For far too many companies, the “Great Procrastination” of 2021 is about to hit hard. The implementation of Regulation F (“Reg F”) on November 30 means businesses across industries must be prepared for significant changes in debt collection procedures.
However, while many companies have lagged behind in adjusting their processes, there is a very real likelihood that additional changes are coming. That means businesses must also act now, using regtech solutions, to future-proof themselves against more change.
What is Regulation F?
Reg F is a sweeping set of guidelines about consumer protections regarding debt collection. In July 2021, the Consumer Financial Protection Bureau (CFPB) announced that the new rules would go into effect on November 30. There had been some preliminary deliberations about extending the implementation date to January 31, 2022, but CFPB ruled that that extension was unnecessary.
Reg F is the first comprehensive interpretation of federal debt collection regulations under the Fair Debt Collection Practices Act (FDCPA). The Reg F guidance provides new consumer protections. It includes a broad array of debt collectors, including collection agencies, collection attorneys, mortgage servicers, and debt buyers. In general, the regulations exclude original creditors.
The regulations focus on two core areas – communications and disclosures. Among the key highlights of Reg F are:
- Establishes presumptions that a certain number of calls per week is or is not a violation of the FDCPA.
- Allows the use of electronic communications to offer required disclosures under the FDCPA to collect a debt.
- Permits consumers to stop certain types of communications.
- Requires notification of the right to opt out of electronic communications.
- Provides a safe harbor from liability under the FDCPA for third-party disclosures using email or text messages to communicate with a consumer when the email address or phone number was obtained using specific methods.
- Establishes an expanded list of information a debt collector has to provide to a consumer when starting communications about debt collection.
- Prohibits debt collectors from bringing or threatening to bring a legal action for collection of a time-barred debt.
- Excludes some voicemail messages left for creditors from FDCPA regulations.
- Requires debt collectors to complete specific actions before information about a consumer’s debt is provided to a consumer reporting agency.
One of the most critical areas of Reg F is the list of new consumer protections available, including:
- Guidelines for credit reporting. A debt collector has to send a letter to or speak with a consumer or send an electronic message about an alleged debt before it can be reported to a credit bureau. The intent is to lessen the likelihood that a consumer will first learn about an alleged debt when accessing a credit report to buy a car or home or when an employer completes a credit check for a new job.
- The ability to stop collection calls. A consumer can request that a debt collector cease using a specific type of communication, such as phone calls or texts. If a request is made, even orally, the collector must stop using that communication type.
- Expanded information on debt collection notices. Debt collectors will need to provide more information to consumers when issuing a validation notice. This step is designed to make it easier for a consumer to identify the debt or exercise their rights. However, there is some concern that the information and design elements of the model validation notice may be unclear to consumers.
- Limits on the number of collection conversations. The new guidelines restrict collectors from speaking too frequently. Generally, debt collectors will need to wait a week after speaking with a consumer before placing another call about an account. However, the limitations are applied per debt, meaning a collector could contact a consumer about other debts if multiple accounts are put in collection with a collector.
Misconceptions on Preparedness
For too many businesses, there is a prevailing fallacy that they are good and ready for Reg F. That’s partly because they are not asking the question: “What comes next?”
The reality is that Reg F is not just one law but the top layer of a cascading array of regulations that involve multiple agencies. In addition, the law will trickle down to state and local agencies, creating an increasingly complex set of regulations that companies must be ready to address.
Part of the reason the CFPB declined to delay the implementation of Reg F was comments from the industry that they were prepared to comply with the new debt collection rules by November 30. An extension of the deadline would lead to increased regulatory uncertainty and an increased burden on smaller entities.
However, the reality is that the guidelines could create multiple layers of complexity at the federal level, with the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the CFPB having separate caveats.
What’s more, in addition to multiple federal regulators having a say in how companies operate, a multitude of state regulators and even local municipalities are involved. So companies that say, “We’ve got this. We’re prepared and have the technology and the processes ready to go to meet the new mandates,” could be turning a blind eye to what comes next.
A Future-Proof Solution Is Necessary
To be ready for the myriad permutations coming with the launch of Reg F, your company must set up the right tools and solutions. These solutions cannot be sized and configured just for the federal law coming in November.
Instead, your business needs a solution that will be responsive, intelligent, and scalable, able to handle the nuanced differences of dozens if not hundreds of possible institutions issuing guidance and regulations.
This process will also most certainly not be linear. Now that the CFPB regulations are nearing implementation, state attorney generals are gearing up to issue their own regulations, which will likely include different provisions, restrictions, language requirements, and components. Those changes at the state level will likely lead the CFPB to make further modifications, perhaps in the near term. And those actions will spur additional state actions in a continuous back-and-forth.
Over time, these changes will lead to massive amounts of regulation that need to be managed carefully.
The rewrite of the FDCPA has set in motion changes that will affect everyone. The state attorney general has fewer restrictions governing how they handle consumer debt collections, meaning companies will not enjoy the same lobbying efforts or industry advocacy and protections.
What’s more, the new regulations will affect some industries, such as hospitals and utilities, which have not had to focus on these consumer financial protections before. Those organizations will need to go from 0-60 mph very quickly to remain in compliance by the November 30 deadline.
Finding a Partner to Future-Proof Your Business
At NeuAnalytics, our regtech compliance tools monitor and anticipate regulatory changes to ensure that our clients are prepared for what’s new. We track the items that are coming up from the earliest stages of lawmaking through to implementation. We want to eliminate the surprises and build solutions that reflect new regulations when they go live.
Our integrated support platform powers interoperability across systems, helping clients streamline workflows and manage tasks, content assets, and key performance metrics across vendors and across your organization. Our receivables platform features:
- Compliance management, providing you with data that delivers confidence, down to the consumer level, that vendors are compliant with consumer credit regulations. The solution has a 100 percent audit pass rate and helps you avoid compliance-related fines and brand erosion.
- Receivables management, helping you understand the status of all your receivables, including daily balances, payment plans, and settlements. Use this feature to model an optimal collection strategy for each account and manage vendors.
- Fraud, disputes, and complaints, in one case management system that streamlines workflows and uses predictive modeling and data analytics to detect and stop fraud.
Clients frequently turn to us for regtech solutions for banks related to compliance. That information gives us insights into the challenges our clients face and what is being done to address horizon issues.
We are also able to provide solutions to all our clients based on the changing landscape and emerging regulations. For example, recently, West Virginia enacted a new state license requirement. We quickly added that to our templates and notified all our clients of the change and how to configure systems accordingly. We also provided NeuAnalytics support to ensure that clients could quickly and easily adapt to the change.
Most compliance and regulatory mandates have a well-stated timeframe. Our responsibility to our clients ensures that collectors and lenders can be ready to respond when the moment arrives.
With Reg F, many organizations have been aware of the impending reality but have not yet taken steps to operationalize a solution. For those who’ve not established processes and procedures, December 1 looms when CFPB will levy fines to those without systems that have been built, integrated, and tested.
At NeuAnalytics, we can help those who are behind. We have off-the-shelf solutions ready to get you started. To learn more about how to begin, watch our free webinar, “Regulation F: November Go-Live for a Modernized FDCPA.”
