Bedard: What Collectors Must Do Before Reporting Unpaid Debts to Comply with Reg. F

The Consumer Financial Protection Bureau has used a lot of adjectives so far to detail what debt collectors can not do when trying to recover unpaid debts owed by consumers. Those adjectives include: harassing, oppressive, abusive, false, deceptive, misleading, unfair, and unconscionable. In Section 1006.30, it seems as though the Bureau ran out of adjectives, because this section is just titled, “Other prohibited practices.” All joking aside, this section breaks new ground, especially for debt collectors that furnish information to the credit reporting agencies. In this episode of “You Wanted a Rule, You Got a Rule,” John Bedard of Bedard Law Group details how the CFPB aims to eliminate the practice known as debt parking, which occurs when a furnisher reports negative information to a credit reporting agency without notifying the consumer, in an attempt to get the consumer to contact the furnisher and repay the debt.

Prior to furnishing information, a debt collector is required to notify the consumer that it is going to do so, either through a phone conversation, or via a letter — which can be sent via traditional mail or email, Bedard explains in the video. If the collector opts to send a letter or email, it must then wait a “reasonable” amount of time before reporting the information. The default timeframe that meets the definition of “reasonable” is 14 days, but there are exceptions to that expectation, Bedard notes.

“The Bureau says that 14 days is an automatic, reasonable period of time, whether you send something by mail or you send it electronically,” Bedard said. “But the Bureau says that it’s possible for a reasonable period of time to be shorter than that. How? Well, here’s an example. If the collector has a bunch of data and evidence that for undeliverability notifications, with respect to outbound email, 90% of those undeliverability notifications come in within three days, or within seven days, now that’s good evidence that waiting maybe nine or 10 days is reasonable versus 14, right? And so if you have a basis to conclude why a shorter period of time than 14 days is reasonable, well, then you can take the position that you did wait a reasonable period of time based upon that information.”

As with most things, there is an exception to this rule, specifically when it comes to checks. As well, what happens if you wait 14 days, report the debt as delinquent, and then get a notice that the message was not delivered? What do you do then? Want to know? Be sure to check out the video.

Check out all the episodes in the series here: You Wanted a Rule, You Got a Rule. You will also find links on that page to subscribe to the audio version of the series through Apple Podcasts, Google Podcasts, and Spotify.

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