This latest installment of our blog posts about the CFPB debt collection rule examines how the final rule will impact credit reporting.
As an initial matter, let's discuss what is not in the final rule.
- Furnishing before communicating with the consumer: In the CFPB's proposed rule, §1006.30(a) would have prohibited a debt collector from furnishing information about a debt to consumer reporting agencies ("CRAs") under the Fair Credit Reporting Act ("FCRA") before communicating with the consumer about the debt. The CFPB justified this proposal by arguing that subjecting a consumer to pressure by furnishing information to a consumer reporting agency without first providing notice to the consumer constitutes conduct that may have the natural consequence of harassment, oppression, or abuse in violation of FDCPA §806, and that is an unfair or unconscionable means to collect or attempt to collect a debt under FDCPA §808. Specifically, the CFPB was concerned about debt collectors that engage in "passive" collections practices that pressure consumers to pay debts that they otherwise would dispute in an effort to remove the debts from their consumer reports when applying for credit, housing, employment, or another product or service.
- In the final rule, the CFPB chose not to finalize proposed §1006.30(a) and instead said the Bureau will take up this issue in the disclosure-focused final rule that it expects to release in December 2020.
- Validation notices: The CFPB was asked to clarify that credit reporting during the validation period does not constitute overshadowing in violation of FDCPA §809(b), which states that, for 30 days after the consumer receives the validation notice, a debt collector must not engage in collection activities or communications that overshadow or are inconsistent with the disclosure of the consumer's right to dispute the debt or request information about the original creditor. The CFPB is expected to address this issue as part of its disclosure-focused final rule in December.
We will discuss how the Bureau addresses both of these issues in a future blog post once its next final CFPB debt collection rule is released.
While we await the CFPB's future rulemaking on credit reporting, the final rule does reference the FCRA and the impact on credit reporting in a number of places. These references include:
- Negative credit reporting: The CFPB cited negative credit reporting concerns raised by commenters about the CFPB proposed debt collection rule's call frequency limit. The commenters argued that such a limit would harm consumers by preventing communications that could resolve issues before information is furnished, which would ultimately lead to increases in negative credit reporting. In response to these concerns, the CFPB modified the final rule so that the CFPB will impose a rebuttable-presumption approach toward call limits rather than implementing a bright-line rule.
- False representations about credit reporting: Despite calls by the industry to provide a list of specific statements that debt collectors could use to inform consumers of the credit reporting status of their debts or of the effect of paying their debts without violating the FDCPA's prohibition on false representations, the CFPB declined to do so. Instead, the CFPB concluded that safe harbors for general statements about credit reporting are unnecessary for simple statements about a debt collector's actions. The CFPB further concluded that safe harbors may not be accurate or effective for complicated statements about the effects of paying a debt on a consumer's credit report, credit score, creditworthiness, or likelihood of receiving credit because these effects depend on the facts and circumstances of a particular case.
- Identity theft: The CFPB chose not to include in the final rule proposed §1006.30(b)(1) that would have prohibited a debt collector from selling, transferring, or placing for collection a debt if the debt collector knows or should know that an identity theft report was filed with respect to the debt. While the CFPB recognized the importance of this consumer protection, the CFPB stated that it believes that FCRA §615(f) already prohibits a person from selling, transferring for consideration, or placing for collection a debt after such person has been notified in accordance with the FCRA that the debt resulted from identity theft. Thus, §1006.30(b)(1)–2 merely states that nothing in the final rule alters a debt collector's obligation to comply with the prohibition already set forth in FCRA § 615(f) (15 U.S.C. 1681m(f)(1)).
- Furnishing is not a sale: The final rule states that a debt collector does not transfer a debt for consideration if the debt collector reports to a consumer reporting agency information that a debt has been paid or settled or discharged in bankruptcy.
- Record retention: Many public comments were submitted to the CFPB about the record retention period, including calls for the final rule to parallel the length of time that information generally may stay in consumer credit reports under the FCRA. While the CFPB noted that debt collectors who furnish information to consumer reporting agencies pursuant to the FCRA must also comply with the recordkeeping requirements of the FCRA (generally seven years), the CFPB decided to finalize a three-year record retention period. Under the final rule, records that reasonably substantiate a debt collector's claims that a consumer owes a debt should be retained for three years after the last collection activity on an account. However, the CFPB noted that if a debt collector deletes an account's records, then a FDCPA violation of the record retention provision would occur if the debt collector undertook any further collection activity with respect to that account because restarting debt collection activity at any time would mean that the last collection activity on the debt had not yet occurred.
- Debtor's list: In connection with the collection of a debt, a debt collector must not publish a list of consumers who allegedly refuse to pay debts, except to a consumer reporting agency. Under the final rule, the publication of any such list would constitute harassing, oppressive, or abusive conduct in violation of the FDCPA.
- Misrepresentations: A debt collector must not falsely represent or imply that it operates or is employed by a consumer reporting agency. Under the final rule, any such statements would constitute false, deceptive, or misleading representations or means in violation of the FDCPA.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.