bureau not finalize proposed when the original creditor and the 269 and interpret FDCPA section 809(a)(3) § 1006.34(c)(3)(ii). Some commenters current creditor are the same, the as well as its authority under Dodd- stated that the validation information Bureau is finalizing a special rule for Frank Act section 1032(a), the Bureau need not include a statement informing that scenario in § 1006.38(c)(2).271 For consumers of their right to request proposed to interpret FDCPA section these reasons, the Bureau is finalizing 277 original-creditor information because, 809(a)(3) to allow oral disputes. § 1006.34(c)(3)(ii) as proposed, with Industry commenters, industry trade under the Bureau’s rule, the validation minor wording changes to clarify the information will include the creditor as group commenters, and a group of content of the required disclosure, academic commenters supported the of the itemization date and, according to including by specifying that the the commenters, that creditor and the Bureau’s proposed interpretation that consumer must notify the debt collector FDCPA section 809(a)(3) permits original creditor often will be the same. in writing ‘‘on or before’’ the end date Relatedly, some commenters suggested of the validation period, as opposed to 273 15 U.S.C. 1692g(a)(3). that, because the validation information ‘‘before’’ the end of the validation 274 84 FR 23274, 23343–44, 23404 (May 21, 2019). will include the names of the period, as proposed.272 275 Compare Clark v. Absolute Collection Serv., itemization-date creditor and the The Bureau declines to omit the Inc., 741 F.3d 487, 490 (4th Cir. 2014) (per curiam) current creditor, debt collectors should validation period end date and the (holding that oral disputes trigger certain FDCPA be permitted to omit the statement protections, including under FDCPA section collections pause disclosures from 809(a)(3)), Hooks v. Forman, Holt, Eliades & Ravin, informing consumers of their right to § 1006.34(c)(3)(ii) for the same reasons LLC, 717 F.3d 282, 286 (2d Cir. 2013) (same), and request original-creditor information if discussed in the section-by-section Camacho v. Bridgeport Fin. Inc., 430 F.3d 1078, the original creditor is the same as analysis of § 1006.34(c)(3)(i). 1082 (9th Cir. 2005) (same), with Graziano v. either of those creditors.270 Harrison, 950 F.2d 107, 112 (3d Cir. 1991) (‘‘[A] 34(c)(3)(iii) dispute, to be effective, must be in writing.’’). 276 FDCPA section 810 is implemented by 266 The model validation notice uses the term FDCPA section 809(a)(3) requires a § 1006.30(c). See 85 FR 76734, 76843 (Nov. 30, ‘‘by’’ instead of ‘‘on or before’’ for plain language debt collector to disclose to a consumer 2020); see also Camacho, 430 F.3d at 1081–82 purposes. (holding that oral disputes trigger certain FDCPA 267 See 15 U.S.C. 1692g(a)(5). that, unless the consumer disputes the protections, including under FDCPA sections 807(8) 268 84 FR 23274, 23343, 23404 (May 21, 2019). validity of the debt within 30 days of and 810). 269 See the ‘‘Model Validation Notice’’ discussion receipt of the validation information, 277 After the proposal was published, the circuit in the section-by-section analysis of § 1006.34(d)(2) the debt collector will assume the debt split was resolved. In Riccio v. Sentry Credit, Inc., for additional details about how the statement the Third Circuit sitting en banc overruled its prior required by § 1006.34(c)(3)(ii) is disclosed on the decision and determined that FDCPA section model validation notice. This comment is addressed in the section-by- 809(a)(3) does not require a dispute to be in writing. 270 As an alternative to complying with section analysis of § 1006.38. Riccio v. Sentry Credit, Inc., 954 F.3d 582, 594 (3d § 1006.34(c)(3)(ii), an industry trade group 271 See the section-by-section analysis of Cir. 2020) (en banc) (‘‘In short, we conclude that commenter recommended that debt collectors be § 1006.38(c)(2). debt collection notices sent under § 1692g need not permitted to proactively disclose the original- 272 The model validation notice uses the term require that disputes be expressed in writing. In creditor information that a consumer would receive ‘‘by’’ instead of ‘‘on or before’’ for plain language doing so, we overrule Graziano’s contrary in response to an FDCPA section 809(b) request. purposes. holding.’’).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00047 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5812 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

consumers to dispute the validity of a financial product or service, both requiring consumers to click on a debt orally or in writing. initially and over the term of the hyperlink if the validation notice is Several industry and industry trade product or service, are fully, accurately, delivered electronically would create group commenters expressed concerns and effectively disclosed to consumers procedural hurdles that reduce about how proposed § 1006.34(c)(3)(iii) in a manner that permits consumers to consumer follow through and would was disclosed on the proposed model understand the costs, benefits, and risks pose security risks to consumers. validation notice, perceiving a tension associated with the product or service, At least one industry trade group between the regulatory text and the in light of the facts and circumstances. commenter disagreed and supported proposed model notice text. To enhance consumer understanding of proposed § 1006.34(c)(3)(iv) on the Specifically, whereas the proposed protections available during the debt grounds that including a reference model validation notice stated that a collection process, and pursuant to its document with the validation notice consumer may ‘‘call or write’’ to dispute authority under Dodd-Frank Act section would overwhelm consumers. all or part of the debt, proposed 1032(a), the Bureau proposed For the reasons discussed below, the § 1006.34(c)(3)(iii) did not specify the § 1006.34(c)(3)(iv) to provide that, if a Bureau is finalizing § 1006.34(c)(3)(iv) manner in which a consumer must debt collector is collecting a consumer as proposed with a revision in response contact the debt collector and instead financial product or service debt, as to feedback. used the general term ‘‘contact.’’ defined in § 1006.2(f), then validation The Bureau declines to require debt As proposed, the Bureau determines information includes a statement that collectors to provide consumers a that FDCPA section 809(a)(3) permits informs the consumer that additional reference document describing both oral and written disputes. The information regarding consumer rights consumer protections in debt collection. Bureau agrees with every circuit court in debt collection is available on the Because the Bureau did not propose that has addressed this issue and Bureau’s website at https:// such a requirement, the Bureau did not interprets the absence of a reference to www.consumerfinance.gov. receive robust feedback in response to a writing requirement in FDCPA section Commenters generally agreed that the proposal about what such a required 809(a)(3) to mean that a writing is not consumers would benefit from form should look like and how a required. Further, commenters overall information about additional requirement to provide it might operate. supported this interpretation. protections available to consumers Further, the Bureau expects that most The Bureau declines to modify how experiencing debt collection. However, consumers will receive the disclosure § 1006.34(c)(3)(iii) is phrased on the commenters disagreed about the best referring to the Bureau’s website and model validation notice. The Bureau way to provide that information. will be able to access the website; most developed the phrase ‘‘call or write’’ for A large number of consumer advocate consumers use the internet and have comprehension purposes. The model and academic commenters experience navigating to websites.283 notice’s language is intended to be plain recommended that, rather than a The Bureau determines that language and consumer-friendly and statement that additional information is consumers would benefit from being was validated through multiple rounds available on the Bureau’s website, the directed to a page dedicated to of qualitative and quantitative consumer Bureau should require debt collectors to consumer protections in debt collection testing.278 Regulatory text and the provide consumers, along with the instead of the Bureau’s website landing model notice language reflecting that validation notice, a reference document page. Accordingly, the Bureau is regulatory text need not be identical in describing consumer protections in debt modifying § 1006.34(c)(3)(iv) to every case. For instance, if consumers collection, similar to the document that specifically reference the web page may not understand a requirement as the Bureau developed prior to the www.cfpb.gov/debt-collection instead of described in regulatory text, it is SBREFA process.281 Commenters stated the Bureau’s general landing page. The appropriate to express that requirement that a reference document would be Bureau is also making a conforming in plain language in consumer more useful to consumers than a change to how the statement described disclosures.279 statement appearing on a validation in § 1006.34(c)(3)(iv) is disclosed on the For these reasons, the Bureau is notice. Further, some such commenters model validation notice. finalizing § 1006.34(c)(3)(iii) as stated that proposed § 1006.34(c)(3)(iv) The Bureau determines that proposed, with minor wording changes would not help consumers without consumers will not face significant to clarify the content of the required internet access who are unable to visit security risks when accessing the disclosure, including by specifying that the Bureau’s website. Bureau’s website. The vast majority of the consumer must notify the debt Consumer advocate commenters and a validation notices today are delivered collector in writing ‘‘on or before’’ the group of academics also stated that, if by mail, so an active hyperlink is not end of the validation period, rather than the Bureau does not require a reference possible. In the case of electronic ‘‘before’’ the end of the validation document, the Bureau should revise communications, the Bureau recognizes period, as proposed.280 proposed § 1006.34(c)(3)(iv) to require that active hyperlinks can present debt collectors to include a web address security concerns to consumers, 34(c)(3)(iv) that directs consumers to a Bureau page including, among other things, phishing Dodd-Frank Act section 1032(a) dedicated to consumer protections in permits the Bureau to prescribe rules to debt collection, instead of to the consumers to the Bureau’s website address ensure that the features of any consumer Bureau’s general website landing described in proposed § 1006.34(c)(3)(iv). As 282 discussed in the section-by-section analysis of page. Other commenters stated that § 1006.34(d)(4)(ii), the Bureau is adopting this 278 See part III.C. recommendation to permit debt collectors to 279 See the ‘‘Model Validation Notice’’ discussion 281 For additional detail about information that include a hyperlink without losing the safe harbor in the section-by-section analysis of § 1006.34(d)(2) the Bureau considered including in the reference in § 1006.34(d)(2). for additional details about how the statement document, see appendix G of the Small Business 283 For example, a Pew Research Center study in required by § 1006.34(c)(3)(iii) is disclosed on the Review Panel Outline, supra note 39. 2019 found that 90 percent of U.S. adults use the model validation notice. 282 Also, in response to proposed internet. See Pew Research Ctr., Internet/Broadband 280 The model validation notice uses the term § 1006.34(d)(4)(ii), a consumer advocate commenter Fact Sheet, https://www.pewresearch.org/internet/ ‘‘by’’ instead of ‘‘on or before’’ for plain language recommended that the Bureau permit debt fact-sheet/internet-broadband/#who-uses-the- purposes. collectors to embed a hyperlink that directs internet (last visited Dec. 1, 2020).

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00048 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5813

risks.284 But the Bureau is not requiring for original-creditor information to the verification requests for the purpose of debt collectors to include an active debt collector using a medium of delaying or avoiding paying a debt. hyperlink to the Bureau’s website in electronic communication through The Bureau determines that requiring validation notices. In other words, even which a debt collector accepts debt collectors who provide validation if the validation information is provided electronic communications from notices electronically to include electronically, § 1006.34(c)(3)(iv) only consumers, such as an email address or statements on the validation notice requires that the text ‘‘www.cfpb.gov/ a website portal.286 Thus, debt explaining how consumers can dispute debt-collection’’ be displayed in the collectors are required to give legal the debt or request original-creditor information. As discussed in the effect to consumer disputes or requests information electronically will benefit section-by-section analysis of for original-creditor information consumers by facilitating their ability to § 1006.34(d)(4)(ii), a debt collector is submitted electronically only if a debt exercise those verification rights permitted, but not required, to include collector chooses to accept electronic electronically. The Bureau agrees that an active hyperlink to the Bureau’s communications from consumers. The such disclosures will increase the website. This is because hyperlinks are Bureau proposed § 1006.34(c)(3)(v) to likelihood of engagement between a common feature of electronic provide that validation information consumers and debt collectors but does commercial communications. A includes a statement explaining how a not agree that they will encourage validation notice that includes a consumer can take the actions described consumers to submit disputes or hyperlink to the Bureau’s website may in proposed § 1006.34(c)(4) and (d)(3), original-creditor-information requests to be safe and convenient for a consumer. as applicable, electronically, if the debt delay or avoid paying the debt. As This would particularly be the case if collector sends a validation notice discussed in the section-by-section the debt collector had prior contact with electronically. analysis of § 1006.34(c)(3)(i), the consumer and the consumer Proposed comment 34(c)(3)(v)–1 commenters have not provided evidence recognizes that the validation notice explained that a debt collector may demonstrating that a significant number was sent by a familiar source. If a provide the information described in of consumers exercise their verification consumer is unfamiliar with the debt § 1006.34(c)(3)(v) by including the rights with the principal purpose of collector or otherwise has concerns statements, ‘‘We accept disputes avoiding paying debts that they owe. about clicking on an active hyperlink, electronically,’’ using that phrase or a Absent such evidence, the Bureau the consumer could choose, rather than substantially similar phrase, followed declines to conclude that consumers will exercise verification rights for this clicking on the hyperlink, to navigate by an email address or website portal purpose. independently to the Bureau’s website that a consumer can use to take the to obtain more information about Accordingly, the Bureau is finalizing action described in § 1006.34(c)(4)(i), § 1006.34(c)(3)(v) and its related consumer protections in debt collection. and ‘‘We accept original-creditor Accordingly, the Bureau is finalizing commentary largely as proposed, except information requests electronically,’’ § 1006.34(c)(3)(iv) to provide that, if a that the final rule does not require debt using that phrase or a substantially debt collector is collecting debt related collectors who provide validation similar phrase, followed by an email to a consumer financial product or notices electronically to include address or website portal that a service as defined in § 1006.2(f), statements stating how consumers can consumer can use to take the action validation information includes a take the actions described in described in § 1006.34(c)(4)(ii).287 statement that informs the consumer § 1006.34(d)(3) (i.e., responding to a that additional information regarding Proposed comment 34(c)(3)(v)–1 also payment prompt (§ 1006.34(d)(3)(iii)) or consumer protections in debt collection clarified that, if a debt collector accepts requesting a Spanish-language is available on the Bureau’s website at electronic communications from translation (§ 1006.34(d)(3)(vi))) www.cfpb.gov/debt-collection. consumers through more than one electronically. medium, such as by email and through The Bureau notes that 34(c)(3)(v) a website portal, the debt collector is § 1006.34(d)(3)(vi)(A) affirmatively Proposed § 1006.34(c)(4) provided only required to provide information permits a debt collector to include that validation information includes regarding one of these media but may supplemental information in Spanish information that a consumer can use to provide information about additional specifying how a consumer may request take certain actions, including disputing media. a Spanish-language validation notice, a debt or requesting original-creditor An industry commenter and an and such information could include information.285 As discussed in the industry trade group commenter how the consumer may do so section-by-section analysis of supported proposed § 1006.34(c)(3)(v) electronically. In addition, as discussed § 1006.34(c)(3)(i) and (ii), FDCPA because it would inform consumers at the outset of the section-by-section section 809(b) provides that consumers about alternative methods to contact analysis of § 1006.34, the Bureau is not must notify a debt collector ‘‘in writing’’ debt collectors and would increase the finalizing the proposed requirement that to dispute a debt or request original- likelihood that consumers would engage all validation notices must be creditor information. Under § 1006.38, with debt collectors. However, another substantially similar to the model this writing requirement is satisfied if a industry commenter objected to the validation notice in order to avoid consumer provides a dispute or request proposal because, the commenter violating the rule. Therefore, under the argued, allowing consumers to exercise final rule, a debt collector who chooses 284 See, e.g., Fed. Trade Comm’n, How to verification rights electronically would to include either or both of the optional Recognize and Avoid Phishing Scams (May 2019), encourage consumers to submit payment disclosures in https://www.consumer.ftc.gov/articles/how- recognize-and-avoid-phishing-scams (last visited § 1006.34(d)(3)(iii) is not prohibited by Dec. 1, 2020). 286 See the section-by-section analysis of Regulation F from including a statement 285 Proposed § 1006.34(c)(4) set forth required § 1006.38 and comment 38–1. about how the consumer can make a consumer-response information. Proposed 287 On the model validation notice, this phrase payment electronically (although § 1006.34(d)(3)(iii)(B) and (vi)(B) set forth certain appears as ‘‘We accept such requests other consumer-response information related to electronically.’’ This wording deviates from the including such a statement will take the payment requests and requests for Spanish- regulatory text due to space considerations and the debt collector out of the safe harbor in language validation notices. context of surrounding disclosures. § 1006.34(d)(2)). The Bureau is

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00049 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5814 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

finalizing § 1006.34(c)(3)(v) pursuant to rendered ineffective merely because a provided that the consumer-response its authority to interpret FDCPA section consumer opts out of future electronic information section must be segregated 809(a) and (b), as well as its authority communications pursuant to the from the validation information under Dodd-Frank Act section 1032(a). instructions in § 1006.6(e). described in § 1006.34(c)(1) through (3) and from any optional information 34(c)(4) Consumer-Response 34(c)(3)(vi) included pursuant to proposed The Bureau proposed Information § 1006.34(d)(3)(i), (ii), (iv), or (v) and, if § 1006.34(c)(3)(vi) to provide that, for a FDCPA section 809(b) contains the validation information is provided validation notice delivered in the body certain requirements that a debt in writing or electronically, located at of an email pursuant to procedures set collector must satisfy if a consumer the bottom of the notice and under the forth in the proposal, validation exercises the consumer’s right to headings, ‘‘How do you want to information includes the opt-out dispute the validity of the debt or respond?’’ and ‘‘Check all that apply:’’. statement required by § 1006.6(e).288 request the name and address of the As shown on the proposed model Proposed comment 34(c)(3)(vi)–1 original creditor. If a consumer disputes validation notice, the consumer- clarified certain details, including that a debt in writing within 30 days of response information section appeared the requirement would not apply in the receiving the validation information, a as a tear-off portion of the form. case of validation notices delivered by debt collector must stop collection of Proposed comment 34(c)(4)–1 clarified hyperlink and that electronic delivery of the debt until the debt collector obtains that, if the validation information is a validation notice is not rendered verification of the debt or a copy of a provided in writing or electronically, a ineffective if a consumer opts out of judgment against the consumer and prompt described in § 1006.34(c)(4) may future electronic communications mails it to the consumer. Similarly, if a be formatted as a checkbox, as shown on pursuant to § 1006.6(e). consumer requests the name and the model validation notice. Although no commenters objected to address of the original creditor in A group of academic commenters proposed § 1006.34(c)(3)(vi), the Bureau writing within 30 days of receiving the expressed general support for proposed is not finalizing it. The Bureau has validation information, FDCPA section § 1006.34(c)(4). However, some industry determined that it is not necessary to 809(b) requires the debt collector to commenters objected to the proposed require debt collectors to include the cease collection of the debt until the consumer-response information section. § 1006.6(e) opt-out instructions on debt collector obtains and mails such According to a depository institution, validation notices sent electronically information to the consumer. FDCPA the proposed consumer- response because § 1006.6(e) itself already section 809(b) also prohibits a debt information formatted as a tear-off is an requires those instructions in every collector, during the 30-day period obsolete approach because physical electronic communication or consumers have to dispute a debt or mail is increasingly less relevant as communication attempt, which will request information about the original consumers prefer electronic includes every electronic creditor, from engaging in collection communications. An industry communication transmitting a activities and communications that commenter stated that the proposed validation notice. Thus, overshadow, or are inconsistent with, consumer-response information section § 1006.34(c)(3)(vi) would be redundant. the disclosure of the right to dispute the would encourage consumers to A debt collector who sends a debt or request original-creditor communicate through mail, which is validation notice electronically may information, which the Bureau more expensive and time-intensive than provide the § 1006.6(e) disclosure in the collectively refers to as ‘‘verification other communication methods, such as electronic communication outside of the rights.’’ email. Several commenters raised concerns validation notice. A debt collector who The Bureau proposed § 1006.34(c)(4) about proposed § 1006.34(c)(4)’s use of provides the model validation notice to require a consumer-response the heading ‘‘How do you want to electronically will not lose the safe information section to help consumers respond?’’ A group of State Attorneys harbor described in § 1006.34(d)(2) by exercise their FDCPA section 809(b) General and at least one industry including the § 1006.6(e) disclosure in verification rights.289 Specifically, commenter stated that consumers may the electronic communication outside proposed § 1006.34(c)(4) provided that incorrectly infer from this phrase that the model notice. Accordingly, the required validation information they must use the consumer-response Bureau determines that the § 1006.6(e) includes certain consumer-response information section to respond to a debt opt-out disclosure is not necessary to information situated next to prompts collector. Some commenters suggested include as validation information. that consumers could use to indicate that this phrase created the false Although the Bureau is not finalizing that they want to take action or make a impression that consumers must engage proposed § 1006.34(c)(3)(vi), the Bureau request. The proposed information, with the debt collector, even if they reaffirms the clarification in proposed which is discussed in the section-by- prefer not to. To address this concern, comment 34(c)(3)(vi)–1 that electronic section analysis of § 1006.34(c)(4)(i) consumer advocate commenters and a delivery of a validation notice is not through (iii), included statements group of State Attorneys General describing certain actions that a 288 recommended that the consumer- As finalized in the November 2020 Final Rule, consumer could take, including response information section include § 1006.6(e) requires a debt collector who submitting a dispute, identifying the communicates or attempts to communicate with a ‘‘Do Nothing’’ as a response option. consumer electronically in connection with the reason for the dispute, providing Some industry trade group collection of a debt using a specific email address, additional detail about the dispute, and telephone number for text messages, or other commenters objected to proposed requesting original-creditor § 1006.34(c)(4) being formatted for use electronic-medium address to include in such information.290 Proposed § 1006.34(c)(4) communication or attempt to communicate a clear with a return envelope. According to and conspicuous statement describing a reasonable these commenters, some debt collectors and simple method by which the consumer can opt 289 84 FR 23275, 23404 (May 21, 2019). out of further electronic communications or 290 As discussed in the section-by-section analysis do not include return envelopes with attempts to communicate by the debt collector to of § 1006.34(d)(3), proposed § 1006.34(d)(3)(iii)(B) that address or telephone number. See 85 FR 76734, and (vi)(B) provided that a debt collector also could validation notice request disclosure as consumer- 76890 (Nov. 30, 2020). include a payment disclosure and Spanish-language response information.

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00050 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5815

validation notices and instituting such a consequences of not responding to a effectively disclosed to consumers, such practice would entail significant costs. validation notice.294 These findings that consumers may better understand However, a consumer group commenter suggest that the heading will not induce the costs, benefits and risks associated disagreed and stated that the Bureau otherwise unwilling consumers to with debt collection. should require debt collectors to include engage with debt collectors. This 34(c)(4)(i) Dispute Prompts a return envelope with prepaid postage conclusion is bolstered by findings from to facilitate use of the proposed the Bureau’s most recent qualitative FDCPA section 809(a)(4) requires a consumer-response information section. consumer testing. The Bureau’s debt collector to disclose to consumers After considering comments, the consumer testing suggests that their right under FDCPA section 809(b) Bureau is adopting § 1006.34(c)(4) with consumers understand that they have to dispute the validity of the debt within minor wording changes to conform to the option of not engaging with a debt 30 days after receipt of the validation changes in § 1006.34(d). collector in response to a validation notice.297 Proposed § 1006.34(c)(4)(i) The Bureau acknowledges that notice.295 This testing also indicates that provided that consumer-response electronic communications are consumers understand that, if they information includes statements, increasingly prevalent in society at choose to communicate with a debt situated next to prompts, that the large; however, most debt collectors do collector, they do not have to use the consumer can use to dispute the validity not presently communicate with consumer-response information section of a debt and to specify a reason for that 298 consumers electronically, particularly to to do so.296 The Bureau therefore dispute. Proposed § 1006.34(c)(4)(i), 291 provide validation notices. Further, determines that it is unnecessary to which was designed to work in tandem 299 many consumers still prefer to include a ‘‘Do Nothing’’ response with § 1006.34(c)(3)(i), provided that communicate with debt collectors via option, as some commenters suggested. consumer-response information mail instead of email or other electronic The consumer-response information includes the following four statements, 292 media. Given communication section should be formatted for use with listed in the following order, using the practices in the debt collection industry a return envelope. The fact that the following phrasing or substantially and consumer preferences, the Bureau consumer-response information similar phrasing, each next to a prompt: determines that formatting the model established by § 1006.34(c)(4) is ‘‘I want to dispute the debt because I validation notice consumer-response formatted on the model validation think:’’; ‘‘This is not my debt.’’; ‘‘The information section as a tear-off so that notice for use with a return envelope amount is wrong.’’; and ‘‘Other: (please a consumer can return that portion of does not require debt collectors to describe on reverse or attach additional the form by mail if the consumer so include return envelopes with information).’’ chooses will benefit both debt collectors validation notices, even if they use the A group of academic commenters and and consumers. Thus, if debt collectors model notice. some consumer advocate commenters opt not to format the consumer-response Accordingly, the Bureau is finalizing supported the dispute prompts information section as a tear-off, the § 1006.34(c)(4) with minor wording described in proposed § 1006.34(c)(4)(i). § 1006.34(d)(2) safe harbor will not changes to conform to changes in The academic commenters stated that apply to their validation notices. § 1006.34(d). The Bureau also is the prompts would facilitate consumer The Bureau concludes that the finalizing § 1006.34(c)(4)(i) through (iii) disputes because consumers are heading ‘‘How do you want to and their related commentary with accustomed to using forms with respond?’’ likely will not lead certain modifications that are discussed prompts, such as drop-down menus in consumers to believe that they must in the section-by-section analysis below. online transactions. According to these respond to the debt collector or use the The Bureau is finalizing commenters, the Bureau should consumer-response information section § 1006.34(c)(4) pursuant to its authority facilitate consumer disputes given the to do so. Consumer testing indicated under FDCPA section 814(d) to low consumer literacy levels in the that consumers paid relatively little prescribe rules with respect to the United States—particularly among attention to this heading.293 Further, collection of debts by debt collectors consumers with limited English consumers generally grasped the and, as described more fully below, its proficiency (LEP consumers)—and the authority to implement and interpret FDCPA’s least-sophisticated-consumer 291 See 85 FR 76734, 76852 (Nov. 30, 2020). standard.300 These commenters stated 292 According to the CFPB Debt Collection FDCPA section 809. The Bureau is also Consumer Survey, 71 percent of consumers finalizing § 1006.34(c)(4) pursuant to its 297 preferred to be contacted by a debt collector by authority under section 1032(a) of the 15 U.S.C. 1692g(a)(4). 298 mail. Only 12 percent of consumers preferred email. Dodd-Frank Act, on the basis that the 84 FR 23274, 23404–05 (May 21, 2019). Bureau of Consumer Fin. Prot., Consumer 299 As finalized, § 1006.34(c)(3)(i) provides that Experience with Debt Collection: Findings from information in § 1006.34(c)(4)(i) through validation information includes the date the debt CFPB’s Survey of Consumer Views on Debt, at 29– (iii) informs consumers how to exercise collector will consider the end date of the 30 (Jan. 12, 2017), http://files.consumerfinance.gov/ their rights under FDCPA section 809(b) validation period and a statement that, if the _ _ f/documents/201701 cfpb Debt-Collection-Survey- and therefore is a feature of debt consumer notifies the debt collector in writing on Report.pdf (CFPB Debt Collection Consumer or before that date that the debt, or any portion of Survey). collection. Requiring disclosure of the debt, is disputed, the debt collector must cease 293 ‘‘The ‘You Have Rights’ and ‘How do you want consumer-response information will collection of the debt, or the disputed portion of the to respond to this notice?’ sections had a help to ensure that the features of debt debt, until the debt collector sends the consumer comparatively low number of fixations (i.e., a collection are fully, accurately, and either the verification of the debt or a copy of a testing participant’s eyes resting on a piece of judgment. information) compared to other parts of the notice. 300 See, e.g., Rosenau v. Unifund Corp., 539 F.3d These two sections were often discussed during the 294 See id. at 83–84. 218, 221 (3d Cir. 2008) (‘‘We use the ‘least interview as being important so the fewer number 295 When asked about whether they were legally sophisticated debtor’ standard in order to effectuate of fixations suggests that this information might required respond to the model validation notice, the basic purpose of the FDCPA: to protect all have been easy to read and comprehend. approximately 90 percent of participants reported consumers, the gullible as well as the shrewd.’’) Participants also commented that these sections that they were not. See November 2020 Qualitative (citations and some internal quotation marks only needed to be scanned, further suggesting that Testing Report, supra note 34, at 11. omitted); Clomon v. Jackson, 988 F.2d 1314, 1319 fewer fixations on this section might have been due 296 During testing, participants generally (2d Cir. 1993) (‘‘To serve the purposes of the to ease of processing the information rather than a understood that they could dispute the debt by consumer-protection laws, courts have attempted to disinterest in the information. See FMG Usability telephone, electronically, or writing with or without articulate a standard for evaluating deceptiveness Report, supra note 28, at 7. the ‘‘tear-off.’’ See id. at 15. Continued

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00051 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5816 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

that facilitating disputes will also correspondence, including disputes, at information about the debt and will benefit industry because consumer separate addresses. Industry help consumers recognize debts they disputes may lead to questionable or commenters stated that proposed owe. Thus, § 1006.34(c)(2) may reduce invalid debts being removed from the § 1006.34(c)(4)(i) would effectively the number of disputes arising from lack market. combine a dispute form with a payment of consumer recognition. Other commenters objected to coupon. According to commenters, a The Bureau disagrees that proposed § 1006.34(c)(4)(i). Industry consumer’s dispute may not be § 1006.34(c)(4)(i) will make it more trade group commenters stated that the processed in a timely fashion if a difficult for debt collectors to identify proposed dispute prompts would consumer returns a consumer-response and process valid disputes. As noted increase dispute volume and, information form with a dispute to a above, § 1006.34(c)(2) should reduce the consequently, debt collectors would dedicated payment address. number of disputes arising from lack of incur additional costs responding to Several consumer advocate consumer recognition. Therefore, the disputes. Industry commenters stated commenters recommended combining disputes debt collectors receive will be that higher dispute volumes would the proposed dispute prompts into a more likely to reflect problems with the overwhelm debt collectors, making it single prompt. According to these underlying debt. Further, difficult to identify and process valid commenters, a single dispute prompt § 1006.34(c)(4)(i)’s dispute prompts— disputes. Industry and industry trade would be appropriate because the including § 1006.34(c)(4)(i)(D)’s free- group commenters stated that the FDCPA does not require a consumer to form dispute prompt—may help proposed dispute prompts would lead specify a reason for a dispute and a consumers articulate and provide more consumers to believe that they had to consumer may make unintentional detailed information about the nature of dispute the debt, even if they recognized admissions against their interest by their disputes. Thus, debt collectors the debt as valid. Industry and industry providing details. may better understand the nature of a trade groups argued that streamlining Some commenters suggested consumer’s dispute and be able to the dispute process would encourage additional dispute-related prompts. respond more efficiently than if frivolous disputes. One industry trade Consumer advocate commenters consumers had provided generic group stated that requiring a lawyer recommended prompts for debts disputes. engaged in debt collection to include discharged in bankruptcy, debts Further, dispute prompts likely will the proposed dispute prompts on a resulting from identity theft, and debts not lead consumers to believe that they validation notice would constitute that were previously paid or settled. must dispute the debt. The Bureau’s providing legal advice to unrepresented Industry commenters urged the Bureau consumer testing indicates that persons, which is a violation of attorney to add a general account inquiry consumers who receive a validation rules of professional conduct. prompt. According to one industry notice understand that they are not commenter, consumers with an account Industry and industry trade group required to dispute a debt.301 Further, inquiry may perceive that they have no commenters stated the proposed dispute the Bureau disagrees that streamlining alternative but to select a dispute prompts would not solicit enough the dispute process will significantly prompt if proposed § 1006.34(c)(4)(i) information for debt collectors to increase the frequency of frivolous does not include a general account evaluate disputes. According to disputes. As discussed in the section- inquiry prompt. commenters, the proposed dispute by-section analysis of § 1006.34(c)(3)(i) prompts are too general and would An industry commenter asked for additional guidance about how the and (v), debt collectors have not result in generic disputes that would provided evidence that supports the increase compliance costs, frustrate proposed dispute prompts should be formatted when validation information premise that a significant number of dispute investigation, undermine consumers exercise their FDCPA section consumer communication, and increase is provided on a website. Consistent with the rationale 809 verification rights solely to evade or litigation risk. To address these avoid paying debts that they owe. concerns, commenters recommended discussed in the proposal and for the following reasons, the Bureau is Absent such evidence, the Bureau modifications to proposed declines to conclude that consumers § 1006.34(c)(4)(i). Some commenters adopting proposed § 1006.34(c)(4)(i). The Bureau determines that will dispute for such purposes. suggested that the validation notice § 1006.34(c)(4)(i) will help consumers The Bureau determines that requiring provide additional space where a exercise their FDCPA section 809 debt collectors who are attorneys to consumer could include additional dispute rights, in part because prompts include dispute prompts in the dispute detail, update contact are a common feature in written and consumer-response information will not information, or provide communication electronic communications and most cause those debt collectors to violate the preferences. Other commenters consumers are familiar with the professional rule of conduct against recommended replacing the proposed concept. The Bureau determines that providing legal advice to an dispute prompts with narrative 302 facilitating consumer disputes under unrepresented person. The FDCPA instructions that solicit dispute detail FDCPA section 809 is beneficial, and supporting documentation. 301 particularly for less sophisticated During one round of testing, approximately 50 As discussed in the section-by-section percent of participants stated that they would analysis of § 1006.34(c)(2)(i), consumers. Further, to the extent attempt to ‘‘confirm’’ a debt in response to receiving commenters stated that some debt consumer disputes help remove invalid a validation notice. Participants stated that they would do so by, for example, contacting either the collectors receive payments and other debts from circulation, § 1006.34(c)(4)(i) will improve the efficiency of debt creditor or the debt collector. Participants did not report that they would dispute solely for the that does not rely on assumptions about the markets. purposes of confirming the details of the debt. See ‘average’ or ‘normal’ consumer. This effort is It is also not clear that finalizing the November 2020 Qualitative Testing Report, supra grounded, quite sensibly, in the assumption that dispute prompts will result in a note 34, at 11. consumers of below-average sophistication or significant increase in consumer 302 See Am. Bar Ass’n, Model Rules of intelligence are especially vulnerable to fraudulent Professional Conduct, Rule 4.3: Dealing with schemes. The least-sophisticated-consumer disputes compared to current dispute Unrepresented Person https:// standard protects these consumers in a variety of rates. Section 1006.34(c)(2) will require www.americanbar.org/groups/professional_ ways.’’). debt collectors to disclose more responsibility/publications/model_

VerDate Sep<11>2014 20:52 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00052 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5817

requires all debt collectors, including an unintentional admission against their their right under FDCPA section 809(b) debt collectors who are attorneys, to interest. to request the name and address of the include in the validation information The Bureau declines to adopt original creditor, if different from the statements relating to the consumer’s additional dispute-related prompts. current creditor.305 Proposed right to dispute the debt. The dispute Additional prompts for debts discharged § 1006.34(c)(4)(ii) provided that prompt merely provides consumers a in bankruptcy, debts resulting from consumer-response information simple way to exercise that right if the identity theft, and debts that were includes the statement, ‘‘I want you to consumer so chooses; it does not advise previously paid or settled are, in the send me the name and address of the the consumer whether to do so. In aggregate, not feasible and would likely original creditor,’’ using that phrase or addition, the commenter that raised this overwhelm consumers. Further, the a substantially similar phrase, next to a concern cited no case law, legal Bureau believes the dispute prompts in prompt the consumer could use to interpretation, or comparable evidence § 1006.34(c)(4)(i)(B) (this is not my debt) request original-creditor information.306 to support the proposition that and (C) (the amount is wrong) Proposed § 1006.34(c)(4)(ii) was including the dispute prompt will be essentially capture these scenarios. intended to work in tandem with problematic. The Bureau also declines to add a proposed § 1006.34(c)(3)(ii).307 The The Bureau is not modifying general account inquiry prompt distinct Bureau received no comments § 1006.34(c)(4)(i) to provide additional from the dispute prompt, as suggested specifically addressing proposed space for consumers to provide dispute by some commenters who argued that § 1006.34(c)(4)(ii) and is finalizing it as details or to replace the dispute prompts consumers would use the dispute proposed. prompts to obtain general information. with narrative instructions. As 34(c)(4)(iii) discussed above, the Bureau finds that The Bureau’s testing has shown that consumers generally understand that FDCPA section 809(b) assumes that a it is unlikely that § 1006.34(c)(4)(i) will their response options are not limited to consumer has the ability to write to a increase generic dispute volume. On the selecting a dispute prompt and that debt collector to exercise the consumer’s contrary, the dispute prompts— disputing the debt is not the appropriate verification rights.308 Requiring a debt including the free-form dispute prompt method to raise a general question about collector to include mailing addresses in § 1006.34(c)(4)(i)(D)—will provide the account.303 for the consumer and the debt collector, debt collectors with more detailed The Bureau declines to provide along with the consumer-response dispute information than they receive in additional guidance about formatting information described in many cases today. Further, the free-form the dispute prompts if validation § 1006.34(c)(4)(i) and (ii), may facilitate dispute prompt informs consumers that information is provided on a website. a consumer’s ability to exercise the they can provide additional information As discussed in the November 2020 consumer’s verification rights. The on the reverse of the consumer- Final Rule, the Bureau did not finalize Bureau proposed § 1006.34(c)(4)(iii) to response-information section (which is several proposed interventions related provide that consumer-response formatted as a tear-off on the model to electronic delivery of required information includes mailing addresses validation notice) or on a separate page. notices, including proposed alternative for the consumer and the debt Thus, there is no need to provide procedures for providing the validation collector.309 additional space for dispute detail on information on a secure website An industry trade group stated that the validation notice itself. (proposed § 1006.42(c)(2)(ii)).304 some debt collectors use vendors to Section 1006.34(c)(4)(i) will not lead Because the Bureau is not addressing receive and process mail from to disputes being misdirected to electronic delivery more broadly, the consumers. According to this dedicated payment addresses. As Bureau declines here to provide commenter, the Bureau should permit a discussed in the section-by-section guidance about disclosing validation debt collector to disclose the address at analysis of § 1006.34(c)(4)(iii), the debt information on websites. However, as which a debt collector receives mail, collector must disclose in the consumer- discussed in the section-by-section even if that address is not the debt response information section the same analysis of § 1006.34(d)(2), in contrast to collector’s physical address. mailing address disclosed pursuant to the proposal, debt collectors are not The Bureau is finalizing § 1006.34(c)(2)(i), which is the mailing required to use the model validation § 1006.34(c)(4)(iii) with a clarifying address where the debt collector accepts notice or a substantially similar form. revision that addresses the commenter’s disputes and requests for original- Accordingly, the Bureau is finalizing request regarding letter vendor mailing creditor information. proposed § 1006.34(c)(4)(i) pursuant to addresses. The Bureau is revising The Bureau declines to structure its authority to implement and interpret § 1006.34(c)(4)(iii) to provide that the § 1006.34(c)(4)(i) as a single dispute FDCPA section 809, as well as its mailing addresses disclosed for the prompt. As discussed above, the dispute authority under Dodd-Frank Act section consumer and the debt collector in the prompts are designed to help consumers 1032(a). consumer-response information must articulate, and debt collectors better 34(c)(4)(ii) Original-Creditor include the debt collector’s and the understand, the nature of a consumer’s Information Prompt dispute and respond more efficiently 305 15 U.S.C. 1692g(a)(5). than if consumers had provided generic FDCPA section 809(a)(5) requires a 306 84 FR 23274, 23405 (May 21, 2019). disputes. Reformulating debt collector to disclose to consumers 307 As finalized, § 1006.34(c)(3)(ii) provides that § 1006.34(c)(4)(i) as a single prompt validation information includes the date that the 303 During usability testing, when participants debt collector will consider the end date of the would undermine this goal. Meanwhile, were asked what they could do if they did not think validation period and a statement that, if the the dispute prompts described in they owed the debt, ‘‘all participants understood consumer requests in writing on or before that date § 1006.34(c)(4)(i) do not contain that they had options for contacting the debt the name and address of the original creditor, the individualized information that could collector to dispute the debt,’’ which included debt collector must cease collection of the debt calling and writing. FMG Usability Report, supra until the debt collector sends the consumer the reasonably result in a consumer making note 28, at 48. See also November 2020 Qualitative name and address of the original creditor, if Testing Report, supra note 34, at 11 (discussion in different from the current creditor. of_professional_conduct/rule_4_3_dealing_with_ ‘‘Response to the model validation notice’’ section). 308 See 15 U.S.C. 1692g(b). unrepresented_person/ (last visited Dec. 2, 2020). 304 85 FR 76734, 76850–55 (Nov. 30, 2020). 309 84 FR 23274, 23405 (May 21, 2019).

