Debt Collection (Regulation F)

Federal RegisterNov 12, 2013

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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1006

[Docket No. CFPB-2013-0033]

RIN 3170-AA41

Debt Collection (Regulation F)

AGENCY:

Bureau of Consumer Financial Protection.

ACTION:

Advance notice of proposed rulemaking.

SUMMARY:

The Consumer Financial Protection Bureau (the Bureau) is seeking comment, data, and information from the public about debt collection practices. Debt collection affects a significant number of consumers and the Bureau is considering proposing rules relating to debt collection. Therefore, the Bureau is interested in learning through responses to this advance notice of proposed rulemaking (ANPR) about the debt collection system, about consumer experiences with the debt collection system, and about how rules for debt collectors might protect consumers without imposing unnecessary burdens on industry.

The Fair Debt Collection Practices Act (FDCPA) was passed in 1977 and the Bureau is the first Federal agency to possess the authority to issue substantive rules for debt collection under this statute. The Bureau may also address concerns related to debt collection using its authority under the Dodd-Frank Act to issue regulations concerning unfair, deceptive, and abusive acts or practices and to establish disclosures to assist consumers in understanding the costs, benefits, and risks associated with consumer financial products and services.

DATES:

Comments on this ANPR must be received by February 10, 2014.

ADDRESSES:

You may submit comments, identified by Docket No. CFPB-2013-0033 or Regulatory Identification Number (RIN) 3170-AA41, by any of the following methods:

•

Electronic: http://www.regulations.gov.

Follow the instructions for submitting comments.

•

Mail/Hand Delivery:

Monica Jackson, Office of the Executive Secretary, Bureau of Consumer Financial Protection, 1700 G Street NW., Washington, DC 20552.

Instructions

: All submissions must include the agency name and docket number or RIN. Please include the question number(s) to which your comment pertains. In general, all comments received will be posted without change to

http://www.regulations.gov.

In addition, comments will be available for public inspection and copying at 1700 G Street NW., Washington, DC 20552, on official business days between the hours of 10 a.m. and 5 p.m. Eastern Time. You can make an appointment to inspect the documents by calling (202) 435-7275.

All comments submitted through the formal means described above, including attachments and other supporting materials, will become part of the public record and subject to public disclosure. Sensitive personal information, such as account numbers or Social Security numbers, should not be included. Comments will not be edited to remove any identifying or contact information.

E-Rulemaking Initiative:

The Bureau is working with the Cornell e-Rulemaking Initiative (CeRI) on a pilot project, RegulationRoom (

www.RegulationRoom.org

), that uses web technologies and approaches to enhance public understanding and effective participation. This ANPR on debt collection is a focus of the project. RegulationRoom is set up to make it easier for consumers and others to understand what the Bureau is considering, to share their information, experiences, and concerns, and to discuss possible ideas and solutions. Note that RegulationRoom is not an official United States Government Web site. Although comments made on that site are not formal comments like those submitted through the means identified above, the discussion on RegulationRoom will be captured through a detailed summary, which participants will have the chance to review and suggest revisions. This summary will be filed as a formal comment on Regulations.gov. For questions about this project, please contact Whitney Patross, Counsel, Office of Regulations, at (202) 435-7700.

FOR FURTHER INFORMATION CONTACT:

Krista Ayoub and Pavneet Singh, Senior Counsels; or Kristin McPartland, Lauren Weldon, and Evan White, Counsels; Bureau of Consumer Financial Protection, 1700 G Street NW., Washington, DC 20552, at (202) 435-7700.

SUPPLEMENTARY INFORMATION:

This ANPR seeks data and other information to assist the Bureau in developing proposed rules for debt collection. Part I provides a general overview of debt collection, consumer protection problems in debt collection, and government authority and activities to address these problems.

Parts II and III of the ANPR principally focus on the quantity and quality of information in the debt collection system. Part II solicits information on the transfer of information and access to information upon sale or placement of debts. Part III seeks information regarding validation notices, disputes, investigations, and verification of disputes.

Parts IV, V, and VI primarily concern the conduct of collectors in interacting with consumers in trying to recover on debts through the collection process. Part IV requests information about collector communications seeking location information about consumers, interacting with consumers themselves, disclosing debts to third parties, and newer technologies. This part includes issues concerning sections 804 and 805 of the FDCPA. Part V asks for information about unfair, deceptive, and abusive acts and practices, including issues concerning sections 806, 807, and 808 of the FDCPA. Part VI addresses issues relating to the collection of debts that are beyond the statute of limitations.

Parts VII and VIII predominantly address debt collection activities that implicate issues relating to State law. Part VII requests information about debt collection litigation, most of which occurs in State courts. Part VIII raises questions about exemptions under Federal law for State debt collection systems under section 817 of the FDCPA, as well as for private entities that operate bad check diversion programs under contracts with State and local district attorneys under section 818 of the FDCPA.

Finally, Part IX solicits information concerning recordkeeping, monitoring, and compliance.

While the Bureau encourages all commenters to read and respond to the entire ANPR, we provide the outline above to assist commenters in identifying the sections most relevant to their interests and knowledge. The Bureau also invites consumers, consumer service organizations, creditors, collectors, or other interested parties to file comments describing the practical experiences that they have had or observed in the area of consumer debt collection, even if it is not apparent to which particular question those experiences are closely related. In particular, Parts III and VII may be of most interest to consumers, who may be able to offer insight on their experiences and expectations with respect to debt collection communications and interactions with debt collection litigation.

I. Debt Collection and Consumer Protection

A. Consumer Debts

A debt is commonly understood to be an obligation by a consumer to pay its owner; these obligations frequently arise out of an extension of credit. Consumers have many debts in collection and may have many different types of debts in collection. In 2011, for example, a national trade association of collectors reported that the most frequent debts on which collectors seek to recover from others include medical and other health-related debts (36%), credit card debts (20%), telecom debts (13%), and student loan debts (12%).

ACA International,

2011 Top Collection Markets Survey: For Period: Jan.1, 2010-Dec. 31, 2010

at 9 (2011),

available at http://www.acainternational.org/files.aspx?p=/images/12980/2011topmarketsurvey-electronic.pdf.

Owners of debts include original creditors as well as those who buy debts from original creditors and from others. Some consumers are unable or unwilling to pay debts at the time when payment is required. Owners of debts who are not paid typically deem, for various reasons, that the consumer is in default after a period of time and therefore place the debt in collection. Owners either use their own collectors to recover in their own names on these defaulted debts (first-party debt collectors) or they place the debts with collection firms or law firms that specialize in the collection of defaulted debt (third-party debt collectors).

Collection of consumer debts serves an important role in the functioning of consumer credit markets by reducing the costs that creditors incur through their lending activities.

Collection efforts directly recover some amounts owed to owners of debts and may indirectly support responsible borrowing by underscoring the obligation of consumers to repay their debts and by incenting consumers to do so.

The resulting reductions in creditors' losses, in turn, may allow them to provide more credit to consumers at lower prices.

Collection activities can also lead to repayment plans or debt restructuring that enable consumers to gradually make payments and resolve their debts.

U.S. Bureau of Consumer Fin. Prot.,

Fair Debt Collection Practices Act: CFPB Annual Report 2013

at 9 (Mar. 20, 2013),

available at

http://files.consumerfinance.gov/f/201303_cfpb_March_FDCPA_Report1.pdf

(2013 FDCPA Annual Report); U.S. Fed. Trade Comm'n,

The Structure and Practices of the Debt Buying Industry

at 11 (Jan. 2013),

available at

http://www.ftc.gov/os/2013/01/debtbuyingreport.pdf

(2013 FTC Debt Buyer Report).

2013 FDCPA Annual Report

at 9.

2013 FDCPA Annual Report

at 9.

While debt collection can benefit consumers by reducing the price and increasing the availability of credit, in the absence of legislation and regulation many consumers may be subject to debt collection efforts that raise consumer protection concerns. Typically, competition in markets will incentivize firms to provide products and services on terms that consumers favor, but this competition may not be effective with regard to collections practices. Once a debt has gone into collection, consumers cannot choose their collector; the relevant choice for the consumer came when deciding from which firm to purchase or borrow. If firms' collection practices—or the practices of third-party collectors employed by the creditors or the buyers to whom creditors sell debt—played an important role in consumers' borrowing or purchasing decisions, then this competition would impose some discipline on firms to reduce overly aggressive tactics. When consumers make borrowing or purchasing decisions, however, they may not be focused on the risk that they will default. As a result, a consumer's decision to obtain credit from a particular creditor is unlikely to be influenced by the identity of the collector that might eventually collect on the debt if the consumer defaults. Indeed, it is unlikely that the consumer and perhaps even the creditor could know the identity of the future third-party collector. Firms therefore have a limited incentive to engage in less aggressive tactics if those tactics lead to increased recovery of debts. This effect may be exacerbated in the case of third-party collectors or debt buyers if consumers do not associate their treatment by the collector or debt buyer with the original creditor.

B. Debt Collection Industry

Debt collection is currently a multi-billion dollar industry composed of first-party collectors, third-party collectors, debt buyers, collection law firms, and a wide variety of related service providers. The Bureau understands that, over the past few decades, the debt collection industry has experienced dramatic growth along with significant evolution in business practices.

When a consumer defaults on a debt, the first efforts to collect on that debt are often made by the creditor itself, either through in-house collectors or others collecting in the name of the creditor. In either case, first-party collections are largely exempt from the FDCPA. These collections presumably constitute a significant segment of the debt collection market, with one industry source estimating revenues to collection companies acting in the name of first-party collectors to have been around $2 billion in 2007.

Kaulkin Ginsberg,

Executive Summary: The Kaulkin Report: The Future of Receivables Management

(Kaulkin-Ginsberg Company 7th ed. 2007),

available at http://www.insidearm.com/wp-content/uploads/The-Kaulkin-Report-7th-Ed-Executive-Summary.pdf.

If the creditor or other owner of the debt decides not to collect on the debt itself, it may engage a third-party debt collector to try to recover on the debt in the collector's own name rather than in the name of the creditor or other owner of the debt. In 2010, there were more than 4,000 third-party debt collection firms that employed more than 140,000 people.

These third-party collection firms had reported revenue of $11.7 billion in 2010.

Robert Hunt, Fed. Reserve Bank of Pa.,

Understanding the Model: The Life Cycle of a Debt

at 10 (2013),

available at

http://www.ftc.gov/bcp/workshops/lifeofadebt/UnderstandingTheModel.pdf

(presented at the FTC-CFPB Roundtable).

Id.

An original creditor or subsequent debt purchaser may choose to “outsource” its collections to a third party to collect in the third party's name for several reasons. Third-party collectors may possess capabilities and expertise in collections that the creditors' in-house operations lack. Typically, third-party collectors are paid on a contingency basis, usually a percentage of recoveries. This transfers collections expenses from the debt owner or creditor to the third party, with the result that the debt owner or creditor may recover some of what it is owed but without assuming risk that its in-house collections expense would be unproductive. Additionally, using third parties may allow debt owners and creditors to expand collection capacity during down-cycles in the economy (when the number of debts in collection increases) without having to hire or invest in additional systems or higher additional collectors on a short-term basis. Finally, an original creditor or debt owner may determine that a customer in default is no longer one with whom it is likely to maintain a long-term business relationship and thus may choose to devote its customer service efforts toward paying or prospective customers.

Debt collectors typically contact consumers to try to recover on debts, but if these efforts are unsuccessful, debt owners may decide to file an action in court to try to recover the debt. Most debt collection litigation is filed in State

and local courts, and, therefore, owners of debts often retain law firms and attorneys that specialize in debt collection and are familiar with these courts and State and local requirements to act on their behalf. The use of debt collection litigation to recover on debts has grown to become a critical part of the debt collection industry, with collection law firms having an estimated $2.4 billion in revenues from collections in 2011.

Kaulkin Ginsberg,

Executive Summary: The Kaulkin Report: The Future of Receivables Management

(Kaulkin-Ginsberg Company 7th ed. 2007),

available at

http://www.insidearm.com/wp-content/uploads/The-Kaulkin-Report-7th-Ed-Executive-Summary.pdf.

While third-party collection agencies have been increasing in size in recent years, third-party debt collection continues to include a significant number of smaller entities.

Several factors account for this level of industry fragmentation. First, debt collection has historically been subject to low barriers to entry; and while debt collection relies on an array of data processing and communications technologies, the cost of investing in these technologies has steadily declined. Secondly, some collection firms specialize regarding the types of debt they collect. For example, some firms specialize in the collection of student loans, while others may specialize in collection of medical debt.

Robert Hunt, Fed. Reserve Bank of Pa.,

Understanding the Model: The Life Cycle of a Debt

at 10 (2013),

available at

http://www.ftc.gov/bcp/workshops/lifeofadebt/UnderstandingTheModel.pdf

(presented at the FTC-CFPB Roundtable).

