The Consumer Financial Protection Bureau (CFPB) released its debt collection proposal for time-barred debt in May of 2019. To date, the regulations, while published in the Federal Register, are still not finalized, as the comment period has been extended numerous times since its March 2020 publication. Regardless of additional stipulations and changes to the document, the main ideas published in the Federal Register provide our industry with the current structure and ideology of the CFPB and how our industry can best respond.
Out of Statute Debt
We all know that statutes of limitations vary by state, but whether the debt can be revived, what revives that debt, and what type of debt it is are all factors we’re currently awaiting the official CFPB word on. The point of time-barring debt is part of the CFPB’s job to advance a defendant’s interest in repose, eliminate stale claims (loss of evidence, whether by death or disappearance of witnesses, fading memories, the disappearance of documents, or otherwise) and to provide certainty about a plaintiff’s opportunity for recovery and a defendant’s potential liabilities; but, what is reasonable to accommodate these factors and actual collection of legitimate debt are still out for (final) decision.
Time-barred debt as a concept requires that a debt collector must disclose to consumers that: the law limits how long the consumer can be sued for a debt; the debt collector’s right to bring legal action against the consumer to collect the debt can be revived under applicable law; and, outlines the circumstances in which this can occur. How these concepts are worded to a consumer can determine whether these debts are revived and/or become the potential subject of a claim.
Model Disclosure
The CFPB proposes model language and forms that debt collectors can use to comply with the proposed disclosure requirements when collecting time-barred debt. Using this model language creates a safe harbor for our industry when attempting to collect a time-barred debt to help ensure compliance. Out of statute debt disclosure is necessary because a debt collector’s attempt to collect a time-barred debt is, according to the CFPB, likely to give a consumer the false impression that the debt is legally enforceable and likely to affect a consumer’s decision whether to pay or prioritize the debt. However, the verbiage is largely negative towards our industry and yet still creates ambiguity for the role of the consumer to know whether they can request additional information about the debt and whether that revives the debt. In fact, many in our industry will not sue or use the statute to revive the debt if the consumer asks a question about the debt; however, the way the model disclosure is worded seemingly makes any inquiry the consumer might have about their debt seem as if they could end up getting sued.
The verbatim model disclosure language points from the CFPB are included below:
- The actual language from the law limits how long you can be sued for a debt.
- Because of the age of this debt, we will not sue you for it.
- The law limits how long you can be sued for a debt. If you do nothing or speak to us about this debt, we will not sue you to collect it. This is because the debt is too old. BUT if you make a payment, then we can sue you to collect it.
- The law limits how long you can be sued for a debt. If you do nothing or speak to us about this debt, we will not sue you to collect it. This is because the debt is too old. BUT if you acknowledge in writing that you owe this debt, then we can sue you to collect it.
- The law limits how long you can be sued for a debt. If you do nothing or speak to us about this debt, we will not sue you to collect it. This is because the debt is too old. BUT if you make a payment or acknowledge in writing that you owe this debt, then we can sue you to collect it.
Again, most in our industry won’t sue a consumer and do not want to involve ourselves in lengthy litigation over debt, and all of us who are RMAI certified know litigiously conducting our jobs is essentially against our best practices and compliance doctrines. In fact, the proposed CFPB language contradicts RMAI Certification Standard A12, so those of us with our certifications know we won’t sue a consumer over a revived debt. However, these model disclosures from the CFPB are written to lead consumers to believe this is the outcome of making a payment.
Regardless of whether communication with a consumer is written or oral, the CFPB requires that one of these four disclosures be provided to the consumer for any out of statute debt when such debt becomes time-barred. However, a proposed rule from the CFPB does state that a consumer must have easily accessible to them the statement regarding the out of statute nature of the debt, meaning that a debt collector must provide this information in writing.
Issues and Solutions Moving Forward with the CFPB’s Language
If a consumer wants to pay on a debt, will the CFPB’s language create an element of fear for them to take that action? What will happen if state law statute of limitation and federal law are different? What will happen if a debt is already being paid and an agreement has been reached with a consumer and the language in the CFPB detracts from that arrangement? In short, the CFPB proposed language and rulemaking on out of statute debt raises more concerns and questions for both our industry and consumers than answers.
Luckily, RMAI certified businesses recognize out of statute debt will always be out of statute and not revived for litigation. In fact, the RMAI Model Statute of Limitations states that nothing can revive the debt or extend the limitation period. New York, California, Maine, Washington, Oregon, Texas, Connecticut, and Maryland have all adopted RMAI’s Statute of Limitations. Unfortunately, though, even with RMAI’s plain language and favor towards the consumer, the CFPB’s model disclosure is the language that ensures federal compliance. RMAI will be working on providing a Supplementary Notice of Proposed Rulemaking (SNPRM) to the CFPB and they encourage any RMAI members to help them work on these important statutes and industry standards by reaching out to RMAI and providing your ideas, feedback, and comments to pass along to their Board and help shape our industry as these federal CFPB statutes are finalized. I know I am personally looking forward to the CFPB language not making our industry sound anti-consumer and am happy to help them adopt more fair language than the current model disclosure wordings.
Disclaimer
This information is not legal advice and may not be used as legal advice. Information discussed or contained is not an explanation of the law and is presented for educational purposes only.