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00053 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5818 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

consumer’s names and mailing provided with such a periodic statement as open-end credit, home-equity lines of addresses as disclosed pursuant to every billing cycle, even if a loan is credit, and credit cards. § 1006.34(c)(2)(i) and (ii). In turn, the transferred between servicers. Pursuant A consumer advocate commenter Bureau notes that final § 1006.34(c)(2)(i) to 12 CFR 1026.41(d)(3), such a periodic recommended that the Bureau revise and comment 34(c)(2)(i)–2 permit debt statement must include a past payment proposed § 1006.34(c)(5) to apply only collectors to disclose a vendor’s mailing breakdown, which shows the total of all to debts that are currently subject to address, if that is an address at which payments received since the last Regulation Z, 12 CFR 1026.41, to reduce the debt collector accepts disputes and statement, including a breakdown the likelihood that a debt collector requests for original-creditor showing the amount, if any, that was provides an outdated periodic information. Thus, under the final rule, applied to principal, interest, escrow, statement. According to the commenter, a debt collector may include a vendor’s fees, and charges, and the amount, if TILA coverage is fluid and a significant address in the consumer-response any, sent to any suspense or unapplied amount of time can elapse between information if that is the address that funds account. The proposal stated that when the creditor provides a last the debt collector discloses pursuant to these periodic statement disclosures periodic statement and when the debt § 1006.34(c)(2)(i). may be functionally equivalent to, and collector provides a validation notice. The Bureau notes that final as useful for the consumer as, the This commenter recommended that the § 1006.34(c)(2)(i) and comment information described in proposed Bureau revise proposed § 1006.34(c)(5) 34(c)(2)(i)–1 permit a debt collector to § 1006.34(c)(2)(vii) through (ix).312 to provide that the previous periodic disclose its trade name or DBA, instead Proposed § 1006.34(c)(5) therefore statement must have been provided no of its legal name. Thus, under the final provided that, for debts subject to more than 31 days before the validation rule, a debt collector must disclose its Regulation Z, 12 CFR 1026.41, a debt notice is sent. The commenter also trade name or DBA in the consumer- collector need not provide the recommended that, if any entity other response information if that is the name validation information described in than the current servicer provided the that the debt collector discloses § 1006.34(c)(2)(vii) through (ix) if the most recent periodic statement, the debt pursuant to § 1006.34(c)(2)(i). debt collector provided the consumer, at collector must conduct a reasonable the same time as the validation notice, investigation to verify the accuracy of 34(c)(5) Special Rule for Certain a copy of the most recent periodic the prior entity’s periodic statement or Residential Mortgage Debt statement provided to the consumer prepare its own periodic statement. FDCPA section 809(a)(1) requires a under 12 CFR 1026.41(b), and referred The Bureau declines to expand debt collector to disclose to consumers to that periodic statement in the § 1006.34(c)(5) to cover additional debt the amount of the debt.310 As discussed validation notice. Proposed comment types. For certain residential mortgage in the section-by-section analysis of 34(c)(5)–1 provided examples clarifying debt, the final rule permits debt § 1006.34(c)(2)(vi) through (viii), the how debt collectors could comply with collectors to provide a periodic Bureau interprets FDCPA section § 1006.34(c)(5). Consistent with the statement that was provided under 12 809(a)(1) to require debt collectors to proposal’s rationale, and for the reasons CFR 1026.41(d)(3) in lieu of the disclose three pieces of itemization- discussed below, the Bureau is adopting information described in final related information: The itemization § 1006.34(c)(5) and its related § 1006.34(c)(2)(vi) through (viii) because date; the amount of the debt on the commentary with a substantive those periodic statement disclosures are itemization date; and an itemization of modification and a clarification. functionally equivalent to, and as useful the debt reflecting interest, fees, Some commenters recommended that for the consumer as, that itemization payments, and credits since the the Bureau expand proposed information. This special rule is not itemization date. § 1006.34(c)(5) to cover additional debt appropriate for the additional debt types For certain residential mortgage debt types. An industry trade group recommended by commenters because covered by TILA, as implemented by commenter stated that the Bureau those debt types are not subject to Regulation Z, 12 CFR 1026, 12 CFR should revise proposed § 1006.34(c)(5) prescriptive disclosure regimes, such as 1026.41(b) generally requires that a to apply to all residential mortgage debt, Regulation Z. The Bureau doubts that periodic statement be delivered or including to transactions that are disclosures used for those other debt placed in the mail within a reasonably exempt from § 1026.41(b)’s periodic types relate to information that is prompt time after the payment due date statement requirement, such as functionally equivalent to, or as useful or the end of any courtesy period mortgage loans with certain consumers as, the information § 1006.34(c)(2)(vi) provided for the previous billing cycle. in bankruptcy. As discussed in detail in through (viii) requires. For instance, The Bureau understands that most the section-by-section analysis of mortgage loans with certain consumers residential mortgage debt is subject to § 1006.34(c)(2)(viii), the Bureau received in bankruptcy are exempt from this requirement, although exceptions feedback that its proposed itemization § 1026.41(b)’s periodic statement exist.311 The Bureau further would be incompatible with the account requirement.313 With respect to debts in understands that a consumer is characteristics of debts in bankruptcy. bankruptcy in general, the Bankruptcy Thus, this commenter suggested that the Code does not prescribe disclosure 310 15 U.S.C. 1692g(a)(1). Bureau should revise proposed requirements for proofs of claim that are 311 The periodic statement requirement pursuant § 1006.34(c)(5) to permit a debt collector comparable to Regulation Z, 12 CFR to 12 CFR 1026.41(b) does not apply to open-end consumer credit transactions, such as a home equity to reference the consumer’s bankruptcy 1026.41(d)(3). As discussed in the line of credit. See 12 CFR 1026.41(a)(1). Pursuant case and the filed or pending proof of section-by-section analysis of to 12 CFR 1026.41(e), certain types of transactions claim instead of providing the § 1006.34(c)(2)(ix), reverse mortgages are are exempt from § 1026.41(b)’s periodic statement itemization-related disclosures required not subject to prescriptive regulatory requirement, including reverse mortgages, timeshare plans, certain charged-off mortgage loans, by § 1006.34(c)(2). Other industry trade requirements for periodic statements. mortgage loans with certain consumers in group commenters variously The periodic statement requirement in bankruptcy, and fixed-rate mortgage loans where a recommended that the special rule 12 CFR 1026.41(b) does not cover open- servicer provides the consumer with a coupon book for payment. Further, small servicers as defined by extend to reverse mortgages structured end consumer credit transactions, 12 CFR 1026.41(e)(4)(ii) are exempt from the periodic statement requirement. 312 84 FR 23274, 23348 (May 21, 2019). 313 See 12 CFR 1026.41(e).

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00054 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5819

including home-equity lines of credit.314 implement and interpret FDCPA section multiple validation notices in one With respect to credit card debt, no 809(a) and pursuant to its authority envelope. Commenters asked the Bureau special accommodation is necessary as under FDCPA section 814(d) to to modify proposed § 1006.34(d)(1)(ii) to debt collectors can readily disclose the prescribe rules with respect to the provide debt collectors more flexibility itemization information pursuant to collection of debts by debt collectors. to customize validation notices to § 1006.34(c)(2)(vi) through (viii). The Bureau also adopts § 1006.34(d)(1) accommodate their business practices The Bureau determines that pursuant to its authority under section and the types of debts they collect. § 1006.34(c)(5) should apply only to 1032(a) of the Dodd-Frank Act to As discussed in the section-by-section debts that are currently subject to prescribe rules to ensure that the analysis of § 1006.34(d)(2), the Bureau Regulation Z, 12 CFR 1026.41. features of consumer financial products Modifying the proposal to this effect is and services are disclosed fully, has determined that a model validation appropriate to reduce the likelihood that accurately, and effectively. The Bureau notice will benefit consumers and a debt collector provides an outdated finalizes this requirement on the basis industry. However, based in part on periodic statement, which may not that validation information is a feature feedback from commenters, the Bureau provide information that is functionally of debt collection and this information also has determined that proposed equivalent to, or as useful as, the must be readily understandable to be § 1006.34(d)(1)(ii) was overly information described in effectively and accurately disclosed. prescriptive. Proposed § 1006.34(d)(1)(ii) would have required § 1006.34(c)(2)(vi) through (viii). The Proposed Provision Not Finalized Bureau therefore is revising proposed any validation notice provided by a debt § 1006.34(c)(5) and its related As noted at the outset of the section- collector to be substantially similar to commentary to provide that the special by-section analysis of § 1006.34, the the model validation notice. Such a rule only applies to residential mortgage Bureau proposed that debt collectors requirement could cause some debt debt if a periodic statement is required could use the model validation notice to collectors to face undue compliance under Regulation Z, 12 CFR 1026.41, at comply with the disclosure challenges depending on their business the time a debt collector provides the requirements proposed in practices and the types of debts they 318 validation notice.315 § 1006.34(a)(1)(i) and (d)(1). In turn, collect. the Bureau proposed § 1006.34(d)(1)(ii) Accordingly, the Bureau is finalizing For this reason, the Bureau is not § 1006.34(c)(5) as described above and is to require that, if provided in a validation notice, the content, format, finalizing proposed § 1006.34(d)(1)(ii) finalizing comment 34(c)(5)–1 with and its related commentary. Instead, as minor revisions for clarity and and placement of the validation information in § 1006.34(c) and the discussed in the section-by-section consistency with provisions of the final analysis of § 1006.34(d)(2), the Bureau is rule. optional disclosures in § 1006.34(d)(3) must be substantially similar to the adopting a more flexible framework in 34(d) Form of Validation Information model validation notice. Proposed which debt collectors need not use either the model validation notice, 34(d)(1) In General comment 34(d)(1)(ii)–1 explained that a debt collector could make certain specified variations of the model notice, The Bureau proposed changes as long as the resulting or a substantially similar form, but debt § 1006.34(d)(1)(i) to require that the disclosures were substantially similar to collectors who do so will receive a safe validation information described in the model validation notice, and it harbor for compliance with the § 1006.34(c) be conveyed in a clear and provided an example of a change that information and form requirements of conspicuous manner. The Bureau debt collectors may make to the § 1006.34(c) and (d)(1).319 This flexible reasoned that FDCPA section 809(a)’s validation notice if the consumer is framework is more consistent with required disclosures would be deceased. model form safe harbors in other ineffective unless a debt collector While some industry, industry trade consumer financial regulations.320 The disclosed them in a manner that was group, and consumer advocate Bureau determines that this new 316 readily understandable to consumers. commenters supported proposed framework will accommodate industry The Bureau received no comments § 1006.34(d)(1)(ii), other industry and without significantly increasing risks to specifically addressing proposed industry trade group commenters raised consumers because the Bureau believes § 1006.34(d)(1)(i). The Bureau therefore concerns that the proposed model it is likely that, if possible, debt is finalizing it largely as proposed but validation notice would not collectors will use the model validation 317 renumbered as § 1006.34(d)(1) and accommodate all debt types and debt notice, specified variations of the model with a wording change solely for collection practices, suggesting that notice, or a substantially similar form to consistency with final § 1006.34(c). The some debt collectors therefore would be receive the compliance safe harbor. The Bureau adopts § 1006.34(d)(1) to unable to comply with proposed Bureau notes that a debt collector who § 1006.34(d)(1)(ii). At least two provides the validation information in a 314 See 12 CFR 1026.41(a)(1). commenters, including a debt buyer form that is not substantially similar 315 Under § 1006.34(d)(2)(ii), a debt collector who specializing in medical debt, stated that either to the model validation notice or uses the model validation notice and who also uses the proposed model validation notice the special rule for certain residential mortgage debt to a specified variation of the model was not well-suited for non-financial under § 1006.34(c)(5) receives a safe harbor for use notice also is subject to the FDCPA of the model notice except with respect to the debts, such as medical debts. A number disclosures that appear on the separate page. of commenters objected to the proposal section 807 prohibition on false or 316 84 FR 23274, 23348 (May 21, 2019). Section because it would not allow debt misleading representations and the 1006.34(b)(1) defines clear and conspicuous, and collectors to combine multiple debts in FDCPA section 809(b) prohibition on the Bureau responded to comments on that overshadowing. definition in the section-by-section analysis of a single validation notice or place § 1006.34(b)(1). 317 As discussed under the heading Proposed 318 As discussed in the section-by-section analysis 319 The Bureau is relocating and repurposing Provision Not Finalized in this section-by-section of § 1006.34(d)(1), the Bureau proposed some of the proposed text of § 1006.34(d)(1)(ii) and analysis, the Bureau is not finalizing proposed § 1006.34(d)(1)(i) to require that required validation comment 34(d)(1)(ii)–1 to § 1006.34(d)(2). See the § 1006.34(d)(1)(ii) and therefore is finalizing information be provided in a clear and conspicuous section-by-section analysis of § 1006.34(d)(2). proposed § 1006.34(d)(1)(i) as § 1006.34(d)(1). manner. 320 15 U.S.C. 1601 et seq.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00055 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5820 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

34(d)(2) Safe Harbor the model validation notice and still debt collector could deliver the model As discussed, the Bureau proposed receive the safe harbor. validation notice in an ineffective Relatedly, some industry and industry § 1006.34(d)(2) to provide, pursuant to manner and that, as a result, the notice trade group commenters asked the its authority under Dodd-Frank Act would be delayed or never received by Bureau to clarify the meaning of section 1032(b), that a debt collector the consumer. The Bureau does not ‘‘substantially similar,’’ and two who uses the model validation complies intend § 1006.34(d)(2) to provide a safe industry trade group commenters with the disclosure requirements of harbor in such a scenario. For this recommended that the Bureau adopt § 1006.34(a)(1)(i) and (d)(1).321 Proposed reason, the Bureau is finalizing Regulation Z’s definition of comment 34(d)(2)–1 provided certain § 1006.34(d)(2)(i) to specify that the safe substantially similar. Some industry and details regarding use of the model harbor for use of the model notice industry trade group commenters validation notice. Under proposed covers only compliance with the recommended that the Bureau expand § 1006.34(d)(2) and as explained in information and form requirements of § 1006.34(d)(2) to provide that debt proposed comment 34(d)(2)–1, although final § 1006.34(c) and (d)(1). collectors who use the model validation use of the model validation notice was In response to comments requesting notice comply with FDCPA section not required, debt collectors would have clarity about the use of optional 807’s prohibition on false or misleading received a safe harbor for compliance disclosures on the model notice, the statements and FDCPA section 809(b)’s only if they used the model validation Bureau is finalizing § 1006.34(d)(2)(i) to overshadowing prohibition.322 notice. Under proposed § 1006.34(d)(2), squarely address how the safe harbor A group of consumer advocate debt collectors would not have received applies with respect to the commenters stated that proposed 323 a safe harbor if they used a form that § 1006.34(d)(3) optional disclosures. § 1006.34(d)(2) was too broad. was substantially similar to the model First, the Bureau clarifies, as was Specifically, according to the validation notice. intended in the proposal, that a debt commenter, the safe harbor’s cross- As discussed below, the Bureau is collector may include any or all of the reference to § 1006.34(a)(1)(i) was finalizing proposed § 1006.34(d)(2) and § 1006.34(d)(3) optional disclosures overbroad because simply using the comment 34(d)(2)–1 with significant without losing the safe harbor pursuant model validation notice does not mean revisions to, among other things, to § 1006.34(d)(2). Specifically, final that the debt collector sent the provide that debt collectors may obtain § 1006.34(d)(2)(i) provides that the validation notice in an initial a safe harbor for compliance with the model validation notice contains the communication or within five days of validation information disclosure validation information required by the initial communication as required requirements by using either the model § 1006.34(c) and certain optional by § 1006.34(a)(1)(i). This commenter validation notice, specified variations of disclosures permitted by recommended that the Bureau remove the model notice, or a substantially § 1006.34(d)(3). Section 1006.34(d)(2)(i) the reference to § 1006.34(a)(1)(i) from similar form. The Bureau is finalizing further provides that a debt collector § 1006.34(d)(2). who uses the model validation notice new commentary to provide additional After considering this feedback, and details regarding the revised safe harbor complies with the information and form to clarify each of the ways in which a requirements of § 1006.34(c) and (d)(1), framework. debt collector may receive a safe harbor Industry and industry trade group including if the debt collector: Omits for compliance with the final rule’s any or all of the optional disclosures commenters overall supported validation information disclosure providing a safe harbor to debt shown on the model notice (see requirements, the Bureau is finalizing § 1006.34(d)(2)(i)(A)); or adds any or all collectors who use the model validation § 1006.34(d)(2) and its related notice. An industry and an industry of the optional disclosures described in commentary with significant revisions, § 1006.34(d)(3) that are not shown on trade group commenter stated that a safe as follows. harbor would reduce frivolous litigation the model notice (see and compliance costs. An industry 34(d)(2)(i) In General § 1006.34(d)(2)(i)(B)), provided that any such optional disclosures are no more commenter stated that not requiring First, the Bureau is finalizing prominent than any of the required debt collectors to use the model § 1006.34(d)(2)(i) to provide that, as validation information.324 validation notice would help to ensure proposed, a debt collector who uses the that debt collectors can provide model validation notice receives a safe 323 validation notices in a manner Proposed § 1006.34(d)(3) specified that a debt harbor for compliance with the final collector who used the model validation notice consistent with their business practices rule’s validation information disclosure could include any of the optional disclosures along and the debt types they collect. requirements. The Bureau determines with the validation information without losing the Some industry commenters asked the that a safe harbor is appropriate because § 1006.34(d)(2) safe harbor for compliance. Bureau to specify what optional 324 The model validation notice includes the the model validation notice will following optional disclosures permitted by disclosures could be added to the model effectively disclose information required § 1006.34(d)(3), each of which is described in more notice. A number of industry and by § 1006.34(c), and the safe harbor will detail in the section-by-section analysis below: (1) industry trade group commenters also incentivize debt collectors to use the Debt collector telephone contact information (see asked the Bureau to further clarify what § 1006.34(d)(3)(i)); (2) reference code (see model notice. § 1006.34(d)(3)(ii)); (3) payment disclosures (see changes debt collectors could make to The Bureau agrees that the § 1006.34(d)(3)(iii)); (4) a statement referring to § 1006.34(d)(2) safe harbor should not disclosures made under applicable law on the 321 84 FR 23274, 23405 (May 21, 2019). As cover delivery of the validation notice. reverse of the validation notice (see discussed elsewhere in part V, proposed § 1006.34(d)(3)(iv)(A)); (5) debt collector’s website § 1006.34(a)(1)(i) provided that debt collectors must The Bureau recognizes the risk that a (see § 1006.34(d)(3)(v)(A)); (6) statement explaining send validation notices containing the information how a consumer can dispute the debt or request described in proposed § 1006.34(c) to consumers in 322 See 15 U.S.C. 1692e; see also 15 U.S.C. original-creditor information electronically (see a manner permitted by § 1006.42 (i.e., in a manner 1692g(b) (‘‘Any collection activities and § 1006.34(d)(3)(v)(B)); (7) Spanish-language reasonably expected to provide actual notice and in communication during the 30-day period may not translation disclosures (see § 1006.34(d)(3)(vi)); (8) a form that the consumer may keep and access overshadow or be inconsistent with the disclosure merchant brand information (see later). And proposed § 1006.34(d)(1) provided that of the consumer’s right to dispute the debt or § 1006.34(d)(3)(vii)); and (9) for debt not related to debt collectors must provide such validation request the name and address of the original a consumer financial product or service, the information clearly and conspicuously. creditor.’’). information specified in § 1006.34(c)(2)(iii) or

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00056 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5821

The requirement that any model validation notice could include For this reason, final § 1006.34(d)(3) optional disclosures that false or misleading information about § 1006.34(d)(2)(iii) provides that a debt are added to the model validation notice the debt, such as an inflated current collector who uses the model validation be no more prominent than any of the amount of the debt. notice as described in § 1006.34(d)(2)(i) validation information is designed to However, the Bureau agrees that debt or (ii) may make changes to the form ensure that any such optional collectors who use the model validation and retain a safe harbor for compliance disclosures do not overload consumers notice should have a safe harbor for with the information and form with information or distract them from compliance with FDCPA section requirements of § 1006.34(c) and (d)(1), the required validation information. A 809(b)’s overshadowing prohibition. provided that the form remains debt collector who chooses to include The Bureau provides a safe harbor to substantially similar to the model one or more of the § 1006.34(d)(3) that effect in § 1006.38(b). The section- notice. (As discussed elsewhere in this optional disclosures that do not appear by-section analysis of § 1006.38(b) Notice, a debt collector may comply on the model validation notice, but who discusses this change in further detail. with the requirements in § 1006.34(c) violates the no-more-prominent and (d)(1) without using the model requirement, loses the safe harbor under 34(d)(2)(ii) Certain Disclosures on a validation notice.) Separate Page § 1006.34(d)(2) and may violate Final comment 34(d)(2)(iii)–1 § 1006.34 depending on the facts and To conform with modifications in provides details regarding the meaning circumstances. other sections of the Rule that permit of substantially similar, as requested by As discussed in the section-by-section debt collectors to make certain commenters, including examples of analysis of § 1006.34(c)(1), a consumer itemization-related disclosures on permissible changes. The Bureau advocate commenter asked the Bureau separate pages, the Bureau is finalizing believes that these are differences that to clarify what version of the FDCPA new § 1006.34(d)(2)(ii). As discussed in may be useful to debt collectors and section 807(11) disclosure should the section-by-section analysis of consumers and will not increase the risk appear on the validation notice: The § 1006.34(c)(2)(viii), when disclosing of consumer harm. longer, initial disclosure described in the itemization of the current amount of One permissible change relates to § 1006.18(e)(1) or the shorter, the debt, a debt collector has the option deceased consumers. Comment subsequent disclosure described in of disclosing that itemization on a 34(d)(2)(iii)–1 incorporates proposed § 1006.18(e)(2). The model validation separate page. As discussed in the comment 34(d)(1)(ii)–1, which notice includes the disclosure required section-by-section analysis of discussed changes that debt collectors by § 1006.18(e)(1). The Bureau is § 1006.34(c)(5), the final rule establishes could make if the consumer were adopting new comment 34(d)(2)(i)–1 to a special rule for certain residential deceased. The Bureau proposed clarify that a debt collector who uses the mortgage debt that permits a debt comment 34(d)(1)(ii)–1 to explain that a model notice to provide a validation collector, subject to certain conditions, debt collector may make certain changes notice as described in to provide a periodic statement under to the content, format, and placement of § 1006.34(a)(1)(i)(B)—i.e., a debt Regulation Z, 12 CFR 1026.41, instead the validation information described in collector who provides the validation of the itemization-related validation § 1006.34(c) as long as the resulting notice within five days of the initial information required by disclosures are substantially similar to communication—may replace the § 1006.34(c)(2)(vi) through (viii). the model notice. Proposed comment disclosure required by § 1006.18(e)(1) Section 1006.34(d)(2)(ii) establishes 34(d)(1)(ii)–1 also provided an example with the disclosure required by how these provisions interact with the of a change that debt collectors may § 1006.18(e)(2) without losing the safe safe harbor provided by use of the make to the model validation notice if harbor provided by use of the model model notice. Specifically, the consumer is deceased. notice. Comment 34(d)(2)(i)–1 also § 1006.34(d)(2)(ii) establishes that a debt The Bureau explained that, although refers to comment 34(c)(1)–1 for further collector who uses the model validation the model validation notice will contain guidance related to providing the notice and makes certain disclosures on the name of the deceased consumer, disclosure required by § 1006.18(e) on a a separate page pursuant to some persons who are authorized to act validation notice. § 1006.34(c)(2)(viii) or (5) may still on behalf of the deceased consumer’s The Bureau declines to extend the receive a safe harbor for use of the estate may be misled by the use of § 1006.34(d)(2) safe harbor to cover model notice except with respect to the second person pronouns such as ‘‘you’’ compliance with FDCPA section 807’s disclosures that appear on the separate in the validation notice. For example, prohibition on false or misleading page. the proposed model validation notice statements. A debt collector who uses stated that ‘‘you owe’’ the debt collector. 34(d)(2)(iii) Substantially Similar Form the model validation notice is still While nothing in the proposal would capable of making false or misleading As discussed in the section-by-section have prohibited a debt collector from statements to consumers in the notice. analysis of § 1006.34(d)(1), the Bureau including a cover letter to explain the For example, a debt collector using the has determined that debt collectors nature of the validation notice, should receive a safe harbor for the proposed comment 34(d)(1)(ii)–1 also (c)(3)(iv) (i.e., name of the creditor to whom the clarified that a debt collector could debt was owed on the itemization date and Bureau’s information and form requirements of debt collection website, respectively) (see § 1006.34(c) and (d)(1) if they use a form modify inapplicable language in the § 1006.34(d)(3)(viii)). The model validation notice that is substantially similar to the model validation notice that could suggest that does not include the following optional disclosures validation notice. The Bureau the recipient of the notice was liable for permitted by § 1006.34(d)(3): (1) Time-barred debt determines that, so long as a form is the debt. For example, if a debt collector disclosures made under applicable law on the front of the validation notice (see § 1006.34(d)(3)(iv)(B)); substantially similar to the model sent a validation notice to a person (2) debt collector email address (see notice, the validation information authorized to act on behalf of the § 1006.34(d)(3)(v)(A)); and (3) affinity brand or disclosures will remain effective; the deceased consumer’s estate, and if that facility name information (but, as noted above, Bureau therefore is finalizing person was not liable for the debt, the merchant brand information is shown on the model notice in the same location) (see § 1006.34(d)(2) to provide this flexibility debt collector could use the deceased § 1006.34(d)(3)(vii)). for debt collectors. consumer’s name instead of ‘‘you.’’

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00057 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5822 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

The Bureau received a few comments the validation notice. Except as information to help consumers on proposed comment 34(d)(1)(ii)–1. described in § 1006.34(d)(2)(ii), the recognize their debts or exercise their One trade group commenter Bureau has determined not to apply the FDCPA verification rights.326 With the recommended that the Bureau allow safe harbor on a partial (i.e., disclosure- model validation notice, the Bureau has debt collectors to replace second-person by-disclosure) basis because it is not developed an improved validation pronouns with references to the estate, clear how disclosures other than those notice that benefits both consumers and such as ‘‘the estate’s bill.’’ A group of referenced above would interact with debt collectors. In quantitative testing, consumer advocates stated that, the validation information.325 Final the model validation notice consistently although the comment’s example would comment 34(d)(2)–1 clarifies that a debt performed better than or equal to a be appropriate in certain circumstances, collector who provides a validation ‘‘status quo’’ notice designed to the Bureau should provide an entirely notice that is neither a notice described resemble validation notices that some separate model validation notice for in § 1006.34(d)(2)(i) or (ii), nor a debt collectors use today.327 The Bureau decedent debt because, these substantially similar notice as described also disagrees that the model validation commenters believed, debt collectors in § 1006.34(d)(2)(iii), does not receive a notice resembles a government would be unlikely to diverge from the safe harbor for compliance with the document; the form clearly discloses model notice. Two trade group information and form requirements of that it is from a debt collector, not the commenters also asked the Bureau to § 1006.34(c) and (d)(1). The Bureau government. create a second model validation notice notes that a debt collector who adds A number of consumer advocate and for decedent debt. disclosures to the model validation academic commenters asserted that the The Bureau is incorporating proposed notice that are not referenced above proposed model notice was not comment 34(d)(1)(ii)–1 into comment nevertheless may be able to comply adequately tested. Some of these 34(d)(2)(iii)–1, which clarifies that a with the requirements in § 1006.34(c) commenters stated that the Bureau’s debt collector may make changes to the and (d)(1), § 1006.38(b)(1), and other testing included too few participants to model validation notice and retain the requirements of the FDCPA and this generate valid conclusions about the safe harbor provided by use of the final rule. proposed model notice’s efficacy or to model notice. Because the example Model Validation Notice evaluate the comprehension of regarding decedent debt is illustrative, consumers, particularly of the least nothing in comment 34(d)(2)(iii)–1 While the majority of industry sophisticated consumers. For instance, a prohibits a debt collector from making commenters who commented on the consumer advocate commenter topic supported the idea of a model other substantially similar expressed concern that only 60 form, some criticized the design of the modifications, such as referring to the consumers were included in the proposed model validation notice. At estate rather than ‘‘you,’’ while still cognitive and usability testing least two industry commenters stated retaining the safe harbor. As explained rounds.328 Likewise, an academic that the proposed model notice elsewhere in this section-by-section commenter stated that the Bureau’s contained too much content and would analysis, the Bureau declines to create consumer testing focused too heavily on overwhelm consumers. One commenter separate model forms for certain types observing what testing participants criticized the proposed model notice for of debt. The Bureau has modified the looked at on the model notice (based on departing from the prevailing industry model-form-safe-harbor framework the use of eye tracking techniques) at design for validation notices. A number under § 1006.34(d)(2) to afford debt the expense of testing participants’ collectors more flexibility to customize of identical or nearly identical comprehension of the notice. Another validation information to accommodate comments suggested that consumers commenter stated that the Bureau their business practices and the types of would confuse the proposed model should have tested more diverse groups, debts they collect. Within identified notice for a government document, such including consumers with limited limits, debt collectors may make as an IRS notice, but did not explain English proficiency, students, older changes to the model validation notice what in particular about the model consumers, and consumers from more and still meet the standard for a safe notice they believed would cause such diverse socioeconomic backgrounds. harbor under § 1006.34(d)(2). consumer confusion. Comment 34(d)(2)(iii)–1 also includes The Bureau’s findings do not support Some consumer advocate and academic four new examples of other permissible the conclusions that the model notice commenters recommended that the changes: Relocating the consumer- contains too much content or will Bureau field test the proposed model response information required by overwhelm consumers. The model notice with consumers with real debts. § 1006.34(c)(4) to facilitate mailing; validation notice was developed and A consumer advocate expressed concern adding barcodes or QR codes, as long as validated over multiple rounds of about the performance of certain aspects the inclusion of such items does not consumer testing that support its of the proposed model notice in violate § 1006.38(b); adding the date the efficacy and comprehensibility. The fact quantitative testing, noting in particular form is generated; and embedding that the model validation notice departs that approximately 40 percent of hyperlinks, if delivering the form from prevailing industry design is respondents who received the model electronically, which was proposed in intended. As the proposal noted, many notice failed to identify the correct comment 34(d)(2)–1. validation notices used today are entity the consumer should pay.329 The Bureau clarifies that, if a debt confusing and lack sufficient collector includes disclosures other than 326 See 84 FR 23274, 23338 (May 21, 2019). 327 (1) the required validation information, 325 As described in § 1006.34(d)(2)(ii), a debt CFPB Quantitative Testing Report, supra note collector who includes certain itemization-related 31, at 13–16. (2) any optional disclosures described in 328 disclosures on a separate page in the same See FMG Summary Report, supra note 29, at § 1006.34(d)(3), or (3) any disclosures communication with the validation notice, and who 5–7. that, if included, still leave the form includes on the front of the notice the required 329 Several comments in response to the May substantially similar in substance, statement referring to those disclosures, receives a 2019 proposal also criticized the consumer testing clarity, and meaningful sequence to the safe harbor for compliance with the information as being outdated because, when that proposal was and form requirements of § 1006.34(c) and (d)(1) published, the most recent testing had occurred in model notice, then the safe harbor does except with respect to the disclosures that appear 2016. However, the Bureau does not find any reason not apply with respect to the entirety of on the separate page. to believe that consumer understanding of the

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00058 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5823

