Many business owners get understandably frustrated when they hear about new consumer protections when it comes to debt collection. Politicians tend to construct legislative changes around what’s popular, and since there are many more people who owe money than businesses trying to collect, it can be a daunting task.
In late November of last year, another major regulation update came down the pike, this time to Regulation F. In this article, we’ll take a look at what Reg F is and what changes might affect you the most.
A Guide to Regulation F: What It Is and How It Impacts Debt Collection
In December 2011, the Consumer Financial Protection Bureau (CFPB) issued a new regulation, known as Regulation F, which governs the way creditors can collect debts from debtors. The regulation is designed to protect consumers from unfair and abusive debt collection practices.
Under the established rules, creditors could not engage in certain activities, such as making repeated phone calls to a debtor’s home or place of work. The regulation also prohibited profane or obscene language or making false or misleading statements about a debt. In addition, creditors were required to provide debtors with certain information about their rights and options under the law.
The CFPB has also established a website, http://www.consumerfinance.gov/complaint/, where consumers could file complaints about unfair or abusive debt collection practices. The new regulation made it more difficult for creditors to collect debts from consumers; however, it also made it easier for consumers to know their rights and to file complaints if they believed they were being treated unfairly.
For almost 10 years, the regulation sat untouched until the CFPB issued two updates in 2021: the first, on May 3, and the second on November 30. The current version of the regulation can be read in full at this link.
What Is in the November 2021 Update?
The latest version of Regulation F includes changes to Communications, prohibitions of conduct, validation information, time-barred debts, debt disputes, state exemption programs, and records retention. In this section, we’ll be taking a closer look, starting with:
Debt collectors are now required to wait one week before contacting a consumer about the same debt. However, they can make up to seven attempted calls and contact consumers through emails or text messages as well. However, once contact has been established, they will need to wait another seven days before attempting another contact.
Notice and Disclosures
The FDCPA requires certain notice to be given when collecting debts from consumers. This includes sending written notice with all necessary information within five days of initial contact, including an explanation about how much you’re owed and which creditor has the debt on their account.
The latest changes allow for disclosures to be made by electronic means or orally instead of in writing. This is beneficial because it reduces any risk associated with providing notice through channels like mail delivery and also ensures that consumers receive the notice as soon as possible. The earlier they receive it, the faster you get paid.
Prior to reporting a debt, the collector must now actually speak with the consumer and send this information by letter, phone call, or some form of electronic communication. They’ll also need to wait a “reasonable” period of time before issuing a notice of default accounts to credit reporting agencies. The prior practice of reporting the debt to an agency and then placing the burden on the consumer to contact you is no more.
The debt collector may still pressure the consumer to make a payment on time-barred debts. If they do, these bills will be renewed. For example, if a debt has been unpaid for six years, the statute of limitations in most states would prohibit the creditor from suing to collect. The update stipulates that if consumers make even a partial payment on the debt, the clock restarts and the consumer can be responsible for the full balance. However, debt collectors may not threaten legal action on any debt considered to fall under the statute of limitations.
These are some of the most significant tweaks to the law, but there are more and it is in your best interests to understand the full extent of your rights as a creditor. These laws seem to usually favor the consumer, so any change brings with it a bit of uncertainty.
If you are looking to improve your debt recovery success rate, it’s best to partner with an agency that specializes in knowing how to work within the law to get you paid as quickly as possible. Southwest Recovery Services has a long, storied tradition of pursuing methods that work while keeping their clients in compliance. Contact today to learn how they can help!