The Consumer Financial Protection Bureau (CFPB) recently implemented Regulation F, which mandates that debt collection agencies ask creditors for more information when they submit past-due accounts to be collected. November 30, 2021, marked the beginning of the Regulation.
The collection sector has been impacted by Regulation F, and there is much discussion about what will happen next, especially among creditors that work with third-party debt collection agencies to help them recover past-due payments. The modifications to Regulation F are listed below, along with an explanation of how creditors may be affected.
Background to the CFPB’s New Requirements
The Fair Debt Collection Practices Act (FDCPA) Regulation F debt collection standards Parts 1 and 2 were released by the CFPB in late 2020. The regulations cover many different topics, such as the requirement that debt collectors provide consumers with specific information at the beginning of the debt collection process, harassment and abuse, unfair, deceptive, or abusive acts or practices, the frequency of communication, obtaining and managing consent for communication methods, and more.
The FDCPA requires debt collection businesses to provide consumers with a written validation notice about the debt they are attempting to collect after five days of communicating with a customer and before the account is submitted to a credit bureau. The amount owing, the original creditor, and a warning that the debt is legitimate until the customer challenges it in writing within 30 days are all included in this notification.
Regulation F added to these standards by requiring the letters to include more debt validation information. In order to prevent consumer confusion, the CFPB also provided a sample form letter (or model initial notice) for debt collection agencies to use as the new validation notice.
New Information Requirements for Debt Placement
Consumers must be given the new information listed below on any new past-due account placements under Regulation F:
● The itemization date, meaning the date the debt was incurred, charged-off, the judgment date, or the last payment or statement date;
● Any fees or interest added to the debt’s principal balance between the itemization date and the notice date; and
● Any payments or credits applied to the balance between the itemization date and the notice date.
The CFPB has mandated that creditors include an itemization date for the debt when submitting new accounts for collection starting on November 30, 2021. The itemization date should be a moment that the consumer will associate with their debt and remember. Use the date the debt was first incurred, the day the court issued its ruling, or the day the last
payment was made, for example. Most creditors specify an itemization date for the debt when sending accounts to collections; as a result, they are free from this requirement. The main change is that this day will now be listed as the itemization date for the debt on the written validation notification.
In addition to providing the debt’s itemization date, creditors are required to list transactions from that date to the date of the notice. Transactions include everything from interest and fees to credits and payments. Interest and fees must be recorded as separate line items, whereas payments and credits are reported on the same line.
Due to the tailored supplementary information, consumers won’t be perplexed by the initial collecting notification. Consumers will be better able to resolve or dispute their accounts if the information is included in the debt collection agency’s initial letter.
What should your business do to prepare?
These changes will apply to new accounts presented to collection agencies on or after November 30, 2021.
In order to be ready for the CFPB’s new requirements, financial debt collection agencies advise developing an internal method to get the additional data necessary by Regulation F.
Additionally, a reputable third-party debt collection business recommends every creditor confirm that their collection partner complies with the new regulations even though the FDCPA only regulates debt collectors and not necessarily creditors. This includes making sure your collection agency is gathering the required information and making use of the CFPB’s suggested model letter.