The Bureau disagrees that the model debt, is disputed, the debt collector debt’’ is a plain-language phrase that the notice was not adequately tested. The must cease collection of the debt, or the Bureau is adopting to improve model validation notice was developed disputed portion of the debt, until the consumer understanding. This and validated over multiple rounds of debt collector sends the consumer either rulemaking does not interpret what testing between 2014 and 2020, and the verification of the debt or a copy of a constitutes verification under FDCPA Bureau determines that these multiple judgment. The proposed model notice section 809. rounds of testing were sufficient to showed this disclosure as: ‘‘Call or write The Bureau received comments on the assess the model validation notice’s to us by November 12, 2019, to dispute model notice’s description of the efficacy and comprehensibility. Further, all or part of the debt .... If you write dispute rights under FDCPA section the Bureau disagrees that its testing to us by November 12, 2019, we must 809(a)(3) and (4). Under FDCPA section focused on eye-tracking at the expense stop collection on any amount you 809(a)(3), disputes can be made orally or of comprehension testing as consumer dispute until we send you information in writing, which the proposed model comprehension of the model validation that shows you owe the debt.’’ notice showed in part as: ‘‘Call or write notice was assessed in three rounds of Some commenters criticized the to us by November 12, 2019, to dispute testing. The Bureau’s testing used eye- phrase ‘‘shows you owe the debt.’’ all or part of the debt.’’ However, under tracking in conjunction with consumer Industry and industry trade group FDCPA section 809(a)(4) and (b), responses to inform its conclusions. commenters stated that ‘‘shows you owe requests for verification must be made The Bureau disagrees that it did not the debt’’ would require debt collectors in writing to have effect under the sample sufficiently diverse groups. The to prove that consumers owe the debt. statute.335 An academic commenter and Bureau selected respondents with the According to these commenters, this at least two consumer advocates goal of developing diverse testing pools would modify the verification standard expressed concern that the proposed that would serve as a proxy for the established by FDCPA section 809 and model notice’s description of these population at large. For example, in one expose debt collectors to increased dispute rights was too nuanced, and round of usability testing, participants litigation risk.332 Thus, these consumers would not understand that reflected a range of demographic commenters recommended that the they must write to request verification. characteristics broken down by race and Bureau revise the proposed model To address this concern, a commenter ethnicity, household income, education notice to mirror the FDCPA’s statutory recommended that the Bureau revise the level, and employment status.330 With text.333 In contrast, a group of academic model notice to state, ‘‘Call us to respect to criticism that the Bureau did commenters stated that the verification dispute. But if you do call, we may not not ‘‘field test’’ the model validation standard established by case law is more be required to send information that notice, testing the form with consumers robust than the phrase ‘‘shows you owe shows you owe the debt.’’ 336 An with real debts would have been the debt’’ suggests.334 These industry trade group expressed impractical. Regarding comments that commenters expressed concerns that the uncertainty about why the proposed the model validation notice did not proposed model notice would diminish model notice used the phrase ‘‘call or perform well during the quantitative the FDCPA’s verification standard. write’’ as opposed to ‘‘write’’ in testing round, the Bureau disagrees. As The Bureau is not changing the final different sentences. noted above, in that testing round, the model validation notice’s disclosure of The Bureau acknowledges that the model validation notice consistently the FDCPA section 809(a)(4) dispute dispute rights under FDCPA section performed better than or equal to the right. The Bureau does not intend to 809(a)(3) and (4) may not be intuitive to status quo notice, including on the modify FDCPA section 809’s some consumers. Nevertheless, the Bureau settled on the current phrasing question of to whom the consumer verification standard and disagrees that in the model validation notice to should send a payment.331 the phrase ‘‘shows you owe the debt’’ Commenters provided feedback on has that effect. ‘‘Shows you owe the emphasize the validation period end specific aspects of the proposed date as opposed to the actions—i.e., calling or writing—that a consumer may validation notice, including the notice’s 332 An industry commenter stated that courts disclosure of the FDCPA section define verification narrowly and have not imposed take. In general, the model validation 809(a)(4) dispute right. As discussed, a duty upon debt collectors to establish that a debt notice has tested well. The Bureau is is owed. See Walton v. EOS CCA, 885 F.3d 1024, concerned that revising or adding § 1006.34(c)(3)(i), which implements 1027–28 (7th Cir. 2018) (‘‘The verification assures content to clarify the consequences of FDCPA section 809(a)(4), requires debt the consumer that the creditor actually made the writing versus calling may undermine collectors to: (1) Disclose the date the demand the debt collector said it did and equips the consumer to evaluate the validity of the creditor’s the overall efficacy of the form. Further, debt collector will consider the end date claim. It would be both burdensome and this clarification would be unnecessary of the validation period; and (2) state significantly beyond the Act’s purpose to interpret in many cases. The Bureau expects that that, if the consumer notifies the debt § 1692g as requiring a debt collector to undertake many consumers will visit the Bureau’s collector in writing on or before that an investigation into whether the creditor is actually entitled to the money it seeks.’’); Haddad website for more detailed information date that the debt, or any portion of the v. Alexander, Zelmanski, Danner & Fioritto, 758 F.3d 777 (6th Cir. 2014); Dunham v. Portfolio 335 While FDCPA section 809 requires a debt model notice has changed since 2016, and the Recovery Assocs., 663 F.3d 997, 1003 (8th Cir. 2001) collector to honor only written verification requests, commenters did not provide any evidence to (citing Chaudhry v. Gallerizzo, 174 F.3d 394 (4th the Bureau understands that some debt collectors support such a claim. Moreover, since the May 2019 Cir. 1999)). honor both written and non-written verification proposal, the Bureau has conducted two additional 333 For instance, one commenter recommended requests. Nothing in the FDCPA, the November testing rounds. that the model notice should state ‘‘verifies the 2020 Final Rule, or this rule prevents such debt 330 FMG Usability Report, supra note 28, at 85– amount of the debt claimed’’ instead of ‘‘shows you collectors from continuing to do so. 87. owe the debt.’’ 336 This recommendation is based on phrasing 331 In response to the question ‘‘According to the 334 In Haddad, the court wrote that a verifying that the Bureau adopted for usability testing. As notice, if Person A wanted to make a payment on debt collector ‘‘should provide the date and nature noted in the usability testing report, consumers who the debt, who should he or she sent the payment of the transaction that led to the debt, such as a reviewed validation notices using this phrasing to?’’ approximately 60 percent of consumers who purchase on a particular date, a missed rental ‘‘exhibited less confusion’’ about the distinction received the model validation notice answered payment for a specific month, a fee for a particular between how a debt collector would be required to correctly compared to approximately 40 percent of service provided at a specified time, or a fine for respond when receiving a dispute in writing or by consumers who received a status quo notice. CFPB a particular offense assessed on a certain date.’’ 758 telephone. See FMG Usability Report, supra note Quantitative Testing Report, supra note 31, at 14. F.3d at 786. 28, at 55–56.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00059 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5824 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

regarding consumer protections in debt Commenters recommended two other a model notice that debt collectors collection.337 However, to provide modifications to the proposed model could use with consumers who are not further clarity, the Bureau has notice. To emphasize the distinction obligated on the debt, such as heirs, reformatted how these dispute rights between the debt collector and the successors in interest, and consumers appear on the model validation notice. creditor, an industry trade group whose debts were discharged in Specifically, the dispute rights now commenter suggested that the Bureau bankruptcy. An industry commenter appear in separate bullets with bolded revise the proposed model notice to recommended that the Bureau create a text for comprehension purposes. emphasize that ‘‘North South Group is model notice that omits all optional Commenters provided feedback on a debt collector, not a creditor.’’ disclosures. the proposed model validation notice’s Another industry trade group stated that The Bureau declines to create original-creditor-information request the model notice should incorporate additional model validation notice disclosure pursuant to FDCPA section account information into the mini- forms. As discussed earlier in this 809(a)(5). Section 1006.34(c)(3)(ii), Miranda disclosure, which would section-by-section analysis, the Bureau which implements this provision, frontload information that would help has modified the model-form-safe- requires debt collectors to disclose the consumers recognize alleged debts and harbor framework under § 1006.34(d)(2) date the debt collector will consider the thereby reduce the number of disputes to afford debt collectors more flexibility end date of the validation period and a debt collectors receive. An industry to customize validation information to statement that, if the consumer requests trade group commenter stated that the accommodate their business practices in writing on or before that date the proposed model notice is not properly and the types of debts they collect. name and address of the original formatted for standard mailing Within identified limits, debt collectors creditor, the debt collector must cease envelopes. According to the commenter, may make changes to the model collection of the debt until the debt § 1006.34(c)(4)’s consumer-response validation notice and still meet the collector sends the consumer the name information section will not fit a standard for a safe harbor under and address of the original creditor, if standard glassine window return § 1006.34(d)(2). different from the current creditor. The envelope. The Bureau is making an additional proposed model notice showed this The Bureau declines other change to the model validation notice in disclosure as: ‘‘Write to ask for the name recommendations to modify the model response to testing. The statement and address of the original creditor. If validation notice. The Bureau declines required by § 1006.34(c)(3)(iv) informs you write by November 12, 2019, we to specify that North South Group is the consumer that additional will stop collection until we send you ‘‘not a creditor,’’ as consumer testing information regarding consumer that information.’’ An industry indicates that consumers generally have protections in debt collection is commenter stated that, by omitting the a functional understanding that North available on the Bureau’s website. The phrase ‘‘if different from the current South Group is a debt collector.338 The Bureau’s most recent consumer testing creditor,’’ the proposed model notice Bureau declines to modify the debt indicated that a small number of would compel debt collectors to collection disclosure required by participants who used the model respond to original-creditor-information FDCPA section 807(11) and § 1006.18(e) validation notice were uncertain about requests, even if the current creditor is as finalized in the November 2020 Final where to find more information about the original creditor. A consumer Rule. The Bureau concludes that consumers’ protections in debt advocate supported the omission, combining this statutory disclosure with collection.339 In response to this arguing that debt collectors should be account information would undermine finding, the Bureau is modifying how required to respond to all original- its clarity and purpose. The Bureau the statement required by creditor-information requests, even if declines to modify the model notice in § 1006.34(c)(3)(iv) appears on the model the current creditor and the original response to feedback that the form is not validation notice to further emphasize creditor are the same. properly formatted for standard mailing this disclosure and the Bureau’s website The Bureau concludes that the model envelopes. Comment 34(d)(2)(iii)–1 address. validation notice should include the clarifies that debt collectors may statutory phrase ‘‘if different from the relocate the consumer-response 34(d)(3) Optional Disclosures current creditor’’ when disclosing the information required by § 1006.34(c)(4) Proposed § 1006.34(d)(3) provided original-creditor-information request to facilitate mailing without losing the that a debt collector could include the right. Thus, as finalized, the model safe harbor provided by § 1006.34(d)(2). optional information described in validation notice includes the phrase ‘‘if Thus, the Bureau determines that debt § 1006.34(d)(3)(i) through (vi) when different from the current creditor.’’ collectors will be able to format the form providing the validation information. Further, as discussed below, the Bureau for mailing. The Bureau received no comments is finalizing new § 1006.38(c)(2), which Various commenters requested that specifically addressing the language in sets forth an alternative procedure that the Bureau publish additional model proposed § 1006.34(d)(3). Commenters a debt collector may use to respond to validation notices to address specific did suggest a variety of optional a consumer’s request for original- scenarios. Several consumer advocate disclosures to add to § 1006.34(d)(3), creditor information when the original commenters urged the Bureau to such as barcodes or QR codes, the date creditor is the same as the current translate the model notice into other a validation notice was created and sent, creditor. languages, including Spanish. An disclosures required by government industry trade group commenter creditors, and a disclosure notifying the 337 If the debt collector is collecting debt related recommended that the Bureau develop consumer if the debt collector will to a consumer financial product or service as defined in § 1006.34.2(f), a statement that informs the consumer that additional information regarding 338 During November 2020 usability testing, 98 339 During the most recent round of qualitative consumer protections in debt collection is available percent of participants correctly identified North testing, a few participants stated that they were on the Bureau’s website is required under South Group as the correct party to send payments unsure how to learn more about debt collection in § 1006.34(c)(3)(iv). If the debt collector is collecting to. Further, participants generally understood that general. For example, one participant was unable to debt other than debt related to a consumer financial they could dispute the debt with North South find the statement required by § 1006.34(c)(3)(iv) on product or service, such a statement is optional Group. See November 2020 Qualitative Testing the model notice. See November 2020 Qualitative under § 1006.34(d)(3)(viii). Report, supra note 34, at 15. Testing Report, supra note 34, at 13.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00060 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5825

record telephone calls. Some of these information. A group of consumer disclosures along with the validation suggested disclosures are permissible advocate commenters recommended information, provided that such changes to the model notice under that the Bureau make telephone contact disclosures were no more prominent § 1006.34(d)(2)(iii) 340 or optional information a mandatory disclosure. than any of the validation information. disclosures under § 1006.34(d)(3), and The Bureau determines that debt Proposed § 1006.34(d)(3)(iii)(A) debt collectors can choose to make other collectors should be permitted to provided that a debt collector could suggested disclosures without safe include their telephone contact include in the validation notice the harbor protection. information along with the validation statement ‘‘Contact us about your The Bureau is finalizing information. Section 1006.34(d)(3)(i) payment options,’’ using that phrase or § 1006.34(d)(3) largely as proposed but will accommodate debt collectors who a substantially similar phrase. Proposed with minor technical revisions for choose to communicate with consumers § 1006.34(d)(3)(iii)(B) provided that a clarity and with one substantive by telephone or who are required to debt collector could include in the revision to clarify that a debt collector disclose telephone contact information consumer-response information section who includes any of the optional by applicable State law. The Bureau described in proposed § 1006.34(c)(4) disclosures receives the safe harbor declines to make telephone contact the statement, ‘‘I enclosed this amount,’’ described in § 1006.34(d)(2), provided information a mandatory disclosure using that phrase or a substantially that the debt collector otherwise uses because, while many debt collectors similar phrase, payment instructions the model validation notice or a likely will provide telephone contact after that statement, and a prompt for a variation of the model notice as information, either by choice or because consumer to write in a payment amount. described in § 1006.34(d)(2). This of a State-law requirement, some debt As discussed below, the Bureau is revision harmonizes § 1006.34(d)(3) collectors may not need or want to do finalizing § 1006.34(d)(3)(iii) largely as with certain revisions to § 1006.34(d)(2) so. In such cases, consumers can use proposed, but with certain revisions for in the final rule.341 other contact information required in clarity and consistency with other The Bureau is finalizing the validation information to contact the provisions in the final rule. § 1006.34(d)(3) and the related debt collector. For these reasons, the Industry and industry trade group provisions of § 1006.34(d)(2), including Bureau is finalizing § 1006.34(d)(3)(i) commenters supported permitting debt each of the optional disclosures that largely as proposed, except that the collectors to include optional payment § 1006.34(d)(3) permits debt collectors Bureau is finalizing the clarification that disclosures. One industry trade group to provide, to implement and interpret telephone contact information may stated that the proposed optional FDCPA section 809(a) and (b) and include, for example, a telephone payment disclosures were appropriate pursuant to its FDCPA section 814(d) number as well as the times that the because they would not violate FDCPA authority to prescribe rules with respect debt collector accepts consumer section 809(b)’s overshadowing to the collection of debts by debt telephone calls, as new comment prohibition. collectors. The Bureau also is finalizing 34(d)(3)(i)–1, rather than in the Consumer advocate commenters § 1006.34(d)(3) and the optional regulation text as proposed. generally objected to proposed § 1006.34(d)(3)(iii). A number of these disclosures pursuant to its authority 34(d)(3)(ii) Reference Code under section 1032(a) of the Dodd-Frank commenters stated that consumers may Many debt collectors include Act to prescribe rules to ensure that the perceive the payment disclosures as reference codes on validation notices for features of consumer financial products threatening, may misconstrue the administrative purposes. The Bureau and services are disclosed fully, disclosures as stating that consumers proposed § 1006.34(d)(3)(ii) to must make a payment to exercise their accurately, and effectively. accommodate this practice by FDCPA dispute right, or may be 34(d)(3)(i) Telephone Contact permitting a debt collector to include, confused about whether a payment is in Information along with the validation information, a their interest. Some commenters stated Proposed § 1006.34(d)(3)(i) provided number or code that the debt collector that the proposed disclosures could lead that a debt collector could include, uses to identify the debt or the consumers to make payments that they along with the validation information, consumer. One industry commenter might not otherwise have made, which the debt collector’s telephone contact asked the Bureau to create a safe harbor some commenters noted could cause information, including telephone for debt collectors to use an account consumers to inadvertently revive number and the times that the debt number as a reference code, if that previously time-barred debts. These collector accepts consumer telephone number is labeled as a reference code. commenters asked the Bureau not to calls. The Bureau determines that creating finalize proposed § 1006.34(d)(3)(iii). Some commenters suggested revisions Two industry trade group commenters such a safe harbor is unnecessary to the proposed optional payment supported permitting debt collectors to because debt collectors may use any disclosures. Industry and industry trade disclose telephone contact information, number they choose as a reference 342 group commenters recommended that with one such commenter noting that it code. The Bureau therefore is the Bureau make the proposed optional would facilitate communication with finalizing § 1006.34(d)(3)(ii) as payment disclosures more prominent. consumers, and the other noting that proposed. For example, some commenters some State laws require debt collectors 34(d)(3)(iii) Payment Disclosures suggested that the proposed optional to disclose telephone contact The Bureau proposed in payment disclosures be placed at the § 1006.34(d)(3)(iii) to allow debt top of the consumer-response 340 See comment 34(d)(2)(iii)–1 (examples of permissible changes to the model notice include (1) collectors to include certain payment information section. An industry adding barcodes or QR codes as long as their commenter recommended that the inclusion does not violate § 1006.38(b), and (2) 342 Although § 1006.34(d)(3)(ii) permits debt model validation notice include adding the date the form is generated). collectors to use any number they choose as a additional optional payment 341 See the section-by-section analysis of reference code, debt collectors may be prohibited § 1006.34(d)(2)(i), particularly the discussion of from using certain numbers by other applicable disclosures. Industry trade group new § 1006.34(d)(2)(i)(A) and (B), which refers to laws, such as privacy or data security rules or commenters recommended that the the optional disclosures. regulations. Bureau permit debt collectors to include

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00061 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5826 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

instructions about how a consumer consumers about whether making a to clarify that a debt collector may could make a payment by telephone, payment is in their best interest. For the choose to include either of the optional website, or alternative payment same reasons, the Bureau declines the payment disclosures, or both of them. methods, such as debit card or ACH. suggestion to segregate the payment Lastly, the Bureau is finalizing Based on the concerns noted above disclosures from the other disclosures § 1006.34(d)(3)(iii)(B) to clarify that the about potential consumer and to eliminate the payment prompt on optional payment disclosure must misunderstanding of the payment the consumer response form. appear ‘‘below’’ (rather than merely disclosures, a group of consumer The Bureau declines ‘‘with’’) the consumer-response advocate commenters urged the Bureau recommendations to permit debt information required by to amend the validation notice to collectors to emphasize or highlight the § 1006.34(c)(4)(i) and (ii). segregate the payment disclosures from payment option disclosures. Making the Accordingly, final § 1006.34(d)(3)(iii) the other disclosures and to eliminate payment disclosures more prominent, as provides that debt collectors may the payment prompt on the consumer some industry commenters suggested, include either or both of the following response form. would reduce the efficacy of the model payment disclosures: (1) The statement, For the reasons discussed in the validation notice and risk ‘‘Contact us about your payment proposal, the Bureau determines that overshadowing the validation options,’’ using that phrase or a the proposed optional payment information in violation of FDCPA substantially similar phrase; and (2) disclosures facilitate payments that may section 809(b). The Bureau also below the consumer-response benefit both consumers and debt determines that the optional payment information required by collectors. For consumers who disclosures in § 1006.34(d)(3)(iii)(A) and § 1006.34(c)(4)(i) and (ii), the statement, recognize and choose to repay all or part (B) are sufficient to facilitate ‘‘I enclosed this amount,’’ using that of a debt, payment disclosures may payments 347 and that additional phrase or a substantially similar phrase, make the transaction more efficient and prominence for the payment disclosures payment instructions after that convenient. In addition, for consumers is not justified. The Bureau also statement, and a prompt. declines to permit debt collectors to who determine that they owe a debt but 34(d)(3)(iv) Disclosures Under include specific instructions about other may not be ready to repay all of it at that Applicable Law time, payment disclosures may facilitate payment methods. Section Some States require specific a discussion that can lead to repayment, 1006.34(d)(3)(iii)(A) permits debt disclosures to appear on validation settlement, or a payment plan.343 The collectors to invite consumers to contact notices. To enable debt collectors to Bureau also has determined that the them about payment options, and debt comply with both § 1006.34(a)(1) and optional payment disclosures do not collectors have the ability to provide disclosure requirements under other overshadow, and are not inconsistent information about alternative payment methods in subsequent applicable law, the Bureau proposed with, consumers’ verification rights § 1006.34(d)(3)(iv) to permit a debt pursuant to FDCPA section 809(b).344 communications. For these reasons, this Bureau is collector to include, on the front of the Further, the Bureau’s testing found finalizing § 1006.34(d)(3)(iii) largely as validation notice, a statement that other that the model validation notice, which proposed but with several revisions for disclosures required by applicable law was tested with the optional payment clarity and for consistency with other appear on the reverse of the form and, disclosures, was not threatening or provisions in the final rule. First, the on the reverse of the validation notice, intimidating.345 The Bureau disagrees Bureau is deleting the sentences that any such legally required disclosures. that consumers will believe mistakenly specified that the optional payment Proposed comment 34(d)(3)(iv)–1 that they must make a payment to disclosures in both provided examples of disclosure exercise their verification rights. As the § 1006.34(d)(3)(iii)(A) and (B) must be requirements that proposed proposal noted, consumer testing no more prominent than any of the § 1006.34(d)(3)(iv) would cover, indicates that consumers who encounter validation information. These deleted including disclosures required by State a payment disclosure on a validation sentences are unnecessary in view of statutes or regulations and disclosures notice understand that a payment is not required by judicial opinions or orders. 346 revisions to the final rule in required to dispute a debt. The § 1006.34(d)(2) that apply to all of the For the reasons discussed below, the Bureau determines that inclusion of the optional disclosures, which makes the Bureau is adopting proposed neutral, non-threatening optional deleted sentences redundant.348 In § 1006.34(d)(3)(iv) with revisions, payment disclosures will not confuse addition, the Bureau is adding language including the addition of new regulatory text subsections and commentary. 343 See 84 FR 23274, 23350 (May 21, 2019). 347 During usability testing, participants A number of industry and industry 344 For example, during consumer testing, expressed an understanding that one purpose of the trade group commenters stated that the participants reported a variety of actions they model validation notice was to solicit payment on Bureau’s proposal regarding disclosures thought they could take, and approximately 50 a debt. When asked about their payment options percent of respondents said they would confirm the based on the model validation notice, required by other applicable law would debt is accurate before responding. Similarly, approximately 80 percent of participants stated that either conflict with or not accommodate participants who received the model validation they would contact the debt collector by telephone, such disclosures. Commenters stated notice, which included the optional payment website, email, or write to explore payment options. that some States require disclosures to disclosures, generally understood from the notice See November 2020 Qualitative Testing Report, how they could dispute the debt. See November supra note 34, at 10,12. appear on the front of a validation 349 2020 Qualitative Testing Report, supra note 34, at 348 Final § 1006.34(d)(2)(i) states that certain notice. To address such concerns, 11, 15. optional disclosures permitted by § 1006.34(d)(3) 345 Participants with prior debt collection are contained on the model notice; those optional 349 Although these commenters cited various experience observed that the model notice was disclosures satisfy the requirement to be no more State laws requiring disclosures, they primarily ‘‘different’’ than other validation notices they had prominent than any validation information. Final referred to State laws requiring time-barred debt received because the notice did not include § 1006.34(d)(2)(i)(B) also permits inclusion of the disclosures and revival disclosures. For example, threatening or intimidating language. See November optional disclosures described by § 1006.34(d)(3) one industry trade group commenter noted that 2020 Qualitative Testing Report, supra note 34, at that are not included on the model notice so long Massachusetts, New Mexico, and New York State 10. as they are no more prominent than any validation and City require disclosures about time-barred debt 346 FMG Usability Report, supra note 28, at 59– information; see the section-by-section analysis of and revival that specifically or practically must 61. § 1006.34(d)(2)(i) for more detail. appear on the front page of the validation notice.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00062 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5827

commenters recommended that the continue to monitor whether disclosures For example, if the debt collector were Bureau allow debt collectors to include required by other applicable law are to add language to the validation notice required State law disclosures on the inconsistent or conflict with § 1006.34 to try to avoid a finding of an unfair, front of the validation notice. One or Regulation F generally, and if such an deceptive, or abusive practice under commenter, an industry trade group, inconsistency or conflict is identified, Dodd-Frank Act section 1031 or the urged the Bureau to allow for formatting the Bureau will endeavor to take action FDCPA, that is not an optional flexibility for such State law disclosures to address it. The Bureau also reiterates disclosure covered by while still affording safe harbor that, unlike the proposal, the final rule § 1006.34(d)(3)(iv). Debt collectors are protection. At least one commenter does not require the validation notice to not precluded from making such suggested that the Bureau preempt State be substantially similar to the model disclosures, but they will not receive the laws that require disclosures on the validation notice; thus, if safe harbor under § 1006.34(d)(2). front of a validation notice. § 1006.34(d)(3)(iv) does not The Bureau has made modifications The Bureau determines that, accommodate a disclosure required to the final rule, moreover, to provide particularly with the changes to the under State or other applicable law, additional flexibility with respect to model validation notice discussed in the then debt collectors can provide such a time-barred debt disclosures, in section-by-section analysis, final disclosure without necessarily violating response to feedback to the proposal. § 1006.34(d)(3)(iv) generally will the rule, but they would lose the Under new § 1006.34(d)(3)(iv)(B),352 if a accommodate disclosures required by § 1006.34(d)(2) safe harbor. debt collector is collecting time-barred other applicable law.350 As noted above, The Bureau has revised debt, the debt collector may include on a few States require time-barred debt § 1006.34(d)(3)(iv) in response to the front of the validation notice any disclosures to appear on the front of a feedback and for clarity. Final time-barred debt disclosure that is validation notice; time-barred debt § 1006.34(d)(3)(iv)(A) provides that the specifically required by, or that provides disclosures are discussed further below. debt collector may include, on the a safe harbor under, applicable law, The Bureau is not aware that States reverse of the validation notice, any provided that applicable law specifies specifically require any other disclosures that are specifically required the content of the disclosure.353 New disclosures to appear on the front of the by, or that provide safe harbors under, comment 34(d)(3)(iv)(B)–1 clarifies that, validation notice; as such, the Bureau applicable law and, if any such for example, if applicable State law concludes that disclosures specifically disclosures are included, a statement on requires a debt collector who is required by applicable law, other than the front of the validation notice collecting time-barred debt to disclose in those few instances relating to time- referring to those disclosures. Final to the consumer that the law limits how barred debt, can be accommodated on comment 34(d)(3)(iv)(A)–1 clarifies that long a consumer can be sued on a debt the reverse of the validation notice. The disclosures permitted by and that the debt collector cannot or Bureau also is not aware of font size, § 1006.34(d)(3)(iv)(A) include, for will not sue the consumer to collect it, prominence, or placement requirements example, specific disclosures required the debt collector may include that established by State or other applicable by Federal, State, or municipal statutes disclosure on the front of the validation law that final § 1006.34(d)(3)(iv) will not or regulations, and specific disclosures notice. New comment 34(d)(3)(iv)(B)–1 accommodate, as discussed further required by judicial or administrative also includes a cross-reference to the below. Further, the statement that decisions or orders, including definition of time-barred debt under § 1006.34(d)(3)(iv) permits on the front administrative consent orders. The § 1006.26(a)(2) and clarifies that, for of a validation notice is consistent with comment also describes how such purposes of § 1006.34(d)(3)(iv)(B), time- State laws that require statements on the disclosures could include, for example, barred debt disclosures may include front of the notice.351 The Bureau will time-barred debt disclosures and disclosures about revival of debt disclosures that the current amount of collectors’ right to bring a legal action to 350 As discussed in the section-by-section analysis the debt may increase or vary due to enforce the debt. The Bureau concludes of § 1006.34(d)(2), the final rule permits a debt interest, fees, or other charges, provided collector who uses the model validation notice, that providing additional flexibility to that such disclosures are specifically specified variations of the model notice, or a debt collectors to make these optional required by applicable law. substantially similar form to receive a safe harbor. disclosures either on the front or reverse Moreover, as discussed below in this section-by- The Bureau has revised of the validation notice is warranted in section analysis of § 1006.34(d)(3)(iv), the Bureau is § 1006.34(d)(3)(iv) and its modifying how the statement required by view of circumstances in which it may accompanying commentary from the § 1006.34(d)(3)(iv) is disclosed on the model be difficult to discern under applicable proposal to clarify the disclosures that validation notice to mirror language on a disclosure State or local law whether time-barred required under Wisconsin law. are permitted by § 1006.34(d)(3)(iv). 351 debt disclosures must appear on the See, e.g., Colo. Rev. Stat. sec. 12–14–105(3)(c) Specifically, the revisions clarify that (‘‘In its initial written communication to a front of a validation notice. Moreover, the provision applies if a debt collector consumer, a collection agency shall include the the Bureau is finalizing must comply with a specific disclosure following statement: ‘For information about the § 1006.34(d)(3)(iv)(B) in view of the Colorado Fair Debt Collection Practices Act, see requirement under Federal, State, or www.ago.state.co.us/cadc/cadcmain.cfm.’ If the local law, or under a judicial or notification is placed on the back of the written 352 To permit this additional flexibility for time- communication, there shall be a statement on the administrative decision or order. As barred debt disclosures as distinguished from other front notifying the consumer of such fact.’’); Wis. such, the Bureau emphasizes that this disclosures made under applicable law, the final Admin. Code DFI-Bkg sec. 74.13 (‘‘Unless the initial provision is not intended to capture rule has re-numbered proposed § 1006.34(d)(3)(iv), communication is written and contains the circumstances in which a debt collector which would have specified that the applicable law following notice or the debtor has paid the debt, a disclosures are placed on the reverse side of the licensee shall send the debtor the following notice is not providing a disclosure that is validation notice only, as § 1006.34(d)(3)(iv)(A). within 5 days after the initial communication with required under a specific law, decision, 353 As with other disclosures required by or a debtor: ‘This collection agency is licensed by the or order, but rather the debt collector is providing safe harbors under applicable law, debt Division of Banking in the Wisconsin Department providing a disclosure to try to comply collectors can also make the time-barred debt of Financial Institutions, www.wdfi.org.’ . . . here disclosures on the reverse of the validation notice the notice required by sub. (1) is printed on the with a more general legal requirement. pursuant to § 1006.34(d)(3)(iv)(A). See comment reverse side of any collection notice or validation 34(d)(3)(iv)(A)–1, which gives an example of a time- sent by the licensee, the front of such notice shall type: ‘‘Notice: See Reverse Side for Important barred debt disclosure as a disclosure permitted by bear the following statement in not less than 8 point Information.’’). § 1006.34(d)(3)(iv)(A).

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00063 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5828 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

Bureau’s decision not to finalize a In response to feedback, the Bureau 34(d)(3)(iv)(A)–2 to clarify how the requirement for debt collectors to also is finalizing § 1006.34(d)(3)(iv)(A) disclosure described in provide disclosures relating to time- and comment 34(d)(3)(iv)(A)–1 to § 1006.34(d)(3)(iv)(A) may appear barred debt or revival laws, described in permit debt collectors to include depending on the delivery mechanism. more detail in the section-by-section disclosures that provide safe harbors The comment clarifies that, if a debt analysis of § 1006.26. under applicable law without losing the collector includes disclosures pursuant The Bureau received feedback about safe harbor for compliance under to § 1006.34(d)(3)(iv)(A), the debt modifying the scope of proposed § 1006.34(d)(2). Such disclosures can collector must include a statement on § 1006.34(d)(3)(iv). An industry trade mitigate legal risks for debt collectors the front of the validation notice group commenter stated that the Bureau and reduce the potential for consumer referring to those disclosures; and a debt should limit § 1006.34(d)(3)(iv) to State harm.354 On the other hand, the Bureau collector may comply with the laws and exclude disclosures required declines to allow debt collectors to requirement to refer to the disclosures by judicial decisions or orders. include disclosures on the validation by including on the front of the According to the commenter, courts notice that are merely permitted by validation notice the statement, ‘‘Notice: should not be permitted to dictate non- other applicable law and still retain the See reverse side for important standard disclosures that would limit safe harbor.355 Such disclosures may be information,’’ or a substantially similar the efficacy of the model validation irrelevant to consumers, and their statement. The comment further notes notice and result in validation notices inclusion on the validation notice may that if, as permitted by comment that vary by jurisdiction. This overwhelm consumers or overshadow 34(d)(3)(iv)(A)–1, a debt collector places commenter asserted that permitting more relevant disclosures. Nevertheless, the disclosures below the content of the courts to vary the model validation as noted elsewhere, a debt collector who validation notice, the debt collector may notice would be inconsistent with the included such a disclosure would not comply with the requirement to refer to framework in other consumer financial necessarily violate Regulation F; that the disclosures by stating, ‘‘Notice: See laws and regulations, such as TILA and debt collector would, however, be below for important information,’’ or a Regulation Z, which do not permit outside the safe harbor for compliance. substantially similar statement. courts to add disclosures to model Some commenters suggested that the In response to feedback, the Bureau is forms. A group of consumer advocate Bureau revise the text and placement of also modifying how the statement commenters asked the Bureau to the § 1006.34(d)(3)(iv) disclosure that required by § 1006.34(d)(3)(iv) is prohibit debt collectors from including appeared on the model validation disclosed on the model validation disclosures that are permitted, but not notice. An industry trade group notice. Specifically, the required, by applicable law, because commenter noted that Wisconsin law § 1006.34(d)(3)(iv) statement appears on including all possible disclosures would allows disclosures on the reverse of the the final model notice as: ‘‘Notice: See overwhelm consumers. On the other notice but requires the statement, Reverse Side for Important hand, an industry trade group ‘‘Notice: See Reverse Side for Important Information.’’ 356 The Bureau finds that commenter asked the Bureau to allow Information.’’ A group of consumer this phrase is clearer, more debt collectors to include such advocate commenters suggested that conspicuous, and more likely to disclosures. disclosures required by applicable law encourage consumer action than the The Bureau determines that should be separately labeled as proposed phrase, ‘‘Review state law § 1006.34(d)(3)(iv) should cover ‘‘Disclosures Required by Your State’’ disclosures on reverse side, if disclosures required pursuant to judicial and ‘‘Disclosures Required by Local applicable.’’ Finally, the Bureau or administrative decisions or orders, Federal Courts.’’ declines the suggestion to require debt including administrative consent orders. Relatedly, some commenters noted collectors to label which disclosures are Permitting disclosures required by that some State laws include specific included pursuant to State law and judicial or administrative decisions or prominence or font size requirements which are included pursuant to judicial orders to appear, like any State-law- for validation notice disclosures. A orders and decisions. That distinction required disclosures, on the reverse of a comment letter from two associations of likely makes little practical difference to validation notice will neither State regulatory agencies expressed consumers. undermine the efficacy of the model concerns that proposed The Bureau also determines that the validation notice nor create validation § 1006.34(d)(3)(iv), as disclosed on the § 1006.34(d)(3)(iv) disclosure should be notices that significantly vary by model validation notice, was not more prominent than in the proposed jurisdiction, other than on the reverse of sufficiently prominent. In particular, model validation notice, in part to the notice. Further, the Bureau these commenters objected that the account for the fact noted by some concludes that permitting judicially statement about disclosures required by commenters that disclosures required by mandated disclosures to appear on applicable law appeared below the other applicable law may have validation notices is not inconsistent § 1006.34(d)(3)(iii)(A) payment prominence requirements, including with other consumer financial laws, as disclosure. clear and conspicuous requirements. some commenters suggested. For In response to feedback, the Bureau is The Bureau therefore has modified the instance, the Bureau understands that including a new comment model validation notice to further nothing in TILA and its implementing emphasize the § 1006.34(d)(3)(iv) Regulation Z prohibit, as those 354 Avila, 817 F.3d at 76 (adopting the safe harbor disclosure. Specifically, in contrast to approach for debt collectors disclosing the amount commenters appeared to believe, the proposed model validation notice, creditors from making disclosures of the debt when the balance may increase due to interest and fees adopted in Miller v. McCalla, on which the disclosure appeared in required pursuant to judicial orders or Raymer, Padrick, Cobb, Nichols, & Clark, LLC, 214 regular font in the middle of a list of decisions. As noted above, final F.3d 872, 876 (7th Cir. 2000)). other disclosures, the disclosure appears 355 comment 34(d)(3)(iv)(A)–1 clarifies that As discussed earlier in this section-by-section on the final model validation notice the disclosures permitted by analysis, § 1006.34(d)(3)(iv) has been revised in the final rule to clarify that the optional disclosures are § 1006.34(d)(3)(iv) include specific those that are ‘‘specifically’’ required by applicable 356 The Bureau based this statement on a disclosures required by judicial law or that provide a safe harbor under applicable Wisconsin disclosure requirement. See Wis. Admin. decisions or orders. law. Code DFI-Bkg sec. 74.13.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00064 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5829

