CFPB Releases Part II of Debt Collection Rule Covering Validation Notices, Time-Barred Debt

The Consumer Financial Protection Bureau today released Part II of its debt collection rule, providing guidance on sending validation notices and disclosures related to collecting time-barred debt.

The rule, all 354 pages of it, can be accessed by clicking here. An executive summary of what was released today can be accessed by clicking here.

[EDITOR’S NOTE: Click here to sign up for a webinar on Friday, December 18 at 3pm ET to hear initial analysis of this component of the rule.]

Under the provisions of the new rule, a collector will be required to send an email or letter or try to speak with a consumer over the phone before reporting a debt to one of the credit reporting agencies. When sending an email or mailing a letter, a collector will have to wait 14 days until furnishing any information to a credit bureau.

Collectors are also barred from suing or threatening to sue a consumer to collect on a time-barred debt.

The provisions of the second part of the rule begin on Page 321 of the document.

The model validation notice is on Page 335 of the document. The validation notice will be required to include a disclosure notifying the consumer of the ability to request a Spanish-language translation of the notice. The validation notice will also be required to include a link to web page on the CFPB’s website listing the consumer’s rights. The back of the letter will allow collectors to include disclosures required by different states.

Collectors will be required to have a “know or should have known” component to knowing whether a debt was time-barred or not. There is no requirement, per Regulation F, that a letter require a disclosure that a debt is out-of-statute or that a partial payment may revive the statute of limitations.

State requirements related to the collection of time-barred debt will supercede the provisions released by the CFPB.

Part I of the rule was released on October 30 and covered a number of areas, including electronic communication, a limited content message, and establishing caps on the number of times that a collector can call an individual in order to try and collect on a debt.

“Today’s final rule provides clear rules of the road for debt collectors on how to disclose details about a consumer’s debt and informs consumers how they may respond to the collector, if they choose to do so,” said Kathleen L. Kraninger, the director of the CFPB, in a statement. “Our final rule reflects our commitment to ensuring that consumers are better informed; informed consumers are empowered consumers.”

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