A third source of industry fragmentation may be that many businesses that use debt collection services, such as utilities and medical providers, serve local markets and may prefer to rely on collectors who are based in, and familiar with, their local markets. Utilities and medical providers' collection practices, in particular, may be subject to regulation at the State or even local level, and thus require collectors who are sensitive to these requirements.

A final source of collections industry fragmentation may be due to the fact that a considerable amount of debt collection activity, including direct collection from consumers as well as debt litigation, is conducted by law firms, which similarly operate within local and State jurisdictions.

Additionally, the advent and growth of debt buying has been called “the most significant change in the debt collection business in the past decade.”

Debt buyers purchase defaulted debt from original creditors or other owners of debt and thereby take title to the debt. They seek to collect on purchased debts themselves, place them with third-party collectors, or sell them to other debt buyers. Credit card debt comprises a large majority of the debt that debt buyers purchase.

Although over 500 debt buyers are currently active, the market is fairly concentrated, with about 10 firms purchasing a large proportion of the debt that is sold.

U.S. Fed. Trade Comm'n,

Collecting Consumer Debts: The Challenges of Change—A Workshop Report

at iv (2009),

available at

http://www.ftc.gov/bcp/workshops/debtcollection/dcwr.pdf.

U.S. Gov't Accountability Office, GAO-09-748,

Fair Debt Collection Practices Act Could Better Reflect the Evolving Debt Collection Marketplace and Use of Technology

(2009),

available at

http://www.gao.gov/new.items/d09748.pdf.

Robert Hunt, Fed. Reserve Bank of Pa.,

Understanding the Model: The Life Cycle of a Debt

(2013),

available at

http://www.ftc.gov/bcp/workshops/lifeofadebt/UnderstandingTheModel.pdf

(presented at the FTC-CFPB Roundtable).

Creditors who sell their uncollected debt to debt buyers receive a certain up-front return, with these debts typically sold at prices that are a small fraction of the face value of the debt they are owed. The debt buyer assumes the risk that it may recover less than it paid to acquire the debt and collect on it (including litigation costs, if applicable).

While all collectors have an incentive to minimize their costs and maximize their recoveries to increase their profits, their strategies and methodologies may vary considerably based on a number of factors. Types of debts may differ widely in amount or in the amount or type of information available to collectors about them, as discussed further below. For example, a majority of medical, utility, and telecommunications debts in collection are for small amounts and may not warrant the high cost of seeking to locate or contact the consumer; consequently some collectors simply report these items to consumer reporting agencies (CRAs) and wait for the consumer to contact the collector after discovering the item on a credit report.

Some types of debts are subject to statutory or regulatory requirements that may affect how the collector tries to recover on them. Privacy protections may impact how collectors seek to recover on medical debt, for example. The availability of administrative wage garnishment and tax refund intercepts likewise may affect how collectors try to recover on Federal student loans.

For some debts, changes in the consumer's situation may warrant a change in the collector's recovery strategy. For example, a consumer that was unable to pay a debt due to unemployment may find a job. Thus, some collectors purchase information about consumers from CRAs and other third parties to track whether the consumers' circumstances have changed, indicating new ability to pay past debts they still owe.

To assist them in developing efficient and effective means of collecting on debts, collectors may obtain goods and services from a wide range of other businesses. Skip-tracing companies, for instance, provide contact information for consumers and may screen accounts to determine if consumers have declared bankruptcy or have died. Technology firms provide auto-dialers and related software programs to help debt collectors place calls to consumers. Print shops prepare and mail validation notices and other written communications from collectors to consumers. Collectors may furnish information about their experience with the debts about consumers to CRAs and these agencies may, in turn, provide collectors with consumer reports for use in connection with collections.

C. FDCPA Protection for Consumers

The Federal and State governments historically have sought to protect consumers from harmful practices of collectors. From 1938 to 1977, the Federal government primarily protected consumers through Federal Trade Commission (FTC or Commission) enforcement actions against collectors who engaged in unfair or deceptive acts and practices in violation of section 5 of the FTC Act. Despite such efforts, Congress found in 1977 that “there [was] abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors,” and that these practices “contribute[d] to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.”

Congress also found that “existing laws and procedures for redressing these injuries [were] inadequate to protect consumers.”

Fair Debt Collection Practices Act, Public Law 95-109, 91 Stat 874 (FDCPA), 15 U.S.C. 1692(a).

FDCPA section 802(b), 15 U.S.C. 1692(b).

In light of these findings, Congress enacted the FDCPA. Among other things, the FDCPA was enacted to “eliminate abusive debt collection practices by debt collectors, [and] to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged.”

To achieve these purposes, among other things, the FDCPA: (1) prohibits debt collectors from engaging in abusive, deceptive, or unfair practices; (2)

imposes restrictions on debt collectors' communications with consumers and on their communications with others; and (3) mandates a debt dispute process that includes certain protections for consumers and obligations for collectors.

FDCPA section 802(e), 15 U.S.C. 1692(e).

The FDCPA, however, does not apply to all collectors of debts. The statute generally covers the collection activities of third-party collectors for debts in default at the time they are obtained. In addition, a creditor can be treated as a debt collector under the FDCPA with respect to debts that were in default when it obtained them, or when a creditor collects under names other than its own.

D. Continued Consumer Problems and Government Responses

Despite the enactment and enforcement of the FDCPA and other measures,

significant consumer protection problems related to debt collection have persisted. For many years, consumers have submitted more complaints to the FTC about debt collectors than any other single industry.

The Bureau began accepting debt collection complaints on July 10, 2013. As of November 1, 2013, the Bureau is receiving comparable levels of debt collection and mortgage complaints in terms of daily complaint volume, with each accounting for approximately thirty percent of daily volume.

In 1984, the FTC issued its Credit Practices Rule under the FTC Act, which addressed a few unfair or deceptive acts or practices that relate to consumer credit, but which have application in the context of debt collection.

Trade Regulation Rule: Credit Practices,

49 FR 7740 (Mar. 1, 1984). The Board of Governors of the Federal Reserve System (Board), the Federal Home Loan Bank Board (FHLBB) (predecessor to the former Office of Thrift Supervision), and National Credit Union Administration (NCUA) followed suit with similar rules.

Unfair or Deceptive Acts or Practices; Credit Practices,

50 FR 16696 (Apr. 29, 1985) (Board);

Consumer Protections; Unfair or Deceptive Credit Practices,

50 FR 19325 (May 8, 1985) (FHLBB);

Federal Credit Union; Prohibited Lending Practices,

52 FR 35060 (Sept. 17, 1987) (NCUA).

In 2010, for example, the FTC received 141,285 total complaints about collectors, representing 27 percent of all complaints received by the FTC. U.S. Bureau of Consumer Fin. Prot.,

Fair Debt Collection Practices Act: CFPB Annual Report 2012

at 6 (2012),

available at

http://files.consumerfinance.gov/f/201203_cfpb_FDCPA_annual_report.pdf.

In 2011, the FTC received 142,743 total complaints about collectors, representing 27 percent of all complaints.

Id.

In 2012, the FTC received 125,136 total complaints about collectors, representing 24 percent of all complaints received by the FTC. U.S. Bureau of Consumer Fin. Prot.,

Fair Debt Collection Practices Act: CFPB Annual Report 2013

at 14 (2013),

available at

http://files.consumerfinance.gov/f/201303_cfpb_March_FDCPA_Report1.pdf.

Consumer complaints relate to a wide variety of debt collection acts and practices. Consumers most commonly complain to the FTC that collectors harass them, demand amounts that consumers do not owe, threaten dire consequences for non-payment, or fail to send required notices.

2013 FDCPA Annual Report

at 7-9.

Not only do consumers complain about debt collectors, but they also file thousands of private actions each year against debt collectors that allegedly have violated the FDCPA. The number of these actions filed in Federal district court increased from 3,215 in 2005 to 11,811 in 2011, with increases observed each year.

While the number of these actions appeared to level off in 2012,

the continued number of such actions filed each year demonstrates that a significant number of consumers allege that debt collectors are violating the FDCPA.

Blog Post, J. Gordon,

FDCPA and Other Consumer Lawsuit Statistics, Full Year 2011 Recap

(Jan. 12, 2012),

available at

http://accountsrecovery.net/profiles/blogs/fdcpa-and-other-consumer-lawsuit-statistics-full-year-2011-recap.

P. Lunsford,

FDCPA Lawsuits Filed by Consumers Decline 7 Percent in 2012

(Jan. 17, 2013),

available at

http://www.insidearm.com/daily/debt-buying-topics/debt-buying/fdcpa-lawsuits-filed-by-consumers-decline-7-percent-in-2012/.

Other sources report different but no less serious consumer protection problems in debt collection. For instance, some consumer advocates have highlighted issues in debt collection litigation, including problems with inadequate service of process, insufficient evidence accompanying complaints, and high rates of default judgment.

See, e.g.,

Susan Shin & Claudia Wilner, New Econ. Project,

The Debt Collection Racket in New York

(2013),

available at

http://www.nedap.org/resources/documents/DebtCollectionRacketNY.pdf;

Rachel Terp & Lauren Bowne, East Bay Commty. Law Ctr.,

PAST DUE: Why Debt Collection Practices and the Debt Buying Industry Need Reform Now

(2011),

available at

http://www.defendyourdollars.org/pdf/Past_Due_Report_2011.pdf;

Rick Jurgens & Robert J. Hobbs, Nat'l Consumer Law Ctr.,

The Debt Machine: How the Collection Industry Hounds Consumers and Overwhelms Courts

(2010),

available at

http://www.nclc.org/images/pdf/pr-reports/debt-machine.pdf.

In response to these consumer protection concerns, Federal and State officials have made debt collection a top priority. In October 2012, for example, the Bureau used its enforcement authority under the Dodd-Frank Act to bring its first enforcement action involving debt collection practices, requiring three bank subsidiaries to refund an estimated $85 million to approximately 250,000 customers for several distinct illegal credit card practices, including deceptive debt collection.

In 2012, the FTC also brought or resolved seven debt collection cases, matching the highest number of debt collection cases that it has brought or resolved in any single year.

States likewise have continued their traditional vigorous law enforcement activities involving a broad range of conduct by debt collectors.

Press Release, U.S. Bureau of Consumer Fin. Prot.,

CFPB Orders American Express to Pay $85 Million Refund to Consumers Harmed by Illegal Credit Card Practices

(Oct. 1, 2012),

available at http://www.consumerfinance.gov/newsroom/cfpb-orders-american-express-to-pay-85-million-refund-to-consumers-harmed-by-illegal-credit-card-practices/.

2013 FDCPA Annual Report

at 28.

The Bureau has also become the first Federal agency to routinely supervise debt collectors.

In addition to its supervisory activities involving certain creditors collecting on their own debts, in October 2012 the Bureau issued its Larger Participant Rule,

establishing supervisory authority over approximately 175 debt collectors accounting for over 60 percent of the industry's annual receipts.

On July 10, 2013, the Bureau held a field hearing in Portland, Maine, during which it announced guidance in the form of two supervisory bulletins, one that addresses unfair, deceptive, and abusive acts and practices in debt collection activities generally

and one that specifically addresses representations regarding credit reports and credit scores during the debt collection process.

At the field hearing, the Bureau also announced that it was accepting debt collection complaints and released template letters to assist

consumers when corresponding with debt collectors.

Note that collectors of debts also may be subject to licensing, registration, supervision, and other oversight under State law.

Defining Larger Participants of the Consumer Debt Collection Market,

77 FR 65775 (Oct. 31, 2012), 12 CFR 1090.

Note that the Larger Participant Rule does not delineate the scope of the FDCPA, provisions of the Dodd-Frank Act related to consumer debt collection activities, or any other Federal consumer financial law. Activities that the Bureau chose to exclude from the defined consumer debt collection market in the Larger Participant Rule may nonetheless qualify as “collecting debt” within the meaning of the Dodd-Frank Act and may constitute consumer financial products or services.

U.S. Bureau of Consumer Fin. Prot.,

CFPB Bulletin 2013-07, Prohibition of Unfair, Deceptive, or Abusive Acts or Practices in the Collection of Consumer Debts

(July 10, 2013),

available at http://files.consumerfinance.gov/f/201307_cfpb_bulletin_unfair-deceptive-abusive-practices.pdf.

U.S. Bureau of Consumer Fin. Prot.,

CFPB Bulletin 2013-08, Representations Regarding Effect of Debt Payments on Credit Reports and Scores

(July 10, 2013),

available at

http://files.consumerfinance.gov/f/201307_cfpb_bulletin_collections-consumer-credit.pdf.