underlined and in bold font and debt collector includes the disclosures Second, proposed § 1006.34(d)(3)(v)(B) separated from other disclosures. on a second page, the debt collector provided that a debt collector could Commenters sought additional loses the § 1006.34(d)(2) safe harbor include, for validation information not guidance about what constitutes the with respect to the second page. The provided electronically, the statement ‘‘reverse side’’ of the validation notice. Bureau determines that it is described in § 1006.34(c)(3)(v) Two industry trade group commenters unwarranted to provide a safe harbor explaining how a consumer could take recommended that the Bureau interpret that would be more expansive both in the actions described in § 1006.34(c)(4) ‘‘reverse side’’ as synonymous with scope and protection than the other and § 1006.34(d)(3) electronically.358 ‘‘next page’’ to allow debt collectors to targeted exceptions to debt collectors One industry commenter supported use a second page to provide disclosures providing other applicable law proposed § 1006.34(d)(3)(v), and the required by other applicable law. disclosures on a second page. The Bureau is finalizing it as proposed, with Relatedly, one commenter stated that Bureau notes that debt collectors may technical revisions to reflect conforming requiring a debt collector to print on include such disclosures on a second changes to final § 1006.34(c)(3)(v). For both sides of a validation notice would page without necessarily violating the example, final § 1006.34(d)(3)(v)(B) no increase costs. Two associations of State rule. longer contains a reference to regulatory agencies asked the Bureau to The Bureau is making one additional § 1006.34(d)(3) because final clarify where State law disclosures change not in response to comments. § 1006.34(c)(3)(v) itself no longer refers should be placed on validation notices Section 1006.34(d)(3)(iv)(A) provides, in to § 1006.34(d)(3).359 delivered electronically, since relevant part, that disclosures made under § 1006.34(d)(3)(iv) must not 34(d)(3)(vi) Spanish-Language disclosures delivered electronically will Translation Disclosures not have a reverse side. appear directly on the reverse of the The Bureau recognizes that the consumer-response information Proposed § 1006.34(d)(3)(vi) provided meaning of ‘‘on the reverse’’ may vary required by § 1006.34(c)(4), which that a debt collector could include, by delivery method and format and that appears on the front of the notice. This along with the validation information, clarification is warranted, particularly revision is included to ensure that debt optional Spanish-language disclosures as to validation notices delivered collectors who choose to make the that consumers could use to request a electronically. As such, the Bureau is optional disclosures under Spanish-language validation notice. The adopting new comment 34(d)(3)(iv)(A)– § 1006.34(d)(3)(iv) do not provide the proposal stated that Spanish-speaking 1, which clarifies, in relevant part, that disclosures in a place where the LEP consumers may benefit from a if a debt collector provides a validation disclosures would be returned with the Spanish-language disclosure informing notice in the body of an email, the debt consumer-response information. them of their ability to request a collector may, in lieu of including the The Bureau notes that if, as permitted Spanish-language translation, if a debt by § 1006.34(d)(3)(iv), a debt collector collector chooses to make such a disclosures permitted by 360 § 1006.34(d)(3)(iv)(A) on the reverse of includes on the front of a validation translation available. The proposal the validation notice, include them in notice the required statement regarding stated that debt collectors may wish to the same communication below the disclosures under other applicable law provide validation information in content of the validation notice. (i.e., ‘‘Notice: See reverse side for Spanish, as doing so may facilitate their Furthermore, as discussed above, important information’’), the debt communications with consumers. Consumer advocate commenters comment 34(d)(3)(iv)(A)–2 notes that, if collector must actually place such disclosures on the reverse. Conversely, generally supported permitting debt a debt collector places the disclosures a debt collector may not include collectors to provide certain Spanish- below the content of the validation disclosures under other applicable law language disclosures along with the notice, the debt collector may comply on the reverse of a validation notice validation information. Some consumer with the requirement to refer to the without including the statement about advocate commenters recommended disclosures by including the statement, those disclosures on the front of the that the Bureau also require debt ‘‘Notice: See below for important validation notice. The Bureau intended collectors to provide the disclosures information,’’ or a substantially similar this effect when it proposed described in proposed statement. These commentary § 1006.34(d)(3)(iv) and notes it here for § 1006.34(d)(3)(vi). A group of consumer provisions, therefore, address clarity. advocate commenters urged the Bureau circumstances in which the validation Accordingly, the Bureau is finalizing to require a debt collector to send a notice is delivered in the body of an § 1006.34(d)(3)(iv) and its related translated validation notice if the debt email. commentary with both substantive collector receives a request from a The Bureau declines to permit debt revisions and minor wording changes. collectors to place disclosures required consumer seeking information in the by other applicable law on a second 34(d)(3)(v) Information About Electronic Communications 358 Proposed § 1006.34(c)(3)(v) provided that such page while maintaining the a statement was required validation information for § 1006.34(d)(2) safe harbor, as some Proposed § 1006.34(d)(3)(v) provided validation notices provided electronically. commenters requested. In that debt collectors could include 359 As discussed in the section-by-section analysis § 1006.34(d)(2)(ii), the Bureau specifies certain information about electronic of § 1006.34(c)(3)(v), the final rule does not require debt collectors who provide validation notices two narrow circumstances in which communications along with the electronically to include statements explaining how debt collectors are permitted to include validation information. First, proposed consumers can take the actions described in validation information on a second page § 1006.34(d)(3)(v)(A) provided that a § 1006.34(d)(3) electronically. because such information, presented on debt collector could include the debt 360 Spanish speakers represent the second-largest a second page, is likely to benefit collector’s website and email address. language group in the United States after English 357 speakers. As of 2016, 40 million residents in the consumers. And, in both cases, if a United States ages five and older spoke Spanish at on a second page and for the special rule regarding home. See U.S. Census Bureau, Profile America for 357 Final § 1006.34(d)(2)(ii) allows a second page certain residential mortgage debt). This narrow Facts for Features CB17–FF.17: Hispanic Heritage for debt collectors to provide information that exception allows the debt collector to potentially Month 2017, at 4 (Oct. 17, 2017), https:// would otherwise be provided in a relatively provide significantly more information to the www.census.gov/newsroom/facts-for-features/2017/ abbreviated itemization of the debt (i.e., itemization consumer on a second page. hispanic-heritage.html.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00065 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5830 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

consumer’s preferred language, rule clearer, the Bureau is finalizing a disclosure described in proposed including a request received using the new § 1006.34(e)(2), which provides § 1006.34(d)(3)(vi)(A). The Bureau proposed tear off portion of the that a debt collector who includes in the received no other comments specifically validation notice. validation information either or both of addressing the disclosure. Accordingly, An industry commenter supported the optional disclosures described in the Bureau is finalizing proposed § 1006.34(d)(3)(vi) on the § 1006.34(d)(3)(vi), and who thereafter § 1006.34(d)(3)(vi)(A) and its related understanding that the Spanish- receives a request from the consumer for commentary as proposed, with only language disclosures would be optional. a Spanish-language validation notice, minor wording changes. According to the commenter, requiring must provide the consumer a validation 34(d)(3)(vi)(B) debt collectors to provide foreign notice completely and accurately language disclosures would entail translated into Spanish.364 The Bureau Proposed § 1006.34(d)(3)(vi)(B) significant costs. An industry clarifies that, other than with respect to provided that debt collectors could commenter and an industry trade group § 1006.34(e)(2), nothing in the rule include in the consumer-response commenter asked the Bureau to clarify obligates a debt collector to provide information section of the validation whether providing the proposed future communications in Spanish notice a statement in Spanish that a § 1006.34(d)(3)(vi) disclosures would solely because the debt collector consumer could use to request a obligate a debt collector to provide provided a disclosure described in Spanish-language validation notice. future communications in Spanish to § 1006.34(d)(3)(vi) in Spanish. Specifically, the Bureau proposed in the consumer. Some commenters raised Regarding the commenters who asked § 1006.34(d)(3)(vi)(B) to permit debt questions about whether the validation for clarification about, or supported, collectors to include the statement, period would be paused when a restarting the validation period when ‘‘Quiero esta forma en espan˜ ol,’’ using consumer requests a Spanish-language the consumer requests a Spanish- that phrase or a substantially similar translation of the validation notice and language validation notice, the Bureau phrase in Spanish. In English, this then restart when it is received, with a declines to mandate such a change but phrase means, ‘‘I want this form in local government commenter supporting notes that debt collectors who Spanish.’’ Proposed such a revision in the final rule. voluntarily restart the validation period § 1006.34(d)(3)(vi)(B) would have The Bureau declines to make the after providing a copy of the Spanish- required this statement to be next to a Spanish-language disclosures described language validation notice following the prompt that the consumer could use to in § 1006.34(d)(3)(vi) mandatory. A consumer’s request do not violate the request a Spanish-language validation requirement to provide the FDCPA or Regulation F. notice. § 1006.34(d)(3)(vi) disclosures, standing For these reasons, the Bureau is Consumer advocate commenters alone, would not be overly burdensome finalizing § 1006.34(d)(3)(vi) largely as generally supported the Spanish- because the translation language is proposed but with a revision to clarify language disclosure described in precisely described in the regulation that a debt collector may include either proposed § 1006.34(d)(3)(vi)(B). and is also included on the model of the optional Spanish-language However, a group of consumer advocate validation notice. However, the content translation disclosures, or both of them. commenters stated that the Spanish translation in proposed of those disclosures means that 34(d)(3)(vi)(A) mandating them would effectively § 1006.34(d)(3)(vi)(B) was inaccurate. compel debt collectors to provide Proposed § 1006.34(d)(3)(vi)(A) Specifically, the commenters stated that translated validation notices to certain provided that a debt collector could the correct Spanish translation of consumers (i.e., consumers who include a statement in Spanish ‘‘form’’ is ‘‘formulario,’’ not ‘‘forma.’’ respond to the § 1006.34(d)(3)(vi) informing a consumer that the consumer The word ‘‘forma’’ appeared in both disclosures by requesting a Spanish- could request a Spanish-language proposed § 1006.34(d)(3)(vi)(B) and in language validation notice).361 As validation notice. Specifically, the the sample disclosure on the proposed discussed in the proposal, the Bureau Bureau proposed in model validation notice. The Bureau did not propose to require debt § 1006.34(d)(3)(vi)(A) to permit the finds that ‘‘formulario,’’ not ‘‘forma,’’ is ´ collectors to provide translated statement, ‘‘Pongase en contacto con the correct Spanish translation of validation notices because of the nosotros para solicitar una copia de este ‘‘form.’’ The Bureau also finds that, for associated costs of such a formulario en espan˜ ol,’’ using that gender agreement, § 1006.34(d)(3)(vi)(B) requirement,362 and the Bureau is phrase or a substantially similar phrase should read ‘‘este formulario,’’ not ‘‘esta declining to finalize such a requirement in Spanish. In English, this phrase formulario.’’ in this final rule.363 means, ‘‘You may contact us to request The Bureau is finalizing A debt collector who provides the a copy of this form in Spanish.’’ The § 1006.34(d)(3)(vi)(B), its related optional disclosure described in proposal clarified that a debt collector commentary, and the disclosure on the § 1006.34(d)(3)(vi) must honor a who provided this optional disclosure model validation notice as proposed, consumer’s request for a translated could also include supplemental but with revisions to correct the validation notice or risk violating information in Spanish specifying how translation errors and with other, minor FDCPA section 807. However, the a consumer could request a Spanish- wording changes for consistency with proposal did not expressly state that the language validation notice. Proposed other provisions of the final rule. comment 34(d)(3)(vi)(A)–1 explained debt collector would be obligated to 34(d)(3)(vii) provide the Spanish-language that, for example, a debt collector could The Bureau proposed translation of the validation notice in provide a statement in Spanish that a § 1006.34(c)(2)(iii) to provide that the this circumstance. The proposal only consumer could request a Spanish- merchant brand, if any, associated with implied such an obligation. To make the language validation notice by telephone or email. a credit card debt, to the extent available 361 15 U.S.C. 1692e. Consumer advocate commenters to the debt collector, is validation 362 84 FR 23274, 23352 (May 21, 2019). supported the Spanish-language information that must be provided to 363 See the section-by-section analysis of the consumer. Proposed comment § 1006.34(e). 364 Id. 34(c)(2)(iii)–1 provided an example of

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00066 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5831

merchant brand information that the may be more likely to recognize a institution (e.g., ‘‘College of Columbia’’) Bureau initially determined would be facility where treatment was provided or a charity may be associated with a available to a debt collector and that, than the healthcare service provider that consumer financial product (e.g., a therefore, would be required on a is the creditor. A group of consumer credit card provided by ‘‘ABC Bank’’) as validation notice. advocate commenters noted that an affinity brand. See comment For the reasons discussed below, the increasingly a hospital name may act as 34(d)(3)(vii)–2. Moreover, facility name Bureau is not finalizing a brand for an umbrella of service information (e.g., ‘‘ABC Hospital’’) may § 1006.34(c)(2)(iii) and its related providers and thus should be treated in prove more recognizable to consumers commentary. Instead, the Bureau is the same manner as a merchant brand. with respect to a medical debt than the restructuring and renumbering proposed The Bureau determines that merchant name of, for example, the physicians § 1006.34(c)(2)(iii) as a new optional brand information may help consumers group or laboratory that is the actual disclosure under § 1006.34(d)(3)(vii), recognize debts. However, the Bureau creditor (particularly if the consumer which permits, but does not require, agrees with the feedback that whether has one appointment or procedure at debt collectors to disclose the merchant merchant brand information is available one facility that results in multiple bills brand, affinity brand, or facility name, if may not always be clear to a debt from multiple providers). See comment any, associated with the debt (and does collector. This ambiguity is particularly 34(d)(3)(vii)–3. Thus, not limit the optional disclosure to likely with respect to debts that have § 1006.34(d)(3)(vii) also permits debt credit card debt). been sold or transferred multiple times. collectors to disclose an affinity brand Industry, industry trade group, and Furthermore, not all creditors will have or a facility name, if any, associated consumer advocate commenters an associated merchant brand, at least with a debt.366 uniformly agreed that, if available, one that is distinct from the creditor For these reasons, the Bureau is merchant brand information may help name. finalizing § 1006.34(d)(3)(vii) to provide consumers recognize debts. For Accordingly, in lieu of finalizing the that, along with the validation example, consumer advocate requirement in proposed information, debt collectors may commenters stated that, in the case of a § 1006.34(c)(2)(iii), the Bureau is disclose the merchant brand, affinity store-branded credit card, a consumer adopting new § 1006.34(d)(3)(vii), brand, or facility name, if any, may not associate the debt with the which permits, rather than requires, associated with a debt. The Bureau also original creditor (often a bank) and may debt collectors to disclose the merchant is adopting new comments 34(d)(3)(vii)– be more likely to recognize the brand information, if any, associated 1 through –3 to provide examples of a merchant, whose name appears on the with a debt. By making merchant brand merchant brand, an affinity brand, and credit card. A group of consumer an optional disclosure, the Bureau a facility name, respectively. advocate commenters asserted that such eliminates a source of potential information was important, impliedly ambiguity that could expose debt 34(d)(3)(viii) suggesting that the Bureau require its collectors to legal risk. In addition, disclosure as part of the validation The Bureau is finalizing notwithstanding this modification, the § 1006.34(d)(3)(viii) to provide that, information. Bureau concludes that debt collectors Although supportive of the proposed although it is not required, a debt will be incentivized to provide disclosure in principle, some industry collector who is collecting debt not merchant brand information if it is trade group commenters asked the related to a consumer financial product available. Commenters uniformly agreed Bureau to clarify the circumstances in or service may disclose certain that merchant brand information helps which merchant brand information additional information without losing consumers recognize debts.365 Thus, would be deemed available. According the safe harbor provided by debt collectors likely will benefit from to these commenters, whether merchant § 1006.34(d)(2) (assuming the debt including merchant brand information if brand information is available may be collector otherwise satisfies the unclear because it is not always possible. Providing merchant brand conditions for the safe harbor). identifiable in a consumer’s file or a information will also benefit consumers Specifically, § 1006.34(d)(3)(viii) creditor may not have provided it. One by allowing them to more easily identify provides that, if a debt collector is industry trade group commenter stated debts, determine whether they owe collecting debt other than debt related to that the proposed provision requiring them, and avoid the confusion resulting a consumer financial product or service disclosure of merchant brand from seeing a validation notice with an as defined in § 1006.2(f), the debt information for credit cards as part of unfamiliar name (which potentially collector may disclose: (1) The name of the validation information would better leads to the consumer ignoring the the creditor to whom the debt was owed serve consumers and reduce compliance notice). on the itemization date (i.e., the costs if the provision included broader The Bureau finds that affinity brand information specified in categories than merchant brand names information and facility name § 1006.34(c)(2)(iii)); or (2) a statement and was an optional, rather than information also may help consumers that informs the consumer that mandatory, disclosure. recognize debts they owe. Whereas a additional information regarding The Bureau received other comments merchant brand can be generally consumer protections in debt collection about expanding the scope of proposed understood as the labelling or branding is available on the Bureau’s website at § 1006.34(c)(2)(iii). An industry trade of a commercial entity, such as a retail www.cfpb.gov/debt-collection (i.e., the group commenter recommended that store, an affinity brand may reflect the information specified in § 1006.34(c)(2)(iii) also encompass labelling or branding of an entity that is § 1006.34(c)(3)(iv)). The Bureau affinity brand information (e.g., the not necessarily commercial but one with determines that receipt of this name of a college). Other commenters which the consumer has a relationship. recommended that debt collectors be For example, a higher education 366 Although § 1006.34(d)(3)(vii) permits debt permitted or required to disclose the collectors to disclose the facility name associated 365 See 84 FR 23274, 23340 (May 21, 2019) (citing with a medical debt along with the validation facility name associated with a medical the Bureau’s consumer focus group findings that information, debt collectors may be prohibited from debt (e.g., the name of a hospital). indicate consumers use merchant brands to doing so by other applicable laws, such as According to commenters, a consumer recognize credit card debts). healthcare privacy rules or regulations.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00067 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5832 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

information may be helpful for validation notice is delivered by email, to dispute a debt or request original- consumers. a debt collector should be permitted to creditor information. format the prompts in the consumer- Industry trade group commenters 34(d)(4) Validation Notices Delivered response information section so that the supported proposed § 1006.34(d)(4)(ii). Electronically debt collector receives an email if a For example, a commenter stated that As discussed in the proposal and in consumer selects them. Another hyperlinks are an important feature the November 2020 Final Rule, industry trade group commenter asked used to reduce the complexity of email promoting electronic communications the Bureau to clarify whether a fillable and text messages while allowing may benefit consumers and debt field includes a checkbox. readers to access important information. collectors.367 As also discussed in the A consumer advocate commenter A consumer advocate commenter proposal, allowing debt collectors to raised concerns about permitting a debt recommended that the Bureau also make certain formatting modifications collector to format the payment prompt permit debt collectors to embed a to validation notices delivered described in § 1006.34(d)(3)(iii)(B) as a hyperlink that connects consumers to electronically may help consumers fillable field. According to the the Bureau’s website address described exercise their verification rights under commenter, scammers could in § 1006.34(c)(3)(iv). FDCPA section 809 and may facilitate a impersonate legitimate debt collectors The Bureau determines that debt collector’s ability to process and and attempt to convince consumers to hyperlinks are a formatting modification understand a consumer’s response to make payments on fraudulent debts that may benefit consumers and debt such an electronically delivered using the payment prompts. The collectors if included in validation validation notice. Proposed commenter urged the Bureau to evaluate notices that are delivered electronically. § 1006.34(d)(4) therefore provided the security risks associated with And the Bureau agrees that debt several modifications, discussed in the fillable payment prompts and consider collectors should be permitted to section-by-section analysis of other approaches. include a hyperlink that connects § 1006.34(d)(4)(i) and (ii) below, that a The Bureau determines that allowing consumers to the Bureau’s website debt collector could make, at its option, a debt collector to design a validation address described in § 1006.34(c)(3)(iv). to the formatting of a validation notice notice delivered electronically to Accordingly, the Bureau is finalizing delivered electronically. include fillable prompts will benefit § 1006.34(d)(4)(ii) to provide that debt An industry trade group commenter consumers and industry by making it collectors may embed hyperlinks that, expressed support for proposed easier for consumers to exercise their when clicked, connect consumers to the § 1006.34(d)(4)’s facilitation of verification rights, make a payment, or debt collector’s website, connect validation notices delivered request a Spanish-language translation consumers to the Bureau’s debt electronically. The Bureau received no of the notice. The Bureau does not find collection website as disclosed pursuant to § 1006.34(c)(3)(iv), or permit other comments specifically addressing that permitting a debt collector to format consumers to dispute the debt or request proposed § 1006.34(d). Accordingly, the the payment prompt described in original-creditor information. Bureau is finalizing § 1006.34(d)(4) with § 1006.34(d)(3)(iii)(B) as a fillable field only minor wording changes. entails substantial security risks. The 34(e) Translation Into Other Languages The Bureau is finalizing Bureau acknowledges that, in general, § 1006.34(d)(4) to implement and The Bureau proposed § 1006.34(e) to electronic communications present provide that a debt collector could send interpret FDCPA section 809(b) by certain security risks to consumers. establishing formatting requirements a consumer a validation notice However, the Bureau finds that these completely and accurately translated that facilitate the consumer’s right to general risks do not justify preventing into any language if the debt collector dispute a debt and request original- debt collectors from including in also sent an English-language validation creditor information, and pursuant to its electronic communications common notice that satisfied § 1006.34(a)(1). FDCPA section 814(d) authority to design modifications, such as prompts, Proposed § 1006.34(e) also provided prescribe rules with respect to the that are convenient to consumers. Thus, that, if a debt collector already provided collection of debts by debt collectors. the Bureau declines to limit the ability a consumer an English-language The Bureau also is finalizing of legitimate debt collectors to include validation notice that satisfied § 1006.34(d)(4) pursuant to its authority on validation notices a common design § 1006.34(a)(1) and subsequently under section 1032(a) of the Dodd-Frank modification that will benefit provided the consumer a validation Act to prescribe rules to ensure that the 369 consumers. notice translated into any other features of consumer financial products Accordingly, the Bureau is finalizing language, the debt collector would not and services are disclosed fully, § 1006.34(d)(4)(i) largely as proposed, need to provide an additional copy of accurately, and effectively. with only minor wording changes for the English-language notice. Proposed 34(d)(4)(i) Prompts consistency with other provisions in the comment 34(e)–1 clarified that the final rule. Proposed § 1006.34(d)(4)(i) provided language of a validation notice obtained that a debt collector delivering a 34(d)(4)(ii) Hyperlinks from the Bureau’s website would be validation notice electronically considered a complete and accurate Proposed § 1006.34(d)(4)(ii) provided translation, although debt collectors pursuant to § 1006.42 could display any that a debt collector delivering a prompt required by § 1006.34(c)(4)(i) or would be permitted to use other validation notice electronically could validation notice translations if they (ii) or (d)(3)(iii)(B) or (vi)(B) as a fillable embed hyperlinks in the validation 368 were accurate and complete. field. notice that, when clicked, would One industry trade group commenter Industry and industry trade group connect consumers to the debt commenters supported proposed supported proposed § 1006.34(d)(4)(i). collector’s website or permit consumers According to the commenter, if a § 1006.34(e) and its optional approach to providing validation notices 369 With respect to the comment about whether a 367 See 84 FR 23274, 23351 (May 21, 2019); 85 FR fillable field includes a checkbox, the Bureau translated into other languages. An 76734, 76755 (Nov. 30, 2020). confirms that a fillable field may appear as an industry trade group commenter stated 368 84 FR 23274, 23405 (May 21, 2019). unmarked checkbox that a consumer can select. that this approach was appropriate

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00068 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5833

because some debt collectors may not if the debt collector knows or should balance than a mandatory requirement. have the resources to conduct know the consumer has another The final rule permits debt collectors to collections activities in languages other language preference; (3) if the original provide disclosures carrying safe harbor than English. Other industry trade group transaction or the debt collector’s prior protection that notify and encourage commenters stated that requiring debt communication was conducted in a consumers to request a Spanish- collectors to provide validation notices foreign language; (4) upon a consumer’s language translation of the validation in other languages would be request; (5) if the debt collector received notice or additional information in burdensome and costly. An industry information in the file from the creditor Spanish, which can assist the largest trade group commenter stated that, if a or a prior debt collector indicating the group of LEP consumers in the United debt collector provided a validation consumer’s non-English language States by a wide margin compared to notice in another language, a consumer preference; or (6) if and when the debt other languages. At the same time, the would expect the debt collector to collector at a later point communicates final rule does not require debt communicate in that language. with the consumer in a foreign collectors to provide all consumers with According to this commenter, if the debt language. In some cases, commenters translated validation notices, whether in collector was unable to do so, this framed these interventions as narrow or Spanish or other languages, and unfulfilled expectation would frustrate measured. A group of consumer irrespective of whether the consumers consumers and expose debt collectors to advocates also urged the Bureau to make request it or speak a language that is litigation risk. available on its website Spanish- uncommon among LEP consumers in Other commenters, including translated validation notices as well as the United States. consumer advocates, legal aid providers, translations in the next seven most Regarding the request by a group of and faith groups, recommended that common languages spoken by LEP consumer advocate commenters that the debt collectors be required to provide consumers in the United States. Bureau translate the validation notice non-English validation notices to LEP The Bureau determines that LEP into Spanish and seven other languages consumers. According to these consumers may benefit from translated and deem the Bureau translations as commenters, LEP consumers tend to validation notices. Further, some debt complete and accurate, the Bureau plans experience poverty at much greater collectors may want to provide to make available on its website, prior rates, face significant challenges translated validation notices to LEP to the effective date of the final rule, a navigating the debt collection process, consumers, if doing so is consistent Spanish-language translation of the and are often subject to harassment and with their business practices. validation notice, and it will consider The Bureau, however, declines deception. Commenters stated that taking such action in the future with commenters’ requests to require debt English-language validation notices respect to one or more of the other collectors to provide a Spanish-language would not enable LEP consumers to languages cited by these commenters understand their rights in debt translation to all consumers on the back following implementation of the final collection or to take appropriate action of every English-language validation rule. if they did not believe that they owed notice or a translated notice to a debt. Commenters cited demographic consumers in other languages if the debt The Bureau also declines to statistics showing the growing collector knows or should know the implement the other mandatory population of LEP consumers, consumer has a different language approaches suggested by consumer particularly in certain localities. A preference. As discussed in the advocate, faith group, and legal aid consumer advocate commenter stated proposal,371 these types of mandatory provider commenters. As discussed that case law suggests that a debt approaches would result in significant, above, these commenters suggested a collector’s failure to provide a non- industry-wide costs on both an upfront variety of interventions, such as English validation notice to an LEP (implementation) basis and an ongoing requiring the debt collector provide the consumer may violate the FDCPA.370 basis, especially for smaller debt translated notice in circumstances in To address these concerns, these collectors and in connection with which the consumer had expressed a commenters suggested various translations of the validation notice in language preference to a prior debt mandatory frameworks that would languages whose use is not prevalent in collector or the creditor and that require debt collectors to provide the United States.372 The Bureau preference is noted in the file for the translated validation notices to acknowledges that some LEP consumers debt, or in which, at a later point in the consumers. These suggested alternative may experience particular challenges in process, the consumer communicates in frameworks included requiring debt the debt collection process. However, a foreign language. collectors to provide a translated commenters did not provide The Bureau disagrees with some validation notice: (1) In Spanish and information about the costs and benefits commenters’ characterization of these located on the back of every English- of requiring debt collectors to provide interventions as targeted or narrow in language validation notice; (2) with translated validation notices to all scope, as each suggestion would entail every English-language validation notice consumers, regardless of whether the a mandatory requirement with consumer requests the translation, that associated upfront and ongoing costs 370 The commenter cited, for example, Evory v. persuades the Bureau that such and complexity (which would be RJM Acquisitions Funding LLC, 505 F.3d 769, 774 mandatory requirements are justified. compounded if more than one or even (7th Cir. 2007). However, the Bureau disagrees with all of these interventions were adopted the commenter’s premise that this opinion and the The Bureau, as stated above, recognizes others it cited imply a general requirement under the benefits of providing translated collectively). In some cases, these the FDCPA to provide translated notices to all disclosures to consumers. However, the suggested interventions are beyond the Spanish-speaking LEP consumers. The Bureau scope of the proposal. As to others, the believes, instead, that those holdings were Bureau concludes that the approach in dependent on the facts of those cases. For example, the proposal, supplemented by certain Bureau concludes that the costs of such Evory discussed in dicta a hypothetical in which a changes in the final rule, strikes a better interventions to debt collectors, debt collector targeted vulnerable Spanish-speaking particularly smaller entities, would not LEP consumers with English-language validation outweigh the benefits to consumers notices, 505 F.3d at 774, but that particular scenario 371 See also the section-by-section analysis of involved targeting, which is beyond the scope of § 1006.34(d)(3)(vi). because they would add undue § 1006.34(e). 372 See 84 FR 23274, 23352 (May 21, 2019). complexity to the rule from an

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00069 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5834 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

operational, compliance, and disputing the debt or requesting the debt collectors’ obligations for providing supervisory perspective. name and address of the original the validation information and For these reasons, the Bureau declines creditor.374 The second proposed responding to disputes and requests for to adopt a final rule that requires debt example, proposed comment 38–2.ii, original-creditor information. collectors to provide translated would have clarified that a consumer Accordingly, the Bureau is finalizing validation notices. Nevertheless, could return to the debt collector the comment 38–1 as proposed, renumbered because the Bureau determines that, as consumer-response form that proposed as comment 38–3 in this final rule. discussed in the proposal, LEP § 1006.34(c)(4)(i) would have required consumers may benefit from receiving to appear on the validation notice and 38(a) Definitions translated validation notices, the Bureau indicate on the form a dispute or 38(a)(2) Validation Period is finalizing § 1006.34(e) to clarify how request. The Bureau received no debt collectors may provide such comments on proposed comment 38– The Bureau proposed in notices if they choose. The Bureau is 2.ii.375 The Bureau did not finalize § 1006.38(a)(2) to provide that the term finalizing proposed § 1006.34(e) as proposed comment 38–2.ii in the validation period as used in § 1006.38 § 1006.34(e)(1), with certain revisions November 2020 Final Rule because the has the same meaning given to it in 376 and organizational changes for clarity; Bureau did not finalize § 1006.34 as part proposed § 1006.34(b)(5). Because the no substantive change is intended. of that final rule. The Bureau now is Bureau did not finalize § 1006.34 in the Furthermore, as discussed in the finalizing comment 38–2.ii as proposed, November 2020 Final Rule, the Bureau section-by-section analysis of renumbered as comment 38–1.ii, except finalized the definition in § 1006.34(d)(3)(vi), the Bureau is that the Bureau is correcting a § 1006.38(a)(2) with revised wording to finalizing new § 1006.34(e)(2) to provide typographical error in the proposed refer to the 30-day period described in that, if a debt collector includes in the comment such that the final comment FDCPA section 809 as defined by 377 validation information either or both of cross references § 1006.34(c)(4) rather Regulation F. The Bureau noted that the optional disclosures notifying a than § 1006.34(c)(4)(i). it might, as part of this final rule, revise the definition of validation period as consumer that the consumer can request Comment 38–3 a copy of the validation notice in finalized in the November 2020 Final Spanish, the debt collector must provide The Bureau proposed comment 38–1 Rule to cross-reference any definition of the consumer a Spanish-language (renumbered in this final rule as that term that the Bureau adopts in this validation notice if the consumer comment 38–3) to clarify the final rule. As discussed in the section- requests one. The Bureau intended this applicability of § 1006.38 in the by-section analysis of § 1006.34(b)(5), result in the proposal and is including decedent debt context. Proposed the Bureau is finalizing the definition of 378 § 1006.34(e)(2) for clarity and in comment 38–1 would have clarified validation period. Therefore, the response to feedback. Finally, the that, if the consumer has not previously Bureau is making a technical change Bureau is finalizing comment 34(e)–1 disputed the debt or requested the name revising § 1006.38(a)(2), as finalized in with revisions to conform to the and address of the original creditor, the November 2020 Final Rule, to revisions and organizational changes then a person who is authorized to act provide that the term validation period made to § 1006.34(e); no substantive on behalf of the deceased consumer’s as used in § 1006.38 has the same change is intended. estate operates as the consumer for meaning given to it in § 1006.34(b)(5). purposes of § 1006.38. Proposed Section 1006.38 Disputes and Requests comment 38–1 also would have clarified 38(b) Overshadowing of Rights To for Original-Creditor Information that, if a person who is authorized to act Dispute or Request Original-Creditor Information FDCPA section 809(b) requires debt on behalf of the deceased consumer’s collectors both to refrain from taking estate submits either a written request FDCPA section 809(b) provides that, certain actions during the 30 days after for original-creditor information or a for 30 days after the consumer receives the consumer receives the validation written dispute to the debt collector the validation information described in information or notice described in during the validation period, then FDCPA section 809(a), a debt collector FDCPA section 809(a) (i.e., during the § 1006.38(c) or (d)(2), respectively, must not engage in collection activities validation period) and to take certain would require the debt collector to cease or communications that overshadow or actions if a consumer either disputes the collection of the debt until the debt are inconsistent with the disclosure of debt in writing, or requests the name collector has responded to that request the consumer’s right to dispute the debt and address of the original creditor in or dispute. or request information about the original writing, during the validation period. For the reasons discussed in the creditor.379 The Bureau proposed in The Bureau proposed § 1006.38 to section-by-section analysis of implement and interpret FDCPA section § 1006.2(e), the Bureau is interpreting 376 84 FR 23274, 23353 (May 21, 2019). 809(b) and (c), and the Bureau finalized the term consumer to mean any natural 377 85 FR 76734, 76844, 76893 (Nov. 30, 2020). the majority of proposed § 1006.38 in person, whether living or deceased, who 378 The Bureau addresses comments received is obligated or allegedly obligated to pay regarding the definition of validation period in the the November 2020 Final Rule.373 The any debt. And, pursuant to its authority section-by-section analysis of § 1006.34(b)(5). Bureau now is finalizing the remainder 379 under FDCPA section 814(d) to This language was added to the FDCPA by the of proposed § 1006.38 as follows. Financial Services Regulatory Relief Act of 2006, prescribe rules with respect to the Public Law 109–351, sec. 802(c), 120 Stat. 1966, Comment 38–1 collection of debts by debt collectors, 2006 (2006), after an FTC advisory opinion on the The Bureau proposed comment 38–2 the Bureau is adopting commentary same subject. See Fed. Trade Comm’n, Advisory clarifying how this definition operates Opinion to American Collector’s Ass’n (Mar. 31, (renumbered in the November 2020 2000) (opining that the 30-day period set forth in Final Rule as comment 38–1) to set forth in the decedent debt context, including FDCPA section 809(a) ‘‘is a dispute period within which the consumer may insist that the debt examples of written and electronic 374 communications consumers can use in 84 FR 23274, 23353 (May 21, 2019). collector verify the debt, and not a grace period 375 The Bureau addressed comments received on within which collection efforts are prohibited’’ but other aspects of proposed comment 38–2 in the that ‘‘[t]he collection agency must ensure, however, 373 85 FR 76734, 74843–48, 76893 (Nov. 30, November 2020 Final Rule. 85 FR 76734, 76843–44 that its collection activity does not overshadow and 2020). (Nov. 30, 2020). is not inconsistent with the disclosure of the

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00070 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5835

§ 1006.38(b) to implement this provides that a debt collector who uses Three industry commenters requested prohibition and generally restate the Model Form B–1 in appendix B of this that the final rule provide that, if a debt relevant statutory language, with only part in a manner described in collector’s communication of the minor changes for style and clarity.380 § 1006.34(d)(2) has not thereby violated validation information to a consumer As the Bureau discussed in the § 1006.38(b)(1). Therefore, a debt identifies the original creditor, the debt November 2020 Final Rule,381 the collector who uses Model Form B–1 in collector need not give the consumer the Bureau received a few substantive appendix B to Regulation F, specified option of requesting original-creditor comments addressing proposed variations of the model notice, or a information from the debt collector. § 1006.38(b). Two industry commenters substantially similar form, has not These commenters stated that, if the requested that the final rule define the thereby violated § 1006.38(b)(1). The original creditor has already been term ‘‘overshadowing.’’ These safe harbor protects only the use of the identified to a consumer, it would be commenters observed that debt model validation notice to comply with confusing to the consumer to provide collectors’ communications of the information and form requirements the option to request the name and validation information almost always of § 1006.34(c) and (d)(1). If a debt address of the original creditor. Further, expressly advise the consumer of the collector uses the model validation they stated, consumers could use right to dispute the debt and to request notice as described in § 1006.34(d)(2) unnecessary requests for original- the name and address of the original and conducts other collection activities creditor information as a tactic to delay creditor. These commenters asserted during the validation period, the debt or avoid collection. One industry that overshadowing claims are collector does not receive a safe harbor commenter requested that the final rule nonetheless some of the most common for those other collection activities. A clarify that a debt collector is not allegations in FDCPA lawsuits. These debt collector also does not receive a required to include original-creditor commenters also requested clarity as to safe harbor for the manner in which a information in its communication of whether the safe harbor in proposed model validation notice is provided, validation information to a consumer. § 1006.34(d)(2) for debt collectors who such as the envelope in which a model This commenter stated that lawsuits are use the model validation notice also validation notice is provided. often filed alleging that a debt collector would provide a safe harbor for The Bureau declines to otherwise has violated the FDCPA by not compliance with the overshadowing define the term ‘‘overshadow’’ or to identifying the original creditor in the prohibition in proposed § 1006.38(b). clarify whether other collection validation information. One industry commenter requested that activities during the validation period Several commenters recommended the final rule clarify that credit reporting either violate or comply with the that the Bureau define ‘‘original during the validation period does not prohibition in final § 1006.38(b)(1). The creditor’’ to mean the creditor at the constitute overshadowing.382 Bureau finds that the safe harbor in time of charge off. According to an In the November 2020 Final Rule, the § 1006.38(b)(2) provides sufficient industry trade group, this definition Bureau finalized proposed § 1006.38(b) clarity for debt collectors. would be consistent with other laws, as § 1006.38(b)(1) and reserved 38(c) Requests for Original-Creditor including the Uniform Rules for New 387 § 1006.38(b)(2).383 As noted above, Information York State Trial Courts. Other proposed § 1006.38(b) generally restated industry and industry trade group FDCPA section 809(a)(5) states that the relevant statutory language, with commenters stated that this definition the validation information a debt would be appropriate for older debts only minor changes for style and clarity, collector provides to a consumer must and § 1006.38(b)(1) in the November because a consumer may no longer include a statement that, upon the recognize the original creditor, 2020 Final Rule did the same. In the consumer’s written request within the November 2020 Final Rule, the Bureau particularly if an account has been sold. 30-day validation period, the debt An industry trade group suggested that stated that it expected to address, as part collector will provide the consumer of this final rule, the comments it defining ‘‘original creditor’’ as the with the name and address of the creditor at the time of charge off may received requesting further clarity about original creditor, if different from the the safe harbor provided by resolve some compliance challenges in current creditor. FDCPA section 809(b) the retail installment sales context. § 1006.34(d)(2), and the Bureau reserved provides that, if a consumer requests the § 1006.38(b)(2) for that purpose.384 According to the commenter, in retail name and address of the original installment sales, the original creditor is After considering the comments, the creditor in writing within 30 days of the retail seller, not the entity that Bureau is finalizing in § 1006.38(b)(2) a receiving the validation information ultimately buys the contract, and retail- safe harbor from the prohibition in described in FDCPA section 809(a), the seller information may not be readily § 1006.38(b)(1) against debt collector must cease collection of 385 available to the debt collector or helpful overshadowing. Section 1006.38(b)(2) the debt until the debt collector obtains to the consumer. and mails that information to the A group of consumer advocate consumer’s right to dispute the debt specified by consumer. The Bureau proposed in [s]ection 809(a)’’). commenters who addressed proposed 380 84 FR 23274, 23353–54 (May 21, 2019). § 1006.38(c) to implement this § 1006.38(c) generally noted the 381 85 FR 76734, 76844 (Nov. 30, 2020). prohibition and generally restate the importance of original-creditor 382 In addition, one industry commenter stated relevant statutory language. information to consumers in helping that it generally agreed with proposed § 1006.38, As the Bureau discussed in the them recognize the debt in question. and a group of consumer advocates that addressed November 2020 Final Rule, the Bureau proposed § 1006.38(b) did not object to the One commenter stated that the rule proposal. received a number of comments 386 383 addressing proposed § 1006.38(c). 85 FR 76734, 76844, 76893 (Nov. 30, 2020). 387 ‘‘Original creditor means the financial 384 Id. institution that owned the consumer credit account 385 Accordingly, the heading for final § 1006.38(b)(1) to omit a reference to the fact that at the time the account was charged off, even if that § 1006.38(b)(2) refers to the safe harbor, and the the Bureau may provide in this part a safe harbor financial institution did not originate the account. Bureau is revising: (1) The heading for for debt collectors when they use certain Bureau- Charged-off consumer debt means a consumer debt § 1006.38(b)(1) as finalized in the November 2020 approved disclosures because the Bureau is that has been removed from an original creditor’s Final Rule to clarify that that paragraph relates to providing that safe harbor in this final rule. books as an asset and treated as a loss or expense.’’ the overshadowing prohibition; and (2) 386 85 FR 76734, 76844–45 (Nov. 30, 2020). 22 NYCRR 208.14–a(a)(2).

