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It has become apparent that an update to FDCPA regulations was well overdue, but, while the new debt collection rules went into effect on November 30, 2021, two years later, many debt collectors are still unaware or unclear of which the imposed changes are and what they mean for their business moving forward.
Here is everything you need to know to efficiently collect debt while being compliant with the new debt collection regiment for the digital era.
New Debt collection regulations
The old regulations didn’t take into account the rise of social media and how it shifted the way consumers interact (and expect to interact) with companies in the digital era. This reality has significantly lowered the effectiveness of traditional debt collection methodologies, making this update imperative.
This renovation has been on the oven for five years, and it is an attempt by the Consumer Financial Protection Bureau (CFPB) to modernize the terms and conditions by which debtors and collectors interact. Its objective: to give more privacy and safety to consumers, while providing debt collectors with updated and more efficient opportunities to contact debtors.
While there are some positive rules that make debt collection easier in a way, the great majority favors consumers, creating new operational and legal challenges that need to be taken into account in order to drive a profitable and legal debt collection business.
What didn’t change
On this update, the Bureau understood that the core rules of the FDCPA didn’t need any substantial change. This means that debt collectors still can’t:
- Contact debtors before 8 am or after 9 pm (in their local time).
- Get in touch with the debtor at their workplace after they requested so.
- Inform debtors’ families and close friends about their financial situation.
- Harass or threaten debtors in any way.
Important limits on collectors
- Frequency of Calls: the text in the original FDCPA did not address the issue of how often a creditor may contact a debtor by phone. This new rule imposes a strict limit of one call per day, as long as no answer is obtained. However, if the debtor picks up and engages in a conversation, you are prohibited from calling him or her for at least one week.
- Easier to put contact limits: now debtors don’t have to worry about sending a letter to the collections agency in order to request them to stop calling. They can do it over the phone, and once they do so, collectors are required by law to stop attempting to get in touch with them through that channel.
- No reports before contact: debt collectors are now obliged to contact debtors about the debt in person, over the phone, or by sending the consumer a letter or email about the debt (and wait 14 days to ensure that the message was delivered), before reporting it to the credit bureaus.
- You cannot longer sue on expired debts: The FDCPA's new regulations expressly forbid debt collectors from filing lawsuits or threatening to do so for which the statute of limitations has already expired, and if they do, clients can provide proof that the statute of limitations has passed to win the case easily.
- Debt validation is getting simpler: The old rules stated that if debtors wanted clear details on the origin of the debt and its breakdown, they needed to manually request it, giving up to 30 days for the agency to comply. Now, collectors need to provide this information upfront at the point of first contact, or within five days after the first contact.
About the use of email, text & DMs
Due to obvious reasons, the original FDCPA agreement from 1977 only included regulations over phone calls and letters. Since then, a lot has changed on the communication front, so they decided to allow (and regulate) emails, texts, and social media DMs.
Like with phone calls, the core rules still apply to the new channels:
- Collectors have to keep their communication attempts between reasonable hours (8 am - 9 pm).
- Every text, email, and DM is required to have instructions on how to stop getting messages through that method in the future.
- As Debt collectors aren’t allowed to contact the client’s circle about their debt, they cannot post publicly on Facebook, Instagram, or Twitter about it.
It’s important to note that, unlike with phone calls, there’s nothing on the new rules regarding the frequency of contacts through email, texts, or even DMs, meaning debt collectors can contact clients as much as they want, provided that said channels are still allowed as a valid point of contact by them.
How to take advantage of the new regulations as a collector
While the new changes are a great attempt to resurrect an outdated set of rules so that they can ensure fair play between collectors and customers in the digital age, they still have some flaws and gray areas.
As for the telephone calls, the Financial Protection Bureau demonstrated a keen understanding of the role this channel played in the debt collection process for both parties and was able to resolve many of the unanswered questions that had been pending since 1977.
That wasn’t the case when contemplating the digital channels.
The lack of limits in amounts of contacts over time, added to the fact that debtors will have to opt-out one source at a time, makes it clear that email, text, and DMs are the channels you need to be focusing on moving forward.
But, how can you make the most of this communication opportunity? Through an omnichannel approach that lets you leverage automated collections and Artificial Intelligence to make collections simpler and more efficient than ever.
At Resolve, we offer a one-stop debt collection platform that takes advantage of all the latest technologies and tactics available to modernize your operations, scale your collections, and improve your customer journey. Book a free demo.
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