Keeping up with the latest legislation regarding fair debt collection practices can be daunting. But it’s time to dive in headfirst, because now, it’s more important than ever to know the rules. Regulation F is a new rule intended to regulate how debt collectors do business. If you’ve heard about Regulation F but aren’t exactly sure what it is, whether it applies to you, or how it may affect your debt collection operations, this article will be helpful to you.
What Is Regulation F?
The Consumer Financial Protection Bureau’s (CFPB) Regulation F is essentially a set of detailed rules covering every aspect of debt collection. It’s an amendment to the current Regulation F, 12 CFR Part 1006. Within the legislation, there are rules regarding how collectors should communicate with debtors, how debt-related information should be furnished to debtors, what constitutes unsavory representations, harassment rules, and more. The rule aims to make the debt collection experience fair for all relevant parties.
The legislation was a long time coming; the process of drafting the rules began several years ago, in 2013. In that year, the Consumer Financial Protection Bureau (CFPB) published an Advanced Notice of Proposed Rulemaking. Surveys and interviews were also conducted to gain insight into the specific issues facing both debt collectors and consumers. The result is a sizeable overhaul of debt collection rules and requirements set to shift the landscape in an enormous way.
Two Final Rules
According to the Federal Register, Regulation F is made up of two debt collection final rules, each focusing on distinct areas of debt collection.
First Rule
The first rule was released in October 2020 and focuses mainly on the issues of debt collector-to-consumer communication, the role that technology should play in collections, requirements for record retention, guidelines on actions constituting abuse, and more.
For instance, the final rule gives consumers the ability to limit the modes of contact that a debt collector can use (phone, email, etc.). It also clearly lays out the places and times that debt collectors can reach out to consumers for debt collection purposes. In addition, the legislation prohibits debt collectors from making public attempts to collect a debt via social media or otherwise.
Second Rule
The second rule, released in December 2020, outlines rules regarding information that should be provided to the consumer, limited disclosure information, and more. A couple of key principles in the second final rule include (1) the prohibition of legal action for the purposes of collecting a time-barred debt and (2) the prohibition of passing debt information to a credit bureau prior to making attempts to secure the debt from the consumer.
To see the full-length published version of Regulation F, read about it on the Federal Register website.
When Is Regulation F Effective?
There has been some confusion about the Regulation F effective date. As of the time of this writing, the effective date is November 30, 2021. The Bureau of Consumer Financial Protection proposed extending the effective date to January 29, 2022, in light of the COVID pandemic. However, this proposal was withdrawn in August 2021.
Does Regulation F Apply to You?
The Regulation F legislation applies to any debt collector and does not apply to first-party creditors. If you’re not sure whether you are considered a debt collector, kindly reference the definition in the FDCPA or the Final Rule of November 2020 § 1006.2(i). According to the FDCPA, you are a debt collector if you regularly secure debt (or try to secure it) on behalf of an individual or organization or you secure your own debts under a name that’s not your own.
Per the FDCPA, an individual or company would not be deemed a debt collector if they collect:
- For another institution in isolated instances.
- Debts that were not yet in default at the time of collection.
- Outstanding debt under its own name.
Refer to the Federal Reserve Compliance Handbook if you’d like to read more about how the FDCPA defines a debt collector.
Prepare for Regulation F
To become compliant with the Regulation F requirements, debt collectors must adjust their operation procedures. And time is of the essence, being that there’s a hard deadline to meet – November 30, 2021. Debt collectors should take the time to complete a comprehensive review of the rules to ensure that they are in full compliance.
Luckily, firms like Consumerfinance.gov offer condensed details about Regulation F to make the rules easier to digest. With a simple internet search, debt collectors can also find courses to help them sift through the legislation and plan for any changes they’ll need to make.
Get to Know Regulation F
Whether you’re a debt collector or consumer, it’s in your best interest to get to know the updated regulations. As a debt collector, it’ll ensure that you don’t face legal issues and pushback from clients and consumers. On the other hand, as a consumer, understanding the regulations gives you the ability to demand lawful treatment from debt collectors.
It’s crucial to make sure that your debt collection vendor not only stays abreast of the new regulations but achieves and maintains compliance with them. We hope that this article helps you to better understand Regulation F and encourages you to seek out vendors that strive to adhere to it.