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00071 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5836 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

should require debt collectors to therefore has determined to require a already provided the name of the identify the original creditor in the debt collector to respond to a current creditor to the consumer within validation information.388 consumer’s request for original-creditor the validation information (as required In the November 2020 Final Rule, the information if the original creditor is the by FDCPA section 809(a)(2) and Bureau finalized proposed § 1006.38(c) same as the current creditor. § 1006.34(c)(2)(v)) and the original as § 1006.38(c)(1) and reserved However, the Bureau also has creditor is not different from the current § 1006.38(c)(2).389 As noted above, determined that FDCPA section creditor. If the original creditor is the proposed § 1006.38(c) generally restated 809(a)(5) and (b) permits a debt collector same as the current creditor, the Bureau the relevant statutory language, and to respond differently to the consumer’s interprets FDCPA section 809(b)’s § 1006.38(c)(1) in the November 2020 request for original-creditor information requirement to provide original-creditor Final Rule did the same.390 In the when the original creditor is the same information to the consumer to mean November 2020 Final Rule, the Bureau as the current creditor. Specifically, the that a debt collector must cease stated that it expected to address, as part Bureau has determined that FDCPA collection of the debt until the debt of this final rule, how a debt collector section 809(b), when read together with collector either provides the name and may respond to a request for original- FDCPA section 809(a)(5), requires the address of the original creditor to the creditor information if the original debt collector to provide the name and consumer in compliance with creditor is the same as the current address of the original creditor to the § 1006.38(c)(1) or, in compliance with creditor, and the Bureau reserved consumer only if the original creditor is § 1006.38(c)(2), notifies the consumer in § 1006.38(c)(2) for that purpose.391 The different from the current creditor. writing or electronically in the manner Bureau also noted that it would respond Accordingly, the Bureau is finalizing required by § 1006.42 that the original in this final rule to the comments asking new § 1006.38(c)(2) to set forth an creditor is the same as the current the Bureau to define the term original alternative procedure that a debt creditor and refers the consumer to the creditor. collector may use to respond to a debt collector’s earlier provision of the The Bureau has determined that a consumer’s request for original-creditor validation information. debt collector’s communication of the information if the original creditor is the The Bureau declines to require all validation information must include same as the current creditor. debt collectors to include the name of disclosure of the option to request Specifically, if a debt collector receives the original creditor in the validation original-creditor information. As noted a request for the name and address of information because the Bureau believes above, FDCPA section 809(a)(5) states the original creditor submitted by the such a requirement is not necessary or that the validation information must consumer in writing within the warranted. The statute prescribes a include ‘‘a statement that, upon the validation period, the special rule set method for a consumer to obtain this consumer’s written request within the forth in § 1006.38(c)(2) provides that the information upon request. Further, the thirty-day period, the debt collector will debt collector must cease collection of Bureau interprets FDCPA section provide the consumer with the name the debt until the debt collector 809(a)(2) as requiring debt collectors to and address of the original creditor, if reasonably determines that the original disclose in the validation information different from the current creditor.’’ 392 creditor is the same as the current the name of the current creditor; i.e., Because FDCPA section 809(a) requires creditor and either (i) notifies the ‘‘the name of the creditor to whom the the validation information to include consumer in writing or electronically in debt is owed.’’ disclosure of the consumer’s right to the manner required by § 1006.42 that request original-creditor information, the original creditor is the same as the The Bureau declines to define the Bureau finds that consumer current creditor and refers the consumer ‘‘original creditor’’ in the manner confusion would result if the final rule to the debt collector’s earlier provision commenters suggested. Although the were to permit a debt collector not to of the validation information or (ii) definition suggested by commenters respond to a consumer’s timely request satisfies § 1006.38(c)(1). might be accurate for some debts, it is for that information if the original Under the final rule, a debt collector not clear to the Bureau that the creditor is the same as the current is not required to use the alternative suggested definition would be accurate creditor. Further, FDCPA section 809(b) procedure in § 1006.38(c)(2); a debt for all debts. The Bureau did not states that ‘‘[a]ny collection activities collector can always comply with the propose such a definition and the and communication during the 30-day rule by complying with § 1006.38(c)(1). Bureau does not have sufficient period may not overshadow or be By adopting the § 1006.38(c)(2) information to develop and include a inconsistent with the disclosure of the alternative procedure, the Bureau strikes definition of ‘‘original creditor’’ in the consumer’s right to dispute the debt or the best balance between providing debt rule. request the name and address of the collectors with a less burdensome Taking into consideration the original creditor.’’ 393 The Bureau method of responding to consumer provisions of FDCPA section 809(a) and requests for original-creditor (b), the final rule provides debt 388 Consumer advocates also addressed the information and protecting consumers. collectors an alternative response proposal’s provisions regarding electronic delivery The Bureau adopts the alternative procedure, described above, when the of original-creditor information (and other information) in proposed § 1006.42. These procedure in § 1006.38(c)(2) as an original creditor—which in many cases comments regarding electronic delivery were interpretation of FDCPA section will be the creditor as of the itemization addressed in the November 2020 Final Rule. Id. at 809(a)(5) and (b), and pursuant to its date—is the same as the current 76848. authority under FDCPA section 814(d). creditor. The alternative procedure 389 Id. at 76893. In particular, § 1006.38(c)(2) is an permits debt collectors to respond to 390 While this final rule republishes in § 1006.38(c) some of the text of § 1006.38(c)(1) as interpretation of what it means for a some consumer requests for original- finalized in the November 2020 Final Rule, this debt collector, pursuant to FDCPA creditor information in a less final rule makes no change to the substance of section 809(b), to ‘‘obtain[ ] . . . the burdensome way, while also protecting § 1006.38(c)(1) from what the Bureau finalized in the November 2020 Final Rule. name and address of the original consumers. Therefore, the Bureau 391 85 FR 76734, 76845 n.557 (Nov. 30, 2020). creditor’’ and send that information to believes that defining original creditor 392 15 U.S.C. 1692g(a)(5). the consumer when, pursuant to FDCPA in the final rule is unnecessary and 393 15 U.S.C. 1692g(b) (emphasis added). section 809(a)(5), the debt collector unwarranted.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00072 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5837

Section 1006.42 Sending Required Subpart C—Reserved State law that describes additional Disclosures Subpart D—Miscellaneous protections under State law does not contradict the requirements of the 42(a) Sending Required Disclosures Section 1006.100 Record Retention FDCPA or the corresponding provisions 42(a)(2) Exceptions 100(a) In General of Regulation F.405 In the November 2020 Final Rule, the Bureau indicated Section 1006.100(a), as finalized in The Bureau proposed in that it was not finalizing proposed the November 2020 Final Rule, requires § 1006.42(a)(2) to provide that a debt comment 104–1 as part of that rule and a debt collector to retain records that are collector need not comply with would determine whether and how to § 1006.42(a)(1) when providing the evidence of compliance or non- compliance with the FDCPA and finalize the comment as part of this final disclosure required by § 1006.6(e) or rule.406 § 1006.18(e) in writing or electronically, Regulation F. The Bureau proposed comment 100–1 to clarify that, for As discussed in the November 2020 unless the disclosure was included on a purposes of § 1006.100(a), evidence of Final Rule, some commenters asked the notice required by § 1006.34(a)(1)(i) or Bureau to clarify how proposed 394 compliance includes, among other § 1006.38(c) or (d)(2). Because the things, copies of documents provided by comment 104–1 would interact with Bureau did not finalize § 1006.34 in the the debt collector to the consumer in State law disclosure requirements.407 November 2020 Final Rule, the Bureau accordance with the requirements of According to these commenters, the finalized § 1006.42(a)(2) with a proposed § 1006.34.400 Because the proposed commentary did not track reference to the notice required by Bureau did not finalize § 1006.34 in the FDCPA section 816’s statutory language FDCPA section 809(a), as implemented November 2020 Final Rule, the Bureau and therefore would be susceptible to by Regulation F, in lieu of a reference finalized comment 100(a)–1 to include, competing interpretations. These to the notice required by as an example of evidence of commenters expressed concern that § 1006.34(a)(1)(i).395 Because the Bureau compliance, copies of documents proposed comment 104–1 could be is now finalizing § 1006.34, the Bureau provided by the debt collector to the interpreted to mean that § 1006.104 is making a technical change revising consumer in accordance with FDCPA would preempt State law disclosure § 1006.42(a)(2) to refer to the notice section 809(a), as implemented by requirements that afford the same required by § 1006.34(a)(1)(i), as Bureau regulation.401 Because the protections as the FDCPA and the originally proposed. The Bureau Bureau now is finalizing § 1006.34, the corresponding provisions of Regulation addressed comments received regarding Bureau is making a technical change F. These commenters opposed such an proposed § 1006.42(a)(2) in the section- revising comment 100(a)–1 to include, interpretation as inconsistent with by-section analysis of § 1006.42(a)(2) in as an example of evidence of FDCPA section 816. the November 2020 Final Rule.396 compliance, copies of documents provided by the debt collector to the With proposed comment 104–1, the 42(b) Requirements for Certain consumer in accordance with § 1006.34, Bureau did not intend to communicate Disclosures Sent Electronically as originally proposed. The Bureau that § 1006.104 would preempt addressed comments received regarding disclosures required by State law that Proposed § 1006.42(b)(1) generally proposed comment 100–1 in the describe State laws that afford the same would have required a debt collector section-by-section analysis of protections as the FDCPA and the who provided the validation notice § 1006.100(a) and comment 100(a)–1 in corresponding provisions of Regulation described in § 1006.34(a)(1)(i)(B) the November 2020 Final Rule.402 F. To mitigate the risk that the proposed electronically to do so in accordance commentary could be interpreted in this with section 101(c) of the E–SIGN Section 1006.104 Relation to State manner, the Bureau is modifying Act.397 Because the Bureau did not Laws proposed comment 104–1 to more finalize § 1006.34 in the November 2020 FDCPA section 816 provides that the closely track FDCPA section 816’s Final Rule, the Bureau finalized FDCPA does not annul, alter, or affect, statutory language. § 1006.42(b) with a reference to the or exempt any person subject to the Accordingly, the Bureau is finalizing notice required by FDCPA section provisions of the FDCPA from comment 104–1 to clarify that the 809(a), as implemented by Regulation F, complying with the laws of any State FDCPA and the corresponding in lieu of a reference to the validation with respect to debt collection practices, provisions of Regulation F do not annul, notice described in except to the extent that those laws are alter, or affect, or exempt any person § 1006.34(a)(1)(i)(B).398 Because the inconsistent with any provision of the subject to these requirements from Bureau is now finalizing § 1006.34, the FDCPA, and then only to the extent of complying with a disclosure Bureau is making a technical change the inconsistency. FDCPA section 816 requirement under applicable State law also provides that, for purposes of that revising § 1006.42(b) to refer to the that describes additional protections section, a State law is not inconsistent validation notice required by under State law that are not inconsistent with the FDCPA if the protection such with the FDCPA and Regulation F. In § 1006.34(a)(1)(i)(B), as originally law affords any consumer is greater than proposed. The Bureau addressed addition, comment 104–1 clarifies that a the protection provided by the disclosure required by State law is not comments received regarding proposed FDCPA.403 The November 2020 Final § 1006.42(b)(1) in the section-by-section inconsistent with the FDCPA or Rule finalized § 1006.104 to implement Regulation F if the disclosure describes analysis of § 1006.42(b) in the November FDCPA section 816.404 399 a protection such law affords any 2020 Final Rule. Proposed comment 104–1 clarified consumer that is greater than the that a disclosure required by applicable 394 84 FR 23274, 23357–59 (May 21, 2019). protection provided by the FDCPA or 395 85 FR 76734, 76893 (Nov. 30, 2020). 400 84 FR 23274, 23367 (May 21, 2019). Regulation F. 396 Id. at 76850–51. 401 85 FR 76734, 76907 (Nov. 30, 2020). 397 84 FR 23274, 23356–57 (May 21, 2019). 402 Id. at 76858 n.600. 405 84 FR 23274, 23368 (May 21, 2019). 398 85 FR 76734, 76893 (Nov. 30, 2020). 403 15 U.S.C. 1692n. 406 85 FR 76734, 76860 (Nov. 30, 2020). 399 Id. at 76850–51. 404 85 FR 76734 at 76860 (Nov. 30, 2020). 407 Id.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00073 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5838 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

VI. Effective Date conduct of FDCPA debt collectors. market failures in debt collection, for As discussed in the November 2020 Similarly, to the extent the final rule example by prohibiting unfair, Final Rule, the Bureau proposed an establishes a safe harbor from liability deceptive, or abusive debt collection implementation period of one year after for certain conduct or a presumption practices by third-party debt collectors. publication of the final rule in the that certain conduct complies with or Any restriction on debt collection Federal Register.408 The Bureau violates the rule, those safe harbors and may reduce repayment of debts, received several comments on the presumptions are not effective until the providing a benefit to some consumers proposed effective date. As noted in the final rule’s effective date. who owe debts and an offsetting cost to November 2020 Final Rule, a few creditors and debt collectors. A decrease VII. Dodd-Frank Act Section 1022(b) in repayment will in turn lower the industry commenters supported the Analysis proposed effective date, stating that a expected return to lending. This can one-year implementation period would A. Overview lead lenders to increase interest rates provide debt collectors with enough In developing the final rule, the and other borrowing costs and to restrict availability of credit, particularly to time to comply with the rule. Two other Bureau has considered the potential 411 industry commenters supported an 18- benefits, costs, and impacts as required higher-risk borrowers. Because of month and a 24-month implementation by section 1022(b)(2)(A) of the Dodd- this, policies that increase protections period, respectively, arguing that it Frank Act.409 for consumers with debts in collection would take longer than one year to Debt collectors play a critical role in involve a tradeoff between the benefits update policies and procedures, train markets for consumer financial products of protections for those consumers and employees, and make programming and services. Credit markets function the possibility of increased costs of changes necessary to come into because lenders expect that borrowers credit and reduced availability of credit compliance. A government commenter will pay them back. In consumer credit for all consumers. Whether there is a net encouraged the Bureau to provide small markets, if borrowers fail to repay what benefit from such protections depends entities more than one year to comply, they owe per the terms of their loan on whether consumers value the if such entities were not exempted from agreement, creditors often engage debt protections enough to outweigh any the rule altogether. Several industry collectors to attempt to recover amounts associated increase in the cost of credit commenters asked the Bureau to clarify owed, whether through the court system or reduction in availability of credit. The final rule will further the that a debt collector is permitted to or through less formal demands for FDCPA’s goals of eliminating abusive comply with all or part of the final rule repayment. debt collection practices and ensuring before the effective date. In general, third-party debt collection The Bureau considered those creates the potential for market failures. that debt collectors who refrain from Consumers do not choose their debt such practices are not competitively comments in finalizing the November 412 2020 Final Rule and determined that collectors, and, as a result, debt disadvantaged. However, as that final rule would take effect one year collectors do not have the same discussed below, it is not clear based on after publication in the Federal incentives that creditors have to treat the information available to the Bureau Register. The Bureau determined that consumers fairly.410 Certain provisions whether the net effect of the final rule the revisions made to the proposal and of the FDCPA may help mitigate such will be to make it more costly or less discussed in that Final Rule would costly for debt collectors to recover permit debt collectors to meet that 409 Specifically, section 1022(b)(2)(A) of the unpaid amounts, and therefore not clear effective date. The Bureau also Dodd-Frank Act (12 U.S.C. 5512(b)(2)(A)) requires whether the rule will tend to increase or the Bureau to consider the potential benefits and recognized that all stakeholders might decrease the supply of credit. The final costs of the regulation to consumers and covered rule will benefit both consumers and benefit if the November 2020 Final Rule persons, including the potential reduction of access and this final rule had the same by consumers to consumer financial products and debt collectors by increasing clarity and effective date. services; the impact of the rule on insured certainty about what the FDCPA As noted in part III, the November depository institutions and insured credit unions prohibits and requires. When a law is with less than $10 billion in total assets as unclear, it is more likely that parties 2020 Final Rule was published in the described in section 1026 of the Dodd-Frank Act (12 Federal Register on November 30, 2020 U.S.C. 5516); and the impact on consumers in rural will disagree about what the law and will take effect on November 30, areas. requires, that legal disputes will arise, 2021. The Bureau concludes that all 410 Consumers do choose their lenders, and, in and that litigation will be required to principle, consumer loan contracts could specify resolve disputes. Since 2010, consumers stakeholders will benefit if the which debt collector would be used or what debt November 2020 Final Rule and this final collection practices would be in the event a loan have filed approximately 8,000 to rule have the same effective date. The is not repaid. Some economists have identified 12,000 lawsuits under the FDCPA each Bureau also determines that setting the potential market failures that prevent loan contracts year, some of which involve issues on from including such terms even when they could effective date for this final rule as make both borrowers and lenders better off. For 411 November 30, 2021, consistent with the example, terms related to debt collection may not See Thomas A. Durkin et al., Consumer Credit be salient to consumers at the time a loan is made. and the American Economy 521–25 (Oxford U. effective date of the November 2020 Press 2014) (discussing theory and evidence on how Final Rule, will provide debt collectors Alternatively, if such terms are salient, a contract that provides for more lenient collection practices restrictions on creditor remedies affect the supply nearly one year, and therefore sufficient may lead to adverse selection, attracting a of credit). Empirical evidence on the impact of State time, to come into compliance with this disproportionate share of borrowers who know they laws restricting debt collection is discussed in are more likely to default. See Thomas A. Durkin section G below. The provisions in this final rule final rule. could also affect consumer demand for credit, to the The Bureau notes that debt collectors et al., Consumer Credit and the American Economy 521–25 (Oxford U. Press 2014) (discussing potential extent that consumers contemplate collection may, but are not required to, comply sources of market failure and potential problems practices when making borrowing decisions. with the final rule’s requirements and with some of those arguments). See also Erik Durbin However, there is evidence suggesting that prohibitions before the effective date. & Charles Romeo, The Economics of Debt consumer demand for credit is generally not Until that date, the FDCPA and other Collection: With attention to the issue of salience responsive to differences in creditor remedies. See of collections at the time credit is granted, Journal James Barth et al., Benefits and Costs of Legal applicable law continue to govern the of Credit Risk (Sept. 4, 2020) (discussing how rules Restrictions on Personal Loan Markets, Journal of that limit debt collection affect consumer welfare Law & Economics, 29(2) (1986). 408 85 FR 76734, 76863 (Nov. 30, 2020); see also when debt collection is not salient to consumers 411 See 15 U.S.C. 1692(e). 84 FR 23274, 23276 (May 21, 2019). when they borrow). 412 See id.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00074 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5839

which the law is unclear.413 The B. Provisions To Be Analyzed industry impacts, much of the Bureau’s number of disputes settled without The analysis below considers the existing data come from qualitative litigation has likely been much potential benefits, costs, and impacts to input from debt collectors and other 414 greater. Perhaps more important than consumers and covered persons of key entities that operate in the debt the costs of resolving legal disputes are provisions of the final rule (provisions), collection market rather than from the steps that debt collectors take to which include: representative sampling that would prevent legal disputes from arising in 1. Time-barred debt: Prohibiting suits allow the Bureau to estimate total the first place. This includes direct costs and threats of suit. benefits and costs. of legal compliance, such as auditing 2. Notice for validation of debts. General economic principles and the and legal advice, as well as indirect 3. Required actions prior to furnishing Bureau’s expertise in consumer costs from avoiding collection practices information. financial markets, together with the data that might be both effective and legal and findings that are available, provide C. Data Limitations and Quantification but that raise potential legal risks. In insight into the potential benefits, costs, of Benefits, Costs, and Impacts some cases, debt collectors seeking to and impacts of the final rule. Where follow the law and avoid litigation have The discussion in this part VII relies possible, the Bureau has made adopted practices that appear to be on publicly available information as quantitative estimates based on these economically inefficient, with costs that well as information the Bureau has principles and the data available. Some exceed the benefits to consumers or obtained. To better understand benefits and costs, however, are not even impose net costs on consumers.415 consumer experiences with debt amenable to quantification, or are not This final rule relating to disclosures collection, the Bureau developed its quantifiable given the data available to could make debt collection either more 2015 Survey of Consumer Views on the Bureau. The Bureau provides a or less costly in ways that are difficult Debt, which provided the first qualitative discussion of those benefits, to predict. For example, the validation comprehensive and nationally costs, and impacts. The Bureau notice requirements will provide representative data on consumers’ requested additional data or studies that consumers with more information than experiences and preferences related to could help quantify the benefits and 416 they currently receive about debts, debt collection. In addition, the costs to consumers and covered persons which could reduce costs to consumers Bureau relies on its Consumer Credit of the May 2019 Proposed Rule and the and debt collectors from disputes that Panel (CCP) to understand potential February 2020 Proposed Rule. The arise when consumers do not recognize benefits and costs to consumers of the Bureau summarizes comments on this 417 the debt or do not understand the basis rule. To better understand potential subject below, but few comments for the alleged amount due. At the same effects of the rule on industry, the explicitly addressed quantifying the time, the final rule’s clearer explanation Bureau has engaged in significant costs and benefits of the rule or of dispute rights could make consumers outreach to industry, including through provided additional data or studies. the CFPB Debt Collection Operations Comments on the benefits and costs of more likely to dispute, which could 418 provide benefits to consumers while Study. In July 2016, the Bureau the rule are also discussed in part V increasing costs for debt collectors. consulted with small entities as part of above. the SBREFA process and obtained Disputes are costly for debt collectors to important information on the potential D. Baseline for Analysis process, so these requirements could impacts of proposals that the Bureau either increase or decrease debt In evaluating the potential benefits, was considering at the time for the collector and consumer costs depending costs, and impacts of the final rule, the topics covered by the final rule; many on the net effect on dispute rates. Bureau takes as a baseline the current of those proposals are included in the legal framework governing debt In developing the final rule, the final rule.419 Bureau has consulted, or offered to collection. This includes debt collector The sources described above, together practices as they currently exist, consult with, the appropriate prudential with other sources of information and responding to the requirements of the regulators and other Federal agencies, the Bureau’s market knowledge, form FDCPA as currently interpreted by including regarding consistency with the basis for the Bureau’s consideration courts and law enforcement agencies, any prudential, market, or systemic of the likely impacts of the final rule. other Federal laws, and the rules and objectives administered by such The Bureau makes every attempt to statutory requirements promulgated by agencies. provide reasonable estimates of the the States.420 In the consideration of potential benefits and costs to 413 potential benefits, costs, and impacts See WebRecon LLC, WebRecon Stats for Dec consumers and covered persons of this below, the Bureau discusses its 2019 & Year in Review, https://webrecon.com/ final rule given available data. However, webrecon-stats-for-dec-2019-and-year-in-review- understanding of practices in the debt available data sources generally do not how-did-your-favorite-statutes-fare/ (last visited collection market under this baseline Dec. 1, 2020). Greater clarity about legal permit the Bureau to quantify, in dollar and how those practices are likely to requirements could reduce unintentional violations terms, how particular provisions will change under the final rule. and could also reduce lawsuits because, when affect consumers. With respect to parties can better predict the outcome of a lawsuit, Until the creation of the Bureau, no they may be more likely to settle claims out of Federal agency was given the authority court. 416 See CFPB Debt Collection Consumer Survey, 414 Some debt collectors have reported that they supra note 292. to write substantive regulations receive approximately 10 demand letters from 417 For more information about Bureau data implementing the FDCPA, meaning that attorneys asserting a violation of the FDCPA for sources, see Bureau of Consumer Fin. Prot., Sources each lawsuit filed. See Small Business Review and uses of data at the Bureau of Consumer 420 These requirements, and the specificity of the Panel Outline, supra note 39, at 69 n.105. Financial Protection (Sept. 26, 2018), https:// requirements, may vary depending upon the 415 For example, as discussed further below, debt www.consumerfinance.gov/data-research/research- jurisdiction in which the collection occurs. This collectors typically may disclose only the reports/sources-and-uses-data-bureau-consumer- baseline does not include any potential impacts of information that FDCPA section 809(a) specifically financial-protection/. the November 2020 Final Rule, however. The references and may provide the FDCPA section 809 418 See CFPB Debt Collection Operations Study, November 2020 Final Rule included a separate information using statutory language, rather than supra note 37. Dodd-Frank Act Section 1022(b) analysis, and that plain language that consumers can more easily 419 See Small Business Review Panel Report, rule’s provisions do not go into effect until comprehend. supra note 40. November 30, 2021.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00075 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5840 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

many of the FDCPA’s requirements are mitigate the consumer harms that can not knowingly sue or threaten to sue subject to interpretations in court result from such actions, including consumers to collect time-barred debts. decisions that are not always consistent causing some consumers to pay or Although the final rule applies a strict or do not always definitely resolve an prioritize time-barred debts over other liability standard to this prohibition, issue, such as a single district court debts in the mistaken belief that doing under which debt collectors may be opinion on an issue. Debt collectors’ so is necessary to avoid litigation or liable for suits or threats of suit even if practices reflect their interpretations of adverse judgments, when in fact they do not know that the debt is time- the FDCPA and their decisions about consumers have meritorious defenses barred, the Bureau believes that debt how to balance effective collection based on the statute of limitations. collectors have multiple ways of practices against litigation risk. Many of managing such risk including, but not F. Coverage of the Rule the impacts of the final rule relative to limited to, confirming that the statute of the baseline would arise from changes The final rule applies to debt limitations has not expired before that debt collectors would make in collectors as defined in the FDCPA and bringing or threatening to bring a legal response to additional clarity about the § 1006.2(i) of the November 2020 Final action or, if a debt collector is unable to most appropriate interpretation of what Rule. Creditors that collect on debts make such a determination, refraining conduct is permissible and not they own generally will not be affected from bringing or threatening to bring a permissible under the FDCPA’s directly by the final rule because they legal action while, in most States, provisions. typically are not debt collectors for continuing with non-litigation The Bureau received no comments purposes of the FDCPA. Creditors, collection activities. Therefore, the regarding its choice of baseline for its however, may experience indirect Bureau does not expect this provision of section 1022(b) analysis. effects if debt collectors’ costs increase the rule to have a significant effect on E. Goals of the Rule and if those costs are passed on to most debt collectors. creditors. To the extent that there are costs to The final rule is intended to further covered persons or benefits to G. Potential Benefits and Costs to the FDCPA’s goals of eliminating consumers from this provision, they Consumers and Covered Persons abusive debt collection practices and will most likely come from reduced ensuring that debt collectors who refrain The Bureau discusses the benefits and payments on time-barred debts, to the from such practices are not costs of the rule to consumers and extent that some debt collectors competitively disadvantaged. To these covered persons (generally FDCPA debt currently sue or threaten to sue on time- ends, an important goal of the rule is to collectors) in detail below.421 The barred debts as a strategy to elicit benefit both consumers and debt Bureau believes that an important payment.422 If it is currently true that (1) collectors by increasing clarity and benefit of many of the provisions to both suing or threatening to sue on debts is certainty about what the FDCPA consumers and covered persons— an important means of collection for prohibits and requires, which could compared to the baseline of the FDCPA debts for which the statute of limitations improve compliance with the FDCPA as currently interpreted by courts and is close to expiring, and (2) most debt while reducing unnecessary litigation law enforcement agencies—is an collectors stop suing or threatening to regarding the FDCPA’s requirements. increase in clarity and precision of the As discussed in part V and in this part sue once the statute of limitations for a law governing debt collection. Greater debt expires, then one would expect VII, other goals of the rule’s provisions certainty about legal requirements can regarding validation information repayment rates to drop after the statute benefit both consumers and debt of limitations expires, and that drop include providing more information to collectors, making it easier for consumers about their debts, which may might be made more significant by the consumers to understand and assert provision. Such a reduction in help consumers determine whether a their rights and easier for firms to debt is theirs and whether the reported payments would benefit consumers who ensure they are in compliance. The owe the debts while imposing costs on amount owed is accurate and may Bureau discusses these benefits in more reduce unnecessary disputes. The debt collectors and creditors and detail with respect to certain provisions potentially increasing the cost of credit validation information is also intended below but believes that they generally to help consumers to know their rights generally. apply, in varying degrees, to all of the The Bureau therefore attempted to and be able to exercise them, including provisions discussed below. indirectly measure the potential effect of by disputing a debt. In addition, the the provision by examining the behavior model validation notice is intended to 1. Time-Barred Debt: Prohibiting Suits of consumers who owe debts that either provide information to consumers in a and Threats of Suit recently expired or are close to expiring more appealing and easy-to-read format, Section 1006.26(b) prohibits a debt under their State’s statute of limitations. making it more likely that consumers collector from suing or threatening to To do so, the Bureau used data from its read and comprehend the information sue a consumer to collect a time-barred Consumer Credit Panel (CCP), which than with the validation notices debt. contains information from one of the currently in use. As discussed in part V above, The rule’s provision requiring debt multiple courts have held that the 422 The final rule may also increase costs to collectors to take certain actions prior to FDCPA prohibits suits and threats of covered persons to the extent that debt collectors furnishing information about a debt to a suit on time-barred debt. The Bureau who currently sue or threaten to sue to collect time- barred debt increase their efforts to determine consumer reporting agency is intended understands that most debt collectors do to increase the likelihood that whether or not a debt is time barred. As discussed above in part V, The Bureau recognizes that, in consumers learn about an alleged debt 421 For purposes of the section 1022(b)(2) most jurisdictions, expiration of the statute of before furnishing occurs, giving them an analysis, the Bureau considers any consequences limitations provides the consumer with an opportunity to resolve the debt or that consumers perceive as harmful to be a cost to affirmative defense to liability, but it does not bar dispute it if appropriate. consumers. In considering whether consumers a debt collector from bringing suit. As such, some might perceive certain activities as harmful, the debt collectors who sue or threaten to sue on older The rule’s provision prohibiting debt Bureau is not analyzing whether those activities debts may currently expend less time and effort collectors from suing or threatening to would be unlawful under the FDCPA or the Dodd- verifying the time-barred status of a debt than they sue on time-barred debts is intended to Frank Act. will under the final rule.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00076 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5841

three nationwide CRAs. The Bureau consumer’s credit report. The Bureau The Bureau then calculated the average used data from the CCP to attempt to assumed this starting date because there hazard rate based on the number of estimate the current effect of State was no other date in the available data months before or after the estimated statutes of limitation on the propensity on which to reasonably base the expiration of the applicable statute of of consumers to pay old debts in beginning of the statute of limitations. limitations. This calculation is plotted collection. There is likely to be some inaccuracy in in Figure 1, below. The figure shows The CCP contains information on this assumption due to a variety of that the probability of a collections collections tradelines—records that factors, including delays between the tradeline showing evidence of payment were furnished to this nationwide CRA beginning of the period defined by the declines steadily for at least a year by third-party debt collectors or debt statute of limitations and the first report leading up to the estimated expiration of buyers. The Bureau analyzed these data of information to the CRA and cases in the statute of limitations and continues to determine whether the probability of which the applicable statute of payment declines around the expiration limitations is not the one in the to decline at roughly the same rate of the statute of limitations in the consumer’s State. However, if the afterwards. Thus, while the probability consumer’s State. Specifically, the estimated expiration of the statute of of payment declines over time, the Bureau followed debts reported in the limitations is at least approximately reduced ability of debt collectors to CCP from the time they were first correct in most cases, then one would pursue litigation does not seem to reported on a consumer’s credit record expect to observe whether the materially affect payments on until they either showed some record of expiration of the statute of limitations collections tradelines. Combined with payment or disappeared from the credit has an effect on the likelihood that a the Bureau’s understanding that debt record. In this analysis, the Bureau debt is reported to have been paid. collectors generally do not knowingly assumed that the applicable statute of The Bureau calculated the probability sue or threaten to sue on time-barred limitations is the one applicable to of payment occurring after a given debt, this suggests that the provision written contracts in the consumer’s number of days, conditional on no would be unlikely to cause any further State of residence and that the statute of payment occurring before—in technical reduction in the rate of repayment on limitations begins for a debt on the date terms, the ‘‘hazard rate’’ for payments— time-barred debt. that the debt first appears on the for all collections tradelines in the CCP.

