Section 1006.34(d)(2) Model Validation Notice
The following perspective was provided by Joann Needleman of Clark Hill.
For industry one of the most anticipated aspects of the Final Rule was to have a Model Form of the validation notice pursuant to 15 U.S.C. §1692(g). For years industry has been telling both the CPFB and state regulators, “Tell us what you want us to say.” While CFPB has made good on its promise to provide a Model Form, the safe harbor that goes along with the use of the form may not be all that industry had hoped for.
The 1006.34(d)(2) Safe Harbor provides the following:
- (i) In general. Model Form B–1 in appendix B to this part contains the validation information required by paragraph (c) of this section and certain optional disclosures permitted by paragraph (d)(3) of this section. A debt collector who uses Model Form B–1 complies with the information and form requirements of paragraphs (c) and (d)(1) of this section, including if the debt collector:
- (A) Omits any or all of the optional disclosures shown on Model Form B–1; or
- (B) Adds any or all of the optional disclosures described in paragraph (d)(3) of this section that are not shown on Model Form B–1, provided that any such optional disclosures are no more prominent than any of the validation information required by paragraph (c) of this section.
- (ii) Certain disclosures on a separate page. A debt collector who uses Model Form B–1 as described in paragraph (d)(2)(i) of this section and who, pursuant to paragraphs (c)(2)(viii) or (5) of this section, includes certain disclosures on a separate page in the same communication with the validation notice and, on the notice, the required statement referring to those disclosures, receives a safe harbor for compliance with the information and form requirements of paragraphs (c) and (d)(1) of this section except with respect to the disclosures on the separate page.
- (iii) Substantially similar form. A debt collector who uses Model Form B–1 as described in paragraphs (d)(2)(i) or (ii) of this section may make changes to the form and retain a safe harbor for compliance with the information and form requirements of paragraphs (c) and (d)(1) of this section provided that the form remains substantially similar to Model Form B–1.
Thus use of the Model Form, either exactly as written, incorporating a second page or in some other substantially similar form will only provide the debt collector with a safe harbor as to the required validation information as outlined in prior sections of §1006.34. The CFPB was very clear in its pre-ample that it declined to extend the “1006.34(d)(2) safe harbor to cover compliance with FDCPA’s section 807’s [15 U.S.C. §1692e] prohibition on false and misleading statements”. The CFPB states that use of the Model Form may protect a debt collector from claims of over shadowing, but that too will depend on what is stated in the validation notice.
The validation notice has limited utility and was never meant to be anything more than a disclosure given to a consumer to inform them about the debt. Very few debt collectors saw high liquidation or response rates from the sending of a validation notice to a consumer. Unfortunately the CFPB has left the door open for consumer attorneys to challenge the “misconception” consumers may experience even from the use of the Model Form. This may mean that claims like Avila, reverse Avila and lack of meaningful involvement may continue even with the use of the Model Form. Therefore, it is incumbent upon industry to use the Model Form as vehicle to leverage the opportunities of electronic communication found in both parts of the Final Rule.
For example, §1006.34(b)(4) and §1006.42 permits the sending of a validation notice electronically, as long as the consumer is expected to reasonably get actual notice. If the validation notice is sent as an initial communication and in the body of an email, it does not have to comply with e-SIGN. The optional disclosures provided in §1006.34(d)(3)(v) permit a debt collector to provide information about their website, email address and if the validation information is not provided electronically, a statement to consumers that they can dispute the debt or request original-creditor information electronically. Remember also that the CFPB has provided an opportunity to work with your creditor clients with respect to “hand-off” letter that can also be provided electronically to an email address the consumer has already used. These important communication touchpoints will be important as debt collectors consider the use of the validation notice as an invitation to engage in a method by which consumer are now accustomed. If your strategy will be more digitally focused, it is imperative that you update your website now. Remember that a consumer’s inbound outreach to a debt collector and their conscious decision to engage is the better safe harbor.