See, e.g.,

U.S. Bureau of Consumer Fin. Prot.,

How Can I Stop Debt Collectors from Contacting Me?, available at

http://www.consumerfinance.gov/askcfpb/1405/how-can-i-stop-debt-collectors-contacting-me.html

(last updated July 12, 2013); U.S. Bureau of Consumer Fin. Prot.,

I've Been Contacted by a Debt Collector and Need Help Responding. How Do I Reply?, available at

http://www.consumerfinance.gov/askcfpb/1695/ive-been-contacted-debt-collector-and-need-help-responding-how-do-i-reply.html

(last updated July 10, 2013); Blog Post, U.S. Bureau of Consumer Fin. Prot.,

New Ways to Combat Harmful Debt Collection Practices, available at

http://www.consumerfinance.gov/blog/debtcollection/

(last updated July 10, 2013).

Finally, Federal agencies have engaged in extensive efforts to identify consumer protection problems and potential solutions relating to debt collection. In 2009, for example, the FTC issued a report, “Collecting Consumer Debts: The Challenges of Change” (2009 FTC Modernization Report), which discussed a range of critical consumer protection issues thirty years after the enactment of the FDCPA.

In 2010, the FTC issued another report, “Repairing a Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration” (2010 FTC Litigation and Arbitration Report), which identified consumer protection issues and possible responses related to debt collection litigation and arbitration.

In 2011, the FTC held a workshop to consider the impact of technological advances on the debt collection system, during which participants discussed, among other things, the ways in which changing technology affects debt collector communications.

In January 2013, the FTC issued “The Structure and Practices of the Debt Buying Industry” (2013 FTC Debt Buyer Report), which examined the manner and flow of information from creditors and other owners of debts to debt buyers, among other issues.

Most recently, in June 2013, the Bureau and the FTC held a joint FTC-CFPB Roundtable (FTC-CFPB Roundtable or Roundtable) on data integrity and information flows in debt collection.

U.S. Fed. Trade Comm'n,

Collecting Consumer Debts: The Challenges of Change—A Workshop Report

at iv (2009),

available at

http://www.ftc.gov/bcp/workshops/debtcollection/dcwr.pdf.

U.S. Fed. Trade Comm'n,

Repairing a Broken System

(2010),

available at

http://www.ftc.gov/os/2010/07/debtcollectionreport.pdf.

Additional information about the Workshop is available at

http://www.ftc.gov/bcp/workshops/debtcollectiontech.

U.S. Fed. Trade Comm'n,

The Structure and Practices of the Debt Buying Industry

(2013),

available at

http://www.ftc.gov/os/2013/01/debtbuyingreport.pdf.

Additional information about the Roundtable is available at

http://www.ftc.gov/bcp/workshops/lifeofadebt.

E. Federal Debt Collection Rulemaking

1. Rulemaking Authority

From the FDCPA's enactment in 1977 until its amendment by the Dodd-Frank Act in 2010, the FDCPA expressly prohibited the FTC and any other agency with enforcement responsibility from issuing implementing rules with respect to the collection of debts by debt collectors.

In 2010, the Dodd-Frank Act authorized the Bureau to “prescribe rules with respect to the collection of debts by debt collectors, as defined in [the FDCPA].”

15 U.S.C. 1692l(d). During that time period, the FDCPA required the FTC by regulation to exempt from the requirements of the FDCPA any class of debt collection practices within any State if the FTC determined that under the law of that State that class of debt collection practices was subject to requirements substantially similar to those imposed by the FDCPA, and that there was adequate provision for enforcement. 15 U.S.C. 1692o. The FTC issued its rule on State exemptions in 1979.

Fair Debt Collection Practices; Procedures for State Application for Exemption,

44 FR 21005 (Apr. 9, 1979) (Interim rule promulgating 16 CFR pt. 901). Maine applied for and received such an exemption from the FTC, effective March 26, 1996.

Exemption from Sections 803-812 of the Fair Debt Collection Practices Act granted to State of Maine,

60 FR 66972 (Dec. 27, 1995).

Section 814(d) of the FDCPA, 15 U.S.C. 1692l(d), as amended by section 1089 of the Dodd-Frank Act. This provision expressly excludes certain motor vehicle dealers from the scope of the Bureau's rulemaking authority.

Id. See

section 1029 of the Dodd-Frank Act, 12 U.S.C. 5519. The Dodd-Frank Act also transferred the FTC's rule writing authority with respect to State exemptions to the Bureau.

See

section 817 of the FDCPA, 15 U.S.C. 1692o, as amended by section 1089 of the Dodd-Frank Act. The Bureau restated the FTC's rule in 2011.

Fair Debt Collection Practices Act (Regulation F),

76 FR 78121 (Dec. 16, 2011). The FTC rescinded its rule in 2012.

Rescission of Rules,

77 FR 22200 (Apr. 13, 2012).

In addition to conferring rulemaking authority under the FDCPA, the Dodd-Frank Act empowers the Bureau to issue regulations “identifying as unlawful unfair, deceptive, or abusive acts or practices in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service.”

Such rules “may include requirements for the purpose of preventing such acts or practices.”

Section 1031(b) of the Dodd-Frank Act, 12 U.S.C. 5531(b).

Id.

Section 1032 of the Dodd-Frank Act also grants the Bureau the authority to “prescribe rules to ensure that the features of any consumer financial product or service, both initially and over the term of the product or service are fully, accurately, and effectively disclosed to consumers in a manner that permits consumers to understand the costs, benefits, and risks associated with the product or service in light of the facts and circumstances.”

“In prescribing rules under this section, the Bureau shall consider available evidence about consumer awareness, understanding of, and responses to disclosures or communications about the risks, costs, and benefits of consumer financial products or services.”

The Bureau may include in such rules a model form that may be used at the option of the covered person for provision of the required disclosures and provide a safe harbor.

Such model forms must be validated through consumer testing.

Section 1032(a) of the Dodd-Frank Act, 12 U.S.C. 5532(a).

Section 1032(c) of the Dodd-Frank Act, 12 U.S.C. 5532(c).

Section 1032(b) of the Dodd-Frank Act, 12 U.S.C. 5532(d).

Section 1032(b) of the Dodd-Frank Act, 12 U.S.C. 5532(b).

Further, the Bureau has the authority to “prescribe rules and issue orders and guidance, as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of the Federal consumer financial laws, and to prevent evasions thereof.”

“Federal consumer financial laws” include the FDCPA and other statutes enumerated in the Dodd-Frank Act, as well as the rules to implement these statutes.

Section 1022(b) of the Dodd-Frank Act, 12 U.S.C. 5512(b).

Section 1002(14) of the Dodd-Frank Act, 12 U.S.C. 5481(14).

The Bureau can exercise the Dodd-Frank Act rulemaking authority above with regard to any “covered person or service provider.”

“Covered person” is defined as “(A) any person that engages in offering or providing a consumer financial product or service; and (B) any affiliate of a person described in subparagraph (A) if such affiliate acts as a service provider to such person.”

“Covered persons” for purposes of the Dodd-Frank Act includes first-party collectors and third-party collectors who are collecting or attempting to collect on debts that arise out of consumer credit transactions.

“Service provider” is generally defined as “any person that provides a material service to a covered person in connection with the offering or provision by such covered person of a consumer financial product or service.”

Section 1031(b) of the Dodd-Frank Act, 12 U.S.C. 5531(b).

Section 1002(6) of the Dodd-Frank Act, 12 U.S.C. 5481(6). However, a person is not a “service provider” solely by virtue of offering or providing to a covered person “(i) a support service of a type provided to businesses generally or a similar ministerial service; or (ii) time or space for an advertisement for a consumer financial product or service through print, newspaper, or electronic media.”

Id.

“Consumer financial product or service” under the Dodd-Frank Act means any “financial product or service,” either offered or provided for use by consumers primarily for personal, family, or household purposes, or, as applicable, delivered, offered, or provided in connection with a consumer financial product or service. Section 1002(5) of the

Dodd-Frank Act, 12 U.S.C. 5481(5). “Financial product or service” includes “extending credit and servicing loans, including acquiring, purchasing, selling, brokering, or other extension of credit (other than solely extending commercial credit to a person who originates consumer credit transactions).” Section 1002(15)(A)(i) of the Dodd-Frank Act, 12 U.S.C. 5481(15)(A)(i);

see

Section 1002(7) of the Dodd-Frank Act, 12 U.S.C. 5481 (defining “credit” as “the right granted by a person to a consumer to defer payment of a debt, incur debt and defer its payment, or purchase property or services and defer payment for such purchase.)” “Financial product or service” also includes “collecting debt related to any consumer financial product or service.” Section 1002(15)(A)(x) of the Dodd-Frank Act, 12 U.S.C. 5481(15)(A)(x).

Section 1002(6) of the Dodd-Frank Act, 12 U.S.C. 5481(26).

In addition, the Bureau has the authority to, after considering enumerated factors,

“conditionally or unconditionally exempt any class of covered persons, service providers, or consumer financial products or services from any provision of this title, or from any rule issued under this title, as the Bureau determines necessary or appropriate to carry out the purposes and objectives of this title [title X of the Dodd-Frank Act].”

These factors include the total assets of the class of covered persons, the volume of transactions involving consumer financial products or services in which the class of covered persons engages, and existing provisions of law which are applicable to the consumer financial product or service and the extent to which such provisions provide consumers with adequate protections. Section 1022(b)(3)(B) of the Dodd-Frank Act, 12 U.S.C. 5512(b)(3)(B).

Section 1022(b)(3)(B) of the Dodd-Frank Act, 12 U.S.C. 5512(b)(3).

2. Federal Debt Collection Rulemaking Proceeding

The Bureau is issuing this ANPR to request information on a wide range of debt collection practices and issues and to explore potential debt collection rulemaking proceedings and other actions that the Bureau could take to improve the systematic performance of the debt collection market. The Bureau believes this information will be useful for several reasons. First, significant consumer protection problems relating to debt collection appear to persist despite various vigorous government enforcement, supervision, policy development, and educational efforts. While the Bureau is active in these efforts, the Bureau believes it is appropriate to explore ways in which the new rulemaking authorities afforded by the Dodd-Frank Act could be used to address some of the longstanding problems discussed above.

Second, there have been technological developments, such as email and text messaging, since the enactment of the FDCPA. These new communication tools have created uncertainty as to the applicability of the FDCPA in various contexts. Rulemaking permits the Bureau to consider these technological issues in a comprehensive and careful manner, fostering the considered development of standards that provide adequate protection for consumers while reducing uncertainty for collectors.

Third, the Bureau believes it is important to examine whether rules covering the conduct of creditors collecting in their own names on their own debts that arise out of consumer credit transactions are warranted. As discussed above, Congress excluded such creditors from the FDCPA in 1977, but it gave the Bureau authority under the Dodd-Frank Act in 2010 to prescribe rules applicable to creditors. Congress excluded such creditors in 1977 because it concluded that the risk of reputational harm would be sufficient to deter creditors from engaging in harmful debt collection practices.

However, experience since passage of the FDCPA suggests that first-party collections are in fact a significant concern in their own right. For instance, the FTC receives tens of thousands of debt collection complaints each year concerning creditors.

The Bureau likewise has brought a debt collection enforcement action against a creditor,

and it recently issued a supervisory bulletin emphasizing that collectors, including creditors, need to ensure that they are not engaging in unfair, deceptive, or abusive, acts and practices in violation of the Dodd-Frank Act.

Moreover, many States have enacted consumer protection statutes that apply to the collection activities of creditors,

with some of these statutes enacted after Congress excluded creditors in the FDCPA. In addition to seeking input on whether any proposed rules should cover creditors, the Bureau seeks input on the basic premise that it should generally seek to harmonize any rules it develops for third-party collectors and first-party collectors, except to the extent that the law, facts, or policy considerations warrant different treatment.

As early as two years after the FDCPA's enactment, the FTC submitted a report to Congress finding that “there is little difference between the practices employed by certain creditors and those employed by debt collection firms. Indeed, there evidence that the collection practices of creditors may be more egregious than those practices engaged in by debt collection firms.” U.S. Fed. Trade Comm'n,

1979 FDCPA Annual Report

at 7 (1979). The FTC therefore “urge[d] the Congress to reconsider its decision to exempt creditors from the provisions of the Fair Debt Collection Practices Act.”

Id.

