The CFPB’s Notice of Proposed Rulemaking Risks & Requirements

Today’s Panel Wendy Badger ECMC Group Boyd Gentry Boyd Gentry Law Clyde Murphree Valor Intelligent Processing, LLC Susan Namm Navient Joann Needleman Clark Hill

Legal Disclaimer This presentation is intended to convey general information only and not to provide legal advice. The information conveyed is not intended and should not be construed or relied upon as legal advice. As legal advice must be tailored to the specific circumstances of each case, please consult with your own legal advisor or attorney with respect to your particular situation. While every effort has been made to assure this information is up-to-date, they are not promised or guaranteed to be current, complete or up-to-date.

Agenda Record Retention (1006.100) Collection of Time-Barred Debt (1006.26) Validation (1006.34, 1006.38, 1006.42) Prohibited Behavior (1006.14, 1006.18, 1006.22, 1006.30) Locating/Communicating (1006.6, 1006.10) Agenda

1006.100 – Record Retention

This is the first time that record retention has been addressed and the proposed rule states that you must keep “record” of all interaction (and attempted interaction) with the consumer for three years. The proposed rule does not answer what is considered a “record” for purposes of the proposed rule. Is it all call logs, call recordings, call monitoring results, correspondence, etc.? Assuming the agency is complying with state record retention laws, there may not be many changes the agency needs to make. If the agency is not retaining telephone call logs, it will need to begin doing so. The Official Commentary (p. 536) specifically states that the collector must retain evidence that the debt collector complied with the call frequency limits – such evidence includes telephone call logs. 1006.100 – Record Retention

Storage space, and storage space requirements – including costs and infrastructure – can add additional staff and financial stresses to a company looking to stay in compliance. Look at the various state laws for record retention to determine if the agency is in compliance with the state laws. Review contracts for record retention requirements and to compare to state and federal requirements. 1006.100 – Record Retention

1006.100 – Collection of Time-Barred Debt

1006.26 – Collection of Time-Barred Debt “Time-barred debt” is an improper term. Only rarely is a “debt” extinguished by the operation of an SOL. In many states, the SOL does not extinguish the debt. Moreover, the SOL expiration does not necessarily prohibit the filing of a PROOF OF CLAIM in bankruptcy. An alternate term could be “Frivolous Legal Action by Operation of Statute of Limitation.” There are six states that already require certain written state disclosures when sending letters on out of stat debt. Adding a federal requirement may confuse the least sophisticated consumer, especially if one or the other is more or less stringent than the other. “Should know” is sure to cause a great deal of litigation. Could we provide a safe harbor in the form of procedures that must be followed to determine whether a firm should have known? (Would help with Regulatory Flexibility Act (page 422)) 1006.26 – Collection of Time-Barred Debt

1006.34, .38, .42 -- Validation

Determine what is required vs. what is optional for validation notices. State-specific text requirements might differ from the federal requirements. How are we to interpret “Clear & Conspicuous”? Readily understandable Written/Electronic: Noticeable location and type-size Verbal: Volume and speed sufficient to hear/comprehend Include the date on which the validation period ends. Tear-off portion of letter with disputing options. 1006.34, .38, .42 – Validation

1006.34, .38, .42 – Validation Itemization date Four ways to define Work with creditors (may be different for each) Providing required disclosures (e.g., validation notice) Reasonably expected to provide actual notice In a form the consumer may keep and access later May be done electronically Ample opportunity to collaborate with creditor-clients. Safe harbor validation notice New standard for validations? Validation end date “Call or write us” to dispute the debt 1006.34, .38, .42 – Validation

1006.14, .18, .22, .30 – Prohibited Behavior

1006.14 – Harassing, Oppressive, or Abusive Conduct Limit of seven calls within seven consecutive days or one verbal “communication” with the consumer in seven days, unless: Requested by the consumer Prior consent by consumer Not connected to the dialed number Limited content voicemail does not count as a “call” for limit purposes Includes conveying ringless voicemail but does not include a text or email Limits apply per particular debt Consumer may request no communication via specific medium May reply to confirm opt-out (may not demand payment) May respond to once to a ceased phone or address if consumer initiated communication 1006.14 – Harassing, Oppressive, or Abusive Conduct

1006.18 – False, Deceptive or Misleading Representation or Means Mostly mirrors existing FDCPA provisions Limited content messages do not require mini-Miranda be provided Allows aliases provided: Used consistently Can readily identify individual associated with the alias Safe harbor for attorney meaningful involvement if attorney personally: Drafts or reviews the pleadings or motions, and Reviews information supporting pleading or motion and determines 1006.18 – False, Deceptive or Misleading Representation or Means

