CFPB Extends Comment Period on Proposed Time-Barred Debt Rule; Only 18 Comments Filed So Far

The Consumer Financial Protection Bureau yesterday extended the comment period for its Supplemental Notice of Proposed Rulemaking (SNPRM) on time-barred debt disclosures by an additional 60 days, citing the coronavirus pandemic as the reason for the extension.

Instead of having to file comments by June 5, individuals and organizations will now have until August 4. Originally, comments were supposed to be filed by May 4, but the CFPB extended the comment period by 30 days when the COVID-19 crisis essentially shut down the country in mid-March.

To date, there have been 18 comments filed. Among them is one from Morgan King, who wanted to let people know about his new book, “King’s 2020 Guide to COVID-19 And Bankruptcy Practice.” There have been several comments from representatives in the credit and collection industry thus far.

The SNPRM would not affect the lengths of statutes of limitations set by each state, but would establish a national standard for how collectors must attempt to collect on debts where the statutes have expired. Individuals are not allowed to be sued for unpaid debts once the statute of limitations has expired, but collectors can still attempt to collect. In many cases, the courts have decided what a collector can or can not say when attempting to collect on a time-barred debt, and that has created a patchwork set of de facto regulations to which the industry must adhere.

The CFPB is seeking comment on the SNPRM in a number of areas:

  • The merits of using a “know or should know” standard versus a “strict liability” standard for determining when debt collectors must provide time-barred debt and revival disclosures. 
  • The merits of using, as an alternative, a “strict liability” standard with a safe harbor for debt collectors who provide the disclosures when they neither knew nor should have known the debt was time- barred.
  • Whether knowing if a debt is time barred affects or is likely to affect a consumer’s conduct relating to the debt
  • The frequency with which debt collectors should be required to provide required disclosures, including the basis for requiring more or less frequent disclosures
  • Whether additional guidance is needed to address situations in which a validation notice might be re-issued voluntarily because, for example, the consumer requests a copy or a translation
  • Debt collectors’ current practices with respect to disclosing whether a debt is time barred and the circumstances, if any, in which revival can occur
  • Debt collectors’ current practices with respect to revival, including whether and how frequently they sue to collect debts when the right to do so has been revived

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