Earlier this month the Consumer Relations Consortium (CRC) submitted a proposal to the Bureau of Consumer Financial Protection (BCFP or Bureau) to address the need for debt collectors to initiate communications with consumers through modern communication methods. While this topic has been a focus of discussion since the Bureau’s 2013 Advance Notice of Proposed Rulemaking, the environment changed materially since that time and continues to evolve rapidly. In addition to consumers’ movement away from landline phones, postal mail and fax and toward email, texting and mobile communications, a crisis of trust has emerged which presents unique challenges to the debt collection industry.
Overview of the Full Range of the Problem
Because of the proliferation of scams through the mail, the phone and online, a majority of consumers do not trust anyone unknown who is seeking to contact them. Regulators, consumer groups and the media regularly advise consumers a) not to respond to unknown callers, and/or b) not to provide any sensitive information to someone they don’t know.
Spurred by the vast explosion of illegal “robocalls,” consumers are demanding transparency – they want to know who is calling before they decide to answer a call. The Federal Communications Commission and industry responded with a host of solutions and with each passing day, more calls are being labeled and caller ID information is being enhanced. While there are a range of hardware and software barriers today, it is clearly only a matter of time before an unidentified (or un-labeled) caller will become the exception rather than the norm.
Yet the requirements of the Fair Debt Collection Practices Act (FDCPA) for communicating with consumers directly conflict with this new consumer demand for transparency. The FDCPA defines "communication" as “the conveying of information regarding a debt directly or indirectly to any person through any medium,” but the statute does not define this key term “information.”
As a result, courts established an extremely broad definition of "information" which evolved to include internal collection agency account numbers appearing through the window of a collection letter envelope and even the legal name of the debt collector in some circumstances.
Due to the legal landscape caused by FDCPA litigation, debt collectors are forced to appear unforthcoming when initiating communication with consumers. If using U.S. Postal Mail, debt collectors cannot clearly identify the name of the sender on envelopes -- their identity is limited to solely an address -- thus appearing like junk mail. Most debt collectors do not leave voicemails or if they do, the messages that are left in compliance with current laws sound vague and provide little useful information. The notion of a debt collector sending an email raises further concerns and initiating communication by text – the overwhelmingly preferred communication method for a growing number of consumers – is largely untested due to further compliance concerns including third party disclosures and the difficulty with including all required disclosures in a short message.
To avoid potential litigation when a collector connects with a consumer on an outbound telephone call, debt collectors must confirm they are speaking with the right party before they can disclose information about who they are or why they are calling. The best practice (often dictated by creditor clients and required of credit issuers by Federal banking regulators) is to request personal data the collector can verify, such as a birthdate or the last four digits of a social security number. This is exactly the kind of data consumers are urged not to share with people they don’t know.
An uncomfortable standoff ensues, where neither the consumer nor the collector is willing to share information before the other does so first. Further, the consumer feels vulnerable because the caller has more information about the consumer and appears unwilling to share that information until the consumer divulges sensitive information to verify a right party contact.
When collectors cannot reach the consumer in any meaningful way, additional adverse consequences may result for the consumer. Many accounts which would otherwise be resolved are instead escalated, resulting in unnecessary negative credit reporting, debt collection lawsuits, garnishments, repossessions and other litigation against consumers.
This Authentication Dance Could be Eliminated
A rule that clearly authorizes and enables debt collectors to initiate communication through digital channels would make it possible to employ the dozens of more advanced ways to authenticate the consumer’s identity. These very same methods are already in wide use by banks and other financial institutions. Enabling use of these newer methods preferred by consumers would greatly benefit the consumer from the very beginning of the collection cycle by making communication far less awkward and frightening, more immediate, more likely to be opened and not ignored – and thus less likely that an account would escalate unnecessarily.
Contact which is initiated digitally rather than via phone call would also give the consumer the opportunity to independently check out the organization that is contacting them before they engage in a live discussion. In fact, it might even remove the direct interpersonal interaction via phone entirely – in the case of a consumer who chooses to pay or dispute online.
Additionally, a rule that clarifies the definition of “information” would provide guardrails for all stakeholders. To be clear, CRC is not recommending the elimination of the US Postal Mail. Rather, debt collectors simply seek to be able to use the consumers’ communication channel of choice without requiring hurdles which render that channel useless.
The CRC offered five recommendations that --together-- provide a comprehensive solution to the complex set of challenges outlined above:
- Declare that for purposes of the FDCPA, email is equivalent to U.S. Postal Mail.
- Provide an exemption in the E-Sign law for the FDCPA’s 1692g notice.
- Clarify the meaning of “information” as it relates to a communication under the FDCPA.
- Affirmatively declare that disclosure of the debt collector’s true legal identity or a trade name by which it is more commonly known does not constitute an unauthorized conveyance of information about the debt.
- Affirmatively declare that a limited content message does not constitute a conveyance of information subject to the disclosure requirements of the FDCPA.
We believe these suggestions are all within the scope of the Bureau's authority to clarify and modernize the FDCPA. We hope the team will carefully consider this full range of solutions so that legitimate collectors and consumers will have the practical ability to engage in order to resolve accounts – whether resolution involves payment, clarification, correction, a cease contact request, or anything else.