Contact Frequency Is Key as CFPB Pursues Debt Collection Rules

By Jeff Bater

July 22 — The Consumer Financial Protection Bureau (CFPB) is expected to provide the first hints this week of how it will regulate debt collection, and banks are anxious to hear whether the agency will limit how frequently they can contact consumers.

The regulation would be the first under the Fair Debt Collection Practices Act, a law that went into effect in 1978, when debt collection meant picking up a telephone. The rise of new technologies ranging from the internet and smartphones to social media makes the question of “contact frequency” — how many times a creditor can call, e-mail or text — a central concern for creditors.

“If the CFPB adopts a very restrictive attitude with regards to call frequency such that it causes creditors and third-party collectors alike to significantly reduce the frequency of contact they have with consumers who owe money, it may very dramatically affect the success of collection efforts in the sense of dollars that are collected from them,” Christopher Willis, a partner at Ballard Spahr in Atlanta, told Bloomberg BNA in a phone interview. “And that business impact could be larger than the burden of building systems or designing compliance around whatever the CFPB requires.”

Field Hearing July 28

The CFPB is planning a field hearing in Sacramento, Calif., on July 28 featuring remarks by agency Director Richard Cordray and a panel discussion with consumer advocates and industry representatives. The bureau regularly holds such events around the U.S. as a vehicle to unveil regulatory proposals and gather feedback from stakeholders, and it is expected that the CFPB will publish an outline kicking off a multiyear rulemaking.

Before it can issue formal proposed rules, the bureau is required to submit its plans to a Small Business Regulatory Enforcement Fairness Act (SBREFA) panel required by the Dodd-Frank Act. The panel will examine the CFPB's regulatory outline for potential negative impacts on small entities — such as debt collection firms or community banks — that would have to comply with the potential new regulation.

David Anthony, a partner at Troutman Sanders in Richmond, Va., pointed to Massachusetts rules as a possible influence for the CFPB in its rulemaking.

Massachusetts debt collection regulations limit phone calls, text messages and voicemails to two a week. Another state, Washington, refers more broadly to a “communication” and limits contacts to three times a week.

“It wouldn’t surprise me at all if the CFPB adopts limitations on contact frequency,” Anthony said. “Some of the more aggressive states have done that.”

Consumer Advocates Weigh In

Some consumer groups would prefer even stricter limits.

Ed Mierzwinski, consumer program director at U.S. PIRG, said the CFPB should limit contacts to once a week and increase penalties when collectors harass consumers, especially at work. “After all, debt collectors lead complaints to the CFPB and false debt collection tradelines ruin credit reports and lives,” he said in an e-mail.

The National Consumer Law Center (NCLC) said the CFPB needs to adopt a regulatory limit on the number of permissible calls that strikes a balance between allowing debt collection communications and preventing harassment. The nonprofit group recommends that collectors be allowed to call consumers up to three times a week. However, only one of those contacts can be a direct conversation with the debtor.

“Every time the consumer's phone rings, we're proposing that that counts as a call,” said Margot Saunders, of counsel to the NCLC.

The group said the CFPB should also require collectors to stop all calls if the consumer asks them to stop calling. “Study after study has shown most consumers do not avoid debts they can afford to pay,” Saunders said. “It's almost always because they lost a job, there's been a downturn in their economic situation and they can't afford to pay the debt.”

No Hard Number on Contacts?

Jenny Lee, a partner at Dorsey & Whitney LLP, said it may be easier for the bureau to make ambiguous descriptions about what harmful contact frequency is without providing a hard-line number on contacts.

“If I had to hazard a guess on it, I would bet they would not be inclined to provide a number in the SBREFA proposal,” she said. Rather than specify frequency of contact, the bureau could define the boundary separating legal and illegal contact based on whether there's been a request to cease communications, said Lee, who previously worked inside the CFPB's Office of Enforcement.

Lee also said that if collections calls persist after the person provided notification, either verbally or in writing, to cease contact, “that might be a clear line that the bureau might be more willing to draw” on impermissible communications from debt collectors.

Mobile Phones, Texts

The Telephone Consumer Protection Act (TCPA) governs calls that are made to mobile phones by auto-dialers. The law prohibits robocalls or text messages to mobile phones from debt collectors unless the owner of the mobile phone has provided prior express consent. The Federal Communications Commission (FCC) has exclusive jurisdiction over the TCPA.

A 2015 paper by the NCLC on debt collection communications said the FDCPA defines the term “communication” broadly to mean “the conveying of information regarding a debt directly or indirectly to any person through any medium.” The group said the CFPB should clarify that the statute applies to both phone calls and text messages.

In addition, a regulation should clarify that any communication by a debt collector that can be viewed by others online — posts to social media, bulletin boards, chat rooms or blogs — is prohibited, the NCLC said.

Use of e-mail in debt collection communications raises an issue involving written disclosure requirements, such as the verification notice under the FDCPA. “If debt collectors want to replace legally required written communications with an e-mail, they must first have obtained consumer consent and ensure compliance with the requirements of the E-Sign Act, which defines when a consumer can be deemed to have consented to receive electronic records instead of paper writings,” the NCLC paper said.

It said the CFPB “should clarify that the FDCPA’s protections against harassing, oppressing, or annoying consumers apply to all forms of communications and, as such, frequent or repeated communications in any media can violate the FDCPA.”

Debt Collection Litigation

In its spring 2016 rulemaking agenda, the CFPB said the federal government, for many years, has received more consumer complaints about debt collectors than about any other single industry. The FDCPA prohibits debt collectors from engaging in unfair, deceptive, abusive and other unlawful collection practices, but no federal agency was vested with authority to issue general implementing regulations prior to the creation of the CFPB.

Tighter regulation of call frequency could have negative consequences for consumers.

If banks have no alternative in terms of contacting the consumer and getting a settlement or working out a payment plan, then that means the creditor has only one choice: a lawsuit, said Ballard Spahr's Willis, chair of the firm's Consumer Financial Services Litigation Group.

“So the worry is, by clamping down on contact frequency, you push more consumers into debt collection litigation, which is not better for them, and you extend the period of time within which they are experiencing adverse credit reporting,” he said. “So I personally don’t believe a reduction in contact frequency is even good for consumers, but it is one of the things that is under consideration.”

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To contact the editor responsible for this story: Mike Ferullo at

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