The Consumer Financial Protection Bureau (CFPB) issued a Notice of Proposed Rulemaking (NPRM) to require debt collectors to make certain disclosures when collecting time-barred debts under the Fair Debt Collection Practices Act (FDCPA), Regulation F, 12 CFR part 1006, on February 21, 2020. Comments must be received on or before May 2, 2020. The CFPB proposes the effective date of the final rule be one year after the final rule is published in the Federal Register.
Time-barred debt, also commonly referred to as "out-of-statute debt," refers to debt for which the applicable statute of limitations has expired. The CFPB proposes to require a debt collector collecting a debt that the debt collector knows or should know is time barred to disclose:
- That the law limits how long the consumer can be sued for a debt and that, because of the age of the debt, the debt collector will not sue the consumer to collect it; and
- If the debt collector's right to bring a legal action against the consumer to collect the debt can be revived under applicable law, the fact that revival can occur and the circumstances in which it can occur.
The CFPB proposes model language and forms that debt collectors could use to comply with the proposed disclosure requirements. Debt collectors using these forms would receive "a safe harbor for using the model forms (or, when applicable, for providing the disclosures shown on the model forms)."
Proposed Model Forms
The NPRM provides two types of Proposed Model Forms containing these disclosures. The first type (Proposed Model Form B-4) is a validation notice that includes a time-barred debt disclosure. The form contains the disclosure required under proposed § 1006.26(c)(1)(i) for time-barred debts where the right to bring legal action cannot be revived. The sample disclosure for this type of time-barred debt is as follows:
Excerpt of the disclosure in Proposed Model Form B-4.
The second type of model form (Proposed Model Forms B-5, B-6, and B-7) is validation notices that include a time-barred debt and revival disclosures. These forms contain the disclosure required under proposed § 1006.26(c)(1)(i) and (ii) for time-barred debts where the right to bring legal action can be revived under applicable law. The sample disclosures for this type of time-barred debt are as follows:
Excerpt of the disclosure in Proposed Model Form B-5.
Excerpt of the disclosure in Proposed Model Form B-6.
Excerpt of the disclosure in Proposed Model Form B-7.
Highlights of Areas Requested for Comment
Change in Knowledge for Triggering Disclosure – The CFPB seeks comment on the proposed requirement that a debt collector who neither knows nor should know that a time-barred debt is time barred when the debt collector makes the initial communication and sends any validation notice required by rule, but who later knows or should know that the debt is time barred, must provide the disclosures required in the debt collector's first communication, if any, with the consumer on or after the date on which the debt collector knows or should know that the debt was time barred.
Form and Delivery of Disclosure – The CFPB seeks comment on conflicts that may arise between the CFPB's proposed model forms and other disclosures required by applicable law. In particular, the CFPB seeks comment on whether any jurisdictions require time-barred debt or revival disclosures to be included on the front of the validation notice and whether, if so, it is possible for a debt collector to comply with both the CFPB's proposal and any such laws. The CFPB also requests comment and any supporting data on whether consumers who receive both federal and state time-barred debt (and, if applicable, revival) disclosures on a validation notice might be confused by the dual disclosures.
CFPB's Authority and Primary Considerations in Issuing the NPRM
The above requirements are the Bureau's proposed interpretation of FDCPA section 807's prohibition on using "any false, deceptive, or misleading representation or means in connection with the collection of any debt." The CFPB claims attempting to collect time-barred debt without the above disclosures would create a false impression that the debt is legally enforceable. The CFPB cites qualitative testing results, stating that the results "suggest that, without a disclosure, many consumers are likely to believe that a debt collector is legally allowed to sue to collect a time-barred debt."
The NPRM supplements the CFPB's May 2019 proposal to, among many other things, prohibit a debt collector from bringing a legal action or threatening legal action for debts for which the debt collector knows or should know the applicable statute of limitations had expired.
For more information on the Proposed Rule, including a "Fast Facts" summary of the proposal, see: https://www.consumerfinance.gov/policy-compliance/rulemaking/rules-under-development/debt-collection-practices-regulation-f-supplemental-proposal-time-barred-debt/.