In 2012, the FTC received 22,353 complaints about first-party collectors, representing 4.3 percent of all complaints received. In 2011, the FTC received 25,506 complaints about first-party collectors, representing 4.9 percent of all complaints received. In 2010, the FTC received 31,952 complaints first-party collectors, representing 6.2 percent of all complaints received. U.S. Bureau of Consumer Fin. Prot.,

Fair Debt Collection Practices Act: CFPB Annual Report 2013

at 14 (2013),

available at http://files.consumerfinance.gov/f/201303_cfpb_March_FDCPA_Report1.pdf;

U.S. Bureau of Consumer Fin. Prot.,

Fair Debt Collection Practices Act: CFPB Annual Report 2012

at 7 (2012),

available at http://files.consumerfinance.gov/f/201203_cfpb_FDCPA_annual_report.pdf

See http://www.consumerfinance.gov/newsroom/cfpb-orders-american-express-to-pay-85-million-refund-to-consumers-harmed-by-illegal-credit-card-practices/

See

U.S. Bureau of Consumer Fin. Prot.,

CFPB Bulletin 2013-07, Prohibition of Unfair, Deceptive, or Abusive Acts or Practices in the Collection of Consumer Debts

(July 10, 2013),

available at http://files.consumerfinance.gov/f/201307_cfpb_bulletin_unfair-deceptive-abusive-practices.pdf

see also Wilson

Quadramed Corp.,

225 F.3d 350, 354 (3d Cir. 2000);

Miller

Payco-Gen. Am. Credits, Inc.,

943 F.2d 482, 484 (4th Cir. 1991);

Swanson

S. Oregon Credit Serv., Inc.,

869 F.2d 1222, 1225 (9th Cir. 1988).

1. Information in Validation Notices Related to Recognizing the Debt

Debt collectors must disclose two pieces of information about the specific debt in validation notices: (1) The name of the creditor to whom the debt is owed, and (2) the amount of the debt. Concerns have been raised by the FTC and consumer groups that this information is not sufficient in many cases to allow consumers to recognize whether the debts being collected are their own because consumers may not recognize the name of the debt buyer that currently owns the debt. In addition, the amount of the debt shown on the validation notice may not be recognizable to consumers because it may differ from the amount of debt that was disclosed on the last periodic statement or billing statement sent by the original creditor because original creditors, debt collectors, and debt buyers sometimes add fees and interest to the amount of the debt that appeared on the last periodic statement, billing statement, or other documentation that consumers received.

a. Current Owner of the Debt

As discussed above, under FDCPA section 809(a), a debt collector must disclose in the validation notice the name of the current owner of the debt.

15 U.S.C. 1692g(a).

Q16: Where the current owner of the debt is not the original creditor, should additional information about the current owner, such as the current owner's address, telephone number or other contact information, be disclosed in the validation notice or upon request? Would this information be helpful to consumers so that they may contact the current owner directly about the debt, or about the conduct of its third-party collector?

b. Itemization of Total Amount of Debt

As discussed above, the amount of the debt shown on the validation notice may not be recognizable to consumers because original creditors, debt collectors, and debt buyers sometimes add fees and interest to the amount of the debt that appeared on the last periodic statement, billing statement, or other documentation that consumers received. In its 2009 Modernization Report, the FTC recommended that debt collectors be required to include in all validation notices an itemization of the total debt using the following categories: (1) Principal; (2) total of all interest; and (3) total of all fees and other charges added. The FTC concluded that this itemization would benefit consumers and debt collectors, insofar as consumers would be more likely to recognize debts they have incurred and to identify debts that are not theirs. Once they recognize a debt, consumers might be more willing to discuss payment arrangements. The FTC also stated that debt buyers, in particular, would benefit from obtaining such an itemization of debts they purchase because they must distinguish between principal and interest to prepare Form 1099-C's to comply with section 6050P of the Internal Revenue Code.

2009 FTC Modernization Report

at 29-30.

For certain types of debts, such as closed-end mortgage loans, the amount of outstanding principal is disclosed on periodic statements for those loans.

For other types of debts, such as credit card debts, consumers may not understand the term “principal” and how it relates to amounts shown on periodic statements or billing statements provided by the original creditor.

For example, beginning January 10, 2014, creditors, assignees, and servicers generally will be required under Regulation Z to provide periodic statements for most closed-end consumer mortgage loans secured by a dwelling. 12 CFR 1026.41; 78 FR 10902, 11007 (Feb. 14, 2013). The periodic statements for these loans must include the outstanding principal on the loan. 12 CFR 1026.41(d)(7)(i); 78 FR 10902, 11007 (Feb. 14, 2013).

For example, for credit card accounts or other open-end credit, whether a charge is “interest” or a “fee” or “principal” may change over time, depending on whether the interest or fee is capitalized. For credit card accounts, if interest or fees charged in a billing cycle are not paid by the end of the billing cycle, these charges typically are

added to the outstanding balance as principal. Creditors typically do not label the outstanding account balance on periodic statements given for credit card accounts or other open-end credit using the term “principal.”

The Bureau specifically solicits comments on the alternatives discussed below for itemizing the total amount of debt. The Bureau also solicits comments on whether there are other alternatives it should consider. For each alternative, the Bureau solicits comment on the benefits and costs of providing each itemization, including the costs for creditors and debt collectors in tracking or collecting data and in providing this itemization on the validation notice. The Bureau also solicits comment on: (1) The types of debts for which or situation in which each alternative would be most useful to consumers and (2) how should relevant terms for each alternative should be defined.

Alternative 1:

(1) Principal; (2) interest; and (3) fees and other charges?

Alternative 2:

(1) The amount of debt at the date of charge-off or default; (2) total of interest added after the date of charge-off or default; (3) total of all fees or other charges added or credits posted after the date of charge-off or default; and (4) any payments or credits received after the date of charge-off or default.

Alternative 3:

(1) The amount due shown on the last periodic statement given for the account; (2) any additional outstanding balance that became due after the closing date of such periodic statement; (3) any interest imposed after the closing date of such periodic statement; (4) any fees or other charges imposed after the closing date of such periodic statement; and (5) any payments or credits received after the closing date of such periodic statement.

Other alternatives.

Q17: Are there other approaches to itemization of the total amount of debt on validation notices that the Bureau should consider, and if so, for what type of debts should this itemization apply? For example, the Bureau recognizes that the three alternatives described above might work best for credit-based debt. Are there other approaches that might work better for other types of debts? Are there advantages to consistency in itemization across different types of debt or would it be more helpful, for consumers and collectors alike, to require different itemizations standards depending on the type of debt? Or could a standard set of information be required, with certain augmentation for specific types of debt?

c. Additional Information

Q18: What additional information should be included in the validation notice to help consumers recognize whether the debts being collected are owed by them or respond to collection activity? For example, which of the following pieces of information would be most useful to consumers?

• The name and address of the alleged debtor to whom the notice is sent

• The names and addresses of joint borrowers

• A partial Social Security number of the alleged debtor

• The account number used by the original creditor or a truncated version of the account number

• Other identifying information

• The name of the original creditor (if different from current owner)

• The name of the brand associated with the debt, where different from the original creditor (

e.g.,

the name of a retail partner on a private label or co-branded credit card, or the name of the person providing the periodic statement for closed-end mortgages)

• The name of the doctor, medical group, or hospital for medical bills ancillary to their provision of services (

e.g.,

a testing laboratory)

• Type of debt (

e.g.,

student loan, auto loan, etc.)

• Date and amount of last payment by the consumer on the debt

• Copy of last periodic statement

To what extent is this information available to debt collectors and debt buyers and what would be the cost of requiring that it be included in the validation notice? What privacy concerns would be implicated by providing any of this information (

e.g.,

the name and addresses of joint borrowers, partial Social Security numbers, and account numbers) and how might the Bureau address such concerns?

2. Statements of Consumers' Rights Set Forth in the FDCPA

Under FDCPA section 809(a), debt collectors must disclose in the validation notice two statements regarding the consumer's right to dispute the debt. Specifically, the validation notice must include a statement that if the consumer notifies the debt collector in writing within the 30-day period that the debt, or any portion of it, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and will mail a copy of such verification or judgment to the consumer. The validation notice must also include a statement that unless the consumer disputes the validity of the debt or any portion of it within 30 days after receipt of the notice, the debt collector will consider the debt valid.

Q19: Are the statements currently provided to consumers regarding these FDCPA rights understandable to consumers? If consumers do not understand the statements that collectors currently include on validation notices as to their FDCPA rights, please provide suggested language for how these statements should be changed to make them easier to understand.

The FDCPA does not require debt collectors to notify consumers that: (1) Disputing a debt will suspend collection until it is verified, and (2) consumers can request that collectors cease communicating with them. In its 2009 Modernization Report, the FTC noted that few, if any, debt collectors appear to voluntarily disclose this information to consumers.

100

2009 FTC Modernization Report

at 26.

Q20: Should consumers be informed in the validation notice that, if they send a timely written dispute or request for verification, the debt collector must suspend collection efforts until it has provided the verification in writing? Would any other information be useful to consumers in understanding this right? Should consumers be informed in the validation notice of their right to request that debt collectors cease communication with them?

Q21: Are there any other rights provided in the FDCPA that should be described in the validation notices? For example, would it be helpful to consumers for the validation notice to state that the consumer has the right to refer the debt collector to the consumer's attorney, to inform a debt collector about inconvenient times to be contacted, or to advise the collector that the consumer's employer prohibits the consumer from receiving communications at work? If so, please identify the costs and benefits of including each right that should be included in the validation notices.

Q22: What would be the costs and benefits of disclosing FDCPA rights in the validation notice itself, as opposed to the Bureau developing a separate “summary of rights” document that debt collectors would include with validation notices?

101

See

12 CFR pt. 1022, App. K for an example of a stand-alone document summarizing rights under the FCRA.

3. Format and Delivery of Validation Notices

a. Format

FDCPA section 809(a) does not impose formatting requirements for

validation notices, such as form, sequence, location, grouping, segregation, or type-size requirements for the information in the notice.

102

In addition, FDCPA section 809(a) does not expressly prohibit debt collectors from adding language to the written validation notice with the mandatory disclosures. Nevertheless, FDCPA section 809(b) expressly states that “[a]ny collection activities and communication during the 30-day period [to dispute the debt] may not overshadow or be inconsistent with the disclosure of the consumer's right to dispute the debt or request the name and address of the original creditor.”

103

102

The FTC in its Commentary indicated that an illegible notice, however, does not comply with FDCPA section 809. FTC Commentary section 809(a), comment 3.

103

15 U.S.C. 1692g(b).

Debt collectors typically add language to the written validation notice along with the mandatory disclosures, such as a demand for payment.

Q23: What additional information do debt collectors typically include on or with validation notices beyond the mandatory disclosures? Do debt collectors typically include State law disclosures on the validation notices? If so, do debt collectors typically use a validation notice that contains the State law disclosures from multiple States, or do debt collectors typically tailor validation notices for each State?

b. Foreign Language Notices

According to the U.S. Census, approximately 34 million Americans speak Spanish at home. Of those, approximately 10 million speak English less than “well,” making it the largest linguistic population with limited English proficiency (LEP) in the United States.

104

Many other LEP consumers speak languages at home other than Spanish, but no other individual language is nearly as prevalent.

105

104

See

U.S. Census Bureau,

Language Use, available at

http://www.census.gov/hhes/socdemo/language/.

105

For example, LEP consumers speaking Chinese, Korean, and Vietnamese, the next three largest LEP linguistic populations, number in the hundreds of thousands.

Id.

Recognizing that only providing forms and notices in English may impede these populations' ability to understand written material, some financial service providers, including debt collectors, apparently provide forms and notices in languages other than English. For example, some providers will convey disclosures to a consumer in Spanish if the consumer initiated the credit application in Spanish. Other providers may allow consumers to choose the language they would like to use in communicating with collectors.

Q24: How common is it for collectors to communicate with consumers or provide validation notices in languages other than English?

Q25: If collectors were sometimes required to provide validation notices in languages other than English, what should trigger that obligation? For example, should it be triggered by the request of the consumer, by information from the original creditor indicating that the consumer communicated in a language other than English, by the language used in the original credit contract, or by information gathered by the collector during the course of its dealing with the consumer? What would be the costs of requiring validation notices in languages other than English using each of these triggers?

c. Method of Delivery of Validation Notices

(1) Electronic Delivery of the Validation Notice

The Electronic Signatures in Global and National Commerce Act (E-Sign Act) prescribes a procedure by which firms may provide to consumers electronically disclosures that are required to “be provided or made available to a consumer in writing.” In essence, that statute requires affirmative consent from consumers to receiving disclosures electronically after they demonstrate they can access the disclosure electronically and after they have been informed of their right to a paper copy.

106

The statute also gives Federal regulatory agencies the ability to interpret, within certain limits, the E-Sign Act with respect to other statutes over which they have rulemaking authority.

107

106

15 U.S.C. 7001(c)(1).

107

15 U.S.C. 7004(b).

Q26: Do collectors currently provide validation notices to consumers electronically? If so, in what circumstances, by what electronic media (

e.g.,

email), and in what format (

e.g.,

PDF, HTML, plain text)?

