CFPB Finalizes Rule on Consumer Disclosures Related to Debt Collection

The Consumer Financial Protection Bureau today finalized the second part of its debt collection rule, which covers passive debt collection, time-barred debt, and required validation notices to consumers pursuant to the Fair Debt Collection Practices Act. The 350-page rule is a follow-up to the FDCPA final rule issued in October that modernized and clarified rules around debt collection communications.

Among other things, the rule requires third-party collectors to disclose detailed information about the debt to consumers before reporting to a consumer reporting agency (CRA). The rule also prohibits third-party collectors from suing or threatening to sue consumers to collect a time-barred debt, which is defined as a debt for which the applicable statute of limitations has passed. Based on comments from ABA and other industry stakeholders, the Bureau declined to finalize certain time-barred debt disclosures included in the supplemental proposed rule.

The FDCPA does not generally apply to creditors collecting their own debts, and thus would not generally apply to banks; however, many banks place debt with third-party debt collectors and must monitor vendor compliance with the FDCPA. The final rule takes effect Nov. 30, 2021.