On October 17, 2018, the Bureau of Consumer Financial Protection (BCFP), formerly known as the CFPB, announced that it plans to issue a Notice of Proposed Rulemaking (NPRM) for the Fair Debt Collection Practices Act (FDCPA) by March 2019. The NPRM will address “how to apply the 40-year old [FDCPA] to modern collection processes,” including communication practices and consumer disclosure requirements.
The Dodd-Frank Act granted the BCFP authority to prescribe rules that are necessary to carry out and administer the purposes and objectives of federal consumer financial laws, including the FDCPA. The BCFP has been working on FDCPA rules for a number of years. In 2016, the BCFP went so far as to issue an outline of proposed debt collection rules and convened a panel pursuant to the Small Business Regulatory Enforcement Fairness Act. However, the BCFP’s change in leadership delayed further progress on the rules until now.
The first quarter 2019 NPRM will pick up where the BCFP left off in 2016 and is the next step towards issuing final rules. The NPRM will likely contain the following sections:
- Background Section – Provides information about the relevant markets and other applicable legal requirements;
- Section-By-Section Analysis – Provides an analysis of the proposed regulatory text and official commentary;
- Proposed Impact Analysis – Assesses the benefits and costs to affected consumers and companies; and
- Proposed Regulatory Text and Official Commentary – Provides the proposed regulatory text and official commentary.
The public, including affected companies and industry groups, will then have a period of time, usually 60 to 90 days, to provide feedback and comments. Once the comment period is closed, the BCFP will review all comments, make revisions to the proposed regulatory text and official commentary as it deems appropriate, and issue final rules.
These rules will likely impact anyone currently subject to the FDCPA, including debt collection companies, debt purchasers, debt sellers, small dollar lenders, mortgage servicers, credit card companies, student loan servicers, and auto finance companies.
What It Means
All consumer finance companies currently subject to the FDCPA should carefully follow the development of these rules. The FDCPA, which is in many ways a vague statute, has been largely unchanged since it was enacted over 40 years ago. In the absence of regulations, courts have been largely responsible for clarifying statutory ambiguity and determining how the FDCPA applies to new technologies, often resulting in differing opinions across different jurisdictions. The absence of binding regulations has created a landscape full of ambiguity and litigation risk. The BCFP’s rules will bring more clarity to the interpretation of the FDCPA. Additional clarity should allow companies to significantly reduce FDCPA litigation risk. However, additional clarity will also require companies to invest significant resources towards complying with the new rules.