Q27: Does the consent regime under the E-Sign Act work well for electronic delivery of validation notices? If a consumer consents to electronic disclosures pursuant to the E-Sign Act prior to the account being moved to collection, are debt collectors currently requiring E-Sign consent again when the account moves into collection? When the account is sold or placed with a new collector, is the new collector currently requiring a new E-Sign consent? If a consumer consents to electronic correspondence, what process do debt collectors currently require to revoke this consent?

(2) Consumers' Use of Electronic Means To Fulfill Writing Requirements for Exercising Rights Described in Validation Notice

To be effective under FDCPA section 809(a)(4), a consumer's right to dispute the debt must be exercised in writing.

108

Likewise, under FDCPA section 809(a)(5), the collector must provide the consumer with the name of the original creditor only if the consumer submits a written request within 30 days after receiving a validation notice.

109

Also, under FDCPA section 805(c), consumers can request in writing that collectors cease communicating with them. The purpose of requiring that such communications be in writing appears to be to establish a written record of the request.

108

15 U.S.C. 1692g(a)(4).

109

15 U.S.C. 1692g(a)(5).

Q28: Do debt collectors currently treat emails, text messages, or other forms of electronic communications as satisfying the “in writing” requirement to exercise the three rights described above? If so, what would be the costs and benefits of treating them as satisfying the “in writing” requirement?

(3) Consumer Testing of Validation Notices

Q29: Have industry organizations, consumer groups, academics, or governmental entities developed model validation notices? Have any of these entities or individuals developed a model summary of rights under the FDCPA that is being given to consumers to explain their rights, or a model summary of rights under State debt collection laws? Which of these models, if any, should the Bureau consider in developing proposed rules?

Q30: Is there consumer testing or other research concerning consumer understanding or disclosures relating to validation notices that the Bureau should consider? If so, please provide any data collected or reports summarizing such data.

B. Disputes and Verification

The adoption of standards for transferring information about debts and for compiling and presenting clarified and enhanced validation notices may make it more likely that collectors will try to collect the correct amounts from the correct consumers. Currently, there are many circumstances in which consumers deny or question that they are the debtor, that they owe the debt, or that the amount sought is accurate, as

evidenced by the significant volume of these complaints to the FTC and the Bureau.

Under the FDCPA, consumers have the right to dispute and receive verification of the debts that collectors attempt to collect and many consumers exercise this right.

110

Section 809(b) of the FDCPA provides that if a consumer disputes a debt in writing within 30 days of receiving the validation notice, a debt collector must stop collection of the debt until the collector obtains verification of the debt or a copy of a judgment against the consumer and mails it to the consumer.

111

The FDCPA does not elaborate on the standards for investigating a dispute, nor does it expressly define what constitutes “verification of the debt.”

110

15 U.S.C. 1692g. Although the Bureau is not aware of any comprehensive data regarding what percentage of debts are disputed, the data available indicate that a significant number of consumers avail themselves of their FDCPA dispute rights each year. In its 2013 Debt Buyer Report, the FTC found that consumers disputed 3.2 percent of all accounts on which debt buyers attempted to collect themselves. The FTC noted that this dispute figure likely underestimated the prevalence of information problems, but that if it were applied across the entire debt buying industry, it would result in about one million disputed debts per year.

2013 FTC Debt Buyer Report

at iv. The total number of disputed debts for the entire debt collection industry is likely to be substantially higher because it would include disputes of debt on which third-party collectors, not just debt buyers, seek to recover.

111

15 U.S.C. 1692g(b). Notably, the FDCPA contains other provisions related to consumer disputes that are not dependent upon when the debt was disputed or whether the dispute was made in writing. For example, section 807(8) requires that a debt collector communicate that a debt is disputed if it shares credit information about that debt, and section 810 provides that if a consumer owes multiple debts and makes a single payment, a debt collector cannot apply the payment to a disputed debt. 15 U.S.C. 1692e(8), 1692h. In addition to obligations under the FDCPA related to disputes, debt collectors that furnish information on debts to CRAs are also subject to dispute obligations under the FCRA, which imposes different requirements than the FDCPA.

The Bureau is interested in information bearing on the adequacy of current practices to investigate collection disputes and verify the debt under the FDCPA. According to the 2009 FTC Modernization Report, “many collectors currently do little more to verify debts than confirm that their information accurately reflects what they received from the creditor,” which is unlikely to reveal whether collectors are trying to collect from the wrong consumer, collect the wrong amount, or otherwise misrepresent the debt.

112

The FTC further noted that to verify a debt, some debt collectors only provide consumers with a written statement that the amount being demanded is what the creditor claims is owed. To address these concerns, the FTC recommended that if a consumer disputes a debt, the debt collector should be required to undertake a “reasonable” investigation that is responsive to the specific dispute raised by the consumer.

113

At the recent FTC-CFPB Roundtable, a number of participants raised similar concerns about the limited investigations collectors conduct when consumers dispute debts.

114

112

2009 FTC Modernization Report,

at v.

113

Id.

Recent FTC consent orders have also addressed the issue of how collectors subject to such orders must investigate debt disputes in the future. For example, the FTC's recent

Expert Global Solutions

consent order defines how the debt collector defendant must conduct each investigation, and includes consideration of specific information from the original creditor, the alleged debtor, third parties such as skip tracers, and from its own systems. Stipulated Order at 5-6,

United States

Expert Global Solutions, Inc.,

No. 3-13CV2611-M (N.D. Tex. Jul. 16, 2013),

available at http://www.ftc.gov/os/caselist/1023201/130709ncoorder.pdf.

The

Asset Acceptance

consent order also stipulates certain requirements for completing an investigation, such as considering whether “other accounts in a particular portfolio have been disputed by consumers for similar reasons at disproportionately high rates” or whether “a disproportionately high number of accounts in a particular portfolio have been supplemented by data from third-party sources.” Consent Decree at 9,

United States

Asset Acceptance, LLC,

No. 8:12-CV-182-T-27EAJ (M.D. Fla. Jan. 30, 2012),

available at http://www.ftc.gov/os/caselist/0523133/120131assetconsent.pdf.

114

Transcript of the 2013 FTC-CFPB Roundtable

at 189, 191, 204.

1. Definition, Types, and Timing of Disputes

Q31: What types of consumer inquiries do debt collectors currently treat as “disputes” under the FDCPA? What standards do debt collectors currently apply in distinguishing disputes from other types of consumer communications? What data exist to indicate the percentage of debts that are disputed, and what definition of “dispute” is being used to arrive at this percentage? What data exist to indicate how disputes are resolved by debt collectors?

Q32: Are certain types of debts (

e.g.,

credit card vs. student) disputed at higher rates than others? Do dispute rates differ between debts being collected by debt buyers versus those being collected by third-party collectors?

Q33: What data or other information are available regarding how disputed debts are resolved? What percentage of disputed debts are verified? What percentage of debt disputes are never investigated? Where disputes are investigated, what percentage of the investigations reveal that there was an error?

Q34: Should the Bureau define or set standards for what communications must be treated as “disputes” under the FDCPA and, if so, how? What are the advantages and disadvantages of the definition recommended?

Dispute Requirements

Regulation V sets standards for the consumer's direct dispute notice under the FCRA. This notice must include: (1) Sufficient information to identify the account or other relationship that is in dispute; (2) the specific information that the consumer is disputing and an explanation of the basis for the dispute; and (3) all supporting documentation or other information reasonably required by the furnisher to substantiate the basis of the dispute.

115

12 CFR 1022.43(d).

Q35: Should consumers be required to provide particular information or documentation as part of their disputes to debt collectors to trigger an investigation requirement under the FDCPA? What would be the costs and benefits of requiring that consumers provide the same or similar information as required under the FCRA when making disputes directly to debt collectors? Should a consumer's obligation to provide this information about the basis for their disputes be contingent on having received a validation notice with requisite information? Why or why not?

Types of Disputes.

Consumers apparently dispute debts for various reasons, such as disputing that they are the debtor or the amount of the debt. With respect to the amount of the debt, the consumer also might dispute more specific issues relating to the debt owed, such as the charges comprising a credit card balance, the fees applied after default, the application of past payments, or the interest calculation.

Q36: Do consumer disputes typically specify what is being disputed, or do consumers simply make general statements that they dispute the debt? If consumers do make specific statements, are those statements typically relevant to the consumer's particular circumstances or the alleged debt, or do they typically appear to be unrelated to the consumer's particular circumstances or the alleged debt? What types of specific disputes are most commonly received by debt collectors (

e.g.,

identity theft, wrong amount, do not recognize the debt, previously paid, previously disputed)?

Timing.

Although a consumer can dispute a debt at any time, only a written dispute sent within 30 days of receipt of the validation notice triggers a debt collector's requirement to stop collection activities and provide

verification of the debt. The FDCPA does not impose a time limit for a debt collector to respond to a dispute; it only requires that the collector must cease collection until it provides verification of the debt. At the recent FTC-CFPB Roundtable, some industry participants stated that debt collectors typically honor disputes that are received after the 30-day time period by stopping collection on the account, although it was unclear the extent to which those disputes are investigated or the debts verified.

116

Transcript of 2013 FTC-CFPB Roundtable

at 183.

Q37: What practices do debt collectors follow when they receive a dispute after the 30-day period following receipt of the validation notice has expired? Do collectors usually follow the same verification procedures as for disputes that are received during the 30-day period? What would be the potential costs and benefits of a debt collector following the same investigation and verification procedures for disputes received after the 30-day period relative to disputes received within the 30-day period?

Q38: How long does it typically take after a debt has been disputed for the collector to investigate and provide verification to the consumer? Would establishing a specific time period for responding to a dispute be beneficial to consumers? Does the prohibition on collection until verification has been provided give collectors a sufficient incentive to investigate expeditiously and appropriately? What costs and burdens would establishing a specific deadline for an investigation impose?

2. Investigation of Disputed Debts

Under section 809(b) of the FDCPA, after receiving a consumer dispute, a debt collector may either cease collection efforts without investigation or may investigate the dispute with the intent of providing verification to the consumer.

117

The FDCPA does not detail how a collector must investigate a dispute. Several commenters have raised concerns that some debt collectors state that they have verified the debt to the extent the FDCPA requires

118

when, in fact, the collector has done little or nothing to investigate the disputes and verify the debts.

117

15 U.S.C. 1692g(b).

118

See, e.g., Chaudhry

Gallerizzo,

174 F.3d 394, 406 (4th Cir. 1999) (“[V]erification of debt involves nothing more than the debt collector confirming in writing that the amount being demanded is what the creditor is claiming is owed. . . . Verification is only intended to `eliminate the problem of debt collectors dunning the wrong person or attempting to collect debts which the consumer has already paid.' ”)

The FTC has recommended that debt collectors be required to conduct “reasonable” investigations under the FDCPA, noting that such a standard would be consistent with the FCRA.

119

In the FTC's view, adopting a “reasonable investigation” standard would decrease consumer concerns about mistaken collection attempts, but also respond to collection industry requests for flexible standards.

120

119

2009 FTC Modernization Report

at 33.

120

Id.

at 34.

Q39: What steps do collectors take to investigate a dispute under the FDCPA? Do collectors request information from the debt owner or any other parties? Do they look beyond confirming that the information contained in the validation notice is consistent with their records? Are the steps debt collectors are taking adequate?

Q40: What steps should debt collectors be required to take to investigate a dispute? Would a “reasonableness” standard benefit consumers and debt collectors? Would more specific standards or guidance be useful to help effectuate such a standard? For example, should debt collectors be required to review account-specific documents upon receiving the consumer's dispute? Should debt collectors be required to consider the accuracy and completeness of the information with a portfolio of accounts, including whether the information is facially inaccurate or incomplete? Should debt collectors be required to consider the nature and frequency of disputes they have received about other accounts within the same portfolio?

Q41: How should the investigation required vary depending on the type of dispute? For example, if a consumer states the balance on a debt is incorrect, what information should a debt collector review for its investigation? If a consumer states that she is not the alleged debtor, what information should a debt collector be required to obtain or review? If a consumer disputes the debt by stating that she does not recognize it, what information should a debt collector obtain or review? If the consumer claims prior payment of the debt, what information should a debt collector obtain or review? Please comment on other common dispute scenarios that may require review of specific types of information.

FCRA Obligations.

In addition to their obligations under the FDCPA, debt collectors who furnish information to CRAs are subject to obligations to investigate disputes submitted directly to them by consumers (“direct disputes”)

121

and submitted to them through CRAs.