1006.22 – Unfair or Unconscionable Means Clarifies that the post-dated payment notification does not include legal holidays, Saturdays or Sundays when calculating the 3-10-day period Prohibits emails to consumer at work unless: Consumer provided prior consent Sent an email to the debt collector Consumer may opt out Debt collector has no reason to know employer prohibits debt collection communications Prohibits social media communication that is viewable to others (e.g., on a consumer’s Facebook “wall”) Allows social media private message, including limited-content messages Fees “incidental to the principle obligation” – no clarification 1006.22 – Unfair or Unconscionable Means

1006.30 – Other Prohibited Practices No credit reporting before communicating with the consumer. Validation notice sent is a comm. Limited content VM is not a comm. Verbal comm. Overlay state law and type of debt requirements May not sell, transfer or place for collection a debt that debt collector knows or should know is subject to identify theft report 1006.30 – Other Prohibited Practices

1006.6, .10 – Locating/ Communication

1006.10 – Acquisition of Location Information Reorganized but for most part tracks existing §1692b(1-6) and adopts the definition of ‘location information’ from existing §1692a(7) (home, home number, POE). Key difference: NPRM §1006.10(c) applies the call frequency limits of §1006.14(b) to efforts to obtain location information. 1006.10 – Acquisition of Location Information

1006.10 – Acquisition of Location Information 10(a)-1 clarify that can seek location information for a person ‘authorized to act on behalf of’ deceased consumer’s estate. 10(b)(2)-1 debt collector does not violate §1006.10(b)(2) [disclosing consumer owes a debt] when stating seeking to identify ‘person who is authorized to act on behalf of the estate’. The CFPB notes the FTC allows reference to ‘outstanding bills’, and CFPB seeks comment on limit to ‘authorized to act on behalf of’ language. 1006.10 – Acquisition of Location Information

1006.6 – Communications in Connection with Debt Collection Making Communications Language, reorganizes existing §1692c, some noted additions 6(a) Definition of consumer for communication purposes (only) now include ‘confirmed successor in interest’. Note this definition of consumer adopted for §1006.14(h)[Prohibited Communications Media], so prohibition extends to spouse, parent, executor. 6(b) adds may not ‘attempt to communicate’ in certain manner. ‘Attempt’ is defined §1006.2(b) and includes attempt to leave ‘limited content messages’ as defined §1006.2(j). Time restrictions 8 AM to 9 PM Known or should know inconvenient to consumer Knows of attorney representation Place of employment. 1006.6 – Communications in Connection with Debt Collection

1006.6 – Communications in Connection with Debt Collection Place of Employment Highlight CFPB request for comment, significant. NPRM presently applies §1006.22(f)(3) work email restriction to only person obligated on debt. CFPB seeks comment on whether to apply work email restriction to all §1006.6(a) defined consumers (spouse, parent, executor, successor in interest) Work email consent given to creditor does NOT follow to debt collector, or subsequent debt collector (note this does not apply to ‘recent’ non-work email non-work phone §1006.6(d)(3)(i)(C) NO SAFE HARBOR on work email (NPRM p. 104) Work provided telephone numbers not well addressed 1006.6 – Communications in Connection with Debt Collection

1006.6 – Communications in Connection with Debt Collection Ceasing Communications Language. Largely restates existing §1692c(c) Adds may not ‘attempt to communicate’ if in writing refuse to pay or cease Exceptions: same- acknowledge request, or invoke normal or specific remedy Written cease instruction to include electronic writing from consumer via email or web portal. Comment sought on if electronic cease is immediate upon receipt, and if need clarify includes §1006.6(a) ‘consumers.’ 1006.6 – Communications in Connection with Debt Collection

1006.6 – Communications in Connection with Debt Collection Communication with Third Parties Language: Largely restates existing §1692c(b) (comm w consumer, attorney, CRA) Same exceptions: location info, consent of consumer, court, judicial remedy Adds: §1006.6(d)(3) B.E. safe harbor “reasonable procedures for email and text” email and phone recently used other than for opting out non work email and phone, after written notice other than the non-work email and non-work phone w30 days notice and consumer did not opt out, or prior creditor or collector ‘recently’ used it without complaint Opt out: §1006.6(e) provide ‘clear and conspicuous’ opt out without charge