Debt Collection Rule Adds Validation Notice, Bans Suits on Old Debts

Citation

86 Fed. Reg. 5766 (Jan. 19, 2021) (codified at 12 C.F.R. pt. 1006)

Court or agency

Consumer Financial Protection Bureau

Date

November 30, 2021

Law

Regulation F, FDCPA

Summary

The second part of Regulation F, published January 19, 2021 and effective November 30, 2021, standardized the 'validation notice' collectors must send, created a model form, and turned the ban on suing over time-barred debt into an express federal rule. It also stopped collectors from 'parking' debts on credit reports without first contacting the consumer.

Background

The FDCPA has long required collectors to send a “validation notice” telling consumers the amount of the debt, the creditor’s name, and their right to dispute it within 30 days. In practice, these letters varied widely, and many gave little detail about how a balance grew.

The second part of the CFPB’s Regulation F was published on January 19, 2021. It took effect on November 30, 2021, the same day as the first part.

What changed

• Validation notice and itemization (12 C.F.R. 1006.34). Collectors must provide specific validation information, either in the first communication or within five days after it. That includes an itemization showing the amount owed on an “itemization date” and the interest, fees, payments and credits since then. The itemization date must be one of five reference dates: the last statement date, the charge-off date, the last payment date, the transaction date, or a judgment date. The CFPB published Model Form B-1, and a collector who uses it complies with the form and content requirements.
• Electronic delivery (1006.42). A validation notice may be sent electronically only in a way reasonably expected to give actual notice. When it is sent on its own after the first contact, the collector must follow the federal E-SIGN Act’s consent procedures.
• Time-barred debt (1006.26(b)). “A debt collector must not bring or threaten to bring a legal action against a consumer to collect a time-barred debt.” This does not apply to proofs of claim in bankruptcy. The final rule does not require a separate federal time-barred-debt disclosure. It allows collectors to include disclosures that state law requires.
• No “passive” credit reporting (1006.30(a)). A collector may not furnish information about a debt to a credit bureau until it has spoken with the consumer about the debt, or has mailed or electronically sent a message about it and waited a reasonable time for a notice that it could not be delivered. The official commentary treats 14 consecutive days as a reasonable wait.

Our take

The itemization requirement is the most useful part of this rule for people who are being sued. Debt-buyer petitions often state a single number. The validation notice should show how that number was built, and mismatches between the notice, the petition and the account records are worth examining.

The time-barred rule largely confirms what many courts had already held under the FDCPA. Putting it in a regulation makes the standard clearer, though collectors still dispute which limitations period applies and when it began to run.

The passive-reporting ban targets a practice the CFPB found harmful. Collectors were putting a debt on a credit report and waiting for the consumer to discover it, often while applying for a loan or an apartment.

What it means if you’re sued in Texas

Texas has its own protection for old debts. Since September 1, 2019, Texas Finance Code § 392.307 has barred debt buyers from suing or starting arbitration after the limitations period has run. Under that statute, a payment or acknowledgment does not revive a time-barred debt. Texas’s general limitations period for debt claims is four years (Civil Practice and Remedies Code § 16.004).

Limitations is an affirmative defense in Texas, so it generally must be raised in your answer. If you have been sued, look at the date of your last payment or the charge-off date, and keep the validation notice you received.

If a collector has sued you on an old debt or reported one without contacting you first, a free case review is available.

Takeaway

Keep the first letter you receive from any collector. Compare its itemization to the lawsuit petition, and check the dates against Texas's four-year limitations period.

Sources

Primary authority

• Final rule, Part 2 (Federal Register, 86 Fed. Reg. 5766)
• Regulation F, 12 C.F.R. part 1006 (eCFR)
• Texas Finance Code § 392.307 (time-barred debt, debt buyers)

Secondary sources

• CFPB's 2-Part Final Rule on Fair Debt Collection Practices Act (Duane Morris)

This summary and analysis are general information, not legal advice. Later decisions, amendments or agency actions may change the law; check the current status before relying on it.