122

The FCRA contains an exception from the investigation requirement for certain disputes that are deemed “frivolous and irrelevant,” an exception for which there is no parallel in the FDCPA. A debt collector may treat a FCRA dispute submitted by a consumer directly to the collector as “frivolous and irrelevant” if the consumer does not provide sufficient information to investigate the dispute, the dispute is substantially the same as a previously submitted dispute that has already been investigated, or it falls within one of several other exceptions, including an exception for disputes the furnisher reasonably believes are submitted or prepared by a credit repair organization.

123

If the direct dispute is treated as frivolous and irrelevant, the FCRA and Regulation V require the collector to provide the consumer with a notice of that determination.

124

121

12 CFR 1022.43.

122

15 U.S.C. 1681s-2(b). Although section 623(b)(1)(A) does not specifically state that a furnisher must conduct a “reasonable” investigation upon learning of a dispute from a CRA, courts applying the provision have consistently adopted a “reasonable investigation” standard.

See, e.g., Gorman

Wolpoff & Abramson, LLP,

584 F.3d 1147 (9th Cir. 2009);

Westra

Credit Control of Pinellas,

409 F.3d 825, 827 (7th Cir. 2005);

Johnson

MBNA Am. Bank, NA,

357 F.3d 426, 431 (4th Cir. 2004);

King

Asset Acceptance, LLC,

452 F. Supp. 2d 1272, 1278 (N.D. Ga. 2006).

123

15 U.S.C. 1681s-2(a)(8)(F)-(G); 12 CFR 1022.43(b), (f). The FCRA also contains an exception from the investigation requirements for disputes submitted to CRAs that are deemed “frivolous and irrelevant.” 15 U.S.C. 1681i(a)(3).

124

15 U.S.C. 1681s-2(a)(8)(F); 12 CFR 1022.43(f). Similarly, when a CRA treats a dispute as “frivolous and irrelevant,” the FCRA requires the CRA to provide the consumer with a notice of that determination. 15 U.S.C. 1681i(a)(3)(B).

Q42: What percentage of debt collectors are “furnishers” under the FCRA? How many FCRA disputes do debt collectors receive? What percentage of FDCPA disputes do collectors treat as direct disputes under the FCRA? How do debt collectors fulfill their responsibilities to investigate disputes that are covered by both the FDCPA and the FCRA? To what extent do debt collectors stop collecting debts disputed pursuant to the FDCPA and the FCRA without investigation? To what extent do debt collectors stop reporting debts disputed pursuant to the FDCPA and the FCRA without investigation?

Q43: What percentage of disputes are repeat disputes that were already subject to a reasonable investigation and do not include any new information from consumers? How do debt collectors currently handle repeat disputes or disputes that are unclear or

incomplete? Do debt collectors receive a significant number of disputes from credit repair organizations? Is any data available as to the number of repeat disputes or disputes from credit repair organizations that debt collectors receive?

Q44: Should the Bureau consider including in proposed rules for debt collection an exception for “frivolous and irrelevant” disputes, similar to the one found in the FCRA? Are the incentives of those collecting on debts different from the incentives of other furnishers and CRAs with respect to information included on consumer reports? What would be the costs and benefits of allowing collectors not to investigate “frivolous and irrelevant” disputes?

3. Verification of Disputed Debts

Congress intended the dispute and verification process in FDCPA section 809(b) to address the problem of debt collectors collecting from the wrong person or collecting the wrong amount.

125

As noted above, the FDCPA does not define what constitutes proper verification of a debt, and some commenters have interpreted court decisions as holding that section 809(b) does not require debt collectors to undertake substantial efforts to verify a disputed debt.

126

In one case addressing this issue,

Chaudhry v. Gallerizzo,

the Fourth Circuit stated that “verification of a debt involves nothing more than the debt collector confirming in writing that the amount being demanded is what the creditor is claiming is owed; the debt collector is not required to keep detailed files of the alleged debt.”

127

Based upon this statement, some debt collectors believe that verification requires nothing more than providing consumers with a written statement that the amount being demanded is the amount the creditor claims is owed.

128

However, other commenters have pointed out that, in the

Chaudhry

case, the debt collector had already verified the amount of the debt with the creditor; broken out that amount into principal, interest, and inspection fees; and forwarded bank summaries of consumers' loan transactions that included a description of and the date of each transaction.

125

See

S. Rept. 382, 95th Cong., at 4 (1977); 94 Cong. Rec. H7789 (1976).

126

See 2009 FTC Modernization Report

at 31.

127

Chaudhry

Gallerizzo,

174 F.3d 394, 406 (4th Cir. 1999).

128

2009 FTC Modernization Report

at 32.

In the 2009 FTC Modernization Report, the Commission noted that some debt collectors currently respond to verification requests only by confirming in writing that the amount demanded is what the creditor claims is owed.

129

A number of consumer advocates have recommended that debt collectors should be required to provide consumers with verification that is responsive to the consumer's specific dispute.

130

For example, if a consumer raises a claim of identity theft, the debt collector should provide verification that relates to the consumer's identity. Some debt collection industry representatives have stated that any requirements to provide more substantial verification should be flexible enough to account for different types and ages of consumer debt.

129

Id.

at 32.

130

Id.

at 33.

Under the FCRA, if a consumer continues to dispute information appearing in her consumer report with a CRA after an investigation is completed, the consumer may file a brief statement with the CRA setting forth the nature of the dispute.

131

Under the FCRA, a CRA is required to include this statement or a clear and accurate summary of the statement in any subsequent reports about the consumer.

132

131

15 U.S.C. 1681i(b).

132

15 U.S.C. 1681i(c).

Q45: What information do debt collectors currently provide to verify a disputed debt? Do debt collectors typically provide documentation (media) to consumers to verify a debt?

Q46: Under which circumstances, if any, should collectors be required to provide consumers with documentation (media) to verify a debt? Would providing the last periodic or billing statement related to the account be sufficient to verify most disputed debts?

Q47: What would be the costs and benefits of requiring particular forms of information to verify a debt? Are there any particular types of verification that would be especially beneficial to consumers or particularly costly for collectors to provide?

Q48: Section 809(b) of the FDCPA states that verifications must be “mailed” to the consumer.

133

Do debt collectors currently provide the verifications only by postal mail, or are debt collectors providing verifications in other formats, such as email or text message? Do collectors obtain consumer consent if they wish to provide the verification electronically and, if so, what type of consent are they obtaining (

e.g.,

do they follow E-Sign standards)?

133

15 U.S.C. 1692g(b).

Q49: If consumers disagree with the verification of disputed debts provided by debt collectors, or if they do not receive verification of the disputed debts, should consumers be afforded the opportunity to file statements with collectors that explain the nature of their disputes with the debt collector, and should the debt collector then be required to provide that statement to the owner of the debt or subsequent collectors? What would be the costs and benefits of requiring debt collectors to accept and communicate consumers' statements of dispute?

Unverified Debts.

The 2013 FTC Debt Buyer Report found that debt buyers did not verify nearly 50 percent of disputed debts.

134

The following types of debts were less likely to be verified than others: medical, telecommunications, and utility debts; debts purchased from another debt buyer rather than from the creditor; and debts more than six years old. In comparison, credit card debt, debt purchased from the creditor rather than from another debt buyer, and debt less than three years old were more likely to be verified.

135

The study also found that at least some debt buyers sold a small percentage of debt with unresolved disputes.

136

One participant at the recent FTC-CFPB Roundtable stated that many creditors and collectors refrain from selling or collecting on any debts with unresolved disputes.

137

The Debt Buyers Association has commenced a certification program that prohibits the sale of disputed debts that are unresolved.

138

Under the FCRA, debt owners are prohibited from selling a debt or placing it for collection if a CRA notifies the owner that the debt resulted from identity theft.

139

The FCRA also contains a prohibition on furnishing information related to an account disputed by a consumer without noting for the CRA that such information is disputed.

140

134

2013 FTC Debt Buyer Report

at 40.

135

Id.

at 40-41.

136

Id.

at 41.

137

Transcript of 2013 FTC-CFPB Roundtable

at 224.

138

DBA Int'l,

DBA Int'l Debt Buyer Certification Program, Certification Standards Manual

at 8,

available at http://www.dbainternational.org/certification/certificationstandards.pdf.

139

FCRA section 615(f), 15 U.S.C. 1681m(f).

140

FCRA section 623(a)(3), 15 U.S.C. 1681s-2(a)(3).

Q50: To what extent do debt collectors attempt to verify a debt that is disputed? What do debt collectors currently do when they are unable to verify a disputed debt? What, if anything, should debt collectors be required to do when they are unable to verify a disputed debt? Do third-party collectors typically return the account to the debt owner when it is disputed, without attempting to verify it?

Q51: If a debt collector's investigation reveals errors or misrepresentations with respect to the debt, do collectors report those findings to the consumer? When and how are such findings conveyed to consumers?

Q52: Do owners of debts sell disputed but unverified debts to debt buyers or place them with new third-party collectors? Are these debts reported to CRAs? What limitations should be placed on the sale or re-placement of unverified disputed debts? For example, should the owner of the debt or the collector be required to inform debt buyers and new collectors that it is an unverified disputed debt when it is sold or re-placed? Should the new debt buyer or collector be required to verify the debt before making collection efforts? What would be the potential costs and benefits of such restrictions or conditions?

4. Reporting of Un-Validated Debts

Section 809(b) of the FDCPA provides for a 30-day window after the collector first contacts the consumer about the alleged debt in which the consumer may dispute or request verification of the debt.

141

The FTC's Staff Commentary states that collectors may report a debt to a CRA within the 30-day window, as long as the consumer has not yet disputed the debt.

142

141

15 U.S.C. 1692g(b).

142

FTC Staff Commentary on FDCPA section 809(b), comment 1. At least one State, Colorado, prohibits collectors from reporting a debt to a CRA during the 30-day validation period.

See

Colo. Rev. Stat. 12-14-108(1)(j). The reasoning behind such a statute apparently is that such a prohibition gives consumers the opportunity to dispute debts before they are reported and appear on their credit reports. The Colorado statute provides some exceptions, such as when the consumer's last known address is known to be invalid.

Q53: What would be the costs and benefits of prohibiting collectors from reporting a debt to a CRA during the 30-day window?

IV. Debt Collection Communications (Sections 804 and 805 of the FDCPA)

Many provisions of the FDCPA regulate debt collectors' communications with consumers and third parties. For example, debt collectors are generally prohibited from contacting consumers at unusual times or places, from disclosing collection-related information to third parties, and from communicating with consumers that have asked the collector to cease communications.

143

The FDCPA also governs communications in which a debt collector seeks location information about a consumer from a third party.

144

These provisions focus on preventing consumer harm in debt collection communications.

143

15 U.S.C. 1692c(a)(1), (b), (c).

144

15 U.S.C. 1692b.

Despite the FDCPA's protections, consumers still consistently report abuses focusing on debt collection communications. For example, the FDCPA prohibits collectors from calling consumers “repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.”

145

Nevertheless, the most frequent debt collection-related complaint in the FTC's Consumer Sentinel database is that a collector is calling repeatedly or continuously, conduct in which collectors may be engaged to annoy, abuse, or harass the recipients of these calls.

146

A 2009 survey conducted by Ohio University similarly found that approximately one-third of survey respondents had received multiple calls from a debt collector in a pattern that seemed to them to be harassment.

147

Other communications-related concerns include calling hours, communications at the workplace, and inappropriate communications with friends and family. Consumers also file many lawsuits alleging that collectors have engaged in communication practices that are prohibited by the FDCPA.

145

Section 806(5) of the FDCPA, 15 U.S.C. 1692d(5).

146

2013 FDCPA Annual Report

at 16-17.

147

Scripps Survey Research Ctr., Ohio Univ.,

Survey: SHOH42

(Sept. 26, 2009),

available at http://www.newspolls.org/surveys/SHOH42/22540

(Question: Have you or your family ever received multiple calls from a debt collection agency, so many that it seemed to you to be harassment? Answers: Yes 32%; No 66%; Don't know 2%).

The Bureau seeks comment on how rulemaking with respect to communications in debt collections could help both consumers and the industry. Part IV.A discusses recent advances in communications technologies, including social media, and their potential implications for debt collection practices. Part IV.B discusses communications soliciting location information from third parties about consumers, including when collectors may reinitiate contact with a third party and how collectors identify themselves in location communications. Part IV.C discusses issues regarding communications between debt collectors and consumers, including the times and places that are unusual or inconvenient for consumers, and issues specific to military servicemembers. Part IV.D addresses communications between debt collectors and third parties, including issues regarding decedent debt, caller ID, and recorded messages. Finally, Part IV.E discusses the right for consumers to cease communications from a debt collector, including the consumer's ability to limit communications to certain media or certain times of day.

