Cory Stumpf

Much-Needed Guidance on the Horizon for U.S. Debt Collectors

For decades, debt collection agencies have operated within a regulatory framework that requires compliance with a hodgepodge of dated legislation subject to various interpretations across different jurisdictions. The Fair Debt Collection Practices Act (FDCPA) was passed in 1977 and was followed in 1991 by the Telephone Consumer Protection Act (TCPA). This legislation pre-dated most modern communication technology, including the Internet and texting, which has resulted in a challenging (and expensive) legal environment for debt collectors and their insurers. There are, however, two promising sources of guidance on the horizon.

The Consumer Financial Protection Bureau (CFPB) expects to soon finalize a proposed rule intended to better define the scope of prohibited communications in connection with debt collection. For example, the proposed rule would “[c]larify that, subject to certain exceptions, a debt collector is prohibited from placing a telephone call to a person more than seven times within a seven-day period or within seven days after engaging in a telephone conversation with the person.”

The comment period for the proposed rulemaking closed after its extension to August 4, 2020.  Susan Bernard, CFPB Assistant Director for Regulations in the Research, published a Spring Rulemaking Agenda advising that the CFPB expects to take final action in October 2020.

According to its Spring agenda, the CFPB also plans to take final action “at a later date” on its supplemental proposal issued in February 2020, which addresses time-barred debt disclosures.  As currently written, the FDCPA prohibits debt collectors from suing or threatening to sue on a time-barred debt (i.e., debt that is no longer legally enforceable due to the applicable statute of limitations). Debt collectors can still attempt to collect time-barred debt but must take care to avoid giving the debtor the impression that he or she can be sued on the debt. The CFPB’s supplemental proposal will clarify the necessary disclosures with respect to the collection of time-barred debt and will include safe-harbor disclosures that can be utilized by debt collectors. These safe-harbor options are intended to provide peace of mind for debt collectors and reduce exposure to FDCPA penalties when attempting to collect time-barred debt.

Additional guidance is expected for debt collectors in October from the Supreme Court in an important TCPA decision. One of the key features of the TCPA is the strict set of limitations placed upon communications made using an automatic telephone dialing system (ATDS). Various jurisdictions have diverged, however, in the way they define an ATDS. Fortunately, the Supreme Court granted certiorari in Facebook, Inc. v. Duguid, wherein Facebook has asked the Supreme Court to address a question at the center of a nationwide circuit split: “Whether the definition of [ATDS] . . .  encompasses any device that can ‘store’ and ‘automatically dial’ telephone numbers, even if the device does not ‘us[e] a random or sequential number generator.’”

Currently, the Third, Seventh, and Eleventh Circuit Courts of Appeal have held that technology must use number generation in order to qualify as an ATDS. The Second and Ninth Circuit Courts of Appeal, in contrast, have liberally construed the ATDS definition and do not require number generation. The Supreme Court’s decision could drastically narrow the scope of what constitutes an “automatic telephone dialing system” under the TCPA in many jurisdictions. Regardless of the result, however, the decision is expected to resolve the current circuit split and provide much-needed clarification to businesses that utilize any manner of robocalling across multiple jurisdictions. The case is slated for the Supreme Court’s October term.

article hero image