Because the available data do not 2. Notice for Validation of Debts exceptions, a debt collector must permit the Bureau to identify the provide a consumer the validation expiration of the statute of limitations Section 1006.34 implements and information described in § 1006.34(c). precisely, the analysis above may fail to interprets FDCPA section 809(a), (b), (d), Section 1006.34(c) implements FDCPA identify some effects. and (e). Specifically, § 1006.34(a) section 809(a)’s content requirements provides that, subject to certain

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00077 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 ER19JA21.027 5842 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

and specifies that validation sufficient for the consumer to recognize in figuring out whether they owed a information includes certain the debt, particularly if: (1) The amount debt, consumers were most likely to information about the debt and the owed has changed over time due to indicate that the creditor name, type of consumer’s protections with respect to interest, fees, payments, or credits; (2) debt, and an itemization of the amount debt collection that debt collectors do the debt collector has changed since an owed (such as principal, interest, and not currently provide to consumers. original collection attempt; or (3) the fees) were especially valuable.423 These Section 1006.34(d) sets forth a general creditor’s name is not one the consumer opinions were echoed in focus groups in requirement that such information be associates with the debt (as with some which consumers noted that, after a clear and conspicuous. Section store-branded credit cards issued by debt is sold, it is more difficult to 1006.34(d) also provides safe harbors for third-party financial institutions). recognize, and that they wanted as using the model validation notice, Consumers who do not recognize a debt much information as possible to help specified variations of the model notice, because the information on a validation them recognize the debt as theirs or a substantially similar form, and notice is insufficient may incur costs if (especially the account number, permits the inclusion of certain optional they mistakenly dispute a debt they creditor, and amount due) with the information. Section 1006.34(e) owe, make a payment on a debt they do exception of sensitive information like affirmatively permits debt collectors to not owe, or ignore a debt on the social security numbers.424 provide validation notices translated assumption that the collection attempt To quantify the benefits of the into other languages and requires debt is in error. provision requiring a clear and collectors who offer to provide Relative to current validation notices, conspicuous disclosure of a consumer’s consumers translated notices to provide the validation information under the right to dispute a debt, the Bureau them to consumers who request them. final rule will include more specific would need to estimate the number of Potential benefits and costs to details about the debt, such as the debt’s consumers who fail to dispute debts that consumers. The required validation account number and an itemization of they do not owe because they are information may benefit consumers in the debt. The Bureau has determined unaware of, or do not comprehend, their four ways. First, the disclosures will that this information will benefit right to dispute. The Bureau cannot provide more information about the consumers by making it easier for them precisely quantify this benefit; however, debt, which may help consumers to determine whether they owe a debt the discussion below identifies several determine whether the debt is theirs and and, therefore, reducing the likelihood applicable considerations and estimates. whether the reported amount owed is of incurring costs due to mistakes like The Bureau estimates that at least 49 accurate. Second, the notice will those noted above. The consumer can million consumers are contacted by debt provide a plain-language disclosure of also use the consumer-response collectors each year.425 Twenty-eight the consumer’s rights in debt collection, information to request the name and percent of consumers who said they had in particular the right to dispute, which address of the original creditor, which been contacted about one or more debts should help consumers to know their may further help the consumer to in collection reported that the contacts rights and be able to exercise them. recognize the debt. included attempts to collect at least one To fully evaluate the benefits to Third, the validation information will debt that the consumers believed they consumers of disclosing this additional include consumer-response information did not owe.426 One-third of consumers information, the Bureau would need that should make it easier for consumers who had been contacted said the representative data to estimate how to take certain actions, including amount the creditor or debt collector disputing a debt. Finally, the model often consumers would read and was trying to collect was wrong for at validation notice form is intended to understand the additional information least one of these debts, and 16 percent provide information to consumers in a on the notice and the extent to which said the contacts included at least one more plain-language and visually that information increases consumer contact about a debt that was instead appealing format, making it more likely recognition and understanding owed by a family member. (Some that consumers will read and compared to a notice without it. For consumers reported more than one of comprehend the information than with example, the Bureau could further these issues). Taken together, more than the validation notices currently in use. quantify some of the consumer benefits To quantify the benefit of providing of the additional information if the half of consumers (53 percent) who said more and clearer validation information, Bureau were able to estimate: (1) How they had been contacted about one or the Bureau would need to estimate the many consumers ignore notices out of a more debts in collection reported that impact of this additional information on mistaken conclusion that the debt is not they thought at least one of the debts consumers’ ability to recognize their theirs; (2) how many consumers dispute they were contacted about was in error. debts compared to what is currently correct debts, and subsequently, how This suggests that there are many provided on validation notices, as well much time the validation notice saves consumers who receive the validation as how consumers would respond to by obviating later interactions that result notices in use today who might be likely that additional information. Although from improper disputes; and (3) how 423 CFPB Debt Collection Consumer Survey, supra the Bureau is not aware of data that many consumers fail to dispute or make note 292. would permit a full accounting of these payments on incorrect debts. The 424 FMG Focus Group Report, supra note 26, at benefits, below is a summary of Bureau is not aware of a source of 15–16. information the Bureau is aware of that information on the number of 425 See CFPB Debt Collection Consumer Survey, is relevant to assessing these benefits. consumers in these categories or the supra note 292, at 13, 40–41. The Bureau understands that, in possible time savings that could result 426 The survey questions concerning consumer beliefs about errors in collections did not ask general, validation notices currently from the validation information. The respondents to distinguish between debts owed to include little or no information about Bureau’s Debt Collection Consumer a debt collector and debts owed to a creditor. If the debt beyond the information Survey suggests that the required consumers are more or less likely to believe there specifically listed in section 809(a) of validation information would likely be is an error for collection attempts by debt collectors, then this percentage and those below may over- or the FDCPA (e.g., the current amount of helpful in recognizing a debt. under-estimate the likelihood that a consumer the debt and the name of the current Specifically, when asked how helpful believes a debt is in error when the consumer is creditor). This information may not be various pieces of information would be contacted by a debt collector.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00078 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5843

to dispute based on their perception that request information about the original uses shading to highlight the amount either the debt is not theirs or is wrong. creditor. Original-creditor information due and plain language rather than Among the 53 percent of consumers may help consumers in determining technical terms. Usability testing who cited one of the issues noted above, whether the debt is theirs. analyzing eye-tracking suggests that 42 percent reported that they disputed The Bureau has tested a model participants were able to locate relevant a collection in the prior year, and 11 validation notice. Several information on the form, with most percent of consumers who had not cited considerations went into the content participants able to quickly locate their one of those issues indicated that they and design of the model validation account number and the contact had disputed a debt. The fact that less notice. First, consumers must have information of the creditor.432 The than half of consumers who questioned relevant and accurate information to information presented in the form is a debt about which the creditor or debt make informed decisions about how to also concise, presenting consumers with collector contacted them reported act with regard to the debt. The Bureau a manageable amount of information disputing a debt is consistent with the therefore conducted consumer testing to about the debt and what they can do in possibility that some consumers do not identify what pieces of information response to the information. This is dispute in response to a collection effort consumers considered to be important important, as the perceived and actual because they are not aware of the option to help them identify whether a debt cost to a consumer of reading a to dispute or do not understand the was theirs, whether the amount stated disclosure increases with the amount of steps required to do so. The required was correct, and how the amount the information provided.433 debt collector was attempting to collect clear-and-conspicuous statement of the A number of consumer advocate and dispute right could benefit these has changed over time (e.g., due to fees, interest, and payments).428 However, academic commenters asserted that the consumers by making them aware of proposed model notice was not their right to dispute and informing there is some indication that consumers tend to not read certain types of adequately tested. Some of these them how to dispute. commenters stated that the Bureau’s The survey’s finding that only 42 standard-form disclosures.429 To try to avoid this result, the Bureau conducted testing included too few participants to percent of consumers who thought they generate valid conclusions about the experienced an error with a debt in consumer testing exploring how consumers interacted and engaged with proposed model notice’s efficacy or to collection disputed the error suggests evaluate the comprehension of consumers are uncertain about how to the notice and the pieces of information contained therein.430 This helped the consumers, particularly of the least dispute a debt in collection or that they sophisticated consumers. For instance, a believe that disputes require too much Bureau understand whether consumers were inclined to engage with the consumer advocate expressed concern time and effort relative to the expected that only 60 consumers were included benefit. The required consumer- document in general and which pieces of the validation notice received more or in the cognitive and usability testing response information could reduce rounds.434 Likewise, an academic these impediments to disputing debts less consumer attention. The Bureau incorporated the findings commenter stated that the Bureau’s that consumers believe are in error. consumer testing focused too heavily on Specifically, the consumer-response from this consumer testing in its design of the model validation notice. To observing what testing participants information will provide a clear means looked at on the model notice (based on of disputing a debt in a way that triggers increase both consumer engagement with and comprehension of the the use of eye tracking techniques) at the protections provided by the FDCPA the expense of testing participants’ and this rule. Furthermore, the validation information, the Bureau designed the model notice to be visually comprehension of the notice. Another convenience of the consumer-response commenter stated that the Bureau information, which is formatted on the engaging. The notice uses plain language wherever possible and should have tested more diverse groups, model validation notice as a tear-off including consumers with limited with prompts for various actions, could conforms to recommendations the Securities and Exchange Commission English proficiency, students, older reduce barriers to responding by consumers, and consumers from more eliminating or reducing the burden of, (SEC) set forth in its plain English 431 diverse socioeconomic backgrounds. for example, deciding what information handbook. To reduce the perceived complexity of the information, the form Some consumer advocate and academic is relevant and how to phrase the commenters recommended that the response.427 This could allow some uses a clear hierarchy of information through positioning in a columnar Bureau field test the proposed model consumers to save time and avoid other notice with consumers with real debts. negative consequences, such as lower format, varying type size, and bold- faced type for subsection headings. It A consumer advocate expressed concern credit scores due to a debt they may not about the performance of certain aspects owe being listed as unpaid on their 428 of the proposed model notice in credit reports. FMG Summary Report, supra note 29. 429 quantitative testing, noting in particular Additionally, the consumer-response See, e.g., Ian Ayres & Alan Schwartz, The No- Reading Problem in Consumer Contract Law, 66 that approximately 40 percent of information includes an option to Stan. L. Rev. 545 (2014); Yannis Bakos et al., Does respondents who received the model Anyone Read the Fine Print? Consumer Attention 427 A 2016 research report by the United to Standard-Form Contracts, 43 J. Legal Studies 1, Kingdom’s Financial Conduct Authority showed 1–35 (2014); George R. Milne & Mary J. Culnan, 432 FMG Summary Report, supra note 29. that, in a large randomized control trial, a tear-off Strategies for Reducing Online Privacy Risks: Why 433 The idea that consumers may decrease their form (with a text or email reminder) led to more Consumers Read (or Don’t Read) Online Privacy engagement with information when more consumers switching from a current savings Notices, 18 J. Interactive Mktg. 3, 15–29 (2004); information is provided is somewhat supported by account to one with a better interest rate relative to Jonathan A. Obar & Anne Oeldorf-Hirsch, The research on ‘‘choice overload.’’ This work indicates getting only an informational text or email reminder Biggest Lie on the internet: Ignoring the Privacy that, if choice sets are large, some people opt to and relative to an informational box with Policies and Terms of Service Policies of Social make no choice at all. See, e.g., Sheena Iyengar et instructions on how to switch. Paul Adams et al., Networking Services (York U., draft version, 2018), al., How Much Choice is Too Much? Contributions Attention, Search and Switching: Evidence on http://dx.doi.org/10.2139/ssrn.2757465. to 401(k) Retirement Plans, in Pension Design and Mandated Disclosure from the Savings Market (UK 430 FMG Cognitive Report, supra note 27. Structure: New Lessons from Behavioral Finance, at Fin. Conduct Authority, Occasional Paper No. 19 431 See Sec. & Exchange Comm’n, A Plain English 83 (Oxford U. Press 2004). 2016), https://www.fca.org.uk/publication/ Handbook (Aug. 1998), https://www.sec.gov/pdf/ 434 See FMG Summary Report, supra note 29, at occasional-papers/occasional-paper-19.pdf. handbook.pdf. 5–7.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00079 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5844 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

notice failed to identify the correct easy’’ or ‘‘easy’’ to understand.438 debt or whether the amount owed is entity the consumer should pay.435 Between 71 percent and 100 percent of correct. If consumers are better able to The Bureau disagrees that the model participants responded correctly to 14 identify debts, they may be less likely to validation notice was not adequately different comprehension questions. dispute or ignore a debt that they in fact tested. The model validation notice was Although some participants expressed owe, and at the same time may be better developed and validated over multiple confusion about a few aspects of the able to articulate the basis for a dispute rounds of testing between 2014 and notice, the initial reactions to the notice of a debt that they do not owe. These 2020, and the Bureau determines that were that information was clear and the effects could benefit debt collectors by these multiple rounds of testing were available actions were obvious. reducing the costs associated with sufficient to assess the model validation In summary, the Bureau’s testing consumer disputes. Although it is notice’s efficacy and comprehensibility. establishes that consumers will benefit possible that debt collectors could Further, the Bureau disagrees that its from the use of the model notice currently provide such information on testing focused on eye-tracking at the compared to the baseline of status quo validation notices, the Bureau validation notices. expense of comprehension testing as understands that some debt collectors The Bureau expects consumers to consumer comprehension of the model who would like to provide additional validation notice was assessed in three experience few costs as a result of the provision. information do not do so largely due to rounds of testing. The Bureau’s testing the legal risks associated with including used eye-tracking in conjunction with Potential benefits to covered persons. The provision provides debt collectors information in the validation notice consumer responses to inform its beyond what is expressly required by conclusions. with a safe harbor if they use the model validation notice, specified variations of the FDCPA.440 The form will The Bureau disagrees that it did not significantly reduce this legal risk. To sample sufficiently diverse groups. The the model notice, or a substantially similar form to meet the requirements in quantify the benefits of this provision to Bureau selected respondents with the covered persons, the Bureau would goal of developing diverse testing pools § 1006.34(c). The Bureau understands that debt collectors currently face need data on how frequently consumers that would serve as a proxy for the do not recognize the debt or the amount population at large. For example, in one litigation risk associated with the owed as identified on a validation round of usability testing, participants validation notices they send, reflecting, notice, how many consumers would reflected a range of demographic in part, conflicting court decisions about better recognize the debt if they received characteristics broken down by race and what language is required and what 439 the required validation information, and ethnicity, household income, education language is permitted in the notices. how consumers would act in response level, and employment status.436 With The Bureau expects a significant to that information. While the Bureau is respect to the criticism that the Bureau number of debt collectors will use the not aware of available data that would did not ‘‘field test’’ the model validation model notice, specified variations of the permit it to estimate these numbers, the notice, testing the form with consumers model notice, or a substantially similar Debt Collection Consumer Survey does with real debts would have been form and, therefore, will face provide some basis for concluding that impractical. significantly reduced litigation risk the required validation information will Regarding comments that the model when providing validation notices validation notice did not perform well because they will receive the safe be helpful to consumers and, therefore, during the quantitative testing round, harbor. This will benefit debt collectors beneficial for debt collectors. the Bureau disagrees. As noted above, in directly, by reducing litigation costs The validation information could that testing round, the model validation related to validation notices. The reduce debt collector costs associated notice consistently performed better provision’s requirements to provide with disputes by preventing some than or equal to the status quo notice, specific information about the debt and disputes from consumers who are more including on the question of to whom about a consumer’s protections in debt likely to recognize that they owe a debt the consumer should send a collection could also indirectly benefit and by making the disputes that debt payment.437 Additionally, the Bureau debt collectors by adding information to collectors receive clearer and easier to conducted qualitative follow-up testing validation notices that would be helpful resolve. of the model notice in October 2020. In to consumers but that debt collectors currently do not include for fear that it Debt collectors report that processing this testing 88 percent of respondents disputes is a costly activity and that it reported that the notice was either ‘‘very would increase litigation risk. The validation information may also make can be especially difficult to process consumers more likely to dispute, disputes if the consumer provides little 435 Several comments in response to the May or no detail about the basis for a 2019 proposal also criticized the consumer testing which could increase costs for debt as being outdated because, when that proposal was collectors, as discussed under ‘‘Potential dispute. Debt collectors surveyed by the published, the most recent testing had occurred in costs to covered persons’’ below. Bureau indicated that most disputes 2016. However, the Bureau does not find any reason The validation information includes took between five minutes and one hour to believe that consumer understanding of the of staff time to resolve, with 15 to 30 model notice has changed since 2016, and the specific information about the debt commenters did not provide any evidence to intended to help consumers identify the minutes being the most common support such a claim. Moreover, since the May 2019 debt and understand the amount the amount of time.441 Respondents said proposal, the Bureau has conducted two additional debt collector claims is owed. The that disputes took the longest amount of testing rounds. time to resolve if the basis of the dispute 436 FMG Usability Report, supra note 28, at 85– Bureau’s qualitative consumer research 87. and the Bureau’s complaint data suggest 437 In response to the question ‘‘According to the that the information currently included 440 See Small Business Review Panel Report, notice, if Person A wanted to make a payment on in validation notices is often not supra note 40, at 22 (finding that small entities the debt, who should he or she sent the payment sufficient for consumers to identify a would benefit from a model notice that reduced to?’’ approximately 60 percent of consumers who litigation risk arising from conflicting court received the model validation notice answered decisions about what information is permitted on correctly compared to approximately 40 percent of 438 See id. at 16. a validation notice). consumers who received a status quo notice. CFPB 439 See Small Business Review Panel Report, 441 CFPB Debt Collection Operations Study, supra Quantitative Testing Report, supra note 31, at 14. supra note 40, at 22. note 37, at 31.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00080 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5845

was unclear or if the consumer said the the form. These include one-time would be significantly higher than debt was not theirs.442 compliance costs, the ongoing costs of $1,000, at least for collectors of medical One commenter noted that 40 percent obtaining the required validation debt. This commenter estimated costs of of disputes at their debt collection information, and potentially ongoing between $22,000 and $31,000 for agency are non-generic and generally costs of responding to a potential implementation. The commenter noted resolvable. This commenter asserted increase in the number of disputes. that, for collectors of medical debt, an that the tear offs on the model The provision will require debt itemization of charges requires validation notice will make these non- collectors to reformat their validation information about payments by the generic disputes less informative. An notices to accommodate the validation consumer’s health insurance, increasing industry commenter noted that 99.4 information requirements. The Bureau the complexity and cost of tracking the percent of accounts it received were not expects that any one-time costs to debt necessary information. The Bureau disputed. Of the 0.6 percent that are collectors of reformatting the validation acknowledges that costs may be higher disputed, 80 percent are accurate once notice will be relatively small, for some debt collectors. However, the more information is gathered. Given particularly for debt collectors who rely Bureau’s estimate is based on responses this, the commenter argued that on vendors, because the Bureau expects to the CFPB Debt Collection Operations providing consumers itemized that most vendors will provide an Study, more than half of which came statements for medical bills, which can updated notice at no additional cost.445 from debt collectors of medical debt. As run into many pages, is unnecessary. The Bureau understands from its such, the Bureau believes that, on The Bureau does not have a basis to outreach that many covered persons average, its estimate of less than $1,000 estimate how much the validation currently use vendors to provide in one-time costs is reasonable. information might affect dispute rates. validation notices.446 Surveyed firms, If debt collectors adjust their systems As an illustration of potential cost and their vendors, told the Bureau that to produce notices including the new savings if dispute rates fall, if the vendors do not typically charge an validation information, the Bureau does information were to reduce the number additional cost to modify an existing not expect there would be an increase of consumers who dispute by 1 percent template (although this practice might in the ongoing costs of printing and of all validation notices sent, and not apply given that the final rule likely sending validation notices. However, assuming that there are 140 million will require more extensive changes to there could be ongoing costs related to validation notices sent per year,443 the validation notices than vendors the validation information requirements overall number of annual disputes typically make today).447 Debt collectors if the required data are not always would fall by 1.4 million. Assuming and vendors will bear costs to available to debt collectors.450 The time to process each dispute of 0.375 understand the requirements of the Bureau understands that some creditors hours, the overall savings to industry provision and to ensure that their do not currently track post-default would be estimated at 525,000 person- systems generate notices that comply charges and credits in a way that can be hours, or approximately 250 full-time with the requirements, although these readily transferred to debt collectors. equivalents. Assuming labor costs for costs will be mitigated somewhat by the However, the Bureau’s understanding is 444 debt collectors of $22 per hour, this availability of a model notice. that most creditors, including medical would represent industry cost savings of The validation information will providers, do track this information, and about $11.5 million. require debt collectors to provide many debt collectors already provide The validation notice could also certain additional information about the this information on validation notices. reduce the cost of processing disputes debt, which will require that debt Further, debt collectors are already by making it easier for consumers who collectors receive and maintain certain dispute to provide at least some data fields and incorporate them into 450 One industry trade group estimated that an information about the basis of their the notices. The Bureau believes that the itemization requirement would cost $600 million in disputes. This could reduce the costs to professional fees to conduct legal analyses of large majority of debt collectors already HIPAA compliance for medical debt, $30 million covered persons of processing disputes receive and maintain most data fields for one-time system reprogramming for debt by making it easier for debt collectors to included in the final validation collectors, and $3 billion for one-time system reprogramming for creditors. The proposal allegedly investigate disputed debts in order to information. However, some verify the debt. would also result in billions of dollars in ongoing respondents to the Debt Collection support costs and uncompensated medical care Potential costs to covered persons. Operations Study reported that they do because, according to the commenter, the proposed Debt collectors already send validation requirement, if adopted, would increase the risks not receive from creditors information notices to consumers to comply with the that hospitals might be unable to use debt about post-default interest, fees, FDCPA, so the validation information collectors. As discussed in part V, the itemization payments, and credits.448 These debt requirement should not raise issues of HIPAA will generally affect the content of collectors will have to update their compliance that would require creditors to engage existing disclosures debt collectors are legal counsel in order to provide the required systems to track these fields. The sending rather than require debt information, as HIPAA privacy regulations Bureau understands that such system explicitly permit disclosure where required by law. collectors to send entirely new updates would be likely to cost less than While some one-time costs will be required so that disclosures. Nonetheless, debt collectors $1,000 for each debt collector.449 collection and billing systems can incorporate the will incur certain costs to comply with data needed to comply with the requirement, as At least one industry commenter discussed in this section, the Bureau understands asserted that one-time compliance costs that the required changes would not be far outside 442 Id. the scope of normal adjustments to billing and 443 The assumption of 140 million validation 445 See id. at 33. collection systems and does not have reason to notices per year is based on an estimated 49 million believe the changes would be so expensive as to 446 In the Operations Study, over 85 percent of consumers contacted by debt collectors each year prevent hospitals from using debt collectors. The debt collectors surveyed by the Bureau reported and an assumption that each consumer receives an final rule permits debt collectors to use the date of using letter vendors. Id. at 32. average of approximately 2.8 notices during the the last statement or invoice provided to the 447 year. Id. at 33. consumer by a creditor as the itemization date. If 444 This assumes an hourly wage of $15 and taxes, 448 In the Bureau’s Operations Study, 52 of 58 providing a debt collector with itemization benefits, and incentives of $7 per hour. See CFPB respondents reported receiving itemization of post- information were prohibitively expensive for a Debt Collection Operations Study, supra note 37, at charge-off fees on at least some of their accounts. medical provider, such providers could avoid these 17 (reporting estimated debt collector wages Id. at 23. costs by simply issuing a statement to the between $10 and $20 per hour plus incentives). 449 Id. at 26. consumer.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00081 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5846 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

required to disclose an itemization for believed that the only available obtained enough business through non- some types of debt in at least one itemization date permitted by the compliance with the rule to do material jurisdiction, New York State.451 proposal for these debts would be date harm to debt collectors who comply In addition, as discussed in the of service (i.e., the transaction date), and with the rule would be likely to attract section-by-section analysis of the commenter stated that date of enforcement action from regulators. § 1006.34(b)(3), the final rule’s service was currently only available Moreover, the risk of reputational harm itemization date definition permits debt from 17.2 percent of its clients. Another is likely to deter some medical collectors to select an itemization date industry commenter noted that there providers from intentionally employing that is feasible for the type of debt in would be costs associated with debt collectors who knowingly do not collection and the information debt providing updated itemization dates for comply with the rule. collectors receive. And a debt that transfers between debt Other potential costs to debt § 1006.34(c)(2)(viii) requires itemization collectors. collectors could arise if changes to the of fees, interest, and credits only Industry trade association validation information affect how subsequent to the selected itemization commenters noted that there would be consumers respond, particularly date. Thus, for example, if a debt costs to creditors of providing the fields whether they dispute the debt. As collector selects the last statement date to debt collectors and that not all of the discussed above, because the validation as the itemization date under required fields are necessarily tracked information would include more detail, § 1006.34(b)(3), and if the creditor has by all creditors currently, particularly consumers might be more likely to recently issued a statement to the credit unions. The Bureau recognize the debt and less likely to consumer, the debt collector need only acknowledges that the FDCPA and this mistakenly dispute debts that they owe. obtain and provide to the consumer an final rule may create indirect costs for On the other hand, the new consumer- itemization with fees, interest, and creditors that use debt collectors, response information would make it credits subsequent to that last statement because the costs to debt collectors of easier to dispute debts or request the date. And, as discussed in the section- complying with FDCPA requirements name and address of the original by-section analysis of § 1006.34(d)(2), a may be passed on to creditors and creditor. Together with the additional debt collector may provide the because debt collectors must receive information about consumers’ ability to itemization on a separate page and certain information about debts in order dispute that will be provided, this could retain the safe harbor for the rest of the to comply with FDCPA requirements. increase the number of consumers who validation notice. The information available to the Bureau dispute or request original-creditor Industry commenters asserted that does not suggest that any indirect costs information. Similarly, some industry there would be additional printing and to creditors of this provision will be commenters argued that the tear-off mailing costs of the provision due to the large. portion of the model notice would make tear-off portion of the model notice, Further, one industry commenter disputes easier, resulting in more which is formatted for use with a return asserted that the itemization disputes. The overall impact on dispute envelope. The commenters argued that requirement could competitively harm rates is unclear. many debt collectors do not currently collectors of medical debt. This Any increases in dispute rates would include return envelopes with their commenter asserted that medical care not be likely to substantially reduce validation notices and that including a providers are currently unable to collection revenue, but increased return envelope would increase mailing provide the required itemization dispute rates would increase debt costs. The Bureau disagrees that this information, and rather than incurring collector costs. With respect to would be a cost of the rule, as the rule costs to provide this information, would collections revenue, the Bureau expects does not require including a return switch to using debt collectors who do that, with some fairly limited envelope with a mailed validation not comply with the law. This would exceptions, consumers who choose to notice, the format of the tear-off portion put compliant debt collectors at a pay a debt are generally those who notwithstanding. Given that it is not competitive disadvantage. As noted recognize that they owe the debt and required, the Bureau expects that debt above, the Bureau acknowledges that want to pay it, and that in most cases collectors will only begin including the provision may affect the costs to the validation information would be return envelopes if they find, in their creditors, including medical care unlikely to cause such consumers to own analysis, that the benefit exceeds providers, of using FDCPA debt dispute rather than pay.453 With respect the additional costs. collectors, because creditors must to costs, the disclosures could lead Several commenters discussed the provide debt collectors with the consumers who do not recognize the potential for ongoing costs of providing necessary information for the validation debt or who believe there is a problem the new validation information. One notice. It is also possible that in some with the amount demanded to dispute industry commenter expressed concern cases a less sophisticated creditor may about the availability of the information employ a debt collector who does not Partners Announce Nationwide Crackdown on required on the model validation notice attempt to comply with the rule. Phantom and Abusive Debt Collection (Sept. 29, 2020), https://www.consumerfinance.gov/about-us/ for medical debt, as the commenter However, the Bureau finds it unlikely newsroom/cfpb-ftc-state-and-federal-law- that this provision of the rule would enforcement-partners-announce-nationwide- 451 See 23 NYCRR 1.2(b) (requiring debt collectors lead to widespread non-compliance, at crackdown-phantom-and-abusive-debt-collection. to provide an itemized accounting of the debt the expense of debt collectors who 453 While there is some evidence that consumers within five days after the initial communication comply with the requirements of the sometimes pay alleged debts even though they do with a consumer in connection with the collection not believe they owe them, such consumers may be of certain types of charged-off debt, such as credit rule. The Bureau, the FTC, and other motivated by factors, such as credit reporting card debt). The fact that debt collectors subject to Federal and State law enforcement concerns, that are not addressed by the validation New York’s requirements continue to operate and agencies have and will continue to notice itself. See Jeff Sovern et al., Validation and send validation notices in New York suggests that, maintain vigorous enforcement of the Verification Vignettes: More Results from an although the itemization requirement may impose 452 Empirical Study of Consumer Understanding of one-time adjustment costs on some creditors and FDCPA. Any debt collector who Debt Collection Validation Notices, at 46–47 (St. debt collectors, ongoing costs are not prohibitive, at John’s U., Working Paper No. 18–0016, 2018), least for the types of debts for which New York has 452 See, e.g., Bureau of Consumer Fin. Prot., https://papers.ssrn.com/sol3/papers.cfm?abstract_ required itemization. CFPB, FTC, State, and Federal Law Enforcement id=3219171.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00082 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5847

the debt rather than ignoring it. benefits of a provision that requires by the debt’s presence on their credit Responding to disputes is a costly Spanish-language translations as well as reports. They may pay more for credit activity for debt collectors, so an the costs to debt collectors of such a or lose out on employment or housing increase in dispute rates would increase provision, although there would still be because they are unaware that their these costs. As discussed above, covered costs associated with ensuring that such credit scores have been negatively persons surveyed by the Bureau disclosures were made as required by affected or they may discover the indicated that most disputes took regulation. adverse information only when they between five minutes and one hour of Consumer advocate and academic apply for credit, employment, or staff time to resolve, with 15 to 30 commenters argued that the Bureau housing. minutes being the most common should have required that the validation To quantify the potential consumer amount of time.454 notice be in the language of the original benefits from the final rule, the Bureau Alternative proposals to require transaction, including languages other would need to know: (1) How frequently Spanish-language disclosures. The than English or Spanish. The consumers are unaware that debt Bureau considered proposals that would commenters noted that procedural collectors furnished information about require debt collectors to provide a hurdles, such as a mismatch between their debts to CRAs but would become Spanish-language translation of the the consumers’ primary language and aware of it if debt collectors informed validation information under certain the language of a disclosure, can have consumers prior to furnishing circumstances, such as on the reverse large effects on behavior. The Bureau information; and (2) the benefit to these side of any English-language validation notes that this alternative would impose consumers of becoming aware they had notice or if requested by a consumer. significantly greater costs on debt a debt in collections. Consumers with limited English collectors than the final rule, as they In many cases, consumers will not be proficiency may benefit from would need to maintain versions of the affected by the provision because many translations of the validation model notice for each such language. At debt collectors already take one of the information, and Spanish speakers the same time, the marginal benefit to actions required by the final rule before represent the second-largest language consumers of the alternative suggested furnishing information to CRAs. Many group in the United States after English by commenters would be smaller, as other consumers will not be affected by speakers.455 fewer consumers communicate in the provision because not all debt Requiring Spanish-language languages other than English and collectors furnish information to CRAs disclosures would impose costs on some Spanish. about the debts on which they are debt collectors. A requirement to send a 3. Required Actions Prior to Furnishing seeking to recover. Spanish-language disclosure on the back Information The Bureau understands that most debt collectors mail validation notices of each validation notice could increase Section 1006.30(a)(1) prohibits a debt mailing costs for all validation notices to consumers shortly after they receive collector from furnishing information to accounts for collection.456 A minority of that are sent by mail, because it would a consumer reporting agency (CRA) require information that would debt collectors sometimes or always about a debt before taking specific mail validation notices only after otherwise be printed on the back of actions to contact the consumer about validation notices, such as State- speaking with consumers (whether that debt. A debt collector can satisfy contact was initiated by the debt mandated disclosures, to be provided on this requirement by: (i) Speaking to the a separate page. A requirement to collector or the consumer).457 The consumer about the debt in person or by Bureau does not have representative provide Spanish-language validation telephone; or (ii) placing a letter in the notices upon request could lead to a data to estimate how often consumers mail or sending an electronic message to would be affected by the provision, but smaller increase in mailing costs but the consumer about the debt and could require debt collectors to develop the evidence suggests that a relatively waiting a reasonable period of time to small share of debt collectors furnish and maintain systems for tracking a receive a notice of undeliverability, consumer’s language preference and information to CRAs before providing a provided certain other conditions are validation notice or taking one of the responding to that preference. satisfied. A validation notice is one type The Bureau understands that some other actions required by the final rule. of letter or electronic communication If, for example, debt collectors sent debt collectors currently send validation debt collectors can use to satisfy notices in Spanish to some consumers. § 1006.30(a)(1)(ii). These debt collectors presumably 456 See CFPB Debt Collection Operations Study, Potential benefits and costs to supra note 37, at 28. One large industry commenter, believe that the increase in revenues consumers. The final rule will help which does furnish to the CRAs, also confirmed from sending them to these consumers consumers to learn about an alleged that it almost always mails a validation notice exceeds the costs of doing so. To the debt before a debt collector furnishes before furnishing. To comply with the final rule, extent sending such notices is already these debt collectors would also need to wait a adverse information to a CRA. If reasonable period of time to allow for notifications prevalent, it would limit the consumer consumers believe that the information of non-delivery, and only furnish if they don’t is incorrect, they will have an receive such notifications. The Bureau does not 454 CFPB Debt Collection Operations Study, supra opportunity to dispute the debt. have information as to how many of these debt note 37, at 31. The discussion in ‘‘Benefits to collectors currently take these additional steps. covered persons’’ above provides an illustration of When debt collectors furnish However, the Bureau expects that taking these the potential impact on debt collectors of a change information about unpaid debts to additional steps would impose minimal costs on in dispute rates. Using the assumptions in that CRAs, that information can appear on debt collectors that do not already take them. illustration, if the net impact of the proposal were consumer credit reports, potentially 457 In the Bureau’s Operations Study, 53 of 58 to increase industrywide disputes by 1 million respondents said that they send a validation notice disputes per year, it could imply increased industry limiting consumers’ ability to obtain shortly after debt placement, and of those that do costs totaling around $8.25 million per year. credit, employment, or housing. If not, three respondents that said that they furnish 455 In 2013, 38.4 million residents in the United consumers are unaware that information data to CRAs. Id. During the meeting of the SBREFA States aged five and older spoke Spanish at home. about a possible unpaid debt is being Panel, only one small entity representative See U.S. Census Bureau, Facts for Features: described additional burdens it would face as a Hispanic Heritage Month 2015 (Sept. 14, 2015), furnished to a CRA, then they may not result of a requirement to communicate with https://www.census.gov/newsroom/facts-for- realize that their ability to obtain credit, consumers before furnishing information to credit features/2015/cb15-ff18.html. employment or housing may be affected bureaus.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00083 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5848 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

validation notices for an additional five a reasonably large impact on credit period of time prior to furnishing to percent of debts in collection, the scores. For example, analysis of allow for notifications of non-delivery, provision could result in up to telecommunications collection items in accept non-delivery notifications, and approximately seven million additional credit reports has shown that, while only furnish if they do not receive such validation notices sent each year additional collection items have notifications would need to adopt these (assuming that no debt collectors would relatively small effects in some cases, practices, but the Bureau expects this cease furnishing in response to the they can have substantial effects for would impose minimal ongoing provision).458 some consumers, with an average operational costs. Other debt collectors Learning that a debt is in collections reduction in credit score of more than do not furnish information to CRAs at shortly after the collections process 41 points for super-prime consumers.462 all and will not be affected by the begins can help consumers prevent or In some circumstances, these changes requirement. mitigate harm from adverse information could lead to higher interest rates for Debt collectors who furnish on their credit reports. This can be consumers or denial of credit, information to CRAs prior to particularly important if the information particularly for borrowers with communicating with consumers but about the debt is inaccurate because in otherwise high credit scores. provide validation notices to consumers those cases consumers who learn of the Potential benefits and costs to covered only after they have been in contact alleged debt can dispute the debt under persons. The final rule will affect the with consumers will need to change the FDCPA or dispute the item of practices of debt collectors who their practices and would face increased information under the FCRA. By sometimes furnish information about costs as a result of the final rule. informing consumers about the consumers’ debts to CRAs before taking Because these debt collectors are collection item before it is furnished to one of the required actions under the already required to provide validation a CRA, the final rule will make it less final rule. The Bureau understands that notices to consumers (unless validation likely that consumers learn about a most debt collectors mail validation information is provided in an initial collection item when they are in the notices to consumers shortly after they communication or the debt has been process of applying for credit or other receive the accounts for collections and paid), the Bureau expects that many benefits, at which point they may feel before they furnish information on those already have systems in place for pressure to resolve the item and may not accounts. These debt collectors either sending notices and will not face one- have the opportunity to fully dispute already would be in compliance with time compliance costs greater than those the item. the final rule or could come into of other debt collectors.465 However, An FTC report addressed the compliance with minimal additional these debt collectors will face ongoing prevalence of collections-related errors cost.463 Forty-five out of 58 debt costs from sending validation notices to in credit reports.459 The FTC report collectors responding to the Bureau’s more consumers than they otherwise analyzed data from a sample of 1,001 Operations Study said that they furnish would, at an estimated cost of $0.50 to consumers and identified errors in the information to CRAs.464 Of these $0.80 per debt if sent by mail.466 To the credit records of three nationwide respondents, all but three said that they extent debt collectors take advantage of CRAs. The report found collections- send a validation notice upon account opportunities to send validation notices related errors in 4.9 percent of credit placement, such that the final rule’s electronically, the marginal cost of reports, and credit reports with requirement would be satisfied as long sending each notice is likely to be documented errors contained, on as the debt collectors also wait a approximately zero. Alternatively, these average, 1.8 errors per report. The reasonable period of time to allow for debt collectors could cease furnishing Bureau’s Debt Collection Consumer notifications of non-delivery, and only information to CRAs until after they Survey also suggests that debt collectors furnish if they do not receive such make collection errors, finding that 53 take the specific steps identified in the notifications. These debt collectors will final rule, which could impact the percent of consumers who said they had likely need to review their policies to been contacted about one or more debts effectiveness of their collection ensure that validation notices are 467 in collection said that these contacts efforts. Because debt collectors could always sent (or validation information is choose the less burdensome of these included at least one debt the consumer provided in an initial communication) thought was in error.460 options, the additional costs of prior to reporting on the account, which Credit scores are based on a wide delivering notices represent an upper the Bureau expects would involve a variety of information in consumer bound on the burden of the provision credit files. While many errors have small one-time cost. Debt collectors that for debt collectors. only small effects on consumers’ credit do not currently wait a reasonable scores,461 in some cases information in 465 Debt collectors who do not currently have 462 See Brian Bucks et al., Bureau of Consumer systems in place for sending notices will face one- credit files about unpaid debts can have Fin. Prot., Collection of Telecommunication Debt, time compliance costs to implement those systems. https://files.consumerfinance.gov/f/documents/ 466 See CFPB Debt Collection Operations Study, 458 This estimate assumes 140 million validation bcfp_consumer-credit-trends_collection- supra note 37, at 32–33. One small entity notices are sent each year, based on an estimated telecommunications-debt_082018.pdf (Aug. 2018). representative on the Bureau’s SBREFA Panel 49 million consumers contacted by debt collectors 463 In the Operations Study, 53 of 58 respondents indicated that, for about one-half of its accounts, it each year and an assumption that each receives an said that they send a validation notice shortly after currently sends validation notices only after average of approximately 2.8 notices during the debt placement. CFPB Debt Collection Operations speaking with a consumer, and that, if it were year. Study, supra note 37, at 28. To comply with the required to send validation notices to all 459 Fed. Trade Comm’n, Report to Congress under final rule, these debt collectors would also need to consumers, it would incur additional mailing costs Section 319 of the Fair and Accurate Credit wait a reasonable period of time to allow for of $0.63 per mailing for an estimated 400,000 Transactions Act of 2003, (Dec. 2012) https:// notifications of non-delivery, accept non-delivery accounts per year. A small industry commenter www.ftc.gov/sites/default/files/documents/reports/ notifications and only furnish if they don’t receive asserted that mailing costs were significantly higher section-319-fair-and-accurate-credit-transactions- such notifications. The Bureau does not have than $0.50–$0.80 per debt but did not provide an act-2003-fifth-interim-federal-trade-commission/ information as to how many of these debt collectors alternative figure. 130211factareport.pdf (FTC Report to Congress). currently take these additional steps. However, the 467 If debt collectors furnish information to CRAs 460 CFPB Debt Collection Consumer Survey, supra Bureau expects that taking these additional steps less frequently this could make consumer reports note 292, at 24. would impose minimal costs on debt collectors that less informative in general, which could have 461 See FTC Report to Congress, supra note 459, do not already take them. negative effects on the credit system by making it at 43. 464 Id. at 19. harder for creditors to assess credit risk.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00084 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5849