A. Advances in Communications Technologies

The debt collection landscape has changed dramatically since the FDCPA was enacted in 1977. Perhaps the greatest transformations have occurred in the technologies that debt collectors and debt owners use to communicate with consumers. The statute itself contemplates communications via telephone, postal mail, and telegraph, but it does not reflect the advent of the internet, smartphones, autodialers, fax machines, and social media. These newer technologies present new challenges and new opportunities.

148

The challenges often arise when attempting to apply the FDCPA's prohibitions to a technology that was not envisioned at the time of its enactment and may not easily fit its statutory framework. Nonetheless, these technologies also create new opportunities for consumers, debt collectors, and debt owners to communicate in ways that may be more convenient and less costly than prior methods.

148

In 2009, the FTC published a report that focused in part on the issues raised by changes in debt collection technologies.

See 2009 FTC Modernization Report.

Q54: In addition to telephone and mail, what technologies, if any, do debt collectors currently use on a regular basis to communicate or transact business with consumers? For which technologies would it be useful for the Bureau to clarify the application of the FDCPA or laws regarding unfair, deceptive, or abusive acts or practices? What are the potential efficiencies or cost savings to collectors of using certain technologies, such as email or text messaging? What potential privacy, security, or other risks of harm to consumers may arise from those technologies and how significant are those harms? Could regulations prevent or mitigate those harms? Should consumers also be able to communicate with and respond to collectors through such technologies, including to exercise their rights under the FDCPA and particularly when a collector uses the same technology for outgoing communications to the consumer? What would be the potential costs and benefits of such regulations?

Q55: Are there nascent communication technologies, or communication technologies that are

likely to arise in the future, whose use in connection with debt collection might materially benefit or harm debt collectors or consumers? What additional challenges do those communication technologies present in applying the FDCPA or the Dodd-Frank Act's prohibition against unfair, deceptive, and abusive acts and practices to debt collectors?

Q56: What complications or compliance issues do social media present for consumers or collectors in the debt collection process? How, if at all, should collector communications via social media be treated differently from other types of communications under debt collection rules? What privacy concerns are raised by various social media platforms?

Q57: FDCPA section 807(11) declares it to be a false, deceptive, or misleading representation for collectors to fail to disclose that a communication is from a debt collector. This section also requires in the collector's initial communication what is often called a “mini-Miranda” warning, in which the collectors state that they are attempting to collect a debt and any information obtained will be used for that purpose. Standard industry practice is for third-party debt collectors to provide the mini-Miranda warning during every collection call. What are the costs and benefits of such collectors including the mini-Miranda disclosure when they send communications via social media?

B. Communications To Locate Debtors (Section 804 of the FDCPA)

Collectors are generally prohibited from communicating with third parties regarding the collection of a debt, but one exception is location communications.

149

Location communications are permitted under FDCPA section 804 and used by collectors to obtain or update contact information for consumers. That section, for instance, requires a debt collector making location calls to “identify himself, state that he is confirming or correcting location information concerning the consumer, and, only if expressly requested, identify his employer” but not state that the consumer owes any debt.

150

Collectors are also limited to one location communication with a person unless, inter alia, “the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information.”

151

149

15 U.S.C. 1692c(b).

150

15 U.S.C. 1692b(1), (2).

151

15 U.S.C. 1692b(3).

Q58: How frequently do debt collectors communicate with third parties about matters other than the location of the consumer? What other topics are discussed and for what reason? What are the potential risks to consumers or third parties? Would additional regulation to address this issue be useful?

Q59: What would be the costs and benefits of setting a standard for when a debt collector's belief about a third party's erroneous or incomplete location information is reasonable? If a standard would be useful, what standard would be appropriate?

152

A recent FTC consent order provided standards governing when the debt collector subject to the order has a “reasonable belief” that a third party's prior statements are “erroneous or incomplete.” That order required that, to establish such a belief, the defendant debt collector must have:

(1) Conducted a thorough review of all applicable records, documents, and database entries for the alleged debtor Defendants are trying to reach to search for any notations that indicate that the alleged debtor cannot be reached at that telephone number or that the person does not have location information about the alleged debtor Defendants are trying to reach; and (2) obtained and considered information or evidence from a new or different source other than the information or evidence previously relied upon by Defendants in attempting to contact the alleged debtor Defendants are trying to reach and such information or evidence substantiates Defendants' belief that the person's earlier statements were erroneous or incomplete and that such person now has correct or complete location information.

Stipulated Order at 5-6,

United States

Expert Global Solutions, Inc.,

No. 3-13CV2611-M (N.D. Tex. July 16, 2013),

available at http://www.ftc.gov/os/caselist/1023201/130709ncoorder.pdf.

Q60: Some individuals employed by debt collectors use aliases to identify themselves to third parties when seeking location information about a consumer. Should this practice be addressed in a rulemaking? If so, how?

Q61: Under FDCPA section 804(1), debt collectors are permitted to identify their employers during location communications only if the recipient of the communication expressly requests that information. Does providing the true and full name of the collector's employer upon request risk disclosing the fact of the alleged debt to a third party? If so, how could the risk be minimized? What would be the costs and benefits of minimizing or otherwise addressing this risk?

Q62: FDCPA section 804(5) bars a debt collector from using any language or symbol on an envelope or elsewhere in a written communication seeking location information if the name indicates that the collector is in the debt collection business or that the communication relates to the collection of the debt.

153

How should such a restriction apply to technologies like email, text message, or fax?

153

15 U.S.C. 1692b(5).

C. Communications With Consumers (Section 805(a) of the FDCPA)

1. Unusual or Inconvenient Times

a. Traditional Communications Technologies (Phones)

Section 805(a) of the FDCPA sets parameters on collector communications with consumers, including a bar on contacting consumers at “any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer.”

154

The statute further states, “In the absence of knowledge to the contrary, a collector shall assume that a convenient time for communicating with a consumer is” between 8:00 a.m. and 9:00 p.m., local time in the consumer's location.

154

15 U.S.C. 1692c(a)(1).

The advent of mobile phones complicates the determination of what times are unusual or inconvenient. Mobile phones are increasingly the prominent mode of telephone communications.

155

With landline phone numbers, a collector can generally determine the consumer's time zone using the area code for the number (call forwarding is one exception). But consumers may take mobile phones anywhere and travel to different time zones is not uncommon. In addition, many consumers now keep their mobile phone number when they move, so that the area code for their mobile phone does not match the area code of their current residence. Collectors that use area codes or home addresses to determine convenient calling hours therefore may inadvertently call earlier or later than the law permits. In the 2009 FTC Modernization Report, the FTC recommended that collectors be permitted to assume, for the purposes of determining appropriate calling hours, that the consumer was located in the same time zone as her home address.

156

155

Eighty-nine percent of U.S. households now own a mobile phone, up from 36% in 1998, while 71% of households own a landline, down from 96% in 1998. Moreover, mobile-only households are on the rise among younger households, with about two-thirds of households led by people ages 15 to 29 having only mobile phones. Jeffrey Sparshott,

More People Say Goodbye to Landlines,

Wall St. J., Sep. 6, 2013, at A5.

156

2009 FTC Modernization Report

at vi.

Q63: Does sufficiently reliable technology exist to allow collectors to screen to determine whether a given phone number is a landline versus a

mobile phone? If so, should collectors conduct such screening before relying on an area code to determine a consumer's time zone? What would be the costs and benefits of requiring such screening? Should collectors be allowed to rely on information provided by consumers at the time they applied for credit, such as when a consumer provides a phone number identified as a “home” number or a “mobile” phone number on an initial credit application without screening the area code?

Q64: Should collectors assume that the consumer's mailing address on file with the collector indicates the consumer's local time zone? If the local time zone for the consumer's mailing address and for the area code of the consumer's landline or mobile telephone number conflict, should collectors be prohibited from communicating during any inconvenient hours at any of the potential locations, or should one type of information (

e.g.,

the home address) prevail for determining the consumer's assumed local time zone?

b. Newer Communications Technologies (Email and Text Message)

The legislative history of the FDCPA indicates that the restrictions on convenient hours in section 805(a)(1) were intended to apply principally, or perhaps exclusively, to telephone communications rather than postal mail.

157

Newer technologies like email and text messages present challenges in applying section 805(a)(1) because the technologies themselves are hybrids between the textual nature of postal mail and the immediate delivery of telephone calls (as with faxes). For email, recipients arguably do not receive their messages until they affirmatively check their email account, thus allowing consumers to control when they view new messages. However, some consumers have devices that notify them when the email is delivered to their email provider, such as a smartphone that makes a sound upon the delivery of an email. The extent to which the receipt of an email occurs at an unusual or inconvenient time may therefore differ greatly among consumers.

157

See, e.g.,

S. Rept. 382, 95th Cong., at 2 (1977); 123 Cong. Rec. S13851, 13854 (daily ed. Aug. 5, 1977); H. Rept. 5294, 95th Cong., (1977) (prior version of the bill specifying that the hours restriction applied to telephone calls).

Text messaging presents similar but distinct issues. Text messages arrive primarily over telephones, whereas emails can arrive on any device with an internet connection. As with email, a consumer may not view a text message until long after it was delivered to her phone, but many consumers are alerted when a text message arrives, often by an audio alert.

Q65: A main purpose of designating certain hours in the FDCPA as presumptively convenient apparently was to prevent the telephone from ringing while consumers or their families were asleep. Do similar concerns exist for other technologies? Should any distinction be made between the effect of a telephone ringing and an audio alert associated with another type of message delivery, such as email or text message, if a mobile phone is on during the night?

Q66: Should a limitation on usual times for communications apply to those sent via email, text message, or other new media? Should it matter whether the consumer initiates contact with the collector via that media? Is there a means of reliably determining when an electronic message is received by the consumer? Are there data on how frequently consumers receive audio alerts when either emails or text messages are delivered? Are there data showing how many consumers disable audio alerts on their devices when they wish not to be disturbed?

Q67: Is there a general principle that can guide the incorporation of standards on unusual times for communications to newer technologies? For instance, should such restrictions apply only to technologies that have “disruptive” effects, like phone calls, and if so, how might “disruptive” be best defined? What would be the costs and benefits of applying any such general principles?

2. Unusual or Inconvenient Places

Inconvenient Places.

The Bureau seeks comment about the types of places, if any, that are unusual or that collectors know or should know to be inconvenient for them to contact consumers.

Q68: Especially with the advent and widespread adoption of mobile phones, consumers often receive calls at places other than at home or at work. Under what circumstance do collectors know, or should know, that the consumer is at one of the types of places listed below? What would be the costs and benefits of specifying that such locations are unusual or inconvenient, assuming the debt collector knows or should know the location of the consumer at the time of the communication?

• Hospitals, emergency rooms, hospices, or other places of treatment of serious medical conditions

• Churches, synagogues, mosques, temples, or other places of worship

• Funeral homes, cemeteries, military cemeteries, or other places of burial or grieving

• Courts, prisons, jails, detention centers, or other facilities used by the criminal justice system

• Military combat zones or qualified hazardous duty postings

• Daycare centers

Q69: Are there additional places not listed above that would be inconvenient places for consumers to be contacted?

Q70: Under what circumstances are communications at a consumer's place of employment inconvenient, even if the employer does not prohibit the receipt of such communications? What would be the potential costs and benefits of prohibiting communications at a consumer's place of employment due to inconvenience, assuming that the collector knows or should know the consumer's location? To what extent does the inconvenience depend on the nature of the consumer's workplace or on the consumer's type of employment at that workplace?

Place of employment communications.

Under FDCPA section 805(a)(3), a collector may not contact a consumer at his place of employment if the collector knows or has reason to know that his employer prohibits the consumer from receiving such communication.

158

15 U.S.C. 1692c(a)(3).

Q71: Do employers typically distinguish, in their policies regarding employee contacts at work, between collection communications and other personal communications? Are employers' policies concerning receipt of communications usually company-wide, specific to certain job types, or specific to certain individuals?

Q72: Collectors may have many accounts with consumers employed by the same large employer, such as a national chain store, and this may enable collectors to become familiar with the employers' policies regarding receipt of personal or collection communications in the workplace. Can collectors reliably determine consumers' employers and their policies with regard to receiving communications at work? If so, what would be the costs and benefits of requiring that collectors cease communications at work for all consumers working for a certain employer if collectors are informed by one (or more) consumer(s) that the employer does not permit personal communications for any of its employees overall, or at a particular location or job type (

e.g.,

retail premises employers)? What would be the costs and benefits of requiring that collectors

cease communication at work if they learn of the employer's policy through other means, such as the policy being posted on the employer's Web site?

3. Consumers Represented by Attorneys

The FDCPA provides that “[w]ithout the prior consent of the consumer given directly to the debt collector or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the collection of any debt if the debt collector knows the consumer is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney's name and address, unless the attorney fails to respond within a reasonable period of time to a communication from the debt collector or unless the attorney consents to direct communication with the consumer.”

