Last week, the Consumer Financial Protection Bureau shared their latest action involving collections and time-barred debt disclosures.
The bureau issued a supplemental notice of proposed rulemaking (supplemental NPRM) regarding the collection of time-barred debt. The bureau proposes to prohibit collectors from using non-litigation means such as calls to collect on time-barred debt unless collectors disclose to consumers during the initial contact and on any required validation notice that the debt is time-barred.
Consumer research conducted by the bureau found that a time-barred debt disclosure “helps consumers understand that they cannot be sued if they do not pay.”
Officials added, “That can help consumers make better-informed decisions whether to pay the debt or not.”
Last May, the bureau published a proposal to implement the Fair Debt Collection Practices Act (FDCPA). The May proposal would provide consumers with what the regulator called “clear protections against harassment by debt collectors and straightforward options to address or dispute debts.” The CFPB went on to explain its proposal also would:
— Set “clear, bright-line” limits on the number of calls debt collectors may place to reach consumers on a weekly basis
— Clarify how collectors may communicate lawfully using newer technologies, such as voicemails, emails and text messages, that have developed since the FDCPA’s passage in 1977
— Require collectors to provide additional information to consumers to help them identify debts and respond to collection attempts
The bureau also mentioned its proposal from last May suggested to prohibit debt collectors from “suing or threatening to sue on debts they know or should know are time-barred.” The bureau said it included the “know or should know” standard in its proposal recognizing the concern that, in some instances, debt collectors may be genuinely uncertain whether the statute of limitations has expired even after undertaking a reasonable investigation.
The bureau said it received more than 14,000 public comments on the May proposal. A large number of comments addressed time-barred debt, including the proposed “know or should know” standard.
The CFPB acknowledged that the regulator is analyzing those comments as part of the process of taking final action on the May proposal.
Officials added that its latest supplemental NPRM proposes model language and forms that debt collectors could use to comply with the proposed disclosure requirements.
“As with the May (proposal), the supplemental NPRM also proposes to require disclosures only if a debt collector knows or should know that the debt is time-barred to address debt collector liability if there was too much uncertainty as to whether a debt was time-barred,” officials said.
“The public is invited to submit written comments on the proposed rule, including on the proposed knowledge standard,” they continued. “The bureau will carefully consider all comments received before a final regulation is issued.