Commenters noted several specific 1006.30(a)(2) of the final rule also Such creditors could experience higher situations in which the proposed specifies that § 1006.30(a)(1) does not costs if debt collectors’ costs increase provision could, in the commenters’ apply to the furnishing of information and if debt collectors are able to pass view, unduly burden debt collectors. about a debt to a specialty check those costs on to creditors. The Bureau One small industry commenter raised verification CRA. The Bureau believes understands that many depository the concern that a bad address, which these changes will reduce or eliminate institutions and credit unions with $10 occurs in 15 percent of accounts at their many of the costs cited by the billion or less in total assets rely on agency, would stop collections. Another commenters. FDCPA debt collectors to collect uncollected amounts, but the Bureau industry commenter noted that 3 H. Potential Reduction of Access by does not have data indicating whether percent of its notices are returned as Consumers to Consumer Financial such institutions are more or less likely undeliverable and argued that Products and Services attempting to deliver a validation notice than other creditors to do so. The should count as a communication and Economic theory indicates that it is Bureau did not receive any comments thus allow furnishing. Another industry possible for changes in debt collection on this issue with respect to the commenter noted that some States are rules, such as those contained in this provisions in this final rule. ‘‘closed’’ in the sense that debt final rule, to affect consumers’ access to credit. Under economic theory, creditors 2. Impact of the Final Rule on collectors based in other States are not Consumers in Rural Areas allowed to deliver notices into those should decide to extend credit based on States. This commenter was concerned the discounted expected value of the Consumers in rural areas may that the proposed provision would not revenue stream from that extension of experience benefits from the final rule allow furnishing of information about credit. This entails considering the that are different in certain respects consumers in those States and argued possibility that the consumer will from the benefits experienced by that this will reduce credit report ultimately default and expected consumers in general. For example, accuracy. A joint comment by an payments will decrease. If this final rule consumers in rural areas may be more industry commenter and CRA argued addressing disclosures were to increase likely to borrow from small local banks that the proposed provision would be collection costs or reduce revenue and credit unions that may be less likely particularly problematic in the check collected from delinquent debt, then to outsource debt collection to FDCPA verification space. The commenter this would reduce the return to lending, debt collectors. which in theory could lead lenders to noted that, in the case of bad checks, the The Bureau requested interested increase the cost of lending, restrict debt collector generally does not have parties to provide data, research results, availability of credit, or both. and other factual information on the the consumer’s address or telephone As discussed in the November 2020 number and cannot communicate with impact of the proposed rule on Final Rule, the Bureau has considered consumers in rural areas, but the Bureau the consumer directly. In these cases, the available empirical data and the debt collector would report the bad did not receive any comments on this research on the effect of State debt subject. check to a check verification CRA, but collection laws on the price and this could be prohibited under the availability of credit.468 That research VIII. Final Regulatory Flexibility Act proposed provision. The commenter shows that State debt collection laws Analysis argued that the proposed provision affect the price and availability of credit The Regulatory Flexibility Act (RFA) could undermine the reliability of the in ways that theory would predict, but generally requires an agency to conduct check payment system by making it that effects are relatively small even for an Initial Regulatory Flexibility impossible to track check fraud, among changes in State laws that are likely Analysis (IRFA) and a Final Regulatory other things. more significant than the provisions in Flexibility Analysis (FRFA) of any rule The Bureau agrees with some of the this final rule.469 In light of that subject to notice-and-comment commenters with respect to these research and the CCP analysis above, rulemaking requirements.470 Section additional costs and has revised the the Bureau concludes that the 604(a) of the RFA sets forth the required final rule from the proposal to reduce or provisions in this final rule are unlikely elements of the FRFA. Section 604(a)(1) eliminate these costs. In particular, the to cause any significant reduction in requires a statement of the objectives of, Bureau has revised § 1006.30(a) to access to consumer credit. and the legal basis for, the rule.471 specify that, if a debt collector places a I. Potential Specific Impacts of the Rule Section 604(a)(2) requires a statement of letter in the mail or sends an electronic the significant issues raised by the message to the consumer about the debt, 1. Depository Institutions and Credit public comments in response to the the debt collector must wait a Unions With $10 Billion or Less in Total initial regulatory flexibility analysis, a reasonable period of time (with a safe Assets, as Described in Section 1026 statement of the assessment of the harbor for waiting 14 consecutive days) Depository institutions and credit agency of such issues, and a statement before furnishing information about the unions are generally not debt collectors of any changes made in the proposed debt to a CRA and, during that period, under the FDCPA and therefore would rule as a result of such comments. permit receipt of, and monitor for, not be covered under the final rule. Section 604(a)(3) requires the response notifications of undeliverability for mail Creditors could experience indirect of the agency to any comments filed by and electronic messages. A debt effects from the final rule to the extent the Chief Counsel for Advocacy of the collector who places a letter in the mail they hire FDCPA debt collectors or sell Small Business Administration in or sends an electronic message, does not debt in default to such debt collectors. response to the proposed rule and a receive a notice of undeliverability detailed statement of any change made during that period, and furnishes 468 See 84 FR 23274, 23389–91 (May 21, 2019). to the proposed rule in the final rule as information to a consumer reporting 469 For example, one study found that additional a result of the comments. Section agency after the period ends has not State regulations on debt collectors’ conduct caused 604(a)(4) requires a description of and, violated the rule even if the debt the rate at which a credit inquiry led to a successful account opening to decline by less than 0.02 collector subsequently receives a notice percentage points off a base rate of about 43 470 5 U.S.C. 603(a), 604(a). of undeliverability. Section percent. See id. at 23389–90. 471 5 U.S.C. 604(a)(1).

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00085 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5850 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

where feasible, an estimate of the from abusive debt collection practices discusses both the IRFA and the number of small entities to which the are not competitively disadvantaged.477 proposed requirements (the ‘‘second rule will apply.472 Section 604(a)(5) As amended by the Dodd-Frank Act, SBA letter’’). This section first responds requires a description of the projected FDCPA section 814(d) provides that the to comments on the IRFA and then reporting, recordkeeping, and other Bureau may ‘‘prescribe rules with responds to the substantive comments compliance requirements of the rule, respect to the collection of debts by debt on the proposed rule’s provisions. collectors,’’ as that term is defined in including an estimate of the classes of The first SBA letter notes that the the FDCPA.478 Section 1022(a) of the small entities that will be subject to the proposed rule could impose costs to requirement and the types of Dodd-Frank Act provides that ‘‘[t]he read and understand the rule and to professional skills necessary for the Bureau is authorized to exercise its train employees in new practices. The preparation of the report or record.473 authorities under Federal consumer Bureau had discussed these costs in the Section 604(a)(6) requires a description financial law to administer, enforce, and context of some specific provisions but of any significant alternatives to the rule otherwise implement the provisions of that accomplish the stated objectives of Federal consumer financial law.’’ 479 has added a more general discussion of applicable statutes and that minimize ‘‘Federal consumer financial law’’ these costs to section E of the FRFA, any significant economic impact of the includes title X of the Dodd-Frank Act below. rule on small entities.474 Finally, section and the FDCPA. The legal basis for the The first SBA letter also notes that the 604(a)(7) requires a description of the final rule is discussed in detail in the Bureau claims some provisions will steps the agency has taken to minimize legal authority analysis in part IV and in cause no significant impact because any additional cost of credit for small the section-by-section analysis in part V. those provisions are already part of debt 475 entities. B. Significant Issues Raised by the collectors’ business practices, and argues that the Bureau should clarify A. Statement of the Objectives of, and Public Comments in Response to the Legal Basis for, the Final Rule Initial Regulatory Flexibility Analysis what the benefit of such provisions is to consumers if they will not change debt As discussed in part IV, the Bureau The Bureau received comments on the collector practices. As discussed in part issues this rule pursuant to its authority IRFA from the Acting Chief Counsel for V above and the section 1022(b)(2) under the FDCPA and the Dodd-Frank Advocacy of the Small Business analysis of the proposed rule, the Act. The objectives of the final rule are Administration, which are discussed in Bureau believes that, by clarifying the to clarify and implement the FDCPA’s the next section. The Bureau did not FDCPA’s requirements, the rule will provisions and to further the FDCPA’s receive other comments that referenced benefit both consumers and debt goals of eliminating abusive debt the IRFA specifically; however, several collectors, including small entities. commenters did raise issues about the collection practices and ensuring that Many market participants have burdens of the proposed rule’s debt collectors who refrain from abusive identified a need for greater clarity in provisions, and the Bureau’s response to debt collection practices are not interpreting many of the FDCPA’s competitively disadvantaged.476 As the these issues is discussed in parts V and provisions. For example, a trade group first Federal agency with authority VII above and in this part below. commenter emphasized that ambiguities under the FDCPA to prescribe C. Response to Any Comments Filed by in the FDCPA lead to unnecessary and substantive rules with respect to the the Chief Counsel for Advocacy of the costly litigation. The Bureau believes collection of debts by debt collectors, Small Business Administration that there is a benefit to providing the Bureau is requiring consumer additional clarity about the FDCPA’s disclosure requirements to provide The Acting Chief Counsel for requirements even where the vast greater clarity for both consumers and Advocacy of the Small Business majority of debt collectors follow industry participants as to the Administration filed a public comment practices that meet those requirements. information debt collectors must letter on the May 2019 proposed rule The additional clarity helps those debt provide consumers to comply with the that discusses both the IRFA and certain collectors to avoid unnecessary law. The Bureau intends that these of the proposed requirements (the ‘‘first litigation and to have confidence in clarifications will help to eliminate SBA letter’’). The Acting Chief Counsel what practices do and do not violate the abusive debt collection practices and for Advocacy of the Small Business FDCPA. The additional clarity also ensure that debt collectors who refrain Administration also filed a public comment letter on the February 2020 makes it easier to establish when less 472 5 U.S.C. 604(a)(4). supplemental proposed rule that scrupulous debt collectors have violated 473 5 U.S.C. 604(a)(5). the statute and to hold them 474 5 U.S.C. 604(a)(6). 477 See id. accountable, which benefits consumers 475 Id. 478 15 U.S.C. 1692l(d). as well as debt collectors who do 476 See 15 U.S.C. 1692(e). 479 12 U.S.C. 5512(a). comply with the law.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00086 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5851

The first SBA letter points out that the final rule, and those burdens are Small Business Review Panel (Panel) proposed rule’s Paperwork Reduction discussed in this FRFA as well as in the identified four categories of small Act (PRA) section estimates 1,029,500 supporting statement. entities that may be subject to the final burden hours and argues that this could The SBA letters also expressed several rule: Collection agencies (NAICS translate into millions of dollars in concerns about specific provisions of 561440) with annual receipts at or recordkeeping and reporting costs. Most the proposed rule and recommended below the SBA size standard (currently of this burden is not attributable to the changes to those provisions. These $16.5 million), debt buyers (NAICS rule itself but rather to the requirements concerns and recommendations, and the 522298) with annual receipts at or of the FDCPA. As discussed in the Bureau’s response, are discussed in the below the size standard (currently $41.5 supporting statement accompanying the section-by-section analysis of the million), collection law firms (NAICS Bureau’s information collection request, relevant provisions in part V above. 541110) with annual receipts at or the PRA estimates include the burden D. Description and, Where Feasible, below the size standard (currently $12 not only of complying with the new Provision of an Estimate of the Number million), and servicers who acquire requirements introduced by the final accounts in default. These servicers rule but also of complying with the of Small Entities to Which the Final Rule Will Apply include depository institutions (NAICS FDCPA itself. These burdens had not 522110, 522120, and 522130) with previously been accounted for under the As discussed in the Small Business assets at or below the size standard PRA. Thus, the large majority of the Review Panel Report, for the purposes (currently $600 million) or non- estimated burden hours represent the of assessing the impacts of this final rule depository institutions (NAICS 522390) burden of complying with existing on small entities, ‘‘small entities’’ is FDCPA provisions that exist defined in the RFA to include small with annual receipts at or below the size independent of the rule, in particular businesses, small nonprofit standard (currently $22 million). The the requirement to provide a validation organizations, and small government Panel did not meet with small nonprofit notice under § 809(a) of the FDCPA and jurisdictions.480 A ‘‘small business’’ is organizations or small government 482 the requirement to respond to consumer determined by application of SBA jurisdictions. disputes under § 809(b) of the FDCPA. regulations in reference to the North The following table provides the There are, of course, burdens associated American Industry Classification Bureau’s estimate of the number and with other information collections that System (NAICS) classifications and size types of entities that may be affected by are being introduced or modified by the standards.481 Under such standards, the the final rule:

TABLE 1—ESTIMATED NUMBER OF AFFECTED ENTITIES AND SMALL ENTITIES BY CATEGORY

Estimated Estimated number of total number small-entity Category NAICS Small-entity threshold of debt debt collectors collectors within within category category

Collection agencies ... 561440 ...... $16.5 million in annual receipts ...... 9,000 8,800 Debt buyers ...... 522298 ...... $41.5 million in annual receipts ...... 330 300 Collection law firms ... 541110 ...... $12.0 million in annual receipts ...... 1,000 950 Loan servicers...... 522110, 522120, and 522130 (deposi- $600 million in annual receipts for deposi- 700 200 tories); 522390 (non-depositories). tory institutions; $22.0 million or less for non-depositories.

Descriptions of the four categories: in the United States. Of these, the or through agents. The Bureau estimates Collection agencies. The Census Bureau estimates that 3,800 collection that there are approximately 330 debt Bureau defines ‘‘collection agencies’’ agencies have $16.5 million or less in buyers in the United States, and that a (NAICS code 561440) as annual receipts and are therefore small substantial majority of these are small 484 485 ‘‘establishments primarily engaged in entities. Census Bureau estimates entities. Many debt buyers— collecting payments for claims and indicate that in 2012 there were also particularly those that are small remitting payments collected to their more than 5,000 collection agencies entities—also collect debt on behalf of 486 clients.’’ 483 According to the Census without employees, all of which are other debt owners. Bureau, in 2012 (the most recent year presumably small entities. Collection law firms. The Bureau for which detailed data are available), Debt buyers. Debt buyers purchase estimates that there are 1,000 law firms there were approximately 4,000 delinquent accounts and attempt to in the United States that either have as collection agencies with paid employees collect amounts owed, either themselves their principal purpose the collection of

480 5 U.S.C. 601(6). few collection agencies collect only commercial approximately 300 debt buyer members and 481 The current SBA size standards are found on debt. believes that 90 percent of debt buyers are current SBA’s website, http://www.sba.gov/content/table- 484 The U.S. Census Bureau estimates average members. small-business-size-standards. annual receipts of $95,000 per employee for 486 The Bureau understands that debt buyers are 482 collection agencies. Given this, the Bureau assumes Small Business Review Panel Report, supra generally nondepositories that specialize in debt note 40, at 29. that all firms with fewer than 100 employees and buying and, in some cases, debt collection. The 483 As defined by the U.S. Census Bureau, approximately one-half of the firms with 100 to 499 Bureau expects that debt buyers that are not collection agencies include entities that collect only employees are small entities, which implies commercial debt, and the proposed rule would approximately 3,800 firms. collection agencies would be classified by the U.S. apply only to debt collectors of consumer debt. 485 The Receivables Management Association, the Census Bureau under ‘‘all other nondepository However, the Bureau understands that relatively largest trade group for debt buyers, states that it has credit intermediation’’ (NAICS Code 522298).

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00087 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5852 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

consumer debt or regularly collect procedures, and small entities with the Dodd-Frank Act while minimizing consumer debt owed to others, so that employees will need to train employees the impact of the rule on small entities. the proposed rule would apply to them. in new policies and procedures. The Some of these alternatives are discussed The Bureau estimates that 95 percent of extent of training required will depend in part V, above. such law firms are small entities.487 on debt collectors’ existing practices Loan servicers. Loan servicers would G. Discussion of Impact on Cost of and on the roles performed by Credit for Small Entities be covered by the final rule if they are individual employees. Debt collectors covered by the FDCPA because, among employ an estimated 123,000 Section 603(d) of the RFA requires the other things, they acquire the right to workers.491 If, on average, the rule Bureau to consult with small entities service loans already in default.488 The required an additional hour of training regarding the potential impact of the Bureau believes that this is most likely for each of these employees, at an proposed rule on the cost of credit for to occur with regard to companies that average cost of $22 per hour, the total small entities and related matters.494 To service mortgage loans or student loans. training cost would be approximately satisfy these statutory requirements, the The Bureau estimates that $2,700,000.492 Bureau provided notification to the approximately 200 such mortgage In evaluating the potential impacts of Chief Counsel for Advocacy of the Small servicers may be small entities and that the rule on small entities, the Bureau Business Administration (Chief few, if any, student loan servicers that takes as a baseline conduct in debt Counsel) that the Bureau would collect would be covered by the final rule are collection markets under the current the advice and recommendations of the small.489 legal framework governing debt same small entity representatives identified in consultation with the Chief E. Projected Reporting, Recordkeeping, collection. This includes debt collector practices as they currently exist, Counsel through the SBREFA process and Other Compliance Requirements of concerning any projected impact of the the Rule, Including an Estimate of responding to the requirements of the FDCPA as currently interpreted by proposed rule on the cost of credit for Classes of Small Entities That Will Be small entities. The Bureau sought to Subject to the Requirements and the courts and law enforcement agencies, other Federal laws, and the rules and collect the advice and recommendations Type of Professional Skills Necessary for of the small entity representatives the Preparation of the Report or Record statutory requirements promulgated by the States. This baseline represents the during the Small Business Review Panel The final rule will not impose new status quo from which the impacts of meeting regarding the potential impact reporting or recordkeeping this rule will be evaluated. on the cost of business credit because, requirements, but it will impose new The Bureau requested that interested as small debt collectors with credit compliance requirements on small needs, the small entity representatives 490 parties provide data and quantitative entities subject to the rule. The analysis of the benefits, costs, or could provide valuable input on any requirements and the costs associated impacts of the proposed rule on small such impact related to the proposed with them are discussed below. In entities but did not receive any rule. addition to the specific costs discussed comments on this subject. The Bureau’s Small Business Review below, all small entities will incur costs The Bureau believes that, except Panel Outline asked small entity to read the rule and incorporate its where otherwise noted, the impacts representatives to comment on how the provisions into their policies and discussed in part VII would apply to proposals under consideration would small entities to the same extent as to affect the cost of credit to small entities. 487 The primary trade association for collection larger entities. During the SBREFA process, several attorneys, the National Creditors Bar Association small entity representatives said that the (NCBA), states that it has approximately 600 law firm members, 95 percent of which are small F. Description of Any Significant proposals under consideration at that entities. The Bureau estimates that approximately Alternatives to the Rule That time, which included time-barred debt 60 percent of law firms that collect debt are NCBA Accomplish the Stated Objectives of the disclosures among several other members and that a similar fraction of non-member Applicable Statutes and Minimize Any proposals, could have an impact on the law firms are small entities. Significant Economic Impact of the Rule cost of credit for them and for their 488 The Bureau expects that loan servicers are generally classified under NAICS code 522390, on Small Entities small business clients. Some small ‘‘Other Activities Related to Credit Intermediation.’’ Section 604(a)(6) of the RFA requires entity representatives said that they use Some depository institutions (NAICS codes 522110, lines of credit in their business and that 522120, and 522130) also service loans for others the Bureau to describe in the FRFA any and may be covered by the final rule. significant alternatives to the rule that regulations that raise their costs or 489 Based on the December 2015 Call Report data accomplish the stated objectives of reduce their revenue could mean they as compiled by SNL Financial (with respect to applicable statutes and that minimize are unable to meet covenants in their insured depositories) and December 2015 data from any significant economic impact of the loan agreements, causing lenders to the Nationwide Mortgage Licensing System and reduce access to capital or increase their Registry (with respect to non-depositories), the rule on small entities.493 In developing Bureau estimates that there are approximately 9,000 the rule, the Bureau has considered borrowing costs. small entities engaged in mortgage servicing, of alternative provisions and believes that The Bureau believes that the which approximately 100 service more than 5,000 none of the alternatives considered disclosures in the final rule will have loans. See 81 FR 72160, 72363 (Oct. 19, 2016). The little impact on the cost of credit to Bureau’s estimate is based on the assumption that would be as effective at accomplishing all those servicing more than 5,000 loans may the stated objectives of the FDCPA and small entities. The Bureau does acquire servicing of loans when loans are in default the applicable provisions of title X of recognize that consumer credit could and that at most 100 of those servicing 5,000 loans become more expensive and less or fewer acquire servicing of loans when loans are available as a result of requirements that in default. 491 2020 FDCPA Annual Report, supra note 12, at 490 While the final rule does not include new 7. restrict the collection of debt; however, recordkeeping requirements, the Bureau notes that, 492 The estimated hourly cost is based on an the Bureau does not anticipate that the by introducing a new compliance requirement, the estimated wage of $15 per hour and taxes, benefits, requirements of this final rule will have rule may increase the cost of complying with and incentives of $7 per hour. See CFPB Debt any significant impact on the cost or recordkeeping requirements of the November 2020 Collection Operations Study, supra note 37, at 17 Final Rule. This is because debt collectors would (describing estimated debt collector wages ranging availability of consumer credit. Many need to retain evidence of compliance with any from $10 to $20 per hour). additional compliance requirement. 493 5 U.S.C. 604(a)(6). 494 5 U.S.C. 603(d).

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00088 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5853

small entities affected by the disclosures profit businesses that are FDCPA debt OMB to any documents associated with in the final rule use consumer credit as collectors. any information collection requirements a source of credit and may, therefore, The collections of information adopted in this rule. see costs rise if consumer credit contained in this rule, and identified as X. Congressional Review Act availability decreases. The Bureau does such, as well as the information not expect this to be a large effect and collections contained in the November Pursuant to the Congressional Review does not anticipate measurable impact. 2020 final rule have been submitted to Act,497 the Bureau will submit a report OMB for review under section 3507(d) containing this rule and other required IX. Paperwork Reduction Act of the PRA. A complete description of information to the U.S. Senate, the U.S. Under the Paperwork Reduction Act the information collection requirement, House of Representatives, and the of 1995 (PRA),495 Federal agencies are including the burden estimate methods, Comptroller General of the United generally required to seek approval from is provided in the information States at least 60 days prior to the rule’s the Office of Management and Budget collection request (ICR) supporting published effective date. The Office of (OMB) for information collection statement that the Bureau has submitted Information and Regulatory Affairs has requirements prior to implementation. to OMB under the requirements of the designated this rule as a ‘‘major rule’’ as Under the PRA, the Bureau may not PRA. The Bureau will publish a separate defined by 5 U.S.C. 804(2). conduct or sponsor, and, notice in the Federal Register when XI. Signing Authority notwithstanding any other provision of these information collections have been law, a person is not required to respond approved by OMB. The Director of the Bureau, Kathleen to, an information collection unless the Please send your comments to the L. Kraninger, having reviewed and information collection displays a valid Office of Information and Regulatory approved this document, is delegating control number assigned by OMB. Affairs, OMB, Attention: Desk Officer the authority to electronically sign this As part of its continuing effort to for the Bureau of Consumer Financial document to Grace Feola, a Bureau reduce paperwork and respondent Protection. Send these comments by Federal Register Liaison, for purposes of burden, the Bureau conducts a email to [email protected] publication in the Federal Register. preclearance consultation program to or by fax to (202) 395–6974. If you wish List of Subjects in 12 CFR Part 1006 provide the general public and Federal to share your comments with the agencies with an opportunity to Bureau, please send a copy of these Administrative practice and comment on the information collection comments as described in the procedure, Consumer protection, Credit, Debt collection, Intergovernmental requirements in accordance with the ADDRESSES section above. The ICR relations. PRA. This helps ensure that the public submitted to OMB requesting approval understands the Bureau’s requirements under the PRA for the information Authority and Issuance or instructions, respondents can provide collection requirements contained For the reasons set forth above, the the requested data in the desired format, herein is available at Bureau is further amending Regulation reporting burden (time and financial www.regulations.gov as well as on F, 12 CFR part 1006, as revised on resources) is minimized, collection OMB’s public-facing docket at November 30, 2020, at 85 FR 76734, instruments are clearly understood, and www.reginfo.gov. effective November 30, 2021, as set forth the Bureau can properly assess the Title of Collection: Regulation F: Fair below: impact of collection requirements on Debt Collection Practices Act. respondents. OMB Control Number: 3170–0056. PART 1006—DEBT COLLECTION The final rule amends 12 CFR part Type of Review: Revision of a PRACTICES (REGULATION F) 1006 (Regulation F), which implements currently approved collection. the FDCPA. The Bureau’s OMB control Affected Public: Private Sector. ■ 1. The authority citation for part 1006 number for Regulation F is 3170–0056; Estimated Number of Respondents: continues to read as follows: 496 it expires April 30, 2022. This final rule 12,027. Authority: 12 U.S.C. 5512, 5514(b), 5532; along with the November 2020 Final Estimated Total Annual Burden 15 U.S.C. 1692l(d), 1692o, 7004. Rule would revise the information Hours: 881,000. collection requirements contained in The Bureau has a continuing interest Subpart A—General Regulation F that OMB has approved in the public’s opinion of its collections ■ under that OMB control number. of information. At any time, comments 2. Section 1006.1 is amended by Under the final rule, the Bureau regarding the burden estimate, or any adding paragraph (c)(2) to read as requires two information collection other aspect of the information follows: requirements in Regulation F beyond collection, including suggestions for § 1006.1 Authority, purpose, and coverage. those required by the November 2020 reducing the burden, may be sent to the Consumer Financial Protection Bureau * * * * * Final Rule: (c) * * * (Attention: PRA Office), 1700 G Street 1. Validation notices (final rule (2) Section 1006.34(c)(2)(iii) and NW, Washington, DC 20552, or by email § 1006.34). (c)(3)(iv) applies to debt collectors only to [email protected]. 2. Communication with consumers when they are collecting debt related to Where applicable, the Bureau will prior to furnishing information (final a consumer financial product or service display the control number assigned by rule § 1006.30(a)). as defined in § 1006.2(f). These information collections are ■ 3. Section 1006.2 is amended by required to provide benefits for 496 The Bureau shares enforcement authority under the FDCPA with the Federal Trade revising paragraph (e) and adding consumers and will be mandatory. Commission. To avoid double-counting, the Bureau paragraph (f) to read as follows: Because the Bureau does not collect any allocates to itself half of the estimated paperwork information, no issue of confidentiality burden under the final rule by dividing the burden § 1006.2 Definitions. arises. The likely respondents are for- hours even between the agencies. However, since the Bureau has joint authority over the respondents * * * * * themselves, the Bureau retains the entity count of 495 44 U.S.C. 3501 et seq. all affected respondents as shown above. 497 5 U.S.C. 801 et seq.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00089 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5854 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

(e) Consumer means any natural this section does not apply to a debt (3) Itemization date means any one of person, whether living or deceased, collector’s furnishing of information the following five reference dates for obligated or allegedly obligated to pay about a debt to a nationwide specialty which a debt collector can ascertain the any debt. For purposes of § 1006.6, the consumer reporting agency that amount of the debt: term consumer includes the persons compiles and maintains information on (i) The last statement date, which is described in § 1006.6(a). a consumer’s check writing history, as the date of the last periodic statement or (f) Consumer financial product or described in section 603(x)(3) of the Fair written account statement or invoice service has the same meaning given to Credit Reporting Act (15 U.S.C. provided to the consumer by a creditor; it in section 1002(5) of the Dodd-Frank 1681a(x)(3)). (ii) The charge-off date, which is the Act (12 U.S.C. 5481(5)). * * * * * date the debt was charged off; (iii) The last payment date, which is * * * * * ■ 6. Section 1006.34 is added to read as the date the last payment was applied follows: Subpart B—Rules for FDCPA Debt to the debt; Collectors § 1006.34 Notice for validation of debts. (iv) The transaction date, which is the date of the transaction that gave rise to (a) Validation information required— ■ the debt; or 4. Section 1006.26 is added to read as (1) In general. Except as provided in follows: (v) The judgment date, which is the paragraph (a)(2) of this section, a debt date of a final court judgment that § 1006.26 Collection of time-barred debts. collector must provide a consumer with determines the amount of the debt owed (a) Definitions. For purposes of this the validation information required by by the consumer. section: paragraph (c) of this section either: (4) Validation notice means a written (i) By sending the consumer a (1) Statute of limitations means the or electronic notice that provides the validation notice in the manner required period prescribed by applicable law for validation information required by by § 1006.42: bringing a legal action against the paragraph (c) of this section. (A) In the initial communication, as (5) Validation period means the consumer to collect a debt. defined in paragraph (b)(2) of this (2) Time-barred debt means a debt for period starting on the date that a debt section; or collector provides the validation which the applicable statute of (B) Within five days of that initial limitations has expired. information required by paragraph (c) of communication; or this section and ending 30 days after the (b) Legal actions and threats of legal (ii) By providing the validation consumer receives or is assumed to actions prohibited. A debt collector information orally in the initial receive the validation information. For must not bring or threaten to bring a communication. legal action against a consumer to (2) Exception. A debt collector who purposes of determining the end of the validation period, the debt collector collect a time-barred debt. This otherwise would be required to send a may assume that a consumer receives paragraph (b) does not apply to proofs validation notice pursuant to paragraph the validation information on any date of claim filed in connection with a (a)(1)(i)(B) of this section is not required that is at least five days (excluding legal bankruptcy proceeding. to do so if the consumer has paid the public holidays identified in 5 U.S.C. ■ 5. Section 1006.30 is amended by debt prior to the time that paragraph 6103(a), Saturdays, and Sundays) after adding paragraph (a) to read as follows: (a)(1)(i)(B) of this section would require the debt collector provides it. the validation notice to be sent. (c) Validation information. Pursuant § 1006.30 Other prohibited practices. (b) Definitions. For purposes of this to paragraph (a)(1) of this section, a debt (a) Required actions prior to section: collector must provide the following furnishing information—(1) In general. (1) Clear and conspicuous means validation information. Except as provided in paragraph (a)(2) readily understandable. In the case of of this section, a debt collector must not (1) Debt collector communication written and electronic disclosures, the disclosure. The statement required by furnish to a consumer reporting agency, location and type size also must be as defined in section 603(f) of the Fair § 1006.18(e). readily noticeable and legible to (2) Information about the debt. Except Credit Reporting Act (15 U.S.C. consumers, although no minimum type as provided in paragraph (c)(5) of this 1681a(f)), information about a debt size is mandated. In the case of oral section: before the debt collector: disclosures, the disclosures also must be (i) The debt collector’s name and the (i) Speaks to the consumer about the given at a volume and speed sufficient mailing address at which the debt debt in person or by telephone; or for the consumer to hear and collector accepts disputes and requests (ii) Places a letter in the mail or sends comprehend them. for original-creditor information. an electronic message to the consumer (2) Initial communication means the (ii) The consumer’s name and mailing about the debt and waits a reasonable first time that, in connection with the address. period of time to receive a notice of collection of a debt, a debt collector (iii) If the debt collector is collecting undeliverability. During the reasonable conveys information, directly or a debt related to a consumer financial period, the debt collector must permit indirectly, regarding the debt to the product or service as defined in receipt of, and monitor for, notifications consumer, other than a communication § 1006.2(f), the name of the creditor to of undeliverability from in the form of a formal pleading in a whom the debt was owed on the communications providers. If the debt civil action, or any form or notice that itemization date. collector receives such a notification does not relate to the collection of the (iv) The account number, if any, during the reasonable period, the debt debt and is expressly required by: associated with the debt on the collector must not furnish information (i) The Internal Revenue Code of 1986 itemization date, or a truncated version about the debt to a consumer reporting (26 U.S.C. 1 et seq.); of that number. agency until the debt collector (ii) Title V of the Gramm-Leach-Bliley (v) The name of the creditor to whom otherwise satisfies this paragraph (a)(1). Act (15 U.S.C. 6801 through 6827); or the debt currently is owed. (2) Special rule—information (iii) Any provision of Federal or State (vi) The itemization date. furnished to certain specialty consumer law or regulation mandating notice of a (vii) The amount of the debt on the reporting agencies. Paragraph (a)(1) of data security breach or privacy risk. itemization date.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00090 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5855