159

Collectors are also prohibited from making location communications concerning represented consumers unless the attorney fails to respond within a reasonable period of time to the communications from the debt collector.

160

159

15 U.S.C. 1692c(a)(2).

160

15 U.S.C. 1692b(6).

Q73: The FDCPA's restriction on contacting consumers represented by attorneys does not apply if “the attorney fails to respond within a reasonable period of time.”

161

How do collectors typically calculate a “reasonable period of time” for this purpose, and does the answer vary depending on particular circumstances?

161

Id.

Q74: How common is it for consumers to be represented by attorneys on debts? When consumers have multiple debts, do attorneys usually represent them on one debt, all debts, or some number of debts less than the total? How often do consumers with debts change their attorney?

4. Servicemember Issues

Credit applications for servicemembers may sometimes require them to provide contact information for their commanding officers. These applications may also request or require that servicemembers provide some form of consent allowing debt owners to contact their commanding officers with respect to the debt. When a servicemember signs such an application, some collectors may believe that communications to commanding officers are not subject to the prohibition on communication with third-parties under FDCPA section 805(b). Nonetheless, servicemembers may report that these communications are inconvenient, annoying, or harassing, or may harm their reputations at work.

Q75: How prevalent is the practice of requesting or requiring, as part of a credit application or credit contract, contact information and consent to contact a servicemember's commanding officer or other third parties? Are such consent agreements to contact a consumer's employer or boss as common among civilian consumers? How frequently do debt collectors actually contact servicemembers' commanding officers or other third parties identified in credit contracts? Are servicemembers harmed in unique ways by communications with their commanding officers? Relatedly, do such harms suggest solutions that are unique to servicemembers, either in the disclosures they receive as part of credit applications or regarding limits on communications with commanding officers?

Collectors may communicate with spouses while servicemembers are deployed to combat zones or qualified hazardous duty areas.

162

Collectors may ask military spouses to pay the debts of these consumers during periods when it is difficult for the spouse to contact these consumers, or when such contact may interfere with combat readiness. Alternatively, collectors may contact military spouses during the potentially sensitive period immediately following the death of a servicemember serving in a combat zone or qualified hazardous duty zone, with the hope of obtaining payment from the spouse's military death gratuity.

162

See

Part IV.D's discussion of spouses.

Q76: How common are the practices mentioned above?

D. Communications With Third Parties (Section 805(b) of the FDCPA)

FDCPA section 805(b) bars communication with most third parties absent prior consent of the consumer provided directly to the debt collector, express permission of a court, or as reasonably necessary to effectuate a postjudgment judicial remedy.

163

Communications with the consumer, the consumer's attorney, a CRA if otherwise permitted by law, the creditor, the attorney of the creditor, and the attorney of the debt collector are not subject to the bar in section 805(b). The purpose of this provision is to protect the privacy of consumers' personal and financial affairs.

164

163

15 U.S.C. 1692c(b).

164

See, e.g.,

S. Rept. 382, 95th Cong., at 4 (1977) (“[T]his legislation strongly protects the consumer's right to privacy by prohibiting a debt collector from communicating the consumer's personal affairs to third persons . . . .

[T]his legislation adopts an extremely important protection . . .: it prohibits disclosing the consumer's personal affairs to third persons . . . . Such contacts are not legitimate collection practices and result in serious invasions of privacy, as well as the loss of jobs.”).

1. Definition of “Consumer”

The FDCPA's definition of “consumer” is “any natural person obligated or allegedly obligated to pay any debt.”

165

In addition, for the purposes of FDCPA section 805, “consumer” is defined as including “the consumer's spouse, parent (if the consumer is a minor), guardian, executor, or administrator.”

166

The Bureau seeks comment on the following questions related to the FDCPA's definition of “consumer.”

165

15 U.S.C. 1692a(3).

166

15 U.S.C. 1692c(d).

Q77: During a consumer's lifetime, a collector can communicate with a consumer's spouse about the consumer's debt. When a consumer dies, the FDCPA does not specify whether a consumer's surviving spouse continues to be the consumer's “spouse,” such that collectors may continue to contact the person without violating section 805(b). How often do collectors contact surviving spouses and what is the effect of such contacts? What would be the potential costs and benefits of regarding surviving spouses as “spouses” under section 805(b)?

Q78: Are there circumstances under which a collector should not be permitted to contact a consumer's spouse, for example, the individuals are estranged or the consumer has obtained a restraining order against her spouse? How frequently do these circumstances occur? What would be the costs and benefits of prohibiting or limiting communications with a consumer's spouse upon the consumer's request?

Q79: The FDCPA permits collectors to communicate with “executors” and “administrators” about a decedent's debts. State laws may allow individuals other than those with the status of “executor” or “administrator” under State law, for example, “personal representatives,” to pay the debts of a decedent out of the assets of the decedent's estate. How frequently do collectors contact individuals who are not “executors” or “administrators” but still have the authority under State law to pay the debts of decedents out of the assets of decedents estates? What is the effect of these contacts? What would be the potential costs and benefits of treating any person who has the authority to pay the debts of the

decedent out of the assets of the estate as “executors” or “administrators?”

167

To what extent do spouses, executors, and administrators pay decedents' debts out of their own assets? Do collectors state or imply that such parties have an obligation to pay these debts?

167

The FTC previously issued a Policy Statement providing that the agency will not take enforcement action under the FDCPA against collectors that communicate with someone who is authorized to pay a decedent's debts from the estate of the deceased even if that person is not officially designated as an “executor” or “administrator.”

Statement of Policy Regarding Communications in Connection With the Collection of Decedents' Debts,

76 FR 44915 (July 27, 2011).

Q80: Do owners of debts or collectors inform executors and administrators when collecting on debt that was disputed by the decedent prior to the decedent's death?

Q81: A third party who is not a “consumer” under FDCPA section 805(d) may know details about the consumer's debt and contact a debt collector to settle a consumer's debt. For example, the parent of a non-minor child may reach out to a collector to assist with the child's debt. How often are such contacts made? Should collectors be permitted to assume that the consumer has consented to the third-party contact, where a third party already knows about the consumer's debt and is offering to repay the debt? When would it be appropriate to allow collectors to rely on this theory of implied consent?

2. Recorded Messages

Communications by telephone remain the most common form of consumer contact in debt collections. Telephones themselves were one of the communications technologies Congress addressed when the FDCPA was enacted in 1977. However, over the years, phone technology has changed dramatically, from landlines to mobile phones and then to smart phones. In addition to voice calling, the ability to record voice messages for others to retrieve at a later date is commonplace (

e.g.,

voicemails). Many phones also allow consumers to see the caller's phone number, and sometimes other information about the caller, before answering.

When collectors leave recorded messages, they must identify themselves in the communication but they also must refrain from disclosing information about debtors to third parties. FDCPA section 806(6) prohibits debt collectors from placing telephone calls without meaningful disclosure of their identity.

168

Section 807(11) of the FDCPA also requires that collectors disclose in their initial communications with consumers, including telephone calls, that they are trying to collect a debt and that any information they obtain will be used for that purpose.

169

For many years, collectors did not include the information set forth in FDCPA sections 806(6) and 807(11) in recorded messages that they left on voicemails or answering machines.

170

However, in 2006, a Federal district court in

Foti v. NCO Financial Systems, Inc.,

held that a collector's telephone message is a “communication” within the meaning of the FDCPA, thereby requiring that these messages include the information set forth in FDCPA sections 806(6) and 807(11).

171

Other courts have reached the same conclusion as

Foti.

172

168

15 U.S.C. 1692d(6).

169

15 U.S.C. 1692e(11).

170

For example, collectors would often leave messages stating, “This is John Smith calling for Nancy Jones about an important business matter. Please call me back at 555-5555.”

171

424 F. Supp. 2d 643 (S.D.N.Y. 2006) (denying collector's motion to dismiss).

172

See, e.g., Hosseinzadeh

M.R.S. Assocs.,

387 F. Supp. 2d 1104 (C.D. Cal. 2005) (denying collector's motion for summary judgment);

Costa

Nat'l Action Fin. Services,

634 F. Supp. 2d 1069, 1076 (E.D. Cal. 2007) (denying collector's motion for summary judgment);

Berg

Merchants Ass'n Collection Div., Inc.,

586 F. Supp. 2d 1336, 1340-41 (S.D. Fla. 2008) (denying a collector's motion to dismiss);

Edwards

Niagara Credit Solutions, Inc.,

586 F. Supp. 2d 1346, 1350-51 (N.D. Ga. 2008) (granting consumer's motion for summary judgment),

aff'd on other grounds,

584 F.3d 1350 (11th Cir. 2009).

Collectors believe that

Foti

creates a dilemma. On the one hand, if recorded messages are “communications,”

173

then collectors must identify themselves as a debt collector. On the other hand, if they leave that information in a recorded message, they risk disclosing such information to a third party who may hear the message, which could violate FDCPA section 805(b).

173

Some collectors argue that messages that do not reference the debt or the fact that the message is from a debt collector are not “communications” because they do not convey information regarding a debt, as required by the definition of “communication” under FDCPA section 803(2).

Courts and other observers have noted that collectors can avoid both forms of liability by simply refraining from leaving recorded messages altogether.

174

Some collectors argue that this would impose high costs, by limiting their ability to reach many consumers, such as those that work night hours (given the calling-time restrictions in FDCPA section 805(a)(1)), those that do not answer calls from unfamiliar numbers, or those for whom collectors have the wrong mailing address. It could also cause harm if consumers do not learn that their debts are in collection and debt collectors furnish information about these debts to CRAs or file law suits to collect.

174

See, e.g., Mark

J.C. Christensen & Assocs., Inc.,

Civil No. 09-100 ADM/SRN, 2009 WL 2407700, at *5 (D. Minn. Aug. 4, 2009);

Berg

Merchants Ass'n Collection Division, Inc.,

586 F. Supp. 2d 1336, 1343 (S.D. Fla. 2008);

Leyse

Corporate Collection Services,

No. 03 Civ 8491 (DAB), 2006 WL 2708451, at *5 (S.D.N.Y. Sept. 18, 2006).

In its 2009 Modernization Report, the FTC acknowledged the challenges that

Foti

and similar cases create for collectors and stated that it would be beneficial to clarify the law relating to collectors leaving recorded messages.

175

2009 FTC Modernization Report

at 49.

Q82: How should a rule treat recorded messages, if at all? What benefits do recorded messages (as distinct from live phone calls) offer to debt collectors or consumers?

Q83: What would be the costs and benefits of allowing the following approaches to leaving recorded messages?

• When leaving recorded messages on certain media where there is a plausible risk of third-party disclosure, the collector leaves a message that identifies the consumer by name but does not reference the debt and does not state the mini-Miranda warning.

• The collector leaves a recorded message identifying the consumer by name and referring the consumer to a Web site that provides the mini-Miranda warning after verifying the consumer's identity.

• The collector leaves a recorded message identifying the consumer by name, but only on a system that identifies (

e.g.,

via an outgoing greeting) the debtor by first and last name and does not identify any other persons.

• The collector leaves a recorded message that identifies the consumer by name and includes the mini-Miranda warning but implements safeguards to try to prevent third parties from listening.

176

ACA International, a debt collection trade association, developed a model message designed to address the

Foti

dilemma. The message provides the required disclosures only after asking third parties to stop listening and providing time for execution of those directions: “This message is for [ ]. If you are not [ ] or their spouse, please delete this message. If you are [ ] or their spouse, please continue to listen to this message. By continuing to listen to this message, you acknowledge that you are the right party. You should not listen to this message so that other people can hear it, as it contains personal and private information. There will be a three second pause in the message to allow you to listen to the message in private. (Pause.)” A 2010 survey of ACA's members found that 47 percent used its proposed message, while 39 percent did not, and 14 percent left no messages whatsoever. However, collectors note that these messages may prove too complicated to execute, their length may prove expensive, and their efficacy, in the end, may not convince courts, due

to the continued risk that third parties can listen in.

See, e.g., Leahey

Franklin Collection Serv., Inc.,

756 F. Supp. 2d 1322, 1327 (N.D. Ala. 2010) (denying a collector's motion to dismiss in which it had argued that the ACA message did not violate FDCPA section 1692c(b));

Berg

Merchants Ass'n Collection Div., Inc.,

586 F. Supp. 2d 1336, 1343 (S.D. Fla. 2008) (denying a collector's motion to dismiss).

• The collector leaves a recorded message that indicates the call is from a debt collector but does not identify the consumer by name.

• The collector leaves a message that does not contain the mini-Miranda warning, but only after the consumer consents to receiving voice messag

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