CFPB Releases Final Debt Collection Rule

The CFPB issued a final debt collection rule Friday, making it clear that the agency is not trying to regulate “first party debt collectors,” such as credit unions.

The agency issued a 653-page rule that agency officials said updates decades-old guidelines that were issued before cell phones and other newer technology were available.

When it was first proposed, credit union trade groups had expressed concern that first-party debt collectors might fall under the rule.

“Depository institutions and credit unions are generally not debt collectors under [the debt collection law] and therefore are generally not covered by the rule,” the agency said Friday. Still, credit unions might be affected because some institutions hire professional debt collectors.

“Credit unions treat members with respect during the debt collection process,” CUNA President/CEO Jim Nussle said following the release of the rule. “While this rule is designed to implement the [federal law], we remain concerned about the potential impacts the rule could have on the credit ecosystem. Because they are the owners of the credit union, credit union members have an interest in debt collection practices that are effective, fair and efficient. We will continue to evaluate the rule to determine its full impact on credit unions and their partners.”

CFPB Director Kathleen Kraninger said that in issuing the rule, the CFPB wanted to provide a guide for consumers to use in evaluating whether a debt collector was harassing them.

“No matter the reason a consumer has a debt in collection, we want to make sure there are clear rules of the road for debt collectors to follow the law and alongside that, swift action against those who flout the law,” she said in releasing the final rule.

The rule prohibits debt collectors from making a collection phone call for a particular debt more than seven times within a seven-day period or within seven days of having a telephone conversation with the debtor. It states that a consumer may restrict the type of media used by a debt collector to contact a person.

It also allows newer communication technologies, such as emails and text messages, to be used in debt collection.

The CFPB acknowledged that some creditors could experience higher debt collection costs if they hire a third-party debt collector rather than collect debts themselves.

Consumer groups said the final rule drops some of the proposals they disliked the most but that the debt collection rules still will permit telephone harassment.

The National Consumer Law Center and other consumer groups noted the final rule drops part of the proposed rule that offered “a free pass for collection attorneys who make false, deceptive or misleading representations.”

They also said the CFPB delayed until December a rule governing time-barred debt.

However, the consumer advocates said the rule still allows debt collectors to make one call every day and several calls for consumers who owe multiple debts. They also said the rule allows the use of emails, text messages and social media without a consumer’s consent.

“We appreciate that the CFPB has modified many aspects of the rule in response to our concerns, but with millions of Americans scraping by amid the economic fallout from a global pandemic, the rule still allows debt collectors to make excessive, harassing calls,” National Consumer Law Center attorney April Kuehnhoff said.

Senate Banking Committee ranking Democrat Sherrod Brown of Ohio had a mixed reaction to the final rule.

“While I am pleased that the CFPB did not include some of the most harmful provisions of the proposed rule, the final rule still allows collectors to make excessive phone calls to consumers — up to seven times a week for each debt — and unfairly puts the burden on consumers to ‘opt out’ of harassing text, email and social media messages,” he said.