(viii) An itemization of the current this section, and, if provided on a (B) Adds any or all of the optional amount of the debt reflecting interest, validation notice, located at the bottom disclosures described in paragraph fees, payments, and credits since the of the notice under the headings, ‘‘How (d)(3) of this section that are not shown itemization date. A debt collector may do you want to respond?’’ and ‘‘Check on Model Form B–1, provided that any disclose the itemization on a separate all that apply:’’: such optional disclosures are no more page provided in the same (i) Dispute prompts. The following prominent than any of the validation communication with a validation statements, listed in the following order, information required by paragraph (c) of notice, if the debt collector includes on and using the following phrasing or this section. the validation notice, where the substantially similar phrasing, each next (ii) Certain disclosures on a separate itemization would have appeared, a to a prompt: page. A debt collector who uses Model statement referring to that separate page. (A) ‘‘I want to dispute the debt Form B–1 as described in paragraph (ix) The current amount of the debt. because I think:’’; (d)(2)(i) of this section and who, (3) Information about consumer (B) ‘‘This is not my debt.’’; pursuant to paragraph (c)(2)(viii) or protections. (i) The date that the debt (C) ‘‘The amount is wrong.’’; and (c)(5) of this section, includes certain collector will consider the end date of (D) ‘‘Other (please describe on reverse disclosures on a separate page in the the validation period and a statement or attach additional information).’’ same communication with the that, if the consumer notifies the debt (ii) Original-creditor information validation notice and, on the notice, the collector in writing on or before that prompt. The statement, ‘‘I want you to required statement referring to those date that the debt, or any portion of the send me the name and address of the disclosures, receives a safe harbor for debt, is disputed, the debt collector original creditor.’’, using that phrase or compliance with the information and must cease collection of the debt, or the a substantially similar phrase, next to a form requirements of paragraphs (c) and disputed portion of the debt, until the prompt. (d)(1) of this section except with respect debt collector sends the consumer either (iii) Mailing addresses. Mailing to the disclosures on the separate page. verification of the debt or a copy of a addresses for the consumer and the debt (iii) Substantially similar form. A debt judgment. collector, which are the debt collector’s collector who uses Model Form B–1 as (ii) The date that the debt collector and the consumer’s names and mailing described in paragraph (d)(2)(i) or (ii) of will consider the end date of the addresses as disclosed pursuant to this section may make changes to the validation period and a statement that, § 1006.34(c)(2)(i) and (ii). form and retain a safe harbor for if the consumer requests in writing on (5) Special rule for certain residential compliance with the information and or before that date the name and address mortgage debt. For residential mortgage form requirements of paragraphs (c) and of the original creditor, the debt debt, if a periodic statement is required (d)(1) of this section provided that the collector must cease collection of the under Regulation Z, 12 CFR 1026.41, at form remains substantially similar to debt until the debt collector sends the the time a debt collector provides the Model Form B–1. consumer the name and address of the validation notice, a debt collector need (3) Optional disclosures. A debt original creditor, if different from the not provide the validation information collector may include any of the current creditor. required by paragraphs (c)(2)(vi) following information when providing (iii) The date that the debt collector through (viii) of this section if the debt the validation information required by will consider the end date of the collector: paragraph (c) of this section. A debt validation period and a statement that, (i) Provides the consumer, in the same collector who includes any of the unless the consumer contacts the debt communication with the validation following information receives the safe collector to dispute the validity of the notice, a copy of the most recent harbor described in paragraph (d)(2) of debt, or any portion of the debt, on or periodic statement provided to the this section, provided that the debt before that date, the debt collector will consumer under Regulation Z, 12 CFR collector otherwise uses Model Form B– assume that the debt is valid. 1026.41(b); and 1 in appendix B to this part, or a (iv) If the debt collector is collecting (ii) Includes on the validation notice, variation of Model Form B–1, as debt related to a consumer financial where the validation information described in paragraph (d)(2) of this product or service as defined in required by paragraphs (c)(2)(vi) section. § 1006.2(f), a statement that informs the through (viii) of this section would have (i) Telephone contact information. consumer that additional information appeared, a statement referring to that The debt collector’s telephone contact regarding consumer protections in debt periodic statement. information. collection is available on the Bureau’s (d) Form of validation information— (ii) Reference code. A number or code website at www.cfpb.gov/debt- (1) In general. The validation that the debt collector uses to identify collection. information required by paragraph (c) of the debt or the consumer. (v) If the debt collector sends the this section must be clear and (iii) Payment disclosures. Either or validation notice electronically, a conspicuous. both of the following phrases: statement explaining how a consumer (2) Safe harbor—(i) In general. Model (A) The statement, ‘‘Contact us about can, as described in paragraphs (c)(4)(i) Form B–1 in appendix B to this part your payment options.’’, using that and (ii) of this section, dispute the debt contains the validation information phrase or a substantially similar phrase; or request original-creditor information required by paragraph (c) of this section and electronically. and certain optional disclosures (B) Below the consumer-response (4) Consumer-response information. permitted by paragraph (d)(3) of this information required by paragraphs The following information, segregated section. A debt collector who uses (c)(4)(i) and (ii) of this section, the from the validation information Model Form B–1 complies with the statement, ‘‘I enclosed this amount:’’, required by paragraphs (c)(1) through (3) information and form requirements of using that phrase or a substantially of this section and from any optional paragraphs (c) and (d)(1) of this section, similar phrase, payment instructions information included pursuant to including if the debt collector: after that statement, and a prompt. paragraphs (d)(3)(i) and (ii), (A) Omits any or all of the optional (iv) Disclosures under applicable (d)(3)(iii)(A), (d)(3)(iv) and (v), disclosures shown on Model Form B–1; law—(A) Disclosures on the reverse of (d)(3)(vi)(A), and (d)(3)(vii) and (viii) of or the validation notice. On the reverse of

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00091 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5856 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

the validation notice, any disclosures specified in paragraph (c)(2)(iii) or not engage in any collection activities or that are specifically required by, or that (c)(3)(iv) of this section. communications that overshadow or are provide safe harbors under, applicable (4) Validation notices delivered inconsistent with the disclosure of the law and, if any such disclosures are electronically. If a debt collector consumer’s rights to dispute the debt included, a statement on the front of the delivers a validation notice and to request the name and address of validation notice referring to those electronically, a debt collector may, at the original creditor. disclosures. Any such disclosures must its option, format the validation notice (2) Safe harbor. A debt collector who not appear directly on the reverse of the as follows: uses Model Form B–1 in appendix B to consumer-response information (i) Prompts. Any prompt required by this part in a manner described in required by paragraph (c)(4) of this paragraph (c)(4)(i) or (ii) or paragraph § 1006.34(d)(2) has not thereby violated section. (d)(3)(iii)(B) or (d)(3)(vi)(B) of this paragraph (b)(1) of this section. (B) Disclosures on the front of the section may be displayed electronically (c) Requests for original-creditor validation notice. If a debt collector is as a fillable field. information. Upon receipt of a request collecting time-barred debt, on the front (ii) Hyperlinks. Hyperlinks may be for the name and address of the original of the validation notice below the embedded that, when clicked: creditor submitted by the consumer in disclosure required by paragraph (A) Connect a consumer to the debt writing within the validation period, a (c)(2)(ix) of this section, any time-barred collector’s website; debt collector must cease collection of debt disclosure that is specifically (B) Connect a consumer to the the debt until the debt collector: required by, or that provides a safe Bureau’s debt collection website as (1) In general. Sends the name and harbor under, applicable law, provided disclosed pursuant to paragraph address of the original creditor to the that applicable law specifies the content (c)(3)(iv) of this section; or consumer in writing or electronically in (C) Permit a consumer to respond to of the disclosure. the manner required by § 1006.42; or the dispute and original-creditor (v) Information about electronic (2) Special rule if the current creditor information prompts required by communications. The following and the original creditor are the same. paragraphs (c)(4)(i) and (ii) of this information: In lieu of taking the actions described in section. (A) The debt collector’s website and paragraph (c)(1) of this section, email address. (e) Translation into other languages— (1) In general. A debt collector may send reasonably determines that the original (B) If the validation information is not a consumer a validation notice creditor is the same as the current provided electronically, a statement completely and accurately translated creditor, notifies the consumer of that explaining how a consumer can, as into any language if the debt collector: fact in writing or electronically in the described in paragraphs (c)(4)(i) and (ii) (i) Sends the consumer an English- manner required by § 1006.42, and of this section, dispute the debt or language validation notice in the same refers the consumer to the validation request original-creditor information communication as the translated information previously provided electronically. validation notice; or pursuant to § 1006.34(a)(1). (vi) Spanish-language translation (ii) Previously provided the consumer * * * * * disclosures. Either or both of the an English-language validation notice, ■ 8. Section 1006.42 is amended by following disclosures regarding a in which case the debt collector need revising paragraphs (a)(2) and (b) to read consumer’s ability to request a Spanish- not send the consumer an English- as follows: language translation of a validation language validation notice in the same notice: communication as the translated § 1006.42 Sending required disclosures. (A) The statement, ‘‘Po´ngase en validation notice. (a) * * * contacto con nosotros para solicitar una (2) Spanish-language validation (2) Exceptions. A debt collector need copia de este formulario en espan˜ ol’’ notice—requirement to provide after not comply with paragraph (a)(1) of this (which means ‘‘Contact us to request a optional disclosure. A debt collector section when sending the disclosure copy of this form in Spanish’’), using who includes in the validation required by § 1006.6(e) or § 1006.18(e) that phrase or a substantially similar information either or both of the in writing or electronically, unless the phrase in Spanish. If providing this optional disclosures described in disclosure is included on a notice optional disclosure, a debt collector may paragraph (d)(3)(vi) of this section, and required by § 1006.34(a)(1)(i) or include supplemental information in who thereafter receives a request from § 1006.38(c) or (d)(2). Spanish that specifies how a consumer the consumer for a Spanish-language (b) Requirements for certain may request a Spanish-language validation notice, must provide the disclosures sent electronically. To validation notice. consumer a validation notice comply with paragraph (a) of this (B) With the consumer-response completely and accurately translated section, a debt collector who sends the information required by paragraph (c)(4) into Spanish. notice required by § 1006.34(a)(1)(i)(B), of this section, the statement ‘‘Quiero ■ 7. Section 1006.38 is amended by or the disclosures described in este formulario en espan˜ ol’’ (which revising paragraphs (a)(2), (b), and (c) to § 1006.38(c) or (d)(2)(i), electronically means ‘‘I want this form in Spanish’’), read as follows: must do so in accordance with section using that phrase or a substantially 101(c) of the Electronic Signatures in similar phrase in Spanish, next to a § 1006.38 Disputes and requests for Global and National Commerce Act (E– original-creditor information. prompt. SIGN Act) (15 U.S.C. 7001(c)). (vii) The merchant brand, affinity (a) * * * ■ brand, or facility name, if any, (2) Validation period has the same 9. Appendix B to part 1006 is added associated with the debt. meaning given to it in § 1006.34(b)(5). to read as follows: (viii) If a debt collector is collecting (b) Overshadowing of rights to dispute Appendix B to Part 1006—Model Forms debt other than debt related to a or request original-creditor consumer financial product or service as information—(1) Prohibition. During the B–1 Model Form for Validation Notice defined in § 1006.2(f), the information validation period, a debt collector must BILLING CODE 4810–AM–P

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00092 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5857

BILLING CODE 4810–AM–C ■ d. Under Section 1006.100—Record Subpart B—Rules for FDCPA Debt ■ 10. In supplement I to part 1006: Retention, 100(a) In general, including Collectors ■ a. Under Section 1006.30—Other the heading, is revised. Prohibited Practices, the headings 30(a) * * * * * ■ e. Section 1006.104—Relation to State Required actions prior to furnishing Section 1006.30—Other Prohibited Laws is added. information, and 30(a)(1) In general, Practices and paragraphs 1 and 2 are added. The additions and revisions read as ■ b. Section 1006.34—Notice for follows: 30(a) Required actions prior to Validation of Debts is added. furnishing information. ■ c. Under Section 1006.38—Disputes Supplement I to Part 1006—Official 30(a)(1) In general. and Requests for Original-Creditor Interpretations 1. About the debt. Section Information, the introductory text before * * * * * 1006.30(a)(1) provides, in relevant part, 38(a) Definitions is revised. that a debt collector must not furnish to

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00093 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 ER19JA21.028 5858 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

a consumer reporting agency, as defined collector mails the consumer another Code) is a communication in the form in section 603(f) of the Fair Credit validation notice as described in of a formal pleading in a civil action and Reporting Act (15 U.S.C. 1681a(f)), § 1006.34(a)(1)(i)(A). From May 11 to therefore is not an initial information about a debt before taking May 24, the debt collector permits communication for purposes of one of the actions described in receipt of, monitors for, and does not § 1006.34. § 1006.30(a)(1)(i) or (ii). Each of the receive, a notice of undeliverability and 34(b)(3) Itemization date. actions includes conveying information thereafter furnishes information 1. In general. Section 1006.34(b)(3) ‘‘about the debt’’ to the consumer. The regarding the debt to a consumer defines itemization date for purposes of validation information required by reporting agency. The debt collector has § 1006.34. Section 1006.34(b)(3) states § 1006.34(c), including such information not violated § 1006.30(a)(1). that the itemization date is any one of if provided in a validation notice, is iii. Assume that, on May 1, a debt five reference dates for which a debt information ‘‘about the debt.’’ collector mails the consumer a collector can ascertain the amount of the 2. Reasonable period of time. Section validation notice as described in debt. The reference dates are the last 1006.30(a)(1)(ii) provides, in relevant § 1006.34(a)(1)(i)(A). From May 1 to statement date, the charge-off date, the part, that a debt collector who places a May 14, the debt collector permits last payment date, the transaction date, letter about a debt in the mail, or who receipt of, monitors for, and does not and the judgment date. A debt collector sends an electronic message about a receive, a notice of undeliverability and may select any of these dates as the debt to the consumer, must wait a thereafter furnishes information itemization date to comply with reasonable period of time to receive a regarding the debt to a consumer § 1006.34. Once a debt collector uses a notice of undeliverability before reporting agency. After furnishing the reference date for a debt in a furnishing information about the debt to information, the debt collector receives communication with a consumer, the a consumer reporting agency. The a notice of undeliverability. The debt debt collector must use that reference reasonable period of time begins on the collector has not violated § 1006.30(a)(1) date for that debt consistently when date that the debt collector places the and, without taking any further action, providing the information required by letter in the mail or sends the electronic may furnish additional information § 1006.34(c) to that consumer. For message. A period of 14 consecutive about the debt to a consumer reporting example, if a debt collector uses the last days after the date that the debt agency. statement date to determine and collector places a letter in the mail or * * * * * disclose the account number associated sends an electronic message is a with the debt pursuant to reasonable period of time. Section 1006.34—Notice for Validation § 1006.34(c)(2)(iv), the debt collector 3. Notices of undeliverability. Section of Debts may not use the charge-off date to 1006.30(a)(1)(ii) provides, in relevant 34(a) Validation information required. determine and disclose the amount of part, that, if a debt collector who places 34(a)(1) In general. the debt pursuant to § 1006.34(c)(2)(vii). a letter about a debt in the mail, or who 1. Deceased consumers. Section 2. Subsequent debt collectors. When sends an electronic message about a 1006.34(a)(1) generally requires a debt selecting an itemization date pursuant debt to the consumer, receives a notice collector to provide the validation to § 1006.34(b)(3), a debt collector may of undeliverability during the information required by § 1006.34(c) use a different reference date than a reasonable period of time, the debt either by sending the consumer a prior debt collector who attempted to collector must not furnish information validation notice in the manner required collect the debt. about the debt to a consumer reporting by § 1006.42, or by providing the Paragraph 34(b)(3)(i). agency until the debt collector information orally in the debt collector’s 1. Last statement date. Under otherwise satisfies paragraph (a)(1) of initial communication. If the debt § 1006.34(b)(3)(i), the last statement date this section. A debt collector who does collector knows or should know that the is the date of the last periodic statement not receive a notice of undeliverability consumer is deceased, and if the debt or written account statement or invoice during the reasonable period and who collector has not previously provided provided to the consumer by a creditor. thereafter furnishes information about the validation information to the For purposes of § 1006.34(b)(3)(i), the the debt to a consumer reporting agency deceased consumer, a person who is last statement may be provided by a does not violate paragraph (a)(1) of this authorized to act on behalf of the creditor or a third party acting on the section even if the debt collector deceased consumer’s estate operates as creditor’s behalf, including a creditor’s subsequently receives a notice of the consumer for purposes of service provider. However, a statement undeliverability. The following § 1006.34(a)(1). In such circumstances, or invoice provided by a debt collector examples illustrate the rule: to comply with § 1006.34(a)(1), a debt is not a last statement for purposes of i. Assume that, on May 1, a debt collector must provide the validation § 1006.34(b)(3)(i), unless the debt collector mails the consumer a information to an individual that the collector is also a creditor. validation notice as described in debt collector identifies by name who is Paragraph 34(b)(3)(iii). § 1006.34(a)(1)(i)(A). On May 10, the authorized to act on behalf of the 1. Last payment date. Under debt collector receives a notice of deceased consumer’s estate. § 1006.34(b)(3)(iii), the last payment undeliverability and, without taking any 34(b) Definitions. date is the date the last payment was additional action described in 34(b)(2) Initial communication. applied to the debt. A third-party § 1006.30(a)(1), subsequently furnishes 1. Bankruptcy proofs of claim. Section payment applied to the debt, such as a information regarding the debt to a 1006.34(b)(2) defines initial payment from an auto repossession consumer reporting agency. The debt communication and states that the term agent or an insurance company, can be collector has violated § 1006.30(a)(1). does not include a communication in a last payment for purposes of ii. Assume that, on May 1, a debt the form of a formal pleading in a civil § 1006.34(b)(3)(iii). collector mails the consumer a action. A proof of claim that a debt Paragraph 34(b)(3)(iv). validation notice as described in collector files in a bankruptcy 1. Transaction date. Section § 1006.34(a)(1)(i)(A). On May 10, the proceeding in accordance with the 1006.34(b)(3)(iv) provides that the debt collector receives a notice of requirements of the United States itemization date may be the date of the undeliverability. On May 11, the debt Bankruptcy Code (Title 11 of the U.S. transaction that gave rise to the debt.

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00094 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5859

The transaction date is the date that the § 1006.34(c)(3) disclosures is based on requirement to provide this validation good or service that gave rise to the debt the date the consumer receives or is information, a debt collector must was provided or made available to the assumed to receive the validation notice disclose the version of the consumer’s consumer. For example, the transaction sent on January 15. name that the debt collector reasonably date for a debt arising from a medical 34(c) Validation information. determines is the most complete and procedure may be the date the medical 34(c)(1) Debt collector communication accurate version of the name about procedure was performed, and the disclosure. which the debt collector has knowledge. transaction date for a consumer’s gym 1. Statement required by § 1006.18(e). A debt collector does not disclose the membership may be the date the Section 1006.34(c)(1) provides that most complete and accurate version of membership contract was executed. In validation information includes the the consumer’s name if the debt some cases, a debt may have more than statement required by § 1006.18(e). collector omits known name one transaction date. This could occur, Section 1006.18(e)(1) requires a debt information in a manner that creates a for example, if a contract for a service collector to disclose in its initial false, misleading, or confusing is executed on one date and the service communication that the debt collector is impression about the consumer’s is performed on another date. If a debt attempting to collect a debt and that any identity. For example, assume the has more than one transaction date, a information obtained will be used for creditor provides the consumer’s first debt collector may use any such date as that purpose. Section 1006.18(e)(2) name, middle name, last name, and the transaction date for purposes of requires a debt collector to disclose in name suffix to the debt collector. In this § 1006.34(b)(3)(iv), but the debt collector each subsequent communication that scenario, the debt collector would must use whichever transaction date is the communication is from a debt reasonably determine that the most selected consistently, as described in collector. A debt collector who provides complete and accurate version of the comment 34(b)(3)–1. a validation notice as described in consumer’s name about which the debt 34(b)(5) Validation period. § 1006.34(a)(1)(i)(A) complies with collector has knowledge includes the 1. Assumed receipt of validation § 1006.34(c)(1) by providing on the first name, middle name, last name, and information. Section 1006.34(b)(5) validation notice the disclosure required name suffix. If the debt collector omits defines the validation period as the by § 1006.18(e)(1). A debt collector who any of this information, the debt period starting on the date that a debt provides a validation notice as collector has not satisfied the collector provides the validation described in § 1006.34(a)(1)(i)(B) requirement to provide the consumer’s information required by § 1006.34(c) complies with § 1006.34(c)(1) by name pursuant to § 1006.34(c)(2)(ii). and ending 30 days after the consumer providing either the disclosure required Paragraph 34(c)(2)(iii). receives or is assumed to receive it. by § 1006.18(e)(1) or the disclosure 1. Creditor’s name. Section Section 1006.34(c)(3)(i) through (iii) required by § 1006.18(e)(2). The 1006.34(c)(2)(iii) provides that, if a debt requires statements that specify the end following example illustrates the rule: collector is collecting debt related to a date of the validation period. If a debt i. ABC debt collector has an initial consumer financial product or service as collector provides the validation communication with the consumer by defined in § 1006.2(f), validation information in writing or electronically, telephone. Within five days of that information includes the name of the then, at the time that the debt collector initial communication, ABC debt creditor to whom the debt was owed on calculates the validation period end collector sends the consumer a the itemization date. Pursuant to date, the debt collector will know only validation notice using Model Form § 1006.34(c)(2)(iii), a debt collector may the date on which the consumer is B–1 in appendix B to this part. ABC disclose this creditor’s trade or doing- assumed to receive the validation debt collector has complied with business-as name, instead of its legal information. In such cases, the debt § 1006.34(c)(1) even though Model Form name. collector may use that date to calculate B–1 includes the disclosure described in Paragraph 34(c)(2)(iv). the validation period end date even if § 1006.18(e)(1) rather than the 1. Account number truncation. the debt collector later learns that the disclosure described in § 1006.18(e)(2). Section 1006.34(c)(2)(iv) provides that consumer received the validation 34(c)(2) Information about the debt. validation information includes the information on a different date. Paragraph 34(c)(2)(i). account number, if any, associated with 2. Updated validation period. If a debt 1. Debt collector’s name. Section the debt on the itemization date, or a collector sends a subsequent validation 1006.34(c)(2)(i) provides, in part, that truncated version of that number. If a notice to a consumer because the validation information includes the debt debt collector uses a truncated account consumer did not receive the original collector’s name. A debt collector may number, the account number must validation notice and the consumer has disclose its trade or doing-business-as remain recognizable. For example, a not otherwise received the validation name, instead of its legal name. debt collector may truncate a credit card information required by § 1006.34(c), 2. Debt collector’s mailing address. account number so that only the last the debt collector must calculate the end Section 1006.34(c)(2)(i) provides, in four digits are provided. date of the validation period specified part, that validation information Paragraph 34(c)(2)(v). in the § 1006.34(c)(3) disclosures based includes the mailing address at which 1. Creditor’s name. Section on the date the consumer receives or is the debt collector accepts disputes and 1006.34(c)(2)(v) provides that validation assumed to receive the subsequent requests for original-creditor information includes the name of the validation notice. For example, assume information. A debt collector may creditor to whom the debt currently is a debt collector sends a consumer a disclose a vendor’s mailing address, if owed. A debt collector may disclose this validation notice on January 1, and that that is an address at which the debt creditor’s trade or doing-business-as notice is returned as undeliverable. collector accepts disputes and requests name, instead of its legal name. After obtaining accurate location for original-creditor information. Paragraph 34(c)(2)(vii). information, the debt collector sends the Paragraph 34(c)(2)(ii). 1. Amount of the debt on the consumer a subsequent validation 1. Consumer’s name. Section itemization date. Section notice on January 15. Pursuant to 1006.34(c)(2)(ii) provides, in part, that 1006.34(c)(2)(vii) provides that § 1006.34(b)(5), the end date of the validation information includes the validation information includes the validation period specified in the consumer’s name. To satisfy the amount of the debt on the itemization

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00095 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5860 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

date. The amount of the debt on the 1. Current amount of the debt. Section debt, if a periodic statement is required itemization date includes any fees, 1006.34(c)(2)(ix) provides that under Regulation Z, 12 CFR 1026.41, at interest, or other charges owed as of that validation information includes the the time a debt collector provides the date. current amount of the debt (i.e., the validation notice, a debt collector need Paragraph 34(c)(2)(viii). amount as of when the validation not provide the validation information 1. Itemization of the debt. Section information is provided). For residential required by § 1006.34(c)(2)(vi) through 1006.34(c)(2)(viii) provides that mortgage debt subject to Regulation Z, (viii) if the debt collector provides the validation information includes an 12 CFR 1026.41, a debt collector may consumer, in the same communication itemization of the current amount of the comply with the requirement to provide with the validation notice, a copy of the debt reflecting interest, fees, payments, the current amount of the debt by most recent periodic statement provided and credits since the itemization date. If providing the consumer the total to the consumer under 12 CFR providing a validation notice, a debt balance of the outstanding mortgage, 1026.41(b), and the debt collector collector must include fields in the including principal, interest, fees, and includes on the validation notice, where notice for all of these items even if none other charges. the validation information required by of the items have been assessed or 2. Debt collectors collecting multiple paragraphs (c)(2)(vi) through (viii) of applied to the debt since the itemization debts. A debt collector who combines this section would have appeared, a date. A debt collector may indicate that multiple debts on a single validation statement referring to that periodic the value of a required field is ‘‘0,’’ notice complies with § 1006.34(c)(2)(ix) statement. A debt collector may comply ‘‘none,’’ or may state that no interest, by disclosing on the validation notice a with the requirement to refer to the fees, payments, or credits have been single cumulative figure that is the sum periodic statement in the validation assessed or applied to the debt; a debt of the current amount of all the debts. notice by, for example, including on the collector may not leave a required field 34(c)(3) Information about consumer validation notice the statement, ‘‘See the blank. protections. enclosed periodic statement for an Paragraph 34(c)(3)(v). itemization of the debt.’’ 2. Itemization required by other 1. Electronic communication media. applicable law. If a debt collector is 34(d) Form of validation information. Section 1006.34(c)(3)(v) provides that, if 34(d)(2) Safe harbor. required by other applicable law to the debt collector provides the 1. In general. A debt collector who provide an itemization of the current validation notice electronically, provides a validation notice that is amount of the debt with the validation validation information includes a neither a notice described in information, the debt collector may statement explaining how a consumer § 1006.34(d)(2)(i) or (ii), nor a comply with § 1006.34(c)(2)(viii) by can, as described in paragraphs (c)(4)(i) substantially similar notice as described disclosing the itemization required by and (ii) of this section, dispute the debt in § 1006.34(d)(2)(iii), does not receive a other applicable law in lieu of the or request original-creditor information safe harbor for compliance with the itemization described in electronically. A debt collector may information and form requirements of § 1006.34(c)(2)(viii), if the itemization provide the information required by § 1006.34(c) and (d)(1). required by other applicable law is § 1006.34(c)(3)(v) by including the 34(d)(2)(i) In general. substantially similar to the itemization statements, ‘‘We accept disputes 1. Disclosure required by § 1006.18(e). that appears on Model Form B–1 in electronically at,’’ using that phrase or Section 1006.18(e)(1) requires a debt appendix B to this part. a substantially similar phrase, followed collector to disclose in its initial 3. Itemization on a separate page. by an email address or website portal communication that the debt collector is Section 1006.34(c)(2)(viii) provides that that a consumer can use to take the attempting to collect a debt and that any a debt collector may disclose the action described in § 1006.34(c)(4)(i), information obtained will be used for itemization of the current amount of the and ‘‘We accept original creditor that purpose. Section 1006.18(e)(2) debt on a separate page provided in the information requests electronically,’’ requires a debt collector to disclose in same communication with a validation using that phrase or a substantially each subsequent communication that notice if the debt collector includes on similar phrase, followed by an email the communication is from a debt the validation notice, where the address or website portal that a collector. Model Form B–1 in appendix itemization would have appeared, a consumer can use to take the action B to this part includes the disclosure statement referring to that separate page. described in § 1006.34(c)(4)(ii). If a debt required by § 1006.18(e)(1). A debt A debt collector may comply with the collector accepts electronic collector who uses Model Form B–1 to requirement to refer to the separate page communications from consumers provide a validation notice as described by, for example, including on the through more than one medium, such as in § 1006.34(a)(1)(i)(B) may replace the validation notice the statement, ‘‘See the by email and through a website portal, disclosure required by § 1006.18(e)(1) enclosed separate page for an the debt collector is required to provide with the disclosure required by itemization of the debt,’’ situated next to information regarding only one of these § 1006.18(e)(2) without losing the safe the information about the current media but may provide information on harbor described in § 1006.34(d)(2). See amount of the debt required by any additional media. comment 34(c)(1)–1 for further guidance § 1006.34(c)(2)(ix). 34(c)(4) Consumer-response related to providing the disclosure 4. Debt collectors collecting multiple information. required by § 1006.18(e) on a validation debts. A debt collector who combines 1. Prompts. If the validation notice. multiple debts on a single validation information is provided in writing or 34(d)(2)(iii) Substantially similar notice complies with electronically, a prompt required by form. § 1006.34(c)(2)(viii) by disclosing either § 1006.34(c)(4) may be formatted as a 1. Substantially similar form. a single, cumulative itemization on the checkbox as in Model Form B–1 in Pursuant to § 1006.34(d)(2)(iii), a debt validation notice or a separate appendix B to this part. collector who uses Model Form B–1 as itemization of each debt on a separate 34(c)(5) Special rule for certain described in § 1006.34(d)(2)(i) may page or pages provided in the same residential mortgage debt. make changes to the form and retain the communication as the validation notice. 1. In general. Section 1006.34(c)(5) safe harbor for compliance with the Paragraph 34(c)(2)(ix). provides that, for residential mortgage information and form requirements of

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00096 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations 5861

§ 1006.34(c) and (d)(1) provided that the that such disclosures are specifically collector to include the merchant brand, form remains substantially similar in required by applicable law. if any, associated with debt. For substance, clarity, and meaningful 2. Statement referring to disclosures. example, assume that a debt collector is sequence to Model Form B–1. If a debt collector includes disclosures attempting to collect a consumer’s credit Permissible changes include, for pursuant to § 1006.34(d)(3)(iv)(A), the card debt. The credit card was issued by example: debt collector must include a statement ABC Bank and was co-branded XYZ i. Modifications to remove language on the front of the validation notice Store. ‘‘XYZ Store’’ is the merchant that could suggest liability for the debt referring to those disclosures. A debt brand. if such language is not applicable. For collector may comply with the 2. Affinity brand. Section example, if a debt collector sends a requirement to refer to the disclosures 1006.34(d)(3)(vii) permits a debt validation notice to a person who is by including on the front of the collector to include the affinity brand, if authorized to act on behalf of the validation notice the statement, ‘‘Notice: any, associated with the debt. For deceased consumer’s estate (see See reverse side for important example, assume that a debt collector is comment 34(a)(1)–1), and that person is information,’’ or a substantially similar attempting to collect a consumer’s credit not liable for the debt, the debt collector statement. If, as permitted by comment card debt. The credit card was issued by may use the name of the deceased 34(d)(3)(iv)(A)–1, a debt collector places ABC Bank, and the logo for the College consumer instead of ‘‘you’’; the disclosures below the content of the of Columbia appears on the credit card. ii. Relocating the consumer-response validation notice, the debt collector may ‘‘College of Columbia’’ is the affinity information required by § 1006.34(c)(4) comply with the requirement to refer to brand. to facilitate mailing; the disclosures by stating, ‘‘Notice: See 3. Facility name. Section iii. Adding barcodes or QR codes, as below for important information,’’ or a 1006.34(d)(3)(vii) permits a debt long as the inclusion of such items does substantially similar statement. collector to include the facility name, if not violate § 1006.38(b); 34(d)(3)(iv)(B) Disclosures on the front any, associated with the debt. For iv. Adding the date the form is of the validation notice. example, assume that a debt collector is generated; and 1. In general. Section attempting to collect a consumer’s v. Embedding hyperlinks, if 1006.34(d)(3)(iv)(B) provides, in medical debt. The medical debt relates delivering the form electronically. relevant part that, if a debt collector is to a treatment that the consumer 34(d)(3) Optional disclosures. collecting time-barred debt, the debt received at ABC Hospital. ‘‘ABC 34(d)(3)(i) Telephone contact collector may include on the front of the Hospital’’ is the facility name. information. validation notice any time-barred debt 34(e) Translation into other 1. In general. Section 1006.34(d)(3)(i) disclosure that is specifically required languages. permits a debt collector to include by, or that provides a safe harbor under, 1. Safe harbor for complete and telephone contact information. applicable law, provided that applicable accurate translation. Section 1006.34(e) Telephone contact information may law specifies the content of the provides, among other things, that, if a include, for example, a telephone disclosure. For example, if applicable debt collector sends a consumer a number as well as the times that the State law requires a debt collector who validation notice translated into a debt collector accepts consumer is collecting time-barred debt to disclose language other than English, the telephone calls. to the consumer that the law limits how translation must be complete and 34(d)(3)(iv) Disclosures under long a consumer can be sued on a debt accurate. The language of a validation applicable law. and that the debt collector cannot or notice that a debt collector obtains from 34(d)(3)(iv)(A) Disclosures on the will not sue the consumer to collect it, the Bureau’s website is considered a reverse of the validation notice. the debt collector may include that complete and accurate translation. Debt 1. In general. Section disclosure on the front of the validation collectors are permitted to use other 1006.34(d)(3)(iv)(A) permits, in relevant notice. See § 1006.26(a)(2) for the validation notice translations if they are part, a debt collector to include on the definition of time-barred debt. For complete and accurate. reverse of the validation notice any purposes of § 1006.34(d)(3)(iv)(B), time- Section 1006.38—Disputes and Requests disclosures that are specifically required barred debt disclosures may include for Original-Creditor Information by, or that provide safe harbors under, disclosures about revival of debt applicable law. If a debt collector collectors’ right to bring a legal action to 1. In writing. Section 1006.38 contains provides a validation notice in the body enforce the debt. requirements related to a dispute or of an email, the debt collector may, in 34(d)(3)(vi) Spanish-language request for the name and address of the lieu of including the disclosures translation disclosures. original creditor timely submitted in permitted by § 1006.34(d)(3)(iv)(A) on Paragraph 34(d)(3)(vi)(A). writing by the consumer. A consumer the reverse of the validation notice, 1. Supplemental information in has disputed the debt or requested the include them in the same Spanish. Section 1006.34(d)(3)(vi)(A) name and address of the original communication below the content of the permits a debt collector to include creditor in writing for purposes of validation notice. Disclosures permitted supplemental information in Spanish § 1006.38(c) or (d)(2) if the consumer, by § 1006.34(d)(3)(iv)(A) include, for that specifies how a consumer may for example: example, specific disclosures required request a Spanish-language validation i. Mails the written dispute or request by Federal, State, or municipal statutes notice. For example, a debt collector to the debt collector; or regulations, and specific disclosures may include a statement in Spanish that ii. Returns to the debt collector the required by judicial or administrative a consumer can request a Spanish- consumer-response form that decisions or orders, including language validation notice by telephone § 1006.34(c)(4) requires to appear on the administrative consent orders. Such or email, if the debt collector accepts validation notice and indicates on the disclosures could include, for example, consumer requests through those form the dispute or request; time-barred debt disclosures and communication media. iii. Provides the dispute or request to disclosures that the current amount of Paragraph 34(d)(3)(vii). the debt collector using a medium of the debt may increase or vary due to 1. Merchant brand. Section electronic communication through interest, fees, or other charges, provided 1006.34(d)(3)(vii) permits a debt which the debt collector accepts

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00097 Fmt 4701 Sfmt 4700 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8 5862 Federal Register / Vol. 86, No. 11 / Tuesday, January 19, 2021 / Rules and Regulations

electronic communications from that are evidence of compliance or collector provided the information consumers, such as an email address or noncompliance with the FDCPA and required by §§ 1006.34 and 1006.38 and a website portal; or this part. Thus, under § 1006.100(a), a met the delivery requirements of iv. Delivers the written dispute or debt collector must retain records that § 1006.42. request in person or by courier to the evidence that the debt collector * * * * * debt collector. performed the actions and made the * * * * * disclosures required by the FDCPA and Section 1006.104—Relation to State 3. Deceased consumers. If the debt this part, as well as records that Laws collector knows or should know that the evidence that the debt collector consumer is deceased, and if the refrained from conduct prohibited by 1. State law disclosure requirements. consumer has not previously disputed the FDCPA and this part. If a record is The Act and the corresponding the debt or requested the name and of a type that could evidence provisions of Regulation F do not annul, address of the original creditor, a person compliance or noncompliance alter, or affect, or exempt any person who is authorized to act on behalf of the depending on the conduct of the debt subject to these requirements from deceased consumer’s estate operates as collector that is revealed within the complying with a disclosure the consumer for purposes of § 1006.38. record, then the record is one that is requirement under applicable State law In such circumstances, to comply with evidence of compliance or that describes additional protections § 1006.38(c) or (d)(2), respectively, a noncompliance, and the debt collector under State law that are not inconsistent debt collector must respond to a request must retain it. Such records include, but with the Act and Regulation F. A for the name and address of the original are not limited to, records that evidence disclosure required by State law is not creditor or to a dispute timely submitted that the debt collector’s inconsistent with the FDCPA or in writing by a person who is authorized communications and attempts to Regulation F if the disclosure describes to act on behalf of the deceased communicate in connection with the a protection that such law affords any consumer’s estate. collection of a debt complied (or did not consumer that is greater than the * * * * * comply) with the FDCPA and this part. protection provided by the FDCPA or For example, a debt collector must Subpart D—Miscellaneous Regulation F. retain: Dated: December 18, 2020. Section 1006.100—Record Retention i. Telephone call logs as evidence of Grace Feola, * * * * * compliance or noncompliance with the 100(a) In general. prohibition against harassing telephone Federal Register Liaison, Bureau of Consumer 1. Records that evidence compliance. calls in § 1006.14(b)(1); and Financial Protection. Section 1006.100(a) provides, in part, ii. Copies of documents provided to [FR Doc. 2020–28422 Filed 1–15–21; 8:45 am] that a debt collector must retain records consumers as evidence that the debt BILLING CODE 4810–AM–P

VerDate Sep<11>2014 20:50 Jan 17, 2021 Jkt 253001 PO 00000 Frm 00098 Fmt 4701 Sfmt 9990 E:\FR\FM\19JAR8.SGM 19JAR8 khammond on DSKJM1Z7X2PROD with RULES8